indian equity market capitalization today- buy stocks of emami ltd with target price rs 635

8/13/2019 Indian Equity Market Capitalization Today- Buy Stocks of Emami Ltd with Target Price Rs 635.

1/21

With a cash-rich balance sheet and strong visibility over production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.TheRampura Agucha underground mine project is operational via ramps (tunnel driven downward from the surface) and commercial production willramp up in Q3 and Q4 of FY14. The Kayad mine project will also commence commercial production in the current fiscal year. A cash-rich balancesheet, low cost of production and inexpensive valuations make HZL an attractive bet at the current price levels. But looking at the lower LMEprices for silver and lead we are neutral for this financial year.we Valuing the stock at this level, we recommend Neutral rating on HZL with atar et rice of Rs.143 for FY14 ........................ Pa e : 9-11

Year 2014 promises to be bigger and stronger than the last two years, which were marked by bloodbath in global markets due to Euro-zonecrisis and falling consumer confidence in the US. Demand is set to pick up in sectors like BFSI, healthcare, retail and transportation globally in theyear ahead. FY 15E is going to be better that FY14E, which was better than FY13. It will be good for us as well as theindustry. ........................................... ( Page : 7-8)

DCB : "REDUCE" 27th Dec 2013

"Neutral"Hindustan Zinc LTD :

"HOLD"

DCB is currently trading at 1.3 times of one year forward book which is almost upper side of valuation band. We value the bank at Rs.62/sharewhich is 1.4 times of one year forward book and 15 times of FY14E earnings. Valuation multiple is justified at present fundamental in our viewbut has potential to expand the multiple once visibility of ROE improvement clearly come to on the floor after 1-2 quarters.......................................................... ( Page : 18-20)

J&K Bank is one of our prefer bank in mid cap private sector banking space. Currently bank is trading at 1 times of one year forward book and 4.6times of one forward earnings which we believe bank is still trading at attractive valuation post recent rally. We advice our investor to hold thestock as bank is trading at lower valuation in comparison to private sector banks despite of having sound fundamental. We value bank atRs.1578/share which is 1.1 times of FY15s book and 5.2 times of FY15s earnings. ................................... ( Page : 15-17)

30th Dec 2013J&K BANK :

"BUY"RELIANCE :Good Growth AheadReliance Industries Limited registered a turnover of Rs 197112 Cr for the half year ended 30th September 2013, up 4.7% YoY while it had madeturnover of Rs 188,193 Cr in 1HFY13. The exports were higher by 19.3% YoY to Rs 134455 Cr for 1HFY14 .. ( Page : 12-14)

3rd Jan, 2014

Edition : 176

IEA-EquityStrategy

31th Dec 2013

Emami Ltd : "The niche advantage" "BUY" 3rd Jan 2014

Considering Emamis focus on increasing rural penetration, favorable monsoon, continuous strengthening of its brand equity and new product

funnel strongly in next 2- 3 years, we are positive on the stock. We recommend Buy on the stock with a target price of Rs 635. At a CMP of Rs481 , the stock is trading at P/BV of 10.3x and 7.8x on FY14E and FY15E, respectively. .................... ( Page : 2-3)

ANDHRABANK: "REDUCE" 2nd Jan 2014

During quarter (3QFY14) Andhra Banks stock performance was ahead of fundamental in our view as there are multiple headwinds associatedwith bank like earnings quality, impairment of asset, deposits cost etc. Asset quality of bank remained high at 5% and expected to remain atelevated level along with higher restructure asset. According to banks management, restructure and non performing asset would consists 18%of total asset in FY14 means 82% of assets has to service 100% of liability which itself challenging especially when bank with average earnings,high cost of fund and downward trajectory of provision coverage ratio. ...................................... ( Page : 4-6)

IT Industry; from 2013 to 2014:"a year of innovation and transformation" 1st Jan 2014

Narnolia Securities Ltd,

India Equity Analytics


2/21

Emami Ltd

BUY

Key facts:

1M 1yr YTDsolute -3.3 20.3 50.6l. to Nifty -4 15.8 33

Current 1QFY14 4QFY13omoters 72.74 72.74 72.74

16.68 15.46 14.46I 2.18 3.27 3.45

hers 8.4 8.53 9.35

Financials Rs, Cr2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-

Revenue 406.7 383.7 6.0% 360.7 12.8%EBITDA 87.4 59.2 47.6% 64.1 36.3%PAT 80 60.7 31.8% 59.2 35.1%EBITDA Margin 21.5% 15.4% 610bps 17.8% 370bpsPAT Margin 19.7% 15.8% 390bps 16.4% 330bps

yr Forward P/B

are Holding Pattern-%

(Source: Company/Eastwind)

View and Valuation: Considering Emamis focus on increasing rural penetration,favorable monsoon, continuous strengthening of its brand equity and new productfunnel strongly in next 2- 3 years, we are positive on the stock. We recommend Buon the stock with a target price of Rs 635. At a CMP of Rs 481 , the stock is trading atP/BV of 10.3x and 7.8x on FY14E and FY15E, respectively.

Strong distribution reach: Although rural continues to grow ahead of urban markets, thegrowth for Emami has tapered off in both urban and rural areas. While urban marketsgrew 8%, rural markets by 11% growth. Direct rural business was up by 17%. Thecompany's direct outlet reach is 6 lakh. The company has added 20000 outlets in Q2 and

expects to add 75000 100000 in FY14.Product expansion: The company has launched Boroplus face-wash last month andthere will be new launches in Q4 also. The mgmt said that for next 2 3 years it hastrong pipeline of products to be launch.

Capex plan: For FY14 & FY15, they plan to spend INR700-750mn per year. It is setting upa new factory in Guwahati at an investment of INR500-600mn.

Favorable rural discretionary demand: Recently, rural discretionary demand hasincreased because of favorable monsoon and per capita rural growth. During the2QFY14, its revenue from urban markets grew 8%, rural markets by 11%. Direct ruralbusiness was up by 17%.ock PerformanceStable Ad spend: The ad spends in Q2FY14 have declined by 125bps YoY to 16.6% as apercentage of sales. The ad spends, as a percentage of sales, are expected to be in therange of 16-17% in FY14 and FY15.

Please refer to the Disclaimers at the end of this Report.

arket DataE Code 531162

erage Daily Volume 37072fty 6221

The Companys major raw material Menthol Prices declined by 34% (YoY), as thecompany has already forward contracted menthol for the year, menthol pricescontinue to trend lower and price hikes for the year have been taken. Therefore,margin expansion visibility remains high.We expect better revenue growth in 2HFY14 as the weather related headwinds forcooling oils is behind us and pricing on balms stabilize. Visibility of margin expansionremains high because of benign cost of Menthol.wk Range H/L 539/368

kt Capital (Rs Crores) 10912

E Symbol EMAMI

"The niche advantage."

ompany updateMP 481

rget Price 635

Usually, Emami reports good earnings growth for third quarter every year. For3QFY14E, we expect 20-22% sales growth led by strong rural demand and 22-25% PAT

growth on YoY Basis. In addition, we expect to improve margin by 150-200bps (YoY) to26% because of softening raw material prices.evious Target Price 500side 32%ange from Previous 27%

"BUY"3rd Jan' 14



3/21

The company has already taken price hikes and no further hikes are expected in FY14E.tal annualized price hike for FY14 is 4% YoY.

Emami Ltd

ey facts from recent Conference CallThe management has lowered its annual revenue growth guidance from 16% - 18% to% - 15% while PAT guidance continues to stand at 18% - 20% aided by strong gross

argin expansion on the back of lower Mentha Oil prices.

Contribution from power brands is ~65%. The company plans to grow these brands by-16% in FY14.

The mgmt has guided for a capex of Rs 70 75 crore each during FY14 and FY15. ASP forY14 will be 16% - 17%.

Emami has a good cash balance of Rs3bn which it expects to utilize for acquisition.



inancials


in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

les 1037.98 1247.08 1453.51 1699.09 1936.23 2211.18w Materials Cost 380.53 346.76 415.12 539.83 580.87 685.47rchases of stock-in-trade 0 204.9 189.13 182.14 203.30 221.12IP 0 -28.48 22.17 -6.52 -7.37 -8.42

mployee Cost 57.91 72.87 92.31 115.55 135.54 165.84vertisement and Publicity 194.42 219.41 228.99 279 319.48 353.79

her expenses 158.66 178.17 209.02 241.82 281.65 321.64tal expenses 791.52 993.63 1156.74 1351.82 1513.46 1739.44ITDA 246.46 253.45 296.77 347.27 422.76 471.74preciation and Amortisation 117.52 116.09 120.89 124 131.63 150.32her Income 7 33.1 54.12 56 58.09 66.34ceptional Items 89.97 113.9 84.15 96 109.82 125.41IT 128.94 137.36 175.88 223.2 291.14 321.42erest 20.98 15.23 15.21 6.6 6.86 5.14T 204.93 269.13 298.94 368.69 452.18 508.03x Exp 35.21 40.41 40.12 54 66.24 74.42

AT 169.72 228.72 258.82 314.68 385.94 433.61owth-% (YoY)les 35.5% 20.1% 16.6% 16.9% 14.0% 14.2%ITDA 91.0% 2.8% 17.1% 17.0% 21.7% 11.6%

AT 85.0% 34.8% 13.2% 21.6% 22.6% 12.4%penses on Sales-%

M Cost 36.7% 27.8% 28.6% 31.8% 30.0% 31.0% Spend 18.7% 17.6% 15.8% 16.4% 16.5% 16.0%

mployee Cost 5.6% 5.8% 6.4% 6.8% 7.0% 7.5%her expenses 15.3% 14.3% 14.4% 14.2% 14.5% 14.5%argin-%ITDA 23.7% 20.3% 20.4% 20.4% 21.8% 21.3%IT 12.4% 11.0% 12.1% 13.1% 15.0% 14.5%

AT 16.4% 18.3% 17.8% 18.5% 19.9% 19.6%luation:

MP 197.7 249.4 260.8 397.4 481 481 of Share 15.1 15.1 15.1 15.1 22.7 22.7

W 625.4 689.9 706.6 777.5 1070.5 1397.9S 11.2 15.1 17.1 20.8 17.0 19.1

VPS 41.3 45.6 46.7 51.4 47.2 61.6E-% 27.1% 33.2% 36.6% 40.5% 36.1% 31.0%vidend payout-% 23.4% 23.2% 23.8% 44.6% 24.1% 24.5%BV 4.8 5.5 5.6 7.7 10.2 7.8E 17.6 16.5 15.2 19.1 28.3 25.2


4/21

64

66-4-

1M 1yr YTDbsolute 0.5 -46.2 -46.2el.to Nifty -1.4 -52.7 -52.7

Current 4QFY13 3QFY1omoters 58.0 58.0 58.0I 13.3 13.3 13.0I 12.4 14.6 15.2hers 16.4 14.1 13.8

Financials Rs, Cr

2011 2012 2013 2014E 2015ENII 2195 3759 3757 4143 4694Total Income 3159 4619 4804 5529 6081PPP 1810 2815 2767 2765 3344Net Profit 1046 1345 1289 1131 1433EPS 22.6 24.0 23.0 19.2 24.3

ANDHRABANK

High impairment asset with downward trajectory of PCR

We observed that banks deterioration in asset quality was much ahead of peersgroup in term of fresh slippage and restructure assets. Banks GNPA and net NPAduring the last quarter was 5.3% and 3.5% much above of industry average of 3.5%and 2.5% respectively. Asset quality trend is likely to remain at elevated level as per management. Total restructure asset consist of 10.6% of total asset and another Rs.3000 cr are in the pipeline means around 13% of total asset will go for restructureand about 50% of fresh restructure slip into non performing asset. If the trendcontinued then GNPA would be 5.5% which would itself alarming specially for thebank because its provision coverage ratio without technical write off was low at 33%.Bank has been continuous downward trajectory of PCR which implying very littlecushion for its future earnings.

Average quality of earnings asset and stress in other segment keep NIM at low

During 2QFY14, banks advance grew by 15% YoY and yield on advance declined to11.4% as against average run rate of 12%. We model 15% of advance growth with11% of loan yield for FY14E and FY15E largely due to challenging economicenvironment and present running trend. Earnings asset especially with loan andinvestment yield have nothing extraordinary as far as we observed and are likely toremain at average quality. With average quality of earnings asset and stress in other segment would keep NIM at low.

1473

arket Data

pside

MP

rget Price

D u r in g q u a r te r (3 QF Y1 4) A n d h r a Banks p er fo r m an c e w a s a h ea d o f fund amental in our v iew as there are mu lt ip le headwind s assoc iated with bank

l ike earning s qual i ty, impairm ent of asset , depos i ts cost etc . At the end of 2QFY14, banks res t ructu re acco unt co nsis ts of 10 .6% of to tal ass et which wil l go up 13% of total ass et in full year alon g with 5% of NPA acc ord ing to the manag ement . This imp lies that 82% of to tal asset has to serv ice 100% of l iabi l i ty wh ich wo uld be real chal leng es for the bank as per our v iew. In the regards , we analyze t rend of imp airment ass et , earning qu al i ty and cos t of dep os its and tweak ou r earnin gs estim ate and value bank at 0.4 tim es of book .Banks v a lua t ion m ay com e down to 0 .3 t imes (h i s to r i ca l low) look ing a t banks own s tress and fund amental . We have reduced rat ing on the s tock w ith price targ et of Rs.66.130/47.15

SE Code 532418SE Symbol ANDHRABANK

ompany UPDATE REDUCE

evious Target Price

wk Range H/L

hange from Previous

ndhra Bank Vs Nifty


1.09lac

fty 6304

verage Daily Volumekt Capital (Rs Cr)



ock Performance

"REDUCE"2nd Jan, 2014



5/21

ASA trend declined; high cost of depositsnks low cost of deposits (CASA) trend has been declining from 35% in FY07 to 24%2QFY14. We observed that banks CASA ratio remained stick to 24% in last 7-8arters. In rising interest rate scenario, cost of deposits could not be sustained at 7.5 to

% without adequate support of CASA. In term of deposits cost, Andhra banks cost of posits remain high at 7.7 %( 2QFY14) as compare to peers average of 7%. However e model 7.5% of cost of deposits and 24% of CASA for FY14E and FY15E in line withesent trend.

ew & Valuationndhra Banks stock performance during the quarter (3QFY14) was ahead of ndamental in our view. There are multiple headwinds regarding the earnings and assetality which would erode the book value in FY14. At the end of 2QFY14, banksstructure account consists of 10.6% of total asset which will go up 13% of total asset inll year along with 5% of NPA according to the management. This implies that 82% of

tal asset has to service 100% of liability which would be real challenges for the bank asr our view. In the regards, we analyze trend of impairment asset, earning quality andst of deposits and tweak our earnings estimate and value bank at 0.4 times of book.nks valuation may come down to 0.3 times (historical low) looking at banks owness and fundamental. We have reduced rating on the stock with price target of Rs.66.luation Band

ANDHRABANK

Source:Company/Eastwind




6/21

ANDHRABANK

Source: Eastwind/Company



come Statement 2011 2012 2013 2014E 2015E

terest Income 6373 11339 12910 15555 17818terest Expense 4178 7579 9153 11412 13124II 2195 3759 3757 4143 4694hange (%) 34.9 71.3 -0.1 10.3 13.3on Interest Income 965 860 1047 1387 1387otal Income 3159 4619 4804 5529 6081hange (%) 32.1 46.2 4.0 15.1 10.0perating Expenses 1350 1804 2037 2765 2736e Provision Profits 1810 2815 2767 2765 3344hange (%) 40.5 55.5 -1.7 -0.1 21.0ovisions 374 991 996 1215 1382

BT 1436 1824 1771 1549 1963AT 1046 1345 1289 1131 1433hange (%) 60.2 28.6 -4.1 -12.3 26.7

alance Sheet

eposits( Rs Cr) 77688 105851 123796 142365 163720hange (%) 31 36 17 15 15 which CASA Dep 22864 27947 31759 34168 39293

hange (%) 23 22 14 8 15orrowings( Rs Cr) 5852 8241 11119 13225 15209vestments( Rs Cr) 20881 29629 37632 43565 50100oans( Rs Cr) 56114 83223 98373 113129 130099hange (%) 27 48 18 15 15

atio

vg. Yield on loans 9.2 11.1 10.5 11.0 11.0vg. Yield on Investments 5.7 6.7 6.6 7.0 7.0vg. Cost of Deposit 4.9 6.6 6.9 7.51 7.51vg. Cost of Borrowimgs 6.4 7.7 5.4 5.5 5.5

luation

ook Value 91 134 151 166 190MP 108 119 95 63.6 63.6BV 1.2 0.9 0.6 0.4 0.3


7/21

IT Industry; from 2013 to 2014

Favorable supply side scenario:

SMAC as new emerging opportunity:

R/USD&CNX IT Performance(2013);

SMAC (social, mobile, analytics and cloud ) is throwing up huge opportunities as firmswant to optimise investments in current technology and drive growth by using digitaltechnologies and platforms. The digital forces of SMAC will reach mainstream status in2014 and create requirements, drive new purchasing and establish new competitiverealities.



013 has been a year of innovation andtransformation

The Indian IT governing body NASSCOM is expecting to clock 12-14% revenue growth inUSD term for FY14E, while Industry had reported 10-12% range of growth in FY13E.Now, we expect higher growth with stable margin trajectory for FY 15E than previous

years led by healthy demand scenario and offering new delivery platform like analytics,mobility, cloud, social media and emerging verticals such as healthcare and medicaldevices.

NASSCOM on positive mood:

The Indian Rupee (INR) has depreciated against USD roughly by around 13-14% since Jan1, 2013. The INR depreciation is favorable for all exporters and IT companies. As athumb rule, a 1% change in value of the rupee against the US dollar has an impact of 30-40 bps on the operating margins of a company. During the 2QFY14, across the IT space,companies reported healthy ramp up in operating margin.

With its top 4 bellwethers TCS, Infosys, Wipro and HCL- have been consolidated itspresence in software service sector. Now, new players with expertise in new emergingservices have entered into the marathon race and performing well in all aspects.Indian IT Industry has been successful to maintain double-digit growth again in exportas well as in the domestic markets.

INR Depreciation:

Factors behind the success story of IT Industry in 2013:

Euro zone was a pleasant surprise in 2013 with no bad news surfacing from that part of the world. But that does not mean the sovereign debt problems have been solvedpermanent. The attractiveness of Europe as a market is being reflected in the acquisitionactivity within Tier-I IT (Valuesource, Equinox and C1 Group by Cognizant, Alti by TCS andInfosys' acquisition of Lodestone).

Though attrition remained higher than last year, especially among the bellwethers,campus hiring and fresh offers declined during the year. However, utilization rateespecially on onsite and offshore are on increasing mode, it indicates favorable supplyside scenario for the industry.Pleasant surprise from Euro zone:


fty and CNX IT Performance(2013); IT Industry with perception "I can do it better"The year 2013 has proved a year of innovation and transformation for IT industryacross all verticals and geographies led by healthy demand environment and positivefactors for Industry, Indian IT Industry came to track with positive surprise andopportunities. The resilient of $120bn plus IT Industry returned to higher growthtrajectory in 2013 and expecting to retain its momentum in the ensuring year for agreater share of global multi-billion dollar IT Industry.

"a year of innovation and transformation"


59.5%

6.8%

59.5%

13%


8/21

- Govt mulls fresh incentives for IT companies, -Software exports to grow 12-14% to clock $84-87 billion in FY14E, -Domestic market to also grow 14% to $185 billion in FY14E, -N.R. Narayana Murthy returns to Infosys as chairman, -8 top executives quit Infosys in 6 months, -Wipro hives off non-IT business as separate enterprise, -Industry diversifies into offering new services & products, -Campus hiring and fresh offers dip despite higher attrition, -Thrust on providing IP-led solutions on multiple platforms,

IT Industr ; from 2013 to 2014


ar 2014 promises to be bigger and stronger than the last two years, which were markedbloodbath in global markets due to Euro-zone crisis and falling consumer confidence in

e US. Demand is set to pick up in sectors like BFSI, healthcare, retail and transportationobally in the year ahead.

ew and Valuation;

e have seen a significant increase in global technology spending this year, creatingportunities for the Indian software services sector to post double digit growth again inport as well as in the domestic markets.

FY 15E is going to be better that FY14E,which was better than FY13. It will be

good for us as well as the industry


ghlights of 2013: Performance of Our IT Coverage

oncerns:owever, hardening of regulatory related to visa approval in USA, Canada and Australia

uld spoil the party. Even, the approval of Immigration Bill attached with higher visa fee,

age requirements and enhanced audit by US agencies could turn the growth story of

dian IT players adversely. If passed in its current form, the Bill could hurt the marginsthe Indian IT export sector, which derives almost 55-60% of its revenues from USA.

14 and IT Industry: Another year of flawless rideanks to playing a pivotal role of technology across transforming delivery of diverse

rvices in the government and private sector, the domestic market is also maturing andone of the fastest in the developing countries.



CMP Upside(31.12.13) % FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E

CS 2170.95 BUY 2369.1 9.1% 71.82 90.74 102.37 30.23 23.92 21.21 36.42% 36.22% 32.95FOSYS 3485.5 BUY 3982.7 14.3% 164.2 181.1 208.2 21.23 19.25 16.74 24.8% 23.0% 22.2%

CLTECH 1263.1 BUY 1415.5 12.1% 58.10 71.87 83.49 21.74 17.57 15.13 30.72% 29.10% 26.39IPRO 559.05 NEUTRAL 469.97 25.0 25.15 27.4 22.32 22.23 20.40 21.7% 18.9% 17.8%

ECHM 1838.05 BUY 2329.5 26.7% 85.48 144.15 161.64 21.50 12.75 11.37 35.91% 38.31% 30.38MC 1632 BUY 1692.5 3.7% 75.27 101.56 110.07 21.68 16.07 14.83 24.10% 25.81% 22.92ITTECH 360.5 BUY 408.32 13.3% 36.28 44.03 53.38 9.94 8.19 6.75 20.0% 19.6% 19.3%

PIT 171.55 BUY 177.33 3.4% 10.80 13.07 15.95 15.88 13.13 10.75 20.10% 19.80% 19.75EXAWARE 131.75 BUY 140.59 6.7% 11.1 13.1 14.3 11.87 10.09 9.21 27.2% 27.0% 26%RSISTENT 980.05 REDUCE 960.51 46.12 63.40 76.92 21.25 15.46 12.74 18.1% 20.5% 20.4%LERX 1068.5 BUY 1357.9 27.1% 64.25 71.61 83.65 16.63 14.92 12.77 43.8% 37.9% 34.4%

ATAELXSI 415.65 REDUCE 236.85 10.63 17.53 19.76 39.10 23.72 21.03 16.94% 23.55% 22.37ENSARTECH 355.85 BUY 439.43 23.5% 40.03 57.16 74.62 8.89 6.23 4.77 23.22% 26.07% 26.34

RoE-%mpany View Target

EPS-Rs P/E-x


9/21

Hindustan Zinc LTD.

133143

NA8%NA

500188 Revenue increased due to Depreciation in Rupee

5613356136291

1M 1yr YTD

solute 4.3 -1.7 -3.4l. to Nifty 0.0 9.2 11.3

2QFY14 1QFY14 4QFY13omoters 64.9 64.9 64.9

1.8 1.5 1.5I 31.4 31.5 2.0hers 1.8 2.1 31.6

Investment Concern

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY

Net Revenue 3826 13.0 6.2 3387 3604EBITDA 1883 28.2 25.3 1469 1503Depriciation 186 6.3 1.1 175 184Tax 254 -6.3 -4.9 271 267PAT 1640 6.5 -1.2 1540 1660

(In Cr

The cost of production benefited from higher production volume and operationalefficiencies , which were more than offset by rupee depreciation and over Rs 3000/MTdecline in by-product credits On YoY basis. The Net Realization per tonne of Silverslumped by 24% on YoY basis. This fall in realization was due to fall in price of silver inLME as company adopts the import parity price. The Companys EBIDTA zoomed by 28%YoY basis at Rs 1,883 Cr and 30% QoQ basis. Net profit was up 7% to Rs. 1,640 Cr in Q2The positive impact of higher EBITDA was partly offset by lower other income due tomark-to-market losses on investments during the quarter.

HZLs revenues are directly linked with the global market for products essentially, Zincand Lead which are priced with reference to LME prices and Silver to LBMA (LondonBullion Metal Association) prices.Disruptions in mining due to equipment failures, unexpected maintenance problems ,non-availability of raw materials of appropriate price, quantity and quality for our energyrequirements, disruptions to or increased cost of transport services or strikes andindustrial actions or disputes.Lower than expected demand by galvanizing industries forzinc and industrial batteries, car batteries industries for lead would affect the companyestimates.


ock Performance-%


yr Forward P/B

Source - Comapany/EastWind Research

fty

Hind Zinc reported net sales of Rs3559 Cr up by 24% YoY and 19% QoQ. The growth wasmainly due to higher sales volume and improvement in realisation per tonne. The netrealsation per tonne of zinc increased by 15% on YoY basis and 9% QoQ at Rs.131794. Thenet realization per tonne of Lead remained almost flat on YoY basis and increased by 5%

in QoQ basis. The increase in net realization per tone is due to depreciation in rupee.Zincs cost of production before royalty during the quarter was Rs.50522 , 8% higher inRupee and 3% lower in USD terms on YoY basis.

sideange from Previous

MPrget Price

evious Target Price

Mined metal production in Q2FY14 was 221k tonnes against 190k tonnes YoY basis agrowth of 8.5% and 238k tonnes in Q1 FY14. The increase is due to higher production atRampura Agucha and restarting of Zawar mines. Integrated Refined Zinc production was

at 195k tonnes in Q2FY14 against 153k tonnes in Q2FY13 increase of 28%. IntegratedLead Production was at 29k tonnes against 22k tonnes growth of 31% YoY basis. Silverproduction was at 83 tonnes in Q2FY14 against 77 tonnes YoY basis. The increase inProduction of Zinc and lead was on account of improved utilization of smelter capacity.

ompany Update Neutral

arket Data

erage Daily Volume (Nos.)

E CodeHINDZINCE Symbol

wk Range H/Lkt Capital (Rs Crores)

143/94

"Neutral "31st Dec' 13


J a n -

0 7

J u

l - 0 7

J a n -

0 8

J u

l - 0 8

J a n -

0 9

J u

l - 0 9

J a n -

1 0

J u

l - 1 0

J a n -

1 1

J u

l - 1 1

J a n -

1 2

J u

l - 1 2

J a n -

1 3

J u

l - 1 3

J a n -

1 4


10/21

wer other income mutes PAT growth: LME Price/Ton

om the Management Corner :

utlook and valuation:LME Price/Ton

LME Price/Ton

FY11 FY12 FY13 FY14E9912 11405 12700 13577

979 1543 2032 178710891 12948 14732 15364

1023 1228 1070 1291492 568 696 707

4417 5336 6218 64845496 6069 6482 7093

475 611 647 718

19 14 29 371059 1419 921 10974900 5526 6899 696721.8 20.7 21.4 18.5

10



wer, fuel & waterpairspenditure

BITDA


Hindustan Zinc LTD.

L PERFORMANCEet Revenue from Operationher Incometal Income

e other income declined by 48.7% yoy to 267cr due to mark to market losses bookedthe company during the quarter while depreciation expenses also increased by 6.8%y to 186cr. Consequently the adjusted net profit growth was muted at 10.5% yoy to

701cr (in-line with our estimate of 1,722cr).

ith a cash-rich balance sheet and strong visibility over production growth of zinc, leadd silver over FY2013-15, we are positive on HZL.The Rampura Agucha undergroundne project is operational via ramps (tunnel driven downward from the surface) andmmercial production will ramp up in Q3 and Q4 of FY14. The Kayad mine project willo commence commercial production in the current fiscal year. A cash-rich balanceeet, low cost of production and inexpensive valuations make HZL an attractive bet ate current price levels. But looking at the lower LME prices for silver and lead we areutral for this financial year.we Valuing the stock at this level, we recommend Neutraling on HZL with a target price of Rs.143 for FY14.

latile Desel Price and high Sulphuric acid price affecting the company,s PATversly.Company is tracking on 95% capacity utilization.Captive plants enjoy the lowerx rate and company enjoys zero tax from tax free geographycal areas. Smelting Plantse improvised and management is confident that the smelting plants will maintaineir stance for the coming quarters also.

erest Costet tax expense / (benefit)ATOE%

epriciation


0

200

400

600

800

10001200

1400

1600

1800

J a n - 1

3

F e b - 1

3

M a r - 1

3

A p r - 1 3

M a y - 1

3

J u n - 1

3

J u l - 1 3

A u g - 1 3

S e p - 1

3

O c t - 1

3

N o v - 1 3

D e c - 1 3

Silver(rs/ounce)

0

20000

40000

60000

80000

100000

120000

140000160000

J a n - 1

3

F e b - 1

3

M a r - 1

3

A p r - 1 3

M a y - 1

3

J u n - 1

3

J u l - 1 3

A u g - 1 3

S e p - 1

3

O c t - 1

3

N o v - 1 3

D e c - 1 3

Lead

90000

95000

100000

105000

110000

115000

120000

125000

J a n - 1

3

F e b - 1

3

M a r - 1

3

A p r - 1 3

M a y - 1

3

J u n - 1

3

J u l - 1 3

A u g - 1 3

S e p - 1

3

O c t - 1

3

N o v - 1 3

D e c - 1 3

Zinc


11/21

FY10 FY11 FY12 FY13are 423 845 845 845serve & 17701 21688 26036 31431tal equity 18124 22533 26881 32276

ng-term 0 0 0 0ort-term 60 0 0 0ng-term 0 0 0 0ade 478 475 410 484ort-term 340 567 504 825tal 20238 25053 29485 35465angibles 109 109 47 10ngible 6071 7145 8466 8474pital 1113 875 445 1082ng-term 361 594 876 1898

ventories 452 762 798 1111ade 152 209 332 403sh and 928 5633 5255 6942ort-term 96 158 233 373tal 20238 25053 29485 35465

FY10 FY11 FY12 FY13B 3.2 2.2 2.1 1.7S 95.6 11.6 13.1 16.3

ebtor to 1.9 2.1 2.9 3.2editors to 6.0 4.8 3.6 3.8ventories 0.6 0.8 0.7 0.9

FY10 FY11 FY12 FY13

sh from 4001 4483 4553 4935hanges In 77 -212 -61 -183et Cash 4077 4272 4492 4752sh From -3881 -3658 -3499 -3234sh from -187 -363 -1242 -1257

et Cash 8 250 -248 262



EBIDTA & Margin :


S PERFORMANCE

rading At :

ATIOS

ASH FLOWS

Hindustan Zinc LTD.

ZinC Productions:


0

20

40

60

80

100

120

140

160

0

1000

2000

3000

4000

5000

6000

7000 NIFTY HINDZINC


12/21


13/21

e management of the company on their half yearly performance said that diversified andegrated petrochemicals business captured margins across segments and delivered near

cord profit levels even as the domestic economy slowed. The management further saidat optimal utilization of best-in-class refinery assets and inherent flexibility in sourcing,oduct delivery contributed to healthy operating profits from our refining business .



RELIANCEntinued.

ew and Valuat ione stock is trading at Rs 878 and in light of half yearly performance, business outlook andanagement commentary we recommend BUY for the stock with Target Price Rs40.

QFY14 SEGMENTAL REVENUE BREAK UP

aphica l Depic t ion

e net addition to fixed assets for the half year ended 30th September 2013 was Rs,154 Cr including exchange rate difference capitalization. Capital expenditure wasncipally on account of ongoing expansions projects in the petrochemicals and refiningsiness at Jamnagar, Dahej, Silvassa and Hazira.

e Outstanding debt as on 30th September 2013 was Rs 83,982 Cr compared to Rs,427 Cr as on 31st March 2013. The company had cash and cash equivalents of Rs,540 Cr. These were in bank deposits, mutual funds, CDs and Government securities /nds. RIL is debt free on a net basis as at 30th September 2013.

a nage me n t C omme nta ry



14/21


RELIANCE

les Trend (Rs/Bn)

A better realisation with a weaker rupee andimproved volume were the key drivers of thesales growth of both petchem and refinerybusinesses.

BITDA & OPM %


AT & NPM %



The improved margin and higher volume of

the petrochemical (petchem) business were

the major drivers of the profit in Q2FY2014.

Despite a healthy revenue growth, OPMremain flat due to a lower margin in therefining and exploration segments



15/21

J&K BANK

1411

15781420

1211

1M 1yr YTDbsolute 3.6 7.8 7.8el.to Nifty -12.9 -0.8 -0.8


Financials Rs, Cr 2011 2012 2013 2014E 2015E

NII 1544 1838 2316 2595 3091Total Income 1908 2172 2800 2979 3817PPP 1149 1370 1811 1906 2443Net Profit 615 803 1055 1128 1478EPS 126.9 165.7 217.6 232.6 304.9

kt Capital (Rs Cr)



ock Performance

At the end of 2QFY14, bank reported GNPA of 1.7% and in absolute basis, GNPAgrew by mere 4% QoQ despite of current phase of economy cycle. Restructure loansdeclined by 70 bps to 3.6% of loans whereas fresh restructure was low at 70 bps of loan. Provision coverage ratio declined by 250 bps QoQ to 89% (without technicalwrite-off) made net NPA to 0.2% from 0.1% in 1QFY14.

wk Range H/L

hange from Previous

&k Bank Vs Nifty


21053

fty 6314

verage Daily Volume6841

1695/1130SE Symbol J&KBANK

ompany Update HOLDMP

rget Price

Jam mu and Kas hm ir Bank (J&K Bank ) is one of our prefer bank in mid cap private sector ban king s pace. Current ly bank is t rading at 1 t imes of one year

forw ard book and 4 .6 t imes of one forw ard earnings wh ich w e bel ieve bank is s t i l l t rad ing a t a t t rac t ive va lua t ion desp i t e o f recen t ra l ly. We adv ice ou r inves tor to hold the s toc k as bank is t rading at low er valuat ion pr emium in com pariso n to peers despi te of havin g soun d fundam ental . We value bank at Rs.1578/share which is 1 .1 t imes o f FY15s book and 5 .2 t imes o f FY15s

earn ings . Look ing a t banks metric s lik e Tier1 cap ital of 13.2%, GNPA of 1.7%,PCR at 92% mak e i t s t ron g for t rading at premiu m valu at ion as com pare to peers g roup .

evious Target Price

arket Data

pside

SE Code 532209

St rong ba lance sheet g rowth con t inued wi th marg in expans ion J&K bank aggressively expanding its loan growth outside of the state and witnessed

20.3% growth whereas within state loan grew by 26.4% in 2QFY14. Management

guided loan growth of 20-25% in FY14 premium of industry average of 15%.Deposits growth would be 17-18% in FY14 according to management. Banks CAS

ratio at the end of 2Q stood at 39% which keep cost of deposits at 6% of level, one

of the lowest in industry. Low cost and high yield asset helped bank to maintain NIM

at 4.33%. Banks management guided NIM 4%+ level in FY14.

Sustainable high return ratio makes a strong case to trade at premiumvaluationJ&K bank has sustainable high return ratio like ROE of 23%+ and ROA of 1.5%+which help bank to maintain high valuation premium. Operating leverage (operatingcost to total asset) of the bank remains at 1.4 to 1.6 times in last few quarters whichrestrict cost income escalate beyond 36%. Capital adequacy ratio of 13.2%according to basel-II helps bank to maintain high growth trajectory with raising capitalin next few years.

Stable asset quality with lowest restructure asset comparison to peers

"HOLD"30th Dec, 2013



16/21


17/21

J&K BANK

Source: eastwind/Company



L 2010 2011 2012 2013 2014E 2015Eerest/discount on advances / bills 2342 2630 3394 4318 4959 5703ome on investments 705 1066 1403 1723 1892 2085erest on balances with Reserve Bank of India 11 17 39 97 53 53hers 0 0 0 0 0 0tal Interest Income 3057 3713 4836 6137 6904 7841hers Income 416 365 334 484 383 727tal Income 3473 4078 5170 6621 7287 8568erest on deposits 1841 2069 2902 3741 4217 4639erest on RBI/Inter bank borrowings 83 46 41 26 91 111hers 14 54 54 54 0 0erest Expended 1938 2169 2997 3821 4308 4750I 1119 1544 1838 2316 2595 3091I Growth(%) 37.9 19.1 26.0 12.1 19.1her Income 416 365 334 484 383 727tal Income 1536 1908 2172 2800 2979 3817

mployee 366 524 521 652 633 811her Expenses 211 235 281 337 440 563erating Expenses 577 759 802 989 1072 1374P( Rs Cr) 958 1149 1370 1811 1906 2443ovisions 446 534 567 756 779 965t Profit 512 615 803 1055 1128 1478t Profit Grwoth(%) 20.1 30.6 31.4 6.9 31.1

ey Balance sheet dataposits 37237 44676 53347 64221 70643 77707posits Growth(%) 20.0 19.4 20.4 10.0 10.0rrowings 1100 1105 1241 1075 1230 1500rrowings Growth(%) 0.4 12.3 -13.4 14.4 22.0an 23057 26194 33077 39200 45080 51843an Growth(%) 13.6 26.3 18.5 15.0 15.0

vestments 13956 19696 21624 25741 20124 22178

vestments Growth(%) 41.1 9.8 19.0 -21.8 10.2

stwind Calculationeld on Advances 10.2 10.0 10.3 11.0 11.0 11.0eld on Investments 5.0 5.4 6.5 9.4 9.4 9.4eld on Funds 7.7 7.5 8.3 8.9 10.6 10.6st of deposits 4.9 4.6 5.4 5.8 6.0 6.0st of Borrowings 8.8 9.1 7.7 7.4 7.4 7.4st of fund 5.1 4.7 5.5 5.9 6.0 6.0

luationok Value 621 718 844 1003 1186 1441

BV 1.1 1.2 1.1 1.3 1.2 1.0E 6.4 6.9 5.5 5.9 6.1 4.6


18/21

57.25

6262

8-

1M 1yr YTDbsolute 19.2 20.4 20.4el.to Nifty 15.6 13.1 13.1


Financials Rs, Cr 2011 2012 2013 2014E 2015E

NII 189 228 284 127 190Total Income 301 328 401 272 334PPP 86 84 126 95 127Net Profit 21 55 102 95 127EPS 1.1 2.3 4.1 3.8 5.1

SE Code 532772SE Symbol DCBwk Range H/L

ompany Update Book ProfitMP

rget Price

Well capitalized and stable asset qualityBank is well capitalized with tier 1 ratio of 13% means no need to raise money inshort term. Banks management guided loan and deposits growth of 25-27% and 30-32% in FY14 which seen possible looking at present scenario. Management is also

very focus on low ticket size loan (prefer less than 30 mn) on account of avoidinglarge slippage. At the 2QFY14, bank reported slippage of Rs.21 cr which was 1.3%in annualized basis. Fresh slippage ratio remains in the range of 1.1-1.5 times in lastfew quarters, so we believe bank would maintain similar trend in term of freshslippage which restrict GNPA out of control. Provision coverage ratio at the end of 2QFY14 stood at 84% (without technical write off) and management reiterate PCR tomaintain above of 80%.

kt Capital (Rs Cr)



Potential to expand valuation multiple, need to watch growth trajectory 1-2quarters moreOn valuation front, DCB valuation could be expanded if visibility of ROE

improvement is clearly seen. ROE improvement could be possible in two front- firstreducing cost income ratio which will boost the profit and second loan growth

specially in high yield segment like SME and MSME. We observed that banks Co

Income ratio was higher at 66.2% at the end of 2QFY14. Cost income ratio would

reduce to less than 65% in FY14 and would further reduce to 60% in FY15 according

to management. To reduce the cost, bank initiated to invest high yield segment,

planning to maintain CASA at 30% in long run while in short term does not expect

below of 27% and escalating branch network. In FY13 bank opened 10 branches but

in 1HFY14, DCB opened 9 branches and will go upto 120-125 branches in FY14.

54.85/38

ock Performance

DCB

hange from Previous

CB Vs Nifty


2158026

fty 6279

Developm ent Credi t Bank (DCB) cur rent ly t rading at 1 .3 t imes o f one year forw ard book whic h is now alm ost of h igher s ide of our valuat ion range. We

valu e the bank at Rs.62/sh are at the high er side whi ch is 1.4 tim es of one year forw ard book and 15 t imes of FY14Es earn ings . P resen t va lua t ion mu l t ip le ju s t i f ied o n ac c o u n t o f DCBs con sis tent improv ement in i ts return rat io and

managemen t gu ided s imi la r t rend o f g rowth in FY14 ,however bank c i t ed marg in could be com press ed by 25-30 bps . We cant ru le out the valuat ion mu ltip le exp ans ion s but there is need to watch 1-2 qu arters mo re as per ou r v iew

verage Daily Volume1437

evious Target Price

arket Data

pside

"Book Profit"27th Dec,2013



19/21

DCB

Source: Company/Eastwind



uarterly Result( Rs Cr) 2QFY14 1QFY14 2QFY13 % YoY % QoQ terest/discount on advances / bills 205.2 201.5 170.9 20.1 1.8come on investments 57.9 56.7 47.6 21.8 2.1

terest on balances with Reserve Bank of India 5.5 2.3 1.1 378.2 142.4thers 0.2 0.2 0.4 -45.6 -9.7 otal Interest Income 268.8 260.7 219.9 22.2 3.1thers Income 27.3 45.1 27.5 -0.9 -39.5otal Income 296.1 305.8 247.5 19.6 -3.2terest Expended 177.6 177.6 153.0 16.1 0.0II 91.3 83.1 67.0 36.3 9.8ther Income 27.3 45.1 27.5 -0.9 -39.5otal Income 118.5 128.2 94.5 25.5 -7.6

mployee 38.8 37.7 34.1 13.9 2.9ther Expenses 39.6 39.2 33.9 16.8 1.1perating Expenses 78.4 76.9 68.0 15.4 2.0PP( Rs Cr) 40.1 51.3 26.5 51.4 -21.8rovisions 7.0 8.5 4.4 60.8 -17.4BT 33.1 42.8 22.1 49.5 -22.7 ax 0.0 0.0 0.0et Profit 33.1 42.8 22.1 49.5 -22.7

alance Sheet (Rs Cr)et Worth 1079 1046 902 19.6 3.2eposits 8788 8320 7137 23.1 5.6oan 6677 6472 5671 17.7 3.2

sset quality (Rs Cr)NPA 235 226 226 4.0 4.0PA 57 54 38 50.0 5.6

GNPA 3.5 3.5 4 NPA 0.9 0.8 0.7


20/21

DCB

Source: Eastwind/ Company



come Statement 2010 2011 2012 2013 2014E 2015Eterest Income 459 536 717 916 1090 1279terest Expense 317 347 489 632 963 1089II 142 189 228 284 127 190hange (%) -28.2 33.6 20.4 24.9 -55.3 49.1on Interest Income 107 112 100 117 145 145otal Income 249 301 328 401 272 334hange (%) -21.6 21.2 8.9 22.4 -32.3 23.0perating Expenses 201 215 244 275 177 207e Provision Profits 48 86 84 126 95 127hange (%) -36.5 79.9 -2.6 50.5 -24.5 33.5ovisions 121 57 29 24 0 0

BT -73 29 55 102 95 127AT -79 21 55 102 95 127hange (%) -10.1 -127.2 157.1 85.3 -6.7 33.5

alance Sheeteposits( Rs Cr) 4787 5610 6336 8364 9618 11061hange (%) 3 17 13 32 15 15 which CASA Dep 1693 1975 2035 2272 2597 1825

hange (%) 17 17 3 12 14 -30orrowings( Rs Cr) 504 861 1123 1526 1697 1952vestments( Rs Cr) 2018 2295 2518 3359 2886 3318

oans( Rs Cr) 3460 4271 5284 6586 7903 9484hange (%) 6 23 24 25 20 20

atiovg. Yield on loans 10.4 9.4 10.1 10.8 9.7 9.7vg. Yield on Investments 4.7 5.8 6.9 5.8 6.8 6.8vg. Cost of Deposit 5.9 5.2 6.4 6.4 5.9 5.9vg. Cost of Borrowimgs 6.8 6.4 7.2 6.4 6.0 6.0

aluationook Value 30 31 36 40 44 49

MP 32.2 45.9 45 45 57.3 57.3BV 1.1 1.5 1.3 1.1 1.3 1.2


21/21

N arno lia Securitie s Ltd

402, 4th floor 7/ 1, Lord s Sinh a Road Kolkat a 700071, Ph033-32011233 Toll Free no : 1-800-345-4000

ema il: resear ch@nar nolia.com ,website : www.narnolia.com

Risk Disclosure & Disclaimer: This report/message is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxationadvice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting anyaction based upon it. This report/message is not for public distribution and has beenfurnished to you solely for your information and should not be reproduced orredistributed to any other person in any from. The report/message is based upon publiclyavailable information, findings of our research wing East wind & information that weconsider reliable, but we do not represent that it is accurate or complete and we do not

provide any express or implied warranty of any kind, and also these are subject to changewithout notice. The recipients of this report should rely on their own investigations,should use their own judgment for taking any investment decisions keeping in mind thatpast performance is not necessarily a guide to future performance & that the the value of any investment or income are subject to market and other risks. Further it will be safe toassume that NSL and /or its Group or associate Companies, their Directors, affiliatesand/or employees may have interests/ positions, financial or otherwise, individually orotherwise in the recommended/mentioned securities/mutual funds/ model funds andother investment products which may be added or disposed including & other mentionedin this report/message.

indian equity market capitalization today- buy stocks of emami ltd with target price rs 635

Documents