stock advisory for today - natural view on the stock jsw steel ltd, marico and buy heromotoco

Bank’s profit growth of 12.6% YoY despite of 21.6% YoY growth in NII and 28.6% growth in operating profit was largely due to higher tax

provisions made of bank (32.4% of PBT versus 27.9% of PBT in 2QFY14). During quarter, bank has created special reserve for deferred tax liability

to the tune of Rs.215 Cr as per recent RBI guideline dated 20th December 2013. Adjusting the same, profit grew by 22% YoY which was quite

impressive. But bank’s cost of fund increased higher than loan yield which would restrict margin expansion. We lower our book value estimates

to Rs.643 from earlier of Rs.657. Accordingly we reduce our target price to Rs.1094 from earlier of Rs.1118.

............................................................... ( Page : 20-24)

3th Feb, 2014

Edition : 197

IEA-Equity

Strategy

ICICI BANK : "BUY" 31th Jan 2014

We have rolled forward our valuation to FY16E earnings and maintained our Accumulated rating on CGL with a revised target price of Rs130

(Rs105 earlier) based on 14xFY16E EPS, driven by likely turnaround in international operations and a better earnings growth trajectory. We

believe that a record backlog, better/leaner cost structure, good & increasing product basket, improved reach in terms of geography will drive

earnings & intrest coverage ratio over the next few years. ................................................ ( Page : 18-19)

Maruti Suzuki India Limited : "NEUTRAL" 31th Jan 2014

The company for 3QFY14 has registered net sales of Rs 10620 Cr down by 2.7% YoY led by 4.5 % volume decline to 288151 units for the period

under review. The decline in the volume came majorly due to weaker performance on export business front. Export sales volumes were down

38.6% YoY ......................................................... ( Page : 16-17)

BANK OF INDIA : "BUY" 31th Jan 2014

Bank of India reported profit de-growth of 27% YoY largely due to higher loan loss provision. At operating profit level, bank reported 15.5% YoY

growth but higher provisions against loan loss (almost double from last quarter) drag profit downward. Bank’s loan and deposits grew

handsomely and asset qualities were also improved sequentially. Restructure loan was at Rs 1146 cr (0.3% loan) which is not alarming. We have

not found any stress at operating profit level. The stock is corrected almost 10% likely due to profit de-growth. We believe buffer up provision

would be temporally phenomena. The stock could reshape its valuation multiple. We have buy rating on the stock with price target of Rs.217

...................................................... ( Page : 11-15)

Crompton Greaves Ltd : "Rebounds begains…….." "BUY" 31th Jan 2014

JSW Steel’s third quarter performance was good and ahead of expectation by a huge margin. Consolidated net sales at Rs 13,383 crore , while

Ebitda at Rs 2,409 crore. While net profit at Rs 466 crore came in below expectations of Rs 583 crore, it was largely due to adjustments on

account of merger with JSW Ispat.Crude steel production-wise, there is a 52% growth, to the tune of 3.17 million tonnes of steel.

...................................................................... ( Page : 7-10)

Marico : " Volume slows…" "NEUTRAL" 3th Feb 2014

Beats the street on profitability and Margin front with poor volume growth;Marico witnessed better numbers than expectation with 10% sales

growth (excluding Kaya Sales) led by 3% volume growth on YoY basis. We believe that slower volume growth could not easily turned out in next

1-2 quarters because of poor discretionary demand environment. Therefore, we downgrade our view from "BUY" to "NEUTRAL".

....................................................................... ( Page : 4-6)

HEROMOTOCO: Average Sales with Flat Profits Growth.. "BUY" 3th Feb 2014

The company registered its 3QFY14 net sales at Rs 6846 Cr up by 11.3% YoY led by healthy volume growth of 7% for the period under review.

The company during 3QFY14 sold 1680940 units including exports. The volume performance was led by a strong 7.8% YoY growth in the

domestic segment. ..................................................................... ( Page : 2-3)

JSW STEEL LTD : "NEUTRAL" 3th Feb 2014

Narnolia Securities Ltd,

India Equity AnalyticsDaily Fundamental Report on Indian Equities

1M 1yr YTD

Absolute -5.0 9.5 9.3

Rel. to Nifty -1.6 8.9 -4.4

Current 2QFY14 1QFY1

4Promoters 39.9 39.9 39.9

FII 30.6 30.4 29.9

DII 8.5 8.8 9.3

Others 21.0 20.9 8.7

Financials Rs, Crore

3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 6846 5696 20.2 6151 11.3

EBITDA 898 833 7.8 779 15.3

PAT 525 482 8.9 489 7.4

EBITDA Margin 13.1% 14.6% (150bps) 12.7% 50bps

PAT Margin 7.7% 8.5% (80bps) 7.9% (30bps)

2

HEROMOTOCO

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

52wk Range H/L 2215

6%

Market Data

BSE Code 500182

HEROMOTOCO

Stock Performance-%

NSE Symbol

Change from Previous -

The stock at its CMP of Rs 1979 which is 17.9x of one year forward FY14E EPS of Rs 110

and upcoming capacity expansion, Rising trend of volume growth of scooter business,

Improvement in operational efficiency are few factors which make us positive for the stock.

We recommend BUY for the stock with Target Price Rs 2100.

One Yr Price Vs NIFTY

(Source: Company/Eastwind)

1,434

Average Daily Volume 245841

Nifty 6089

Share Holding Pattern-%

Mkt Capital (Rs, Cr)

The operating EBITDA for the 3QFY14 came at Rs 898 Cr and OPM stands at 13.06

%.There is yearly rise in the OPM by nearly 40 bps however on sequential basis it had

shrunk by 150 bps due to led by increase in raw-material costs and significantly higher other

expenditure. Raw material cost as a percentage of sales increased 120bp QoQ due to the

currency impact on indirect imports, which comes with a quarter’s lag. The other expenses

in the quarter rose significantly very high because of higher advertisement expenses due to

festival season and also due to the launch of new products/ refreshes and higher royalty

payments on the back of rising share of new products. Additionally, the ongoing cost

reduction initiatives from the company led to a savings of Rs45 Cr during the quarter.

View & Valuation

The net profits for the stands at Rs 525 Cr for the quarter grew by only 7.5% yoy as the tax

rate increased to nearly 27% from 16% earlier due to expiry of tax benefits at the Haridwar

facility.

Post the 3QFY14 result management said that Industry motorcycle sales should be in the

range of 5 % and it will be in that level for the year and HMC will be at par with that.

Company has maintained its ad spend guidance at 2-2.5 % of sales and R&D spends at

nearly 0.75% of sales. The capital expenditure guidance for FY2014 stands at Rs1100 Cr to

Rs1200 Crr.For FY2015 the company has guided for Rs 1,500 Cr to Rs1,800 Cr.

The Management indicated that the current dividend policy of 35-45% payout will continue in

future. The total installed capacity of the company currently stands at 6.9mn units. Post the

commissioning of the Neemrana plant, scheduled by end of March 2014, the installed capacity is

expected to increase to 7.65mn units.

Average Sales with Flat Profits Growth..

Result Update BUY

CMP 1979

The company registered its 3QFY14 net sales at Rs 6846 Cr up by 11.3% YoY led by

healthy volume growth of 7% for the period under review. The company during 3QFY14

sold 1680940 units including exports. The volume performance was led by a strong 7.8%

YoY growth in the domestic segment, while export volumes posted a decline of 26.5% YoY,

mainly due to a weak demand environment in major exporting nations. Scooters sales

maintained strong momentum, led by the success of Maestro.

The average realization for the quarter moved up and came around at Rs 41000 verses Rs

39100 for the same time last fiscal. The net average realization for the quarter was driven by

price increases, which were undertaken in April and October 2013.

Upside

Target Price 2100

Previous Target Price -

"BUY" 3rd

Feb' 14.


3

SALES & PAT TREND

Company registered its 3QFY14 net sales at

Rs 6846 Cr up by 11.3% YoY led by healthy

volume growth of 7%.

Rise in the OPM by nearly 40 bps however on

sequential basis it had shrunk by 150 bps due

to led by increase in raw-material costs and

significantly higher other expenditure.

HEROMOTOCO

OPM & NPM TREND



Realization Trend


Profits for the grew by only 7.5% yoy as the

tax rate increased to nearly 27% from 16%

earlier due to expiry of tax benefits at the

Haridwar facility.



Marico

-

1M 1yr YTD

Absolute -3.6 2.4 0.5

Rel. to Nifty -10.8 -7.9 -9.1


Promoters 59.69 59.69 59.72

FII 27.58 27.6 27.96

DII 5.72 5.88 5.19

Others 7.01 6.83 7.13



Revenue 1089.29 1115.36 (2.3) 1155.89 -5.8

EBITDA 201.81 168.51 19.8 165.8 21.7

PAT 135.4 105.9 27.9 102.3 32.4

EBITDA Margin 18.5% 15.1% 340bps 14.3% -

PAT Margin 12.4% 9.5% 290bps 8.9% -

4

Stock Performance

MARICO

Upside -

Nifty 6090

Market Data


1 year forward P/BV-X


View and Valuation: The company expects demand scenario to remain challenging

especially in urban areas in India and some of its international market like Bangladesh,

Egypt and MENA. Based on hypothesis, management is expecting regarding the bottom

out of volume decline but they are not ignoring the threat of demand environment

challenges for near future. We believe that slower volume growth could not easily

turned out in next 1-2 quarters because of poor discretionary demand environment.

Therefore, we downgrade our view from BUY to NEUTRAL on the stock, at a price of Rs

214, stock trades at 4.9x FY15E P/BV.

Mix segmental growth: India FMCG business grew by 10%(YoY). Parachute’s rigid

portfolio (packs in blue bottles), recorded a volume growth of about 2% during Q3FY14

over Q3FY13. Parachute along with Nihar marginally improved its market share over the

same period last year to 56%. The Saffola refined edible oils franchise grew by about 9%

in volume terms during Q3FY14. During the quarter, Saffola average price hiked by 4-5%

to manage its RM cost and Packaging materials. Marico’s hair oil brands (Parachute

Advansed, Nihar Naturals and Hair & Care) grew by 8% (YoY) in volume terms during

Q3FY14.

Result update Neutral

Change from Previous

" Volume slows…"

CMP 214

Target Price -


Marico witnessed better numbers than expectation with 10% sales growth (excluding

Kaya Sales) led by 3% volume growth on YoY basis. PAT grew by 31% (YoY) because of

cost rationalization across various head of expenses like Ad Spend, employee cost etc.

However, the profits of Q3FY14 are not strictly comparable to Q3FY13 due to the

change in the method of depreciation from WDV to SLM carried out in Q4FY13 and

demerger of Kaya business.

Beats the street on profitability and Margin front with poor volume growth;

Margin ramp up: During the quarter, its EBITDA margin of the India FMCG business

during Q3FY14 was 18.7% and PAT margin was at 11.3%. The Company believes that an

operating margin in the band of 17% to 18% is sustainable in the medium term. On YoY

basis margin growth could not computed because of Kaya consolidation in same quarter

previous year.

Poor volume growth: Because of weak demand discretionary environment and socio

political instability in some regions, its volume growth of various segments have come

down during the quarter. The volume growth in India was marginally above 3% for the

quarter, reflecting continued soft consumption trends. Post earning, management

stated that the trend of volume decline has bottomed out based on hypothesis.

The Company maintained its market share across the portfolio, reflecting strong equity

of its brands, even though the rates of category growth have decelerated over the past

few quarters. We believe that slower volume growth could not easily turned out in next

1-2 quarters because of poor discretionary demand.

Mkt Capital (Rs Cr) 13829

Average Daily Volume 126142


BSE Code 531642

NSE Symbol

52wk Range H/L 248/188

"NEUTRAL"3rd Feb' 14


5


Marico

Sales (cr) and Growth (%) -


Margin-%

Expenses on Sales -%

For 2QFY14, Marico reported 4% (YoY)

decline in sales growth because of sluggish

volume growth impacted by weaker demand

in urban area.

The demerger of Kaya is on the way, and

new demerged entity would expected to get

listed by November or December.

Because of cost control in ad spend by

200bps and Raw material about 190bps, its

margin gone up by 210 bps to 15.1% on YoY

basis.

Geographical challenges: International market recorded a growth of 15%. Because of

political uncertainty, Bangladesh sales declined by 14%(YoY). While, the MENA business

on an average grew by 10% CC basis. The business in Egypt grew by 22% mainly led by

strong volume growth in Haircode and Fiancée. The business in GCC continued to report a

decline. Political environment in Egypt seems to have bettered for the time being with no

major report of violence, however the uncertainty continues. South Africa reported a top-

line growth of 5%. The business in South East Asia of which Vietnam comprises a

significant portion grew by 24% in constant currency terms.




(3) Operating Margin could sustain at a range of 17-18% in the medium term.

(4) The Youth brands portfolio is expected to grow by about 20% to 25%.

(5) In near term, Company does not expect to see any price hike decision.

6

Marico

Key facts from Management guidance;

Financials

(1) Management believes that the decline trend of volume growth has turned out, while

the economic environment is still challenging and there will be gradual recovery.


(2) Immediate future could see volume growth rates of 7%- 8%. With the price increases

already in market place the overall sales growth could still be in the region of 12%-14%.

This is expected to improve from early/mid FY15.



Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 2500.09 3134.99 4008.28 4259.53 4740.86 5344.65

Other Operating Income 160.67 19.06 30.90 12.51 14.22 16.03

Total income from operations 2660.76 3154.05 4039.18 4596.86 4755.08 5360.68

RM Cost 1265.48 1712.66 2132.04 2212.27 2228.20 2672.32

Purchases of stock-in-trade 12.47 20.36 17.44 116.59 48.53 54.71

WIP -16.35 -115.43 -50.78 -127.47 -98.72 -111.29

Employee Cost 190.13 229.98 307.29 380.56 380.41 428.85

Ad Spend 351.12 345.95 448.99 597.94 618.16 643.28

Other expenses 482.76 523.36 668.90 791.07 808.36 911.32

Total expenses 2285.61 2716.88 3523.88 3970.96 3984.94 4599.19

EBITDA 375.15 437.17 515.30 625.90 770.14 761.49

Depreciation and Amortisation 60.06 70.80 72.52 86.62 145.44 133.80

Other Income 18.26 2.16 1.67 37.52 19.17 21.61

Exceptional Item -9.79 48.91 -1.75 33.20 33.29 37.52

EBIT 323.56 417.44 442.70 610.00 677.15 686.82

Interest 25.69 41.01 42.39 57.43 57.43 57.43

PBT 297.87 376.43 400.31 552.57 619.72 629.39

Tax Exp 64.33 84.98 78.25 146.18 163.95 166.50

PAT 233.54 291.45 322.06 406.39 455.78 462.89

Growth-% (YoY)

Sales 11.4% 18.5% 28.1% 13.8% 3.4% 12.7%

EBITDA 29.2% 16.5% 17.9% 21.5% 23.0% -1.1%

PAT 33.5% 24.8% 10.5% 26.2% 12.2% 1.6%

Expenses on Sales-%

RM Cost 47.6% 54.3% 52.8% 48.1% 46.9% 49.9%

Ad Spend 13.2% 11.0% 11.1% 13.0% 13.0% 12.0%

Employee Cost 7.1% 7.3% 7.6% 8.3% 8.0% 8.0%

Other expenses 18.1% 16.6% 16.6% 17.2% 17.0% 17.0%

Tax rate 21.6% 22.6% 19.5% 26.5% 26.5% 26.5%

Margin-%

EBITDA 14.1% 13.9% 12.8% 13.6% 16.2% 14.2%

EBIT 12.2% 13.2% 11.0% 13.3% 14.2% 12.8%

PAT 8.8% 9.2% 8.0% 8.8% 9.6% 8.6%

Valuation:

CMP 108.55 138.75 206.00 216.95 214.00 214.00

No of Share 60.90 61.40 61.40 64.48 64.48 64.48

NW 653.96 915.44 1143.01 1981.52 2399.58 2824.75

EPS 3.83 4.75 5.25 6.30 7.07 7.18

BVPS 10.74 14.91 18.62 30.73 37.21 43.81

RoE-% 35.7% 31.8% 28.2% 20.5% 19.0% 16.4%

P/BV 10.11 9.31 11.07 7.06 5.75 4.88

P/E 28.31 29.23 39.27 34.42 30.28 29.81

JSW STEEL LTD.

A steely performance917

797

NA

-13%

NA

500228

22175

11087

6089

1M 1yr YTD

Absolute -9.1 5.5 7.0 Operational EfficienciesRel. to Nifty -6.3 4.0 5.7

2QFY14 1QFY14 4QFY13

Promoters 37.3 36.3 35.8

FII 18.6 17.2 18.0

DII 4.9 6.3 6.1

Others 39.2 40.3 40.1 Exports boost

Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY13

Net Revenue 13623 53 5 8888 12984

EBITDA 2409 81 3 1331 2348

Depriciation 806 43 0 563 803

Tax 374 -2300 214 -17 119

PAT 466 -733 -504 -74 -116(In Crs)

7

Initial Coverage NeutralCMP JSW Steel’s third quarter performance was good and ahead of expectation by a huge

margin. Consolidated net sales at Rs 13,383 crore , while Ebitda at Rs 2,409 crore. While

net profit at Rs 466 crore came in below expectations of Rs 583 crore, it was largely due

to adjustments on account of merger with JSW Ispat.Crude steel production-wise, there

is a 52% growth, to the tune of 3.17 million tonnes of steel. Also,reduced inventories by

17,000 tonnes and sold 3.08 million tonnes of steel in this quarter, showing a growth of

42% in terms of volume. Therefore, the volume of production and sales have contributed

to the bottom line.Secondly, the operational efficiencies which were brought in are

clearly visible in the results. EBITDA per tonne improved and the EBITDA margin is 19.3%

as against 15.8% in the corresponding quarter of last year, showing a significant

improvement of 3.5%.

Target Price

Previous Target Price

Upside


JSL also reported higher incidence of tax amounting to 374 crore with an effective tax

rate at 45% in Q3FY14. The iron ore situation has improved in Karnataka but is below the

company’s comfort levels. We have a cautious view on the stock due to elevated debt

levels and stretched valuations.

Stock Performance-%

Market DataBSE Code

NSE Symbol JSWSTEEL

52wk Range H/L 1046/451

Mkt Capital (Rs Crores)

Average Daily Volume (Nos.)

Nifty

The operating margins are under pressure due to the high cost of raw materials.

company is operating only at 80 per cent of the capacity at Vijayanagar in Bellary district.

The company is sourcing ore from Odisha, Jharkhand and Chhattisgarh besides importing

ore for its Dolvi and Salem plants. It is, however, left with little option to source the raw

material for its Karnataka plant.

Source - Comapany/EastWind Research


This performance is remarkable looking at the fact that JSW’s operations are not

backward integrated in terms of basic raw material like coal and iron ore. While it is

dependent on imported coal to meet its energy requirements, the company has been

grappling with iron ore availability issues in Karnataka for quite a while due to mining

curbs. However, the company’s ability to export a substantial portion of its steel output

has acted as a natural hedge as well as boosted its overall revenues and profitability.


JSW’s exports touched one-million-tonne (mt) mark, which was 60 per cent of India’s

overall steel exports and accounted for 32.4 per cent of the company’s steel sales of 3.08

mt (up 42 per cent year-on-year). Management of JSW Steel, said they are looking at

increasing exports, especially the value-added products to developed markets to boost

profitability.

1 yr Forward P/B

"Neutral"3rd Feb' 14


0

500

1000

1500

2000

2500

3000

Mar

-07

Nov

-07

Jul-0

8

Mar

-09

Nov

-09

Jul-1

0

Mar

-11

Nov

-11

Jul-1

2

Mar

-13

Nov

-13

PRICE 0.5x

1x 1.5x

Iron ore availability remains still challenging

Steel Demand Healthy Outlook

Capex Guidiance

About The Company.

8

During the quarter, the company commissioned

a waste heat recovery system for BF-4 stove

heating process. The pickling cum coupled

tandem cold rolling mill (PLTCM) facility, which

is part of phase 1 of CRM2 project has

commenced commercial production at

Vijayanagar from December 1, 2013.

The management has maintained its earlier annual guidance of saleable steel sales

volume of 11.55 MT. However, based on 9MFY14 reported volume of 8.76 MT we

believe JSL will exceed its sales volume target. We have modelled sales volume of 11.75

MT for both FY14E and FY15E.

The work on turning around JSW Ispat’s operations is on and its Dolvi unit (currently

operating at 87-88 per cent utilisation) will become more profitable after the pallet and

coke oven plants are commissioned.JSW’s largest unit at Vijaynagar in Karnataka,

however, is running at 83 per cent capacity utilisation. The iron ore availability situation

in Karnataka still remains challenging. While the overall availability in the state has

improved to 18 mt, steel industries’ requirement in the state is close to 30 mt. JSW, to

meet its requirement, still depends on supplies from outside the state to the extent of

20-25 per cent. Landed blended coal costs for JSW are about $160-165 a tonne and

likely to remain at similar levels during the March quarter, too, believes the

management.

The company remains upbeat on steel demand scenario, especially from emerging

markets. While Rao said that with Chinese steel production declining, exports from

emerging markets should pick up during FY15.JSW Steel, also increased prices by up to

Rs 1,200 a tonne, or up to two per cent, across the board for February, its second

increase in a month, which should support profitability.

The management has front ended its capex programme (10500 crore in FY14-16) with a

capex guidance of 5500 crore for FY14 as against 4000 crore guided in Q2FY14. For

FY15, the company has maintained the guidance of 4000 crore with the balance to be

incurred in FY16E.

Going ahead, the company expects its profit margin to improve with the commissioning

of coke oven and pallet plants at its Dolvi unit in Maharashtra. Besides, the availability

of iron ore in Karnataka is set to improve with the Supreme Court directing the State

and Central governments to submit an action plan to improve supply. We value the

stock,and we are Neutral on the stock at a Target price Rs.797.

JSW Steel is India’s leading private sector steel producer and among the world’s most

illustrious steel companies.JSW Energy Ltd., a power utility arm of Sajjan Jindal-led JSW

group,was incorporated in 1994. Currently, it owns 3.1GW of operationalpower plants,

with another 7GW under various stages of development.It came up with an IPO in 2009

at Rs100/share. Around 50% of thecurrent operational capacity is on merchant.

Project Updates

JSW STEEL LTD.


FY12 FY13 FY14E FY15E

34368 38210 49817 49000

21879 24158 29440 28518

846 980 1301 1299

1752 2041 3879 4043

2041 2284 3228 2989

28266 31706 40937 39984

6102 6504 8880 9016

1933 2237 3179 3280

1933 2237 3179 3280

1427 1967 3076 3200

2818 2369 2730 2686

500 845 710 537

2318 1523 2020 2149

14 9 12 11

24.1 43.2 15.0 88.8

9

PAT WITHOUT EXCEPTIONAL ITEMS

ROE%

EPS

EBITDA

Depriciation

Depriciation

Interest Cost

PBT

Net tax expense / (benefit)

JSW STEEL LTD.

P/L PERFORMANCE

Power Fuel

Other expences

Expenditure

Net Revenue from Operation

Cost Of Projects & Contractual

Employee benefit Expence

All India Steel Imports & Exports

India turns into a net exporter; exports surge on

the back of improving demand in developed

markets and INR depreciation enhancing export

competitiveness


FY10 FY11 FY12 FY13

527 563 563 563

8730 15966 16186 16781

9257 16529 16750 17344

13454 12173 12889 17393

2719 4302 1376 1653

35 53 35 41

1706 2487 9714 10251

230 347 231 308

35686 46167 54238 57728

254 376 39 55

21198 25435 32529 33348

6956 6508 2832 5898

927 1246 2818 3342

2867 4410 5789 5495

696 933 1462 2106

303 2048 3047 1653

677 910 2058 2535

35686 46167 54238 57728

FY10 FY11 FY12 FY13

2.5 1.2 1.0 0.9

85.4 78.6 24.1 43.2

3.7 3.9 4.3 5.5

9.0 10.4 28.3 26.8

1.5 1.8 1.7 1.4

8.0 6.9 6.7 4.0

14.2 12.8 12.1 11.1

20.9 19.3 17.7 17.0

14.5 11.7 29.9 15.5

9.6 7.5 4.5 5.0

5.8 4.9 1.5 2.4

6.8 5.7 10.0 10.3

1.7 1.0 0.9 1.1

10

JSW STEEL LTD.

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings


Inventories

Trade receivables

EPS

Debtor to Turnover%

Trading At :

RATIOS

NPM %

Capital work-in-progress

Long-term loans and advances

B/S PERFORMANCE

Long-term provisions

Trade payables

Short-term provisions

Total liabilities

Cash and bank balances

Creditors to Turnover%

Total Assets

P/B

Intangibles

Tangible assets

ROCE VS Weighted Avg Cost to Debt




Short-term loans and advances

Weighted Average Cost of Debt %

Debt/Equity

OPM %

EBITDA %

P/E

EV/EBIDTA

ROCE%

Inventories to Turnover%


50

70

90

110

130 NIFTY JSWSTEEL

BANK OF INDIA

187

217

235

16

1M 1yr YTD

Absolute -21.6 -47.5 -18.1

Rel.to Nifty -17.9 -47.5 -18.1


3Promoters 64.1 64.1 64.1

FII 13.2 13.6 13.5

DII 15.3 15.6 16.3

Others 7.4 6.7 6.0

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 7878 8313 9024 10578 10869

Total Income 10519 11635 12790 15082 15373

PPP 5398 6694 7458 8701 8917

Net Profit 2542 2678 2749 2776 3170

EPS 46.5 46.7 47.9 43.2 49.4

11

BANKINDIA Vs Nifty




NII growth on the back of higher loan growth and margin expansion

Operating leverage remained stable

Bank’s operating leverage remained stable at 0.3% which is quite impressive. In

absolute term, operating expenses increased by 20.3% YoY in which employee cost

and other operating expenses increased by 18.7% and 22.8% respectively. Healthy

NII growth and higher operating cost led pre provisioning profit growth of 15.5% YoY.

Loan loss provisions were almost double from last quarter, but asset quality

improved

Provisions and contingencies increased by 53.3% which includes loan loss provision

of Rs.1173 cr which was double from last quarter. But in absolute term, GNPA

marginally increased by 1.4% on sequential basis while in percentage to gross

advance, it improved by 12.5 bps to 2.8% from 3%. Provisions were little higher by

4% in sequential basis taking almost flat improvement in net NPA. In percentage

term, NPA improved to 1.7% from 1.9% in previous quarter. Provision coverage ratio

without technical write-off was 38.7% and with technical write off, it stood at 63.8%.

Slippage during the quarter was at Rs.1747 cr (2% of advance) versus Rs.1469 cr

(1.8% of advance).

2271804

Nifty 6074

Mkt Capital (Rs Cr)

CMP

Target Price

Bank of India reported profit de-growth of 27% YoY largely due to higher loan

loss provision. At operating profit level, bank reported 15.5% YoY growth but

higher provisions against loan loss (almost double from last quarter) drag

profit downward. Bank’s loan and deposits grew handsomely and asset

qualities were also improved sequentially. Restructure loan was at Rs 1146 cr

(0.3% loan) which is not alarming. We have not found any stress at operating

profit level. The stock is corrected almost 10% likely due to profit de-growth.

We believe buffer up provision would be temporally phenomena. The stock

could reshape its valuation multiple. We have buy rating on the stock with

price target of Rs.217.

Company Update BUY

During quarter, Bank India reported NII growth of 17.8% YoY to Rs.2719 cr versus

our expectation of Rs.2683 largely due to higher than expected loan growth,

improvement in credit deposits ratio and margin expansion. Bank reported other

income of Rs.1097 cr versus Rs.937 cr in last quarter and Rs.1097 cr in previous

quarter. Total revenue grew by 17.6% YoY to Rs.3816 cr.

Average Daily Volume

12260


Market Data

Upside

393/126

BSE Code


532149

NSE Symbol BANKINDIA

Stock Performance

52wk Range H/L

"BUY"31th Jan, 2014


12

BANK OF INDIA


Balance sheet growth impressive

We are impressed with bank’s balance sheet growth trajectory during the quarter as bank

reported deposits growth of 30% YoY higher than peers (result so far announced) led by

term deposits growth of 35% YoY. Current deposits and saving deposits reported growth

of 24% and 14% respectively taking overall CASA deposits growth of 16%. In percentage

to total deposits, CASA ratio declined to 22.5% from 24.6% in 3QFY13 largely due to

higher growth in term deposits than CASA deposits. Loan grew by 27.2% YoY which is

highest so far result announced. Credit deposits ratio for the quarter stood at 77.4% as

against 76.8% in previous quarter and 79.2% in last quarter.

Margin expansion led by imrprovement in investment yield

NIM for the quarter was 2.89%, an improvement of 50 bps YoY due to improvement of

investment yield. However fund yield and cost of fund both were declined marginally in

sequential but investment yield improved to 8.2% from 7.9% in previous quarter.

Profit declined on account of higher loan loss provisions

Bank of India (Bank India) profit was declined by 27.1% YoY to Rs.586 cr as against our

expectation of Rs.602 cr. Profit growth was lower on account of 98% YoY rise in loan loss

provisions. Overall provisions were increased by 53.3% YoY which drag PBT to 21.3%

YoY de-growth. Tax rate were 21% versus 28.5% of PBT in previous quarter and 14.5 of

PBT in 3QFY13. Total provisions for the quarter stood at 0.4% of net advances higher

than 0.28% in 3QFY13.

Valuation & View

Bank of India reported profit de-growth of 27% YoY largely due to higher loan loss

provision. At operating profit level, bank reported 15.5% YoY growth but higher provisions

against loan loss (almost double from last quarter) drag profit downward. Bank’s loan

and deposits grew handsomely and asset qualities were also improved sequentially.

Restructure loan was at Rs 1146 cr (0.3% loan) which is not alarming. We have not

found any stress at operating profit level. The stock is corrected almost 10% likely due to

profit de-growth. We believe buffer up provision would be temporally phenomena. The

stock could reshape its valuation multiple. We have buy rating on the stock with price

target of Rs.217.


13

BANK OF INDIA

Source: Eastwind/Company


Fundamental Through Graph

NII growth on the back of higher loan growth

and margin expansion

Loan loss provisions were almost double from

last quarter, but asset quality improved

Profit declined on account of higher loan loss

provisions


14

BANK OF INDIA




Quarterly Result 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation

Interest/discount on advances / bills 7017 6631 5791 21.2 5.8 6910 -1.5

Income on investments 2207 2129 1809 22.0 3.7 2261 2.5

Interest on balances with Reserve Bank of India 546 479 298 83.4 14.0 472 -13.5

Total Interest Income 9769 9239 8023 21.8 5.7 9644 -1.3

Others Income 1097 1100 937 17.1 -0.3 1141 4.0

Total Income 10866 10340 8960 21.3 5.1 10784 -0.8

Interest Expended 7050 6712 5714 23.4 5.0 6960 -1.3

NII 2719 2527 2308 17.8 7.6 2683 -1.3

Other Income 1097 1100 937 17.1 -0.3 1141 4.0

Total Income 3816 3627 3246 17.6 5.2 3824 0.2

Employee 989 897 833 18.7 10.2 931 -5.8

Other Expenses 684 628 557 22.8 8.8 674 -1.3

Operating Expenses 1672 1525 1390 20.3 9.7 1606 -4.0

PPP( Rs Cr) 2144 2102 1856 15.5 2.0 2218 3.4

Provisions 1404 1232 916 53.3 13.9 1382 -1.5

Net Profit 586 622 803 -27.1 -5.8 602 2.7

Balance Sheet Data

Equity Capital 643 597 575 11.9 7.8 597 -7.2

Reserve & Surplus 26,672 25,686 22,698 17.5 3.8 27,243 2.1

Deposits 454,140 432,282 349,117 30.1 5.1 449,063 -1.1

Borrowings 40,545 41,751 28,686 41.3 -2.9 42,513 4.9

Other liabilities and provisions 14,492 12,727 14,890 -2.7 13.9

Total Liability 536,492 513,042 415,966 29.0 4.6 -100.0

Cash in hand 21,406 24,621 17,940 19.3 -13.1 -100.0

Cash and balances with reserve bank of india 39,662 34,658 22,580 75.7 14.4 -100.0

Investment 108,253 107,413 86,083 25.8 0.8 2,261 -97.9

Advance 351,725 332,190 276,486 27.2 5.9 345,503 -1.8

Fixed Assets 2,975 2,957 2,853 4.3 0.6

Others Assets 12,470 11,203 10,024 24.4 11.3

Total Assets 536,492 513,042 415,966 29.0 4.6

Asset Quality

GNPA 9881 8765 8898 11.0 12.7

NPA 6156 5947.3 5,228 17.7 3.5

GNPA(%) 3.0 3.0 3.5

NPA(%) 1.9 2.0 2.0

PCR(%) Without technical write off 37.7 32.1 41.2

15

BANK OF INDIA




Financials & Assuption 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 15570 20241 23139 27015 31171

Income on investments 5195 7142 7261 8562 10773

Interest on balances with Reserve Bank of India 798 834 1257 1987 1987

Others 295 264 251 1 1

Total Interest Income 21858 28481 31909 37565 43932

Others Income 2642 3321 3766 4504 4504

Total Income 24500 31802 35675 42069 48436

Interest on deposits 12218 17957 20238 29922 30362

Interest on RBI/Inter bank borrowings 813 1145 1489 1419 1419

Others 950 1065 1158 1281 1281

Interest Expended 13981 20167 22885 26987 33063

NII 7878 8313 9024 10578 10869

Other Income 2642 3321 3766 4504 4504

Total Income 10519 11635 12790 15082 15373

Employee 3492 3069 3131 0 3810

Other Expenses 1629 1871 2201 0 3656

Operating Expenses 5121 4941 5332 6381 6457

PPP( Rs Cr) 5398 6694 7458 8701 8917

Provisions 2909 4016 4709 4766 5045

Net Profit 2542 2678 2749 2776 3170

46.0 5.3 2.7 1.0 14.2

Key Balance Sheet DataDeposits 299559 318216 381840 465844 535721

Deposits Growth(%) 30 6 20 22 15

Borrowings 22021 32114 35368 43275 49766

Borrowings Growth(%) -2 46 10 22 15

Loan 213708 248833 289367 358816 366720

Loan Growth(%) 26 16 16 24 2

Investment 86677 86754 94613 117097 134662

Investment Growth(%) 27 0 9 24 15

Eastwind CalculationYield on Advances 7.3 8.1 8.0 7.5 8.5

Yield on Investments 6.3 8.7 7.1 7.3 8.0

Yield on Funds 6.5 7.8 7.7 7.5 8.4

Cost of deposits 4.1 5.6 5.2 6.4 5.7

Cost of Borrowings 8.0 6.9 6.8 7.5 7.5

Cost of fund 4.3 5.8 5.3 5.3 6.2

ValuationBook Value 322.7 365.3 416.9 434.0 0.0

P/BV 1.5 1.0 0.7 0.6 0.5

P/E 10.3 7.7 6.3 5.6 4.9

1M 1yr YTD

Absolute -7.1 2.9 35.0

Rel. to Nifty -3.4 2.5 22.0


4Promoters 56.2 56.2 56.2

FII 21.5 19.7 22.0

DII 14.0 15.4 13.1

Others 8.3 8.8 8.7



Revenue 10894 10468 4.1 11200 -2.7

EBITDA 1355 1321 2.6 891 52.0

PAT 681 669 1.8 501 35.9

EBITDA Margin 12.4% 12.6% (20bps) 8.0% 450bps

PAT Margin 6.3% 6.4% (10bps) 4.5% 180bps

16

CMP 1638 The company for 3QFY14 has registered net sales of Rs 10620 Cr down by 2.7% YoY led

by 4.5 % volume decline to 288151 units for the period under review. The decline in the

volume came majorly due to weaker performance on export business front. Export sales

volumes were down 38.6% YoY and 41.3% QoQ to 19,966 units.

Target Price 1700


Upside 4%

Maruti Suzuki India Limited

Result Update NEUTRAL Result Analysis:

Change from Previous - EBITDA for MSIL is up 52% YoY to Rs.1,355 Cr and EBITDA margin was up 448 bps YoY

to 12.3%. However results are not comparable on yearly basis as 3QFY13 does not

include impact of SPIL merger. Raw material cost as % of net sales is down 671 bps

YoY.Employee cost as % of net sales is up 62 bps YoY but down 82 bps QoQ to

2.8%.Royalty payments for Q3 FY14 were around levels of H1 FY14.

Market Data

BSE Code 532500

NSE Symbol MARUTI

Average Daily Volume 423015 On realization front, the Net realization for company is up 1.4% YoY to Rs.368547 however

there is sequential decrease in net realization mainly due weak product mix, lower export

sales number and higher contribution of Mini Segments. Discounts in 3QFY14 is at all time

high to Rs.19412/unit vs. 17,500/unit QoQ.

Nifty 6073

Stock Performance-%

52wk Range H/L 1864/1217 The net profits for the company during 3QFY14 came at Rs 681 Cr and NPM at 6.25

%.Effective tax rate is around 23.1%.Market Cap (Rs/Cr) 22,266

Recent Event :

MSIL has announced that the proposed capacity expansion (1.5 Million units per annum) in

Gujarat would be through a 100% Suzuki (parent) owned subsidiary. The subsidiary would

be fully dedicated to Maruti.

Share Holding Pattern-% How we see the deal :

1.The near term effect of the deal on PAT is neutral, as this Greenfield facility at Gujrat will

take 2 -3 year to get commissioned and another 1 year to get its full capacity utilization, this

translates period FY17 onwards.

2.The MSIL is getting cars at cost of manufacturing plus portion of incremental capex which

means MSIL will lose manufacturing margins and will getting only the trading margin. The

newly formed company will be 100 % subsidiary of Suzuki Motors Limited.

One Year Price Vs NIFTY 3.The profit sharing from the upcoming Gujrat facility would depend on the stake of Suzuki

Motor in MSIL.

4..In any case Suzuki Motor will make profit equal to its stake in MSIL whether it makes its

own capex as in this case or MSIL made capex then why did Suzuki made this huge capex.

View & Valuation:

At CMP Rs 1638 the stock is trading at highest 5 year historical P/E multiple and in current

scenario we donot see much upsides from hereon. Therefore we are Neutral for the stock

with target price Rs 1700.The CMP seems to factored almost all the upsides including

improving operational efficiency and volume growth. The stock may see some upward

movement from current price on buzz that Suzuki may increase its stake in MSIL.



"NEUTRAL"31st Jan' 14


17

Raw material cost as % of net sales is down

671 bps YoY. Employee cost as % of net sales

is up 62 bps YoY but down 82 bps QoQ to

2.8%.

Maruti Suzuki India Limited

Graphical Represenation

SALES & PAT TREND

Net sales of Rs 10620 Cr down by 2.7% YoY

led by 4.5 % volume decline to 288151 units

for the period under review.


OPM & NPM TREND




REALIZATION PER VEHICLE

Net realization for company is up 1.4% YoY to

Rs.368547 however there is sequential

decrease in net realization mainly due weak

product mix, lower export sales number and

higher contribution of Mini Segments


V- Crompton Greaves Ltd.

CMP 110

Target Price 130

Previous

Target Price

120

Upside 15%

Change from

Previous

8%

Market DataBSE Code 500093

NSE Symbol

4,251

775,133

Nifty 6,074

Stock 1M 1yr YTD

Absolute (14.2) 2.3 17.9

Rel. to Nifty (10.6) 2.3 11.0

Share 3QFY14 2QFY14 1QFY14

Promoters 42.5 42.5 41.7

FII 18.5 16.6 15.2

DII 23.8 24.5 23.7

Others 15.2 16.5 19.4


Consolidated 3QFY14 2QFY13 (QoQ)-% 3QFY13 (YoY)-%

Revenue 3351.9 3204.9 4.6% 2971.8 12.8%

EBITDA 169.3 161.3 5.0% 2.0 8322.4%

PAT 59.5 57.8 3.0% -69.0 186.2%

EBITDA Margin 5.1% 5.0% 10 bps 0.1% 500 bps

PAT Margin 1.8% 1.8% 0 bps -6.3% 810 bps

18

1 yr Forward P/B

CROMPGREAV

(Consolidated)


We have rolled forward our valuation to FY16E earnings and maintained our Accumulated rating

on CGL with a revised target price of Rs130 (Rs105 earlier) based on 14xFY16E EPS, driven by

likely turnaround in international operations and a better earnings growth trajectory. We believe

that a record backlog, better/leaner cost structure, good & increasing product basket, improved

reach in terms of geography will drive earnings & intrest coverage ratio over the next few years.

It has assumed break even EBIT level for international subsidiaries in FY14. Further, In our view,

the stock's performance would largely be driven by an improvement in overseas business, though

standalone performance would protect downsides.

Valuations :

(Source: Company/ Eastwind Research)

Consolidated order book at the quarter ended Dec'14 was Rs. 10074 crore, up 9.12% yoy.

Consolidated order inflow for the quarter was Rs. 2624 crore up 15.7% yoy. Crompton expects a

robust order intake in high value-added segments like UHV/EHV in Asia, Automation/smart grid

in the power segment, Motors in EMEA market, Railway transportation and electronic drives in

the industrial segment.


Order scenerio :

Domestic power systems and consumer products segment were key margin drivers as they

sustained healthy operating margins of 9.4% and 11.7%, respectively. Collectively, both segments

constitute 41% of total consolidated revenue. Consumer products segment continued its market

share expansion following higher distribution reach in categories like lighting (up 17% yoy and

fans up 13% yoy.

Margin to improve further :

"Rebounds begains…….."

AccumulateResult update

Mkt Capital (Rs Crores)

52wk Range H/L 72/137

Crompton consolidated net sales rose 12.8% on yearly basis to Rs 3351.9 crore during the

quarter, which were inline with street expectations. Consolidated earnings before interest, tax,

depreciation & amortisation (EBITDA) stands to Rs 169.3 crore and EBITDA margin at 4.9

percent. Power systems revenues increased 17.3 percent on yearly basis to Rs 2132.2 crore

during Dec quarter FY14, and earnings before interest & tax (EBIT) from power segment during

the quarter were Rs 53.3 crore. Meanwhile, its consumer products and industrial systems

divisions posted single digit growth in topline during the quarter and it gone by 7.3% to Rs 651

crore. EBIT of consumer products rose to Rs 75.9 crore up by 19.9% and industrial systems'

EBIT decreased by 42.7% to Rs 29.5 crore. Other income jumped 33.0% yoy to Rs 40.4 crore

while finance cost climbed to Rs 26.7 crore up by 25.6% yoy. At the current level of INR 110, we

maintain 'ACCUMULATE' at the Stock as Power sector has shown sign of revival by posting an

EBIT of Rs 53.3 crore VS Loss of Rs 104.6 crore qoq and also performance of Consumer division

was satisfactory with a sales growth of 7.25% yoy and EBIT Growth of 19.9%.

"Accumulate"31th Jan' 14


19


Key financials

Crompton Greaves Ltd.

(Source: Company/ Eastwind Research)


PARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E 2016E

Performance

Revenue 8737 9141 10005 11249 12094 13304 14634 16098

Other Income 74 110 113 63 75 110 110 110

Total Income 8811 9251 10118 11311 12170 13414 14744 16208

EBITDA 996 1278 1344 804 383 665 922 1014

EBIT 874 1122 1150 544 180 412 669 736

DEPRICIATION 122 155 194 260 203 253 253 278

INTREST COST 81 43 34 57 71 90 100 110

PBT 867 1190 1229 550 185 432 679 736

TAX 305 365 310 182 101 137 215 233

Extra Oridiniary Items 0 35 -38 0 -121 0 0 0

Reported PAT 563 860 881 368 -37 295 464 502

Dividend (INR) 75 82 82 52 30 52 52 52

DPS 1.2 1.3 1.3 0.8 0.5 0.8 0.8 0.8

EPS 8.8 13.4 13.7 5.7 -0.6 4.6 7.2 7.8

Yeild %

EBITDA % 11.4% 14.0% 13.4% 7.1% 3.2% 5.0% 6.0% 6.0%

NPM % 6.4% 9.4% 8.8% 3.3% -0.3% 2.2% 3.0% 3.0%

Earning Yeild % 13.0% 5.2% 5.1% 4.1% -0.6% 4.2% 6.6% 7.1%

Dividend Yeild % 1.7% 0.5% 0.5% 0.6% 0.5% 0.7% 0.7% 0.7%

ROE % 30.7% 34.3% 26.9% 10.2% -1.0% 8.4% 11.8% 11.4%

ROCE% 25.2% 30.0% 24.9% 9.2% 0.6% 7.5% 11.3% 11.5%

Position

Net Worth 1831 2504 3275 3611 3562 3529 3941 4391

Total Debt 718 501 395 985 1851 2000 2000 2000

Capital Employed 2549 3005 3670 4596 5413 5529 5941 6391

No of Share (Adj) 64 64 64 64 64 64 64 64

CMP 68 256 268 138 94 110 110 110

Valuation

Book Value 28.5 39.0 51.0 56.3 55.5 55.0 61.4 68.4

P/B 2.4 6.6 5.3 2.5 1.7 2.0 1.8 1.6

Int/Coverage 10.8 26.2 33.5 9.6 2.5 4.6 6.7 6.7

P/E 8 19 20 24 24 15 14

981

1094

1118

12

-2.147

1M 1yr YTD

Absolute -11.3 -18.1 -18.1

Rel.to Nifty -7.6 -18.1 -18.1


3Promoters 66.7 64.1 64.1

FII 11.0 13.2 13.6

DII 15.4 15.3 15.6

Others 6.9 7.4 6.7

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 10739 10734 13866 17734 21111

Total Income 42252 18237 22212 27035 30413

PPP 10950 10386 13199 16762 18856

Net Profit 6093 6465 8325 10658 11955

EPS 52.9 56.0 72.2 92.3 103.6

20

ICICI BANK


11104


Market Data

Upside

358/127

BSE Code 532174NSE Symbol

Healthy NII growth on the back of higher loan growth and margin expansion

During quarter, bank reported NII growth of 21.6% YoY to Rs.4256 cr on the back of

higher than expected loan growth and loan yield led by credit deposits ratio and

expansion NIM. Other income registered growth of 26.5% YoY to Rs.2801 cr versus

Rs.2166 cr in previous quarter and Rs.2215 Cr in last quarter in corresponding

quarter. Healthy NII along with higher support from other income, revenue of the

bank grew by 23.5% YoY to Rs.7057 Cr.

Result update ACCUMULATE

CMP

Target Price

Bank’s profit growth of 12.6% YoY despite of 21.6% YoY growth in NII and

28.6% growth in operating profit was largely due to higher tax provisions

made of bank (32.4% of PBT versus 27.9% of PBT in 2QFY14). During quarter,

bank has created special reserve for deferred tax liability to the tune of Rs.215

Cr as per recent RBI guideline dated 20th December 2013. Adjusting the same,

profit grew by 22% YoY which was quite impressive. But bank’s cost of fund

increased higher than loan yield which would restrict margin expansion. We

lower our book value estimates to Rs.643 from earlier of Rs.657. Accordingly

we reduce our target price to Rs.1094 from earlier of Rs.1118.

52wk Range H/L


ICICI Bank Vs Nifty


19.54 lakhs

Nifty 6073

ICICIBANK

Stable operating leverage led healthy operating profit growth

Operating leverage (opex to total assets) was remained very impressive and was

stable at 0.46% versus 0.43% in 3QFY13. Cost to income ratio of the bank improved

by 250 bps YoY to 37.4% as against 39.6%. Operating expenses increased by

15.7% YoY in which employee cost and other operating expenses increased by 6%

and 23% YoY respectively. Healthy revenue growth and controlled operating

expenses led operating profit growth of 28.6% YoY to Rs.4440 cr.

Asset quality by and large stable sequentially but provision declined

Bank reported deterioration in asset quality (GNPA) in sequential basis by 3.7% in

absoluter term. In percentage to gross advance, GNPA stood at 3.07% versus 3.1%

in previous quarter (marginally improved). Provisions were declined by 0.6% QoQ

taking net NPA increased by 15.3% QoQ. In percentage to net advance, this ratio

stood at 0.94% versus 0.85% in previous quarter. Lower provisions made PCR to

70.1% versus 73.1% in previous quarter.

Mkt Capital (Rs Cr)



Stock Performance

"ACCUMULATE"31th Jan, 2013


21

ICICI BANK

Bank’s profit growth of 12.6% YoY despite of 21.6% YoY growth in NII and 28.6% growth

in operating profit largely due to higher tax provisions made of bank (32.4% of PBT

versus 27.9% of PBT in 2QFY14). During quarter, bank has created special reserve for

deferred tax liability to the tune of Rs.215 Cr as per recent RBI guideline dated 20th

December 2013. Adjusting the same, profit grew by 22% YoY which was quite

impressive. But bank’s cost of fund increased higher than loan yield would restrict margin

expansion. We lower our book value estimates to Rs.643 from earlier of Rs.657.

Accordingly we reduce our target price to Rs.1094 from earlier of Rs.1118.


Lower growth in deposits led by muted growth in term deposits

In balance sheet front, bank’s deposits grew by 11% YoY lower than expectation largely

due to lower growth in term deposits. Demand deposits and saving deposits grew by

9.3% and 11.8% YoY taking overall CASA deposits growth to 16% YoY. In percentage to

total deposits, CASA stood at 42.9% versus 40.9% in last quarter. But in sequential

basis, bank reported 40 bps declined in CASA and borrowing also increased by 4%.

Overall cost of fund was increased by 32 bps in sequential basis which restricted margin

expansion despite of improvement in loan yield.

Higher loan growth led by retail loan followed by overseas and corporate loan

Loan grew by 16% YoY higher than expectation. Incremental loan growth came from

retail advances which grew by 22% YoY followed by oversea and corporate loan. Retail

loan now constituted 39% of total loan versus 37% in last quarter. Retail loans are

generally high yield in nature and higher loan constitute would result of margin sustaining

at current level. We are susceptible about the margin improvement because of higher

cost of fund as bank reported lower CASA and higher borrowing as a percentage to

NDTL in sequential basis.

Margin expansion marginally on account of higher cost of fund than deposits

NIM improved marginally from previous quarter to 3.32% from 3.31% largely due to

higher cost of fund than loan yield. Sequentially, cost of fund increased to 9.1% from

8.8% in previous quarter due to higher borrowing cost along with lower CASA ratio. Loan

yield improved to 9.9% from 9.7% in previous quarter. We believe NIM of the bank would

be highest as increasing cost of fund would cushion loan yield improvement.

Valuation & View


22

ICICI BANK

Source: Company/Eastwind


Chart Focus

NII growth on account of higher than expected

loan growth and margin expansion

Healthy revenue growth and impressive

operating leverage led operating profit

Despite of higher revenue grwoth and

operating profit growth, net profit muted

because of higher tax provisions against DTL


23

ICICI BANK

Quarterly Result




Quarterly Result 3QFY14 2QFY14 3QFY13 % YoY % QoQ 3QFY14E Variation

Interest/discount on advances / bills 8224 7737 7066 16.4 6.3 7971 -3.1

Income on investments 2923 2839 2742 6.6 2.9 3012 3.0

Interest on balances with Reserve Bank of India 34 47 136 -75.3 -28.5 52 55.8

Others 275 190 194 42.1 44.7 236 -14.1

Total Interest Income 11456 10813 10138 13.0 5.9 11271 -1.6

Others Income 2801 2166 2215 26.5 29.3 2325 -17.0

Total Income 14257 12980 12353 15.4 9.8 13597 -4.6

Interest Expended 7200 6770 6639 8.4 6.4 6766 -6.0

NII 4256 4044 3499 21.6 5.2 4505 5.9

Other Income 2801 2166 2215 26.5 29.3 2325 -17.0

Total Income 7057 6210 5714 23.5 13.6 6831 -3.2

Employee 997 872 941 6.0 14.4 0 -100.0

Other Expenses 1620 1451 1321 22.7 11.7 0 -100.0

Operating Expenses 2617 2322 2261 15.7 12.7 2596 -0.8

PPP( Rs Cr) 4440 3888 3452 28.6 14.2 4235 -4.6

Provisions 695 625 369 88.4 11.2 657 -5.4

PBT 3745 3263 3084 21.4 14.8 3578 -4.5

Tax 1212 911 834 45.4 33.1 1073 -11.5

Net Profit 2533 2352 2250 12.6 7.7 2504 -1.1

Balance Sheet

Net Worth 74057 73103 67119 10.3 1.3 75608 2.1

Deposits 316970 309046 286418 10.7 2.6 318387 0.4

Borrowings 150940 145356 147149 2.6 3.8 153387 1.6

Investment 171985 168829 166842 3.1 1.9 3012 -98.2

Loan 332632 317786 286766 16.0 4.7 328689 -1.2

Asset Quality

GNPA (Rs Cr) 10448 10078 9803 6.6 3.7

NPA (Rs Cr) 3121 2707 2185 42.8 15.3

% GNPA 3.1 3.1 3.4

% NPA 0.9 0.9 0.8

PCR(w/o technical write-off)(%) 70.1 73.1 77.7

24

ICICI BANK

Financials & Assuption




Quarterly Result 2011 2012 2013 2014E 2015EInterest/discount on advances / bills 19098 22130 27341 31646 34992

Income on investments 9181 9684 11009 11785 13220

Interest on balances with Reserve Bank of India 469 491 543 184 184

Others 1334 1238 1182 946 946

Total Interest Income 30081 33543 40076 44561 49342

Others Income 31513 7503 8346 9302 9302

Total Income 61595 41045 48421 53863 58644

Interest on deposits 11315 14304 16889 18217 20402

Interest on RBI/Inter bank borrowings 1683 1469 2087 0 0

Others 6345 7035 7234 10146 11364

Interest Expended 19343 22808 26209 27812 28840

NII 10739 10734 13866 16749 20502

Other Income 31513 7503 8346 9302 9302

Total Income 42252 18237 22212 26051 29804

Employee 4393 3515 3893 4451 5096

Other Expenses 26910 4335 5120 5441 6229

Operating Expenses 31302 7850 9013 9892 11325

PPP( Rs Cr) 10950 10386 13199 16159 18478

Provisions 4631 1583 1803 2592 2853

PBT 0 8803 11397 13567 15626

Tax 0 2338 3071 4071 4688

Net Profit 6093 6465 8325 9496 10938

Balance Sheet

DEPOSITS 259106 255500 292,614 321,875 360,500

Deposits Growth 7.3 -1.4 14.5 10.0 12.0

Borrowings 125839 140165 145,341 158,535 177,560

Borrowings Growth(%) 8.8 11.4 3.7 9.1 12.0

Investment 209653 159560 171,394 187,360 209,843

Growth(%) 12.5 -23.9 7.4 9.3 12.0

Advances 256019 253728 290,249 339,592 380,343

Growth(%) 13.4 -0.9 14.4 17.0 12.0

Eastwind CalculationYield on Advances 7.5 8.7 9.4 9.3 9.2

Yield on Investments 4.7 6.4 6.7 6.3 6.3

Cost of deposits 4.4 5.6 5.8 5.7 8.0

Cost of Borrowings 6.4 6.1 6.4 6.4 6.4

Cost of fund 5.0 5.8 6.0 0.0 5.9

ValuationBook Value 480 524 578 643 682

P/BV 2.3 1.7 1.5 1.6 1.5

P/E 5.5 7.3 9.4 9.2 10.6

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stock advisory for today - natural view on the stock jsw steel ltd, marico and buy heromotoco

Economy & Finance

yoy growth

sales growth

net sales of rs

healthy volume growth

slower volume growth

banks profit growth

profit degrowth

price target of rs