Indain Equity Analysis by Narnolia Securities Limited - 12 December 2013

email: [email protected], website : www.narnolia.com

Narnolia Securities Ltd,

402, 4th floor 7/1, Lords Sinha Road Kolkata 700071, Ph 033-32011233 Toll Free no : 1-800-345-4000

AUTO SALES DASHBOARD : NOVEMBER 2013 4th Dec 2013

Automobile sales for the month of November contracted mainly due to tepid sales after the end of festive season & high base effect. The

better monsoon resulted in better rural sales especially for 2 Wheeler and Tractor. Going forward we expect rate of decline to recede with

possible recovery in the overall economy ........................................... ( Page : 18)

IEA-Equity

Strategy

12th Dec, 2013

Jyothy Lab : "Efforts for stability" "BUY" 5th Dec 2013

Recent management commentary reveals that the company is planning for inorganic growth with Rs 250 Cr of bank balance (post repayment of

its debt) and especially looking at regionally strong brands. We expect that company’s new management and new strategy of product reach

would energize its growth story in near future. Hence, the management has maintained its guidance of achieving around 22% - 25% revenue

growth and OPM of 14% - 15% for FY14............................... ( Page : 15-17)

Amara Raja Batteries Limited : OPTIMISTIC MANAGEMENT SPEECH "BUY" 6th Dec 2013

Amara Raja had posted its 2QYFY14 sales at Rs 805 Cr up by 12.3 % YoY on the back of the strong demand in the automotive replacement and

industrial battery business. There was double digit growth in both of these segments.The automotive battery business reported double digit

growth in revenues........................................ ( Page : 13-14)

NIIT Tech : "Next Journey to Billion Dollar" "BUY" 9th Dec 2013

NIIT Tech management expressed its confidence of driving growth in the organization and looking at an aspirational goal of USD 1 billion

revenue in next 5 years.its order wins in the recent quarters have been healthy, lending visibility on revenue growth. At a CMP of Rs332, trades

at 7.5x FY14E earnings. We retain “ buy” view on the stock with a price target of Rs360 (revised from Rs310)............................................. (

Page : 11-12)

TATA Steel Ltd : "HOLD" 10th Dec 2013

Over the past two quarters, Tata Steel has reported strong growth in volumes in the domestic operations despite weak demand. Its Europe

operations have been broadly better than expectations indicating some stability and predictability from its Europe operations. Tata Steel’s

earnings growth is likely to be driven by higher sales volume in FY2014-15 on the back of 2.9mn ton brownfield expansion project in

Jamshedpur and steady improvement in profitability of European operations. We have arrived at "Hold" rating on the stock watching our step

for a target price of Rs.340 in near term. ................... ( Page : 7-10)

LUPIN : "Optimistic Guidance " "BUY" 11th Dec 2013

The management of the company in its latest interaction said that company is confident of logging 15-20 % CAGR in US and India in the days to

come on the back of rich pipeline as well as acquisition based strategy . ……………………………………… ( Page : 5-6)

COAL INDIA : "BUY" 12th Dec 2013

We expect modest increase in sales volumes growth during FY2013-15 on account of poor offtake capabilities of CIL. Also, we expect CIL’s

margins to decline during FY2014 due to lower e-auction realizations and higher staff costs/other expenses.News flows related to further

divestment in CIL by the government is likely to keep the stock price under pressure in our view. we recommend Buy rating on the stock with

our previous target price Rs.350............................................ ( Page : 2-4)

India Equity Analytics

Coal India LTD.

CCI’s Rs 1,773-crore penalty:289

350

350

21%

NA

533278

176226 Coal India to get Rs 2,119 cr extra on coal price revision :17622

6308

1M 1yr YTD

Absolute -1.3 -21.2 -21.4

Rel. to Nifty 2.8 8.8 8.6

2QFY14 1QFY14 4QFY13

Promoters 90.0 90.0 90.0

FII 5.5 5.4 5.4

DII 5.3 2.3 2.0

Others 2.2 2.4 2.6

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14

Net Revenue 15411 5.8 -6.4 14573 16472

EBITDA 2794 -2.4 -29.4 2862 3958

Depriciation 495 27.8 4.1 387 476

Interest Cost 8 -22.2 7.0 10 7

Tax 1412 -4.2 -27.9 1475 1958

PAT 3052 -0.8 -18.2 3078 3731(In Crs)

2

The company’s net sales grew 5.8% yoy to 15,411cr (above our estimate of 15,083cr).

Sales volumes stood at 109mn ton in 2QFY2014 compared to 102mn ton in 2QFY2013.

The blended realizations declined by 1.4% yoy to 1,414/ton (despite price hike) due to

lower realization on FSA coal.Despite 5.8% yoy growth in top-line, EBITDA decreased by

8.2% yoy to 3,176cr due to higher raw material costs (18.1% yoy to 2,251cr) and

contractual expenses (27.6% yoy to 1,394cr). The depreciation expenses increased by

27.8% yoy to 495cr; hence, adjusted net profit was flat yoy at 3,043cr .1 yr Forward P/B

Coal India 2QFY2014 top-line was above our estimate. The company’s net sales grew

5.8% yoy to 15,411cr. Sales volumes stood at 109mn ton in 2QFY2014 compared to

102mn ton in 2QFY2013. The blended realizations declined by 1.4% yoy to 1,414/ton

despite price hikes. Its FSA coal’s realizations were lower than expected due to lower

grade coal. The company liquidated 11mn ton of old stock.

Source - Comapany/EastWind Research

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

Mkt Capital (Rs Crores)

Average Daily Volume (Nos.) Coal India Ltd is likely to get additional revenue of Rs 2,119 cr in this fiscal on account of

revision in dry fuel prices.CIL (Coal India Ltd) has revised and rationalized the basic

notified prices of all the grades of non-coking coal except GI, G2 and G5.The estimated

additional revenue due to revision of basic notified price for the current financial year is

Rs 2,119 cr.CIL had revised the prices of all grades of coal, barring three, for all its eight

producing subsidiaries with effect from May 28 this year. Mahanadi Coalfields which is

expected to contribute Rs 686 crore, followed by Rs 664 crore from Northern Coalfields

and Rs 495 crore from South Eastern Coalfields.

Nifty

Stock Performance-%

Share Holding Pattern-%

Market DataBSE Code

NSE Symbol COALINDIA

52wk Range H/L 372/238

Company UpdateCMP The Competition Commission of India (CCI) imposed a Rs 1,773 cr fine on Coal India, the

country' monopoly commercial coal miner, based on a complaint filed by two power

companies that India's monopoly producer of coal abused its dominance. The

government owns 90% stake in Coal India, and has traditionally drawn hefty dividend

income from the cash rich coal company. In 2012-13, the company paid a total dividend

of Rs 8,843 cr out of which the government's share was Rs 7,959 cr. A Rs 1800-crore fine

could possibly mean less profits for the company and less dividend income for its owners.

But as the main owner, the government, will pocket this amount in the form of a fine, it

will not be poorer in any way.

Target Price

Previous Target Price

Upside

Change from Previous

"Buy"12nd Dec' 13


OUTLOOK:

FY10 FY11 FY12 FY13

431 431 436 452

416 425 433 465

1073 1183 1441 1468

404744 390243 377447 364736

1066 1105 1155 1240

FY11 FY12 FY13 FY14E

50234 62415 68303 69864

7573 5123 6556 8383

1755 2013 2333 2595

4580 4901 5802 6057

20481 26705 27943 28943

40390 40857 50219 53738

9843 21558 18084 16126

1673 1969 1813 1860

79 54 45 34

5595 6484 7623 7332

10868 20588 17356 15870

33 51 36 33.1

3

EBITDA

Depriciation

Interest Cost

Tax

PAT

ROE

Cost Of Projects & Contractual

Power and fuel

contractual expenses

Employee benefit Expence

Expenditure

Revenue Generation From unit Ton

Avg Man Power (in numbers)

Productivity Per Man

P/L PERFORMANCE

Net Revenue from Operation

OPERATING MATRIX

Coal Production in MT

Coal Offtake in MT

Coal India LTD.

Coal India 2QFY2014 top-line was above our estimate. The company’s net sales grew

5.8% yoy to 15,411cr. Sales volumes stood at 109mn ton in 2QFY2014 compared to

102mn ton in 2QFY2013. The blended realizations declined by 1.4% yoy to 1,414/ton

despite price hikes. Its FSA coal’s realizations were lower than expected due to lower

grade coal. The company liquidated 11mn ton of old stock.

CIL’s e-auction realizations have declined over the past one year on account of decline

in international coal price coupled with weak domestic demand. Going forward, we

expect CIL’s profitability to be affected due to lower e-auction realizations, sticky staff

costs and other expenses. Moreover, given the price hike taken during 4QFY2013, we

do not expect CIL to undertake any further price hikes in the near-term.

We expect modest increase in sales volumes growth during FY2013-15 on account of

poor offtake capabilities of CIL. Also, we expect CIL’s margins to decline during FY2014

due to lower e-auction realizations and higher staff costs/other expenses.News flows

related to further divestment in CIL by the government is likely to keep the stock price

under pressure in our view. we recommend Buy rating on the stock with our previous

target price Rs.350.


FY10 FY11 FY12 FY13

6316 6316 6316 6316

20956 26998 34137 42156

27273 33314 40453 48472

343 1334 1305 1078

1620 33 0 0

2545 22461 28271 31144

772 645 829 837

1404 12387 15595 20447

5443 8490 9785 12385

0 779 759 712

12035 12065 12681 12754

2211 2057 1848 3496

610 845 1017 1181

4402 5586 6071 5618

2169 3419 5663 10480

39078 45806 58203 62236

8066 11180 13478 16189

17921 21646 24688 25479

FY10 FY11 FY12 FY13

0.0 5.7 5.5 4.0

0.0 17.3 32.6 27.5

4.9 22.8 29.2 52.7

1.7 4.3 4.3 4.2

1.0 3.7 3.1 2.8

FY10 FY11 FY12 FY13

10727 12819 16323 15948

-131 -3822 3565 -6839

10596 8997 19888 9109

950 697 -10410 -1833

2163 2911 -7382 -7852

13708 12606 2095 -575

Down 21% from its 52week High

Up 14% from its 52 week Low

4

Net Cash Flow during year

Trading At :

Net Cash From Operation

Cash From Investment

Cash from Finance

CASH FLOWS

Cash from Operation

Changes In Working Capital

Creditors to Turnover%

Inventories to Turnover%

P/B

EPS

Debtor to Turnover%

Total Assets

RATIOS

Trade receivables

Cash and bank balances

Short-term loans and advances

Capital work-in-progress

Long-term loans and advances

Inventories

Total liabilities

Intangibles

Tangible assets

Long-term borrowings

Short-term borrowings

Long-term provisions

Trade payables

Short-term provisions

Coal India LTD.

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity


BUY

1M 1yr YTD

Absolute -1 46 41

Rel. to Nifty -4 39 23

Current 1QFY14 4QFY1

3Promoters 46.8 46.8 46.8

FII 31.5 30.7 28.8

DII 12.1 12.4 14.3

Others 9.7 10.1 10.0

Financials Rs, Crore

2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%

Revenue 2668 2476 7.8 2301 15.9

EBITDA 660 590 11.9 515 28.2

PAT 417 405 3.0 297 40.4

EBITDA Margin 24.7% 23.8% 90bps 22.4% 240bps

PAT Margin 15.6% 16.4% (70bps) 12.9% 270bps

5

LUPIN"Optimistic Guidance "

Target Price 1006

Previous Target Price -

Result Update

CMP 873

The management of the company in its latest media interaction stated that the company is

confident of logging 15-20 % CAGR in US and India in the days to come on the back of rich

pipeline as well as acquisition based strategy. Management further said that company is

expecting to launch about 100 new drugs in next three years. This new launch will include

an entire range of oral contraceptives and opthal products.

One Year Forward P/E

(Source: Company/Eastwind)

39101

Average Daily Volume 395892

15%Upside

We have slightly raise our TP to Rs 1006 on the back management guidance post the

results. The management is quite optimistic for its business outlook going forward and

believes that the company will achieve its set target going forward.


The Net profits for 2QFY14 came at Rs 417 Cr. The higher incidence of tax during the

quarter is due to tax provision of Rs 51 Cr made on dividends received from subsidiaries

Lupin earlier posted slightly better than expected 2QFY14 results ,the company reported

its net sales at Rs 2631 Cr up by 18 % YoY on the back of strong business performance

from US and Europe formulation segment. The segment grew by 31% YoY to Rs. 1108.9

Cr during 2Q FY14, against Rs. 844.4 Cr for Q2, FY 2012

‐

13.This segment contributes

42% to overall Company sales.US brands business contributed 10% of total US sales,

whereas the generics business contributed 90% for the quarter under review.

The Indian formulation business contributed 25% of the Company’s

overall revenues for the quarter.Company’s India formulation business grew by 9%

recording revenues of Rs. 6,635 m. during Q2, FY 2013

‐

14, as compared to Rs. 6,064 m.

for Q2, FY 2012

‐

13. The company’s rest other business geographies to have performed

relatively good for the company.

The company has filed 7 ANDAs and received 6 ANDA approvals in the quarter. Cumulative

ANDA filings with the US FDA now stand at 183 with the company having received 92

approvals to date.

Stock Performance-%


Mkt Capital (Rs, Cr)

The operating EBITDA for the 2QFY14 came at Rs 660 Cr and OPM stands at 24.7%.The

RM cost decreased by 7.7% to 32.0% of net sales at Rs. 841.3 Cr during 2QFY14 as

compared to Rs. 889.8 Cr for 2Q FY 13.Manufacturing & other expenses increased by to

30.4% of net sales at Rs. 798.8 Cr during 2Q FY14 as compared to Rs. 591.7 Cr for the

same period last fiscal.Revenue expenditure on R&D stood at 8.3% of net sales at Rs.

217.2 Cr.

Nifty 6332

Change from Previous -


NSE Symbol LUPIN

Market Data

BSE Code 500257

"BUY"11th Dec' 13


6


LUPIN

Sales and PAT Trend (Rs)


OPM %

NPM %

company reported its net sales at Rs 2631 Cr

up by 18 % YoY on the back of strong

business performance from

US and Europe formulation segment.

The higher incidence of tax during the

quarter is due to tax provision of Rs 51 Cr

made on dividends received from subsidiaries




TATA Steel Ltd.

420

440

NA

5%

NA

From the Management Corner the key takeaways are :

500470

40863

28604

6363

1M 1yr YTD

Absolute 21.7 5.5 9.5

Rel. to Nifty 23.4 0.3 3.5

2QFY14 1QFY14 4QFY13

Promoters 31.4 31.4 31.4

FII 13.6 13.2 13.9

DII 26.1 26.3 27.3

Others 29.0 29.2 27.5

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14

Net Sales 36645 7.4 11.7 34133 32805

EBIDTA 3705 60.4 0.5 2310 3688

Other Income 203 0.5 10.3 202 184

Interest Cost 1067 9.8 7.6 972 992

Depriciation 1444 8.2 2.9 1335 1403

Tax 447 -32.4 27.4 661 351

PAT 917 -325.3 -18.2 (407) 1121(In Crs)

7

Upside


Initial CoverageCMP

Target Price

Company Update:

TATA Steel’s consolidated net sales increased 7.4% yoy to 36,645Cr. TSE sales volumes

grew by 10.0% yoy to 3.46mt .The consolidated EBITDA increased by 60.4% yoy to

3,705cr. The company’s tax expenses declined 32.3% yoy. There was an exceptional gain

related to deferred tax write-back of 390cr. Adjusting for this, the net profit stood at

527cr, compared to a loss of 407cr in 2QFY2013.



Stock Performance-%


1 yr Forward P/B


Outlook: Over the past two quarters, Tata Steel has reported strong growth in volumes in

the domestic operations despite weak demand. Its Europe operations have been broadly

better than expectations indicating some stability and predictability from its Europe

operations. Tata Steel’s earnings growth is likely to be driven by higher sales volume in

FY2014-15 on the back of 2.9mn ton brownfield expansion project in Jamshedpur and

steady improvement in profitability of European operations. We have arrived at "Hold"

rating on the stock watching our step for a target price of Rs.340 in near term.

On the back of a consistent operational improvement at the company’s European

operations We are positive on the stock in long run .However, on the back of ongoing

capacity expansion, the gross debt is expected to increase from 66074 crore (FY13) to

76919 crore (FY14E) and 77543 crore (FY15E).

Market DataBSE Code

TATASTEEL

Average Daily Volume (Nos.)

NSE Symbol

52wk Range H/L


448/195

Nifty

Focus on Domestic Market: The Management aims to sell incremental sales volumes

from Jamshedpur expansion mainly in the domestic market. This is unlike other flat steel

producers such as JSW Steel and Essar Steel who have been opportunistically raising

exports, considering INR depreciation against the USD alongside low domestic demand.

Odisha Project could provide further upside in long-term: The Company aims to make

value added steel products at the new facility in Odisha (3mtpa) where the blended

realizations could be potentially higher than existing products by 2015. We believe timely

clearance for expansion of iron ore mine is critical for the plant. The company's Odisha

plant is highly automated and will require fewer employees/ton compared to its

Jamshedpur facility.

Debt levels to rise: Debt of the company is likely to rise till 2015 as it draws debt for

Odisha expansion.

"Hold"10th Dec' 13


INDIAN Operation:

8

EUROPIAN Operation:

The apparent steel demand in the European Union continued to deteriorate during

Financial Year 2012-13 having decreased by about 9.7% in 2012. In aggregate, the steel

demand in Europe is currently about 30% below pre-crisis levels, which has impacted

the demand and customer buying behavior significantly. TSE’s performance in the

Financial Year 2012-13 was also impacted on account of operational issues faced in

rebuilding the Blast Furnace at Port Talbot, UK and undertaking of major repairs of the

Blast Furnace at Ijmuiden. Even though the market demand was relatively muted. The

rebuilding of the Blast Furnace and other management tasks and initiatives may

position TSE on a better platform for Financial Year 2013-14 even though the market is

expected to be subdued for the next 12 months. The European operations are

undertaking structural improvement measures including supply chain transformation,

differentiated product strategy, reduction of manufacturing costs and overheads (head

count currently 25% below pre-crisis levels).

TATA Steel Ltd.

TATA Steel Profile:

Tata Steel is among the top ten global steel companies with an annual crude steel

capacity of over 28 mtpa. It is now one of the world's most geographically-diversified

steel producers, with operations in 26 countries and a commercial presence in over 50

countries. The Tata Steel Group, with a turnover of US$ 24.82 billion in FY 2012- 2013,

across five continents and is a Fortune 500 company. Tata Steel’s larger production

facilities include those in India, the UK, the Netherlands, Thailand, Singapore, China and

Australia. Operating companies within the Group include Tata Steel Limited (India),

Tata Steel Europe Limited (formerly Corus), NatSteel, and Tata Steel Thailand (formerly

Millennium Steel).

The Indian Steel industry witnessed an increase in crude steel production of 5.4% y-o-y,

where as the real consumption increased only by 3.3% with imports registering a sharp

increase on account of lower import duties applicable to ASEAN countries. The

slowdown in fixed asset investment and lackluster automotive demand impacted

margins of steelmakers adversely. In Financial Year 2013-14, Indian operations are

expected to benefit on account of stabilization of the commissioned capacity, sourcing

coke internally and reduced impact of exchange fluctuations because of part liquidation

of foreign currency loans. The shift to an enhanced product-mix with new cold rolling

facilities being set up and the collaboration with Nippon Steel to produce high strength

automotive steels is expected to aid profitability.


FY10 FY11 FY12 FY13

102393 118753 132900 134712

1186 680 1573 479

103579 119433 134473 135191

44092 53283 65745 60536

5549 6390 6660 7434

16463 15840 17229 18918

94350 102006 120483 122390

8043 16747 12417 12321

4492 4415 4517 5575

3022 3956 4250 3968

1715 9056 5223 3257

2152 3246 3636 3229-15 60 173 214

-1684 3046 3362 -7390

-2009 8983 5390 -7058

22814 35386 42616 34172

-1.4 16.8 4.8 1.0

257 371 439 352

2.64 0.90 0.98 1.13

FY10 FY11 FY12 FY13

-0.31 4.97 1.51 0.25

3.43 10.33 5.87 4.99

7.76 14.02 9.23 9.11

-185.06 5.38 20.51 116.19-2.41 9.11 5.18 -6.87

-23 94 55 -73

9

EBITDA

Depriciation

Interest Cost

VALUATION

NPM %

Net Worth

ROE%

Book value per share

OPERATION & PAT

Net Revenue from Operation

Other Income

Total Income

Total Expenditure

TATA Steel Ltd.

Source - Comapany/EastWind ResearchMinority Interest

Exceptional items

PAT

Cost Of Projects

Freight and forwarding

Employee benefit Expence

PBT

Tax

P/EROCE%

EPS Source - Comapany/EastWind Research


EBITDA %

P/B

OPM %


FY10 FY11 FY12 FY13

887 959 971 971

21927 34427 41645 33201

22814 35386 42616 34172

884 889 1091 1669

28059 49251 45238 46858

25041 3794 4699 8115

53100 53045 49937 54972

1769 2188 2504 3155

3789 4585 4715 5356

22020 18457 20529 21779

2806 3395 3476 2943

109738 135488 146852 146906

1635 1790 2851 2959

14542 15298 17355 13065

31778 34778 39081 51978

12383 13552 20196 14277

3237 4688 2623 2497

4801 8685 6837 7098

18687 24055 25598 24091

11624 14812 14878 13994

6788 10859 10799 9860

1961 3547 3717 4061

2181 3159 1398 760

109738 135488 146852 146906

FY10 FY11 FY12 FY13

5600 13638 10312 10195

Net Cash From Operation 10502 6463 11385 13324

(4700) (8379) 3705 (12321)

(5135) 5993 (8462) (2045)

Net Cash Flow during year 667 4077 6628 (1042)

4.8% Down from its 52week High112% Up from its 52 week Low

10

TATA Steel Ltd.

Total equity

Minority Interest

Long-term borrowings

Short-term borrowings

Cash from Operation

Tangible assets

Capital work-in-progress

Total liabilities

Total Borrowings

Deferred tax liabilities (net)

Long-term provisions

Trade payables

Short-term provisions

Trading At :

Current investments

Total Assets

Cash Flows

Cash From Investment

Cash from Finance

B/S Performance

Share capital

Reserve & Surplus

Intangibles

Goodwill on consolidation

Non-current Investments

Long-term loans and advances

Inventories

Trade receivables

Cash and bank balances

Short-term loans and advances


NIIT Tech

1M 1yr YTD

Absolute 18.4 19.5 26.8

Rel. to Nifty 18.29 6.1 23.1


Promoters 31.19 31.23 31.29

FII 29.21 29.04 27.79

DII 19.94 19.67 19.52

Others 19.66 20.06 21.4

Financials2QFY14 1QFY14 (QoQ)-% 2QFY13 (YoY)-%

Revenue 587.3 541.9 8.4 500.1 17.4

EBITDA 88.6 78.2 13.3 84.8 4.5

PAT 60.4 52 16.2 43.1 40.1

EBITDA Margin 15.1% 14.4% 70bps 17.0% (190bps)

PAT Margin 10.3% 9.6% 70bps 8.6% (170bps)

11

"Next Journey to Billion Dollar"

CMP 332

Target Price 360

Company update In an interview to Media, NIIT Tech management expressed its confidence of driving

growth in the organization and looking at an aspirational goal of USD 1 billion revenue

in next 5 years.

NSE Symbol NIITTECH

Buy

1 year forward P/E

Rs, Crore



View and Valuation: We expects good growth from Travel & Tourism vertical in FY'14

but not the same level of the growth, But the BFSI expected to be softer. However, the

MFG and Govt verticals expected to improve going forward. Company’s Order wins in

the recent quarters have been healthy, lending visibility on revenue growth. At a CMP of

Rs332, trades at 7.5x FY14E earnings. We retain “ buy” view on the stock with a price

target of Rs360 (revised from Rs310).

During the 2QFY14, they secured fresh orders of $84 million, leading to $248 million

worth of orders executable over the next 12 months.

Change from Previous 16%

Previous Target Price 310

Upside 8%

Market DataBSE Code 532541

Consistent in order addition: Fresh orders of USD 84Mn versus USD 154 mn in Q1 were

secured during the quarter leading to USD 263Mn worth of orders executable over the

next 12 months. In 1QFY14, Company had huge business in the domestic market which

was USD 65 million intake from the Airports Authority of India (AAI). But in Q2 FY14,

order has primarily been in the international market.

Stock Performance




Nifty 6260

2011


The Company's growth in past 3years gives the confidence of driving growth going

forward. NIIT Tech has been strong performer from the slowdown with CAGR of 30%

in the last 3 years and even we look at it in dollar terms, it has been about 22-23%.

Next journey to USD 1 billion in next 5 years, company would report at a CAGR of 20%

in INR term and 18% in USD term for FY13-19E.

Aggressive in the US market:The company is expecting slight uptrend in the US market

(Us market contributes 41% of sales) led by recent healthy demand environment. The

company’s focus would be very sharply on those developed markets particularly the US

as well as Asian market going forward. That will be one aspect of growth strategy.

Scouting for acquisition: NIIT Tech’s focus is on strengthening the industry segments by

meaning full acquisition particularly in the insurance and the travel space. Its

management has indicated that they are constantly on the lookout and in conversation

with the potential assets. Therefore, certain amount of inorganic initiative is important

to sustain the growth momentum.

Eyeing on Infrastructure services: NIIT Tech’s large engagements typically involved with

significant amount of infrastructure management services, which is a strong practice in

the organization. The travel vertical and the infrastructure management services line

will be key areas of focus for NIIT, going forward.

Aspects of growth strategy:

"BUY"9th Dec' 13


12

NIIT Tech

Operating Metrics;



Financials;


. 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14

Banking and Finacial Services 13% 13% 12% 12% 12% 14%

Insurance 21% 20% 19% 19% 18% 19%

Transport 40% 42% 42% 37% 36% 37%

Manufacturing 7% 6% 6% 6% 7% 6%

Government 8% 5% 8% 11% 13% 10%

Others 11% 14% 13% 15% 14% 14%

Americas 36% 38% 37% 38% 39% 41%

EMEA 39% 39% 40% 37% 35% 36%

RoW 25% 23% 23% 25% 26% 23%

DSO-days 84 75 76 82 98 100

Top-5 30% 32% 34% 32% 31% 36%

Top-10 43% 47% 48% 47% 46% 49%

No of Headcounts 7444 7617 7882 8158 8207 8017

Sales Mix-Geography

Revenue Concentration %

Headcounts

Sales Mix-Verticles

Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 913.7 1232.25 1576.48 2021.36 2385.41 2863.75

Employee Cost 503.71 601.36 891.12 1115.1 1347.75 1589.38

Other expenses 239.75 393.1 415.26 576.96 667.91 816.17

Total expenses 743.46 994.46 1306.38 1692.06 2015.67 2405.55

EBITDA 170.24 237.79 270.1 329.3 369.74 458.20

Depreciation 35.81 31.46 36.42 56.69 65.73 73.49

Other Income 7.64 13.6 30.37 22.75 71.56 71.59

EBIT 134.43 206.33 233.68 272.61 304.00 384.71

Interest Cost 0 2.22 3.84 1.91 4.89 3.67

Profit (+)/Loss (-) Before Taxes 142.07 217.71 260.21 293.45 370.68 452.64

Provision for Taxes 14.42 32.3 63.75 75.05 105.64 131.26

Net Profit (+)/Loss (-) 127.65 185.41 196.46 218.4 265.03 321.37

Growth-% (YoY)

Sales -6.8% 34.9% 27.9% 28.2% 18.0% 20.1%

EBITDA 2.3% 39.7% 13.6% 21.9% 12.3% 23.9%

PAT 9.6% 45.2% 6.0% 11.2% 21.4% 21.3%

Expenses on Sales-%

Employee Cost 55.1% 48.8% 56.5% 55.2% 56.5% 55.5%

Other expenses 26.2% 31.9% 26.3% 28.5% 28.0% 28.5%

Tax rate 10.1% 14.8% 24.5% 25.6% 28.5% 29.0%

Margin-%

EBITDA 18.6% 19.3% 17.1% 16.3% 15.5% 16.0%

EBIT 14.7% 16.7% 14.8% 13.5% 12.7% 13.4%

PAT 14.0% 15.0% 12.5% 10.8% 11.1% 11.2%

Valuation:

CMP 170.25 184.65 270.9 262.35 332 332

No of Share 5.88 5.93 5.96 6.02 6.02 6.02

NW 579.78 752.11 922.2 1094.12 1350.45 1662.62

EPS 21.7 31.3 33.0 36.3 44.0 53.4

BVPS 98.6 126.8 154.7 181.7 224.3 276.2

RoE-% 22.0% 24.7% 21.3% 20.0% 19.6% 19.3%

P/BV 1.7 1.5 1.8 1.4 1.5 1.2

P/E 7.8 5.9 8.2 7.2 7.5 6.2

BUY Company hopeful to maintain double digits growth for second half of the year.

1M 1yr YTD

Absolute 4.0 29.0 69.0

Rel. to Nifty 5.0 23.0 53.0


3Promoters 52.1 52.1 52.1

FII 11.1 10.8 10.1

DII 15.0 14.2 15.3

Others 21.9 22.9 22.6

Financials Rs, Crore


Revenue 807 894 (9.7) 719 12.2

EBITDA 142 145 (2.1) 118 20.3

PAT 95 98 (3.1) 70 35.7

EBITDA Margin 17.6% 16.2% 140bps 16.4% 120bps

PAT Margin 11.8% 11.0% 80bps 9.7% 200bps

13

The operating EBITDA for the 2QFY14 came at Rs 142 Cr and OPM at 17.6%.The OPM

improves by nearly 118 bps mainly due to decrease in purchase of stock in trade as

percentage of sales. The purchase of stock in trade as percentage of sales stands at 3%

versus 7% for the same time last fiscal. However RM cost to sales have increased to 64%

from 59% due to rise in the price of major component of RM, lead and an employee benefit

cost was higher by 60 bps to 4.8% during the period.

The management of the company after results said that company will maintain its margins at

17-18 % for the rest of the fiscal with no pricing moderation. The management further said

that company is confident of maintaining double digit growth for the second half of the year.

The company believes that there is improvement in the market share.

The Company's effort to enhance the capacities of Two-wheeler battery in the existing plant

has witnessed some delay and is likely to go on stream by end January 2014. The enhanced

capacities will support the Company to commence business with other major Two-wheeler

OEM's and to grow the aftermarket business in a big manner. The green field project for

enhancement of Four-wheeler capacity is progressing as per schedule and is likely to

commence production by Q2 of next financial year.

Target Price 365

Previous Target Price 315

CMP 328

4%

Upside

Amara Raja Batteries Limited

OPTIMISTIC MANAGEMENT SPEECH

Result Update

One Year Forward P/Bv Band


5,606


Nifty 6241

AMARAJABAT

Stock Performance-%


Mkt Capital (Rs, Cr)



11%

Market Data

BSE Code 500008

The stock is currently trading at CMP Rs 328 and it has achieve our first TP Rs 315.The

strong 2QFY14 results , Optimistic management speech and strong business outlook going

forward raises positive view on the stock. We have slightly tweaked our TP up to Rs 365 on

the back of above fundamental reasons.

NSE Symbol


Amara Raja had posted its 2QYFY14 sales at Rs 805 Cr up by 12.3 % YoY on the back of

the strong demand in the automotive replacement and industrial battery business. There

was double digit growth in both of these segments.

The automotive battery business reported double digit growth in revenue, supported by

strong volume expansion both in 4 wheeler and 2 wheeler batteries in the replacement

market, however the OEM demand continued to be sluggish. The trading volume in the

home UPS business suffered due to unfavorable season on account of mild summer and

good monsoon.

The net profits for the 2QFY14 came at Rs 95 Cr and NPM at 11.7% .The other income for

the quarter came at Rs 7 Cr and Tax rate stands at 29 %.

"BUY" 06th

Dec' 13


14


RM Cost as % Sales


Lead costs which accounts for a major chunk

of its expenses were higher than the year ago

quarter. As a per cent of sales, raw materials

were at 64 % up 500 bps over the year-ago

period.


SALES & PAT TREND

The expansion in OPM seems largely due to

decrease in purchase of stocks in trade costs

by 430 bps to 3% .

Growth in sales came on the back of the

strong demand in the automotive

replacement and industrial battery business.

There was double digit growth in both of

these segments.

Amara Raja Batteries Limited

OPM & NPM TREND



Jyothy Lab

200

260

-

30%

-

1M 1yr YTD

Absolute 3.5 3.9 -

Rel. to Nift 6.0 -1.0 -


Promoters 63.7 63.7 65.6

FII 16.0 17.0 16.5

DII 9.8 9.1 9.6

Others 10.5 10.2 8.4

Financials Rs, Cr


Revenue 306.1 319.2 -4.1% 230.14 33.0%

EBITDA 42.7 48.6 -12% 21.4 100%

PAT 20.9 28.7 -27% 1.4 1393%

EBITDA Margin 13.9% 15.2% (130bps) 9.3% 460bps

PAT Margin 6.83% 8.99% (230bps) 0.61% 620bps

15

"Efforts for stability"

Jyothy Lab has aggressively raised around Rs 262.5 Cr by issuing shares to Promoters

group (Sahyadri Agencies) on preferential basis and Rs400cr of Negotiable Certificate

of Deposits (NCD) coupon payable after 3 years. Now inflow of Rs 662 would be

utilized to pay its outstanding debt of Rs 548cr as on 30th Sept 2013.

Recent management commentary reveals that the company is planning for inorganic

growth with Rs 250 Cr of bank balance (post repayment of its debt) and especially

looking at regionally strong brands. We expect that company’s new management and

new strategy of product reach would energize its growth story in near future. Hence,

the management has maintained its guidance of achieving around 22% - 25% revenue

growth and OPM of 14% - 15% for FY14.

Average Daily Volume

3315


Market Data

211/140

BSE Code 532926

NSE Symbol JYOTHYLAB

Mkt Capital (Rs Cr)

CMP


1 yr Forward P/B


51716

Nifty 6161

Recently, Jyothy Lab witnessed better numbers with 22% sales growth (standalone) led

by 25% volume growth and 8% price/mix led growth. Apart from detergents business

which grew slower versus other categories due to intense price/promotion war between

top-2 players, all other power brands continue to post strong growth which has grown

by 36%. PAT growth was over the head to Rs 21cr from Rs 1.4cr(2QFY13).

View and Valuation: The Company’s products are available through 2.9 mn outlets in

India and have direct reach of 1 mn outlets. Though the company expects the sub-

stockist will increase by 20% from the current 2000 to 2400 by the end of FY14. We

believe the distribution restructuring would lead to generate sales and company’s

presence in highly demanding categories would help to manage high margins and

volume growth simultaneously. We revise our view on the stock from "Neutral" to "Buy"

with a target price of Rs 260, at a CMP of Rs200, stock trades at 3.7x FY15E P/BV.



Stock Performance

Going forward, the company will focus on brand building with extension of current

brands and continue to adapt to the continuous changes of consumers. Management

is confident that these efforts will further strengthen brands and establish better

consumer connect.

Segments/ Brandwise Performance: In its bread and butter business detergent & soap

segment, it has reported a 35% yoy growth led by a strong 77% growth in the Ujala

whitener revenues, a 24% growth in dishwash portfolio and 18% - 20% growth in Henko.

Home care revenues was up 37%, driven by strong growth in Maxo as well as the other

smaller brands in this segment. Maxo revenues grew 33% on YoY basis.

Healthy margin rampup: The EBITDA Margin expanded by 466 bps to 13.9%. In an

inflationary environment there was an impact of 2% of higher freight charges on the

OPM which would have been absent in a normal business environment.

Upside

Company update BUY

Target Price

52wk Range H/L

"BUY"5th Dec' 13


16

Jyothy Lab

Margin-%


Sales Mix-segment (%)




Geographical Presence (PAN India)

RM Cost and Ad Spend-(% of sales)



Region JLL Henkel Total

East 13% 27% 19%

North 22% 22% 22%

South 52% 37% 47%

West 13% 14% 13%

17


Financials


Jyothy Lab

►The company's products are available through 2.9 mn outlets in India and have direct

reach of 1 mn outlets. Now, company does not expects to increase from the current level,

it expects the sub-stockist will increase by 20% from the current 2000 to 2400 by the end

of FY14.

Take away from management guidance:►The management is confident of achieving its target of 22% - 25% revenue growth and

OPM of 14% - 15% for FY14E.

►The mgmt said that its dishwash brand Pril has seen its market-share taken away by

Dettol's newly launch dishwash product. The company is going to double its ad-spend on

Pril in FY14.

► The management is confident of maintaining the strong growth rate in Ujala fabric

whitener.

► The company is planning to planning to raise up to Rs 400 crore of nonconvertible

debenture at zero coupon bonds and also palnning to acquire back IL&FS Trust Company

stake in Jyothy Fabricare Service (JFSL) for about Rs 70 crore. Meanwhile, promoters will

infuse Rs 250 crore by way of a preferential allotment of 1.5 crore shares by the end of

Q3.


Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E

Sales 596.32 626.39 912.99 1105.96 1349.27 1646.11

Raw Materials Cost 317.19 320.27 502.99 584.35 688.13 855.98

Employee Cost 75.38 81.31 113.67 130.48 148.42 172.84

Advertisement and Publicity 26.62 33.99 41.79 95.54 134.93 148.15

Other expenses 85.31 111.52 170.46 165.92 175.41 230.46

Total expenses 504.5 547.09 828.91 976.29 1146.88 1407.42

EBITDA 91.82 79.3 84.08 129.67 202.39 238.69

Depreciation 12.36 13.03 24.65 22.43 26.10 31.84

Other Income 17.8 16.91 22.73 5.202 53.97 65.84

EBIT 79.46 66.27 59.43 107.24 176.29 206.84

Interest Cost 1.7 1.99 23.83 68.22 63.25 49.25

Profit (+)/Loss (-) Before Taxes 95.56 81.19 58.33 44.222 167.01 223.44

Provision for Taxes 21.48 15.43 19.94 -14.87 31.73 42.45

Net Profit (+)/Loss (-) 74.08 65.76 38.39 59.092 135.28 180.99

Growth-% (YoY)

Sales 65.3% 5.0% 45.8% 21.1% 22.0% 22.0%

EBITDA 88.3% -13.6% 6.0% 54.2% 56.1% 17.9%

PAT 93.0% -11.2% -41.6% 53.9% 128.9% 33.8%

Expenses on Sales-%

RM Cost 53.2% 51.1% 55.1% 52.8% 51.0% 52.0%

Employee Cost 12.6% 13.0% 12.5% 11.8% 11.0% 10.5%

Ad spend 4.5% 5.4% 4.6% 8.6% 10.0% 9.0%

Other expenses 14.3% 17.8% 18.7% 15.0% 13.0% 14.0%

Tax rate 22.5% 19.0% 34.2% -33.6% 19.0% 19.0%

Margin-%

EBITDA 15.4% 12.7% 9.2% 11.7% 15.0% 14.5%

EBIT 13.3% 10.6% 6.5% 9.7% 13.1% 12.6%

PAT 12.4% 10.5% 4.2% 5.3% 10.0% 11.0%

Valuation:

CMP 169.85 219.80 155.00 175.00 200.00 200.00

No of Share 7.30 8.10 16.10 16.00 16.00 16.00

NW 387.76 631.10 612.42 638.56 726.69 860.53

EPS 10.15 8.12 2.38 3.69 8.46 11.31

BVPS 53.12 77.91 38.04 39.91 45.42 53.78

RoE-% 19.1% 10.4% 6.3% 9.3% 18.6% 21.0%

P/BV 3.20 2.82 4.07 4.38 4.40 3.72

P/E 16.74 27.07 65.00 47.38 23.65 17.68

Bajaj-Auto:

18

The monthly performance automobile sector for Nov 2013 on yearly basis remains largely

declining except for 2 Wheeler and Tractor segments. The better monsoon resulted in better

rural sales especially for 2 Wheeler and Tractor. The companies like Heromoto Corp and M&M

have shown good monthly performance however Bajaj-Auto and TVS Motor (Unrated )

reported volume decline for the month. The slowdown in economic activity continued to

impact growth in the commercial vehicle segment. All the major players like Tata Motors,

Ashok Leyland have continued to witness volume decline in a successive two months. The post

festive season month seems to much more harsh for the automobiles manufacturers as

nothing goes in their favors.

The export business which was performing consistently good for almost every auto

companies in the past, however has witness decline in this month. Major companies like

Maruti Suzuki and Tata Motors have seen disruption in their export business

The increased excise and custom duty on SUVs continued to show its effects in the month

under review.The effect is clearly visible on the declining sales of SUV business segment of

M&M and Maruti.The better monsoons resulted in better rural sales and which reflected in

good Tractors and Two wheeler sales but still high ownership cost of cars made customers

abstain from four wheelers sales.

Automobile sales for the month of November contracted mainly due to tepid sales after the

end of festive season & high base effect. Going forward we expect rate of decline to recede

with possible recovery in the overall economy .The current scenario does not provide with

any quick turnaround and one can expect only slow and gradual progress in the industry.

On the whole, in the light streched valuation and business outlook we will continue to

maintain our previous recommendation and will tracking for any event in the sector and its

consequent impact on our coverage universe.


AUTO SALES DASHBOARD : NOVEMBER 2013


The performance highlights of few major

players of our coverage area is as under :

Tata Motors: The company reported sales of

40863 units, down 39% YoY & 21% MoM. CV

sales continue to bleed with 40% decline in

overall CV sales to 26816 units.

Maruti Suzuki : Maruti reported sales of

92140 units, down 11% YoY & 12% MoM.

Domestic & Export sales declined 6% YoY &

46% YoY to 85510 & 6630 units respectively.

Mahindra & Mahindra :Vehicle sales for the

company declined 18% YoY & 22% MoM to

39255 units. Tractor sales increased 13% YoY

& declined 39% MoM to 23119 units.

Total vehicle sales declined by 17% YoY to

310591 units.

Motorcycle sales declined 15% YoY to 278703

units.


Company

Nov-13 Oct-13 Nov-12 MoM (% Change) YoY(% Change)

2 Wheeler 278703 348323 326727 -20.0% -14.7%

3 Wheeler 31888 37000 45566 -13.8% -30.0%

BAJAJ-AUTO 310591 385323 372293 -19.4% -16.6%

Domestic Sales 85510 96062 90882 -11.0% -5.9%

Export Sales 6630 9025 12318 -26.5% -46.2%

MARUTI 92140 105087 103200 -12.3% -10.7%

Domestic Sales 36361 47787 46755 -23.9% -22.2%

Exports 2994 2771 1388 8.0% 115.7%

M&M 39255 50558 48143 -22.4% -18.5%

Commercial Vehicles 26816 32793 44323 -18.2% -39.5%

Passenger Vehicles 10376 14133 18031 -26.6% -42.5%

Exports 3671 4712 4146 -22.1% -11.5%

TATAMOTORS 40863 51638 66500 -20.9% -38.6%

Commercial Vehicles 2715 4093 4487 -33.7% -39.5%

Dost & STILE 2660 2710 2883 -1.8% -7.7%

ASHOKLEY 5375 6803 7370 -21.0% -27.1%

2 Wheeler 155604 186376 166783 -16.5% -6.7%

3 Wheeler 6304 4062 5054 55.2% 24.7%

TVSMOTORS 161908 190438 171837 -15.0% -5.8%

AUTO SALES DASHBOARD : NOVEMBER 2013 PERFORMANCE CHART

Sales Volume (Units)

HEROMOTOCO 530530 625420 502306 -15.2% 5.6%

19

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information and should not be reproduced or redistributed to any other person in any from. The report/message is based upon publicly available information, findings of our research wing

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these are subject to change without 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 that past 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

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Indain Equity Analysis by Narnolia Securities Limited - 12 December 2013

Investor Relations

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