AXIS BANK : "BOOK PART PROFIT " 25th Feb 2014 We advice our investor to book part profit in Axis Bank as bank has achieve our target price level of Rs.1217. We still stick to our valuation on account of bank’s uncomfortable earnings and asset quality stress. Bank’s profitability was up by 19% YoY on the back of right back of investment depreciation provisions. Exposure to risky sector remained high which would keep asset quality under stress. These factors compel us to value bank at 1.5 times of FY14E’s book value......................................................... ( Page : 5-9) SHREE CEMENT. "BOOK PROFIT " 25th Feb 2014 The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market scenario the price is fare enough to trade.But looking at future capex plans and sluggish demand we belive the earnings and profitability of Shree cement may fall for the next two consecutive quarters.The profitability may fall due to incrising depriciation.Till now the company's depriciation level is stable but it may surprise further.so we recommend its a better pic to book profit. ................................................................. ( Page : 2-4) IEA-Equity Strategy DENA BANK : "Neutral" 24th Feb 2014 Bank’s performance was lower than our expectation in all fronts and reported very weak set of numbers. Operating as well as financials metrics were remained muted. Profitability was declined by 67% YoY despite of tax reversal owing to muted growth in NII and higher operating expenses. We are pessimist about the growth parameters. We have neutral view on the stock. .............................................................. ( Page : 16- 20 ) J&K BANK : "BUY" 20th Feb 2014 J&K Bank’s profitability increased by 11% YoY on account of reversal of provisions against NPA and investments, further on account of lower tax rate profits inflated. Operating profit was flat at 1.4% YoY led by moderate NII growth which further led to margin compression. We lower our price target to Rs.1525 from earlier of Rs.1578 which implies 1.3 times of FY14E book and 6 times of price earning. .................................................................................... ( Page : 26- 30) Bank of Baroda’s profitability was up by 3.6% YoY due to right back of depreciation provisions. Bank’s operating and financials metrics were remained muted except healthy loan growth. Margin compressed sequentially but management guided domestic NIM of 3% from present of 2.95% which seems achievable if we look at balance sheet structure. We value bank at Rs.634/share which implies 0.75 times of FY14E’s book value. ......................................................................... ( Page : 21- 25) 25th Feb, 2014 Edition : 213 BANKBARODA : "BUY" 21th Feb 2014 Vardhman Textiles : "BUY" 24th Feb 2014 Nestle India :"The nest becomes weaker" "Neutral" 24th Feb 2014 For 4QCY13, Nestle Ind reported below numbers than street expectations in all counts, sales grew by 4.7%(YoY) led by 3.7% domestic growth and 20.9% export growth. Its domestic sales contribute 94% and exports 6% of sales. While, PAT marginally declined by 0.7% on YoY basis. At a CMP of Rs 5043, stock trades at 15.9x P/BV of CY14E. We have a “Neutral” view on stock. .................................................................. ( Page : 10- 12) Considering the favourable export scenario and completion of capacity expansions, we remain positive on FY14. We, hereby, initiate our coverage with Vardhman Textiles to BUY with a target price of Rs.412 . Currently the stock is trading at 0.8x p/b , we cut our Earning parameter for FY15 and cut p/b to 0.7x for FY15 . Looking at the current earning growth and environment the stock is looking very good but due to lack of trigeers in FY15 we are really conservative for FY15 . ................................................. ( Page : 13-15) Narnolia Securities Ltd, India Equity Analytics Daily Fundamental Report on Indian Equities
31
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India Equity Analytics Today: Book Profit on Shree Cement and Axis Bank Stock
Narnolia Securities Limited believe for the current market scenario the price is fare enough to trade.But looking at future capex plans and sluggish demand we belive the earnings and profitability of Shree cement may fall for the next two consecutive quarters.Also Value of Axis bank at Rs.1217/share implying 1.5 times of FY14E’s book value which is quite reasonable as per our view
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AXIS BANK : "BOOK PART
PROFIT "25th Feb 2014
We advice our investor to book part profit in Axis Bank as bank has achieve our target price level of Rs.1217. We still stick to our valuation on
account of bank’s uncomfortable earnings and asset quality stress. Bank’s profitability was up by 19% YoY on the back of right back of
investment depreciation provisions. Exposure to risky sector remained high which would keep asset quality under stress. These factors compel
us to value bank at 1.5 times of FY14E’s book value......................................................... ( Page : 5-9)
SHREE CEMENT. "BOOK PROFIT " 25th Feb 2014
The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market scenario the price is fare enough to trade.But looking at
future capex plans and sluggish demand we belive the earnings and profitability of Shree cement may fall for the next two consecutive
quarters.The profitability may fall due to incrising depriciation.Till now the company's depriciation level is stable but it may surprise further.so
we recommend its a better pic to book profit. ................................................................. ( Page : 2-4)
IEA-Equity
Strategy
DENA BANK : "Neutral" 24th Feb 2014
Bank’s performance was lower than our expectation in all fronts and reported very weak set of numbers. Operating as well as financials metrics
were remained muted. Profitability was declined by 67% YoY despite of tax reversal owing to muted growth in NII and higher operating
expenses. We are pessimist about the growth parameters. We have neutral view on the stock. .............................................................. ( Page :
16- 20 )
J&K BANK : "BUY" 20th Feb 2014
J&K Bank’s profitability increased by 11% YoY on account of reversal of provisions against NPA and investments, further on account of lower tax
rate profits inflated. Operating profit was flat at 1.4% YoY led by moderate NII growth which further led to margin compression. We lower our
price target to Rs.1525 from earlier of Rs.1578 which implies 1.3 times of FY14E book and 6 times of price earning.
Nestle India :"The nest becomes weaker" "Neutral" 24th Feb 2014
For 4QCY13, Nestle Ind reported below numbers than street expectations in all counts, sales grew by 4.7%(YoY) led by 3.7% domestic growth
and 20.9% export growth. Its domestic sales contribute 94% and exports 6% of sales. While, PAT marginally declined by 0.7% on YoY basis. At a
CMP of Rs 5043, stock trades at 15.9x P/BV of CY14E. We have a “Neutral” view on stock. .................................................................. ( Page : 10-
12)
Considering the favourable export scenario and completion of capacity expansions, we remain positive on FY14. We, hereby, initiate our
coverage with Vardhman Textiles to BUY with a target price of Rs.412 . Currently the stock is trading at 0.8x p/b , we cut our Earning parameter
for FY15 and cut p/b to 0.7x for FY15 . Looking at the current earning growth and environment the stock is looking very good but due to lack of
trigeers in FY15 we are really conservative for FY15 . ................................................. ( Page : 13-15)
Narnolia Securities Ltd,
India Equity AnalyticsDaily Fundamental Report on Indian Equities
SHREE CEMENT.
Profitability and Earning drag may surprise for the next cosecutive quarters.4772
4791
4791
0%
NA
500387
16572
4143
6186
1M 1yr YTD
Absolute 8.2 9.5 8.1
Rel. to Nifty 9.5 3.8 4.0
2QFY14 1QFY14 4QFY13
Promoters 64.8 64.8 64.8
FII 8.2 8.2 8.1
DII 5.9 5.7 5.9 MAT Credit support the buttom line :Others 21.2 21.3 21.2
Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY14
Revenue 1318 -7.7 5.6 1428 1248
EBIDTA 271 -24.7 8.8 360 249
Net Profit 115 -46.9 -32.9 217 172
EPS 33 -46.9 -32.9 62 49
EBIDTA% 21 -18.4 3.1 25 20
NPM% 9 -42.5 -36.5 15 14(In Crs)
2
The 2m-ton Line-IX clinker unit at Ras, Rajasthan, was commissioned in Jun’13.Line X of
similar capacity along with 25MW of WHRS (at the same location) is expected by
Jun’14.Two grinding units of 2m tons each, at Ras and in Bihar,are being constructed and
expected by Jun’14.We expect Shree to be a 21.5m-tpa company by Jun’15.It plans to
foray into high demanding eastern.Total capex for these expansion is Rs.3,000 crore
which is spread over next 2 years.
The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market
scenario the price is fare enough to trade.But looking at future capex plans and sluggish
demand we belive the earnings and profitability of Shree cement may fall for the next
two consecutive quarters.The profitability may fall due to incrising depriciation.Till now
the company's depriciation level is stable but it may surprise further.so we recommend
its a better pic to book profit.
BSE Code
SHREECEMNSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
5210/3413
Please refer to the Disclaimers at the end of this Report.
Stock Performance-%
Share Holding Pattern-%
1 yr Forward P/B
Source - Comapany/EastWind Research
On the expansion front :
During the Quarter Company got MAT (minimum alternative tax) credit entitlement of
Rs9.25 crore and deferred tax of Rs1.79 crore. This reduced total tax payable amount to
Rs15.27 crore from Rs26.31 crore.
Previous Target Price
Nifty
Volumes grew by18 % but prices came down by 5%. So the EBITDA margin has hit
badly:Shree Cement Ltd has reported a 47% fall in its December quarter net profit on
lower sales as well as 5% degrowth in realization. PAT impacted due to lower other
income (down by 70% YOY), Depriciation burden on EBIDTA (Depriciation increased 41%
YOY). Volumes grew by18 % to3.8mn ton from 3.3mn ton QOQ. Net profit decreased by
47% yoy from Rs.217.44 crore (Rs.62.42 per share) in 2Q13 to Rs.115.49 crore (Rs.33.15
per share) in 2Q14.Total net income from operations stood at Rs.1318.13 crore in 2Q14,
a 6% fall yoy from Rs.1401.23 crore in 2Q13.Other income decreased from Rs.30.2 crore
in 2Q13 to Rs.9.9 crore in 2Q14.In the mean time company declares a Rs.10 as interim
dividend/share.
Power Segment: Realization Down By 15% : For power generation the net realization has
come down from Rs 383 to Rs 334 compared to last year same quarter and in the first
quarter it was still better at Rs 397.So the power realization is down by 13 percent and
hence sales also have come down by 35 percent to Rs.290 Cr. At the same time 14%
increase in its profitability from power segment to Rs112.56 crore while its cement
segment reported 79% fall in its profitability to Rs37.65 crore.
Update Book Profit
Market Data
Average Daily Volume (Nos.)
Upside
Change from Previous
CMP
Target Price
"Book Profit"25th Feb' 14
Narnolia Securities Ltd,
0
1000
2000
3000
4000
5000
6000
Ma
r-0
2
Oct-
02
Ma
y-0
3
De
c-0
3
Jul-
04
Fe
b-0
5
Se
p-0
5
Ap
r-0
6
No
v-0
6
Jun
-07
Jan
-08
Au
g-0
8
Ma
r-0
9
Oct-
09
Ma
y-1
0
De
c-1
0
Jul-
11
Fe
b-1
2
Se
p-1
2
Ap
r-1
3
No
v-1
3
PRICE 1.5x2x 2.5x3x 3.5x4x 4.5x
Outlook :
FY11 FY12 FY13 FY14E
3454 5898 5590 5409
203 163 188 197
3656 6061 5779 5550
905 1500 1513 1409
602 1006 915 1090
2569 4252 4029 4318
885 1646 1561 1091
676 873 436 562
98 235 193 138
-99 69 115 54
365 619 1004 478
20.8 23.1 26.1 11.0
3
From the view company Operations in the high utilisation North and Central markets,
capacity expansions underway, low gearing and strong RoE are fundamental positives.
We believe although, near term challenges in terms of a slowdown in demand for
cement would remain, strong balance sheet and better efficiency in terms of cost
remains a key positive for this company to overcome challenges.Company Management
is bull for the rest two quarters of FY2014 as according to them demand has already
buttom out.We are positive on the stock as it always beats its peers group with lower
operational cost.
The stock is trading at 4x in 1 yr forward P/B chart.we believe for the current market
scenario the price is fare enough to trade.But looking at future capex plans and
sluggish demand we belive the earnings and profitability of Shree cement may fall for
the next two consecutive quarters.The profitability may fall due to incrising
depriciation.Till now the company's depriciation level is stable but it may surprise
further.so we recommend its a better pic to book profit.
we recommend book profit at a 11% high,and stay out from the stock for medium
term,till the triggers hit.
Company Description : Shree Cement (SCL) is a cement producer operating in the two
segments cement and power. As of June 30, 2012, the company had a cement capacity
of 13.5 million tonnes per annum (MTPA) and power capacity of 560 MW. The
company’s brands include Shree Ultra,Bangur Cement and Rockstrong Cement. It has
manufacturing facilities at Beawar and Ras in Ajmer and Pali district and grinding units
at Khushkhera, Suratgarh and Jaipur, respectively, in Rajasthan and Roorkee in
Uttarakhand.
Source - Comapany/EastWind Research
Net tax expense / (benefit)
PAT
ROE%
Power and fuel
Freight and forwarding
Expenditure
EBITDA
Depriciation
Interest Cost
Source - Comapany/EastWind Research
SHREE CEMENT.
P/L PERFORMANCE
Net Revenue from Operation
Other Income
Total Income
Management Corner : From mid-January there is a big change in demand scenario
because of the Indian calendar, the prices have improved, the demand has also
improved and they think that January to June some impact of elections will be there -
pre-election demand and other things. So margins should be better than 21 percent.
Narnolia Securities Ltd,
-20
-10
0
10
20
30
40
50
60
1100
1150
1200
1250
1300
1350
1400
1450
1500
Revenue
Growth
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0 NPM % OPM % EBITDA %
0
2
4
6
8
10
12
0
50
100
150
200
250
300
350
400
450
EBIDTA
INTEREST SERVICE COVERAGERATIO
FY10 FY11 FY12 FY13
35 35 35 35
1798 1951 2699 3809
1833 1986 2734 3844
1789 1472 818 443
318 217 143 534
28 16 17 18
171 185 584 81
472 267 178 87
4906 4940 5973 6160
0 0 0 0
752 1167 1521 1782
967 729 97 133
299 308 205 378
358 404 503 530
82 108 181 315
416 499 459 369
415 429 363 326
4906 4940 5973 6160
FY10 FY11 FY12 FY13
4.4 3.6 3.8 4.2
212.3 118.6 177.5 288.2
2.3 3.1 3.1 5.6
4.7 5.3 9.9 1.4
1.0 1.2 0.9 0.9
4
Tangible assets
Inventories to Turnover%
Short-term loans and advances
Total Assets
P/B
EPS
Debtor to Turnover%
Short-term borrowings
Long-term provisions
Trade payables
Short-term provisions
Total liabilities
Intangibles
Long-term loans and advances
Inventories
Trade receivables
Cash and bank balances
Creditors to Turnover%
SHREE CEMENT.
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
B/S PERFORMANCE
Trading At :
RATIOS
Capital work-in-progress
Source - Comapany/EastWind Research
Narnolia Securities Ltd,
AXIS BANK
1237
1217
1147
-2
6
1M 1yr YTD
Absolute -2.2 -17.4 -17.4
Rel.to Nifty 0.8 -21.0 -21.0
Current 4QFY13 3QFY1
3Promoters 33.9 33.9 33.9
FII 43.2 43.4 40.7
DII 9.7 4.9 8.8
Others 13.2 17.8 16.6
Financials Rs, Cr
2011 2012 2013 2014E 2015E
NII 6566 8026 9666 12224 14775
Total Income 11238 13513 16217 19146 21697
PPP 6377 7413 9303 11206 12367
Net Profit 3340 4224 5179 5826 6934
EPS 81.4 102.2 110.7 124.2 148.2
5
(Source: Company/Eastwind)
Stock Performance
Average Daily Volume
Change from Previous
Axis Bank Vs Nifty
Share Holding Pattern-%
3.14 lakh
Nifty 6186
Market Data
Upside
1549/764
BSE Code 532215
NSE Symbol
Company Updated BOOK PART
PROFITCMP
Target Price
Axis Bank is now trading at Rs.1237/share which met our target price of
Rs.1217. This price implies P/BV multiple of 1.5 times which is quite
reasonable as per our view. We advice our investor to book part profit from
this stock as we neither see improvement of asset quality nor revival in
economy in near term. In 3QFY14’s result, bank’s profitability was up by 19%
largely due to reversal of investment depreciation otherwise operating profit
was just up by 10.7% YoY. Bank’s exposure to risky sector (Power +
Infrastructure) remained high at 12.87% as against 12.64% in previous quarter.
However, fresh slippage was marginally softened to Rs.589 cr versus Rs.618
on sequential basis. Impairment of assets (GNPA+ Restructure Assets)
remained stable at 3.7% of net advance which was higher among peers.
Previous Target Price
Asset quality pressure remained persist during the quarter with GNPA and net NPA
increased by 10% and 20% YoY respectively in absolute term. Fresh slippage inch
up improved to Rs.589 cr as against Rs.618 cr in previous quarter. In percentage
term GNPA and net NPA stood at 1.42% and 0.47% as against 1.36% and 0.42%
respectively in previous quarter. Provision coverage ratio without technical write off
declined by 270 bps QoQ led by lower provisions made on sequential basis.
Impairment of assets (GNPA + Restructure Assets) for the quarter remained stable
at 3.7% which was higher among peers. Moreover bank’s exposure to risky sector
(Power + Infrastructure) was remained high at 12.87% of net advance where
slippage risks are relatively high.
55229
AXISBANK
52wk Range H/L
Lower multiple on account of uncomfortable earnings and lower corporate
loan demand
We have lower valuation multiple of bank in compare to its peers on account of
uncomfortable earnings and asset quality stress. Operating performance of bank
was remained under pressure as bank’s core operating revenue (NII + Other
Income) grew by 12.6 YoY owing to lower fee income led by muted corporate and
retail fee income. Corporate loan segment which constituted 46% of total loan grew
by 3% YoY while retail segment loan grew by 44% YoY which constituted 33% of
total loan. Incremental loan growth came from retail segment implying that bank has
to maintain retail growth trajectory for industry average loan growth of 15%. Demand
of corporate loan remained weak due to prevailing economy scenario. So loan
growth for FY14 is likely to be line with system credit growth due to weakness in
corporate loan demand and moderation in retail loan.
Asset quality pressure persist; exposure to risky sector remained high
Mkt Capital (Rs Cr)
"BOOK PART PROFIT "
25th Feb, 2014
Narnolia Securities Ltd,
6
Valuation Band
1 Yr forward P/E
Moderate growth in profit & loss
AXIS BANK
Please refer to the Disclaimers at the end of this Report.
Bank’s profitability was up by 19% due to reversal of investment depreciation. Overall
provisions and contingencies were lower by 71% QoQ which led PBT growth of 22%
YoY. At operating profit level, bank grew by 10.7% YoY which was lower among peers
(HDFC Bank 29 YoY, ICICI bank 28.6%). Bank’s NII grew by 19.6% YoY largely due to
margin expansion of 14 bps YoY which was supported by low cost deposits franchise.
Core operating revenue (NII+ other income) grew 12.6% owing to muted other income
growth of 1.8% YoY.
Valuation & View
We value bank at Rs.1217/share implying 1.5 times of FY14E’s book value which is quite
reasonable as per our view. We have given this multiple on account of uncomfortable
earning and asset quality stress. Bank’s profitability was up due to reversal of investment
depreciation otherwise growth at operating profit level was remained lower as compare to
its peers. Asset quality increased at moderate pace with high exposure in risky sector
where fresh slippage risks are remaining high.
1 Yr forward P/BV
Narnolia Securities Ltd,
7
AXIS BANK
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Fundamenatl throught graph
NII growth led by healthy CD ratio and
margin expansion on YoY basis
Lower other income and higher CI ratio led
muted PPP growth
Profit growth was higher than expectation on
the back of lower provisions
Narnolia Securities Ltd,
8
Quarterly Result
AXIS BANK
Source: Eastwind/Company
Please refer to the Disclaimers at the end of this Report.
Narnolia Securities Ltd,
Quarterly Result 3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation