india equity analytics for today - neutral rating on yes bank, cmc and buy niit tech

"BUY" 16th Jan 2014

For 3QFY14, NIITTECH reported marginally below numbers than street estimates, sales was unchanged at Rs587.3cr because of reduced

purchase for resale (PFR) in domestic Government business while revenues from services grew 4.3% sequentially. Company’s Order wins in the

recent quarters have been healthy, lending visibility on revenue growth. At a CMP of Rs 376, trades at 6.9x FY15E earnings. We retain “ buy”

view on the stock with a price target of Rs 440 (revised from Rs360) ........................... ( Page :2-4)

Zensar Tech :"Better growth trajectory" "BUY" 14th Jan 2014

The deal booking and pipeline is good and expects to perform well going forward. It expects double digit growth in the Enterprise Services

business for the FY15E on the back of healthy pipeline. Also, it anticipates good growth from the IMS for the FY'15E. Considering healthy order

pipeline and its earning visibility in near future, we maintain “BUY” view on the stock and we revise our target price from Rs 400 to Rs 440. At a

CMP of Rs 412, stock trades at 7.2x FY14E EPS .............................................. ( Page : 20-21)

16th Jan, 2014

Edition : 185

IEA-Equity

Strategy

Coal India LTD : "BUY" 15th Jan 2014

CMC : "Nothing for excitement" "Neutral" 16th Jan 2014

we expect that its earning visibility and order from government side in coming 2 quarter could be impacted because of general election

schedule in India (earns 41% revenue from India). For a near to medium -term prospect, we are not much excited on the stock taking its earning

visibility in near term. We had already advised to book profit on 9th Jan 2014 at a target price of Rs 1690, now we have a “Neutral” view on the

stock. At a CMP of Rs 1527, stock trades at 16.5X FY15E earnings ................................... ( Page : 9-11)

YES BANK : "Neutral" 16th Jan 2014

Yes Bank profit growth was higher than expectation due to lower provisions made of bank despite of reporting higher delinquencies. Balance

sheet growth on sequential basis declined led by lower incremental deposits (other than CASA) whereas advance grew handsomely. Leverage

ratio (Total asset to Net worth) has been declining from past four quarters indicating no surplus liquidity in balance sheet. Moreover bank need

additional borrowings to fund its growth trajectory, this would result of higher cost of fund and margin compression. We remain have neutral

view on the stock and reduce our target price to Rs.388 from Rs.443.................... ( Page :5-8)

NIIT Tech :"Focused on growth story"

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.Recently Coalindia after a long discussion with govt

declared Rs29/share intrim dividend .which recovers our ROE estimate for FY14 to 40% from 33%.which is up 4% YOY.we revised our EPS

estimate for FY14 to 28.4 which is 3.4% YOY (including 2100 CR realization Gain).Hence we Upgrade coal india to a target price of RS.334/-

(previously 310)................................................ ( Page : 12- 14)

"BUY" 14th Jan 2014

In view of upcoming general election, we expect government ad spending to go up substantially. Being one of the biggest player, company will

benefit from this. Considering its long-term growth story with favorable earning scenario and leadership position in key market, we are positive

on the stock. We initiate “BUY” view on the stock with the target price of Rs 340. At a CMP of Rs 305, stock trades at 4.3x of FY15E P/BV

............................................... ( Page : 18-19)

UltraTech Cement Ltd : "BUY" 14th Jan 2014

We are expecting 8%-15% Sales growth with ~19% ROE in FY15E.We expect cement demand to pick up from 2HFY14 onwards driven by

governments pre-election spending as well as on account of rural demand pick post the good monsoon witnessed this year. UTCL is a largest

cement player in India and we expect it to maintain or increase the same through timely commissioning of capacities, which are expect to come

on stream by FY15E.We value the stock and arrive at the target price of Rs 1846. As from the current level the upside is very limited (10%), so we

recommend investors to "Buy" the stock at lower level dips to get a decent returns over a time horizon of 12-18 months

................................................. ( Page :15- 17)

DB Corp :"On strong footing"

Narnolia Securities Ltd,

India Equity AnalyticsDaliy Fundamental Report on Indian Equities

NIIT Tech

1M 1yr YTD

Absolute 12.7 36.3 43.3

Rel. to Nifty 10.2 31.4 38.5

Current 2QFY14 1QFY14

Promoters 31.08 31.19 31.23

FII 32.35 29.21 29.04

DII 17.34 19.94 19.67

Others 19.23 19.66 20.06

Financials3QFY14 2QFY14 (QoQ)-% 3QFY13 (YoY)-%

Revenue 587.3 587.3 0.0 500.1 17.4

EBITDA 95.1 88.6 7.3 81.3 17.0

PAT 52.5 60.4 (13.1) 56.6 -7.2

EBITDA Margin 16.2% 15.1% 110bps 16.3% (10bps)

PAT Margin 8.9% 10.3% (120bps) 11.3% (140bps)

2

Slow deal execution in Government and Insurance projects: Among industry segments,

Travel and Transportation contributed to 37% (up by 3%, QoQ), BFS was 17% (up by

21%, QoQ), Government projects declined from 10% to 6% (down by 40%, QoQ) to the

revenue mix.

Steady margin: EBITDA Margin improved by 120bps (QoQ) to 16.2% on the back of

reduction Employee cost by 3.5%, sequentially.

PAT declined by 12%(QoQ) impacted by a loss in other income as a result of revaluation

of foreign currency assets and liabilities due to period end exchange difference.

Post earning, management is gearing up for its paradigm shift in growth strategy for the

future and set an aspirational target to grow revenues to USD 1 bn in the next 5yrs. They

stated that, margins will start seeing improvement from Q4FY14, led by the

improvement in the margin from the Geographic Information Systems (GIS) business

and the Morris joint venture.

Stock Performance

52wk Range H/L 399/234

Share Holding Pattern-%

Healthy growth traction from US and Europe: The contribution to the total revenues

from the U.S. increased to 44% from 41% (up 7%,QoQ) and EMEA stood at 38% from

36%( up 6%, QoQ). The revenue share from rest of the world declined from 23% to 18%

(down 22% QoQ). Post result management stated that the demand environment is

clearly showing positive signs in the US with the debt issue being the only overhang.

Mkt Capital (Rs Crores)

Nifty 6321

2281

Market DataBSE Code 532541

NSE Symbol NIITTECH

Average Daily Volume 20884

Previous Target Price 360

Upside 17%

Change from Previous 22%

1 year forward P/E

Rs, Crore

(Source: Company/Eastwind)

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

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

and 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 Rs 376, trades at 6.9x FY15E earnings.

We retain “ buy” view on the stock with a price target of Rs 440 (revised from Rs360).

Healthy order addition: During the quarter, the company secured a USD 300 million

vendor consolidation deal from a top BFSI client for a period of 10 years. It has secured

fresh order of USD 377mn versus USD 84mn in 2QFY14. However, in 3Q FY14, order has

primarily been in the international market. During the quarter, NIIT Tech forayed into

Latin America through its partnership with GRU Aeroporto Internacional de São Paulo

(Sao Paolo International Airport), to implement and transform the cargo handling

system at the airport.

"Focused on growth story"

CMP 376

Target Price 440

Below than street expectations, but confident on future growth; Result update Buy

For 3QFY14, NIITTECH reported marginally below numbers than street estimates, sales

was unchanged at Rs587.3cr because of reduced purchase for resale (PFR) in domestic

Government business while revenues from services grew 4.3% sequentially. During the

quarter, company has been able to maintain healthy order book and eyeing on strong

order pipeline.

"BUY"16th Jan' 14


3


Higher DSO: The DSO days were 98 (2QFY14 – 100) during the quarter.In general, the DSO

days are typically used to be at 80 days.

NIIT Tech

Sales and PAT growth-%(QoQ)

Employee Metrics: Total headcount increased from 8017 from 8,160 at the end of the

quarter. Utilzation declined to 78.4% from 80.3%(2QFY14) because of weak quarter and

still, company is good to maintain attrition at a mark of 12-13%, which is better than its

peers.

Clients Metrics: During the quarter, Company added 4 new clients, each in BFSI, travel

and transportation, manufacturing, and government segment.

Margin-%



Company expects FY14 to be better

than FY13 with respect to both revenue

growth and EBIT margin. And also

expects stronger growth in the US and

Asian markets compared with Europe.

Management also expects to see

demand environmrnt ahead.

The 3QFY14 witnessed sustained hiring

and attrition improved from 12.44% to

13.40% on LTM basis. Managent is very

confident to maintain attrition at 12-13%

and utilization at 77-80%.

It expects the growth momentum will

sustain with holding the margins going

forward.

Clients Metrics



4



Financials;

NIIT Tech

Operating Metrics;


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

Banking and Finacial Services 13% 13% 12% 12% 12% 14% 17%

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

Transport 40% 42% 42% 37% 36% 37% 38%

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

Government 8% 5% 8% 11% 13% 10% 6%

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

Americas 36% 38% 37% 38% 38% 41% 44%

EMEA 39% 39% 40% 37% 37% 36% 38%

RoW 25% 23% 23% 25% 26% 23% 18%

DSO-days 84 75 76 82 98 100 96

Top-5 30% 32% 34% 32% 31% 36% 37%

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

No of Headcounts 7444 7617 7882 8158 8207 8017 8160

Sales Mix-Geography

Revenue Concentration %

Headcounts

Rs in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

Sales 913.7 1232.25 1576.48 2021.36 2341.54 2814.74

Employee Cost 503.71 601.36 891.12 1115.1 1334.68 1562.18

Other expenses 239.75 393.1 415.26 576.96 620.51 774.05

Total expenses 743.46 994.46 1306.38 1692.06 1955.19 2336.24

EBITDA 170.24 237.79 270.1 329.3 386.35 478.51

Depreciation 35.81 31.46 36.42 56.69 65.73 73.49

Other Income 7.64 13.6 30.37 22.75 46.83 56.29

EBIT 134.43 206.33 233.68 272.61 320.62 405.02

Interest Cost 0 2.22 3.84 1.91 2.59 1.94

Profit (+)/Loss (-) Before Taxes 142.07 217.71 260.21 293.45 364.86 459.37

Provision for Taxes 14.42 32.3 63.75 75.05 103.99 133.22

Net Profit (+)/Loss (-) 127.65 185.41 196.46 218.4 260.88 326.15

Growth-% (YoY)

Sales -6.8% 34.9% 27.9% 28.2% 15.8% 20.2%

EBITDA 2.3% 39.7% 13.6% 21.9% 17.3% 23.9%

PAT 9.6% 45.2% 6.0% 11.2% 19.4% 25.0%

Expenses on Sales-%

Employee Cost 55.1% 48.8% 56.5% 55.2% 57.0% 55.5%

Other expenses 26.2% 31.9% 26.3% 28.5% 26.5% 27.5%

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

Margin-%

EBITDA 18.6% 19.3% 17.1% 16.3% 16.5% 17.0%

EBIT 14.7% 16.7% 14.8% 13.5% 13.7% 14.4%

PAT 14.0% 15.0% 12.5% 10.8% 11.1% 11.6%

Valuation:

CMP 170.25 184.65 270.90 262.35 376.00 376.00

No of Share 5.88 5.93 5.96 6.02 6.02 6.02

NW 579.78 752.11 922.20 1094.12 1346.30 1663.24

EPS 21.71 31.27 32.96 36.28 43.33 54.18

BVPS 98.60 126.83 154.73 181.75 223.64 276.29

RoE-% 22.0% 24.7% 21.3% 20.0% 19.4% 19.6%

P/BV 1.73 1.46 1.75 1.44 1.68 1.36

P/E 7.84 5.91 8.22 7.23 8.68 6.94

353

388

443

10

14

1M 1yr YTD

Absolute -2.7 -29.2 -29.2

Rel.to Nifty -5.4 -35.4 -35.4


3Promoters 25.6 25.6 25.7

FII 35.1 46.0 49.0

DII 19.4 15.7 13.2

Others 20.0 12.7 12.1

Financials Rs, Cr

2011 2012 2013 2014E 2015E

NII 1247 1616 2219 2440 2374

Total Income 1870 2473 3476 4217 4150

PPP 1190 1540 2142 2328 2614

Net Profit 727 977 1301 1778 1098

EPS 20.9 27.7 36.3 49.4 35.6

5

Mkt Capital (Rs Cr)



Stock Performance

52wk Range H/L

Change from Previous

1 Yr P/BV


18.04

Nifty 6320

Result update Neutral

CMP

Target Price

Previous Target Price

On sequential basis NIM of bank remained flat at 2.9% but declined 10 bps on YoY

basis. Lending yield declined sharply to 13.3% from 13.6% due to increased share of

low yield Corporate and Institutional banking. Cost of deposits increased to 10.9%

from 10.8% on QoQ basis. Despite of lower lending yield and higher cost of fund,

margin stable on sequential basis was probably due to lower earnings asset growth

as we get evidence from negative growth of balance sheet on QoQ basis.

Cost to Income ratio was highest ever to 41.6% because of bank’s strategy to

increase market share of CASA. During quarter bank hire 647 employee and opened

17branches and 36 ATMs. As the result employee cost and operating cost were

increased by 20% and 42% respectively. Due to higher operating cost, pre

provisioning profit increased by 9% YoY despite of healthy NII and other income.

Operating leverage increased to 0.41% from 0.39% in 3QFY14. We expect this ratio

to remain high because of bank would continue to increase its CASA franchise base

by opening new branches and hiring.

Average Daily Volume

12729

Market Data

Upside

547/216

BSE Code 532648

NSE Symbol

YES BANK

Yes bank reported better than expected profit largely due to lower provision

despite of reported higher delinquencies. This has resulted of lower provision

coverage ratio but still it is above of regulatory requirement. Incremental

deposits (other than CASA) were remained muted whereas advance reported

handsomely. Bank would face liquidity problem or would have to dependent

on additional borrowings to maintain its growth trajectory. This would result of

higher cost of fund and margin compression in our view. Leverage ratio (total

asset to net worth) has been declining from past four quarters indicated no

surplus liquidity in balance sheet. In the absence of comfortable earnings we

remain have neutral view. Also, we reduce our target price from Rs.443 to

Rs.388.

NII growth of 14% YoY led by advance growth and stable cost of fund

Bank’s NII grew by 14% YoY to Rs.665 cr largely due to stable margin and other

income. In 3QFY14, bank reported other income of Rs.388 cr up by 24% YoY

whereas margin was stable at 2.9% declined mere by 10 bps YoY. Credit deposits

ratio was improved by 330 bps QOQ but was declined by 400 bps YoY due to lower

deposits base. We observed that bank’s cost of deposits (Calculated) remain at

elevated level despite of relatively have higher CASA base whereas yield on loan

improved handsomely to 13.3% from 12.7% in 3QFY13.

Muted PPP growth due to higher CI ratio

Stable margin on sequential basis despite of lower lending yield and marginal

increased of cost of fund

YESBANK

"NEUTRAL"16th Jan, 2014


6

YES BANK


Deposits growth moderate sequentially but advance reported handsome growth

On balance sheet front, bank’s advance grew by 14.7% YoY led by retail banking growth

followed by corporate and institutional banking. Retail loan registered growth of 47% YoY

whereas corporate banking reported 18% YoY growth. Deposits grew by 20.7% YoY led

by CASA deposits growth of 38% YoY followed by term deposits (17% YoY). We

observed that bank’s incremental deposits (other than CASA) were remained muted at

Rs.24 cr as against Rs.1708 cr in second quarter. Bank would have to depend on

additional borrowings to maintain its growth trajectory if the present trend continued which

would be the result of higher cost of fund and margin compression. Sequentially credit

deposits ratio was higher at 73.9% from 70.6% on account of lower deposits base

especially of term deposits.

Valuation & View

Yes bank reported better than expected profit largely due to lower provision despite of

reported higher delinquencies. This has resulted of lower provision coverage but it is still

above of regulatory requirement. Incremental deposits (other than CASA) were remained

muted whereas advance increased handsomely. Bank would face liquidity problem or

would have to dependent on additional borrowings to maintain its growth trajectory. This

would result of higher cost of fund and margin compression in our view. Leverage ratio

(total asset to net worth) has been declining from past four quarters indicated no surplus

liquidity in balance sheet. In the absence of comfortable earnings we reduce our target

price to Rs.388 from Rs.443.

Valuation Band ( 1 yr forward P/BV)


7

YES BANK

Source: Eastwind/Company


Quarterly Result


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

Interest/discount on advances / bills 1666 1618 1394 19.5 3.0

Income on investments 840 875 726 15.8 -4.0

Interest on balances with Reserve Bank of India 8 8 4 82.6 -7.5

Others 0 0 10 -96.4 20.0

Total Interest Income 2514 2501 2134 17.8 0.5

Others Income 388 446 313 23.8 -13.1

Total Income 2902 2947 2447 18.6 -1.5

Interest Expended 1849 1829 1549 19.3 1.1

NII 665 672 584 13.9 -1.0

Other Income 388 446 313 23.8 -13.1

Total Income 1053 1118 898 17.4 -5.8

Employee 194 185 162 19.8 4.7

Other Expenses 245 220 172 42.1 11.2

Operating Expenses 439 405 334 31.3 8.2

PPP( Rs Cr) 615 713 563 9.1 -13.8

Provisions 13 179 57 -76.6 -92.6

PBT 601 534 507 18.7 12.7

Tax 186 163 164 13.0 14.2

Net Profit 416 371 342 21.4 12.0

Balance Sheet Data

Advances 50,293 47717 43,857 14.7 5.4

Shareholders’ Funds 6,610 6610 5,679 16.4 0.0

Deposits 68,060 67575 56,401 20.7 0.7

Asset Quality

GNPA 195.8 132.1 76.2 157.0 48.3

NPA 42.3 19.36 15.6 171.2 118.5

% GNPA 0.39 0.28 0.17

% NPA 0.08 0.04 0.04

PCR(%) 78.4 85.3 79.5

8

YES BANK

Souce: Eastwind/Company


Financials & Assuption


Income Statement 2011 2012 2013 2014E 2015EInterest Income 4042 6307 8294 11985 11213

Interest Expense 2795 4692 6075 9544 8840

NII 1247 1616 2219 2440 2374

Change (%) 58.2 29.6 37.3 10.0 -2.7

Non Interest Income 623 857 1257 1776 1776

Total Income 1870 2473 3476 4217 4150

Change (%) 37.2 32.2 40.6 21.3 -1.6

Operating Expenses 680 933 1335 1889 1535

Pre Provision Profits 1190 1540 2142 2328 2614

Change (%) 37.9 29.4 39.1 8.7 12.3

Provisions( Incl tax) 463 563 841 604 1046

PAT 727 977 1301 1778 1098

Change (%) 52.2 34.4 33.1 36.7 -38.2

Balance Sheet 2011 2012 2013 2014E 2015EDeposits( Rs Cr) 45939 49152 66956 80347 96416

Change (%) 71.4 7.0 36.2 20.0 20.0

of which CASA Dep 4751 7392 12688 20087 28925

Change (%) 68.6 55.6 71.6 58.3 44.0

Borrowings( Rs Cr) 6691 14156 20922 21358 30447

Investments( Rs Cr) 18829 27757 42976 49835 62163

Loans( Rs Cr) 34364 37989 47000 54050 62157

Change (%) 54.8 10.5 23.7 15.0 15.0

Ratio 2011 2012 2013 2014E 2015EAvg. Yield on loans 8.7 11.7 11.5 15.2 11.5

Avg. Yield on Investments 5.5 6.7 6.7 7.6 6.5

Avg. Cost of Deposit 5.0 7.8 9.1 11.9 9.2

Avg. Cost of Borrowimgs 7.5 6.0 7.2 7.5 7.5

Valuation 2011 2012 2013 2014E 2015EBook Value 109.3 132.5 161.9 193.1 223.7

CMP 310 367 367.3 350.35 350.35

P/BV 2.8 2.8 2.3 1.8 1.6

CMC

1M 1yr YTD

Absolute 17.12 15.4 27.37

Rel. to Nifty 15.93 10.52 22


Promoters 51.12 51.12 51.12

FII 22.63 23.32 21.84

DII 18.26 17.83 19.05

Others 7.99 7.73 7.99


Revenue 560.96 560.75 0.0 492.97 13.8

EBITDA 90.81 88.41 2.7 83.2 9.1

PAT 70.55 67.3 4.8 61.07 15.5

EBITDA Margin 16.2% 15.8% 40bps 16.9% (70bps)

PAT Margin 12.6% 12.0% 60bps 12.4% 20bps

9

"Nothing for excitement"

CMP 1527

Target Price -

Witnessed inline Sales and PAT numbers;Results update Neutral

CMC Ltd Witnessed inline set of numbers with flat sales growth than previous quarter

led by 2% sales decline in System Integration (contributes 64% of Sales) and 14%

decline in IT enabled Services (contributes 13% of Sales). PAT grew by 4.9% on

sequential basis. Usually, third quarter is not a growth quarter in the international

markets.

Previous Target Price -

Upside -

Change from Previous -

1 year forward P/E

Rs, Crore




Deal pipeline: The deal pipeline is in line with the last year. It indicated that pursuing

good number of deals in the Developed and as well emerging markets. Considering

current sound demand environment across geographies (like US and Europe) and

verticals Company is more optimistic for clients acquisition and deal executions ahead.

Now, CMC is focusing on new emerging segments like IMS (Infrastructure

Management Services), Cloud, Big data, Mobility and Analytics. Considering its

impressive client as well as market response, company is expecting to quantify into

revenue. Its new and emerging projects like Mining Management System, GPS System

and Port & Cargo Management System would play a major role for generating

revenue.

View and Valuation: CMC expects the growth momentum to improve in the 2HFY14E

than 1HFY14. The Company remains a strong with excellent earning visibility led by joint

effort of market strategy by TCS (contributes 59% of sales) in its product and solutions.

However, we expect that its earning visibility and order from government side in

coming 2 quarter could be impacted because of general election schedule in India (earns

41% revenue from India). For a near to medium -term prospect, we are not much

excited on the stock taking its earning visibility in near term. We had already advised to

book profit on 9th Jan 2014 at a target price of Rs 1690, now we have a “Neutral” view

on the stock. At a CMP of Rs 1527, stock trades at 16.5X FY15E earnings.

We believe, CMC will continue with its efforts to enhance revenue contribution of high

margin System Integration and ITES segments. Further, its high focus on education

space will also add margin in near term.

Market Data

Stock Performance

Nifty 6189.35

52wk Range H/L 1780/1107

Steady Margin: Steady Margin: During the quarter EBITDA Margin inched up by 40bps

(QoQ) to 16.1%. However, Management is still confident to maintain the margin in a

range of 15-16%.

Mix growth response from segmental front: Sales from System Integration (65% of total

sales) down by 2%, IT enabled Services (15% of total sales) down by 13.6%. While the

Customer services business (18.4% of total sales) and Education and Training seen

double digit growth by 15.9% and 17.6 %(QoQ)– SEZ Sales was flat sequentially. The

company expects to see good growth traction in ITeS and System Integration.

BSE Code 517326

NSE Symbol CMC


4736Mkt Capital (Rs Crores)

"Neutral"15th Jan' 14


10


Employee Metrics: The total headcount for the quarter stood at 10,890 employees out of

which 4,555were on company payrolls while the remaining 6,235 were subcontractors.

CMC

Sales and Sales growth-%(QoQ)

Margin-%



Second half of FY14 will be better than

the first half. And expects to sees

opportunities in the international

markets in FY15E

Despite salary hike during the quarter,

company's employee cost on sales

increased from 25.1% (2QFY14) to

25.6%.

The management expects operating

Profit margin between 15 percent and

16 percent .

Clients Metrics


Clients Metrics: The Company added 14 clients during the quarter out of which 10 from

India and the 4 from the USA. In FY13, the company added 80 clients. During the quarter,

its DSO increased from 79days to 83days.


11

CMC

Key facts from Concall (attended on 16th Oct, 2013)



Financials;

►CMC continues to target growth ahead of the overall IT industry; the company expects

to grow faster than that in the current financial year

►Expects operating Profit margin at 16 percent for FY14E,

►The company expects to maintatin its tax regime at 20-20.5% for coming quarter. For

next year tax rate could be stand at a range of 20-21%.

►Company’s hiring Plan; a net addition of 400-500 this year

► Notably, it targets revenues of Rs 250-300 crore from Education and Training business

in next two 3-4 years timeline.


Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E

Net Sales 870.73 1084.40 1469.34 1927.87 2155.00 2415.28

Purchases of stock-in-trade 99.35 99.28 145.40 188.56 193.95 217.37

Employee Cost 276.16 345.13 440.22 521.65 560.30 640.05

Subcontracting and outsourcing cost 173.56 262.35 446.11 679.73 818.90 917.81

Other expenses 159.94 170.17 213.63 222.88 215.50 253.60

Total Expenses 709.01 876.93 1245.36 1612.82 1788.65 2028.83

EBITDA 161.72 207.47 223.98 315.05 366.35 386.44

Depreciation 9.85 10.46 21.37 23.20 25.73 37.23

Other Income 18.75 11.80 17.46 13.17 21.55 24.15

EBIT 151.87 197.01 202.61 291.85 340.62 349.21

Interest Cost 3.17 0.22 0.02 0.18 0.1 0.25

PBT 167.45 208.59 220.05 304.84 362.07 373.11

Tax 24.23 32.42 68.59 76.76 101.38 93.28

PAT 143.22 176.17 151.46 228.08 260.69 279.84

Growth-%

Sales -7.4% 24.5% 35.5% 31.2% 11.8% 12.1%

EBITDA 27.7% 28.3% 8.0% 40.7% 16.3% 5.5%

PAT 23.3% 23.0% -14.0% 50.6% 14.3% 7.3%

Margin -%

EBITDA 18.6% 19.1% 15.2% 16.3% 17.0% 16.0%

EBIT 17.4% 18.2% 13.8% 15.1% 15.8% 14.5%

PAT 16.4% 16.2% 10.3% 11.8% 12.1% 11.6%

Expenses on Sales-%

Employee Cost 31.7% 31.8% 30.0% 27.1% 26.0% 26.5%

Subcontracting Cost 19.9% 24.2% 30.4% 35.3% 38.0% 38.0%

Tax rate 14.5% 15.5% 31.2% 25.2% 28.0% 25.0%

Valuation

CMP 1340.00 2079.55 994.80 1410.00 1527 1527

No of Share 1.50 1.50 3.00 3.03 3.03 3.03

NW 510.68 654.02 772.19 946.26 1145.07 1354.19

EPS 95.48 117.45 50.49 75.27 86.04 92.35

BVPS 340.45 436.01 257.40 312.30 377.91 446.93

RoE-% 28.0% 26.9% 19.6% 24.1% 22.8% 20.7%

Dividen Payout ratio 18.6% 19.9% 23.2% 19.4% 23.7% 25.3%

P/BV 3.94 4.77 3.86 4.51 4.04 3.42

P/E 14.03 17.71 19.70 18.73 17.75 16.53

Coal India LTD.

Cash Deployment : Dividend at Rs 29/- per share289

334

310

16%

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)

12


372/238

Q2FY14 :

Management Corner : Management is confident about their coal production target and

coal off take target for FY2014E, which is 482 mmt and 492 mmt respectively. Till now in

the H1FY14 the company cpmpleted 400 mmt production and 424 mmt offtake. The

company is not sure about the production target but very sure abot the offtake .

Market DataBSE Code

COALINDIANSE Symbol

52wk Range H/L


Stock Performance-%


1 yr Forward P/B

Source - Comapany/EastWind Research

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 .

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

Average Daily Volume (Nos.)

Upside


Company UpdateCMP

Target Price

Competition Appellate Tribunal stays Rs 1,773 crore fine on CIL , and will decide on the

matter on next hearing feb 11 2014. We believe , 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.Recently Coalindia after a long discussion with govt declared

Rs29/share intrim dividend .which recovers our ROE estimate for FY14 to 40% from

33%.which is up 4% YOY.we revised our EPS estimate for FY14 to 28.4 which is 3.4%

YOY (including 2100 CR realization Gain).Hence we Upgrade coal india to a target price

of RS.334/- (previously 310).


"Buy"15th Jan' 14


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 69960

7573 5123 6556 8372

1755 2013 2333 2591

4580 4901 5802 6049

20481 26705 27943 28943

40390 40857 50219 53705

9843 21558 18084 16255

1673 1969 1813 1860

79 54 45 34

5595 6484 7623 7310

10868 20588 17356 17921

33 51 36 40

13

Interest Cost

ROE %

Revenue Generation From unit Ton

Avg Man Power (in numbers)

Productivity Per Man

contractual expenses

Employee benefit Expence

Expenditure

EBITDA

Tax

PAT

Net Revenue from Operation

Cost Of Projects & Contractual

Power and fuel

P/L PERFORMANCE

Coal Offtake in MT

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.Recently

Coalindia after a long discussion with govt declared Rs29/share intrim dividend .which

recovers our ROE estimate for FY14 to 40% from 33%.which is up 4% YOY.we revised

our EPS estimate for FY14 to 28.4 which is 3.4% YOY (including 2100 CR realization

Gain).Hence we Upgrade coal india to a target price of RS.334/- (previously 310).From

the CMP the target price is up by ~15% .

E-auction prices remain under pressure: E-auction prices for Nov’13 were at Rs 2,117/t

(-15% YoY/-8% MoM). YTD, weighted average e-auction prices were at Rs 2,238/t, lower

16% YoY. Weakness in sponge iron and cement industry, the two key end-users of e-

auction coal, has impacted E-auction realisations.

Depriciation



Coal India LTD.

OPERATING MATRIX

Coal Production in MT

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.


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

14

CASH FLOWS

Trading At :

Changes In Working Capital

Net Cash From Operation

Cash From Investment

Cash from Finance

Net Cash Flow during year

Cash from Operation

Debtor to Turnover%

Creditors to Turnover%

Inventories to Turnover%

Long-term provisions

Intangibles

Short-term loans and advances

Total Assets

RATIOS

P/B

EPS

B/S PERFORMANCE

Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Tangible assets

Capital work-in-progress

Long-term loans and advances

Inventories

Trade receivables

Cash and bank balances

Coal India LTD.


Trade payables

Short-term provisions

Total liabilities


UltraTech Cement Ltd.

1675

1846

1875

10%

-2%

532538

45942

18377

6272

1M 1yr YTD

Absolute -7.3 -14.8 -10.2

Rel. to Nifty -9.0 -19.9 -14.3

2QFY14 1QFY14 4QFY13

Promoters 62.0 62.0 62.0

FII 20.7 20.7 20.6

DII 4.8 4.6 4.6

Others 12.6 12.7 12.7

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

Net Revenue 4522 -4.3 -9.2 4727 4980

EBITDA 679 -34.4 -36.7 1035 1072

Depriciation 257 10.8 2.0 232 252

Interest Cost 89 48.3 34.8 60 66

Tax 107 -54.1 -56.7 233 247

PAT 264 -52.0 -60.8 550 673(In Crs)

15

Market Data

The outlook continues to remain challenging. Demand growth in FY14 is likely to be around 5 %,

though in the long term growth is likely to be over 8 % - 15% . Government initiatives to

expedite large infrastructure projects have yielded little so far and this is putting pressure on

cement makers, especially those with debt that has become expensive to service due to high

interest rates.We believe that UltraTech will maintain its healthy debt protection metrics ,

supported by its earnings and cash flows.At present Ultratech is running at 79% of its capacity

utilization.The utilization levels will decline due to stabilization of supply from new capacities,

owing to insufficient demand in the domestic market. UltraTech plans to strengthen its logistics

infrastructure and increase its captive power plant capacity, which will help to reduce its

operational cost.We value the stock at the target price of Rs 1846. From the current level the

upside is very limited (10%), so we recommend investors to "Buy" the stock at dips to get a

decent returns.

Average Daily Volume (Nos.)

BSE Code

ULTRACEMCONSE Symbol

52wk Range H/L


2066/1404 Q2FY14 Update : Ultratech Cement reported a 52 per cent dip in net profit for the July-September

quarter at Rs 264. Net sales were down 4 per cent at Rs 4,502 crore .Cement and clinker sales

remained unchanged compared with last year at 9.1 million tonnes while white cement and wall-

care putty sales were up 15 per cent at 2.75 lakh tonnes (2.39 lakh tonnes). Despite flat cement

sales, overall cost increased 4 per cent to Rs 4,100 crore (Rs 3,927 crore) on the back of high

logistics cost.Overal realisation during the quarter was down 5 per cent at Rs 239 per 50 kg bag

compared with Rs 252 in last year.The company’s long-term borrowings stood lower at Rs 3,841

crore (Rs 3,893 crore), while deferred tax liabilities increased 9 per cent to Rs 2,073 crore (Rs

1,906 crore). EBITDA slipped 34.3 percent on yearly basis to Rs 660 crore and operating profit

margin declined 670 basis points Y-o-Y to 14.7 percent in the quarter.

Nifty

Struggle for beter Manufacturing : Financial performance impacted by lower selling price and

subdued demand. The demand remained sluggish due to prolonged monsoon across the country,

resulted in reduced offtake by infrastructure and real estate companies. During the quarter

,benefit of lower imported coal prices was get cancelled due to sharp depreciation of the rupee

against the dollar. Logistics and raw material costs continued to rise given the high diesel prices.

However, optimisation of fuel mix i.e use of pet coke helped to lower power and fuel costs to an

extent.


Stock Performance-%


1 yr Forward P/B


Capacity Addition : Meanwhile, UltraTech Cement agreed to purchase debt-laden Jaiprakash

Associates' Gujarat cement unit having a capacity of 4.8 million tonnes for Rs 3,800 crore. Gujarat

cement unit comprises of an integrated cement unit at Sewagram and grinding unit at Wankbori.

With this acquisition of 4.8 million tonnes per annum, the company's current capacity increases to

59 million tonnes per annum. The transaction implies a valuation of $124 per tonne of cement,

which is lower than the existing benchmark of around $140 per tonne, and is a positive for

UltraTech.Currently, UltraTech’s debt is around Rs.4,500 crore. After the transaction is completed,

the company’s net debt-to-equity ratio will increase to around 0.45 from 0.27. Debt will increase

to 2 times EBIDTA. With projects underway it will stand raised to 70 million tonnes by 2015.

Target Price


Company Update Buy

Upside


CMP

"BUY"14th Jan' 14


Au

g-0

4

Mar

-05

Oct

-05

May

-06

De

c-0

6

Jul-

07

Feb

-08

Sep

-08

Ap

r-0

9

No

v-0

9

Jun

-10

Jan

-11

Au

g-1

1

Mar

-12

Oct

-12

May

-13

Price 1x2x 3x4x 5x6x 7x

OUT LOOK :

FY11 FY12 FY13 FY14E

13798 19232 21319 21267

154 371 304 363

13952 19603 21623 21630

3280 4639 4646 4607

2881 3741 4243 4586

2696 4194 4839 3791

813 963 1023 1110

292 256 252 325

384 948 1179 775

1367 2403 2678 1934

13 19 18 11

2.9 3.2 3.4 2.9

16

PAT

ROE%

P/B

Power and fuel

Freight and forwarding

EBITDA

Depriciation

Interest Cost

Tax

Total Income

Company Description :UltraTech had an estimated market share of around 18 per cent, with presence across regions -

north being the largest, contributing 33 per cent to its sales, followed by west (31 per cent),

south (20 per cent), and east (16 per cent) - thereby insulating it from downtrends in any single

region. The company has a strong focus on improving operating efficiencies; it has 529

megawatts (MW) of captive power generation capacity, which meets 80 per cent of its power

requirement and also maintains power consumption norms in line with the other players in the

industry.

On The Expansion Front : Setting up a cement plant with 5.5 MMTPA cement and a 75 mega

watt (MW) captive power plant, with an investment of Rs 2,500 crore. The company has

received approval from Expert Appraisal Committee (EAC), under the Ministry of Environment,

for the proposed facility. The cement plant will be based on the dry process technology for

cement manufacturing with pre-heater and pre-calciner technology and the coal requirement for

the project will be met by importing it from Indonesia and South Africa, as an interim basis.

Petcoke will be procured from Reliance Industries Limited, Jamnagar.

Source - Comapany/EastWind ResearchOther Income


P/L PERFORMANCE


Ultratech's EBIDTA growth has been consistently beats the industry average as well as its peers

ACC and Abuja cements. In last few years it also led the industry and its peers on PAT growth .It

beats its peers on account of cement realization and volume sales. Additionally Ultratech has

also been increasing the usage of low cost pet coke in its fuel mix there by moderating its cost

pressure. Strong Brand premium and operational efficiency drives its industry leading

profitability . With the overall slow down in demand, Ultratech will continue to loose its market

share in FY14E on capacity delay. Hence, We are expecting 8%-15% Sales growth with ~19% ROE

in FY15E.We expect cement demand to pick up from 2HFY14 onwards driven by governments

pre-election spending as well as on account of rural demand pick post the good monsoon

witnessed this year. UTCL is a largest cement player in India and we expect it to maintain or

increase the same through timely commissioning of capacities, which are expect to come on

stream by FY15E.We value the stock and arrive at the target price of Rs 1846. As from the

current level the upside is very limited (10%), so we recommend investors to "Buy" the stock

at lower level dips to get a decent returns over a time horizon of 12-18 months.



(20.0)

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

-

1,000

2,000

3,000

4,000

5,000

6,000

Q1

FY1

1

Q2

FY1

1

Q3

FY1

1

Q4

FY1

1

Q1

FY1

2

Q2

FY1

2

Q3

FY1

2

Q4

FY1

2

Q1

FY1

3

Q2

FY1

3

Q3

FY1

3

Q4

FY1

3

Q1

FY1

4

Q2

FY1

4

Q3

FY1

4E

Q4

FY1

4E


Sales Growth

60

65

70

75

80

85

0

10

20

30

40

50

60

FY09 FY10 FY11 FY12 FY13

Capacity Of Cement Production (in MT)

Cement Production

Cement Capacity Utilisation in %

14 15

10

12 12

19

22

13

16 18

24

27

19 21

22

-

5

10

15

20

25

30

FY09 FY10 FY11 FY12 FY13

NPM % OPM % EBITDA %

FY10 FY11 FY12 FY13

124 274 274 274

4495 10373 12550 14955

4620 10647 12824 15230

857 3295 4843 5169

750 727 705 1227

32 113 121 135

683 1830 2207 2338

133 473 709 949

8375 21630 24904 29590

6 39 40 62

4953 12265 12729 14254

260 760 1940 3601

146 583 1544 1066

827 2094 2198 2541

210 825 1089 1376

112 190 214 185

219 873 1041 1048

8375 21630 24904 29590

FY10 FY11 FY12 FY13

3.1 2.9 3.2 3.4

88.1 49.9 87.7 97.7

2.9 6.0 5.7 6.5

9.5 13.3 11.5 11.0

1.2 1.5 1.1 1.2

FY10 FY11 FY12 FY13

1673 2195 3482 4122

-79 -197 -96 -481

1593 1998 3385 3641

-843 -2240 -3050 -4407

-740 248 -353 715

10 6 -18 -51

17

Creditors to Turnover%

Inventories to Turnover%

Short-term loans and advances

Total Assets

P/B

EPS

Debtor to Turnover%

Long-term loans and advances

Inventories

Trade receivables

Cash and bank balances


Share capital

Reserve & Surplus

Total equity

Long-term borrowings

Short-term borrowings

Long-term provisions

B/S PERFORMANCE

Trading At :

RATIOS

CASH FLOWS

Capital work-in-progress

Trade payables

Short-term provisions

Total liabilities

Intangibles

Tangible assets


Net Cash From Operation

Cash From Investment

Cash from Finance

Net Cash Flow during year

Cash from Operation

Changes In Working Capital


0

500

1000

1500

2000

2500

0

1000

2000

3000

4000

5000

6000

7000

NIFTY ULTRACEMCO

DB Corp

302

340

-

13%

-

1M 1yr YTD

Absolute 11.5 25.0 -

Rel. to Nift 14.0 21.6 -


Promoters 74.96 74.97 75.0

FII 17.7 16.5 14.7

DII 2.95 4.00 5.34

Others 4.36 4.57 5.02

Financials Rs, Cr

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

Revenue 437.98 449.4 -2.5% 378.37 15.8%

EBITDA 112.45 135.38 -17% 81.36 38%

PAT 63.24 77.71 -19% 45.41 39%

EBITDA Margin 25.7% 30.1% (440 bps) 21.5% 420 bps

PAT Margin 14.4% 17.3% (290 bps) 12.00% 220 bps

18

Market Data

318.65/210

BSE Code 533151

NSE Symbol DBCORP

"On strong footing"

CMP

Upside

Company update BUY

Target Price

Festive season coupled with the recently held state assembly elections in 4 states

(Rajasthan, M.P, Chhattisgarh, and Delhi) will likely drive revenue growth for print

media companies. Across the print media players, DB Corp will be one of the strong

beneficiaries for prospect of revenue generation. These 4 states contribute almost 60%

of its revenue.



Stock Performace with Nifty


25750

Nifty 6273

Recently, Print media companies decided to hike its cover prices selectively in its

mature market to maintain its margin due to increase in news print cost. Going

forward, improving ad revenue, cost control measures and expanding into new area

would energize its revenue visibility in near future.

About the Company: DB Corp, the publisher of Dainik Bhaskar, is a leading publishing

house with its highest readership in the country. It publishes 8 newspapers, 65

newspaper editions and around 200 sub-editions in 4 languages (Hindi, Gujarati, English

and most recently Marathi) in 13 Indian states.

Earning Preview (3QFY14E): DB Corp is like to report 19% (YoY) revenue growth to Rs

366cr led by 18% of revenue growth and 15% of subscription revenue. PAT is expected

to grow by 17% (YoY) to Rs 85Cr. We expect to see EBITDA margin up by 100-150bps

(YoY) to 28-28.5% because of benign RM cost.

Key facts to watch out: Commentary on response of new editions (Patna, Akola and

Amravati), new expansion plan, trend of ad revenue from 4 states poll and from

governments.

Fit well on strong footing: Management is very confident of achieving 17% to 20%

growth rate in upcoming quarter. The Company is following principle of launching at

least 2 editions in a year and enter into at least one 1 market in every 2 years. Company

launched Akola edition in July and Amravati edition in August. Recently company has

launched its Patna edition. According to the company, the initial response in Bihar is

quite encouraging and as per booking, record of new subscription makes it no.1 in the

first day of its launch.

Expanding into new exposure: The company has interest in radio under the MY FM

brand (94.3), operating in 17 FM radio stations across mini metros and small towns. The

company also has exposure to new media with internet and short messaging service

(SMS) portals.



Stock Performance

52wk Range H/L

View and Valuation: In view of upcoming general election, we expect government ad

spending to go up substantially. Being one of the biggest player, company will benefit

from this. Considering its long-term growth story with favorable earning scenario and

leadership position in key market, we are positive on the stock. We initiate “BUY” view

on the stock with the target price of Rs 340. At a CMP of Rs 305, stock trades at 4.3x of

FY15E P/BV.

Average Daily Volume

5502Mkt Capital (Rs Cr)

"BUY"14th Jan' 14


19

DB Corp


Financials


Revenue Geography-wise Revenue Segments


Rs,cr FY10 FY11 FY12 FY13 FY14E FY15E

Sales 1062.1 1265.18 1451.51 1592.32 1865.97 2182.15

RM Cost 327.87 383.91 508.04 544.54 653.09 763.75

WIP -0.0016 -0.06 -0.04 0.03 0.04 0.04

Employee Cost 131.81 184.56 242.93 279.5 335.88 403.70

Ad Spend 12.98 12.52 15.04 17.21 22.39 28.37

Event Expenses 11.83 16.02 15.04 12.08 18.66 21.82

consumption of store & spare 51.49 58.7 83.62 94.81 115.69 150.57

Distribution expenses 22.81 21.28 24.34 28.01 33.59 41.46

Other expenses 161.24 185.2 216.06 234.07 279.90 329.51

Total expenses 720.0284 862.13 1105.03 1210.25 1459.2 1739.2

EBITDA 342.0716 403.05 346.48 382.07 406.7 442.9

Depreciation and Amortisation 37.83 43.28 50.57 58.06 64.6 75.6

Other Income 11.15 14.18 24.02 21.34 24.3 28.4

EBIT 304.2416 359.77 295.91 324.01 342.1 367.4

Interest 35.69 15.3 9.23 7.99 8.0 5.1

PBT 279.7016 358.65 310.7 337.36 358.4 390.7

Tax Exp 105.72 99.97 98.32 113.18 120.2 131.1

PAT 173.9816 258.68 212.38 224.18 238.2 259.6

Growth-% (YoY)

Sales 10.5% 19.1% 14.7% 9.7% 17.2% 16.9%

EBITDA 132.2% 17.8% -14.0% 10.3% 6.5% 8.9%

PAT 265.4% 48.7% -17.9% 5.6% 6.2% 9.0%

Expenses on Sales-%

RM Cost 30.9% 30.3% 35.0% 34.2% 32.0% 34.3%

Employee Cost 12.4% 14.6% 16.7% 17.6% 16.6% 17.0%

Other expenses 15.2% 14.6% 14.9% 14.7% 15.0% 15.1%

Tax rate 10.0% 7.9% 6.8% 7.1% 6.4% 6.0%

Margin-%

EBITDA 32.2% 31.9% 23.9% 24.0% 21.8% 20.3%

EBIT 28.6% 28.4% 20.4% 20.3% 18.3% 16.8%

PAT 16.4% 20.4% 14.6% 14.1% 12.8% 11.9%

Valuation:

CMP 239.15 246.25 219.45 212.1 302.0 302.0

No of Share 18.15 18.3 18.3 18.33 18.3 18.3

NW 648.7 828.87 927.08 1029.15 1160.1 1301.7

EPS 9.59 14.14 11.61 12.23 12.99 14.16

BVPS 35.74 45.29 50.66 56.15 63.29 71.02

RoE-% 26.8% 31.2% 22.9% 21.8% 20.5% 19.9%

P/BV 6.7 5.4 4.3 3.8 4.8 4.3

P/E 24.9 17.4 18.9 17.3 23.2 21.3

Zensar Tech

1M 1yr YTD Key FactsAbsolute 29.1 49 23.99

Rel. to Nifty 28.5 43.6 21.42


Promoters 48.27 48.35 48.36

FII 11.99 11.68 10.75

DII 0.96 1.26 1.28

Others 38.78 38.71 39.61


Revenue 599.7 533.5 12.4 545.05 10.0

EBITDA 102.54 74.1 38.4 81.05 26.5

PAT 70.6 60.9 15.9 32.17 119.5

EBITDA Margin 17.1% 13.9% 320bps 14.9% 220bps

PAT Margin 11.8% 11.4% 40bps 5.9% 590bps

20


CMP 412

Target Price 440

Company update Buy Management expects good growth starting from 4QFY14E with its Infrastructure

Management (IM) business gaining momentum. The deal booking and pipeline is good

and expects to perform well going forward. It expects double-digit growth in the

Enterprise Services business for the FY15 on the back of healthy pipeline. In addition, it

anticipates good growth from the IMS for the FY'15.

Previous Target Price 400

Upside 7%


1 year forward P/E

Rs, Crore


10%

52wk Range H/L

Stock Performance


Strong geographical footing: Given the order book Enterprise, business expects to grow

robustly going forward. It consciously slowed down in the Japan market as it is not

profitable and closed one account in Singapore as well. The Chosen markets to perform

are the Middle East, China and Africa going forward.

Healthy order Pipeline: We are positive on the future prospects on back of the order

bookings and pipeline. The recent measures like lean execution, improved efficiencies,

and best practices are targeted at improving the profitability profile of the company in

FY14E. Recent Management comments also revealed favourable scenario of order

booking.

Inspirational revenue level of $1bn by FY16: The management has detailed the 4 focus

areas, which are expected to take Zensar to an inspirational revenue level of $1bn by

FY16. They will expect to grow its existing US relationships and growing the RIMS

business in European nation like UK, Germany and Benelux.

View and Valuation: The deal booking and pipeline is good and expects to perform well

going forward. It expects double digit growth in the Enterprise Services business for the

FY15E on the back of healthy pipeline. Also, it anticipates good growth from the IMS for

the FY'15E.

Order pipeline continues to be stable at $ 200 mn mainly on the back of good demand

seen in Mobility, Cloud Computing and social networking side. Considering healthy

order pipeline and its earning visibility in near future, we maintain “BUY” view on the

stock and we revise our target price from Rs 400 to Rs 440. At a CMP of Rs 412, stock

trades at 7.2x FY14E EPS.

Zensar is on the way to shut down few if its data centre in on site business, and

entering into new emerging space in Social networking, Mobility, Analytics and Cloud

because of good demand. We expect that order pipeline could be healthier on the

back of good demand seen in these emerging areas.

3QFY14E earnings preview: Zensar Tech is likely to report 5-6% (QoQ) sales growth led

by healthy growth across all geographies and PAT growth could be seen at 4-5% (QoQ).

We expect that EBITDA margin could be down by 100-150bps (QoQ) to 16%.

Key things to watch: Updates on new deal win, revenue traction from all geographies &

inorganic initiatives.

424/181

BSE Code 504067

NSE Symbol ZENSARTECH

Market Data



Nifty 6273

1800

"BUY"14th Jan' 14


21


Financials;

Zensar Tech

Clients/Headcounts Metrics;



$1mn+ 47 43 41 40 49 47

$5mn+ 6 7 7 8 6 6

$10mn+ 1 2 2 2 1 1

$20mn+ 1 1 1 1 1 1

top 5 clients 35% 35% 35% 35% 37% 39%

top 10 clients 40% 42% 42% 43% 43% 46%

DSO 69 59 56 55 66 61

Onsite 69% 72% 70% 69% 68% 67%

Offshore 31% 28% 30% 31% 32% 33%

Utilization (Including Trainees) 81% 82% 83% 82% 81% 80%

Headcount 7286 6825 6504 6508 6519 6657

Number of million dollar

Client Contribution to Business

Effort & Utilization

Rs, Cr FY10 FY11 FY12 FY13 FY14E FY15E

Net Sales 497.08 562.56 700.15 2114.52 2403.19 3205.99

Other Operating Income 0.00 15.03 12.57 13.95 16.82 22.44

Total income from operations (net) 497.08 577.59 712.72 2128.47 2420.01 3228.44

Purchases of stock-in-trade 0.00 0.00 0.00 236.86 269.30 359.27

Employee Cost 393.17 343.12 411.36 1177.83 1258.40 1678.79

Other expenses 0.00 135.71 165.98 418.73 532.40 710.26

Total Expenses 393.17 478.83 577.34 1833.42 2060.11 2748.31

EBITDA 103.91 98.76 135.38 295.05 359.90 480.13

Depreciation 24.92 25.88 25.05 33.16 38.59 51.48

Other Income 8.15 14.20 27.91 8.66 72.60 80.71

Extra Ordinery Items 0.00 0.00 0.00 0.00 0.00 0.00

EBIT 78.99 72.88 110.33 261.89 321.31 428.65

Interest Cost 0.55 0.85 1.03 9.95 9.61 7.69

PBT 86.59 86.23 137.21 260.60 384.30 501.67

Tax 2.43 -2.24 42.67 86.07 134.50 175.58

PAT 84.16 88.47 94.54 174.53 249.79 326.08

Growth-%

Sales 17.8% 13.2% 24.5% 202.0% 13.7% 33.4%

EBITDA 28.7% -5.0% 37.1% 117.9% 22.0% 33.4%

PAT 38.9% 5.1% 6.9% 84.6% 43.1% 30.5%

Margin -%

EBITDA 20.9% 17.6% 19.3% 14.0% 15.0% 15.0%

EBIT 15.9% 13.0% 15.8% 12.4% 13.4% 13.4%

PAT 16.9% 15.7% 13.5% 8.3% 10.4% 10.2%

Expenses on Sales-%

Employee Cost 79.1% 59.4% 57.7% 55.3% 52.4% 52.4%

Other expenses 0.0% 23.5% 23.3% 19.7% 11.2% 11.2%

Tax rate 2.8% -2.6% 31.1% 33.0% 35.0% 35.0%

Valuation

CMP 272.10 157.85 180.00 248.58 412.00 412.00

No of Share 2.16 4.34 4.34 4.36 4.37 4.37

NW 293.93 366.96 417.42 751.69 958.03 1238.10

EPS 38.96 20.38 21.78 40.03 57.16 74.62

BVPS 136.08 84.55 96.18 172.41 219.23 283.32

RoE-% 28.6% 24.1% 22.6% 23.2% 26.1% 26.3%

Dividen Payout ratio 16.4% 19.9% 37.3% 21.9% 17.4% 14.1%

P/BV 2.00 1.87 1.87 1.44 1.88 1.45

P/E 6.98 7.74 8.26 6.21 7.21 5.52

Narnolia Securities Ltd402, 4th floor 7/ 1, Lords Sinha Road Kolkata 700071, Ph

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email: [email protected],

website : www.narnolia.com

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india equity analytics for today - neutral rating on yes bank, cmc and buy niit tech

Economy & Finance

price target of rs

target price of rs

cmp of rs

stock trades

sales growth

good growth

revenue growth

growth storybuyedition