India Equity Analytics

Daily Fundamental Report on Indian Equities

IEA-Equity Strategy 14th Feb, 2014 Edition : 206

14th Feb 2014

CIPLA :

"BUY"

Cipla Limited posted its 3QFY14 results with its standalone net revenues at Rs 2282 up 10 % YoY led by healthy growth in export business with well support from India operations to. The revenues from export business including formulations and API grew by 36 % to 1509 Cr for the quarter while domestic business grew by 9% YoY to 1044 Cr. ................................................ ( Page : 2-3)

Somany Ceremics: "Outlook Challenging in near term"

"REDUCE"

14th Feb 2014

At the current CMP of Rs. 131, the stock is trading at a PE of 15.1x and 11.0x of FY14E and FY15E. The company can post RoE of 17.0% and 17.1% & EPS of Rs. 8.7 and Rs. 10.8 FY14E and FY15E. We are downgrading the rating to "Reduce" and advise investors to book profits at current level. Over the longer term, we expect the efforts to introduce new ventures, curtail costs and the expected economic revival driven by an uptick in demand in the latter part of FY2015, to boost its fortunes. In the interim period, we are reducing our target multiple to 10x of FY15E and price target to Rs 115. ............................................................ ( Page : 4-5 )

Coal India LTD :

"BUY"

14th Feb 2014

Earlier we suggested, if earnings falls, then price might go beyond 256, but p/b level may be maintained , else we assume that since the company is a good dividend paying company with Roe above 30% we assume p/b should remain above 3. We see Coal India at a attractive valuation to go long from the current dips. So we stick to our previous estimates and recommend Maintain Buy CIL at price dips with a target price of Rs.307/-. ............................................................... ( Page : 6-8)

CANARA BANK :

"NEUTRAL"

14th Feb 2014

Canara banks performance was muted all through despite of healthy loan growth. Canara bank was unable to translate its balance sheet growth in profit & loos account due to lower base rate among peers. Banks asset quality was deteriorating sequentially along with higher fresh slippage. PCR was lowest among peers (without technical write off). We are disappointed with growth parameters of the bank. We have neutral view on the stock. ..................................................................... ( Page : 9-13)

Finolex Cables Ltd: "Reasonable prospects..."

"Book Partial Profit "

13th Feb 2014

Finolex Cables (FCL) Q3FY14 PAT of Rs. 24.5 crore was below ourestimate owing to lower sales and EBITDA margin. Decline in communication cable segment segments as well as high raw material prices resulted in flat EBITDA growth of 3.2% yoy. Sales rose 5.58% to Rs. 557.55 crore in the quarter ended December 2013 as against Rs. 528.07 crore during the previous quarter ended December 2012. Third Quarter result were marginally below our expectaton which led us to revise our estimate on stock, we cut our EPS forecast for FY14E-15E by 8.6%/4.1%. Even after posting marginally below result the stock is quite attractive at current market price of Rs. 81 and left a limited upside of 11%, however we advised our reader to book a part profit on stock . ......................................... ( Page : 14- 15)

IT Industry;NASSCOM Guidance :"FY15E; a year of growth opportunity"

13th Feb 2014

For FY15E, NASSCOM expects IT exports to grow by 13-15% and domestic market to grow by 9-12% based on broad feedback loop from companies and captives. Overall, Indian IT Industry is expected to reach the mark of USD130billion. For FY14, Indian IT industry is expected to report 13% growth, in line with NASSCOM guidance at 12-14%. ....................................................... ( Page : 16-18)

ORIENTAL BANK :

"BUY"

13th Feb 2014

Orient Banks profitability declined by 31% YoY on the back of subdues growth at NII level led by margin compression. Higher operating expenses and tax rate caused muted return ratios. Asset quality pressure remained persist and asset impaired (GNPA + Restructure advance) remained at elevated level. We have buy rating on the stock due to inexpensive valuation. We value bank at Rs.216/share which is 0.4 times of FY14Es book. ................................................. ( Page : 19- 23)
Narnolia Securities Ltd,

CIPLA
Result Update
CMP Target Price Previous Target Price Upside Change from Previous

"BUY"
14th Feb' 14

BUY
381 440 15%

Cipla Limited posted its 3QFY14 results with its standalone net revenues at Rs 2282 up 10 % YoY led by healthy growth in export business with well support from India operations to. The revenues from export business including formulations and API grew by 36 % to 1509 Cr for the quarter while domestic business grew by 9% YoY to 1044 Cr. The growth in export revenues was primarily due to growth in anti-retroviral, anti-cancer, anti-allergic and anti-biotic segments. The operating EBITDA for the quarter under review came Rs 403 Cr and OPM at 17.88 %.The OPM declines by more than 600 bps YoY due to the increase in the R&D and the ramp up in the Staff cost during the quarter. The employ cost as percentage of sales stands at 14 % while it was 12 % for the same time last fiscal. The other expenses as percentage of sales were 27% for the 3QFY14 versus 25 % in 3QFY13.The other expenditure increased largely due to rise in R&D expenses and rise in the cost owing to filings and setting up of the front end during the quarter. The R&D expenses 4.5% of Sales during the quarter. The net profits for the quarter came at Rs 261 Cr and NPM stands at 11.43 %. The Rs 40 Cr Forex gain is included in the other income during the quarter. The tax rate for the quarter was nearly at same rate as in corresponding last quarter at 25 %. The Company filed 10 ANDA's in the last nine months and got 6 approvals for the same period. It has 35 ANDA's under approval as on 31st December 2013. The few of the approval products are commercialized. Cipla Medpro formed as acquisition of Medpro,South Africa last year added 500 Cr to top line and 50 Cr to the operating profits during the quarter. The management of the company after the results said that the Global respiratory unit expects some of launches in the next year. It has set up new global respiratory team during the quarter. The Combination inhalers planned to launch in FY'15.Company expects to be more than 5% of Sales on the back of ramp up filings for the FY'15.The Capex is 90 Cr during the quarter and expects to be Rs 400 Cr FY'14. The Rollover Capex of previous year is Rs 150 Cr during the year. View & Valuation The stock at its CMP of Rs 381 is trading at 19.58 x of one year forward FY14E EPS of Rs 19.40.The stock has reacted negatively after 3QFY14 results however we dont see any downside risks to our estimates. We further believe that Cipla-Medpro would be earning accretive in medium to long term horizons and we view the recent correction a good entry point for the stock. We maintain our view BUY for the stock with Target Price of Rs 440.

Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs, Cr) Average Daily Volume Nifty 500087 CIPLA 450/354 30,591 617290 6,001

Stock Performance-%
Absolute Rel. to Nifty 1M -4.5 -1.7 1yr -3 -4.3 YTD -2 -14

Share Holding Pattern-%

Promoters FII DII Others Current 2QFY14 1QFY1 4 36.8 36.8 36.8 23.8 23.8 23.1 10.6 10.9 10.8 28.8 28.5 29.3

One Year Price vs Nifty

Revenue EBITDA PAT EBITDA Margin PAT Margin

3QFY14 2282 403 261 17.7% 11.4%

2QFY14 2347 533 376 22.7% 16.0%

(QoQ)-% (2.8) (24.4) (30.6) (500bps) (460bps)

3QFY13 2070 492 338 23.8% 16.3%

(YoY)-% 10.2 -18.1 -22.8 (610bps) (490bps)

2

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

CIPLA
Business Trend

The revenues from export business including formulations and API grew by 36 % to 1509 Cr for the quarter while domestic business grew by 9% YoY to 1044 Cr.

(Source: Company/Eastwind)

Revenue Trend %

Net revenues at Rs 2282 up 10 % YoY led by healthy growth in export business with well support from India operations to.

(Source: Company/Eastwind)

OPM & NPM Trend %

The OPM declines by more than 600 bps YoY due to the increase in the R&D and the ramp up in the Staff cost during the quarter.

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

VResult update
CMP Target Price Previous Target Price Upside Change from Previous

Somany Ceremics Ltd.

"Outlook Challenging in near term.."
Reduce
131 115 95 -12.2% 21.1%

"Reduce"
13th Feb' 14

Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 531548 SOMANYCERA 61/155 452 3,109 6,001

Stock Performance-%
Absolute Rel. to Nifty 1M 13.2 16.0 1yr 59.9 58.1 YTD 103.2 97.6

The Q3FY2014 results were weak marked by a double-digit decline in the profit after tax on the back of subdued increase in fuel cost, dollar v/s rupee volatility and a pressure on the margin. The management expect improvement in the demand conditions in the near term and guided a revenue growth of 20% in FY14E-15E, however we expect the revenue growth to be somewhere arround 12-15% and financial performance to remain weak on account of margin pressure. Consequently, we are downgrading the rating to "Reduce" and advise investors to book profits at current level. Over the longer term, we expect the efforts to introduce new ventures, curtail costs and the expected economic revival driven by an uptick in demand in the latter part of FY2015, to boost its fortunes. In the interim period, we are reducing our target multiple to 10x of FY15E and price target to Rs 115. Result highlights : For Quarter Ended 2QFY14 For the quarter ended September 2013, Somany Ceramic registered 6.5% rise in sales to Rs 284.5 crore. OPM fell 230 basis points to 6.0% taking OP down 8.3% to Rs 17.0 crore. Other income also rise 77.8% to Rs 48 lakh and interest cost decreased 8.9% to Rs 4.6 crore. As depreciation increased 9.1% to Rs 5.7 crore, PBT fell 41.1% to Rs 7.1 crore. Taxation fell 40.3% to Rs 2.3 crore (tax incidence grew from 32.5% to 32.9) and PAT fell 41.4% to Rs 4.8 crore. For Nine Month Ended 9MFY14 For the nine month ended December 2013, Somany Ceramic registered 18.7% rise in sales to Rs 848.8 crore. However, OPM dived from 8.5% to 6.4% taking OP down 10.7% to Rs 54.5 crore. Other income jumped 28.1% to Rs 1 crore and interest cost decreased 8.2% to Rs 13.8 crore. As depreciation increased 8.7% to Rs 16.5 crore, PBT fell 20.3% to Rs 25.2 crore. Taxation fell to 15.5% to Rs 8.6 crore but tax incidence grew from 32.1% to 34.0% which finally saw PAT falling 22.5% to Rs 16.6 crore. Management Guidence FY14E Management is expected to achive a top-line growth of arround 20-25% in FY14E. Valuations : At the current CMP of Rs. 131, the stock is trading at a PE of 15.1x and 11.0x of FY14E and FY15E. The company can post RoE of 17.0% and 17.1% & EPS of Rs. 8.7 and Rs. 10.8 FY14E and FY15E. We are downgrading the rating to "Reduce" and advise investors to book profits at current level. Over the longer term, we expect the efforts to introduce new ventures, curtail costs and the expected economic revival driven by an uptick in demand in the latter part of FY2015, to boost its fortunes. In the interim period, we are reducing our target multiple to 10x of FY15E and price target to Rs 115. Financials Revenue EBITDA PAT EBITDA Margin PAT Margin
(Standalone)

Share Holding Pattern-%

Promoters FII DII Others 3QFY14 63.3 2.8 1.7 32.2 2QFY14 1QFY14 63.3 63.3 0.8 0.2 1.9 2.0 34.0 34.5

1 yr Forward P/B

3QFY14 284.5 17.0 4.8 6.0% 1.7%

2QFY14 305.6 19.4 6.0 6.4% 2.0%

(QoQ)-% -6.9% -12.8% -20.5% (40) bps (30) bps

3QFY13 267.2 22.1 8.2 8.3% 3.1%

Rs, Crore (YoY)-% 6.5% -23.3% -41.4% (230) bps (140) bps 4

(Source: Company/Eastwind Research)

Narnolia Securities Ltd,

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

Somany Ceremics Ltd.

Key financials :
PARTICULAR Performance Revenue Other Income Total Income EBITDA EBIT DEPRICIATION INTREST COST PBT TAX Reported PAT Dividend EPS DPS Yeild % EBITDA % PBT % NPM % Earning Yeild % Dividend Yeild % ROE % ROCE% Position Net Worth Total Debt Capital Employed No of Share CMP Valuation 65 138 202 3 9 83 162 245 3 31 104 158 262 3 38 126 151 276 3 38 153 142 295 3 65 177 130 307 3 131 211 130 341 3 131 9.5% 3.0% 2.0% 28.5% 3.9% 13.5% 12.3% 10.3% 5.6% 3.8% 18.8% 2.2% 24.6% 13.8% 9.4% 4.8% 3.3% 18.0% 2.1% 23.0% 15.7% 8.4% 4.1% 2.9% 19.5% 2.5% 20.1% 16.6% 8.1% 4.5% 3.1% 14.6% 2.2% 21.3% 17.8% 6.6% 3.5% 2.4% 6.6% 1.4% 17.0% 9.8% 6.6% 4.2% 2.9% 9.1% 1.4% 19.4% 12.0% 446 2 448 42 28 14 16 14 5 9 1 2.5 0.4 542 3 545 56 41 15 13 31 10 20 2 5.9 0.7 720 1 721 68 50 17 17 34 11 24 3 6.9 0.8 879 1 880 74 56 18 21 36 11 25 3 7.3 0.9 1054 3 1056 86 65 21 20 48 15 33 5 9.4 1.4 1250 3 1253 83 59 24 17 44 14 30 6 8.7 1.9 1438 3 1440 95 75 26 17 60 19 41 6 11.9 1.9 2009A 2010A 2011A 2012A 2013A 2014E 2015E

(Ammount in crore)
Book Value P/B Int/Coverage P/E Net Sales/CE Net Sales/Equity 18.8 0.5 1.7 3.5 2.2 6.9 24.0 1.3 3.1 5.3 2.2 6.6 30.1 1.3 2.9 5.6 2.8 6.9 36.5 1.0 2.7 5.1 3.2 7.0

(Source: Company/Eastwind)
44.4 1.5 3.3 6.8 3.6 6.9 51.2 2.6 3.4 15.0 4.1 7.1 61.2 2.1 4.4 11.0 4.2 6.8

(Source: Company/Eastwind Research)

(Figures In crore)

Narnolia Securities Ltd,

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

Coal India LTD.

Result Update
CMP Target Price Previous Target Price Upside Change from Previous 261 307 330 18% -7%

"Buy"
14th Feb' 14

Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume (Nos.) Nifty 533278 COALINDIA 372/238 176226 17622 6001

CIL reported Rs.16928 Cr Sales (-2% YOY) against Rs.17325 Cr in Q3FY13 due to poor off takes of the coal during the quarter. Q3FY14 PAT slipped to -11% to Rs.3894 Cr against Rs.4395 Cr in Q3FY13.Q3FY14 EBIDTA/ton remained flat YOY at Rs.350/ton while it is increased 36% through QOQ. EBIDTA margin corrected in this quarter to 24% from 18% in Q2FY14.Depriciation slipped 11% to 442Cr against 495 Cr in Q2FY14, moderating the burden on EBIDTA. On the expenditure side contractual expenses increased ~20% to Rs.154/ton from Rs.128/ton in Q2FY14.Powerfuel cost and other expenses per ton remained flat, while cost of project per ton decreased to Rs149/ton from Rs.206/ton in the previous quarter. Poor Realization of Coal India showed little uptick like 2% to Rs.1445/ton. Fluctuation in Domestic and international coal price impacted coal offtake In this quarter the international coal price were relatively down by 9% against Q2FY14 while the domestic coal price were showed upward movement. So the Major domestic consumers of coal imported coal at lower price, hence it impacted the off takes and revenue of CIL slipped -2% YOY and unable to meet the target off takes. Govt decision related labor strikes impacted the productions of CIL too. Sequential increase in tax rate further contracted the NPM%. From January we have seen a recovery in international coal price which is positive sign for CIL. Rescheduling Date of hearing stands a key concern Competition Appellate Tribunal stays Rs 1,773 Crore fine on CIL, and will decide on the matter on next hearing 16th April 2014 (Rescheduled from 11th Feb 2014). The quantum of penalty Rs 1,773.05 Crore is equal to three per cent of the PSU's average turnover for the last three years. 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. Realization gain on Revised Coal Price Meanwhile, Coal India Ltd is likely to get additional revenue of Rs 2,119 Crore 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. Though the incremental revenue is a positive sign but it fails to change our previous valuation. Financials : Q3FY14 Y-o-Y % Q-o-Q % Q3FY13 Q2FY14 Net Revenue 16928 -2.3 9.8 17325 15411 EBITDA 4104 -4.3 46.9 2794 4288 Depriciation 442 5.2 -10.7 495 420 Interest Cost 10 0.0 25.6 8 10 Tax 1930 4.9 36.6 1412 1839 PAT 3894 -11.4 27.6 4395 3052
(In Crs)

Stock Performance-%
Absolute Rel. to Nifty 1M -1.3 2.8 1yr -21.2 8.8 YTD -21.4 8.6

Share Holding Pattern-%

Promoters FII DII Others 3QFY14 90.0 5.5 2.4 2.1 2QFY14 1QFY14 90.0 90.0 5.5 5.4 2.3 2.3 2.2 2.4

1 yr Forward P/B

Source - Comapany/EastWind Research

Narnolia Securities Ltd,

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

Coal India LTD.

View & Outlook We revised our estimates due to sequential poor production and off takes of CIL. We expect modest increase in sales volumes growth during FY2013-15 on account of poor off take capabilities of CIL. Management showed his confidence about their coal production target and coal off take target for FY2014E, in previous quarter, which is 482mt and 492mt respectively. But Due to sequential poor production and off take we revised the target to 464mt and 475mt respectively. Also, we expect CILs margins to decline during FY2014 due to lower e-auction realizations and higher staff costs/other expenses. We are expecting flat sales growth for 2014.Coal India Ltd sprang a positive surprise by reporting higher-than-expected realizations as well as earnings before interest, tax, depreciation and amortization (Ebitda). Average price realizations increased by 2.3% sequentially to Rs.1,444.87 per tonne which is positive sign for future growth. Recommendation Earlier we suggested, if earnings falls, then price might go beyond 256, but p/b level may be maintained , else we assume that since the company is a good dividend paying company with Roe above 30% we assume p/b should remain above 3. We see Coal India at a attractive valuation to go long from the current dips. So we stick to our previous estimates and recommend Maintain Buy CIL at price dips with a target price of Rs.307/-.

P/L PERFORMANCE Net Revenue from Operation Cost Of Projects & Contractual Power and fuel contractual expenses Employee benefit Expence Expenditure EBITDA Depriciation Interest Cost Tax PAT ROE % OPERATING MATRIX Coal Production in MT Coal Offtake in MT Revenue Generation From unit Ton Avg Man Power (in numbers) Productivity Per Man

FY11 50234 7573 1755 4580 20481 40390 9843 1673 79 5595 10868 33 FY10 431 416 1073 404744 1066

FY12 62415 5123 2013 4901 26705 40857 21558 1969 54 6484 20588 51 FY11 431 425 1183 390243 1105

FY13 68303 6556 2333 5802 27943 50219 18084 1813 45 7623 17356 36 FY12 436 433 1441 377447 1155

FY14E 69960 8372 2591 6049 28943 53705 16255 1860 34 7310 17921 40 FY13 452 465 1468 364736 1240
7

Narnolia Securities Ltd,

Coal India LTD.

B/S PERFORMANCE Share capital Reserve & Surplus Total equity Long-term borrowings Short-term borrowings Long-term provisions Trade payables Short-term provisions Total liabilities Intangibles Tangible assets Capital work-in-progress Long-term loans and advances Inventories Trade receivables Cash and bank balances Short-term loans and advances Total Assets RATIOS P/B EPS Debtor to Turnover% Creditors to Turnover% Inventories to Turnover% CASH FLOWS Cash from Operation Changes In Working Capital Net Cash From Operation Cash From Investment Cash from Finance Net Cash Flow during year FY10 6316 20956 27273 343 1620 2545 772 1404 5443 0 12035 2211 610 4402 2169 39078 8066 17921 FY10 0.0 0.0 4.9 1.7 1.0 FY11 6316 26998 33314 1334 33 22461 645 12387 8490 779 12065 2057 845 5586 3419 45806 11180 21646 FY11 5.7 17.3 22.8 4.3 3.7 FY12 6316 34137 40453 1305 0 28271 829 15595 9785 759 12681 1848 1017 6071 5663 58203 13478 24688 FY12 5.5 32.6 29.2 4.3 3.1 FY13 6316 42156 48472 1078 0 31144 837 20447 12385 712 12754 3496 1181 5618 10480 62236 16189 25479 FY13 4.0 27.5 52.7 4.2 2.8 FY13 15948 -6839 9109 -1833 -7852 -575

Trading At :

FY10 FY11 FY12 10727 12819 16323 -131 -3822 3565 10596 8997 19888 950 697 -10410 2163 2911 -7382 13708 12606 2095 Down 21% from its 52week High Up 14% from its 52 week Low

Narnolia Securities Ltd,

CANARA BANK
Result update CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol
52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty

"NEUTRAL"
14h Feb2014

NEUTRAL 213 256 20

Canara banks performance was muted all through despite of healthy loan growth. Canara bank was unable to translate its balance sheet growth in profit & loos account due to lower base rate among peers. Banks asset quality was deteriorating sequentially along with higher fresh slippage. PCR was lowest among peers (without technical write off). We are disappointed with growth parameters of the bank. We have neutral view on the stock. Moderate growth in NII was due to margin compression During quarter banks NII grew by 12% YoY to Rs.2227 cr despite of 32% loan growth and 26% deposits growth. Moderate growth in NII was due to margin compression in YoY basis which was lead by lower base rate among peers. On NII level, banks interest earnings asset grew by 18% YoY while interest bearing liabilities grew by 20% due to higher share of wholesale deposits which somehow increased cost. Other income was flat from last quarter and was stood at Rs.851 cr versus Rs.846 cr. Consequently from lower support of other income, revenue grew by 8.6% YoY to Rs.3078 cr. Higher opex and moderate NII growth led muted operating profit growth Operating cost increased by 12.9% YoY was due to higher cost registered in other operating expenses which were came because of 47 new branches and 245 ATMs added on yearly basis. Employee cost was flat on YoY basis while other operating expenses increased by 26.3% YoY. Cost to income ratio 180 bps improved on YoY basis to 48.3%. With moderate NII growth and higher operating expenses led operating profit growth of 4.9% YoY. Deteriorating asset quality with higher slippage On asset quality front, gross NPA increased by 8% QoQ in absolute term whereas fresh slippage was high at Rs.2100 cr versus Rs.1520 cr in previous quarter. In percentage term, GNPA stood at 2.8% versus 2.7% in previous quarter whereas fresh slippage in annualised basis increased by 76 bps sequentially to 2.9%. During quarter, banks increased provisions by 19% QoQ thereby net NPA increased by 6% in absolute term. In percentage term net NPA stood at 2.4% versus 2.3% in previous quarter.PCR slightly improved from 13.6% to 14.9% (without technical write off) much lower than peers. However bank reported PCR at 57.4% in 3QFY14.

532483 CANBK 459/190 9427 1.93 lakh 6001

Stock Performance 1M Absolute -17.2 Rel.to Nifty -13.3

1yr -52.3 -54.1

YTD -52.3 -54.1

Share Holding Pattern-% Current 1QFY14 4QFY1 3 Promoters 69.0 67.7 67.7 FII 10.3 11.9 12.7 DII 12.9 13.1 13.3 Others 7.7 7.3 6.3 CANARA BANK Vs Nifty

Financials
NII Total Income PPP Net Profit EPS 2011 7823 10526 6107 4026 90.9 2012 7689 10617 5943 3283 74.1

Rs, Cr 2013 2014E 2015E 7879 8511 12169 11032 12328 15986 5890 6381 8792 2872 2399 3869 64.8 52.0 83.9 (Source: Company/Eastwind)
9

Narnolia Securities Ltd,

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

CANARA BANK
Healthy loan growth led by retail sector Banks loan grew by 32% YoY led by retail sector growth of 55% YOY followed by SME (46% YoY), Infrastructure (24% YoY). Within infrastructure loan growth, power generation and transmission growth was strong at 63% YoY. Deposits grew by 1% YoY and 4% QoQ in which current and saving account deposits grew by 19% and 16% YoY respectively. In deposits profile, term deposits de-grew by 3% YoY which was took flat growth in overall deposits as share of term deposits reduce to 77% from 80% in last quarter. CASA ratio was declined by 123 bps QoQ to 23%. Credit deposits ratio for the quarter stood at 70.4% versus 71.8% in previous quarter and 67.4% in last quarter. Margin compression on account of higher cost of fund NIM compressed by 15 bps YoY to 2.21 largely due to lower loan yield 70 bps YoY whereas cost of fund increased by 120 bps YoY. Higher cost of fund was due to higher cost of bulk deposits. However declining share of bulk deposits and increasing CASA ratio restricted to escalate funding cost. Yield on loan declined by 70 bps YoY despite of healthy loan growth was due to lower base rate among peers. Valuation & View Canara banks performance was muted all through despite of healthy loan growth. Canara bank was unable to translate its balance sheet growth in profit & loos account due to lower base rate among peers. Banks asset quality was deteriorating sequentially along with higher fresh slippage. PCR was lowest among peers (without technical write off). We are disappointed with growth parameters of the bank. We have neutral view on the stock. Valuation Band

Narnolia Securities Ltd,

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

10

CANARA BANK
Chart Focus

Moderate growth in NII was due to margin compression

Higher opex and moderate NII growth led muted operating profit growth

Profitability declined due to moderate NII growth, higher provisions and higher tax rate

Narnolia Securities Ltd,

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

11

CANARA BANK
Quarterly Performance

Quarterly Result Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest on deposits Interest Expended NII Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions PBT Tax Net Profit Balance Sheet Deposits CASA(%) Loan Investments Asset Quality GNPA NPA % GNPA % NPA PCR(%) (w/o technical write-off)

3QFY14 7360 2575 149 0 10084 851 10935 7311 7857 2227 851 3078 873 614 1488 1591 1052 539 130 409

2QFY14 6964 2597 93 0 9654 773 10427 6923 7463 2191 773 2964 933 607 1539 1425 674 751 125 626

3QFY13 5958 2460 127 0 8544 846 9390 6307 6556 1988 846 2834 831 486 1317 1516 626 891 180 711

% YoY % QoQ 3QFY14E % Variation 23.5 5.7 7298 0.9 4.7 -0.9 2701 -4.7 17.1 60.3 216 -30.8 -13.5 0 18.0 4.4 10214 -1.3 0.7 10.1 1006 -15.3 16.5 4.9 11220 -2.5 15.9 5.6 0 19.8 5.3 7608 3.3 12.0 1.6 2606 -14.5 0.7 10.1 1006 -15.3 8.6 3.9 3612 -14.8 5.1 -6.3 1127 -22.5 26.3 1.2 751 -18.3 12.9 -3.4 1878 -20.8 4.9 11.6 1734 -8.2 68.0 56.0 700 50.3 -39.4 -28.2 1034 -47.8 -27.8 4.0 258 -49.7 -42.4 -34.6 775 -47.2

408924 391613 323963 23.1 24.3 20.0 287700 281104 218242 130359 119481 118835

26.2 31.8 9.7

4.4 2.3 9.1

400424 0.0 291913 127099

2.1 -1.4 2.6

8,074 6870 2.8 2.4 14.9

7,475 6459 2.7 2.3 13.6

6,090 5134 2.8

32.6 33.8

8.0 6.4

Narnolia Securities Ltd,

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

12

CANARA BANK
Income Statement
Interest Income Interest Expense NII Change (%) Non Interest Income Total Income Change (%) Operating Expenses Pre Provision Profits Change (%) Provisions PBT PAT Change (%)

2010
18752 13071 5681 #DIV/0! 2858 8538 #DIV/0! 3478 5061 #DIV/0! 2039 3021 3021 45.8

2011
23064 15241 7823 37.7 2703 10526 23.3 4419 6107 20.7 2081 4026 4026 33.2

2012
30851 23161 7689 -1.7 2928 10617 0.9 4674 5943 -2.7 1860 4083 3283 -18.5

2013
34078 26199 7879 2.5 3153 11032 3.9 5142 5890 -0.9 2218 3672 2872 -12.5

2014E
39193 30682 8511 8.0 3817 12328 11.8 5947 6381 8.3 3347 3034 2399 -16.5

2015E
47413 35244 12169 43.0 3817 15986 29.7 7194 8792 37.8 3565 5228 3869 61.3

Balance Sheet
Deposits( Rs Cr) Change (%) of which CASA Dep Change (%) Borrowings( Rs Cr) Investments( Rs Cr) Loans( Rs Cr) Change (%) 234651 #DIV/0! 68261 #DIV/0! 8441 69677 169335 #DIV/0! 293973 25 83117 22 14262 83700 212467 25 327054 11 79611 -4 15525 102057 232490 9 355856 9 86061 8 20283 121133 242177 4 409234 15 102878 20 24439 133305 293034 21 470620 15 118310 15 28105 168631 339919 16

Ratio
Avg. Yield on loans Avg. Yield on Investments Avg. Cost of Deposit Avg. Cost of Borrowimgs 8.2 6.6 5.2 9.3 8.0 6.9 4.8 7.0 10.1 6.9 6.7 7.7 10.1 7.5 7.1 4.7 9.6 7.7 7.0 7.0 10.0 7.5 6.9 7.0

Valuation
Book Value CMP P/BV 358 410 1.1 452 627 1.4 512 474 0.9 562 393 0.7 639 214 0.3 710 214 0.3
13

Narnolia Securities Ltd,

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

VResult update
CMP Target Price Previous Target Price Upside Change from Previous

Finolex Cables Ltd.

"Reasonable prospects..."
Book Partial Profit 81 90 73 11% 0%

"Book Partial Profit"

13th Feb' 14

Market Data
BSE Code NSE Symbol 52wk Range H/L Capital Mkt (Rs Crores) Average Daily Volume Nifty 500144 FINCABLES 41/92 1,238 94,300 6,084

Finolex Cables (FCL) Q3FY14 PAT of Rs. 24.5 crore was below ourestimate owing to lower sales and EBITDA margin. Decline in communication cable segment segments as well as high raw material prices resulted in flat EBITDA growth of 3.2% yoy. Sales rose 5.58% to Rs. 557.55 crore in the quarter ended December 2013 as against Rs. 528.07 crore during the previous quarter ended December 2012. Third Quarter result were marginally below our expectaton which led us to revise our estimate on stock, we cut our EPS forecast for FY14E-15E by 8.6%/4.1%. Even after posting marginally below result the stock is quite attractive at current market price of Rs. 81 and left a limited upside of 11%, however we advised our reader to book a part profit on stock The copper rods segment was initially set up as backward integration for the cables segment. The excess production after captive consumption is sold off to third parties at market price. However, owing to thin and declining margins from third party transactions, FCL is gradually reducing its exposure to the segment. The contribution of the segment to the top-line has decreased from 21% in FY2010 to ~5% currently. This trend is expected to continue, thereby improving the overall EBIT margin of the company.

Stock Performance-%
Absolute Rel. to Nifty 1M (4.1) (2.7) 1yr 46.7 43.7 YTD 78.0 71.0

Share Holding Pattern-%

Promoters FII DII Others 3QFY14 35.8 1.8 9.8 52.5 2QFY14 1QFY14 35.8 35.8 1.1 1.0 10.2 10.5 52.9 52.8

Outlook : FCL being one of the leading players in the cable industry seems well placed to capture huge opportunities considering the strengths & the industry in which the Company is operating. Derivative losses coupled with bleak performance by communication cable segment were the major reasons for de-rating of the stock in past which in our view seems to have been overdone. The companys LT division is doing very well, they have recently entered into HT and Extra High Voltage (EHV) cable verticals. The company has market share of around 15-16 percent in both electrical and telecommunication verticals. Further the company has approved setting up a captive 5 MW solar power plant at its manufacturing facilities at Urse, Pune at an estimated cost of Rs 40 crore. Valuation : We cut our earnings estimates to factor volume decline in electrical & communication cable segment, margin decline in copper rod segment and losses in the others segment. Consequently, we cut our earnings estimates by 8.6% for FY14E (Rs. 11.6/Share) and 4.1% for FY15E (Rs. 12.6/Share). At the CMP of Rs. 81 stock is trading at PE of 7.0/6.4 of FY14E/15E. We revised our rating on stock from "Buy" to "Hold". However owing to slower pace of economic growth further we advised our readers to book part profit on stock and hold the balance with a target price of Rs. 90

1 yr Forward P/B

Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 563.1 44.3 24.5 7.9% 4.3% 2QFY14 593.1 76.4 80.0 9.3% 12.8% (QoQ)-% -5.1% -42.0% -69.4% (140) bps (850) bps 3QFY13 534.3 42.9 24.0 8.0% 4.5%

Rs, Crore (YoY)-% 5.4% 3.2% 2.1% (10) bps (20) bps
(Standalone)

(Source: Company/ Eastwind Research)

Narnolia Securities Ltd,

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

14

Finolex Cables Ltd.

Key financials :
PARTICULAR Performance Revenue Other Income Total Income EBITDA EBIT Depriciation Intrest Cost PBT TAX Derrivative Loss Reported PAT Dividend EPS DPS Yeild % EBITDA % NPM % Earning Yeild % Dividend Yeild % ROE % ROCE% Position Net Worth Total Debt Capital Employed No of Share CMP Valuation Book Value P/B Int/Coverage P/E 39.0 0.5 1.9 -8.3 42.0 1.2 8.4 13.4 46.9 1.0 7.0 8.5 52.3 0.6 5.2 4.9 60.4 0.8 14.6 4.8 70.6 1.1 13.6 7.0 81.7 1.0 14.6 6.4 596 296 892 15 19 643 275 918 15 51 717 260 978 15 47 800 172 972 15 31 924 184 1109 15 46 1079 160 1239 15 81 1249 160 1409 15 81 7.4% -2.5% -12.0% 1.0% -6.0% -4.0% 12.0% 3.5% 7.4% 1.2% 9.0% 6.3% 8.5% 4.1% 11.7% 1.5% 11.9% 8.7% 8.5% 4.7% 20.6% 2.6% 12.3% 10.1% 10.1% 6.3% 20.9% 2.6% 15.7% 13.1% 10.4% 7.5% 14.3% 1.9% 16.5% 14.3% 10.8% 7.3% 16.2% 1.9% 15.4% 13.7% 1342 51 1392 100 61 39 32 -30 5 -109 -35 3 -2.3 0.2 1619 24 1643 195 157 37 19 89 32 -74 58 9 3.8 0.6 2036 26 2062 174 135 39 19 107 22 -34 85 11 5.6 0.7 2064 36 2100 175 135 39 26 109 11 -36 98 12 6.4 0.8 2271 24 2295 229 182 47 12 171 26 -23 145 18 9.5 1.2 2315 47 2362 241 191 50 14 234 56 10 178 23 11.6 1.5 2500 42 2542 258 205 53 14 233 56 0 185 23 13.1 1.5 2009A 2010A 2011A 2012A 2013A 2014E 2015E

(Source: Company/ Eastwind Research)

Narnolia Securities Ltd,

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

15

IT Industry;NASSCOM Guidance
"FY15E; a year of growth opportunity"
Performance of Our Coverage NASSCOM Guidance and IT Industry Growth-USD term Year NASSCOM Guidance-% Actual Growth-% FY03 30 25 FY04 26-28 34 FY05 30-35 37 FY06 30-32 33 FY07 25-27 32 FY08 24-27 30 FY09 21-24 17 FY10 4-7 5 FY11 13-15 19 FY12 16-18 16 FY13 11-14 10 FY14E 12-14 13 FY15E 13-15 (Source: Company/Eastwind) Optimistic guidance by NASSCOM (FY15E), IT Industry is fit-well for all grounds; After 3 consecutive conservative guidance, NASSCOM (National Association of Software and Services Companies) revealed earning guidance for FY15E with positive outlook led by favorable demand discretionary environment. Overall, Industry is cheering with NASSCOMs fair guidance and they are confident to catch up the growth target. For FY15E, NASSCOM expects IT exports to grow by 13-15% and domestic market to grow by 9-12% based on broad feedback loop from companies and captives. Overall, Indian IT Industry is expected to reach the mark of USD130billion. Considering the better economic data, healthy growth pattern of US economy, and the increase in global IT spending & global sourcing models, Indian IT players are confident to see 3.9% of global IT spending and 5.9% growth in Business Process Management space in 2014.

FY14E and NASSCOM Guidance;

For FY14, Indian IT industry is expected to report 13% growth, in line with NASSCOM guidance at 12-14%. While, domestic revenue could be seen below expectation because of delay in decision-making and policy paralysis by government. Despite various challenges across the Industry, overall ecosystem is changing and they are transforming into dynamic era by adapting new verticals like SMAC (Social, Mobility, Analytics, and Cloud), Big data and Digital etc. Even, IT players are making its healthy existence in US and Europe regions. They are also running for new geographies like Africa, APAC and MEA.

INR/USD&CNX IT Performance(2013); Export Revenue (USD, mn) Year Tier-1 IT Exports FY04 3670 12900 FY05 5300 17700 FY06 7163 23605 FY07 10142 31206 FY08 14399 40418 FY09 16200 47103 FY10 17100 49690 FY11 21342 59035 FY12 25475 68687 FY13 28165 75800 FY14E 31000-32000 84000-87000 FY15E (Tier-1: TCS, INFY, HCLTECH, and WIPRO)

Interesting analytical facts behind NASSCOM Guidance :

(a) Growth rate for the Big 4 (Infosys, Wipro, TCS and HCLT) has been better than industry growth from FY02-08. However, that trend started changing from FY09 with at least two players underperforming the industry growth every year (with the exception of FY11). For FY14E, a street expectation also indicates that still 2 players could be underperformer. (b) Profitability growth is also equally important than revenue growth. While this may be nitpicking, even in a healthy year of growth of 16% for the Indian IT industry in FY12, and EBITDA margins of Tier-1 IT (ex-HCLT) declined 50-180 bps. This was even after 6% depreciation of the Rupee against the US$ and favorable cross-currency trends. (c) This is fact; the tempo of market share gain by top players is reducing combined because of faster growth by global players, faster focus on captives, and dogfight over bidding and vendors consolidation. For FY15E, Tier-1 players are sanguine on beating guidance by on an average 1-2% as record of accomplishment of previous 5 years. Despite above facts, our optimism on Indian IT is based on possibility of accelerated growth in 2014, on: (1) Improved business sentiment in the US and Europe; (2) signs of discretionary spending coming back; (3) continued market share gains for Indian companies; and (4) increased spending due to adoption of new technologies.
16

2013 has been a year of innovation and transformation and 2014 could be an execution year.

Narnolia Securities Ltd,

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

IT Industry;NASSCOM Guidance
Underlying strengths to dictate FY15E growth;
Favorable demand discretionary environment: US is witnessing better GDP growth combined with improving business sentiment, higher consumer spend, lower Government spending cuts and improving job data. These facts are playing key role to uptick in discretionary spending in North America. At a same time, revival in Euro zone has taken place and offshore services from Europe is compounding to revenue traction. We expect to see potential uptick in IT budget. No pressure on billing rate: Considering healthy economic scenario across US and Europe, we are not expecting to see any pressure on billing term. If INR depreciates to the mark of Rs65 against the USD, then client can go with marginal bargaining. Post earning of 3QFY14E, most of management quoted for stable billing rate and clients confident on billing front. Active participations of new emerging verticals: SMAC is throwing up huge opportunities as firms want to optimize investments in current technology and drive growth by using digital technologies and platforms. The digital forces of social, mobile, analytics and cloud (SMAC), Bigdata and digital will reach mainstream status in 2014 and create requirements, drive new purchasing and establish new competitive realities. Favorable supply side scenario: Though attrition remained higher than last year, especially among the bellwethers, campus hiring and fresh offers declined during the year. However, utilization rate especially on onsite and offshore are on increasing mode, it indicates favorable supply side scenario for the industry. Cost rationalization still a part of agenda: Across the Industry, most of players are focusing on cost control by improving volume, reducing expenses, and improving attrition rate to maintain stability on margin front. Considering flat range of currency exchange rate (INR against USD), we expect to see 50-150bps ups and down in IT industry in FY15E. (Source: Company/Eastwind)

Performance of Our IT Coverage

Quote on NASSCOM Guidance

"The guidance is a clear reflection that the market is strengthening, so 13-15% overall growth seems like a fair number, (CMD, Persistent System)

Concerns:
However, hardening of regulatory related to visa approval in USA, Canada and Australia could spoil the party. Even, the approval of Immigration Bill attached with higher visa fee, wage requirements and enhanced audit by US agencies could turn the growth story of Indian IT players adversely. If passed in its current form, the Bill could hurt the margins of the Indian IT export sector, which derives almost 55-60% of its revenues from USA.

Tier-1 Revenue Growth and Margin

Year FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E TCS 41.7 36.4 44.3 36.6 7.5 4.4 28.4 25.1 15.2 18.1 18 Revenue Growth-% INFY WIPRO HCL TECH 51.6 41.6 41.4 35.4 35.9 29.6 43.8 36.5 37.6 35.5 61.3 40.4 11.7 17.8 18.9 3 0.5 25.3 24.6 18.3 27.6 15.8 13 22.4 6.7 6 12.9 12 6.7 14.8 17.5 18.5 18.7 TCS 32.8 32.5 31.6 31.4 33.2 34.6 32.6 31.8 29.1 29.75 28.5 EBITDA Margin-% INFY WIPRO 29.3 29.9 27.7 27.8 27.2 27.4 26 24.6 25.8 24.3 28.9 26.7 30 25.7 29.5 23.9 29 23.7 27 22.7 25.5 21.8 HCL TECH 22.9 21.7 21.1 21.2 21.4 19.7 16.6 18.7 21.6 25 24

13-15% (estimate) for exports looks like a good number, (CEO, outsourcing advisory Offshore Insights)

Revenue in USD-(mn) term-FY14E

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

17

IT Industry;NASSCOM Guidance
Our view on Industry Per se:
We have seen a significant increase in global technology spending this year, creating opportunities for the Indian software services sector to post double-digit growth again in export as well as in the domestic markets. FY15 promises to be bigger and stronger than the last 3 years, which were marked by bloodbath in global markets due to Eurozone crisis and falling consumer confidence in the US. Demand is set to pick up in sectors like BFSI, healthcare, retail and transportation globally in the year ahead. For FY15E, We expect that strong fundamentals should help to sustain earning momentum in FY15E. Foray into niche verticals and executions of large deal would play an important factor for better earning visibility in near future. There is a window of opportunity for competent large caps and midcaps to displace incumbents and gain some incremental business. In the past 4 quarters, large caps (four companies) have grown at 3.4% CQGR, while midcaps (five companies) at 3.2%which is comparable to larger peers. On Tier-1 IT players, we are positive on INFY, TCS and HCL Tech. While, across the Mid cap and niche players we are optimistic view on TECHM, PERSISTENT, ZENSARTECH, ECLERX and KPIT .

NIFTY and CNX IT performance

43.9%

3.1%

View and Valuation; CMP Company (12.02.14) TCS 2103.8 INFOSYS 3599.6 HCLTECH 1491.6 WIPRO 562.15 TECHM 1875.55 CMC 1424.45 NIITTECH 421.55 KPIT 167.15 HEXAWARE 144.55 PERSISTENT 1021.8 eCLERX 1203.15 TATAELXSI 392.1 ZENSARTECH 365.65 MINDTREE 1644.45

View BUY BUY BUY NEUTRAL BUY NEUTRAL BUY BUY NEUTRAL BUY BUY NEUTRAL BUY NEUTRAL

Target 2510 3910 1560 2130 443 177 1065 1358 440 -

Upside % FY13 19.3% 71.82 8.6% 164.2 4.6% 58.10 25.0 13.6% 123.97 75.27 5.1% 36.28 5.9% 10.80 13.9 4.2% 46.12 12.9% 64.25 10.63 20.3% 40.03 89.72

EPS-Rs FY14E
95.00

FY15E
109.31

188.0 79.36 31.07 155.37 86.04 43.33 12.63 15.0 61.42 71.61 24.02 52.70 100.94

218.2 98.11 33.5 175.50 92.35 54.18 16.82 16.0 79.08 83.65 28.36 68.97 114.93

FY13 29.29 21.92 25.67 22.44 15.13 18.92 11.62 15.47 10.40 22.16 18.72 36.89 9.13 18.33

P/E-x FY14E 22.15 19.15 18.79 18.10 12.07 16.56 9.73 13.23 9.61 16.64 16.80 16.32 6.94 16.29

FY15E 19.25 16.50 15.20 16.78 10.69 15.42 7.78 9.94 9.03 12.92 14.38 13.83 5.30 14.31

FY13 36.4% 24.8% 30.7% 21.7% 34.8% 24.1% 20.0% 20.1% 27.4% 18.1% 43.8% 16.9% 23.2% 28.4%

RoE-% FY14E 37.5% 23.7% 31.5% 22.7% 30.7% 22.8% 19.4% 19.3% 24.9% 20.3% 37.9% 29.7% 24.5% 25.6%

FY15E 34.4% 22.9% 29.4% 20.8% 26.0% 20.7% 19.6% 20.7% 22.5% 21.4% 34.4% 27.4% 25.2% 23.6%

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

18

ORIENTAL BANK
Result update CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol
52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty

"BUY"
13h Feb2014

BUY 172 216 222 26 -2.703

Orient bank reported weak set of quarterly numbers with net profit declined by 31% YoY due to muted growth in NII and higher operating expenses. Asset quality pressure remain persist with total impaired asset (GNPA+ Restructure advances) remain high at 11.1% of loan. Bank made lower provisions against bad loan despite of deterioration in asset. We have buy rating on the stock due to inexpensive valuation. We Value bank at Rs.216/share which is 0.5 times of FY14Es book value. Muted NII growth on the back of margin compression During quarter banks NII grew by 2% YoY lower than expectation largely due to margin compression and lower growth in loan and deposits. Margin compression was on account of lower loan yield as compare to cost of deposits. Total interest income grew by 6% YoY while interest expenses increased by 18% YoY which drag lower growth in NII. Other income was lower by 10% YoY to Rs.341 cr versus Rs.378 cr in last year led by 48% declined in treasury gain. Overall revenue de-grew by 1% YoY to Rs.1571 cr. Subdue NII growth and higher operating expenses led negative growth in PPP

500315 ORIENTBANK 310/121 4920 2.21 cr 6084

Stock Performance 1M Absolute -16.8 Rel.to Nifty -13.8

1yr -44.4 -47.4

YTD -44.4 -47.4

Share Holding Pattern-% Current 1QFY14 4QFY1 3 Promoters 59.1 58.0 58.0 FII 9.6 10.0 10.1 DII 24.9 24.0 24.6 Others 6.4 8.1 7.3 ORIENT BANK Vs Nifty

Operating expenses increased by 9% YoY in which employee cost and other operating cost increased by 1% and 20% respectively. Flat employee cost was due to lower wage settlement provisions made by bank. Consequently CI ratio declined to 45.4% from 41.5% in last quarter and 48.2% in previous quarter. Muted NII growth, lower other income and higher operating cost led pre provisioning profit declined to 7% YoY. Asset quality stress persists During quarter bank made provisions and contingencies to tune of Rs.561 cr as against Rs.551 cr in previous quarter and Rs.604 cr in last quarter. During quarter bank reported fresh slippage of Rs. 1043 cr (3.1% annualized) as against Rs.1015 cr (3.2% annualized) in previous quarter. In absolute term GNPA increased by 6% YoY to Rs.5184 cr while provision decreased by 8% YoY to Rs.1351 cr. Consequently net NPA increased by 12% QoQ to Rs.3833 cr. In percentage term, gross GNPA and net NPA stood at 3.87% and 2.9% from 3.81% and 2.7% respectively sequentially. Due to lower provisions PCR (without technical write off) declined from 30% to 26%. Fresh restructure sharply surged to Rs.1365 cr during quarter and outstanding restructure book stood at Rs. 9687 cr Rs, Cr Financials 2011 2012 2013 2014E 2015E NII 4178 4216 4701 5136 6970 Total Income 5138 5456 6356 6724 8558 PPP 3245 3141 3691 3680 4707 Net Profit 1503 1142 1328 1046 1812 EPS 51.5 39.1 45.5 34.9 60.4 (Source: Company/Eastwind) 19 Narnolia Securities Ltd,
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ORIENTAL BANK
Subdue loan and deposits growth On balance sheet front, bank reported very sluggish growth rate with deposits grew by 4% YoY in which current account and saving account deposits grew by 3% and 12% YoY. CASA deposits in absolute term grew by 10% YoY and in percentage to total deposits it stood at 24.2% as against 23.9% in last quarter. Loan grew by 8.4% YoY to Rs.1340 bn led by 16% YoY growth in retail loan followed by mid corporate and large corporate. Credit deposits ratio for the quarter remained same and it stood at 73.4%. Margin compression on account of higher cost of fund than loan yield Bank reported 15 bps QoQ margin compressions on account of higher cost of fund than loan yield. During quarter banks cost of fund declined by 10 bps QoQ while yield on loan declined by 38% QoQ to 10.8% from 11.2%. Yield in investment also declined from 7.4% to 6.9% which also cause margin compression. Profitability declined on account of muted NII growth, higher operating expenses and tax rate Orient banks profitability declined by 31% YoY to Rs.224 cr lower than our expectation of Rs. 269 cr largely due to weak performance all around. During quarter bank reported muted NII growth, lower other income, higher operating cost and higher tax rate. Valuation & View Orient bank reported weak set of quarterly numbers with net profit declined by 31% YoY due to muted growth in NII and higher operating expenses. Asset quality pressure remain persist with total impaired asset (GNPA+ Restructure advances) remain high at 11.1% of loan. Bank made lower provisions against bad loan despite of stress in asset. We have buy rating on the stock due to inexpensive valuation. We Value bank at Rs.216/share which is 0.5 times of FY14Es book value.

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20

ORIENTAL BANK
Chart Focus

Muted NII growth on the back of margin compression

Subdue NII growth and higher operating expenses led negative growth in PPP

Profitability declined on account of muted NII growth, higher operating expenses and tax rate

Source : Eastwind/ Company

Narnolia Securities Ltd,
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21

ORIENTAL BANK
Quarterly Result ( Rs Cr) Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest on deposits Interest on RBI/Inter bank borrowings Others Interest Expended NII Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions PBT Tax Net Profit Balance Sheet ( Rs Cr) Deposits Loan Asset Qiality GNPA NPA % GNPA % NPA 3QFY14 2QFY14 3QFY13 3622 3591 3507 1075 1076 954 21 9 8 6 0 0 4723 4676 4469 341 312 378 5064 4988 4847 3322 3234 3150 93 93 79 78 68 35 3493 3395 3264 1230 1281 1204 341 312 378 1571 1593 1582 394 446 391 319 322 265 713 768 656 858 825 926 561 551 604 297 275 323 73 23 -4 224 251 326 % YoY Gr 3.3
12.7 167.2 2868.4 5.7 -9.8 4.5 5.5 17.9 119.1 7.0 2.2 -9.8 -0.7 0.8 20.3 8.7 -7.3 -7.1 -7.8 -1996.1 -31.3

% QoQ Gr 3QFY14E 0.9 3783 -0.1 1137 135.4 20 5027.3 4 1.0 4943 9.3 425 1.5 5368 2.7 0 0.0 0 14.9 0 2.9 3548 -3.9 1395 9.3 425 -1.4 1820 -11.7 496 -0.8 359 -7.1 856 4.0 965 1.9 581 8.3 384 215.3 115 -10.8 269

182470 175153 164174 133962 128353 123623

11.1 8.4

184299 4.4 135102

4.2

5184 3833 3.9 2.9

4887 3423 3.8 2.7

3690 2610 3.0 2.1

40.5 46.9

6.1 12.0

Source: Company/Eastwind
Narnolia Securities Ltd,
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22

ORIENTAL BANK
P/L
Interest/discount on advances / bills Income on investments Interest on balances with Reserve Bank of India Others Total Interest Income Others Income Total Income Interest on deposits Interest on RBI/Inter bank borrowings Others Interest Expended NII NII Growth(%) Other Income Total Income Employee Other Expenses Operating Expenses PPP( Rs Cr) Provisions Net Profit Net Profit Growth(%)

2011
8954 2774 335 25 12088 960 13048 7474 23 413 7910 4178 43.7 960 5138 1048 844 1892 3245 1742 1503 32.4

2012
12075 3671 34 35 15815 1240 17055 11213 38 348 11599 4216 0.9 1240 5456 1357 959 2315 3141 1999 1142 -24.0

2013
13758 3854 31 61 17705 1655 19359 12553 111 340 13004 4701 11.5 1655 6356 1576 1089 2665 3691 2363 1328 16.3

2014E
14677 4316 80 17 19090 1588 20678 11765 175 525 13954 5136 9.3 1588 6724 1796 1248 3043 3680 2243 1046 -21.2

2015E
16545 4491 80 17 21134 1588 22721 13408 189 567 14164 6970 35.7 1588 8558 2272 1579 3851 4707 2118 1812 73.3

Key Balance sheet data

Deposits Deposits Growth(%) Borrowings Borrowings Growth(%) Loan Loan Growth(%) Investments Investments Growth(%) 139024 15.6 5639 15.4 95908 14.9 42075 17.6 155965 12.2 5259 -6.7 111978 16.8 52101 23.8 175898 12.8 7679 46.0 128955 15.2 58555 12.4 189928 8.0 9996 30.2 139271 8.0 63976 9.3 205123 8.0 10796 8.0 150413 8.0 69094 8.0

Eastwind Calculation
Yield on Advances Yield on Investments Yield on Funds Cost of deposits Cost of Borrowings Cost of fund 9.3 6.6 7.8 5.4 7.7 5.5 10.8 7.0 9.2 7.2 7.3 7.2 10.7 6.6 9.0 7.4 5.9 7.1 10.5 6.7 9.4 6.2 5.9 7.0 11.0 6.5 9.6 6.5 7.0 6.6

Valuation
Book Value P/BV P/E 380 1.0 7.5 409 0.6 6.4 403 0.6 5.5 433 0.4 5.0 483 0.4 2.9

Source: Company/Eastwind
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23

N arnolia Securities Ltd

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the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any action based upon it. This report/message is not for public distribution and has been furnished to you solely for your 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 East wind & information that we consider reliable, but we do not represent that it is accurate or complete and we do not provide any express or implied warranty of any kind, and also these are subject to 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 to assume that NSL and /or its Group or associate Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise, individually or otherwise in the recommended/mentioned securities/mutual funds/ model funds and other investment products which may be added or disposed including & other mentioned in this report/message.