Professional Documents
Culture Documents
"BUY"
Dabur expects volume growth at a range of 8-12% for FY15E led by innovation and effective distribution initiatives in chemist channels. If discretionary demand from urban area improves, then volume growth in double digit would not be a surprise for street. Considering its expected expressive volume growth than other peers, aggression on new launches through innovation and aggressive distribution reach energize our positive stance on the stock. ............................................................. ( Page : 2-6)
"BUY"
We have initiated coverage with Buy rating on the stock with price target of Rs.220 which implies 1 times of FY14E book value. The company has delivered strong performance all around. During quarter, profitability was up by 60% on the back of healthy NII growth and improvement in operating leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is expected to remain healthy on the back of improving operating leverage and aggressive branch expansion. ................................................... ( Page :7-13)
"NEUTRAL"
The Supreme Court upheld the constitutional validity of the November 11, 2011 Union government notifications, directing implementation of the recommendations of the Majithia Wage Boards for journalists and non-journalists of newspapers and news agencies. This judgment will work as a dampener for newspaper industry as well as DB CORP. Companys EBITDA margin will be effected very negatively not only in FY15E but also next few or more years. Therefore we downgrade DB CORP from `BUY to `NEUTRAL ........................................................................ ( Page : 14-15)
"BUY"
Zinc fundamentals are becoming attractive with suppotive lead prices brings a positive outlook for Hindustan Zinc.With a cash-rich balance sheet and strong visibility over production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.Being an integrated & dominant player in the domestic industry with low cost of production, the company is poised to benefit in the long run. Now the stock is trading at 1.6x in one year forward P/B we estimated it at 1.8x for 2015.At current level we see a significant growth in the stock. We valued & reaffirm our positive stance on HZL and assign a BUY rating to the stock with a target price of Rs. 148/-. ....................................................... ( Page : 16-18)
"NEUTRAL"
The company has been evaluating strategic alternatives since 2012, we believe the company is not inclined to sell at valuations multiple of 2 times of its FY15E book value. However, If the company if things will going positively we could rationalize valuations near Rs. 145 per share, but we don't believe buyers would be willing to pay a premium to BVPS more than 2 times at this time. We are downgrading Voltas to Neutral given the recent rise in its share price following 3QFY14 earnings and revised our price target to Rs. 120. ................................................................ ( Page : 19-20)
"BOOK PROFIT"
In our earlier report dated 25-04-13, we had recommended readers to buy the scrip with a view to earn healthy gains. As expected, the counter have given a premium of 40 per cent over its recommended price. We expect the current price growth rally factored all the fundamental changes, and we advise our readers to book profits at the current levels. Our bearish attitude on the counter stems from its valuations. At a P/BV of 2.8x of its annualised FY14E RoE of Rs 28.7%, we believe that the counter is very expensive in comparison of its own past historical data . ...................................................................... ( Page : 21-22)
"BUY"
Healthy movies pipeline for FY15E; Company is expecting to release more than 8 big budget movies across Hindi and regional languages. Likewise, company is going to release much awaited Rajnikanths movie Kochadaiiyaan on 11 April, 2014. Its well positioned to monetize rich content of library ensures annuity and regular set of revenue. .......................................... ( Page :23-25)
Narnolia Securities Ltd,
"BUY"
7th Mar' 14
Analysis on recent management interview to media : Dabur expects volume growth at a range of 8-12% for FY15E led by innovation and effective distribution initiatives in chemist channels. If discretionary demand from urban area improves, then volume growth in double digit would not be a surprise for street. A mature segment like Hair Oil remains a concern because of competitive intensity, likely to grow slower than healthcare and home segments. Consistently, Dabur is aggresively working on innovation activities to launch new product as well as product development activities. Recently new launches would come to the people like Vatika Enriched Coconut Oil with hibiscus, Vatika Olive Enriched Hair Oil. Considering its expected expressive volume growth than other peers, aggression on new launches through innovation and aggressive distribution reach energize our positive stance on the stock. Expecting for bottomed up sign on volume growth: Post earning, management of the company expressed hypothetically its view regarding bottoming out of urban demand. The management of other FMCG bellwether like Marico had also stated that the trend of volume decline has bottomed out based on hypothesis. Recent Consumer Confidence Index indicates some upward movement than previous quarters. At a same point, recent softening in CPI and Food Inflation Index (graph on 3rd page of this company's report) hint to improve consumer discretionary demand from rural and urban area. Aggression on expending distribution reach: Dabur is working on chemist channel to drive growth of its health care and Personal care portfolio, and they are planning to distribute personal products through this channel. Dabur had direct coverage of 55,000 chemist stores, which has now increased to 75,000; plans to take it to 125,000 by FY15E. View and Valuation: Despite signs of weak discretionary demand and increased competitive intensity in the market, Dabur India has reported comparatively better volume growth in its key categories. On all operating parameters, its performance was satisfactory. Still, management is cautious for margin ramp up due to high inflation in India. The strong momentum in relatively low competition in the core categories with diversified portfolio, Dabur gets a better place than other peers and its rural distribution expansion should boost sales volumes. We retain our Buy view on the stock with a target price of Rs206. At a CMP of Rs 173 stock trades at 9x FY15E P/BV. Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 1904.28 297.59 243.5 15.6% 12.8% 2QFY14 1748.81 329.24 249.83 18.8% 14.3% (QoQ)-% 8.9 (9.6) (2.5) 220bps 150bps 3QFY13 1635.98 274.51 209.87 16.8% 12.8% Rs, Crore (YoY)-% 16.4 8.4 16.0 120bps 2
P/BV(x)-1year forward
(Source: Company/Eastwind)
Health Supplements
19.5%
Oral Care OTC & Ethicals Digestives Home Care Skin Care Foods International Business
Hajmola Anardana Super Babool + Salt Power 4QFY13 New Ethnic flavour "Kokam" under Real Burrst Fem brand was introduced in Turkey Odoni l Gel
Honitus
Fem with no ammonia Odonil Variants
(Source: Company/Eastwind)
Pace of innovation continues Vatika Enriched Olive Hair Oil launched during the quarter
We expect that the volume growth in Hair Oil segment has bottomed out and coming quarter and next spell of growth would come largely from increasing per capita income. Innovation combined with optimum pricing strategy to maintain market share will be key growth driver of this category. How chemist channel would play a role to opportune the gain of market share? Considering the weak consumer sentiment in urban area, there was less opportunity to invest in urban growth in the past 2 years. Now, as green shoots are visible and consumer sentiment is improving, the company is beginning to invest in urban growth with Project COREchemist outlet and range expansion. However, there could be a few quarters of transitory period. As part of this project, Dabur has recruited 350 people in the front end and will incur Rs15cr for the first phase. Project COREs primary focus will be the health care portfolio(Chyawanprash, Honey, Glucose), OTC products (Honitus, Lal Tel) and personal care portfolio which are more relevant to the chemist channel than to general trade. At present, it increased its coverage to 75000 from 55000-chemist store and, plans to take it to 125,000 by FY15E. We expect that project CORE will be favorable to improve margin picture as well as revenue builder.
(Source: Company/Eastwind)
International business
For 3QFY14, The International Business (contributes around one third of consolidated sales) grew by 26%. Organic business grew by 29% with 14% constant currency growth rate led by strong performance in GCC, Egypt and Nigeria. The GCC business reported a 21% growth, while sales in Egypt and Nigeria both grew by 16%. Bangladesh remains an important geography for the company, which was impacted by political instability and economic uncertainty resulting in slow growth of 10% YoY. Dabur has organized a strong team and product portfolio for this geography.
Dabur will expand its footprint only in adjacent geographies of its current markets like in Iran, Iraq and Africa. It believes that Bangladesh and Pakistan together have the potential to become Rs500cr market each over the long term.
21% 16% 16% Fem Gold Hair Removal Cream
20.9% 33.9% 28.1% 23.9% 14.6% 8.4% 12.9% 16.7% 18.4% 18.1% 14.8% 158.6 86.8 935.4 5.8 10.8 53.5% 14.7 27.5
21.0% 28.1% 13.5% 44.0% 13.0% 7.5% 12.8% 19.6% 19.5% 17.9% 13.9% 96.1 174.1 1391.1 3.3 8.0 40.9% 12.0 29.4
29.3% 11.3% 13.3% 43.0% 12.4% 7.3% 12.9% 18.5% 16.8% 15.9% 12.1% 103.2 174.2 1716.9 3.7 9.9 37.5% 10.5 27.9
16.5% 16.0% 19.6% 39.2% 13.5% 7.6% 13.3% 19.2% 16.7% 16.4% 12.5% 131 174.3 2124.38 4.4 12.19 36.2% 10.75 29.7
(Source: Company/Eastwind)
"BUY"
7th March 2014
We have initiated coverage with Buy rating on the stock with price target of Rs.220 which implies 1 times of FY14E book value. The company has delivered strong performance all around. During quarter, profitability was up by 60% on the back of healthy NII growth and improvement in operating leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is expected to remain healthy on the back of improving operating leverage and aggressive branch expansion. Healthy NII growth on the back of robust loan growth The companys NII grew by 39% YoY to Rs.40.2 Cr which came from impressive loan growth of 49% YoY. Margin of the company was however declined by 13 bps sequentially on account of higher cost of fund. Yield on loan remained same sequentially which restricted NII growth below than previous quarter (49% YoY). CanFin Home has about 16-17% of exposure in rural area where spread is lower. From last two quarters, yield on loan remained same while cost of borrowing increased by 10 bps which made margin lower sequentially. Loan book continued to be healthy on account of higher non housing loan growth Loan book grew by 49.1% YoY led by strong disbursement in retail segment. The companys exposure to non house loan was about 7% of total loan which grew from Rs.138 cr in 3QFY13 to Rs.400 cr in 3QFY14. The company remains focus on salaried segment which account about 90% of loans. Average ticket size loan is Rs. 16 lakhs. Concentration of individual loan segment declined to 92% of total loan from 94% in March 2013 and this segment shifted towards non housing. Although revenue contribution from this segment is very low but spread is relatively thicker than housing segment. Funding compositions have high credit quality and carried low risk Funding composition of the company continued to be rate MAA+ by ICRA indicating high credit quality and carried low risk. The composition comprises 50% from NHB and 45% from banks, altogether account for 95% of total funding while remaining come from deposits. Average tenure of funding is 7-10 years due to its loan tenure portfolio of 10-15 years. From year FY12 to FY13, source of funding composition saw dramatically changed as share of NHB increased to 50% from previous year of 23% while loan from related party declined to 45% from 70% in FY12. The benefit was also come at effect as blended borrowing cost came down to 9.2% in FY13 from 9.8% in FY12. At the end of 3QFY14, borrowing cost stood at 9.3% from 9.4% in last quarter. Rs, Cr Financials 2010 2011 2012 2013 2014E NII 63 72 84 96 162 Total Income 71 77 91 110 162 PPP 54 60 68 74 114 Net Profit 39 42 44 54 80 EPS 19.1 20.5 21.4 26.4 39.3 (Source: Company/Eastwind) 7 Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
Share Holding Pattern-% Current 4QFY13 3QFY1 3 Promoters 42.4 42.4 42.4 FII 0.6 0.6 0.6 DII 0.5 0.5 0.5 Others 56.5 56.5 56.5 CANFINHOME Vs Nifty
Source:Company/Eastwind
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
10
Valuation BaND
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
11
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
12
PROFIT & LOSS ACCOUNT( Rs Cr) Interest Earned Interest Expenses NII Other Income Total Income Operating Expenses PPP Provisions PBT Tax Expenses PAT BALANCE SHEET ITEMS( Rs Cr) Net Worth Borrowings Loans SPREAD ANALYSIS(%) Yield On Advances Cost of Borrowings Spread NIM EFFICENCY RATIO(%) Operating Expenses to Total Income ( CI Ratio) NII to Loan fund Loan to borrowings VALUATION Book Value(Rs) P/B(x) P/E(x)
2010
208 145 63 9 71 17 54 -1 55 16 39
2011
226 154 72 5 77 17 60 1 58 16 42
2012
279 196 84 8 91 23 68 7 61 17 44
2013
379 283 96 14 110 36 74 -1 75 21 54
2014E
586 424 162 0 162 48 114 0 114 34 80
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
13
DB CORP
"Waging war on Print media"
Latest update
CMP Target Price Previous Target Price Upside Change from Previous
"Neutral"
7th March' 14
Neutral
301 -
Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 533151 DBCORP 321.50/210
5521 25750
6261.65
The Supreme Court upheld the constitutional validity of the November 11, 2011 Union government notifications, directing implementation of the recommendations of the Majithia Wage Boards for journalists and non-journalists of newspapers and news agencies. This will act as a huge negative for newspaper industry. They have to pay all arrears up to March 2014.It will be paid in four equal installments within one year from November 11, 2011. This would create huge financial burden to a industry already facing problems of rising raw material prices. One the other hand most of newspaper venturing into reginal market in search for better sales volume and margin. This judgment will work as a dampener for newspaper industry as well as DB CORP. Companys EBITDA margin will be effected very negatively not only in FY15E but also next few or more years. Therefore we downgrade DB CORP from `BUY to `NEUTRAL
During the quarter, company has seen 18.2% revenue growth from its advertisement, 14% from circulation and 25% from Radio business on YoY basis. Management expressed its interest regarding inorganic expansion in near future to maintain its healthy growth across all segments.
Management Commentary:
Share Holding Pattern-%
Promoters FII DII Others Current 74.96 17.73 2.95 4.36 2QFY14 74.97 16.46 4.00 4.57 1QFY14 74.98 14.66 5.34 5.02
According to management, Company will maintain a pragmatic approach towards operational controls and higher efficiency. DBCORP will continue to capitalize its consumption potential of Tier 2 and 3 cities. And they are studying on marketing strategies of niche brands in Tier 2 and 3 cities. Company is expected to launch its Bihar edition on 19 Jan, 2014, and we expect to see some part of additional revenue from Bihar edition by 4QFY14E and also expect to see breakeven in 3 to 4 years.
Financials
Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 518.2 153.8 93.57 29.7% 18.1% 2QFY14 438 112.5 63.2 25.7% 14.4% (QoQ)-% 18.3 36.7 48.0 400bps 370bps 3QFY13 438.9 122.8 73.2 28.0% 16.7%
(Source: Company/Eastwind)
DB CORP
Revenue Geography-wise Revenue Segments
Financials;
Rs,cr Sales RM Cost WIP Employee Cost Ad Spend Other expenses Total expenses EBITDA Depreciation and Amortisation Other Income EBIT Interest PBT Tax Exp PAT Growth-% (YoY) Sales EBITDA PAT Expenses on Sales-% RM Cost Employee Cost Ad Spend Event Expenses consumption of store & spare Distribution expenses Other expenses Tax rate Margin-% EBITDA EBIT PAT Valuation: CMP No of Share NW EPS BVPS RoE-% P/BV P/E FY10 1062.1 327.87 -0.0016 131.81 12.98 161.24 720.03 342.07 37.83 11.15 304.24 35.69 279.70 105.72 173.98 10.5% 132.2% 265.4% 30.9% 12.4% 1.2% 1.1% 4.8% 2.1% 15.2% 10.0% 32.2% 28.6% 16.4% 239 18 649 9.6 36 27% 6.7 24.9 FY11 1265.18 383.91 -0.06 184.56 12.52 185.2 862.13 403.05 43.28 14.18 359.77 15.3 358.65 99.97 258.68 19.1% 17.8% 48.7% 30.3% 14.6% 1.0% 1.3% 4.6% 1.7% 14.6% 7.9% 31.9% 28.4% 20.4% 246 18 829 14.1 45 31% 5.4 17.4 FY12 1451.51 508.04 -0.04 242.93 15.04 216.06 1105.03 346.48 50.57 24.02 295.91 9.23 310.7 98.32 212.38 14.7% -14.0% -17.9% 35.0% 16.7% 1.0% 1.0% 5.8% 1.7% 14.9% 6.8% 23.9% 20.4% 14.6% 219 18 927 11.6 51 23% 4.3 18.9 FY13 1592.32 544.54 0.03 279.5 17.21 234.07 1210.25 382.07 58.06 21.34 324.01 7.99 337.36 113.18 224.18 9.7% 10.3% 5.6% 34.2% 17.6% 1.1% 0.8% 6.0% 1.8% 14.7% 7.1% 24.0% 20.3% 14.1% 212.1 18.33 1029 12.2 56 22% 3.8 17.3 FY14E 1861.91 623.74 -1.86 307.21 22.34 260.67 1371.5 490.5 64.5 27.9 426.0 8.0 445.9 156.1 289.8 16.9% 28.4% 29.3% 32.0% 16.6% 1.2% 0.8% 6.0% 1.8% 14.0% 8.4% 26.3% 22.9% 15.6% 301 18.33 1180 15.8 64 25% 4.7 19.0 FY15E 2176.94 740.16 -2.18 380.97 23.95 315.66 1656.7 520.3 75.4 28.3 444.9 5.1 468.1 163.8 304.3 16.9% 6.1% 5.0% 34.3% 17.0% 1.1% 1.0% 6.2% 1.9% 14.5% 7.5% 23.9% 20.4% 14.0% 301 18.33 1344 16.6 73 23% 4.1 18.1
(Source: Company/Eastwind)
15
"BUY"
6th March' 14
BUY
123 148 148 20% 0%
Zinc market was bearish during last consecutive years having surplus in inventory, but now sentiment is slowly turning positive showing some uptrends in Zinc LME prices. Visible inventories on the London Metals Exchange, as well as on the Shanghai Futures Exchange, are down about 30% over the last year. And zinc demand is increasing steadily. We believe Zinc price will be the core fundamental behind the Hindustan zincs bull story in the coming years. We see a improving volume of production through FY15.More So Govt. The attorney-generals clearance for the Centres proposal to divest its residual stake in Hindustan Zinc Ltd (HZL) lifted the Streets mood. Again the board delayed this process and guided investors that disinvestment of government's remaining stake in Hindustan Zinc will happen next fiscal year. Stake sale in HZL again seems to be back burner now. We also see gradual and sustainable recovery in global macro Scenario which supports a positive cycle in industrial metals. So, we believe there exists a strong case for significant earnings estimate for Hind Zinc in coming months. Robust Q3FY14 Performance : Hindustan Zincs (HZL) Q3FY14 performance was inline to our estimates on the back of healthy zinc sales volumes and higher metal premiums. Total operating income for Q3FY14 stood at Rs. 3450.1 crore higher by 8.6% YoY but lower by 3.1% QoQ. Total zinc sales in Q3FY14 came in at 196,000 tonne, up 17% YoY and 2% QoQ . The company realised premium on metal sales amounting to $241/tonne for zinc (Zn) & $305/tonne for lead (Pb) . Lead sales volume for the quarter stood at 23500 tonnes (lower by 24% QoQ and 22% YoY), while silver sales volumes stood at 78500 kg (lower by 31% YoY and 14% QoQ) . EBITDA came in at Rs.1823.8 crore and inline to our estimate of Rs. 1829.6 crore. Subsequently, net profit stood at Rs. 1722.7 crore . Valuation & Recommendation Zinc fundamentals are becoming attractive with suppotive lead prices brings a positive outlook for Hindustan Zinc.With a cash-rich balance sheet and strong visibility over production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.Being an integrated & dominant player in the domestic industry with low cost of production, the company is poised to benefit in the long run. Now the stock is trading at 1.6x in one year forward P/B we estimated it at 1.8x for 2015.At current level we see a significant growth in the stock. We valued & reaffirm our positive stance on HZL and assign a BUY rating to the stock with a target price of Rs. 148/-. Financials : Net Revenue EBITDA Depriciation Tax PAT Q3FY14 3450 1824 210 305 1723 Y-o-Y % 8.6 22.1 18.6 50.2 6.8 Q-o-Q % -9.8 -3.1 12.9 20.1 5.1 Q3FY13 3178 1494 177 203 1613 Q2FY14 3826 1883 186 254 1640
(In Crs)
Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume (Nos.) Nifty 500188 HINDZINC 142/94 51929 5192 6329
Stock Performance-%
Absolute Rel. to Nifty 1M 4.3 0.0 1yr -1.7 9.2 YTD -3.4 11.3
1 yr Forward P/B
450
400
350 300 250 200
150
100 50 0
Jul-12
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jan-07
Jan-11
Jan-08
Jan-09
Jan-10
Jan-12
Jan-13
Jul-13
Jan-14
16
Sep-13
Feb-13
Mar-13
Apr-13
Apr-13
May-13
Oct-13
Jan-13
Aug-13
LME Price/Ton
Zinc 125000 120000 115000 110000 105000 100000 95000 90000
Apr-13
May-13
Nov-13
Mar-13
Aug-13
17
Nov-13
Dec-13
Jul-13
Feb-13
Sep-13
Oct-13
Jun-13
Jan-13
Dec-13
Jan-13
Feb-13
Sep-13
Oct-13
Jun-13
Jul-13
2000
1500 1000 500 0
5.0
0.0 -5.0
50000
0
EBIDTA EBIDTA % 43 43 41 49 49
60
50
2000
47
42
40 30
1500
1000 20 500 10 0
Voltas Ltd.
Downgrade to "Neutral".
Company update
CMP Target Price Previous Target Upside Price Change from Previous
"Neutral"
6th Mar' 14
Neutral
139 125 95 -10% 32%
Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Vol. (Nos.) Nifty 500575 VOLTAS 65/143 4,609 624,126 6,329
What New...??? Voltas Ltd has proposed to form a new joint venture (JV) company named Voltas Water Solutions which will have equal capital contribution from Voltas and Dow Chemical Pacific (Singapore) Pte (Dow). This JV company will market and distribute standard packaged Water Treatment Systems and Waste Water Treatment Systems of capacity up to 20 m 3/hour, to residential and commercial complexes and light industrial markets in the Indian subcontinent. The entity's operations would include designing, procuring, testing, marketing, selling and servicing of such standard water treatment systems and waste water treatment systems.
Stock Performance-%
Absolute Rel. to Nifty 1M 28.5 23.1 1yr 75.2 64.0 YTD 84.2 72.9
Management comment on above JV : Water has been identified as a key focus area for the Tata group. With its unrivalled know-how and technological leadership in the water treatment space, the partnership, will help Voltas Water Solutions cater to the growing water treatment requirements of the Indian subcontinent. They further believe that partnership will simultaneously leverage the brand and distribution strength of Voltas, along with the technology prowess of the water and process solutions division of the Dow Group. Our View on said JV : In today scenario major Water and Waste Water Treatment market is mostly and largely catered by unorganized players. And the market which is targeted by this new joint venture will provide a branded and differentiated product line in the sector, with a focus on quality and service delivery. About Dow Group : Dow Chemical Pacific (Singapore) Pte Ltd was established in 1992. Catering to customers in Asia Pacific, particularly South East Asia, Dow Group combines the power of science and technology to passionately innovate what is essential to human progress. The company is driving innovations that extract value from the Intersection of chemical, physical and biological sciences to help address many of the world's most challenging problems such as the need for clean water, clean energy generation and conservation, and increasing agricultural productivity. The company's integrated, market-driven, industry-leading portfolio of specialty chemical, advanced materials, agrosciences and plastics businesses delivers a broad range of technology-based products and solutions to customers in high growth sectors such as packaging, electronics, water, coatings and agriculture. Valuation : The company has been evaluating strategic alternatives since 2012, we believe the company is not inclined to sell at valuations multiple of 2 times of its FY15E book value. We estimate that at the lower end of management's guidance this translates into a 12.1%/12.7% RoE forFY14/15E. We believe management is attempting to be conservative regarding the guidance for FY14 & FY15, but even with a 60/90 bps improvement in the operating margin the RoE would be approximately 12.1%/12.7% for FY14/15E , which we believes would translate into a P/B multiple of approximately 2.0x to 2.2x. This translates to a 12 month price target of approximately Rs. 120 based on our FY14E BVPS of Rs. 59. However, If the company if things will going positively we could rationalize valuations near Rs. 145 per share, but we don't believe buyers would be willing to pay a premium to BVPS more than 2 times at this time. We are downgrading Voltas to Neutral given the recent rise in its share price following 3QFY14 earnings and revised our price target to Rs. 120.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
1 yr Forward P/B
19
Voltas Ltd.
Key financials :
PARTICULAR 2009A 2010A 2011A 2012A 2013A 2014E 2015E
Performance Revenue Other Income Total Income EBITDA EBIT DEPRICIATION INTREST COST PBT TAX Extra Oridiniary Items Reported PAT Dividend (INR) DPS EPS Yeild % EBITDA % NPM % Earning Yeild % Dividend Yeild % ROE % ROCE% Position Net Worth Total Debt Ammount in crores Capital Employed No of Share (Adj) INR in crores CMP
Ammount in crores
1626 1775 1955 261 225 225 (Source: Company/Eastwind) 1887 2000 2180 33 33 33 (Source: Company/Eastwind) 75 145 145
(Source: Company/Eastwind)
(Source: Company/Eastwind)
20
VCompany update
CMP Target Price Previous Target Price Upside Change from Previous
"Book Profit"
6th Mar' 14
In our earlier report dated 25-04-13, we had recommended readers to buy the scrip with a view to earn healthy gains. As expected, the counter have given a premium of 40 per cent over its recommended price. We expect the current price growth rally factored all the fundamental changes, and we advise our readers to book profits at the current levels. We are quite positive on the Swaraj Engines, owing to its strong tractor volume growth, capacity expansion to 1,05,000 engines pa from 75,000 of current level, softening of commodity prices and company presence in all HP segments. We are upbeat on the stock on the account of core business momentum remains robust with healthy EPS growth, cash flow generation and high RoE. Moreover, we feel that caution is necessary over the recent robust financial as well as operational performance that the company has delivered over the past year. With 90 per cent of its turnover generated through parent company, the revenue stream also seems concentrated. In conclusion, looking at the above mentioned woes, we advise readers to book profits in the counter at its current levels and fresh buying may be considered at cheaper levels of around Rs. 500-550 a share. Our bearish attitude on the counter stems from its valuations. At a P/BV of 2.8x of its annualised FY14E RoE of Rs 28.7%, we believe that the counter is very expensive in comparison of its own past historical data Recommendation History
Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 500407 SWARAJENG 382/672 801 1,015 6,329
Stock Performance-%
Absolute Rel. to Nifty 1M 5.3 (0.2) 1yr 47.8 36.6 YTD 63.4 52.0
Date 25th April' 13 17th June' 13 10th July' 13 1st Aug' 13 26th Nov' 13 3rd Feb' 14
Report Type Company Update Company Update Company Update Result Update Result Update Result Update
1 yr Forward P/B
Valuation At the CMP of INR610, the stock discounts its FY14E EPS of Rs. 54.20 by 12.0x and FY15E EPS of Rs. 61.7 by 10.5x. Given the strong revenue growth at a CAGR of 21%; PAT growth at CAGR of 26% post acquisition and stable margins at ~15%, the company is poised to grow further and capable of ustaining its healthy earnings. Furthermore, despite the capex of Rs. 38 crore, the company has strong cash flows and the company is debt free. Also, Company assurance of 3060% dividend payout ratio implies an attractive dividend yield of 4-9%.
21
2009A
2010A
2011A
2012A
2013A
2014E
2015E
97 1 214
123 1 95
152 1 290
186 1 429
194 1 395
236 1 648
287 1 648
(Source: Company/Eastwind)
(Figures In crore)
22
EROSMEDIA
"Moving to Blockbuster"
Initiating Report
CMP Target Price Previous Target Price Upside Change from Previous
"BUY"
5th March' 14
Buy
160 200 25%
Healthy movies pipeline for FY15E; Company is expecting to release more than 8 big budget movies across Hindi and regional languages. Likewise, company is going to release much awaited Rajnikanths movie Kochadaiiyaan on 11 April, 2014. Apart from this, company is expected to release Dishkiyaaoon, Shadi Ke Side Effect, Action Jackson, Tanu weds Manu season 2, Sarkar3, Chalo China, NH-10, Dekho Magar Pyaar Se, Happy Ending and Rana in FY15E. It has largest Indian content library of films with 1100+ films and digital rights to an additional 700 films. Its well positioned to monetize rich content of library ensures annuity and regular set of revenue. Considering diversified and sustainable Business Model along with well positioned to monetize rich content of its library and block buster success ratio of movies (out of the top 10 grossing films in recent years, 3 are from Eros.) make us positive view on the stock. About Company: Eros International Media (EROS) is one of the largest films coproduction and distribution company in India and overseas, engage with presales of overseas rights, music rights and broadcasting rights. It recovers 35-40% of its costs by selling movie rights to channels, recovers another 35-40% from selling its overseas rights to overseas entities. Similarly, it gets 10-15% of the cost of movies by selling music rights . Robust 3QFY14 Result: Company reported better numbers with sales growth of 17% (YoY) led by huge spurt in catalogue monetization, which increase by approx75% (YoY). Its PAT grew by 41%(YoY). During the quarter, Its EBITDA margin improved by 680bps (YoY) to 31.3% because of reduction in operational expenses and employee expenses. Management expects to see EBITDA margin at 25% in FY14E and FY15E than 2022% range of margin in previous 4 years. Recent initiatives: Eros has struck new deals during the period with MSM Satellite Singapore private ltd for broadcast of films on Sony as well as with Viacom18 media for broadcast films on colours. Recently Eros International media has launched two new movie channels HBO DEFINED and HBO HITS, which will reduce its dependence on highly unpredictable revenue streams going forward. View and Valuation: Management is very excited to invest into different medium like internet and launching channels to generate revenue. Companys optimistic stance towards maintaining margins, strong movies slate and very low valuation makes attractive. At a CMP of Rs 160, stock trades at 1.1 P/BVx FY15. We initiate BUY with a target price of Rs 200.
Financials
Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 432.68 135.6 92.0 31.3% 21.3% 2QFY14 201 51.2 37.0 25.4% 18.4% (QoQ)-% 115.2 165.0 148.8 590bps 290bps 3QFY13 369.3 90.6 65.2 24.5% 17.7% Rs, Crore (YoY)-% 17.2 49.6 41.1 680bps 360bps
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Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 533261 EROSMEDIA 195/107
1467 26241
6298
Stock Performance
1M Absolute Rel. to Nifty 13.1 8.2 1yr -7.3 -17.4 YTD -
(Source: Company/Eastwind)
EROSMEDIA
Sales and Sales growth(%)(yoy)
Key Concerns: 1. Piracy is the key concern for the
company. Indian film industry loses approx. Rs.2000 cr. every year due to piracy (source: FICCI-KPMG report 2009).
2. Lower consumer discretionary demand.
(Source: Company/Eastwind)
Margin-%
(Source: Company/Eastwind)
Upcoming Movies:
Date of Release Q4FY14E 28-Feb-14 21-Mar-14 28-Mar-14 Q1FY15 11-Apr-14 6-Jun-14 Q2FY15 12-Sep-14 Upcoming movies Shaadi Ke Side Effects Dishkiyaaoon Happy Ending Kochadaiiyaan Action Jackson NH-10 Tanu Weds Manu Season 2 R. Balki Untitled Aankheen 2 Illuminati Untitled Dekh Tamasha Dekh Purani Jeans Chalo china Director Saket Chaudhary Sanmjit Singh Talwar Raj and DK Soundarya Ashwin Prabhu Deva Navdeep singh Anand Rai R.Balki Apoorva Lakhia Arif Ali Feroz Abbas Khan Tanushree Basu Shashank Ghosh Starcast Farhan Akhtar,Vidya Balan Sunny Deol, Harman Baweja Saif Ali Khan, Ileana D'Cruz Rajnikanth, Deepika Padukone Ajay Devgn, Sonakshi Sinha Anushka sharma,Neil bhoopalam R.Madhavan,Kangana Ranaut Amitabh Bachchan, Dhanush Abhishek Bachchan Armaan Jain Satish Kaushik and Others Aditya Seal Vinay Pathak, Lara Dutta
(Source: Company/Eastwind)
FY15E
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EROSMEDIA
Management Guidance:
1. 2. 3. 4. 5. 6 Catalogue monetization will continue to grow strong in the upcoming quarters. Company will monetize entire portfolio across different platforms Catalogue monetization will increase from 13%-14% to 20-25% of overall revenue in coming 3 to 4 years. Management is looking for more and more free cash flows going forward. Q4 will be very positive and going forward FY15E will also be very positive for the company. Management is very confident about its performance going forward and expects EBITDA margin to be around 25% in FY14E and FY15E.
Financials;
Rs,cr Sales RM Cost(Operatinal expenses) WIP Employee Cost Other expenses Total expenses EBITDA Depreciation and Amortisation Other Income EBIT Interest PBT Tax Exp PAT Growth-% (YoY) Sales EBITDA PAT Expenses on Sales-% RM Cost Employee Cost Other expenses Tax rate Margin-% EBITDA EBIT PAT Valuation: CMP No of Share NW EPS BVPS RoE-% P/BV P/E FY10 640.88 480.33 0 19.7 27.81 527.84 113.04 4.39 12.62 108.65 9.02 112.25 29.63 82.62 16.9% 52.8% 72.1% 74.9% 3.1% 4.3% 4.6% 17.6% 17.0% 12.9% 138.9 9.14 237.55 9.0 26.0 35% 5.3 15.4 FY11 706.97 495.13 0.84 25.28 29.57 550.82 156.15 3.82 8.95 152.33 9.39 151.89 33.67 118.22 10.3% 38.1% 43.1% 70.0% 3.6% 4.2% 4.8% 22.1% 21.5% 16.7% 138.9 9.14 670.48 12.9 73.4 17.6% 1.9 10.7 FY12 943.88 665.45 -2.92 22.55 42.96 728.04 215.84 6 19.3 209.84 13.44 215.7 63.14 152.56 33.5% 38.2% 29.0% 70.5% 2.4% 4.6% 6.7% 22.9% 22.2% 16.2% 181.15 9.17 834.61 16.6 91.0 18.3% 2.0 10.9 FY13 1067.95 765.78 -2.55 27.29 47.47 837.99 229.96 6.45 6.4 223.51 9.22 220.69 61.19 159.5 13.1% 6.5% 4.5% 71.7% 2.6% 4.4% 5.7% 21.5% 20.9% 14.9% 180.53 9.19 986.5 17.4 107.3 16.2% 1.7 10.4 FY14E 1110.8 766.5 -2.7 29.4 29.4 822.7 288.1 7.7 11.1 280.4 25.4 266.2 77.7 188.5 4.0% 25.3% 18.2% 69.0% 2.7% 2.7% 7.0% 25.9% 25.2% 17.0% 160.0 9.2 1158.6 20.5 126.1 16.3% 1.3 7.8 FY15E 1229.9 860.9 -2.9 36.9 36.9 931.8 298.1 9.2 12.3 288.9 26.0 275.2 80.4 194.8 10.7% 3.5% 3.4% 70.0% 3.0% 3.0% 6.5% 24.2% 23.5% 15.8% 160.0 9.2 1337.0 21.2 145.5 14.6% 1.1 7.5
(Source: Company/Eastwind)
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