Emkay India Conference Post Conference Note - Aug-14

INDIA Conference
11th & 12th AUGUST, 2014

Trident Hotels, BKC, Mumbai
EMKAY CONFLUENCE
POST CONFERENCE NOTE

INDIA Conference Post conference note

Emkay Research August 20, 2014 2
Contents

Emkay Confluence; Permeating optimism predicated on reforms ...................................... 3
Companies
ACC..................................................................................................................................... 4
Anant Raj ............................................................................................................................ 6
CEAT................................................................................................................................... 8
Century Plyboards ............................................................................................................ 10
CESC ................................................................................................................................ 12
DB Corp............................................................................................................................. 14
Diamond Power Infrastructure .......................................................................................... 16
eClerx Services .................................................................................................................18
Firstsource Solutions ........................................................................................................ 20
Gati Ltd ............................................................................................................................. 22
Gujarat International Finance Tec-City ............................................................................. 24
Godawari Power & Ispat ................................................................................................... 25
Granules India................................................................................................................... 27
Gujarat Pipavav ................................................................................................................ 29
HT Media .......................................................................................................................... 31
Indian Metals & Ferro Alloys ............................................................................................. 33
IRB Infrastructure ............................................................................................................. 35
J Kumar Infra .................................................................................................................... 37
KEI Industries ................................................................................................................... 39
LIC Housing Finance ........................................................................................................ 40
Lakshmi Machine Works .................................................................................................. 42
MPS Ltd ............................................................................................................................ 44
Natco Pharma ................................................................................................................... 46
Nava Bharat Ventures ...................................................................................................... 48
NIIT Tech .......................................................................................................................... 50
Pennar Industries ............................................................................................................. 52
PTC India Financial Services ............................................................................................ 54
PVR .................................................................................................................................. 56
TCS .................................................................................................................................. 58
Tech Mahindra .................................................................................................................. 60
Technocraft Industries ...................................................................................................... 62
Technofab Engineering .................................................................................................... 64
TIL India ........................................................................................................................... 66
TRIL .................................................................................................................................. 67
Vinati Organics ..................................................................................................................69
V-Mart ............................................................................................................................... 71
Welspun Corp ................................................................................................................... 72
Welspun India ................................................................................................................... 74
Zicom Security Systems ................................................................................................... 76

Your success is our success

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Emkay Global Financial Services Ltd. 3

Emkay Confluence
Permeating optimism predicated on reforms
August 20, 2014

Dhananjay Sinha
dhananjay.sinha@emkayglobal.com
+91 22 6624 2435

Emkay Research

The context of prevailing buoyant predilection made imminent sense for
us to do a broad-based survey across corporates to fathom the realism
behind the renewed sanguineness. Emkay Confluence, held last week,
brought together 39 companies across market capitalization and
industries, including consumers, infrastructure, financial services, capital
goods, utilities, logistic, media, entertainment and industrials. Emkay
Confluence saw enthusiastic participation from more than 160
institutional investors across India who attended over 2000 meetings.
The mood we gathered from the corporate meetings was more constructive than we
may have seen during past several quarters. Most companies expect growth revival
starting from H2FY15, which, in our view, is partially permeating through the modest
revival in global growth and the changed government in India, where expectations are
rife that the newly formed government, under the reformist leadership of Mr. Narendra
Modi, will be able to usher in a full-blown recovery after two years of somnolent
performance. Official prognosis is that the economy will pull off a 5.0-6.0% performance
in FY15 and even higher in the following years. In fact, Finance Minister Arun Jaitley has
vowed to lift economic growth to 7-8% within the next three years. Hope from the new
government centres around its ability to effect a significant change with respect to
governance, policies and implementations.
Since early 2014, business, consumer and market sentiment has buoyed suggesting
that Indian economy has reached a turning point towards recovery in 2015. Industrial
production growth averaged 3.9% yoy during Q1FY15 from a multi-decade low of -0.1%
during FY14. Both DII and FII volume picked up in the first quarter. Sustenance of
excess global liquidity have fuelled an upsurge in Emerging and Indian stock markets to
record highs. Improved financial conditions have motivated several companies to raise
capital to refurbish their balance sheets.
As this juncture, the corporate experience has been mixed, with relatively optimistic
vibes emanating from exports and select consumption plays. Within the companies we
hosted IT (TCS, Tech Mahindra, eClerx and First Source), Pharma (Granules),
consumers-related (PVR, Century Ply, Ceat and CESC) and specialized financial
services companies (LIC Housing and PTC Financial Services), and consumables and
select industrials (KEI, Vinati Organics, Pennar Industries and Technocraft Industries)
sounded fairly optimistic about the business outlook. Construction company JKumar
expects considerable scope for the order-book build-up for the road sector and for urban
infra projects.
However, the feedback from companies was not unanimously optimistic. Precautious
views came from several industrial companies who continue to face trying times.
Technofab Engineering and Transformer & Rectifiers are still awaiting revival in the
power sector and a pick-up in domestic investment cycle. Similarly, Tractors India is
facing weak demand, and associated problems like extended debtor days and pile up of
inventory. Welspun Corp is confronted with uncertain order flows. Delhi-based real
estate player, Anant Raj, finds the sentiment improving amidst weak demand conditions,
which are expected to revive only in H2FY15.
Overall, while the macro conditions and sentiment are seemingly improving, the
optimism level gathered from our conferences was not entirely pervasive. The
sustenance of the recent exuberance depends largely on the Modi governments ability
to steer the economy through the next growth cycle. Uncertainty persists despite the
improving global growth scenario. While advanced economies have done the necessary
adjustments, Indias policy corrections are yet to happen.
The governments actions towards meaningful fiscal consolidation and a revival of
investments remain imperative. Long-term opportunities lie in various investment-driven
measures such as restraining revenue expenditure, implementation of GST/DTC, higher
capital spending, and further opening up of FDI. Only then is the economy will
demonstrate a sustainable recovery cycle.


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Financial Snapshot (Standalone) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Dec Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
CY12A 111,305 19,681 17.7 12,360 65.8 -19.7 17.0 21.8 11.9 3.6
CY13A 109,084 13,683 12.5 8,790 46.8 -28.9 11.6 30.6 16.5 3.4
CY14A 119,966 17,010 14.2 10,753 57.2 22.3 13.4 25.0 13.8 3.3
CY15E 134,547 21,116 15.7 13,373 71.2 24.4 15.6 20.1 11.2 3.0

ACC
Cost-saving initiatives to yield benefits
August 20, 2014
Rating
Accumulate
Previous Reco
Accumulate
CMP
Rs1,465
Target Price
Rs1,500
EPS Chg CY14E/CY15E (%) NA
Target Price change (%) NA
Nifty 7,727
Sensex 25,881
Price Performance
(%) 1M 3M 6M 12M
Absolute 3 8 41 25
Rel. to Nifty -1 -2 12 -8
Source: Bloomberg
Relative price chart
900
1025
1150
1275
1400
1525
Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14
Rs
-30
-24
-18
-12
-6
0 %
ACC (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Cement
Bloomberg ACC IB
Equity Capital (Rs mn) 1,877
Face Value(Rs) 10
No of shares o/s (mn) 188
52 Week H/L 1,526/ 911
Market Cap (Rs bn/USD mn) 275/ 4,499
Daily Avg Volume (No of sh) 385,724
Daily Avg Turnover (US$mn) 9.0
Shareholding Pattern (%)
Jun'14 Mar'14 Dec'13
Promoters 50.3 50.3 50.3
FII/NRI 19.7 19.7 20.0
Institutions 12.8 13.2 12.9
Private Corp 3.7 3.1 2.9
Public 13.5 13.8 13.9
Source: Bloomberg

Vijay Goel
vijay.goel@emkayglobal.com
+91-22-66121285
About the company:
n ACC, the second-largest cement producer in India, is well
diversified across all regions. It sells 21% of its output in
North, 20% in East, 22% in South, 19% in Central and 18% in
West
n With 16 cement plants located across the country, ACC has a
current capacity of 30.6mtpa and has an 11% market share.
Post-Jamul (Chhattisgarh) expansion, its capacity would
reach 34.6mtpa
n Recent price hikes in South to aide margin recovery.
Commissioning of Jamul clinker/cement capacity and coal
mine in CY15 to help margin recovery
n Cost-saving initiatives to yield fruit by CY15. Likely savings of
Rs145-195/t at the manufacturing level alone. Valuation at
EV/t of USD119 is reasonable
Meeting summary:
Net capacity addition of 3.5mt by end-CY15: The ongoing capacity expansion of
3.5mtpa in the eastern region is expected to be completed by end-CY15. The clinker
addition of 2.8mtpa at Jamul (Chhattisgarh) is expected by Q3CY15, while the grinding
units (located at Jamul and Sindri) are likely by end-CY15. The Sindri grinding unit
(Jharkhand) will source clinker from the Jamul unit. On this project, ACC incurred a
capex of around Rs10bn in CY13, and will spend about Rs30bn during CY14-15e.
Cement demand expected to pick up in H2FY15: Demand for cement, which is
currently muted due to the monsoon, is likely to pick up in H2FY15. The company
expects 8-10% demand growth in the long term, with the highest demand potential
expected from the eastern region.
Increase in petcoke usage: ACC has increased its petcoke usage to about 14% of its
total fuel requirement from around 10% in CY13. A further scale-up in petcoke
contribution to about 20% would be considered by CY14, which is expected to benefit
the company, since petcoke as a fuel is more cost-efficient than other fuels. This
measure is expected to result in cost-savings of Rs15-20/t.
Captive coal mining: Of the ongoing development of three coal blocks, the first block
at Bicharpur (annual target of 1.2mtpa) is in advanced stages of development and is
expected to start coal production by March 2015. The captive coal could contribute
roughly 10% of ACCs fuel requirement. The captive coal usage is expected to result in
cost-savings of around Rs40/t, as its cost will be about 20% cheaper than the
companys average coal cost.
Use of alternative fuels: ACC has also increased usage of alternative fuels and has
set up a 7MW waste heat recovery plant. These measures are expected to drive
potential cost-savings of about Rs40/t. It is further looking to augment WHRP capacity
and usage of alternative fuels. In all, ACC is expected to see cost-savings of around
Rs200/t on account of cost-saving measures like clinker substitution, petcoke usage,
captive coal, WHRP and alternative fuels, and logistics and bulk handling.

ACC Company Update


Key Financials (Standalone)
Income Statement
Y/E Dec (Rsmn) CY12A CY13A CY14A CY15E
Net Sales 111,305 109,084 119,966 134,547
Growth (%) 12.1 -2.0 10.0 12.2
Expenditure 91,624 95,402 102,957 113,431
Raw Material 17,843 18,609 20,104 22,122
Operating Expenses 73,781 76,793 82,853 91,308
Other Expenses 0 0 0 0
EBITDA 19,681 13,683 17,010 21,116
Growth (%) -10.0 -30.5 24.3 24.1
EBITDA margin (%) 17.7 12.5 14.2 15.7
Depreciation 5,589 5,740 5,764 6,468
EBIT 14,092 7,943 11,246 14,648
EBIT margin (%) 12.7 7.3 9.4 10.9
Other Income 4,923 4,843 4,643 4,985
Interest expenses 1,147 517 528 528
PBT 17,869 12,270 15,361 19,104
Tax 5,509 3,479 4,608 5,731
Effective tax rate (%) 30.8 28.4 30.0 30.0
Adjusted PAT 12,360 8,790 10,753 13,373
Growth (%) -19.7 -28.9 22.3 24.4
Net Margin (%) 11.1 8.1 9.0 9.9
(Profit)/loss from JVs/Ass/MI 0 0 0 0
Adj. PAT After JVs/Ass/MI 12,360 8,790 10,753 13,373
E/O items -1,748 2,167 0 0
Reported PAT 10,612 10,958 10,753 13,373
PAT after MI 12,360 8,790 10,753 13,373
Growth (%) -19.7 -28.9 22.3 24.4
Balance Sheet
Equity share capital 1,880 1,880 1,880 1,880
Reserves & surplus 71,949 76,369 80,569 86,842
Net worth 73,828 78,248 82,448 88,722
Minority Interest 0 0 0 0
Secured Loans 1,600 320 320 0
Unsecured Loans 30 30 30 30
Loan Funds 1,630 350 350 30
Net deferred tax liability 5,169 5,073 5,073 5,073
Total Liabilities 80,628 83,671 87,871 93,825
Gross Block 102,188 103,996 109,468 136,940
Less: Depreciation 43,549 48,956 54,719 61,188
Net block 58,639 55,040 54,748 75,752
Capital work in progress 5,037 12,094 20,344 7,500
Investment 25,536 21,940 21,940 21,940
Current Assets 28,301 29,907 28,207 28,858
Inventories 11,336 11,215 12,161 12,902
Sundry debtors 3,035 3,972 4,273 4,792
Cash & bank balance 6,784 5,034 2,087 1,478
Loans & advances 6,859 9,491 9,491 9,491
Other current assets 288 195 195 195
Current lia & Prov 36,884 35,309 37,367 40,225
Current liabilities 26,544 27,522 29,581 32,439
Provisions 10,340 7,786 7,786 7,786
Net current assets -8,583 -5,402 -9,161 -11,367
Misc. exp 0 0 0 0
Total Assets 80,628 83,672 87,871 93,825

Cash Flow
PBT (Ex-Other income) 12,945 7,426 10,718 14,120
Depreciation 5,589 5,740 5,764 6,468
Interest Provided 1,147 517 528 528
Other Non-Cash items -14 679 0 0
Chg in working cap -1,620 -4,928 815 1,601
Tax paid -5,509 -3,479 -4,608 -5,731
Operating Cashflow 12,537 5,954 13,216 16,985
Capital expenditure -6,418 -8,865 -13,722 -14,629
Free Cash Flow 6,120 -2,911 -506 2,357
Other income 4,923 4,843 4,643 4,985
Investments -9,285 3,596 1 1
Investing Cashflow -10,779 -425 -9,078 -9,643
Equity Capital Raised 0 0 0 0
Loans Taken / (Repaid) -3,477 -1,280 0 -320
Interest Paid -1,147 -517 -528 -528
Dividend paid (incl tax) -6,546 -6,617 -6,553 -7,099
Income from investments 0 0 0 0
Others -4 -4 -4 -4
Financing Cashflow -11,174 -8,418 -7,085 -7,951
Net chg in cash -9,415 -2,889 -2,947 -609
Opening cash position 16,526 6,784 5,034 2,087
Closing cash position 7,110 3,895 2,087 1,478
Key Ratios
Y/E Dec CY12A CY13A CY14A CY15E
Profitability (%)
EBITDA Margin 17.7 12.5 14.2 15.7
Net Margin 11.1 8.1 9.0 9.9
ROCE 23.4 15.6 18.5 21.6
ROE 17.0 11.6 13.4 15.6
RoIC 31.9 18.1 25.5 27.5
Per Share Data (Rs)
EPS 65.8 46.8 57.2 71.2
CEPS 95.5 77.3 87.9 105.6
BVPS 392.8 416.3 438.7 472.1
DPS 30.0 30.0 30.0 32.5
Valuations (x)
PER 21.8 30.6 25.0 20.1
P/CEPS 15.0 18.5 16.3 13.6
P/BV 3.6 3.4 3.3 3.0
EV / Sales 2.2 2.2 2.1 1.8
EV / EBITDA 11.9 16.5 13.8 11.2
Dividend Yield (%) 2.1 2.1 2.1 2.3
Gearing Ratio (x)
Net Debt/ Equity -0.4 -0.3 -0.3 -0.2
Net Debt/EBIDTA -1.5 -1.8 -1.3 -1.0
Working Cap Cycle (days) -50.4 -34.9 -34.2 -34.8

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Financial Snapshot (Consolidated) (Rsmn)
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY11A 4,242 2,356 55.5 1,678 28.4 -30.0 4.6 2.2 5.0 0.1
FY12A 3,121 1,642 52.6 1,135 19.2 -32.4 3.0 3.2 9.3 0.1
FY13A 5,586 1,588 28.4 1,026 17.4 -9.6 2.6 3.6 11.1 0.1
FY14A 4,834 1,412 29.2 997 16.9 -2.9 2.5 3.7 9.2 0.1

Anant Raj
Well placed to capture NCR recovery
August 20, 2014
Rating
Not Rated

CMP
Rs57

EPS Chg (%) NA
Nifty 7,740
Sensex 25,919
Price Performance
(%) 1M 3M 6M 12M
Absolute -6 -2 7 18
Rel. to Nifty -10 -9 -17 -12
Source: Bloomberg
40
50
60
70
80
90
Rs
-20
-8
4
16
28
40 %
Anant Raj (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Real Estate
Bloomberg ARCP IB
Equity Capital (Rs mn) 590
Face Value(Rs) 2
52 Week H/L 85/ 40
Market Cap (Rs bn/USD mn) 17/ 273
Daily Avg Volume (No of sh) 2,410,821
Promoters 63.4 63.4 63.4
FII/NRI 15.4 14.6 15.3
Public 11.2 11.1 10.0
Source: Bloomberg

Tejas Sheth
tejas.sheth@emkayglobal.com
+91-22-66242482
About the company:
n ARL, an NCR realty developer, has a strong presence across
the segments. It has 2msf of area leased, five operational
hotels and 3msf of on-going housing space
n Ready-to-move-in portfolio of 3msf of office space makes
ARL a big beneficiary of economic revival. It also has a
pipeline of high-value housing projects in New Delhi
n With a gross debt of Rs14bn, the company plans to reduce
the same through cash generation by monetisation of high-
value housing projects and selective hospitality assets
n On EV of Rs30bn, ARL has a rent generating portfolio valued
at Rs9bn and 3msf of completed office space valued at
Rs15bn with another 1100 acres of land
Meeting summary:
Anant Raj Ltd. (ARL) generates rental income of Rs9bn through 2msf of office
space leased area, a mall leased in Delhi and another five hospitality assets leased
ARL has another 3msf of office space vacant across two IT parks and one IT SEZ in
NCR. The company is also developing a large township project in Gurgaon spread
across 200 acres.
The NCR real estate market has seen some revival of sentiment, though the
demand continues to remain weak. The company expects a demand revival post-
Diwali when it has plans to launch the group housing segment of its township
project in Gurgaon.
The company has a gross debt of Rs13.8bn and a net debt of Rs13.2bn. It expects
to reduce the same to Rs11bn by FY15 through sale of land in Delhi and some
hospitality assets in Gurgaon
In its large township project, the company has till date invested Rs9bn. It has sold
land worth Rs6.5bn and has collected Rs3bn from the area sold.
The company believes that the township project will be self-financed once the group
housing project is launched in H2FY15.
In the next 2-3 years, the companys focus would be on leasing of the completed
office and retail space, launching of the group housing project in Gurgaon township,
and reducing the debt through asset monetisation
Post 3 years, growth would come from the launches in Delhi once the new
development plan by DDA is implemented. The company has most of its land bank
falling under the area, which is recently zoned for housing space development by
DDA.

Anant Raj Company Update


Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY11A FY12A FY13A FY14A
Net Sales 4,242 3,121 5,586 4,834
Growth (%) 37.1 -26.4 79.0 -13.5
Expenditure 1,886 1,479 3,998 3,422
Employee Cost 83 124 171 184
Other Exp 176 238 1,002 429
SG&A 0 0 0 0
EBITDA 2,356 1,642 1,588 1,412
Growth (%) -8.7 -30.3 -3.3 -11.0
EBITDA margin (%) 55.5 52.6 28.4 29.2
Depreciation 135 111 140 154
EBIT 2,222 1,532 1,447 1,258
EBIT margin (%) 52.4 49.1 25.9 26.0
Other Income 288 204 195 191
Interest expenses 210 206 157 194
PBT 2,299 1,530 1,485 1,255
Tax 623 396 443 228
Adjusted PAT 1,678 1,135 1,026 997
Growth (%) -30.2 -32.4 -8.1 -1.4
Net Margin (%) 39.5 36.3 18.7 21.3
(Profit)/loss from JVs/Ass/MI 2 1 -16 -31
Adj. PAT After JVs/Ass/MI 1,678 1,135 1,026 997
E/O items 6 -2 3 -6
Reported PAT 1,684 1,133 1,029 991
PAT after MI 1,678 1,135 1,026 997
Growth (%) -30.0 -32.4 -9.6 -2.9
Balance Sheet
Equity share capital 590 590 590 590
Net worth 37,262 38,322 39,177 40,027
Minority Interest 795 860 988 1,080
Secured Loans 8,701 10,280 11,270 6,355
Unsecured Loans 1,081 2,836 3,508 3,508
Loan Funds 9,782 13,116 14,777 9,863
Net deferred tax liability 12 -8 26 38
Gross Block 20,784 22,548 22,373 22,831
Less: Depreciation 743 766 895 1,049
Net block 20,041 21,783 21,478 21,782
Investment 2,579 3,245 4,813 5,496
Current Assets 21,573 24,558 26,151 28,558
Inventories 7,117 8,884 10,381 11,048
Sundry debtors 221 534 919 722
Cash & bank balance 1,620 1,451 816 559
Loans & advances 3,905 3,775 5,793 9,293
Other current assets 8,710 9,914 8,242 6,936
Current lia & Prov 1,607 2,475 3,107 10,461
Current liabilities 778 2,273 3,062 10,355
Provisions 829 202 45 106
Net current assets 19,967 22,083 23,044 18,097
Misc. exp 0 0 0 0
Total Assets 47,851 52,290 54,968 51,008

Cash Flow
Interest Provided 210 206 157 194
Other Non-Cash items 0 0 0 0
Chg in working cap -14,991 -2,306 -1,562 4,702
Tax paid -623 -396 -443 -228
Operating Cashflow -13,252 -1,061 -414 5,880
Capital expenditure 1,530 -1,767 -290 -458
Free Cash Flow -11,722 -2,828 -704 5,423
Other income 288 204 195 191
Investments 370 -666 -1,568 -683
Investing Cashflow 2,188 -2,229 -1,662 -950
Equity Capital Raised -372 -73 -175 -141
Loans Taken / (Repaid) 8,407 3,334 1,662 -4,914
Interest Paid -210 -206 -157 -194
Dividend paid (incl tax) 0 0 0 0
Others -58 66 113 61
Financing Cashflow 7,767 3,121 1,442 -5,188
Net chg in cash -3,298 -169 -635 -257
Opening cash position 4,891 1,620 1,451 816
Closing cash position 1,594 1,451 816 558
Key Ratios
Y/E Mar FY11A FY12A FY13A FY14A
Profitability (%)
EBITDA Margin 55.5 52.6 28.4 29.2
Net Margin 39.5 36.3 18.7 21.3
ROCE 5.8 3.5 3.1 2.7
ROE 4.6 3.0 2.6 2.5
RoIC 7.3 3.8 3.4 3.0
Per Share Data (Rs)
EPS 28.4 19.2 17.4 16.9
CEPS 30.7 21.1 19.8 19.5
BVPS 631.4 649.3 663.8 678.2
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 2.2 3.2 3.6 3.7
P/CEPS 2.0 3.0 3.2 3.2
P/BV 0.1 0.1 0.1 0.1
EV / Sales 2.8 4.9 3.2 2.7
EV / EBITDA 5.0 9.3 11.1 9.2
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)
Net Debt/ Equity 0.2 0.3 0.4 0.2
Net Debt/EBIDTA 3.5 7.1 8.8 6.6
Working Cap Cycle (days) 1,578.6 2,413.0 1,452.5 1,324.3

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Financial Snapshot (Standalone) (Rs mn)
FY11A 34,988 1,393 4.0 223 6.5 (86.5) 3.5 81.5 18.5 2.8
FY12A 44,757 2,436 5.4 75 2.2 (66.2) 1.2 240.7 11.4 2.8
FY13A 48,815 4,080 8.4 1,341 39.2 1,677.9 19.1 13.5 6.1 2.4
FY14A 53,548 6,184 11.5 2,638 73.4 87.4 30.8 7.2 4.3 2.0

CEAT
Improving product mix to drive re-rating
August 20, 2014
Rating
NA

CMP
Rs524
Target Price
NA
EPS Chg (%) NA
Nifty 7,649
Sensex 25,640
Price Performance
(%) 1M 3M 6M 12M
Absolute -19 38 72 374
Rel. to Nifty -18 20 36 254
Source: Bloomberg
100
225
350
475
600
725
Rs
-20
52
124
196
268
340 %
CEAT Ltd (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Auto Ancillaries
Bloomberg CEAT IB
Face Value(Rs) 10
52 Week H/L 731/ 97
Promoters 57.1 57.1 57.1
FII/NRI 11.8 8.9 8.2
Public 17.6 19.1 20.1
Source: Bloomberg

Kaushal Maroo
kaushal.maroo@emkayglobal.com
+91-22-66121252
Yaresh Kothari
yaresh.kothari@emkayglobal.com
+91-22-66121281
n Ceat, part of a US$3bn RPG Group, is among the leading tyre
manufacturers in India, with a revenue market share of ~12%.
It has an overall production capacity of 800tpd (including
outsourced) across Bhandup, Nashik and Halol plants
n Ceat has a presence across all tyre segments, but has
identified two/three-wheeler and utility vehicle tyres and
exports as key strategic focus areas for the future
n The company has a strong exports presence (Latin America,
Middle East, South Asia and Far East) exports accounted
for 20% of total sales in FY2014. Exports have grown at a
strong CAGR of 22% over FY2010-14
n Ceat also operates in Sri Lanka through a JV (installed
capacity of 60tpd), which enjoys a ~50% market share
Meeting summary:
Focusing on B2C Passenger segments: Over the last few years, Ceat has
evolved from a price taker present as No. 3/No. 4 player in each market segment,
to a price maker in two segments of choice: two-wheeler tyres and utility vehicle
tyres. Growth in both these segments is driven by brand recall by customers and
barriers to entry for competition in the form of an extensive dealer/retailer network.
This ensures superior profitability across the cycle driven by higher pricing power.
Emerging market and export thrust: Ceat has identified emerging markets as
another focus area, with Sri Lanka being a case in point. The company is the only
local tyre maker in Sri Lanka, enjoying an EBITDA margin of 20% and a market
share of 50%. It competes largely with imports and has a significant pricing
advantage over them. It is set to replicate the Sri Lanka example in Bangladesh
soon, where it has entered into a 70:30 JV with a local player and is setting up
capacity that is bigger than the one in Sri Lanka. Exports is a thrust area, where the
company is looking to leverage other smaller emerging markets even in the
segments, which have become highly competitive in large markets like India. A
case in point is the CV bias tyres, which enjoys strong margins in exports while
being fiercely competitive in India.
EBITDA margins to sustain double digit: Management sounds confident of
retaining its double-digit margins, driven by: (a) the above-mentioned focus areas,
which now account for 50% of revenues as against 33% in FY10. These segments,
with significantly higher pricing power, have insulated the companys margin from
vagaries in natural rubber prices to a large extent, and (b) the decline in rubber
prices on the back of a favourable demand-supply situation, which is likely to
continue in the medium term.
Capacity expansion on the card: With an enhanced market share, successful
strategic direction and strong cashflows, the company has lined up a significant
capex to further enhance its market share. On its focus areas, the company will
spend: (a) Rs6.5bn on the capex to expand the capacity of the UV/PC radial
segment, (b) Rs0.7bn as equity infusion for the JV in Bangladesh, and (c) Rs0.7bn
on the maintenance capex. The two probable capex areas in the profitable
segments include: (a) equity share in partner (b) off highway tyres.

CEAT Company Update


Income Statement
Y/E Mar (Rs mn) FY11A FY12A FY13A FY14A
Net Sales 34,988 44,757 48,815 53,548
Growth (%) 24.6 27.9 9.1 9.7
Expenditure 33,594 42,321 44,734 47,364
Raw Materials 25,935 33,491 33,778 34,672
Employee Cost 2,119 2,197 2,691 2,891
Other Exp 5,540 6,633 8,266 9,801
EBITDA 1,393 2,436 4,080 6,184
Growth (%) (52.9) 74.9 67.5 51.6
EBITDA margin (%) 4.0 5.4 8.4 11.5
EBIT 1,052 1,732 3,299 5,358
EBIT margin (%) 3.0 3.9 6.8 10.0
Other Income 284 287 215 205
Interest expenses 1,004 1,922 1,779 1,692
PBT 332 97 1,734 3,872
Tax 110 22 394 1,234
Adjusted PAT 223 75 1,341 2,638
Growth (%) (86.5) (66.2) 1,677.9 96.8
Net Margin (%) 0.6 0.2 2.7 4.9
(Profit)/loss from JVs/Ass/MI - - - -
Adj. PAT After JVs/Ass/MI 223 75 1,341 2,638
E/O items (53) (14) 277 100
Reported PAT 275 89 1,064 2,538
PAT after MI 275 89 1,064 2,538
Growth (%) (83.3) (67.7) 1,094.9 138.6
Balance Sheet
Net worth 6,491 6,563 7,467 9,671
Minority Interest
Secured Loans 3,046 5,012 3,822 5,748
Unsecured Loans 5,992 5,793 4,217 4,225
Loan Funds 9,038 10,805 8,038 9,973
Net deferred tax liability 241 334 745 1,091
Gross Block 18,816 21,116 21,668 22,287
Net block 13,611 15,241 15,029 14,821
Capital work in progress 1,074 134 99 223
Investment 865 745 447 1,243
Current Assets 12,437 14,107 14,986 17,489
Inventories 5,675 5,796 5,314 7,183
Sundry debtors 4,807 6,142 6,358 7,158
Cash & bank balance 479 372 814 1,030
Loans & advances 1,454 1,576 2,231 1,685
Current lia & Prov 12,216 12,524 14,311 13,042
Provisions 271 290 774 866
Net current assets 221 1,583 674 4,447
Misc. exp 0 0 0 0
Total Assets 15,771 17,703 16,250 20,735

Cash Flow
PBT (Ex-Other income) 101 (176) 1,243 3,566
Interest Provided 1,004 1,922 1,779 1,692
Other Non-Cash items (207) (36) 446 (1,157)
Chg in working cap 1,313 (2,324) 2,034 (4,078)
Tax paid (110) (22) (394) (1,234)
Operating Cashflow 2,442 68 5,889 (385)
Capital expenditure (4,987) (1,361) (518) (742)
Free Cash Flow (2,544) (1,293) 5,371 (1,127)
Other income 284 287 215 205
Investments (280) 120 298 (796)
Investing Cashflow (4,982) (953) (5) (1,333)
Equity Capital Raised 0 0 (0) 87
Loans Taken / (Repaid) 2,500 1,767 (2,767) 1,934
Interest Paid (1,004) (1,922) (1,779) (1,692)
Income from investments
Others (39) 855 (1,057) 1,184
Financing Cashflow 1,618 779 (5,442) 1,934
Net chg in cash (922) (106) 441 217
Opening cash position 1,401 478 372 813
Closing cash position 479 372 814 1,030

Key Ratios
Profitability (%)
EBITDA Margin 4.0 5.4 8.4 11.5
Net Margin 0.6 0.2 2.7 4.9
ROCE 7.3 10.3 19.3 28.7
ROE 3.5 1.2 19.1 30.8
RoIC 7.2 10.4 21.8 28.7
Per Share Data (Rs)
EPS 6.5 2.2 39.2 73.4
CEPS 18.0 23.2 53.9 93.6
BVPS 189.6 191.7 218.1 268.9
DPS 2.0 1.0 4.0 10.0
Valuations (x)
PER 81.5 240.7 13.5 7.2
P/ CEPS 29.4 22.9 9.8 5.7
P/ BV 2.8 2.8 2.4 2.0
EV / Sales 0.7 0.6 0.5 0.5
EV / EBITDA 18.5 11.4 6.1 4.3
Dividend Yield (%) 0.4 0.2 0.8 1.9
Gearing Ratio (x)
Net Debt/ EBIDTA 5.5 4.0 1.7 1.2
Working Cap Cycle (days) 3 1 (2) 5

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FY13A 11,311 1,128 10.0 527 2.4 -12.4 18.7 38.0 21.2 8.0
FY14A 12,840 1,482 11.5 669 3.0 27.1 24.7 29.9 16.7 6.9
FY15E 15,084 1,951 12.9 1,250 5.6 86.7 37.9 16.0 12.8 5.4
FY16E 17,859 2,539 14.2 1,611 7.3 28.9 38.6 12.4 9.7 4.3

Century Plyboards
Boasting of distribution strength
August 20, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs87
Target Price
Rs110
EPS Chg FY15E/FY16E (%) NA
Nifty 7,721
Sensex 25,895
Price Performance
(%) 1M 3M 6M 12M
Absolute 5 134 260 172
Rel. to Nifty 3 103 186 103
Source: Bloomberg
20
36
52
68
84
100
Rs
-30
12
54
96
138
180 %
Century Plyboard (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Diversified
Bloomberg CPBI IB
Face Value(Rs) 1
52 Week H/L 97/ 22
Promoters 74.5 72.9 72.9
FII/NRI 2.9 1.2 1.2
Institutions 0.5 N/A N/A
Public 10.4 11.9 13.1
Source: Bloomberg

Vijay Goel
vijay.goel@emkayglobal.com
+91-22-66121285
n Century Ply (CPL) is Indias second-largest premier wood panel
company, with a 21% market share in organized plywood
industry and its laminates division command 9% market share
n With plywood/laminate volumes growth of 11%/12% (CAGR)
during FY10-14, its EBITDA has grown by ~15% (CAGR) during
the period.
n 20% expansion in plywood and 2x expansion in laminate
capacity, along with a commensurate expansion in the
distribution network will support its revenue growth
n At 30-40% discount to its peers in building materials, we
believe that CPL at current PE of 12x FY16e offers attractive
investment opportunity
Meeting takeaways:
Strong growth in organized segment to benefit Century
The organized industry accounts for roughly 30% (increased from 10% a decade back) of
the total plywood panel industry, with an estimated size of Rs150bn and two leading
players (Century and Green together account for 50% market share, while the balance is
with small regional players). The plywood industry is expected to grow at 10% annually,
but leading organized players to register growth of 25-30%, as they gain market share
from unorganized, as well as from small regional players. The government thrust on real
estate and construction sectors, rising per capita income, the reduced home renovation
cycle from 15 years to 5 years along with many other factors to drive growth.
CPL to benefit from strong brand and pan-India distribution network
CPL has invested significantly (around Rs2.2bn in the last decade, with annual spend of
4% of plywood revenue) in brand building. It also has a robust pan-India presence, with
strategic location of six manufacturing facilities across all parts of India, and 1500 dealers
and distributors. This will help the company to benefit from rising consumer preference for
branded products.
Raw material availability is a concern
The management believes that the raw material (timber/wood) availability is a growing
challenge for the industry, as the country has witnessed a steep increase in wood prices
(almost 100%) and availability. Imports of timber from neighboring country (mainly
Myanmar) have stopped. However, CPL is likely to gain from its plant located in Myanmar
which is likely to offer uninterrupted supply of raw material in the form of finished Vinyer.
CPL is also exploring options to source raw material from other countries.
Laminates business to benefit from capacity expansion
CPL has recently increased its capacity from 2.4mn to 4.8mn sheets per annum in its
laminates business, which will help the company to increase its market share. Exports also
offers attractive growth opportunity in the laminates segment, as the management targets
increasing share of export from 25% to 40%.

Century Plyboards Company Update


Income Statement
Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E
Net Sales 11,311 12,840 15,084 17,859
Growth (%) 1.1 13.5 17.5 18.4
Expenditure 10,183 11,358 13,134 15,321
Employee Cost 1,184 1,514 1,697 1,900
Other Exp 0 0 0 0
SG&A 0 0 0 0
EBITDA 1,128 1,482 1,951 2,539
Growth (%) -10.0 31.3 31.6 30.1
EBITDA margin (%) 10.0 11.5 12.9 14.2
EBIT 861 1,149 1,596 2,166
EBIT margin (%) 7.6 9.0 10.6 12.1
Other Income 73 95 105 120
PBT 544 693 1,321 1,840
Tax 17 24 72 229
Adjusted PAT 527 669 1,250 1,611
Growth (%) -12.4 27.1 86.7 28.9
Net Margin (%) 4.7 5.2 8.3 9.0
Adj. PAT After JVs/Ass/MI 527 669 1,250 1,611
E/O items 0 0 0 0
Reported PAT 527 669 1,250 1,611
PAT after MI 527 669 1,250 1,611
Growth (%) -12.4 27.1 86.7 28.9
Balance Sheet
Net worth 2,497 2,915 3,679 4,665
Secured Loans 4,678 4,912 5,096 5,346
Loan Funds 4,678 4,912 5,096 5,346
Net deferred tax liability -2 -5 -5 -5
Gross Block 3,199 3,744 3,944 4,144
Net block 1,857 2,120 1,965 1,792
Capital work in progress 360 188 188 188
Investment 156 378 378 378
Current Assets 5,978 6,482 7,911 9,610
Inventories 2,177 2,927 3,306 3,914
Sundry debtors 1,816 2,046 2,480 2,936
Cash & bank balance 797 181 174 658
Loans & advances 612 701 1,323 1,475
Current lia & Prov 1,179 1,346 1,672 1,963
Misc. exp 0 0 0 0
Total Assets 7,172 7,821 8,770 10,005

Cash Flow
PBT (Ex-Other income) 471 598 1,216 1,720
Chg in working cap -594 -957 -1,110 -925
Tax paid -58 44 61 -89
Operating Cashflow 476 569 902 1,525
Capital expenditure -377 -423 -200 -200
Free Cash Flow 99 146 702 1,325
Other income 73 95 105 120
Investments 577 -222 0 0
Investing Cashflow -940 -594 -190 -180
Equity Capital Raised -5 0 0 0
Loans Taken / (Repaid) 1,133 234 184 250
Interest Paid -390 -551 -380 -446
Dividend paid (incl tax) 130 -251 -469 -584
Others 0 0 0 0
Financing Cashflow 868 -568 -665 -779
Net chg in cash 403 -593 47 565
Opening cash position 421 797 181 174
Closing cash position 797 181 201 740
Key Ratios
Y/E Mar FY13A FY14A FY15E FY16E
Profitability (%)
EBITDA Margin 10.0 11.5 12.9 14.2
Net Margin 4.7 5.2 8.3 9.0
ROCE 13.5 16.6 20.5 24.3
ROE 18.7 24.7 37.9 38.6
RoIC 15.6 17.8 21.1 25.8
Per Share Data (Rs)
EPS 2.4 3.0 5.6 7.3
CEPS 3.6 4.5 7.2 8.9
BVPS 11.2 13.1 16.6 21.0
DPS 1.0 0.3 1.0 1.9
Valuations (x)
PER 38.0 29.9 16.0 12.4
P/CEPS 25.2 20.0 12.5 10.1
P/BV 8.0 6.9 5.4 4.3
EV / Sales 2.1 1.9 1.7 1.4
EV / EBITDA 21.2 16.7 12.8 9.7
Dividend Yield (%) 1.1 0.3 1.1 2.1
Gearing Ratio (x)
Working Cap Cycle (days) 129.1 140.8 146.7 142.8

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FY13A 53,170 13,244 24.9 6,187 49.3 11.7 12.0 13.3 8.4 1.5
FY14A 55,100 14,330 26.0 6,520 51.9 5.4 11.3 12.6 8.5 1.4
FY15E 57,861 14,970 25.9 6,377 50.8 -2.2 10.1 12.9 8.2 1.2
FY16E 60,601 15,679 25.9 6,888 54.8 8.0 10.0 11.9 7.5 1.1

CESC
Spencers on track for break-even
August 20, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs661
Target Price
Rs830
Nifty 7,649
Sensex 25,640
Price Performance
(%) 1M 3M 6M 12M
Absolute -13 46 47 105
Rel. to Nifty -11 27 16 53
Source: Bloomberg
250
360
470
580
690
800
Rs
-10
10
30
50
70
90 %
CESC (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Power
Bloomberg CESC IB
Face Value(Rs) 10
52 Week H/L 787/ 271
Promoters 52.5 52.5 52.5
FII/NRI 22.9 23.0 23.5
Public 4.3 4.3 4.4
Source: Bloomberg

Amit Golchha
amit.golchha@emkayglobal.com
+91-22-66242408

Anujay Jain
anujay.jain@emkayglobal.com
+91-22-66242494
About the company:
n CESC, a flagship company of RP-Sanjiv Goenka Group
incorporated in 1978, now operates in four segments: Power
(as generation and distribution utility), Retail (Spencers),
Property, and IT (First Source)
n The company owns 1225MW of generation capacity and
provides electricity distribution services in the Kolkata circle.
It also owns 1.2GW of under-construction power plants
n Spencers remain largely on track for an EBITDA break-even
(Spencers break-even level Rs80-85/sq ft store EBITDA) by
Q3/Q4FY15, as it reported store level EBITDA of ~Rs60/sq ft in
FY14 (FY13 - Rs50/sq ft)
n CESC turning out to be a good mix of earnings growth
(Chandrapur, Haldia), value unlocking (Spencers demerger
and listing or stake sale) and value pick (7.6x FY16E EPS and
1.1x book). Maintain a Buy with a price target of Rs830/share
Meeting summary:
Spencers break-even: Spencers remain largely on track for an EBITDA break-even
(Spencers break-even level Rs80-85/sq ft store EBITDA) by Q3/Q4FY15. It has
reported store level EBITDA of roughly Rs60/sq ft in FY14 (FY13 - Rs50/sq ft).
Chandrapur plant PPA: Unit-1 of the plant has been commissioned in 4Q14. With
UPERC canceling PPA with Essar and asking for alternative sources, there is an
increased visibility on signing of the PPA. Further, PPA with Tamil Nadu (100MW) is
already undertaken, while for Noida and Tata Power Mumbai distribution, it is in various
stages of discussion (200MW each).
Haldia plant: The plant is on track for commissioning in 4Q15, and the PPA for the
whole 600MW is in the process of being approved by the regulator at cost-plus.
Kolkata distribution business: The business is expected to consistently provide ROEs
of 19-20%.
First Source: The acquisition has turned out to be a profitable venture. By FY17, it is
expected to be a debt-free company, and thereafter cashflows will start flowing to CESC.
Emkays view:
CESC is turning out to be a perfect mix of earnings surprise, value unlocking (Spencers
demerger and listing or stake sale) and value pick (7.9x FY16E EPS and 1.1x book).
Despite the stock run-up, we continue to retain it as our top-pick, as we believe the stock
has a significant upside even from these levels. The key triggers for CESC remains
Spencers break-even and the signing of Chandrapur PPAs in the near term. We value
CESC on an SOTP basis on FY16E, with a target price of Rs830/share (we have assumed
value of Spencers in our base case). We value the standalone distribution business at 10x
FY16EPS (Rs480/share) and Spencers separately at 0.5x EV/sales (Rs75/share). The
key downside risks: Chandrapur PPAs not materializing, the slowing economy impacting
Spencers operations and tariff reduction in the Kolkata distribution circle.

CESC Company Update


Income Statement
Net Sales 53,170 55,100 57,861 60,601
Growth (%) 13.6 3.6 5.0 4.7
Expenditure 39,926 40,770 42,890 44,922
Employee Cost 5,585 6,940 7,301 7,647
Other Exp 6,921 6,310 6,638 6,953
SG&A 0 0 0 0
EBITDA 13,244 14,330 14,970 15,679
Growth (%) 14.4 8.2 4.5 4.7
EBITDA margin (%) 24.9 26.0 25.9 25.9
Depreciation 3,062 3,390 3,566 3,735
EBIT 10,182 10,940 11,404 11,944
EBIT margin (%) 19.1 19.9 19.7 19.7
Other Income 930 1,000 450 731
PBT 7,737 8,250 7,972 8,609
Tax 1,550 1,730 1,594 1,722
Adjusted PAT 6,187 6,520 6,377 6,888
Growth (%) 11.7 5.4 -2.2 8.0
Net Margin (%) 11.6 11.8 11.0 11.4
E/O items 0 0 0 0
Reported PAT 6,187 6,520 6,377 6,888
PAT after MI 6,187 6,520 6,377 6,888
Growth (%) 11.7 5.4 -2.2 8.0
Balance Sheet
Net worth 72,088 78,156 83,977 90,215
Secured Loans 37,417 47,995 46,914 45,988
Loan Funds 37,417 47,995 46,914 45,988
Net deferred tax liability 0 0 0 0
Gross Block 133,856 142,421 147,421 152,421
Net block 81,710 86,189 87,623 88,888
Investment 32,614 43,248 47,917 48,517
Current Assets 26,776 29,747 29,866 34,738
Inventories 3,254 3,460 3,633 3,805
Sundry debtors 12,094 11,850 12,444 13,033
Loans & advances 2,864 6,627 6,959 7,289
Current lia & Prov 14,624 14,554 15,305 16,029
Provisions 2,273 3,200 3,360 3,519
Misc. exp 0 0 0 0
Total Assets 130,678 148,734 154,205 160,218

Cash Flow
Depreciation 3,062 3,390 3,566 3,735
Chg in working cap -133 -3,795 -348 -367
Tax paid 1,550 1,730 1,594 1,722
Free Cash Flow 6,737 3,516 11,216 12,034
Other income 930 1,000 450 731
Investments -11,448 -10,634 -4,670 -600
Investing Cashflow -18,442 -18,382 -9,220 -4,869
Loans Taken / (Repaid) 5,565 10,578 -1,081 -926
Interest Paid -3,375 -3,690 -3,882 -4,066
Others 1,737 -337 -1,858 -2,144
Financing Cashflow 2,897 5,363 -7,977 -8,385
Net chg in cash -884 -754 -981 3,781
Key Ratios
Profitability (%)
EBITDA Margin 24.9 26.0 25.9 25.9
Net Margin 11.6 11.8 11.0 11.4
ROCE 7.1 6.8 8.5 8.8
ROE 12.0 11.3 10.1 10.0
RoIC 14.2 13.8 13.4 13.8
Per Share Data (Rs)
EPS 49.3 51.9 50.8 54.8
CEPS 73.6 78.9 79.2 84.6
BVPS 432.8 483.9 525.4 570.3
DPS 8.2 9.5 9.2 9.9
Valuations (x)
PER 13.3 12.6 12.9 11.9
P/CEPS 8.9 8.3 8.3 7.7
P/BV 1.5 1.4 1.2 1.1
EV / Sales 2.1 2.2 2.1 1.9
EV / EBITDA 8.4 8.5 8.2 7.5
Dividend Yield (%) 1.3 1.4 1.4 1.5
Gearing Ratio (x)

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FY13A 15,923 3,821 24.0 2,181 11.9 7.9 22.3 27.1 15.6 5.7
FY14A 18,598 5,036 27.1 3,066 16.7 40.6 28.2 19.3 11.8 5.2
FY15E 20,878 5,678 27.2 3,404 18.6 11.0 27.8 17.3 10.1 4.5
FY16E 23,023 6,473 28.1 3,990 21.8 17.2 28.4 14.8 8.6 3.9

DB Corp
Top-pick in print media space
August 20, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs312
Target Price
Rs370
Nifty 7,792
Sensex 26,103
Price Performance
(%) 1M 3M 6M 12M
Absolute -1 11 3 26
Rel. to Nifty -5 1 -20 -6
Source: Bloomberg
200
230
260
290
320
350
Rs
-20
-10
0
10
20
30 %
DB Corp (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Media & Entertainment
Bloomberg DBCL IB
Face Value(Rs) 10
52 Week H/L 358/ 211
Promoters 70.0 74.9 75.0
FII/NRI 18.3 18.5 17.7
Public 1.4 1.2 1.3
Source: Bloomberg

Naval Seth
naval.seth@emkayglobal.com
+91-22-66242414

Pratik Shah
pratikm.shah@emkayglobal.com
+91-22-66121241
About the company:
n Dainik Bhaskar is one of Indias largest print media
companies, with a presence in 14 states, in 3 different
languages (Hindi, Gujarati and Marathi). Publishing 37
editions of Dainik Bhaskar (Hindi daily), 7 editions of Divya
Bhaskar (Gujarati Daily) and 7 editions of Divya Marathi and
199 sub-editions in three languages across 14 states. DB
Corp operates 17 radio stations across 7 states under the
brand-name MY FM. It operates Internet portals like
bhaskar.com, divyabhaskar.co.in and Indiainfo.com
Meeting summary:
Advertising growth is expected to pick up in H2FY15. The regional print media is
driving advertising growth, which augurs well for DB Corp, given its diversified
presence in regional print media space.
The company expects an ad revenue growth of 12-14% in FY15E. With macro
improvement, the management expects healthy double-digit ad growth in FY16E.
Circulation revenue is expected to grow in double-digits on the back of the
leadership drive in Gujarat, launch in Bihar, Jharkhand and Maharashtra markets.
Radio
At present, the company has 17 stations in seven states. The plan is to scale up the
business to 100 new radio stations covering roughly 125mn customers.
In Phase-III, the content synergy and cost-efficiency to come into play, which shall
aid margins, as the company expands its business in areas where it has an
established print presence.
Principle approval for news on private FM shall augur well for DB Corp, as it has
already integrated with the parent company for airing of news.
Digital media
The main focus is on: a) making online news credible and b) evolving the content
and delivery platforms to access markets, where print and radio cannot reach.
The core strategy of the digital business is to look at ways to: a) increase the
number of unique visitors on its site and b) increasing the page-views
The company does not foresee the print business becoming marginalized due to the
emphasis on the digital business
Outlook
The management foresees incremental growth in Bihar, Jharkhand and
Maharashtra. Further, it intends to scale up its presence in Gujarat by going for a
leadership drive in the cities of Surat, Baroda and Rajkot. This would entail an
additional cost of Rs50-100mn annually. Jharkhand and Maharashtra are expected
to break even in the current fiscal.
It has discontinued eight print editions of Business Bhaskar and has launched them
on an online platform.
EBITDA margin is expected to improve on account of the softening of newsprint
prices, as the management expects newsprint prices to remain benign in FY15.

DB Corp Company Update


Income Statement
Net Sales 15,923 18,598 20,878 23,023
Growth (%) 9.7 16.8 12.3 10.3
Expenditure 12,103 13,562 15,200 16,550
Raw Materials 5,445 6,330 6,931 7,351
Employee Cost 2,795 3,025 3,385 3,739
Other Exp 3,862 4,207 4,883 5,460
EBITDA 3,821 5,036 5,678 6,473
Growth (%) 10.3 31.8 12.8 14.0
EBITDA margin (%) 24.0 27.1 27.2 28.1
EBIT 3,240 4,393 4,887 5,647
EBIT margin (%) 20.3 23.6 23.4 24.5
Other Income 213 239 350 477
PBT 3,313 4,524 5,160 6,045
Tax 1,132 1,457 1,755 2,055
Adjusted PAT 2,181 3,066 3,404 3,990
Growth (%) 7.8 40.6 11.0 17.2
Net Margin (%) 13.7 16.5 16.3 17.3
E/O items 0 0 0 0
Reported PAT 2,181 3,066 3,404 3,990
PAT after MI 2,181 3,066 3,404 3,990
Growth (%) 7.9 40.6 11.0 17.2
Balance Sheet
Net worth 10,291 11,468 12,985 15,124
Minority Interest 11 0 -2 -1
Secured Loans 1,134 1,008 558 458
Loan Funds 1,630 1,544 1,094 994
Gross Block 11,072 11,854 12,251 12,651
Net block 8,313 8,503 8,109 7,684
Investment 807 724 724 724
Current Assets 7,136 8,446 11,478 13,176
Inventories 1,299 1,732 1,840 1,914
Sundry debtors 3,083 3,280 4,042 4,032
Loans & advances 1,395 2,236 2,510 2,768
Current lia & Prov 3,561 3,798 5,370 4,603
Provisions 946 1,050 1,484 1,172
Misc. exp 0 0 0 0
Total Assets 12,765 13,897 14,963 17,003

Cash Flow
Chg in working cap -321 -1,167 402 -1,098
Tax paid -1,132 -1,457 -1,755 -2,055
Capital expenditure -1,031 -785 -398 -400
Free Cash Flow 1,406 1,747 4,199 3,318
Other income 213 239 350 477
Investments -347 83 0 0
Investing Cashflow -1,165 -463 -48 77
Loans Taken / (Repaid) -503 -85 -450 -100
Interest Paid -140 -108 -77 -80
Others -57 -511 -609 -697
Net chg in cash -606 -145 1,862 1,367
Key Ratios
Profitability (%)
EBITDA Margin 24.0 27.1 27.2 28.1
Net Margin 13.7 16.5 16.3 17.3
ROCE 27.7 34.7 36.3 38.3
ROE 22.3 28.2 27.8 28.4
RoIC 32.4 38.8 42.1 48.9
Per Share Data (Rs)
EPS 11.9 16.7 18.6 21.8
CEPS 15.1 20.2 22.9 26.3
BVPS 56.1 62.6 70.8 82.5
DPS 5.5 7.0 7.2 7.2
Valuations (x)
PER 27.1 19.3 17.3 14.8
P/CEPS 21.4 15.9 14.1 12.3
P/BV 5.7 5.2 4.5 3.9
EV / Sales 3.7 3.2 2.7 2.4
EV / EBITDA 15.6 11.8 10.1 8.6
Dividend Yield (%) 1.7 2.2 2.2 2.2
Gearing Ratio (x)
Net Debt/ Equity 0.0 0.0 -0.1 -0.2
Net Debt/EBIDTA 0.1 0.1 -0.3 -0.5

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FY11A 12,676 1,618 12.8 976 26.2 45.6 24.3 4.4 2.5 0.8
FY12A 17,404 1,930 11.1 1,084 29.1 11.0 19.3 3.9 3.4 0.7
FY13A 21,264 2,190 10.3 921 24.7 -15.1 14.2 4.6 4.7 0.6
FY14A 31,775 2,898 9.1 1,100 20.0 -19.0 13.5 5.7 6.3 0.7

Diamond Power Infrastructure
Integrated across the value-chain
August 20, 2014
Rating
Not Rated

CMP
Rs115
Target Price
NA
EPS Chg (%) NA
Nifty 7,747
Sensex 25,908
Price Performance
(%) 1M 3M 6M 12M
Absolute -8 57 136 266
Rel. to Nifty -8 36 84 171
Source: Bloomberg
20
46
72
98
124
150
Rs
-10
30
70
110
150
190
%
Diamond Power (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Others
Bloomberg DIPI IB
Face Value(Rs) 10
52 Week H/L 131/ 29
Promoters 31.4 36.9 40.2
FII/NRI 16.2 11.7 12.7
Public 33.8 38.2 41.1
Source: Bloomberg

John Perinchery
john.perinchery@emkayglobal.com
+91-22-66121374
About the company:
n Diamond Power Infrastructure Ltd. (DPIL) is an integrated
power transmission & distribution (T&D) service provider and
equipment manufacturer
n DPIL provides turnkey services in T&D, manufactures power
cables up to 550KV, power & distribution transformers up to
220KV, transmission and distribution conductors up to 765KV
and transmission towers
n Diatron, a brand built by DPIL, is one of the most respected
names in the power industry, with a product portfolio that
includes flexible wires & cables, power & control cables,
conductors, power & distribution transformers, and
transmission towers
Key takeaways from the Conference
DPIL offers four critical T&D products: conductors, cables (LT, MVC, HT and EHV),
transmission towers and transformer (power and distribution). In the conductor
segment, the company supplies conductors up to 765kv to PGCIL and various SEBs.
In the cables segment, it manufactures and supplies LT cables from 1.1kV to HT
cables up to 132kV for power transmission and distribution purposes. It also
manufactures and supplies aerial bunch cables for LT and HT lines, as well as EHV
cable up to 550 kV capacity. Apart from the conductors and cables, DPIL also
supplies transmission towers and transformers. In addition to the above products,
DPIL also undertook projects in the distribution segment, wherein a substantial
proportion of the material used are sourced from the company itself.
DPIL is in the process of expanding capacities in its conductor and cable segment.
The company would be adding another 100,000 tonnes to its existing conductor
capacity of 50,500 tonnes. In the cable segment, the company would be doubling the
capacities of its MVC to 15,000km. The total capex planned for the above stands at
around Rs8bn. Conductors (Rs3bn), Cables (Rs3.5bn), Windmill (Rs500mn),
Ancillary units (Rs300mn) and working capital requirement of Rs800mn. The capex
would be funded by a mix of debt (Rs4bn) and internal accruals (Rs3bn). Till date, the
company has already spent Rs6.9bn towards the above capex. It is also planning a
QIP and had passed the enabling provisions for the same.
DPILs existing working capital cycle extends to over 180 days, as a substantial
portion of its receivables (including retention monies) are tied up in the EPC business.
Excluding the EPC segment, the working capital cycle stood at around 120 days.
Going forward, the company would not be bidding for any EPC projects, but would be
tying up with other EPC contractors for supply of materials only.
The order backlog stands at Rs30bn. In the conductor segment, the order backlog
stood at Rs6bn, cables at Rs5bn, and transformers at Rs19bn. The company is L1 in
four PGCIL contracts of about Rs600mn each. Existing debt in the books stand at
Rs18bn, with an average cost of 12% per annum.

Diamond Power Infrastructure Company Update


Income Statement
Net Sales 7,243 12,676 17,404 21,264
Growth (%) 0.0 75.0 37.3 22.2
Expenditure 6,259 11,059 15,474 19,074
Other Exp 213 153 181 240
SG&A 0 0 0 0
EBITDA 984 1,618 1,930 2,190
Growth (%) 0.0 64.5 19.3 13.5
EBITDA margin (%) 13.6 12.8 11.1 10.3
EBIT 919 1,430 1,687 1,863
EBIT margin (%) 12.7 11.3 9.7 8.8
PBT 697 1,195 1,234 1,071
Tax 191 219 150 150
Adjusted PAT 506 976 1,084 921
Growth (%) 0.0 93.0 11.0 -15.1
Net Margin (%) 7.0 7.7 6.2 4.3
Adj. PAT After JVs/Ass/MI 506 976 1,084 921
E/O items 0 0 0 0
Reported PAT 506 976 1,084 921
PAT after MI 506 976 1,084 921
Growth (%) 0.0 93.0 11.0 -15.1
Balance Sheet
Net worth 2,962 5,163 6,074 6,937
Secured Loans 3,117 1,548 3,623 5,229
Unsecured Loans 0 2,885 3,337 6,083
Loan Funds 3,117 4,433 6,960 11,312
Gross Block 1,320 4,501 6,252 7,973
Net block 956 3,988 5,534 6,971
Investment 51 171 171 171
Current Assets 5,453 6,995 10,254 16,217
Inventories 1,885 3,412 5,907 8,492
Sundry debtors 1,990 1,903 1,996 3,992
Loans & advances 1,183 1,284 1,865 2,808
Current lia & Prov 1,425 1,559 2,926 5,110
Provisions 257 335 304 328
Misc. exp 83 0 0 0
Total Assets 6,079 9,595 13,034 18,249

Cash Flow
PBT (Ex-Other income) 441 846 911 921
Other Non-Cash items 140 -75 61 96
Chg in working cap -1,225 -1,221 -1,909 -3,385
Tax paid -3 -28 -30 -102
Operating Cashflow -346 -80 -279 -1,328
Capital expenditure -581 -2,167 -1,541 -1,704
Free Cash Flow -927 -2,247 -1,820 -3,032
Investments 0 -120 -1 0
Investing Cashflow -567 -2,254 -1,543 -1,641
Loans Taken / (Repaid) 365 1,290 0 0
Interest Paid -236 -249 -485 -856
Dividend paid (incl tax) 40 65 -130 -89
Others 806 1,316 2,527 4,352
Financing Cashflow 996 2,493 1,912 3,407
Net chg in cash 84 160 91 438
Key Ratios
Profitability (%)
EBITDA Margin 13.6 12.8 11.1 10.3
Net Margin 7.0 7.7 6.2 4.3
ROCE 31.1 18.5 15.2 12.3
ROE 35.1 24.3 19.3 14.2
RoIC 38.7 20.8 15.8 12.6
Per Share Data (Rs)
EPS 1.8 2.6 2.9 2.5
CEPS 2.0 3.1 3.6 3.4
BVPS 10.3 13.9 16.3 18.6
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 63.6 43.7 39.4 46.4
P/CEPS 56.4 36.7 32.2 34.2
P/BV 11.2 8.3 7.0 6.2
EV / Sales 0.4 0.3 0.4 0.5
EV / EBITDA 2.9 2.5 3.4 4.7
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)

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FY13A 6,605 2,546 38.6 1,716 56.9 7.4 43.9 22.7 14.2 8.9
FY14A 8,410 3,535 42.0 2,556 82.9 45.8 49.8 15.6 10.3 6.8
FY15E 9,300 3,584 38.5 2,689 87.2 5.2 41.2 14.8 9.7 5.6
FY16E 10,486 3,977 37.9 3,065 99.4 14.0 38.9 13.0 8.3 4.6

eClerx Services
Moderation in growth trajectory
August 20, 2014
Rating
Hold
Previous Reco
Hold
CMP
Rs1,291
Target Price
Rs1,140
EPS Chg FY15E/FY16E (%) Na
Target Price change (%) Na
Nifty 7,603
Sensex 25,481
Price Performance
(%) 1M 3M 6M 12M
Absolute 10 6 6 77
Rel. to Nifty 10 -6 -15 34
Source: Bloomberg
750
870
990
1110
1230
1350
Rs
-10
4
18
32
46
60 %
eClerx Services (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector IT Services
Bloomberg ECLX IB
Face Value(Rs) 10
52 Week H/L 1,371/ 710
Promoters 52.5 52.7 52.9
FII/NRI 28.9 26.4 26.2
Public 8.4 8.3 8.0
Source: Bloomberg

Manik Taneja
manik.taneja@emkayglobal.com
+91-22-66121253
Ruchi Burde
ruchi.burde@emkayglobal.com
+91-22-66121385
About the company:
n eClerx is a leading knowledge process outsourcing (KPO)
company providing middle/back-office operations support to
over 30 Fortune-500 companies. Headquartered in Mumbai,
India, the company has five delivery centres across India to
support a diverse global client base, including the worlds
leading Financial Services, Broadband, Cable & Telecom,
eCommerce & Retail, High Tech, Industrial Manufacturing &
Distribution, Software, Media & Entertainment, and Travel
companies
Emkays view:
eClerx highlighted the challenges within the top clients, which is driving the relatively muted
revenue growth at the overall level. While the company continues to do well in the sales and
marketing segment (barring the large hi-tech client), it expects improved growth prospects in
the Cable and Media business in H2FY15, as the M&A activity in the segment receives the
necessary regulatory nod going forward. eClerx also expects to recoup 30-40% of the margin
decline seen in June 2014 quarter in the next few quarters, and hopes to maintain EBIT
margins in the lowto-mid 30s range despite greater investments to drive traction in the
emerging clients
Investment rationale
Growth pangs within top clients: The revenue growth trajectory for the top-5 clients has
slipped to <10% YoY growth in recent quarters as against 30%-plus YoY growth until
December 2011 quarters, and could remain subdued due to pressure in a couple of top-5
clients (top-5 clients accounted for roughly 71% of revenues in the June 2014 quarter, down
500bps YoY). While eClerx continues to drive strong growth in non-top-5 clients (revenues
from emerging accounts have grown by 30%-plus in the past 4 quarters), high dependence
on top clients and the associated dependence on them will limit the overall revenue growth
for the company.
Low mid-teens growth outlook for FY15: Despite a strong headcount addition in June 2014
quarter (10%-plus QoQ), eClerx continues to indicate a low mid-teens revenue growth
trajectory for FY15, highlighting that the employee ramp-ups is inline with initial ramp-up
plans on the cable and media business. While the business visibility of the cable and media
business has improved, the company believes that the demand outlook within financial
services and sales and marketing support business remains unchanged.
Hold with a target porice of Rs1140: We note that eClerxs recent quarterly financial
performance has remained lumpy unlike the consistent financial performance associated with
eClerx in the past, given the growth challenges in top clients. Valuations at around 14.8x/13x
FY15/16E earnings are full and limit any case for absolute upsides in our view. We retain a
Hold, with a revised target price of Rs1140, based on 11.5x FY16 P/E.
Catalyst: Better-than-expected economic activities in western countries may lead to positive
earning surprises for the company.
Risks: Rupee appreciation, delays in execution of recent deal-wins, and cost pressure are
some of the downside risks for the company.

eClerx Services Company Update


Income Statement
Net Sales 6,605 8,410 9,300 10,486
Growth (%) 39.7 27.3 10.6 12.8
Expenditure 4,059 4,875 5,715 6,508
Employee Cost 2,254 2,744 3,311 3,855
Other Exp 0 0 0 0
SG&A 1,805 2,131 2,404 2,653
EBITDA 2,546 3,535 3,584 3,977
Growth (%) 34.2 38.8 1.4 11.0
EBITDA margin (%) 38.6 42.0 38.5 37.9
EBIT 2,291 3,205 3,190 3,576
EBIT margin (%) 34.7 38.1 34.3 34.1
Other Income -182 110 312 404
PBT 2,109 3,315 3,502 3,980
Tax 393 759 813 915
Adjusted PAT 1,716 2,556 2,689 3,065
Growth (%) 7.4 48.9 5.2 14.0
Net Margin (%) 26.0 30.4 28.9 29.2
E/O items 0 0 0 0
Reported PAT 1,716 2,556 2,689 3,065
PAT after MI 1,716 2,556 2,689 3,065
Growth (%) 7.4 48.9 5.2 14.0
Balance Sheet
Net worth 4,383 5,889 7,162 8,613
Secured Loans 0 0 0 0
Loan Funds 0 0 0 0
Gross Block 1,983 2,392 2,615 2,828
Less: Depreciation 635 844 1,239 1,640
Net block 1,348 1,548 1,376 1,189
Investment 352 1,155 1,155 1,155
Current Assets 4,292 5,162 6,894 8,825
Inventories 0 0 0 0
Sundry debtors 1,292 1,808 1,962 2,212
Loans & advances 651 949 917 1,034
Current lia & Prov 1,628 2,005 2,293 2,586
Current liabilities 628 646 917 1,034
Provisions 1,000 1,360 1,376 1,551
Misc. exp 0 0 0 0
Total Assets 4,371 5,871 7,144 8,595

Cash Flow
Chg in working cap -74 -442 165 -75
Tax paid -393 -759 -813 -915
Free Cash Flow 1,024 1,921 2,713 2,774
Other income -182 110 312 404
Investing Cashflow -599 -1,106 89 190
Loans Taken / (Repaid) 0 0 0 0
Interest Paid 0 0 0 0
Dividend paid (incl tax) -880 -1,242 -1,415 -1,613
Others -21 0 0 0
Financing Cashflow -827 -1,188 -1,415 -1,613
Net chg in cash 662 40 1,610 1,564
Key Ratios
Profitability (%)
EBITDA Margin 38.6 42.0 38.5 37.9
Net Margin 26.0 30.4 28.9 29.2
ROCE 54.2 64.7 53.8 50.6
ROE 43.9 49.8 41.2 38.9
RoIC 194.8 161.8 149.7 187.7
Per Share Data (Rs)
EPS 56.9 82.9 87.2 99.4
CEPS 65.3 93.6 100.0 112.4
BVPS 145.3 191.0 232.3 279.4
DPS 24.7 34.3 39.2 44.7
Valuations (x)
PER 22.7 15.6 14.8 13.0
P/CEPS 19.8 13.8 12.9 11.5
P/BV 8.9 6.8 5.6 4.6
EV / Sales 5.5 4.3 3.7 3.2
EV / EBITDA 14.2 10.3 9.7 8.3
Dividend Yield (%) 1.9 2.7 3.0 3.5
Gearing Ratio (x)
Net Debt/ Equity -0.6 -0.6 -0.7 -0.8
Net Debt/EBIDTA -1.1 -1.0 -1.4 -1.7

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FY13A 28,185 2,796 9.9 1,459 2.2 50.8 9.3 17.1 12.1 1.5
FY14A 31,059 3,621 11.7 1,934 2.9 32.8 10.2 12.9 8.8 1.2
FY15E 32,233 4,184 13.0 2,555 3.8 32.1 11.5 9.7 7.3 1.1
FY16E 35,814 5,007 14.0 3,415 5.1 33.7 13.6 7.3 5.6 0.9

Firstsource Solutions
Back in the game
August 20, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs37
Target Price
Rs50
Nifty 7,603
Sensex 25,481
Price Performance
(%) 1M 3M 6M 12M
Absolute -7 17 53 225
Rel. to Nifty -7 3 23 146
Source: Bloomberg
10
18
26
34
42
50
Rs
-10
20
50
80
110
140 %
Firstsource Solution (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector IT Services
Bloomberg FSOL IB
Face Value(Rs) 10
52 Week H/L 42/ 11
Promoters 56.5 56.7 56.8
FII/NRI 6.5 3.7 3.1
Public 24.5 28.7 30.6
Source: Bloomberg

Ruchi Burde
+91-22-66121385
Manik Taneja
+91-22-66121253
About the company:
n Firstsouce Solutions works with Fortune-500, FTSE-100 and
several hospital groups in the US, the UK and India to deliver
business process management services in healthcare,
telecom & media, and banking, financial services and
insurance (BFSI) industries. Its service portfolio includes
customer management, collections management and data
processing, with assimilation of technology platforms and
intellectual property (IP) assets, etc.
Emkays view:
While noting that ramp-ups of some large deals is impacting near-term growth, Firstsource
remains confident of growth prospects, highlighting the strong pipeline in certain telecom
clients, as well as in the healthcare segment. Firstsource remains on track to improve
margins by 150-200bps in FY15 (we build in around 130bps improvement currently), led
by the full-year impact of the exit of the lower margin domestic business and the large deal
ramp-ups. Firstsource indicates that while revenue growth in FY15 could be between 5%
and 6%, FY16 revenue growth could be closer to around 10%, led by viability on ramp-ups
on recently concluded deals.
Back in the game as revamped senior team executes a well-crafted turnaround: We
believe Firstsource Solutions is back in the game strongly after a series of steps
undertaken during the past 18 months. The steps include: (1) the exit from low-margin
domestic accounts and (2) improving operational factors (focus on improving seat-fill
factor/utilization) along with focusing on the more profitable customer management and
healthcare segment. These initiatives have already started bearing fruit in the form of a
better revenue profile, thereby aiding improvement in margins (Firstsources EBITDA
margin improved by 340bps over FY12-FY14). The company remains focused on chasing
profitable growth in the global BPM industry. We expect it to witness a 3.8% and 11%
revenue growth in FY15 and FY16E, respectively, as customer management services and
healthcare vertical continue to grow for the company. We expect US healthcare reforms
(a US$20-bn BPM opportunity per industry research) to continue to catalyze growth in the
healthcare vertical. Expect 230bps improvement in EBITDA margins over FY14-16E; near
zero-debt balance sheet by FY17E: We expect EBITDA margins to improve by around
230bps over FY14-16E, driven by better revenue mix (read: lower mix of the domestic
business), as it realizes the benefit of the exit from lower-margin Indian telco accounts, as
well as better hedge rates ahead. We thereby estimate EBITDA margins at 13%/14% in
FY15/16 as against 11.7% in FY14. Further, given the improved focus and management
commitment to repay US$45mn of outstanding debt annually, we estimate that Firstsource
would be able to repay more than 85% of its outstanding debt by end-FY17E.
Buy with a target price of Rs50: Firstsources well-crafted turnaround continues to yield
results, as it is evident from the improving financial profile, which, in our view, should
support further stock upsides. We have a Buy recommendation with a target price of
Rs50. Catalyst: Faster-than-expected spending on Obamacare and better-than-expected
economic activities in western countries may lead to positive earning surprises for the
company.

Firstsource Solutions Company Update


Income Statement
Net Sales 28,185 31,059 32,233 35,814
Growth (%) 25.0 10.2 3.8 11.1
Expenditure 25,390 27,438 28,050 30,807
Employee Cost 19,349 21,294 21,678 23,896
Other Exp 0 0 0 0
SG&A 6,041 6,143 6,372 6,911
EBITDA 2,796 3,621 4,184 5,007
Growth (%) 50.9 29.5 15.5 19.7
EBITDA margin (%) 9.9 11.7 13.0 14.0
EBIT 1,912 2,864 3,461 4,194
EBIT margin (%) 6.8 9.2 10.7 11.7
Other Income 107 0 -17 0
PBT 1,592 2,033 2,779 3,748
Tax 129 101 227 337
Adjusted PAT 1,459 1,934 2,555 3,415
Growth (%) 134.7 32.1 32.0 33.7
Net Margin (%) 5.2 6.2 7.9 9.5
(Profit)/loss from JVs/Ass/MI -3 2 4 4
E/O items 0 0 0 0
Reported PAT 1,459 1,934 2,555 3,415
PAT after MI 1,459 1,934 2,555 3,415
Growth (%) 133.5 32.5 32.1 33.7
Balance Sheet
Net worth 17,136 20,915 23,462 26,869
Secured Loans 10,108 9,084 6,600 3,906
Loan Funds 10,129 9,100 6,600 3,906
Gross Block 31,732 34,615 35,215 36,110
Net block 25,144 27,304 27,181 27,263
Current Assets 8,327 9,534 10,015 11,110
Inventories 0 0 0 0
Sundry debtors 5,230 5,130 5,201 5,545
Cash & bank balance 901 1,863 398 659
Loans & advances 0 0 0 0
Current lia & Prov 5,957 6,548 6,851 7,312
Provisions 311 393 442 491
Misc. exp 0 0 0 0
Total Assets 27,560 30,347 30,398 31,114

Cash Flow
Chg in working cap -9,944 381 -1,643 -373
Tax paid -129 -101 -227 -337
Free Cash Flow 2,024 4,244 1,688 3,402
Other income 0 0 -17 0
Equity Capital Raised 2,269 0 0 0
Loans Taken / (Repaid) -9,794 -1,029 -2,500 -2,694
Interest Paid -427 -832 -665 -446
Others 0 -1,396 29 0
Net chg in cash -5,928 962 -1,466 262
Opening cash position 6,829 901 1,863 398
Closing cash position 901 1,863 397 659
Key Ratios
Profitability (%)
EBITDA Margin 9.9 11.7 13.0 14.0
Net Margin 5.2 6.2 7.9 9.5
ROCE 7.8 9.9 11.3 13.6
ROE 9.3 10.2 11.5 13.6
RoIC 8.9 10.4 11.9 13.9
Per Share Data (Rs)
EPS 2.2 2.9 3.8 5.1
CEPS 3.5 4.0 4.9 6.3
BVPS 25.6 31.3 35.1 40.2
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 17.1 12.9 9.7 7.3
P/CEPS 10.6 9.2 7.6 5.9
P/BV 1.5 1.2 1.1 0.9
EV / Sales 1.2 1.0 1.0 0.8
EV / EBITDA 12.1 8.8 7.3 5.6
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)

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Financial Snapshot (Consolidated) *FY14 financials for 9 Months (Rsmn)
FY11A 12,030 925 7.7 137 1.6 41.3 4.8 76.2 15.8 3.6
FY12A 11,874 640 5.4 -92 -1.1 -166.8 -2.6 -114.0 21.4 2.6
FY13A 12,730 751 5.9 173 2.0 0.0 2.9 60.5 19.7 1.3
FY14A 11,166 841 7.5 283 3.3 63.9 3.7 36.9 17.8 1.4

Gati Ltd
Quasi-play on economy and e-commerce growth
August 20, 2014
Rating
Not Rated

CMP
Rs131

EPS Chg (%) NA
Nifty 7,740
Sensex 25,919
Price Performance
(%) 1M 3M 6M 12M
Absolute 20 57 125 433
Rel. to Nifty 16 44 75 295
Source: Bloomberg
20
46
72
98
124
150
Rs
-20
42
104
166
228
290 %
Gati Ltd (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Logistics
Bloomberg GTIC IB
Face Value(Rs) 2
52 Week H/L 144/ 23
Promoters 34.9 38.1 33.9
FII/NRI 6.5 0.3 0.1
Public 47.8 49.1 49.6
Source: Bloomberg

Tejas Sheth
+91-22-66242482
About the company:
n Network 2
nd
to India Post, Gati is the largest surface express
cargo company in India, with a market share upward of 25%.
The express business is in JV with KWE (30% share)
n Gati is also investing in the cold chain logistics business,
wherein it is the second-largest player in India, with 200-plus
reefer trucks, and plans to build 10 cold storages by FY17E
n Quasi-play on Indias economic recovery and its e-commerce
growth. The company is seeing strong traction in e-commerce
vertical, and expects high growth going forward
n Gati has a gross debt of Rs 4.3bn as on FY14, of which
Rs1.3bn (USD22mn) is through FCCBs, which have a base
conversion rate of Rs38/share.
Meeting summary:
Economic recovery should augur well for the company with the logistics industry
growth at the rate of 2x of GDP growth.
The company further divests a 12% stake in Gati Ship, bringing the stake to 48%,
leading to no consolidation. Gati Ship sells Gati Pride, a loss-making ship, during
Q1FY15
Gross debt has come down to Rs4.3bn, with debt in Gati Ship is no more consolidated
Expects to dilute the stake in Gati Kausar in the near future. The capital will be raised
through structured finance and will be utilised towards developers 10 cold storages.
With expansion, Gati Kausars potential revenue would be Rs2.5bn in FY17E as
against Rs0.5bn in FY14.
The company currently delivers 18,000 parcels per day for e-commerce clients on a
capacity of 23,000 parcels. It expects to augment the capacity to 30,000 parcels by
Q3FY15E, and further to 100,000 parcels by FY20.
The company targets revenue of Rs12bn from e-commerce in FY20, servicing most
large players.
The company has started e-fulfillment centres in Delhi and Chennai, wherein it
provides storage, assembling and packaging services for e-commerce companies.
Currently, the Delhi centre handles 2000 parcels per day, which should increase to
20,000 parcels by FY15
Despite the huge rise in competition in surface transport, the company is able to
maintain its market share of 17-18% over the last 3 years.
The company is in negotiations with FCCB holders for repayment of capital and avoid
conversion at a much lower rate

Gati Ltd Company Update


Income Statement
Net Sales 12,030 11,874 12,730 11,166
Growth (%) 29.9 -1.3 7.2 -12.3
Expenditure 11,105 11,235 11,979 10,325
Employee Cost 1,130 1,136 1,236 1,027
Other Exp 0 0 0 0
SG&A 941 1,002 864 923
EBITDA 925 640 751 841
Growth (%) 15.4 -30.8 17.4 12.0
EBITDA margin (%) 7.7 5.4 5.9 7.5
EBIT 670 270 503 620
EBIT margin (%) 5.6 2.3 4.0 5.6
Other Income 83 1,017 166 106
PBT 237 667 232 402
Tax 96 252 60 118
Adjusted PAT 137 -92 173 283
Growth (%) 48.4 194.4 -58.4 63.9
Net Margin (%) 1.2 3.5 1.4 2.5
(Profit)/loss from JVs/Ass/MI -4 -507 0 0
Adj. PAT After JVs/Ass/MI 137 -92 173 283
E/O items 0 -1 -76 -49
Reported PAT 137 -92 96 234
PAT after MI 137 -92 173 283
Growth (%) 41.3 -166.8 0.0 63.9
Balance Sheet
Net worth 2,972 4,123 7,870 7,728
Minority Interest 0 537 1,154 1,173
Secured Loans 3,609 3,124 3,233 3,149
Unsecured Loans 860 1,493 1,537 1,653
Loan Funds 4,469 4,617 4,770 4,802
Gross Block 5,429 5,527 10,110 10,185
Net block 4,100 3,963 8,340 8,263
Investment 202 202 202 548
Current Assets 5,085 6,630 6,819 6,576
Inventories 121 108 118 119
Sundry debtors 1,903 1,890 2,203 2,414
Cash & bank balance 319 1,401 466 308
Loans & advances 1,849 1,822 2,535 3,717
Other current assets 893 1,409 1,497 18
Current lia & Prov 2,207 1,574 1,703 2,009
Current liabilities 1,656 941 1,109 1,170
Provisions 551 633 594 840
Misc. exp 0 0 0 0
Total Assets 7,545 9,378 13,901 13,764

Cash Flow
PBT (Ex-Other income) 154 -350 -10 246
Chg in working cap -155 -1,099 -989 346
Tax paid -96 -252 -60 -118
Operating Cashflow 673 -712 -374 1,020
Capital expenditure 20 -24 -4,711 -288
Free Cash Flow 694 -736 -5,085 732
Other income 83 1,017 166 106
Investments 0 0 0 -346
Investing Cashflow 104 993 -4,545 -527
Equity Capital Raised -61 1,243 3,650 -376
Loans Taken / (Repaid) -72 148 153 32
Interest Paid -516 -619 -437 -325
Others -1 30 618 19
Financing Cashflow -650 801 3,984 -650
Net chg in cash 127 1,082 -935 -158
Opening cash position 192 319 1,401 466
Closing cash position 319 1,401 466 308
Key Ratios
Profitability (%)
Net Margin 1.2 3.5 1.4 2.5
ROCE 10.1 15.3 5.8 5.3
ROE 4.8 -2.6 2.9 3.7
RoIC 10.1 3.8 4.9 4.9
Per Share Data (Rs)
EPS 1.6 -1.1 2.0 3.3
CEPS 4.5 3.2 4.9 5.8
BVPS 33.6 46.9 90.2 88.6
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 76.2 -114.0 60.5 36.9
P/CEPS 26.7 37.6 24.9 20.8
P/BV 3.6 2.6 1.3 1.4
EV / Sales 1.2 1.2 1.2 1.3
EV / EBITDA 15.8 21.4 19.7 17.8
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)
* FY14 Financials for 9 Months due to change in year ending

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Gujarat International Finance Tec-City
Preview of Mr. Modis plan for 100 'smart cities'
August 20, 2014

Jimit Sheth
jimit.sheth@emkayglobal.com
+91 22 66121235
About the company:
n Gujarat International Finance Tec-City (GIFT city) is a
Rs650bn DTA & SEZ by the Gujarat government to cater to
financial services potential of India and will comprise stock
exchanges, technology parks, international education zone,
integrated townships, entertainment zone, hotels and a
convention centre
n GIFT is conceptualised as a global financial and IT services
hub similar to globally benchmarked financial centres such
as Shinjuku in Tokyo, Lujiazui in Shanghai, La Defense at
Paris and Dockyards in London
n IL&FS will partner the Government of Gujarat and the target
is 2022 to complete the project. It is being developed on a
886-acre land, of which 673 acres is in possession of GIFT
n The city is centrally located in Gujarat between Ahmedabad
and Gandhinagar and is 18km from the Ahmedabad
International Airport
Meeting summary:
To develop and implement the GIFT project, the Government of Gujarat (GOG) and
Infrastructure Leasing & Financial Services (IL&FS) have established a 50:50 joint
venture. GoG has earmarked 886 acres of land for GIFT project, out of which 673
acres of land is in possession of GIFT. Around 261 acres is SEZ and 412 acres in
non-SEZ. The total project would have 62mn sq ft of built-up area. Out of this, 67%
is towards commercial, 22% for residential and 11% for social facilities.
GIFT has been given IFSC status, which is required to become international
financial centre. Currently, only one IFSC is allowed in India. GIFT has potential to
generate 10 lakh jobs (direct and indirect). The focus would be on IT and finance
job only.
Rs.10,000cr is the infrastructure cost of GIFT. It will generate revenues from the
sale of development rights. The total project is expected to be completed over 12
years in four phases. The overall project would require an investment of
Rs80,000cr. The first phase will entail Rs1800cr of infrastructure cost. Rs1157cr of
financial closure has been done with five banks at an interest rate of 11.5%. The
first phase of infra, scheduled to be completed in December 2014, has 13mn sq ft of
area.
IL&FS has taken 7.77mn sq ft of built-up area in Phase-1 of the project. It has
completed 1.4mn sq ft. The Narsee Monjee Education Trust is expected to start
operations in FY15. Sterling Hospital with 200 beds is under construction. SBI Bank
is developing its commercial tower of 2 lakh sq ft. Tata Communications is setting
up a data centre. Overall, things are moving at a rapid pace, with Mr. Narendra
Modi in power.
A district cooling system is being implemented for the first time in India by a reputed
international agency, ETA, Dubai. It will significantly reduce energy costs. An
automated waste collection system is being implemented by NY Corp of Sweden.
GIFT will also have 1.2km of artificial water body. All utility and wiring will be
undertaken through tunnels, which will be laid across the city. Tunnels of 12.1km
are planned, out of which 2km have been completed. Recently, it has advertised for
a 5.5mn sq ft of construction project and has received good response.
The project completion has been moving at a fast pace. The two towers of 29 floors
have been completed in just 16 months. Of this, one tower is operational and
houses leading PSU banks.

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FY13A 23,567 3,309 14.0 1,488 46.9 76.6 20.3 3.6 6.1 0.7
FY14A 21,181 3,473 16.4 578 17.7 -62.3 6.7 9.6 7.5 0.6
FY15E 25,989 4,586 17.6 898 27.4 55.2 9.0 6.2 5.4 0.5
FY16E 28,798 6,031 20.9 1,839 56.2 104.9 16.1 3.0 3.8 0.5

Godawari Power & Ispat
On a strong footing
August 20, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs170
Target Price
Rs209
Nifty 7,792
Sensex 26,103
Price Performance
(%) 1M 3M 6M 12M
Absolute 18 63 139 138
Rel. to Nifty 13 48 87 77
Source: Bloomberg
60
88
116
144
172
200
Rs
-20
4
28
52
76
100 %
Godawari Power (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Metals & Mining
Bloomberg GODPI IB
Face Value(Rs) 10
52 Week H/L 188/ 62
Promoters 64.9 64.9 64.9
FII/NRI 0.1 0.1 0.1
Public 22.2 23.1 23.4
Source: Bloomberg

Goutam Chakraborty
goutam.chakraborty@emkayglobal.com
+91-22-66121275

Parin Vora
parin.vora@emkayglobal.com
+91-22-66121234
n Starting of Boria Tibu mine (0.6mtpa), we believe, the future
prospects look much better; restarting of Ardent Steel pellet
plant would aid further
n Operations of the 50MW solar power plant and the 1.2mtpa
pellet plant have been stabilized and has potential to
contribute Rs3bn additional EBITDA
n No new capex in the immediate future allays concerns about
further addition to debt, while cost rationalizations and
stability in demand would address improvement in cashflow
n Consistent improvement in pellet business both at Raipur
and Odisha along with higher mining output to be crucial;
Maintain a Buy with a target price of Rs209
Meeting updates:
The company has been operating one iron ore mine, Ari Dongri (0.7mtpa magnetite
capacity) since 2010. It has started development work in its second mine, Boria Tibu
(capacity 0.7mtpa hematite) in April 2014. The company expects production to
commence from this new mine beginning October 2014. It also has been trying to
increase its EC in the Ari Dongri mine to 1.2mtpa
A 1.2mtpa new pellet plant in Raipur has been ramping up well, and has reported a
robust performance in Q1FY15. The solar power facility has become stable now and
is operating currently at a PLF of 24-25%.
Another pellet plant (Ardent Steel with a 0.6mtpa capacity) in Odisha has been shut
down since the previous quarter. Initially, the company undertook a maintenance
shutdown, but later the MoEF sought clarification, as the company did not have
environmental clearance for the same. However, the company is of the opinion that
it is not required and has represented its case. The management expects the same
to be resolved very soon
Three coal blocks, viz., Nakia and Madanpur North and South were dealocated.
Currently, 50% coal is sourced through linkage and SECL, while the rest 50%
through e-auction and imports
No new major capex is expected in the next 2 years; debt has peaked at Rs20bn. In
2-3 years, which is likely to come down by Rs2-3bn
Emkays views:
We expect a meaningful contribution from the new mine in FY16, which would help save
costs with regard to purchase of iron ore and raising revenue by way of higher sales of
pellets. With regard to solar power, at a fixed selling price of Rs12.2/unit and at an
average cloudy days of 25 in a year, the facility can generate Rs1.2bn EBITDA. In our
view, without any new capex in the immediate future, it should not face any problem in
servicing the current debt. Besides, a better operating performance would actually help
improve its cashflow going forward. At the CMP of Rs170, the stock trades at 3x FY16
EPS and 3.8x FY16 EV/ EBITDA. We continue to value the stock at 4xFY16 EV/
EBITDA. We maintain a Buy with a target price of Rs209.

Godawari Power & Ispat Company Update


Income Statement
Net Sales 23,567 21,181 25,989 28,798
Growth (%) 14.4 -10.1 22.7 10.8
Expenditure 20,258 17,708 21,403 22,767
Raw Materials 14,826 12,203 15,356 15,745
Employee Cost 614 799 1,089 1,396
Other Exp 0 0 0 0
EBITDA 3,309 3,473 4,586 6,031
Growth (%) 17.4 4.9 32.1 31.5
EBITDA margin (%) 14.0 16.4 17.6 20.9
Depreciation 709 1,055 1,293 1,521
EBIT 2,600 2,418 3,293 4,510
EBIT margin (%) 11.0 11.4 12.7 15.7
Other Income 148 156 119 100
PBT 1,537 923 1,283 2,587
Tax -46 223 247 724
Effective tax rate (%) -3.0 24.2 19.2 28.0
Adjusted PAT 1,583 700 1,037 1,862
Growth (%) 80.7 -55.8 48.1 79.7
Net Margin (%) 6.7 3.3 4.0 6.5
Adj. PAT After JVs/Ass/MI 1,488 578 898 1,839
E/O items 0 0 0 0
Reported PAT 1,488 578 898 1,839
PAT after MI 1,488 578 898 1,839
Growth (%) 76.6 -61.1 55.2 104.9
Balance Sheet
Net worth 7,904 9,362 10,523 12,268
Minority Interest 1,573 1,573 1,573 1,573
Secured Loans 14,035 15,039 14,039 13,039
Unsecured Loans 1,520 6,229 6,229 6,229
Loan Funds 15,555 21,267 20,267 19,267
Gross Block 14,140 28,527 30,527 32,027
Net block 10,830 24,162 24,870 24,848
Investment 178 508 508 508
Current Assets 8,268 10,101 10,818 11,678
Inventories 3,475 4,022 4,820 4,881
Sundry debtors 1,067 1,019 1,266 1,294
Cash & bank balance 799 705 833 2,046
Loans & advances 2,926 4,355 3,898 3,456
Current lia & Prov 5,358 2,740 4,363 4,456
Provisions 171 142 142 142
Misc. exp 0 0 0 0
Total Assets 25,805 33,031 32,832 33,578

Cash Flow
PBT (Ex-Other income) 1,537 923 1,283 2,587
Depreciation 709 1,055 1,293 1,521
Other Non-Cash items -124 -67 -139 -23
Chg in working cap 309 -4,545 1,034 446
Tax paid -437 -223 -247 -724
Operating Cashflow 1,995 -2,857 3,225 3,807
Free Cash Flow -7,956 -6,357 1,225 2,307
Equity Capital Raised 260 -130 0 0
Loans Taken / (Repaid) 6,931 5,713 -1,000 -1,000
Dividend paid (incl tax) -106 -96 -96 -93
Others 566 0 0 0
Financing Cashflow 7,651 5,486 -1,096 -1,093
Net chg in cash -179 -1,201 129 1,213
Closing cash position 799 705 833 2,046
Key Ratios
Profitability (%)
EBITDA Margin 14.0 16.4 17.6 20.9
Net Margin 6.7 3.3 4.0 6.5
ROCE 12.5 8.7 10.3 13.7
ROE 20.3 6.7 9.0 16.1
RoIC 19.2 11.0 10.7 14.9
Per Share Data (Rs)
EPS 46.9 17.7 27.4 56.2
CEPS 69.2 49.9 66.9 102.6
BVPS 248.9 285.9 321.3 374.6
DPS 2.6 2.5 2.5 0.0
Valuations (x)
PER 3.6 9.6 6.2 3.0
P/CEPS 2.5 3.4 2.5 1.7
P/BV 0.7 0.6 0.5 0.5
EV / Sales 0.9 1.2 1.0 0.8
EV / EBITDA 6.1 7.5 5.4 3.8
Dividend Yield (%) 1.5 1.5 1.5 0.0
Gearing Ratio (x)

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FY13A 7,644 861 11.3 337 16.7 15.4 12.9 37.4 17.5 4.6
FY14A 10,959 1,584 14.5 753 37.4 123.9 23.9 16.7 10.4 3.5
FY15E 14,290 2,317 16.2 997 49.6 32.4 25.3 12.6 7.1 2.9
FY16E 17,626 3,123 17.7 1,484 73.7 48.8 29.7 8.5 5.1 2.2

Granules India
Steady outlook ahead
August 20, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs641
Target Price
Rs885
Nifty 7,603
Sensex 25,481
Price Performance
(%) 1M 3M 6M 12M
Absolute 31 82 180 385
Rel. to Nifty 31 60 126 267
Source: Bloomberg
100
220
340
460
580
700
Rs
-10
46
102
158
214
270 %
Granuals India (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Pharmaceuticals
Bloomberg GRAN IB
Face Value(Rs) 10
52 Week H/L 705/ 120
Promoters 48.7 48.9 48.9
FII/NRI 4.2 1.8 1.6
Public 41.6 43.6 46.3
Source: Bloomberg

Ashish Rathi
ashish.rathi@emkayglobal.com
+91-22-66121257
Vivek Agrawal
vivek.agrawal@emkayglobal.com
+91-22-66121254
About the company:
n Granules offers three components of the pharma value-chain
manufacturing APIs, PFIs and FDs and is seeing strong
transformation to high profitable business mix
n Recent Auctus acquisition and Omnichem JV, providing the
much-needed product diversification and a fillip to create a
high-end regulated markets exporter with stronger margins
n Improving return ratios, cashflows and profitability to re-rate
stock valuations. The stock i not pricing in improvement in
business quality and growth
n Inexpensive and compelling valuations, despite strong
growth outlook ahead; we recommend a Buy and a target
price of Rs885 at 12x FY16E EPS of Rs73.7
Meeting takeaways
Granules indicated that the strong growth path for the company would continue in
FY15E and FY16E. The management was very confident of process-related efficiencies
that has helped the company retain strong market share in molecules it is present in.
The future course of growth will come mainly from growth in Finished Dosages and
capacity built up which has happened in the PFI segment. On Auctus, the company
remains confident of breaking-even operations in FY15, but Omnichem is expected to
show tepid numbers over the next couple of years. Company guided that a 20% growth
in top line and bottom line is sustainable over the next couple of years.
Emkays view
Granules has metamorphosed from merely being an API manufacturer into a high-end
intermediates and formulations supplier. Its strong presence across the value-chain
makes it a preferred integrated player for global customers. Recently, it has acquired
Auctus Pharma, which has a USFDA-approved manufacturing facility and several
products. This acquisition would help the company to diversify its product basket. Its
recent entry into the CRAMS business through the Ajinomoto OmniChem JV bodes well
for its long-term profitability, helping upgrade the business quality a notch above peer
pure play API manufacturers.
We believe Auctus Pharma and Ajinomoto OmniChem, along with an improvement in
the base business product mix, will help catapult Granules into better profitability. The
business mix would change more towards PFIs and finished dosages (FD), besides
sales increasing more towards regulated markets, implying better margins ahead.
Sharp improvement in return ratios to continue
ROEs have improved from 10% in FY11 to 24% in FY14, while ROICs have improved
from 11% to 25% during the same period. We believe the improvement in ROEs and
ROICs would continue towards 29% and 35%, respectively, by FY16E.
Valuations cheap; Recommend a Buy with a target price of Rs885
We believe current valuations are unjustified, given the fact that the growth rate, going
forward, would be very strong, which is supported by a healthy change in the business
quality. We recommend a Buy and a target price of Rs885.

Granules India Company Update


Income Statement
Net Sales 7,644 10,959 14,290 17,626
Growth (%) 16.9 43.4 30.4 23.4
Expenditure 6,783 9,374 11,973 14,503
Raw Materials 4,669 6,453 8,291 10,047
Employee Cost 639 879 1,154 1,410
Other Exp 1,475 2,043 2,528 3,046
EBITDA 861 1,584 2,317 3,123
Growth (%) 8.8 84.0 46.2 34.8
EBITDA margin (%) 11.3 14.5 16.2 17.7
EBIT 630 1,286 1,846 2,592
EBIT margin (%) 8.2 11.7 12.9 14.7
PBT 474 1,124 1,489 2,215
Tax 138 371 491 731
Adjusted PAT 337 753 997 1,484
Growth (%) 15.8 123.9 32.4 48.8
Net Margin (%) 4.4 6.9 7.0 8.4
Adj. PAT After JVs/Ass/MI 337 753 997 1,484
E/O items -11 0 0 0
Reported PAT 326 753 997 1,484
PAT after MI 337 753 997 1,484
Growth (%) 15.8 123.9 32.4 48.8
Balance Sheet
Net worth 2,748 3,559 4,320 5,686
Long Term Debt 2,000 3,395 3,192 3,192
Short Term Debt 855 1,009 1,009 1,009
Loan Funds 2,854 4,404 4,201 4,201
Other Liabilities 0 0 0 0
Gross Block 3,874 6,268 7,268 8,168
Net block 2,635 4,730 5,259 5,628
Other Assets 146 132 132 132
Current Assets 2,958 3,812 4,038 5,511
Inventories 1,365 1,742 1,963 2,476
Sundry debtors 710 1,109 1,266 1,598
Cash & Cash Equivalents 328 418 215 735
Accounts Payable 918 1,355 1,749 2,120
Other Current Liabilities 306 600 404 510
Misc. exp 0 0 0 0
Total Assets 5,603 7,964 8,521 9,887

Cash Flow
PBT (Ex-Other income) 454 1,082 1,456 2,172
Chg in working cap 160 -34 -231 -477
Tax paid -138 -371 -491 -731
Operating Cashflow 891 1,320 1,451 1,915
Capital expenditure -1,156 -2,551 -1,000 -900
Free Cash Flow -265 -1,231 451 1,015
Investing Cashflow -1,174 -2,494 -968 -857
Loans Taken / (Repaid) 608 1,550 -203 0
Interest Paid -177 -204 -389 -420
Others 0 0 0 0
Financing Cashflow 384 1,263 -687 -538
Net chg in cash 102 89 -203 520
Key Ratios
Profitability (%)
EBITDA Margin 11.3 14.5 16.2 17.7
Net Margin 4.4 6.9 7.0 8.4
ROCE 12.6 19.6 22.8 28.6
ROE 12.9 23.9 25.3 29.7
RoIC 15.5 25.2 28.2 35.3
Per Share Data (Rs)
EPS 16.7 37.4 49.6 73.7
CEPS 28.2 52.2 73.0 100.1
BVPS 136.6 176.9 214.6 282.5
DPS 2.3 4.1 4.7 5.8
Valuations (x)
PER 37.4 16.7 12.6 8.5
P/CEPS 22.2 12.0 8.6 6.3
P/BV 4.6 3.5 2.9 2.2
EV / Sales 2.0 1.5 1.2 0.9
EV / EBITDA 17.5 10.4 7.1 5.1
Dividend Yield (%) 0.4 0.7 0.7 0.9
Gearing Ratio (x)

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Dec Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
CY13A 5,179 2,558 49.4 1,744 3.6 135.8 13.3 37.0 25.5 4.6
CY14A 6,592 3,900 59.2 3,180 6.6 82.4 20.8 20.3 16.2 3.9
CY15E 7,569 4,619 61.0 3,781 7.8 18.9 21.0 17.1 13.8 3.3
CY16E 9,041 5,788 64.0 5,070 10.5 34.1 23.5 12.7 10.3 2.7

Gujarat Pipavav
In a sweet spot
August 20, 2014
Rating
Accumulate
Previous Reco
Buy
CMP
Rs145
Target Price
Rs160
Nifty 7,603
Sensex 25,481
Price Performance
(%) 1M 3M 6M 12M
Absolute 22 76 135 205
Rel. to Nifty 22 55 89 132
Source: Bloomberg
40
62
84
106
128
150
Rs
-20
12
44
76
108
140 %
Gujarat Pipavav (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Construction
Bloomberg GPPV IB
Face Value(Rs) 10
52 Week H/L 155/ 42
Promoters 43.0 43.0 43.0
FII/NRI 33.8 32.7 33.8
Public 4.7 4.8 4.4
Source: Bloomberg

Nitin Arora
nitin.arora@emkayglobal.com
+91-22-66242491
Kunal Soni
kunal.soni@emkayglobal.com
+91-22-66242431
About the company:
n With a 43% stake held by APM Terminals and a part of the AP
Moller-Maersk Group, GPPL is the largest container ship
operator in the world. APM Terminals operates an integrated
global terminal network of 60 ports. GPPL has rights to
develop 1,561 acres, of which around 900 acres is still
available for developing port infrastructure. The port has five
cargo berths, including an LPG berth, with a total length of
1.1km. It has roughly 4km waterfront available for
development, which provides very strong scalability
potential. GPPL can potentially scale up its container
handling capacity to 4m teu from 1.3m teu currently, and its
bulk cargo-handling capacity to 20mt from the present 4mt.
Scale-up in container volumes to continue
The container volume on the western coast continues to edge higher in Q1FY15. The
volumes grew by 21% to 2mn teu YoY, with JNPT volumes grown by 6.5% to 1.1mn teu.
The company plans to expand the capacity from 0.85mn teu to 1.35 mn teu. However, if
the market continues to grow by 18-20%, the company can look to develop its fifth
container berth. The addition of new lines will help increase the container volumes, as
churning has not been fully seen.
Margin expansion scope increases further on higher utilisation
The company witnessed a significant increase in EBITDA margins by 327bps over
CY11-13 on a tariff hike, higher utilisation and better efficiencies. We believe the margin
expansion to continue over CY13-15E led by the following factors:
Benefit of the revision in port tariffs effective August 16, 2013; a year after
dollarisation of container tariffs (August 2012) also to come in CY14E/15E.
Rise in volumes on increasing market on the western coast from 8.6% in CY13 to
9.5% in CY15E which, we believe, can also surpass our estimate higher if Hazira
lacks growth further on the container business.
Both container and bulk traffic declined in CY12 and, consequently, operating
leverage worked on the negative side. Considering that 70% of the container
handling charges (in some ports it ranges more than 50%) is fixed in nature, it thus
reduces cost/teu for every extra container box handled.
Better efficiencies, as the company has undertaken several efficiency improvement
measures in the last few years such as replacing its stackers by rubber tyre gantry
cranes (RTGCs), which save hire charges, diesel cost and also commissioned a
well-mechanized fertilizer shed (savings amounts to Rs90-100mn in CY13).
The management expects the margin to expand once the handling of liquid cargo
commences. Besides, it does not see Hazira as a threat to volume growth, due to
logistics issues at Hazira Port. However, the company believes that over the longer
term, Hazira will continue to compete with the JNPT container port.

Gujarat Pipavav Company Update


Income Statement
Y/E Dec (Rsmn) CY13A CY14A CY15E CY16E
Net Sales 5,179 6,592 7,569 9,041
Growth (%) 24.5 27.3 14.8 19.4
Expenditure 2,621 2,692 2,950 3,253
Operational Cost 1,320 1,377 1,553 1,768
SG&A 870 872 931 996
EBITDA 2,558 3,900 4,619 5,788
Growth (%) 40.7 52.5 18.4 25.3
EBITDA margin (%) 49.4 59.2 61.0 64.0
EBIT 1,950 3,244 3,845 4,945
EBIT margin (%) 37.7 49.2 50.8 54.7
Other Income 168 235 200 334
PBT 1,744 3,180 3,781 5,070
Tax 0 0 0 0
Adjusted PAT 1,744 3,180 3,781 5,070
Growth (%) 135.8 82.4 18.9 34.1
Net Margin (%) 33.7 48.2 50.0 56.1
E/O items -174 102 0 0
Reported PAT 1,570 3,282 3,781 5,070
PAT after MI 1,744 3,180 3,781 5,070
Growth (%) 135.8 82.4 18.9 34.1
Balance Sheet
Net worth 14,035 16,477 19,502 23,558
Secured Loans 2,819 2,819 2,819 2,500
Loan Funds 2,819 2,819 2,819 2,500
Gross Block 19,029 20,632 24,275 24,622
Net block 13,062 14,009 16,877 16,381
Investment 830 830 830 830
Current Assets 3,197 5,699 5,629 10,098
Loans & advances 658 903 1,141 1,362
Current lia & Prov 1,812 2,348 2,489 2,725
Provisions 406 542 622 743
Misc. exp 0 0 0 0
Total Assets 16,854 19,399 22,424 26,161

Cash Flow
Tax paid 0 -636 -756 -1,014
Free Cash Flow 2,106 2,107 -492 3,910
Other income 168 235 200 334
Investments 0 0 0 0
Investing Cashflow -1,040 -1,000 -3,811 -14
Loans Taken / (Repaid) -387 0 0 -319
Interest Paid -374 -298 -263 -209
Others 0 0 0 0
Financing Cashflow -762 -298 -263 -528
Net chg in cash 1,512 2,044 -555 3,716
Opening cash position 512 2,024 4,068 3,512
Key Ratios
Y/E Dec CY13A CY14A CY15E CY16E
Profitability (%)
EBITDA Margin 49.4 59.2 61.0 64.0
Net Margin 33.7 48.2 50.0 56.1
ROCE 13.2 19.2 19.4 21.8
ROE 13.3 20.8 21.0 23.5
RoIC 15.7 25.1 25.6 29.8
Per Share Data (Rs)
EPS 3.6 6.6 7.8 10.5
CEPS 4.9 7.9 9.4 12.2
BVPS 29.0 34.1 40.3 48.7
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 37.0 20.3 17.1 12.7
P/CEPS 27.4 16.8 14.2 10.9
P/BV 4.6 3.9 3.3 2.7
EV / Sales 12.6 9.6 8.4 6.6
EV / EBITDA 25.5 16.2 13.8 10.3
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)
Net Debt/ Equity 0.1 -0.1 0.0 -0.2
Net Debt/EBIDTA 0.3 -0.3 -0.1 -0.8
Working Cap Cycle (days) -44.9 -34.0 -13.0 10.0

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FY13A 20,484 2,826 13.8 1,677 7.2 1.4 11.0 15.1 9.9 1.6
FY14A 22,014 3,132 14.2 1,615 6.9 -3.7 12.3 15.6 9.1 1.4
FY15E 23,118 3,011 13.0 1,865 8.0 15.5 9.9 13.5 9.3 1.3
FY16E 25,500 3,612 14.2 2,343 10.0 25.6 11.3 10.8 7.4 1.2

HT Media
Waiting for macro recovery
August 20, 2014
Rating
Hold
Previous Reco
Hold
CMP
Rs106
Target Price
Rs102
Nifty 7,792
Sensex 26,103
Price Performance
(%) 1M 3M 6M 12M
Absolute -11 10 48 10
Rel. to Nifty -15 1 16 -18
Source: Bloomberg
70
86
102
118
134
150
Rs
-40
-30
-20
-10
0
10 %
HT Media (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Bloomberg HTML IB
Face Value(Rs) 2
52 Week H/L 131/ 70
Promoters 69.5 69.5 69.0
FII/NRI 11.8 9.7 13.2
Public 4.2 5.4 2.4
Source: Bloomberg

Naval Seth
+91-22-66242414

Pratik Shah
+91-22-66121241
About the company:
n Hindustan Times Media (HT media) is one of the largest
media companies in India, with a presence across different
business verticals of media (print, Internet, radio and
education). HT Media publishes 3 national newspapers, viz.,
Hindustan Times (English), Hindustan (Hindi newspaper
through a subsidiary Hindustan media ventures Ltd) and a
business newspaper Mint. The company operates a job
portal shine.com, besides an education portal HT
campus.com aimed at students passing out of schools and
colleges
Meeting summary:
The English print business is expected to taper off in the longer run in line with the
Western countries. However, the management believes that it is still 5-6 years hence
the English newspaper business might begin to taper off. A pick-up in urban spending
is the key to English advertisement revenue growth.
Given the difference in buying patterns in India compared to Western countries, the
decline would be gradual and not rapidly.
On the contrary, Hindi/vernacular publications would continue to see strong ad growth
in the medium-to-long term. Improving disposable income in smaller towns and rural
areas would continue to drive ad revenue growth
Hindustan continues to gain in Uttar Pradesh. The company has seen meaningful
yield improvement post the recent IRS results. At the current juncture, its revenue
market share stands at 22%
Hindustan has a strong No. 2 readership position in Uttar Pradesh, with 7mn readers
(according to a new readership survey), driven by a 30% jump in yield in the state in
FY14. Further, yields are expected to double in Uttar Pradesh over the next 2-3 years.
The management expects the EBITDA margin in Uttar Pradesh to improve by 100bps
annually going forward.
DB Corp has gained further market share in Patna post its recent launch, and the
entire gains have come at the expense of Jagran. Hindustan's market share is intact.
DB would take another 2-3 years to increase its reach across the state
Digital business accounted for roughly 10% of revenue (Rs76cr) in FY14 (Shine, HT
Campus, Digital Quotient). Shine has already surpassed Monster, and now
commands a No. 2 position after Naukri based on active users.
Investment in Shine.com would continue; however, the management expects losses
to reduce substantially going forward. Change in revenue mix would reduce losses
going forward
Radio revenue is expected to touch the Rs2-bn mark over the next 3-5 years. The
company is looking at 5-6 new licences during Phase-III auctions. It has worked out a
strategy to have a presence in major cities. The capex for both renewal and Phase-III
auctions is expected to be around Rs1.5-2bn over the next 2-3 years

HT Media Company Update


Income Statement
Net Sales 20,484 22,014 23,118 25,500
Growth (%) 2.3 7.5 5.0 10.3
Expenditure 17,657 18,882 20,106 21,888
Raw Materials 7,268 7,353 7,595 8,161
Employee Cost 3,921 4,237 4,943 5,325
Other Exp 6,469 7,293 7,569 8,402
EBITDA 2,826 3,132 3,011 3,612
Growth (%) -1.5 10.8 -3.9 19.9
EBITDA margin (%) 13.8 14.2 13.0 14.2
EBIT 1,912 2,274 2,059 2,636
EBIT margin (%) 9.3 10.3 8.9 10.3
Other Income 938 1,623 1,305 1,395
PBT 2,404 3,248 2,924 3,615
Tax 623 917 802 1,012
Adjusted PAT 1,781 2,331 2,122 2,603
Growth (%) 3.8 30.9 -8.9 22.6
Net Margin (%) 8.7 10.6 9.2 10.2
Adjusted PAT After
JVs/Ass/MI
1,677 2,083 1,865 2,343
E/O items 0 -468 0 0
Reported PAT 1,677 1,615 1,865 2,343
PAT after MI 1,677 2,083 1,865 2,343
Growth (%) 1.4 24.2 -10.4 25.6
Balance Sheet
Net worth 15,976 17,943 19,695 21,923
Secured Loans 4,341 4,526 3,826 3,526
Loan Funds 4,341 4,526 3,826 3,526
Gross Block 11,964 12,679 13,101 13,515
Net block 7,283 7,309 6,957 6,581
Investment 9,731 12,831 13,831 15,331
Current Assets 9,913 10,771 11,716 14,191
Inventories 1,631 2,219 2,446 2,826
Sundry debtors 2,712 2,837 3,117 3,590
Loans & advances 3,097 3,540 3,949 4,611
Other current assets 904 998 1,048 1,156
Current lia & Prov 6,348 8,082 8,393 9,834
Provisions 255 303 338 423
Misc. exp 0 0 0 0
Total Assets 21,723 23,972 25,254 27,412

Cash Flow
Chg in working cap -273 484 -655 -182
Tax paid -623 -917 -802 -1,012
Free Cash Flow 620 2,541 1,563 2,536
Other income 938 1,623 1,305 1,395
Investments -1,411 -3,100 -1,000 -1,500
Investing Cashflow -1,752 -2,361 -295 -705
Loans Taken / (Repaid) 466 185 -700 -300
Interest Paid -446 -649 -440 -416
Others 0 0 0 0
Financing Cashflow -89 -575 -1,250 -826
Net chg in cash 58 489 618 1,606
Key Ratios
Profitability (%)
EBITDA Margin 13.8 14.2 13.0 14.2
Net Margin 8.7 10.6 9.2 10.2
ROCE 13.9 17.1 13.7 15.3
ROE 11.0 12.3 9.9 11.3
RoIC 20.6 25.1 23.0 29.2
Per Share Data (Rs)
EPS 7.2 6.9 8.0 10.0
CEPS 11.1 12.5 12.0 14.2
BVPS 68.1 76.5 84.0 93.5
DPS 0.4 0.4 0.4 0.4
Valuations (x)
PER 15.1 15.6 13.5 10.8
P/CEPS 9.7 8.6 9.0 7.6
P/BV 1.6 1.4 1.3 1.2
EV / Sales 1.4 1.3 1.2 1.0
EV / EBITDA 9.9 9.1 9.3 7.4
Dividend Yield (%) 0.4 0.4 0.4 0.4
Gearing Ratio (x)

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FY11A 10,680 3,372 31.6 1,622 62.4 295.7 24.5 5.8 4.4 1.3
FY12A 11,927 2,274 19.1 616 23.7 -62.0 8.1 15.4 7.8 1.2
FY13A 12,733 2,573 20.2 648 24.9 5.2 7.9 14.6 7.2 1.1
FY14E 13,179 2,975 22.6 349 13.4 -46.1 4.0 27.2 6.3 1.1

Indian Metals & Ferro Alloys
Captive coal to be the biggest trigger
August 20, 2014
Rating
Not Rated

CMP
Rs395
Target Price
NA
EPS Chg (%) NA
Nifty 7,684
Sensex 25,723
Price Performance
(%) 1M 3M 6M 12M
Absolute -11 43 80 154
Rel. to Nifty -10 24 41 89
Source: Bloomberg
100
170
240
310
380
450
Rs
0
28
56
84
112
140 %
Indian Metal & Ferrous (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Bloomberg IMFA IB
Face Value(Rs) 10
52 Week H/L 450/ 134
Promoters 55.7 55.7 55.7
FII/NRI 0.6 N/A N/A
Public 30.2 30.1 29.9
Source: Bloomberg

Goutam Chakraborty
+91-22-66121275
n An integrated ferro-alloy producer with captive chrome ore
mines along with integrated power capacity
n Currently, it operates around 72% of its installed capacity
due to lower availability of ore. However, with the recent EC
extension for Sukinda, it expects increase in ore supply,
resulting in higher alloy production
n Coal sourcing for power via e-auction and washery rejects.
Allotted a linkage coal mine (Utkal coal block sole
ownership); however, the grant order from state remains
pending despite all EC
n Receipt of grant order for linkage coal from captive Utkal C
coal block and start of operations in Sukinda are near-term
triggers
Meeting updates
At 72% capacity utilization, IMFA produced 198kt of ferro chrome in FY14 and 51kt
during Q1FY15. Of the total production in FY14, 40% was supplied to POSCO (via
long-term arrangements), while the rest was sold at spot. Supplies to POSCO are
priced quarterly along with discounts and previous quarter prices as benchmark.
Current ferro chrome realization stands at Rs65,000/tonne.
It has captive chrome ore mines, with estimated reserves of 21mn tonnes. It mined
505kt of chrome ore during FY14. However, with the closure of the Sukinda mine
from April 2014 on failing to get EC, chrome ore production declined to 55,303tn in
Q1FY15. Recently, the company received extension of the mine, and expects ore
production in the coming months.
The company has 258MW of power generation capacity, of which 158MW (of which
120MW is coal-based) suffices the current production requirement. The remaining
100MW currently stands idle. For the operational 120MW plant, IMFA sources coal
via e-auction and washery rejects. The company has been allotted a coal block
(Utkal C reserves of 123mn tonnes), which has all required ECs in place and
awaits the grant order from the Odisha government. The management indicated to
signing of the mining lease within 4 months of the grant order receipt and full
production within 18 months.
Management indicated alloy production of >210kt in FY15. The company indicated
a capex of Rs2.5bn during FY15, largely for maintenance purposes. The current net
debt stands at 1x as at the end of FY14.
Emkays view
The operating profit margin is expected to expand over the next 2 years, with the
expectation of a decline in costs due to: (1) a ramp-up in captive power generation from
the new capacity, (2) increase in production, and (3) captive coal from Utkal-C block.
The next trigger for the company is the Utkal-C coal mine in Odisha, with extractable
reserves of 123mn tons. Once this is through, the execution of the mining lease would
be a positive trigger, as it would halve the cost of thermal power consumed. The
extension of EC for the Sukinda mine has been a positive.

Indian Metals & Ferro Alloys Company Update


Income Statement
Y/E Mar (Rsmn) FY11A FY12A FY13A FY14E
Net Sales 10,680 11,927 12,733 13,179
Growth (%) 80.2 11.7 6.8 3.5
Expenditure 7,308 9,653 10,160 10,204
Raw Materials 4,092 6,439 6,808 6,240
Employee Cost 872 928 1,027 1,188
Other Exp 0 2 -25 0
EBITDA 3,372 2,274 2,573 2,975
Growth (%) 199.5 -32.6 13.1 15.6
EBITDA margin (%) 31.6 19.1 20.2 22.6
Depreciation 419 560 817 1,490
EBIT 2,954 1,715 1,756 1,484
EBIT margin (%) 27.7 14.4 13.8 11.3
Interest expenses 541 832 695 1,156
PBT 2,505 940 1,143 499
Tax 882 324 495 150
Adjusted PAT 1,622 616 648 349
Growth (%) 295.7 -62.0 5.2 -46.1
Net Margin (%) 15.2 5.2 5.1 2.7
Adj. PAT After JVs/Ass/MI 1,622 616 648 349
E/O items 0 0 -120 0
Reported PAT 1,622 616 528 349
PAT after MI 1,622 616 648 349
Growth (%) 295.7 -62.0 5.2 -46.1
Balance Sheet
Net worth 7,382 7,869 8,499 8,811
Secured Loans 5,654 8,586 9,708 9,506
Loan Funds 5,654 8,586 9,708 9,506
Gross Block 8,509 10,714 16,441 18,938
Net block 5,540 7,216 12,332 13,445
Current Assets 8,281 8,556 7,405 8,613
Inventories 3,312 3,297 3,192 3,727
Loans & advances 4,285 4,410 2,920 3,954
Current lia & Prov 4,629 5,714 4,344 4,909
Provisions 1,586 1,678 259 230
Misc. exp 0 0 0 0
Total Assets 13,403 16,883 19,052 19,405

Cash Flow
PBT (Ex-Other income) 2,413 882 1,061 329
Depreciation 419 560 817 1,490
Interest Provided 541 832 695 1,156
Chg in working cap -1,014 805 498 -796
Tax paid 0 0 0 0
Free Cash Flow -581 -2,070 294 758
Investments 486 44 -224 119
Loans Taken / (Repaid) 900 2,932 1,122 -202
Interest Paid -541 -832 -695 -1,156
Others 0 0 0 0
Financing Cashflow 359 2,097 427 -1,358
Net chg in cash -44 -71 379 -396
Key Ratios
Y/E Mar FY11A FY12A FY13A FY14E
Profitability (%)
EBITDA Margin 31.6 19.1 20.2 22.6
Net Margin 15.2 5.2 5.1 2.7
ROCE 25.2 11.7 10.2 8.6
ROE 24.5 8.1 7.9 4.0
RoIC 37.6 18.6 14.4 9.4
Per Share Data (Rs)
EPS 62.4 23.7 24.9 13.4
CEPS 78.6 45.3 56.4 70.8
BVPS 284.1 302.9 327.1 339.1
DPS 5.1 5.0 5.0 3.0
Valuations (x)
PER 5.8 15.4 14.6 27.2
P/CEPS 4.6 8.1 6.5 5.2
P/BV 1.3 1.2 1.1 1.1
EV / Sales 1.4 1.5 1.4 1.4
EV / EBITDA 4.4 7.8 7.2 6.3
Dividend Yield (%) 1.4 1.4 1.4 0.8
Gearing Ratio (x)

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FY13A 36,872 16,333 44.3 5,567 16.7 12.2 20.4 14.3 8.8 3.0
FY14A 37,319 17,537 47.0 4,591 13.8 -17.5 16.6 17.3 9.5 2.7
FY15E 45,495 23,368 51.4 6,146 18.5 33.9 19.5 12.9 8.9 2.3
FY16E 52,394 29,289 55.9 6,048 18.2 -1.6 16.7 13.1 7.8 2.1

IRB Infrastructure
Improved prospects
August 20, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs249
Target Price
Rs290
EPS Chg FY15E/FY16E (%) -13 / NA
Target Price change (%) 4
Nifty 7,603
Sensex 25,481
Price Performance
(%) 1M 3M 6M 12M
Absolute 6 117 223 359
Rel. to Nifty 6 91 160 248
Source: Bloomberg
60
103
146
189
232
275
Rs
-20
22
64
106
148
190 %
IRB Infrastructure (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Construction
Bloomberg IRB IB
Face Value(Rs) 10
52 Week H/L 276/ 52
Promoters 61.1 N/A 62.3
FII/NRI 24.8 N/A 23.2
Institutions 4.4 N/A 3.8
Private Corp 3.6 N/A 3.3
Public 6.1 N/A 7.4
Source: Bloomberg

Nitin Arora
+91-22-66242491

Kunal Soni
+91-22-66242431
About the company:
n Incorporated in 1998, IRB is one of the leading infrastructure
companies in India focusing on development of roads and
highways. IRB designs, builds and operates roads and
highways. It manages one of the largest road portfolios in
India 21 roads with a total length of around 1978km. It has
a market share of around 7.22% in the Golden Quadrilateral.
The promoters of the company own about 61.1% of IRB.
Meeting summary:
Construction revenue visibility kicks in with recent order wins
IRB witnessed some slowdown in its construction revenues (flattish on a YoY basis) in
FY14 on completion of four of its BOT projects (Talegaon-Amravati, Jaipur-Deoli,
Amritsar-Pathankot and Tumkur-Chitradurga). The Ahmedabad-Vadodara project
contributed the major portion of its construction business revenues at Rs19.6bn, which is
76% of FY14 construction revenues. Given the recent order wins, the company expects
to clock construction revenue worth Rs25bn and Rs30bn in FY15E and 1FY6E,
respectively. The NHAI will be giving out Rs880bn of projects in FY15, of which
Rs550bn would be EPC projects and Rs300bn in BOT mode. IRBs total order-book
stood at Rs125bn, of which O&M stood at Rs30bln and EPC orders at Rs95bn. These
will be executed over a period of 3 years.
Comfortably placed to meet incremental equity; restructuring also to help
Given that the equity requirement stands at Rs11bn for existing Ahmedabad-Vadodra
(Rs5.9bn) and Goa-Kundapur project (Rs5.2bn), the three newly won projects adds to
incremental equity requirement of Rs18bn, which will take the total equity requirement to
Rs29bn. The company needs the same to infuse funds over the next 3-3.5 years. We
believe, given the cash balance of Rs15bn, along with the operating cashflow from BOT
projects (bulk of this originates from the Mumbai-Pune project), the construction
business would be sufficient to meet the equity requirement. The recent premium
restructuring scheme, which offsets the lower negative cashflows from Ahmedabad-
Vadodara and Tumkur-Chitradurga projects, also supported the cashflows. However, we
note that any further award wins in FY15 may put equity funding of new projects from
internal cashflows under strain. The company highlighted that for the current project no
funding will be required. It will continue to target 400-500km of orders over the next 2
years. The debt repayment at the BOT level stands at Rs3bn for FY15E and Rs4bn for
FY16E.

IRB Infrastructure Company Update


Income Statement
Net Sales 36,872 37,319 45,495 52,394
Growth (%) 17.8 1.2 21.9 15.2
Expenditure 20,540 19,782 22,127 23,105
Employee Cost 1,557 1,799 1,815 1,845
Other Exp 0 0 0 0
SG&A 1,223 1,482 1,553 1,249
EBITDA 16,333 17,537 23,368 29,289
Growth (%) 18.9 7.4 33.3 25.3
EBITDA margin (%) 44.3 47.0 51.4 55.9
Depreciation 4,415 4,771 7,175 11,208
EBIT 11,918 12,766 16,193 18,081
EBIT margin (%) 32.3 34.2 35.6 34.5
Other Income 1,301 1,214 1,092 1,263
PBT 7,066 6,419 8,429 8,635
Tax 1,530 1,823 2,331 2,651
Adjusted PAT 5,567 4,591 6,146 6,048
Growth (%) 11.6 -17.0 32.7 -1.9
Net Margin (%) 15.0 12.3 13.4 11.4
(Profit)/loss from JVs/Ass/MI -31 5 -48 -63
E/O items 0 0 0 0
Reported PAT 5,567 4,591 6,146 6,048
PAT after MI 5,567 4,591 6,146 6,048
Growth (%) 12.2 -17.5 33.9 -1.6
Balance Sheet
Net worth 32,556 35,607 43,761 57,201
Minority Interest 1,092 356 308 244
Secured Loans 66,349 93,980 129,593 150,464
Unsecured Loans 12,712 8,965 8,965 8,965
Loan Funds 79,060 102,945 138,558 159,429
Gross Block 57,918 88,916 102,151 141,051
Net block 55,088 85,544 98,226 136,551
Investment 620 145 145 145
Current Assets 27,205 27,064 22,053 23,884
Inventories 2,488 2,683 2,385 2,787
Loans & advances 9,696 8,519 8,519 8,519
Current lia & Prov 19,106 17,986 17,367 17,983
Provisions 3,110 2,888 2,888 2,888
Misc. exp 0 0 0 0
Total Assets 112,967 139,634 183,353 217,601

Cash Flow
Depreciation 4,415 4,771 7,175 11,208
Chg in working cap 476 117 -1,117 158
Tax paid -2,422 -1,823 -2,331 -2,651
Free Cash Flow -15,257 -15,851 -35,365 -17,446
Other income 1,301 1,214 1,092 1,263
Investments 1,680 475 0 0
Loans Taken / (Repaid) 14,815 23,884 35,614 20,871
Interest Paid -6,153 -7,562 -8,856 -10,708
Others 0 0 0 0
Financing Cashflow 7,471 15,258 25,332 8,759
Net chg in cash -3,497 1,096 -5,508 1,373
Key Ratios
Profitability (%)
EBITDA Margin 44.3 47.0 51.4 55.9
Net Margin 15.0 12.3 13.4 11.4
ROCE 12.9 11.7 11.3 10.4
ROE 20.4 16.6 19.5 16.7
RoIC 22.9 20.1 18.9 16.2
Per Share Data (Rs)
EPS 16.7 13.8 18.5 18.2
CEPS 30.0 28.2 40.1 51.9
BVPS 78.4 87.6 101.8 115.8
DPS 4.0 2.8 0.0 0.0
Valuations (x)
PER 14.3 17.3 12.9 13.1
P/CEPS 8.0 8.5 6.0 4.6
P/BV 3.0 2.7 2.3 2.1
EV / Sales 3.9 4.5 4.6 4.3
EV / EBITDA 8.8 9.5 8.9 7.8
Dividend Yield (%) 1.7 1.2 0.0 0.0
Gearing Ratio (x)

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FY10 7,624 1,285 16.9 700 29.04 4.00 30.3 8.12 3.99 1.79
FY11 9,398 1,435 15.1 739 25.73 11.00 21.4 4.98 3.21 0.96
FY12 9,299 1,500 16.1 681 25.11 -2.00 16.7 7.19 3.44 1.1
FY13 9,990 1,674 16.7 757 27.24 8.00 16.1 7.34 3.8 1.08

J Kumar Infra
Poised for Growth
August 20, 2014
Rating
NA

CMP
Rs327
Target Price
NA
EPS Chg (%) NA
Nifty 7,684
Sensex 25,723
Price Performance
(%) 1M 3M 6M 12M
Absolute 3 62 79 112
Source: Bloomberg
100
150
200
250
300
350
Rs
-30
-10
10
30
50
70 %
J Kumar Infraprojects (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Construction
Bloomberg JKIL IB
Face Value(Rs) 10
52 Week H/L 351/ 130
Promoters 59.2 57.4 57.4
FII/NRI 10.2 6.2 6.2
Public 11.1 17.7 17.7
Source: Bloomberg

Nitin Arora
+91-22-66242491

Kunal Soni
+91-22-66242431
About the company:
n JKIL is a civil engineering and infrastructure development
company, with its primary focus on development of roads,
flyovers, bridges, metro projects, bridges, irrigation projects,
commercial and residential buildings, railway buildings,
sports complexes, etc. It also undertakes the piling of
foundation work using hydraulic piling rigs for major
projects, which are awarded to other contractors. With over
two decades of experience, it has established a track record
of efficient project management and execution skills, with
trained and skilled manpower, efficient deployment of
equipment and strategic purchasing capabilities
Meeting summary:
Focus on profitable growth
J Kumar Infra has bagged orders worth Rs5bn in Q4FY14; taking its yearly fresh order
wins to Rs10bn in FY14 (order inflow has edged lower over FY12-14). The order
backlog stands at Rs39bn 3.4x FY14 revenue, and continues to stand L1 for orders
worth Rs8bn. Transportation accounts for 90% of the order backlog, which consists of
projects like roads, bridges, flyovers, subways, overbridges, skywalks, railway
terminus/station. The civil construction segment forms roughly 10% of the backlog,
dominated by Rs5.8bn building construction work from Uttar Pradeshs Rajkiya Nirman
Nigam.
The management will continue to bid for metro projects (expects Mumbai Metro Phase-
III projects to be tendered soon), and expects to garner Rs20bn-plus projects each in
FY15E/16E, and maintain the order-book at over Rs50bn. The company raised
Rs1.38bn via QIP to increase the financial net worth of the company, in order to bid for
higher size projects (now can bid for projects worth Rs10-15bn as against earlier of
Rs5bn). The owning of equipment in-house (90-95% of equipment are in-house) helps
improve margins.
Management guides revenue CAGR of 24% over FY14-16E
Backed by a fairly healthy executable backlog now in place, the management expects to
clock revenue of Rs15bn/Rs18bn, implying a revenue CAGR of 24% over FY14-16E.
The management expects to maintain a 17-18% EBITDA margin (after paying a 2%
royalty to the China JV rail company) for its current order-book and a 7-8% PAT margin.

J Kumar Infra Company Update


Income Statement
Y/E Mar (Rsmn) FY10 FY11 FY12 FY13
Net Sales 7,624 9,398 9,299 9,990
Growth (%) 88% 23% -1% 7%
Expenditure 6,502 8,216 8,005 8,577
Raw Materials 5,892 7,352 7,113 7,292
Other Exp 749 692 891 1,595
EBITDA 1,285 1,435 1,500 1,674
Growth (%) 129% 12% 3% 9%
EBITDA margin (%) 16.9 15.1 16.1 16.7
EBIT 1,140 1,276 1,311 1,430
EBIT margin (%) 14.9 13.4 14.1 14.3
Interest expenses 22 (225) (308) (296)
PBT 1,051 1,070 1,012 1,112
Tax 351 330 331 354
Adjusted PAT 700 739 681 757
Growth (%) 33.4 30.9 32.7 31.9
Net Margin (%) 9.2 7.8 7.3 7.6
Adj. PAT After JVs/Ass/MI 700 739 681 757
E/O items 0 0 0 0
Reported PAT 700 739 681 757
PAT after MI 700 739 681 757
Growth (%) 113 6 -8 11
Balance Sheet
Reserves & surplus 2837.8 3504 4112.1 4756.4
Net worth 3115.8 3782 4390.1 5034.4
Secured Loans 552.3 1674 433.4 1072.9
Unsecured Loans 18.9 0 1272.6 1290.5
Loan Funds 571.2 1674 1706 2363.4
Total Liabilities 3687 5460 6104.6 7399.4
Gross Block 1368.5 1628.1 2144.3 3009
Less: Depreciation 339.2 487.4 676 920.1
Net block 1029.3 1140.7 1468.3 2088.9
Capital work in progress 0 597.6 597.6 1012.5
Investment 0.2 1 1 1
Current Assets 4725.7 4091.1 5553.3 7287.7
Inventories 1132.5 1562.3 2753 3949.6
Sundry debtors 683.3 1018.4 888.5 1147.1
Cash & bank balance 792.3 468.3 1138.8 1118.7
Loans & advances 2117.6 1042.1 773 1072.3
Current lia & Prov 2084 1017.5 2384.7 4132
Current liabilities 1218.5 863 2249.3 4018.9
Provisions 865.5 154.5 135.4 113.1
Net current assets 2641.7 3073.6 3168.6 3155.7
Misc. exp
47.6 683.4 911.6 1192.7
Total Assets 3687 5460 6104.6 7399.4

Cash Flow
PBT (Ex-Other income) 1,051.0 1,069.6 1,011.8 1,111.8
Depreciation 144.7 158.5 188.8 244.1
Interest Provided 93.3 209.9 304.7 323.4
Other Non-Cash items 98.9 222.4 317.8 324.9
Chg in working cap 1,304.7 1,730.4 338.2 410.4
Tax paid -351 -330 -331 -354
Operating Cashflow -10.1 -279.9 1,180.2 1,270.4
Capital expenditure -177.2 -885.1 -516.6 -864.7
Free Cash Flow -187.3 -1,165.0 663.6 405.7
Other income 55.4 67.4 61.5 (331.9)
Investments 0 -0.8 0 0
Investing Cashflow -114.1 -800.8 -454.8 -1,196.6
Equity Capital Raised 794.6 0.0 -- --
Loans Taken / (Repaid) 86.1 1,102.8 384.2 385.2
Interest Paid -93.3 -209.9 -304.7 -323.4
Dividend paid (incl tax) -57.9 -72.9 -72.9 -72.7
Others 0 2,278 0 0
Financing Cashflow 674.0 756.7 -54.9 -93.9
Net chg in cash 549.8 -324.0 670.5 -20.1
Opening cash position 242.5 792.3 468.3 1,138.8
Closing cash position 792.3 468.3 1,138.8 1,118.7

Key Ratios
Y/E Mar FY10 FY11 FY12 FY13
Profitability (%)
EBITDA Margin 16.9 15.1 16.1 16.7
Net Margin 9.2 7.8 7.3 7.6
ROCE 42.94 29.6 23.83 22.49
ROE 30.3 21.4 16.7 16.1
RoIC 24.4 19.4 15.4 13.9
Per Share Data (Rs)
EPS 29.04 25.73 25.11 27.24
BVPS 112.08 136.04 157.91 181.08
DPS 2.25 2.25 2.25 3.5
Valuations (x)
PER 8.12 4.98 7.19 7.34
P/CEPS 6.71 4.09 5.61 5.53
P/BV 1.79 0.96 1.1 1.08
EV / Sales 0.73 0.38 0.52 0.54
EV / EBITDA 3.99 3.21 3.44 3.80
Dividend Yield (%) 10.26 8.59 9.3 13.12
Gearing Ratio (x)
Net Debt/ Equity 0.18 0.44 0.39 0.47
Net Debt/EBIDTA 0.01 0.39 0.73 0.77


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FY11A 11436 877 7.7 106 1.6 - 4.6 23.8 5.7 1.2
FY12A 16995 1500 8.8 243 3.6 125.0 10.5 10.9 4.5 1.1
FY13A 16398 1705 10.4 263 3.8 5.5 10.9 10.1 3.7 1.0
FY14A 16023 1530 9.5 116 1.6 -57.8 7.0 22.6 4.6 1.0

KEI Industries
Brewing catalysts for re-rating
August 20, 2014
Rating
NA

CMP
Rs34
Target Price
NA
EPS Chg (%) NA
Nifty 7,726
Sensex 25,908
Price Performance
(%) 1M 3M 6M 12M
Absolute 9 84 186 380
Rel. to Nifty 9 60 124 247
Source: Bloomberg
0
8
16
24
32
40
Rs
-20
32
84
136
188
240 %
KEI Industries (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Others
Bloomberg KEII IB
Face Value(Rs) 2
52 Week H/L 37/ 7
Promoters 49.4 47.0 47.0
FII/NRI 1.0 1.1 1.1
Public 28.8 32.2 32.2
Source: Bloomberg

Pritesh Chheda
pritesh.chheda@emkayglobal.com
+91-22-66121273
About the company:
n KEI is strong player in cables; portfolio comprises high tension,
low tension, and extra-high voltage cables. It also sells
household wires. The bulk of sales is B2B in nature
n Sales had stagnated for the past 3 years (~Rs18 bn), owing
to the lack of inertia in industrial & power capex. Exports
and B2C wires arrested the decline. Margins were 8-10%
n KEI is awaiting up-tick of capex spends for growth inertia;
eyeing better utilization of high voltage capacity; driving
higher B2C sales to reduce working capital intensity
n Eyeing to fill 30% under-utilized capacity and efforts to
reduce working capital intensity; KEI can see quadrupling of
net profits in a short span
A strong player in the cables segment, KEI manufactures and sells high tension
cables (HTC), low tension power cables (LTPC), extra-high voltage cables (EHVC),
household wires, etc. KEI has manufacturing facilities in Silvassa and Bhiwadi.
Revenues of Rs18.0bn is split into exports Rs2.0bn, wires Rs2.7bn, LTPC Rs9.0bn,
HTC Rs2.5bn, stainless wires Rs0.9bn, EHV Rs0.2bn and EPC Rs0.6bn. A large
part of business is B2B; wires are the only component of the B2C business. KEI has
a network of 600 dealers and distributors, mainly in North and West.
Revenues have largely been stable for the past 3 years (around Rs18.0bn). It is
largely due to stagnation in power capex and industrial capex. Exports and dealer
channels have reported traction, which offset the decline from power and industrial
customers. The EHV capacity has remained unutilized; it has been 3 years since
the capacity becoming operational. EBITDA margins are in the range of 8-10%.
Going forward, KEI would be building its capabilities to execute EPC projects. As
most utilities are now placing turnkey contracts, KEI would be interested in
undertaking projects, where the main focus would be on supply of cables
supplemented with value add services on product side to improve margins. Typical
project break up would be 30% cables, 35% transformers & 35% civil erection.
KEI would limit its participation to funded projects of PFC, REC, ADB,etc. to avoid
any cash flow risk. The focus would be on the key states of UP, MP, Haryana and
Punjab to grow its project order book. The WC cycle is around 5 months. It expect
revenues from the EPC segment to be around Rs5bn in the next 3-4 years with
EBITDA margins of about 15%.
Asset utilization for KEI and industry at large is 70%. KEI can generate sales of
Rs27.0bn at current facilities. With 60% of the capital deployed in working capital,
return ratios are very low. KEI is increasing its B2C sales and aiming to route a lot
of institutional business through dealers. This would warrant a cash discount of 3%
and reduce working capital needs for incremental growth. It is aiming to increase
B2C sales from Rs3-4bn in FY14 to Rs13.0 bn in FY17E.


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Y/E Net Net EPS ABV RoA RoE PE P/ABV
Mar Income Profit (Rs) (Rs) (%) (%) (x) (x)
FY13A 17,343 10,819 21.4 124.5 1.5 17.8 13.9 2.4
FY14A 21,408 13,033 25.8 142.2 1.5 18.6 11.5 2.1
FY15E 24,795 13,759 27.2 151.7 1.3 17.8 10.9 2.0
FY16E 29,050 16,247 32.2 178.7 1.3 18.9 9.2 1.7

LIC Housing Finance
Getting back on track
August 20, 2014
Rating
Accumulate
Previous Reco
Accumulate
CMP
Rs286
Target Price
Rs300
Nifty 7,792
Sensex 26,103
Price Performance
(%) 1M 3M 6M 12M
Absolute -10 -6 44 58
Rel. to Nifty -14 -14 12 17
Source: Bloomberg
150
190
230
270
310
350
Rs
-10
2
14
26
38
50 %
LIC Housing Finance (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Banking & Financial Services
Bloomberg LICHF IB
Face Value(Rs) 2
52 Week H/L 352/ 152
Promoters 40.3 40.3 40.3
FII/NRI 38.6 37.9 36.3
Public 10.4 11.6 11.3
Source: Bloomberg
Kashyap Jhaveri
kashyap.jhaveri@emkayglobal.com
+91-22-66121249
Pradeep Agrawal
pradeep.agrawal@emkayglobal.com
+91-22-66121340
Sohail Halai
sohail.halai@emkayglobal.com
+91-22-66121336
About the company:
n LICHF has become a formidable player in retail housing over
the past few years. LICHFs retail loan book now at just 40%
lower than the leader (HDFC Ltd) vs. 65% in FY07
n Lack of clarity on DRR and disallowing unsecured bonds in
new Companies Act impact NIMs in Q1FY15. Revival of bond
borrowings to support margins in rest of FY15
n Various developers loan NPAs under different stages of
resolution. Resolution in couple of them can have positive
impact on NIMs and ABV
n Valuations at 1.8/1.5x FY15/16ABV, which is near to its 10-
year average 1-year forward valuations. We have an
Accumulate rating with a target price of Rs300
# DRR debenture redemption reserve
Meeting summary:
NIMs to get support as bond borrowing programme resumes: LICHF has seen
9-10bp expansion in spreads over last few quarters, driven by repricing of the retail
assets and the shift in the borrowing mix in favour of bonds vis--vis bank loans. In
Q1FY15, LICHF had borrowed Rs3.6bn (13% of total) through bonds, due to a lack
of clarity on creation of debenture redemption reserve and also because of a lack of
clarity on whether a floating charge on assets counts as security to bondholders or
not. Hence, it had to rely largely on bank loans for funding, which impacted NIMs
negatively. As the rules have exempted finance companies from creation of DRR
and clarity on the floating charge has come, LICHF has resumed its bond borrowing
programme. In July 2014, it raised Rs22bn through bonds at an average cost of
9.3% as against its Q1FY15 cost of borrowings at 9.59%. It plans to repay Rs50bn
bank loans in the coming quarters.
Retail disbursement growth back on track: LICHFs retail disbursement growth
had slowed down in Q1FY15, due to lower borrowings as highlighted above. Now
that the borrowing programme is back on track, the retail disbursements have also
picked up. For June-July 2014, the retail disbursements have grown by 19-22%.
The full year FY15 disbursement growth is likely to be in the range of 18-19%.
Resolution of developers loans NPAs to help NIMs and ABV: LICHF has four
large developers NPA accounts, viz., Orbit Corporation (Rs1.1bn including
interest), HIRCO (Rs1.3bn), Marg Construction and an Indore-based account
(Rs400mn). These accounts are in different stages of resolution, and a couple of
them could probably see resolution in the next 1-2 quarters. The resolution of the
two largest accounts could aid our ABV assumptions by 2-2.5% and aid NIMs by
about 3bp.

LIC Housing Finance Company Update


Key Financials
Income Statement
Net interest income 15,463 18,989 22,229 26,329
Other income 1,881 2,419 2,566 2,722
Net Income 17,343 21,408 24,795 29,050
Operating expenses 2,743 3,054 3,514 3,991
Preprovision profit 14,525 18,277 21,181 24,950
Profit before tax 14,523 18,062 20,535 24,249
Tax 3,504 5,083 6,777 8,002
Tax rate 25.5 27.8 33.0 33.0
Adj Profit after tax 10,819 13,033 13,759 16,247
Balance Sheet
Reserves And Surplus 63,803 74,318 78,240 91,415
Net worth 64,813 75,328 79,250 92,425
Borrowings 684,791 820,400 969,397 1,130,691
Deferred tax liability -2,489 -2,489 -2,489 -2,489
Total liabilities 803,400 957,770 1,117,866 1,292,572
Net block 627 756 733 723
Investments 11,214 13,029 13,029 13,029
Loans 778,120 913,409 1,074,618 1,251,151
Current assets 13,440 30,576 31,026 31,026
Total assets 803,400 957,770 1,117,866 1,292,572
Assets

Key Ratio (%)
Yield on assets 10.2 10.3 10.2 10.3
Spreads 1.1 1.2 1.3 1.3
NIM 2.1 2.2 2.1 2.2
Other income 0.3 0.3 0.2 0.2
Net Income 2.4 2.4 2.4 2.4
Operating expenses 0.4 0.3 0.3 0.3
Preprovision profit 2.0 2.1 2.0 2.1
Provisions 0.0 0.0 0.1 0.1
Profit before tax 1.9 2.1 2.0 2.0
RoAA 1.5 1.5 1.3 1.3
Gross NPA (%) 0.6 0.7 0.4 0.2
Net NPA (%) 0.3 0.4 0.2 0.2
Valuation Table
Adj Profit after tax 10,819 13,033 13,759 16,247
No of shares (mn) 505 505 505 505
FDEPS (Rs) 21.4 25.8 27.2 32.2
PER (x) 13.9 11.5 10.9 9.2
Book value (Rs) 128.3 149.2 156.9 183.0
P/BV (Rs) 2.3 2.0 1.9 1.6
Adjusted book value (Rs) 124.5 142.2 151.7 178.7
P/ABV (Rs) 2.4 2.1 2.0 1.7
P/PPP (x) 10.3 8.2 7.1 6.0
RoE (%) 17.8 18.6 17.8 18.9
Dividend yield (%) 1.3 1.5 1.6 1.8


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FY11A 19,023 3,314 17.4 1,533 13.6 0.0 37.9 274.5 6.0 52.0
FY12A 23,901 3,588 15.0 1,388 12.3 -9.4 16.4 303.0 3.0 47.6
FY13A 20,935 3,033 14.5 1,296 11.5 -6.7 14.1 324.6 4.3 44.0
FY14A 24,484 3,816 15.6 1,972 17.5 52.2 19.1 213.3 6.3 38.0

Lakshmi Machine Works
Stable order-book
August 20, 2014
Rating
Not Rated

CMP
Rs3,733
Target Price
NA
EPS Chg (%) NA
Nifty 7,747
Sensex 25,908
Price Performance
(%) 1M 3M 6M 12M
Absolute -5 25 39 103
Source: Bloomberg
1750
2190
2630
3070
3510
3950
Rs
0
14
28
42
56
70 %
Lakshmi Machine Works (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Textiles
Bloomberg LMW IB
Face Value(Rs) 10
52 Week H/L 4,025/ 1,726
Promoters 28.4 28.3 28.3
FII/NRI 1.7 1.9 1.9
Public 26.2 26.9 26.9
Source: Bloomberg

John Perinchery
+91-22-66121374
About the company:
n Lakshmi Machine Works Ltd (LMW), incorporated in 1962, is
among the six textile machinery manufacturers globally,
with the entire range of core spinning machinery for the
cotton yarn manufacturing industry
n On expiry of the collaboration contract with Rieter in 2000,
LMW has built its own R&D capabilities in textile machinery
and tooling divisions. With improvements to existing models
and introduction of new ones, LMW has managed to achieve
a leading domestic market share of 63% for spinning
machines
With the entry of new players (MNCs), the focus of LMW has been to maintain the
market share even at the cost of marginal sacrifice in profit margins. Till a few years
ago, there were only three players, including LMW, in the domestic market.
Currently, all the six global majors have manufacturing facilities in India, and are
competing for a share of the Indian and Chinese spinning machinery markets. In
such circumstances, LMWs endeavour would be to maintain prices, increase
volumes and market share, and maintain overall profitability.
In addition to being highly capital-intensive, the spinning industry requires high
amount of working capital to be tied up in inventories. The volatility in cotton prices
has the potential to impact the profitability of the spinning industry, necessitating the
mills to procure and warehouse the entire years requirement of cotton at the
beginning of the season. A large number of spinning mills are lying idle on account
of working capital mismanagement, and banks are reluctant to further fund these
units.
LMW estimates the size of the domestic spindle market to be around 3mn spindles.
The total installed capacity stands at roughly 40mn spindles, out of which many
units are either closed or sick or non-operating for various reasons. Though there
exists potential for the ginners in Gujarat and Maharashtra to set up spinning mills,
very few banks want to further increase their exposure to the spinning sector, which
is already reeling under high NPAs.
The global spindle market is estimated at around 9mn spindles. LMW has exported
350,000 spindles, amounting to Rs3.7bn during FY14. Exports to Pakistan have
accounted for Rs700mn, and have the potential to reach USD15-20mn. The
company has exported parts and accessories of spinning machineries amounting to
Rs450mn to China.
LMW expects the textile up-gradation fund (TUF) scheme of the Government of
India to be extended, and does not expect the same to be contested at the WTO
forum. The company believes that the interest rate differential (10-12%) in domestic
markets is sufficient ground for extending the scheme.

Lakshmi Machine Works Company Update


Income Statement
Net Sales 18,242 23,054 20,172 23,378
Growth (%) 0.0 26.4 -12.5 15.9
Expenditure 15,708 20,313 17,902 20,668
Raw Materials 10,841 14,394 12,368 14,452
Employee Cost 1,746 1,916 1,897 2,393
Other Exp 0 0 0 0
EBITDA 3,314 3,588 3,033 3,816
Growth (%) 0.0 8.3 -15.5 25.8
EBITDA margin (%) 17.4 15.0 14.5 15.6
Depreciation 1,050 1,200 1,192 1,045
EBIT 2,264 2,388 1,841 2,772
EBIT margin (%) 11.9 10.0 8.8 11.3
PBT 2,251 2,333 1,837 2,766
Tax 719 896 541 794
Adjusted PAT 1,533 1,437 1,296 1,972
Growth (%) 0.0 -6.3 -9.8 52.2
Net Margin (%) 8.1 6.0 6.2 8.1
E/O items 0 0 0 -82
Reported PAT 1,533 1,388 1,296 1,891
PAT after MI 1,533 1,388 1,296 1,972
Growth (%) 0.0 -9.4 -6.7 52.2
Balance Sheet
Net worth 8,088 8,838 9,565 11,081
Loan Funds 0 0 0 0
Gross Block 4,315 5,521 4,423 3,927
Less: Depreciation 0 0 0 0
Net block 4,315 5,521 4,423 3,927
Investment 868 814 643 637
Current Assets 13,196 13,101 13,184 15,764
Inventories 2,907 2,622 2,707 3,348
Sundry debtors 841 1,544 1,209 1,532
Loans & advances 1,634 1,512 1,231 1,248
Current lia & Prov 10,121 10,453 8,699 9,575
Provisions 446 712 298 463
Misc. exp 0 0 0 0
Total Assets 8,364 9,085 9,694 11,108

Cash Flow
Depreciation 1,050 1,200 1,192 1,045
Tax paid -754 -913 -655 -898
Operating Cashflow 2,807 1,762 813 1,509
Capital expenditure -916 -1,849 -400 -581
Free Cash Flow 1,891 -88 414 928
Other income 624 863 108 -575
Investing Cashflow -29 -1,479 -291 -1,137
Equity Capital Raised -2,255 0 0 0
Interest Paid 0 -7 -3 -4
Others -5 -1 -1 -2
Financing Cashflow -2,478 -397 -654 -273
Net chg in cash 301 -115 -132 98
Key Ratios
Profitability (%)
EBITDA Margin 17.4 15.0 14.5 15.6
Net Margin 8.1 6.0 6.2 8.1
ROCE 54.1 27.4 19.6 26.6
ROE 37.9 16.4 14.1 19.1
RoIC -2,656.8 551.0 163.6 252.6
Per Share Data (Rs)
EPS 13.6 12.3 11.5 17.5
CEPS 22.9 23.0 22.1 26.8
BVPS 71.8 78.4 84.9 98.3
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 274.5 303.0 324.6 213.3
P/CEPS 162.9 162.6 169.1 139.4
P/BV 52.0 47.6 44.0 38.0
EV / Sales -0.4 -0.3 -0.4 -0.4
EV / EBITDA -2.3 -2.0 -2.5 -2.4
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)
Net Debt/ Equity -0.9 -0.8 -0.8 -0.8
Net Debt/EBIDTA -2.3 -2.0 -2.5 -2.4

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Financial Snapshot (Rsmn)
CY10A 1,274 -115 -9.0 -88 -5.2 -223.6 -10.0 -71.4 -53.4 9.4
FY12A* 1,910 198 10.4 109 5.2 0.0 15.8 72.3 38.8 8.9
FY13A 1,640 429 26.2 319 19.0 266.7 41.7 19.7 14.1 7.6
FY14A 1,883 661 35.1 434 25.8 36.2 49.6 14.5 9.0 6.8
*Note: FY12 numbers are for 15 months period.

MPS Ltd
Offering opportunity in apprehension
August 20, 2014
Rating
Not Rated

CMP
Rs374
Target Price
NA
EPS Chg (%) NA
Nifty 7,649
Sensex 25,640
Price Performance
(%) 1M 3M 6M 12M
Absolute 5 3 66 208
Rel. to Nifty 6 -10 31 130
Source: Bloomberg
100
165
230
295
360
425
Rs
-20
30
80
130
180
230 %
MPS Ltd (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector IT Services
Bloomberg MPS IB
Face Value(Rs) 10
52 Week H/L 425/ 106
Promoters 75.0 75.0 75.0
FII/NRI 0.1 0.0 N/A
Institutions 0.1 0.0 N/A
Public 22.4 21.9 21.9
Source: Bloomberg

Pritesh Chheda
+91-22-66121273
Ruchi Burde
+91-22-66121385
About the company:
n MPS Ltd is an India-based publishing services company, with
over 43 years of experience with major publishers worldwide.
Formerly known as Macmillan, it was bought by Mr. Nishith
Arora (in October 2011; ADI BPO Services holds 75% equity)
and known as MPS in its new innings. The companys service
offerings include print and digital publishing services,
transformation of content for usability across multiple
platforms, engaging and interactive media products, and
customer support services for educational, academic, trade
and directory publishers. MPS has six production facilities in
India (Bengaluru, Chennai, Delhi, Gurgaon, Noida and
Dehradun). It also has two on-shore offices for project
management and business development at Portland and
Orlando, both in the US. The company serves 62 clients across
the globe and has employee strength of around 2,750 people.
North America and Europe are the primary markets for the
company, which contribute more than 95% of its total revenue
Meeting summary:
Client mining to fuel revenue growth
MPS top clients include worlds top-20 publishers such as Elsevier, Wiley, McGrawHill
and Macmillan. Currently, the company derives roughly 75% of its revenue from top-10
clients. The management is confident of delivering multifold revenue growth on back of
client mining efforts given the marquee clientele. The management is optimistic about
the companys growth prospects for the following reasons: (a) Vendor Consolidation:
Publishers are consolidating suppliers to form fewer yet more strategic partnerships with
suppliers, (b) Increasing outsourcing by publishers MPS currently handles just about
1% of the work of top-5 clients of MPS, and (c) the companys strong decade-long
relationships and delivery excellence puts MPS in a sweet spot.
Base building is accomplished; launch pad is ready: MPS has already undergone a
turnaround under the new ownership. Efforts have been channelized on: (1)
consolidation of business locations, (2) consolidation of manpower, and (3) shifting work
to a low-cost destination (Dehradun). These have transformed MPS into a highly
profitable business, with EBITDA margins of 35.1% in FY14. The company has
developed strong relations with top publishers. MPS is fairly confident of leveraging
strong client relations and business platform to generate sustainable growth.
Industry fundamentals and MPS capabilities promise robust growth: Industry
fundamentals are robust, with the global publishing industry estimated at US$550bn and
outsourcing at a mere US$1.5bn (in CY2012), implying substantial headroom. MPS is
well placed with strong relations, with top-20 global publishers. The company would be
servicing 5-10% of the outsourcing budget of a client, leaving substantial headroom for a
ramp-up. It is fairly confident of mining existing clients and generating sustained growth.

MPS Ltd Company Update


Key Financials
Income Statement
Y/E Mar (Rsmn) CY10A FY12A* FY13A FY14A
Net Sales 1,274 1,910 1,640 1,883
Growth (%) -9.0 19.9 7.3 14.8
Expenditure 1,389 1,712 1,211 1,222
Employee Cost 840 1,069 771 781
Other Exp 340 379 222 0
SG&A 209 264 218 441
EBITDA -115 198 429 661
Growth (%) -193.9 0.0 170.8 54.0
EBITDA margin (%) -9.0 10.4 26.2 35.1
EBIT -182 91 356 610
EBIT margin (%) -14.3 4.8 21.7 32.4
PBT -97 146 399 660
Tax -9 37 81 225
Adjusted PAT -88 109 319 434
Growth (%) -223.6 0.0 266.7 36.2
Net Margin (%) -6.9 5.7 19.4 23.1
Adj. PAT After JVs/Ass/MI -88 109 319 434
E/O items 0 0 0 0
Reported PAT -88 109 319 434
PAT after MI -88 109 319 434
Growth (%) -223.6 0.0 266.7 36.2
Balance Sheet
Reserves & surplus 504 535 658 758
Net worth 673 703 826 926
Loan Funds 109 66 47 37
Total Liabilities 783 770 874 964
Gross Block 871 807 775 1,332
Net block 356 265 218 189
Current Assets 888 653 739 702
Current lia & Prov 475 271 260 207
Current liabilities 467 194 259 196
Net current assets 413 383 479 495
Misc. exp 0 0 0 0
Total Assets 783 770 874 964

Cash Flow
PBT (Ex-Other income) -97 146 400 659
Tax paid 12 -21 -85 -191
Operating Cashflow 39 47 316 425
Free Cash Flow -52 29 285 298
Investments 110 -116 -44 14
Investing Cashflow 20 -134 -74 -113
Loans Taken / (Repaid) 69 -50 -6 -2
Interest Paid -4 -5 -1 -1
Others 4 -5 -33 12
Net chg in cash 108 -182 0 -13
*Note: FY12 numbers are for 15 months period.
Key Ratios
Y/E Mar CY10A FY12A* FY13A FY14A
Profitability (%)
EBITDA Margin -9.0 10.4 26.2 35.1
Net Margin -6.9 5.7 19.4 23.1
ROCE -39.5 49.4 180.1 315.3
ROE -10.0 15.8 41.7 49.6
RoIC -35.5 17.1 62.2 104.2
Per Share Data (Rs)
EPS -5.2 5.2 19.0 25.8
CEPS -1.3 12.8 23.3 28.8
BVPS 40.0 41.8 49.1 55.1
DPS 0.0 4.0 10.0 0.0
Valuations (x)
PER -71.4 72.3 19.7 14.5
P/CEPS -294.0 29.2 16.0 13.0
P/BV 9.4 8.9 7.6 6.8
EV / Sales 4.8 4.0 3.7 3.2
EV / EBITDA -53.4 38.8 14.1 9.0
Dividend Yield (%) 0.0 1.1 2.7 0.0
Gearing Ratio (x)
Net Debt/ Equity -0.9 -0.9 -1.4 -2.0
Net Debt/EBIDTA 1.3 -0.7 -0.6 -0.5

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FY11A 4,831 944 19.5 521 16.2 10.0 15.2 67.2 41.1 10.2
FY12A 5,553 1,130 20.4 584 18.0 11.2 12.6 60.4 34.3 7.6
FY13A 6,640 1,498 22.6 774 21.7 20.6 13.5 50.1 25.9 6.7
FY14A 7,389 1,793 24.3 980 31.4 44.8 14.3 34.6 21.6 5.0

Natco Pharma
Confident on Copaxone
August 20, 2014
Rating
NA

CMP
Rs1,080
Target Price
NA
EPS Chg (%) NA
Nifty 7,649
Sensex 25,640
Price Performance
(%) 1M 3M 6M 12M
Absolute 9 34 49 84
Source: Bloomberg
550
670
790
910
1030
1150
Rs
-10
2
14
26
38
50 %
Natco Pharma (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Pharmaceuticals
Bloomberg NTCPH IB
Face Value(Rs) 10
52 Week H/L 1,211/ 545
Promoters 53.5 53.5 53.7
FII/NRI 14.5 13.0 11.5
Public 19.8 20.4 19.8
Source: Bloomberg

Ashish Rathi
ashish.rathi@emkayglobal.com
+91-22-66121257

Vivek Agrawal
vivek.agrawal@emkayglobal.com
+91-22-66121254
Key takeaways from Natco meeting:
n Copaxone Management was fairly confident of receiving
USFDA approval in 3QFY15. Delay in approval was mainly
due to repeated citizen petitions filed by Teva
n Revlimid The company is confident of launching the
product in 2019 in the most probable scenario after the
expiry of compound patents
n Excluding Copaxone, top-line and bottom-line are expected
to grow by ~15% and ~25% for next couple of years driven by
products like Fosrenol, Prevacid OTC, Tamiflu and Prevpac
n Company is looking for acquisition in domestic market,
mainly specialty physician driven brands in non oncology
segment
Copaxone approval to come soon, likely to launch at risk
Copaxone was scheduled to be launched on May 24, 2014; however, the company is
yet to receive the USFDA approval. The management indicated the key reason for delay
in approval was repeated Citizen Petitions (CP) filed by Innovator (Teva). Teva has filed
7
th
CP on July 1, 2014 and USFDA is likely to respond within 45 days (by Aug 15
th
). The
management expects Tevas current CP should also be rejected as its earlier 6 CPs
were rejected by USFDA. On the question of at risk launch, the management indicated
that they will be launching the product at risk upon receiving approval as they are fairly
confident that US Supreme Court will uphold the verdict of Federal Circuit which earlier
invalidated Copaxones patents expiring in Sept 2015. In the worst case scenario, if US
Supreme Court upholds September 2015 patents valid, penalty will be limited to the loss
of profit to Teva rather than triple damages as there is no gross infringement of patents.
According to the management, competition will be limited to only two players
(Natco/Mylan and Sandoz/Momenta) for 9-12 months and after that Dr Reddys and
Synthon may also come.
The management indicated that proceeds from copaxone will primarily be used in
acquiring some specialty physician driven non oncology brands in India. Apart from that
company will retire most of its debt (current debt Rs1700mn), and will also expand its
injectable capacity (Rs1200mn investment) in Vizag.
Revlimid (sole FTF) launch expected in year 2019
The management has given following three scenarios for the Revlimid launch in the US:
(1) launch can be possible in year 2016-17 if Natco invalidates compound patent;
however possibilities are low, (2) If the company invalidates polymorph patents, then
Revlimid launch can happen in year 2019, and this remains the most likely scenario, and
(3) If the company loses on both (compound and polymorph) patents,, then launch can
be delayed till 2024.
Base business growth of around 15% over next couple of years
The launch of gPrevacid OTC (~USD 50mn) and gFosrenol (USD115mn) in FY15,
gPrevpac (~USD100m) in FY16 with 2-3 undisclosed launches will help Natcos top-line
and bottom-line to grow by around 15% and about 25% over the next couple of years.

Natco Pharma Company Update


Income Statement
Net Sales 4,831 5,553 6,640 7,389
Growth (%) 1.1 14.9 19.6 11.3
Expenditure 3,886 4,422 5,142 5,596
Raw Materials 1,880 2,029 2,428 2,332
Employee Cost 641 778 1,023 1,128
Other Exp 1,366 1,616 1,690 2,136
EBITDA 944 1,130 1,498 1,793
Growth (%) 4.0 19.7 32.6 19.7
EBITDA margin (%) 19.5 20.4 22.6 24.3
Depreciation 147 138 221.2 304.5
EBIT 797 993 1,277 1,489
EBIT margin (%) 16.5 17.9 19.2 20.2
PBT 653 795 1,138 1,290
Tax 132 211 364 310
Adjusted PAT 521 584 774 980
Growth (%) 8.6 12.1 20.6 44.8
Net Margin (%) 10.8 10.5 11.7 13.3
E/O items 0 0 115.9 0.0
Reported PAT 535 595 718 1,040
PAT after MI 535 595 718 1,040
Growth (%) 10.0 11.2 20.6 44.8
Balance Sheet
Y/E Mar (Rsmn) FY11A FY12E FY13A FY14A
Net worth 3,524 4,720 5,335 7,259
Long Term Debt 1,254 1,341 1,378 955
Short Term Debt 946 978 1,477 986
Loan Funds 2,200 2,319 2,856 1,941
Other Liabilities 251 289 536 552
Gross Block 3,744 5,250 7,256 8,181
Net block 2,702 4,070 5,828 6,447
Capital work in progress 987 833 1,085 1,270
Other Assets 626 625 15 16
Current Assets 2,759 3,654 3,877 4,224
Inventories 1,022 1,104 1,460 1,811
Sundry debtors 710 947 1,297 1,188
Cash & Cash Equivalents 333 329 116 115
Loans & advances 692 797 976 1,086
Accounts Payable 1,087 1,743 1,961 2,120
Other Current Liabilities 102 11 17
Misc. exp 0 0 0 0
Total Assets 5,986 7,337 8,833 9,821

Cash Flow
Other Non-Cash items 240 233 -116 0
Chg in working cap -179 -280 -329 -184
Tax paid 185 236 364 310
Free Cash Flow -1,181 -568 -1,438 320
Investing Cashflow -2,012 -911 -1,402 -797
Loans Taken / (Repaid) 1,005 120 698 -915
Interest Paid -158 -236 -263 -366
Others -168 -102 -7 -275
Financing Cashflow 614 -284 535 -1,604
Net chg in cash 253 -5 -213 -1
Key Ratios
Profitability (%)
EBITDA Margin 19.55 20.36 22.57 24.27
Net Margin 10.78 10.51 11.65 13.26
ROCE 13.92 14.10 15.59 16.18
ROE 15.18 12.61 13.45 14.32
RoIC 11.11 10.66 10.33 12.00
Per Share Data (Rs)
EPS 16.17 17.98 21.69 31.41
CEPS 20.62 22.15 28.37 40.61
BVPS 106.47 142.60 161.19 219.30
DPS 3.00 3.00 3.00 3.00
Valuations (x)
PER 67.18 60.39 50.08 34.58
P/CEPS 52.67 49.04 38.28 26.74
P/BV 10.20 7.62 6.74 4.95
EV / Sales 8.03 6.99 5.84 5.25
EV / EBITDA 41.09 34.33 25.90 21.64
Dividend Yield (%) 0.00 0.00 0.00 0.00
Gearing Ratio (x)
Net Debt/ Equity 0.62 0.49 0.54 0.27
Net Debt/EBIDTA 2.33 2.05 1.91 1.08

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FY13A 11,422 2,746 24.0 2,309 25.8 -5.0 9.7 10.1 10.6 0.9
FY14A 17,276 4,728 27.4 2,963 33.2 28.4 11.4 7.9 8.1 0.9
FY15E 17,368 3,922 22.6 2,359 26.4 -20.4 8.3 9.9 12.3 0.8
FY16E 27,960 9,037 32.3 2,246 25.1 -4.8 7.4 10.4 5.4 0.7

Nava Bharat Ventures
Zambia to achieve financial closure in 2 months
August 20, 2014
Rating
Hold
Previous Reco
Hold
CMP
Rs218
Target Price
Rs300
Nifty 7,649
Sensex 25,640
Price Performance
(%) 1M 3M 6M 12M
Absolute -10 34 40 23
Rel. to Nifty -9 17 11 -8
Source: Bloomberg
150
180
210
240
270
300
Rs
-30
-20
-10
0
10
20 %
Nava Bharat Ventures (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Power
Bloomberg NBVL IB
Face Value(Rs) 2
52 Week H/L 300/ 148
Promoters 43.4 43.3 43.3
FII/NRI 32.7 32.8 32.7
Public 21.8 22.0 22.0
Source: Bloomberg

Amit Golchha
amit.golchha@emkayglobal.com
+91-22-66242408
Anujay Jain
anujay.jain@emkayglobal.com
+91-22-66242494
About the company:
n Nava Bharat Ventures Ltd, incorporated in 1972, is a
diversified player with a presence in ferro alloys, power
generation, coal mining and agri business
n It owns and operates 442MW of generation capacity, with
another 300MW is under construction. It also owns a coal
mine in Zambia, with 120mt of reserves
n PPA for the 150MW Paloncha plant in AP renewed till May
2015 provides certainty on its earnings for FY15E. Further,
Zambia commissioning in FY16E to provide stability in
earnings against the likely fall in its southern region plant
profitability
n The stock at 8.0xFY15E EPS and 0.6xFY15E book looks
attractive; however, we would wait for the financial closure
of Zambia before turning positive. We maintain a Hold with a
target price of Rs300
Meeting summary:
Zambian operations: The 300MW plant is 65% complete (total project cost, including
associated coal mine development, stands at $800mn with D:E mix of 70:30, with a
65:35 JV with the Zambian government). The total equity required in the project has
been invested, and now the project has to be completed with debt, for which the
financial closure in expected in the next 2 months. The project is expected to generate
RoE of 20%. The PPA has been signed for 20 years with ZESCO for USD10.89c/unit.
The commissioning is scheduled in FY17. The mining at the associated coal mine
(reserves of 150mt; 90mt low grade and 60mt high grade) has started, and the low-
grade thermal coal is being stored to be used at the plant when commissioned. From
FY17 onwards, the company plans to sell 1mt of high-grade coal locally annually. The
mining cost currently is at USD45/tn, including washing and compacting costs.
64MW plant in Odisha: The company plans to commission the plant by October
2014. It has received approval from MOEF for use of domestic coal for the plant. An
MOU has been signed with GRIDCO for supply of 12% power at cost, while the
balance will be sold at merchant prices.
Outlook on merchant power prices: Due to the severe power shortage in
Telangana and Andhra Pradesh, there is less likelihood of prices going below Rs5/unit
in the near term.
Emkays view
The stock at 8.0xFY15E EPS and 0.6xFY15E book looks attractive. However, we
maintain a Hold rating on the stock, and would wait for financial closure of Zambia
before turning positive. We value the stock at Rs300/share based on a 10% discount to
book value (for uncertainties with respect to Odisha plants).

Nava Bharat Ventures Company Update


Income Statement
Net Sales 11,422 17,276 17,368 27,960
Growth (%) 14.8 51.3 0.5 61.0
Expenditure 8,676 12,547 13,447 18,923
Employee Cost 955 1,042 0 0
Other Exp 3,822 2,253 5,500 6,132
SG&A 0 0 0 0
EBITDA 2,746 4,728 3,922 9,037
Growth (%) 58.0 72.2 -17.1 130.4
EBITDA margin (%) 24.0 27.4 22.6 32.3
Depreciation 588 1,119 947 3,018
EBIT 2,158 3,609 2,975 6,019
EBIT margin (%) 18.9 20.9 17.1 21.5
Other Income 783 935 586 1,021
Interest expenses 189 1,263 612 3,248
PBT 2,752 3,282 2,949 3,792
Tax 641 355 590 758
Adjusted PAT 2,309 2,963 2,359 2,246
Growth (%) 0.2 38.6 -19.4 28.6
Net Margin (%) 18.5 16.9 13.6 10.9
(Profit)/loss from JVs/Ass/MI -197 -37 0 788
E/O items -405 -164 0 0
Reported PAT 1,903 2,799 2,359 2,246
PAT after MI 2,309 2,963 2,359 2,246
Growth (%) -5.0 28.4 -20.4 -4.8
Balance Sheet
Net worth 24,606 27,327 29,257 31,503
Minority Interest -497 -876 2,042 3,465
Secured Loans 13,118 18,721 28,426 32,978
Loan Funds 13,118 18,721 28,426 32,978
Gross Block 15,582 22,382 22,382 64,978
Net block 11,553 17,233 16,489 56,067
Capital work in progress 13,630 16,452 33,023 -3,529
Investment 202 146 146 146
Current Assets 17,293 15,618 15,791 21,381
Inventories 4,603 5,387 5,128 5,721
Sundry debtors 953 1,111 1,482 2,381
Loans & advances 1,741 2,780 2,780 2,780
Current lia & Prov 5,112 4,014 5,462 5,857
Provisions 0 0 0 0
Misc. exp 0 0 0 0
Total Assets 37,566 45,435 59,987 68,208

Cash Flow
Depreciation 588 1,119 947 3,018
Interest Provided 189 1,263 612 3,248
Chg in working cap 896 -3,195 1,335 -1,097
Tax paid -641 -355 -590 -758
Free Cash Flow -3,528 -8,443 -12,107 1,138
Other income 783 935 586 1,021
Investments 52 56 0 0
Loans Taken / (Repaid) 4,433 5,603 9,705 4,552
Interest Paid -189 -1,263 -612 -3,248
Others -283 -138 2,934 1,081
Financing Cashflow 3,559 3,755 11,581 1,939
Net chg in cash 866 -3,696 60 4,098
Key Ratios
Profitability (%)
EBITDA Margin 24.0 27.4 22.6 32.3
Net Margin 18.5 16.9 13.6 10.9
ROCE 8.5 10.9 6.8 11.0
ROE 9.7 11.4 8.3 7.4
RoIC 13.4 17.3 12.3 13.8
Per Share Data (Rs)
EPS 25.8 33.2 26.4 25.1
CEPS 32.4 45.7 37.0 58.9
BVPS 275.4 305.8 327.4 352.6
DPS 4.5 5.0 5.0 5.0
Valuations (x)
PER 10.1 7.9 9.9 10.4
P/CEPS 8.1 5.7 7.1 4.4
P/BV 0.9 0.9 0.8 0.7
EV / Sales 2.6 2.2 2.8 1.7
EV / EBITDA 10.6 8.1 12.3 5.4
Dividend Yield (%) 1.7 1.9 1.9 1.9
Gearing Ratio (x)

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FY13A 20,213 3,296 16.3 2,133 35.5 1.8 21.3 11.4 6.3 2.2
FY14A 23,050 3,516 15.3 2,306 38.4 8.1 19.6 10.5 6.1 1.9
FY15E 23,738 3,555 15.0 2,082 34.7 -9.7 15.6 11.7 5.9 1.7
FY16E 26,220 4,164 15.9 2,470 41.2 18.7 16.6 9.8 4.8 1.5

NIIT Tech
On the road to being predictable
August 20, 2014
Rating
Hold
Previous Reco
Hold
CMP
Rs377
Target Price
Rs410
Nifty 7,721
Sensex 25,895
Price Performance
(%) 1M 3M 6M 12M
Absolute -15 -7 -6 57
Rel. to Nifty -17 -20 -26 17
Source: Bloomberg
250
300
350
400
450
500
Rs
-10
6
22
38
54
70 %
NIIT Tech (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector IT Services
Bloomberg NITEC IB
Face Value(Rs) 10
52 Week H/L 487/ 234
Promoters 31.0 31.1 31.1
FII/NRI 35.0 33.3 32.4
Public 15.2 15.7 15.8
Source: Bloomberg

Manik Taneja
+91-22-66121253
Ruchi Burde
+91-22-66121385
About the company:
n NIIT Technologies is a leading IT solutions organization,
servicing customers in the Americas, Europe, Asia and
Australia. It offers services in Application Development and
Maintenance, Enterprise Solutions, including Managed
Services and Business Process Outsourcing to enterprise in
the Financial Services, Travel & Transportation,
Manufacturing/Distribution, and Government sectors. It has
a large talent pool of about 8000-plus professionals
Emkays view
NIIT Tech expects the softness in revenue growth to persist in the near term on account
of pressure in some of the large clients. Although the company is enthused with the
strong order booking in recent quarters, which will help drive a greater share of revenues
from international geographies, margins are expected to recover only partially in
H2FY15 and, more notably in FY16. The company is in the final stages of negotiation on
a large IMS deal (short-listed in the top-2), and believes that the steps taken by it on
sales reorganization after Mr. Sudhir Chaturvedis induction as COO in FY14 will put
NIIT Tech on a better footing going forward.
Strategy for inducing predictability: The company management is focusing on
delivering a more consistent and predictable financial performance. This initiative is
being led by Mr. Sudhir Chaturvedi (ex-head of Financial Services Business in the US
for Infosys), who was recently inducted as Chief Operating Officer, with Sales function
being led by him. The company has embarked on a correction course as part of this
strategy, whereby it intends to focus more on the international business and thereby
reduce the dependence on the India business.
Target to be vendor of choice in focus verticals: NIIT Tech intends to leverage its
longstanding relationships and execution track record in verticals like Financial Services
and Travel/Transportation to drive increased mining within large clients. While
maintaining its leadership in tavel/transportation vertical, the company intends to position
itself as a vendor of choice in the BFSI vertical. NIIT Tech intends to increase its focus in
the US market, and hopes to gain from the improved spending from the geography.
Recent setback in top clients slows down the journey: Some client-specific issues
have led to dented revenue performance in the last 2 quarters (revenues from top-5
client declined by 5.2%/4.7% QoQ in March 2014 and June 2014 quarter, respectively).
While the company expects muted revenues in the September 2014 quarter, it expects a
stronger revenue performance in H2FY15, aided by ramp-ups of recent deals. However,
the company has tempered down its FY15 margin outlook to around 16% (vs. 17%
earlier), as it expects transition costs related to some of these deals to impact margins
adversely in the near term.
Hold with a target price of Rs410: We have a Hold recommendation on NIIT Tech,
with a target price of Rs410.

NIIT Tech Company Update


Income Statement
Net Sales 20,213 23,050 23,738 26,220
Growth (%) 28.2 14.0 3.0 10.5
Expenditure 16,917 19,534 20,183 22,056
Employee Cost 13,159 15,166 15,545 17,021
Other Exp 0 0 0 0
SG&A 3,758 4,368 4,639 5,034
EBITDA 3,296 3,516 3,555 4,164
Growth (%) 17.6 6.7 1.1 17.1
EBITDA margin (%) 16.3 15.3 15.0 15.9
EBIT 2,729 2,897 2,777 3,314
EBIT margin (%) 13.5 12.6 11.7 12.6
Other Income 207 287 133 132
PBT 2,936 3,184 2,910 3,446
Tax 751 803 757 896
Adjusted PAT 2,133 2,306 2,082 2,470
Growth (%) 6.0 9.0 -9.5 18.4
Net Margin (%) 10.8 10.3 9.1 9.7
(Profit)/loss from JVs/Ass/MI -52 -75 -72 -80
E/O items 0 0 0 0
Reported PAT 2,133 2,306 2,082 2,470
PAT after MI 2,133 2,306 2,082 2,470
Growth (%) 3.1 8.1 -9.7 18.7
Balance Sheet
Net worth 10,941 12,603 14,030 15,812
Loan Funds 60 89 89 89
Gross Block 7,020 7,790 8,790 9,890
Net block 4,383 4,534 4,757 5,007
Capital work in progress 277 1,286 1,286 1,286
Investment 820 820 820 820
Current Assets 9,785 10,569 11,780 13,787
Inventories 4 4 0 0
Sundry debtors 4,539 5,643 6,243 6,896
Loans & advances 1,302 1,302 1,302 1,302
Current lia & Prov 4,214 4,547 4,552 5,028
Provisions 1,058 1,326 1,301 1,437
Misc. exp 0 0 0 0
Total Assets 11,052 12,663 14,090 15,871

Cash Flow
Chg in working cap -685 -1,155 -648 -381
Tax paid -751 -803 -757 -896
Capital expenditure -606 -1,779 -1,000 -1,100
Free Cash Flow 1,254 -221 1,150 1,788
Other income 207 287 133 132
Investing Cashflow -671 -1,492 -867 -968
Loans Taken / (Repaid) -411 29 0 0
Others -154 -74 -71 -81
Financing Cashflow -1,083 -669 -726 -769
Net chg in cash 107 -603 558 1,150
Key Ratios
Profitability (%)
EBITDA Margin 16.3 15.3 15.0 15.9
Net Margin 10.8 10.3 9.1 9.7
ROCE 28.6 26.9 21.8 23.0
ROE 21.3 19.6 15.6 16.6
RoIC 38.1 35.2 30.0 33.1
Per Share Data (Rs)
EPS 35.5 38.4 34.7 41.2
CEPS 45.0 48.8 47.7 55.3
BVPS 182.4 210.0 233.8 263.5
DPS 8.5 8.9 9.4 9.9
Valuations (x)
PER 11.4 10.5 11.7 9.8
P/CEPS 9.0 8.3 8.5 7.3
P/BV 2.2 1.9 1.7 1.5
EV / Sales 1.0 0.9 0.9 0.8
EV / EBITDA 6.3 6.1 5.9 4.8
Dividend Yield (%) 2.1 2.2 2.3 2.4
Gearing Ratio (x)
Net Debt/ Equity -0.3 -0.2 -0.2 -0.3
Net Debt/EBIDTA -0.9 -0.7 -0.8 -1.0

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FY11A 12,082 1,487 12.3 739 6.1 0.0 30.6 6.2 4.1 1.7
FY12A 12,186 1,447 11.9 620 5.1 -16.1 21.3 7.4 4.2 1.5
FY13A 11,182 1,165 10.4 419 3.4 -32.5 12.6 11.0 4.9 1.3
FY14E 10,745 898 8.4 259 2.2 -37.2 7.2 17.5 6.5 1.2

Pennar Industries
Value addition, macro improvement to drive
August 20, 2014
Rating
Not Rated

CMP
Rs41
Target Price
NA
EPS Chg (%) NA
Nifty 7,684
Sensex 25,723
Price Performance
(%) 1M 3M 6M 12M
Absolute -11 23 82 58
Source: Bloomberg
10
18
26
34
42
50
Rs
-30
-14
2
18
34
50 %
Pennar Industries (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Bloomberg PSL IB
Face Value(Rs) 5
52 Week H/L 46/ 18
Promoters N/A 40.6 40.6
FII/NRI N/A 29.6 29.6
Institutions N/A 0.6 0.6
Private Corp N/A 11.9 11.7
Public N/A 17.3 17.5
Source: Bloomberg

Goutam Chakraborty
+91-22-66121275
About the company:
n Leading engineering multi-product company, with an annual
production capacity of more than 300ktpa manufacturing
precision engineered products for various sectors
n Pennar operates through four strategic business units (Steel
Products, Solar, Railway and others), and two subsidiaries
(PEBS & PEL) along with six manufacturing facilities
n Focus would be on business segments, with high margins
and higher RoCE, viz., CRFS, PEBS, PEL, railways and solar
segments
n Improving market conditions and economic recovery portray
growth factors for gaining market share, expanding margins
with value-added products, benefit of operating leverage
Meeting updates:
Pennar Industries (PIL) is a diversified player in the engineering space. It has four
business verticals under the standalone business: steel products, industrial
components, tubes and systems and projects. Besides, it has two subsidiaries, viz.,
Pre-engineered building systems (PEBS) and Pennar Enviro (PEL)
The company has been focusing mainly on its high-margin businesses, viz.,
Railways, PEBS and PEL
Steel products revenue run-rate can reach Rs4.5bn, depicting a 20% YoY growth;
the Tube division can see revenue of Rs2bn. The Tube division is likely to grow at a
CAGR of 30%, which can double its revenue from the current level
The industrial component segment, comprising hydraulics, etc., with an annual
revenue run-rate of Rs600mn has not been growing. However, the operating margin
has been at 20%
The railways segment, with an annual revenue run-rate of Rs2.2bn has been
growing satisfactorily. Operating margins are good at 18-20%. Coaches have been
doing well, while wagons have started gearing up and should aid the revenue
further
The solar module mounting business has done well so far, but overall weakness in
solar power market, this segment is likely to see slow progress
Among subsidiaries, the annual revenue run-rates in PEBS and PEL have been
Rs6bn and Rs500mn, respectively. The company is likely to achieve revenue of Rs
10bn in PEBS and Rs5bn in PEL in the next three years.
Emkays view:
We understand the strategy is to ensure growth through improvement in margins,
product development through value additions and gaining market share in focused
businesses. In FY15 itself the revenue can go up to Rs 14- 16 bn from Rs 10.7 bn with
margins improving by 200 bps YoY to 10%. Similar growth can be seen in FY16 too,
driven primarily by Railways, PEBS and PEL. With low fixed costs and no new major
capex, profitability is likely to improve as well. Along with these, we believe, a possible
revival in the macro economic scenario would be an added advantage for the company.

Pennar Industries Company Update


Income Statement
Net Sales 12,082 12,186 11,182 10,745
Growth (%) 51.5 0.9 -8.2 -3.9
Expenditure 10,595 10,739 10,017 9,847
Raw Materials 8,561 8,347 7,373 6,923
Other Exp 622 543 547 580
EBITDA 1,487 1,447 1,165 898
Growth (%) 33.6 -2.7 -19.5 -22.9
EBITDA margin (%) 12.3 11.9 10.4 8.4
EBIT 1,355 1,277 985 710
EBIT margin (%) 11.2 10.5 8.8 6.6
PBT 1,220 1,006 690 482
Tax 464 359 234 174
Adjusted PAT 756 647 456 307
Growth (%) 50.6 -14.4 -29.5 -32.6
Net Margin (%) 6.3 5.3 4.1 2.9
E/O items 0 0 0 0
Reported PAT 739 620 419 259
PAT after MI 739 620 419 259
Growth (%) 47.4 -16.1 -32.5 -38.0
Balance Sheet
Net worth 2,687 3,141 3,479 3,765
Secured Loans 1,413 1,429 1,322 1,266
Loan Funds 1,659 1,669 1,571 1,520
Gross Block 3,453 4,073 4,182 4,701
Net block 2,033 2,458 2,347 2,678
Current Assets 3,540 4,436 4,986 5,262
Inventories 1,481 1,614 1,658 1,888
Sundry debtors 1,659 2,096 2,333 2,498
Current lia & Prov 1,095 1,843 2,093 2,487
Misc. exp 0 0 0 0
Total Assets 4,547 5,067 5,444 5,836

Cash Flow
PBT (Ex-Other income) 1,193 968 672 445
Chg in working cap -88 -91 -85 -63
Tax paid 0 0 0 0
Operating Cashflow 1,188 1,156 864 798
Free Cash Flow 846 613 641 321
Investments 0 0 -33 -222
Equity Capital Raised 0 0 0 -40
Loans Taken / (Repaid) -265 10 -98 -51
Interest Paid -162 -309 -313 -265
Others 0 0 0 0
Financing Cashflow -427 -299 -410 -356
Net chg in cash -10 27 215 -220
Key Ratios
Y/E Mar FY11A FY12A FY13A FY14E
Profitability (%)
EBITDA Margin 12.3 11.9 10.4 8.4
Net Margin 6.3 5.3 4.1 2.9
ROCE 31.7 27.4 19.1 13.2
ROE 30.6 21.3 12.6 7.2
RoIC 32.9 27.9 20.3 14.1
Per Share Data (Rs)
EPS 6.1 5.1 3.4 2.2
CEPS 7.1 6.5 4.9 3.7
BVPS 22.0 25.7 28.5 31.3
DPS 1.2 1.0 1.0 0.0
Valuations (x)
PER 6.2 7.4 11.0 17.5
P/CEPS 5.3 5.8 7.7 10.1
P/BV 1.7 1.5 1.3 1.2
EV / Sales 0.5 0.5 0.5 0.5
EV / EBITDA 4.1 4.2 4.9 6.5
Dividend Yield (%) 3.3 2.7 2.7 Na
Gearing Ratio (x)

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Y/E Net Net EPS ABV RoA RoE PE P/ABV
Mar Income Profit (Rs) (Rs) (%) (%) (x) (x)
FY11 513 369 0.7 18.1 2.8 4.5 54.1 2.0
FY12 1,114 1,541 2.7 20.9 8.4 14.1 13.0 1.7
FY13 1,854 1,541 1.9 21.8 4.3 14.1 19.2 1.6
FY14 2,430 1,541 3.7 24.0 5.0 14.1 9.6 1.5

PTC India Financial Services
Growing thrust on Infra puts PTC in a sweet spot
August 20, 2014
Rating
Not Rated

CMP
Rs36
Target Price
NA
EPS Chg (%) NA
Nifty 7,649
Sensex 25,640
Price Performance
(%) 1M 3M 6M 12M
Absolute -3 94 166 220
Rel. to Nifty -2 69 110 139
Source: Bloomberg
10
16
22
28
34
40
Rs
-20
18
56
94
132
170 %
PTC India Financial Services (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Banking & Financial Services
Bloomberg PTCIF IB
Face Value(Rs) 10
52 Week H/L 40/ 9
Promoters 60.0 60.0 60.0
FII/NRI 4.9 4.9 6.3
Public 22.3 14.3 25.9
Source: Bloomberg

Kashyap Jhaveri
kashyap.jhaveri@emkayglobal.com
+91-22-66121249
Pradeep Agrawal
pradeep.agrawal@emkayglobal.com
+91-22-66121340
About the company:
n Established name in the field of investments in projects in
the energy value-chain. Provides debt/equity financing for
greenfield/brownfield projects across the energy value-chain
n Sanctioned around Rs105bn in the form of long/short-term
debt assistance to various power projects, which will help to
generate more than 30,000MW capacities in the coming
years
n Despite a strong growth in the loan book, CAR is ~25% and
the gearing ratio is 3x , giving them enough room for further
expansion in FY15 without fidgeting the capital
n At CMP, the stock trades at 1.5x FY14ABV and 9.6x FY14
EPS. We do not have formal coverage on the stock
Meeting summary:
Balance sheet to grow exponentially: The company has growth its advance book
at a CAGR of 46% over last 3 years. With 25% CAR and ample lending
opportunities the management aims to grow the book at a CAGR of 80% over the
next two years. The company has about Rs50bn of sanctioned pipeline, which is yet
to be disbursed. As there is a lag of 5-7 months between sanction and disbursal in
renewal projects, the company is targeting a disbursement of Rs40bn for FY15 from
the current sanction pipeline.
Incremental sanction largely in renewal: While renewal/thermal constitute 35%
each of the current lending book, incrementally almost 80% of the lending would be
in renewal. As a result, the renewal proportion would increase to 55-60%.
Reduction in risk weight on PPP projects to drive CAR higher: PTC Financials
CAR as on June 2014 stood at 25%. However, post-clarification from the RBI, PTC
now need to allocate only 50% risk weight (as against 100% earlier) to PPP projects
which has completed 1 year of satisfactory performance. The company has about
Rs10bn of such projects on its total book of Rs53bn. Adjusting for the same, the
companies CAR will increase to 32% from the current level of 25%.
Maturing investment to drive profitability: The company has equity investment in
four companies at Rs3.5bn. One of the investment in Ind Bharat Energy is maturing
in current year which will fetch Rs3bn (Rs1bn cost), generating 23% CAGR return
over the investment cycle of 6 years.
Margins likely to be maintained at current levels: PTC enjoy better yields than
REC/PFC, as it has about 15% of the portfolio into short term bucket, where yields
are higher than PTCs. The yield on the short-term loan is 2% higher than the long-
term loan. The management expects to maintain the current mix. On the liability
side also the company guided for stable cost of funds. They have also sanctioned
lined from IFC, ADB, and European development financial institution. However, as
the current hedging cost is almost 8%, they would draw once the hedging cost
comes down.

PTC India Financial Services Company Update


Key Financials
Income Statement
Net interest income 308 643 1,502 1,990
Other income 205 470 352 440
Net income 513 1,114 1,854 2,430
Operating expenses 130 279 249 238
Pre provision profit 531 834 1,605 2,193
PPP excl treasury 531 834 1,605 2,193
Profit before tax 513 744 1,553 2,027
Tax 144 476 511 772
Tax rate 28% 24% 33% 27%
Profit after tax 369 1,541 1,042 2,077
Balance Sheet
Liabilities
Equity 5,621 5,621 5,621 5,621
Reserves 4,556 6,099 6,641 7,868
Net worth 10,177 11,720 12,261 13,489
Deposits & Borrowings 5,699 7,474 15,325 37,696
Total liabilities 16,940 19,593 28,848 53,889
Assets
Cash and bank 4,835 1,981 679 334
Investments 4,637 4,211 3,950 3,010
Advances 6,795 12,661 22,962 49,740
Others 677 744 1,255 807
Total assets 16,943 19,597 28,847 53,891

Key Ratio (%)
NIM 6.9 7.5 9.5 5.6
Non-II/avg assets 1.6 2.6 1.5 1.1
Opex/avg assets 1.0 1.5 1.0 0.6
NPA provisions/advances 0.4 1.1 0.3 0.5
PBT/avg assets 3.9 4.1 6.4 4.9
Tax/avg assets 1.1 2.6 2.1 1.9
RoA 2.8 8.4 4.3 5.0
RoAE 4.5 14.1 8.7 16.1
RoAE 4.5 14.1 8.7 16.1

Valuation Table
Net profit (Rs mn) 369 1,541 1,042 2,077
Shares in issue (mn) 562 562 562 562
EPS (Rs) 0.7 2.7 1.9 3.7
PER (x) 54.1 13.0 19.2 9.6
Book value (Rs) 18.1 20.9 21.8 24.0
P/BV (x) 2.0 1.7 1.6 1.5
Adj book value (Rs) 18.1 20.9 21.8 24.0
P/ABV (x) 2.0 1.7 1.6 1.5
P/PPP (x) 37.6 24.0 12.5 9.1
P/PPP (x) 37.6 24.0 12.5 9.1


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FY13A 8,053 1,156 14.4 445 10.8 75.2 9.6 56.2 27.0 3.9
FY14A 13,512 2,154 15.9 528 12.9 18.7 10.2 47.4 14.5 6.3
FY15E 15,706 2,568 16.3 813 19.8 53.9 18.8 30.8 12.0 5.4
FY16E 18,337 3,254 17.7 1,318 32.1 62.1 25.2 19.0 9.3 4.3

PVR
Market leader in multiplex industry
August 20, 2014
Rating
Buy
Previous Reco
Buy
CMP
Rs649
Target Price
Rs900
Nifty 7,792
Sensex 26,103
Price Performance
(%) 1M 3M 6M 12M
Absolute 5 28 15 77
Rel. to Nifty 1 17 -10 32
Source: Bloomberg
350
420
490
560
630
700
Rs
0
12
24
36
48
60 %
PVR (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Bloomberg PVRL IB
Face Value(Rs) 10
52 Week H/L 705/ 356
Promoters 28.9 28.9 29.8
FII/NRI 24.9 19.5 18.4
Public 39.7 41.5 32.7
Source: Bloomberg

Naval Seth
+91-22-66242414

Pratik Shah
+91-22-66121241
About the company:
n PVR, which is among Indias most recognized film exhibition
brands, has evolved from being a single theatre to the
countrys largest multiplex operator, with a presence in 41
cities with 101 properties and 444 screens. Entertaining
60mn customers through its retail presence, it is among the
top-10 multiplex chains across the globe in terms of
footfalls, and enjoys dominant leadership in India with a 30-
35% and 20-22% share of Hollywood and Bollywood box-
office collections, respectively. A dominant market share
and aggressive screen expansion would provide better
negotiating power with content providers and continued
growth in footfalls
Meeting summary:
The company expects to add 65-70 screen in outside of major cities, including
southern region cities Kochi/Chennai/Hyderabad/Mysore
FY14 saw a 6% drop in footfalls as against a 22% increase in footfalls in FY13. The
management remains confident that FY15 would witness marginal improvement as
Q2 and Q3FY15 is loaded with strong content pipeline.
Strong brand positioning and robust content pipeline to drive sponsorship revenues
going forward. The management expects sponsorship revenue to growth in 17-19%
range going forward
PVR has introduced flexi-pricing across its cinemas to drive footfalls. The admit
ratio for weekdays: the weekend was 35:65 three years ago, but now it stands at
48:52, due to its flexi pricing strategy (Friday is considered a weekend).
It has launched F&B application on mobile in order to help patrons pre-book their
orders during movie would help in generating additional revenue.
Entertainment tax: The company pays ~23% entertainment tax on the whole
portfolio. After implementation of GST it is expected to come down to 16-18%. As of
now, the suggestion is that E-tax will be part of GST. In FY14; the company paid
Rs2.25bn Entertainment tax, plus Rs400mn VAT, plus Rs450mn Service tax,
resulting in a total outgo of Rs3.bn. Post-implementation of GST, the company
would be able get set off of Rs450mn.
Online ticket sales: 20% of the tickets sold online, and the company has to share
some part of the convenience fee with Bookmyshow
Bowling: BluO will add 1-2 centres every year (18-19% EBITDA margin).
PVR does not intend to expand its restaurant business.
The company expects to be FCF neutral in FY15E on account of its expansion
plans. However, PVR expects to be FCF positive in FY16E.

PVR Company Update


Income Statement
Net Sales 8,053 13,512 15,706 18,337
Growth (%) 55.5 67.8 16.2 16.8
Expenditure 6,897 11,358 13,138 15,083
Film Distributor Share 2,004 3,295 3,816 4,417
Employee Cost 796 1,244 1,387 1,534
Other Exp 4,096 6,819 7,936 9,132
EBITDA 1,156 2,154 2,568 3,254
Growth (%) 56.9 86.3 19.2 26.7
EBITDA margin (%) 14.4 15.9 16.3 17.7
Depreciation 560 944 1,067 1,166
EBIT 596 1,210 1,501 2,088
EBIT margin (%) 7.4 9.0 9.6 11.4
PBT 319 491 846 1,505
Tax -124 19 56 226
Effective tax rate (%) -38.7 3.9 6.6 15.0
Adjusted PAT 445 528 813 1,318
Growth (%) 75.3 6.5 67.3 62.1
Net Margin (%) 5.5 3.5 5.0 7.0
E/O items 0 0 0 0
Reported PAT 445 528 813 1,318
PAT after MI 445 528 813 1,318
Growth (%) 75.2 18.7 53.9 62.1
Balance Sheet
Net worth 6,426 3,982 4,653 5,813
Secured Loans 6,566 6,362 6,062 5,562
Loan Funds 6,566 6,362 6,062 5,562
Net deferred tax liability -10 7 7 7
Gross Block 12,176 11,138 12,762 14,360
Net block 10,422 8,507 9,367 10,106
Investment 380 230 230 230
Current Assets 3,596 3,979 4,343 4,872
Loans & advances 2,551 2,889 3,201 3,462
Current lia & Prov 2,014 2,577 3,207 3,726
Provisions 0 0 0 0
Misc. exp 0 0 0 0
Total Assets 13,837 11,122 11,516 12,215

Cash Flow
PBT (Ex-Other income) 229 415 804 1,460
Depreciation 560 944 1,067 1,166
Chg in working cap -317 68 206 102
Tax paid 124 -19 -56 -226
Capital expenditure -8,564 1,441 -1,727 -1,856
Free Cash Flow -7,357 2,963 360 731
Investing Cashflow -8,847 1,667 -1,685 -1,810
Loans Taken / (Repaid) 4,530 -204 -300 -500
Interest Paid -368 -795 -697 -629
Others 3,536 -2,214 655 583
Financing Cashflow 7,790 -3,318 -461 -665
Net chg in cash 150 -128 -60 111
Key Ratios
Profitability (%)
EBITDA Margin 14.4 15.9 16.3 17.7
Net Margin 5.5 3.5 5.0 7.0
ROCE 7.3 10.3 13.6 18.0
ROE 9.6 10.2 18.8 25.2
RoIC 7.6 11.4 15.0 19.6
Per Share Data (Rs)
EPS 10.8 12.9 19.8 32.1
CEPS 24.5 35.8 45.7 60.4
BVPS 156.3 96.9 113.2 141.4
DPS 1.1 2.9 2.9 2.9
Valuations (x)
PER 56.2 47.4 30.8 19.0
P/CEPS 24.9 17.0 13.3 10.1
P/BV 3.9 6.3 5.4 4.3
EV / Sales 3.9 2.3 2.0 1.7
EV / EBITDA 27.0 14.5 12.0 9.3
Dividend Yield (%) 0.2 0.5 0.5 0.5
Gearing Ratio (x)

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FY13A 629,894 180,912 28.7 139,457 71.3 31.1 38.1 33.4 25.2 11.4
FY14A 818,094 251,322 30.7 191,087 97.6 37.0 39.6 24.4 17.6 8.4
FY15E 944,115 284,242 30.1 216,089 110.4 13.1 35.4 21.6 15.3 7.0
FY16E 1,080,341 318,285 29.5 245,440 125.4 13.6 33.5 19.0 13.3 5.8

TCS
Commentary stays on course
August 20, 2014
Rating
Accumulate
Previous Reco
Accumulate
CMP
Rs2,580
Target Price
Rs2,600
Nifty 7,721
Sensex 25,895
Price Performance
(%) 1M 3M 6M 12M
Absolute 8 20 17 44
Source: Bloomberg
1700
1885
2070
2255
2440
2625
Rs
-20
-12
-4
4
12
20 %
TCS (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector IT Services
Bloomberg TCS IB
Face Value(Rs) 1
No of shares o/s (mn) 1,959
52 Week H/L 2,610/ 1,665
Market Cap (Rs bn/USD mn) 5,054/ 83,517
FII/NRI N/A 16.1 16.3
Public N/A 4.2 4.1
Source: Bloomberg

Manik Taneja
+91-22-66121253
Ruchi Burde
+91-22-66121385
About the company:
n TCS is Indias largest IT Services firm and amongst the top-
10 technology firms in the world. With revenues of
US$13.4bn in FY14, TCS accounted for 15% of Indian IT
services industry revenues. It has 300,000-plus employee
strength in as many as 46 countries across the globe
Emkays view:
TCS continues to exude confidence on FY15 being a stronger year than FY14, indicating
that it expects organic revenue growth inn FY15 to be higher than FY14. TCS says that the
demand in key verticals/geographies remains strong barring telecom, which remains
relatively challenged. The company expects growth in the domestic market to pick up in
H2FY15. TCS believes that it continues to gain market share from global peers, and
expects even a higher growth in overall outsourced IT spending in the medium term from
the current growth rates of 3-4%, as clients increase spending in new technology areas.
TCSs commentary continues to indicate confidence on FY15 being a better revenue
growth year as against FY14. The companys stellar sequential revenue growth of 5.5%
in the June 2014 quarter pulled down the stiff CQGR arithmetics against the company.
Under-penetration-led growth in Europe and discretionary/digital spending-led
growth from the US to fuel revenue growth: Growth prospects remain rock solid in
Europe (both for TCS and the sector as a whole), as the market continues to become
more amenable for offshoring/outsourcing with TCSs early investments in the market
expected to continue driving results. On the other hand, the up-tick in discretionary
spending in North America will further aid revenue growth.
Expects BFSI & Telecom to boost better than company average growth in FY15:
In terms of verticals, TCS indicates that apart from good prospects in Manufacturing,
Retail, Hi Tech and Life sciences, it should see very strong growth in BFSI and Telecom
in FY15 (the company believes that both verticals could go ahead of company level
average). TCS also expects the Life Sciences and Healthcare vertical to see strong
growth over the foreseeable future, given its low base, as well as the opportunity arising
out of the US Healthcare reforms (we highlight that Healthcare and Life sciences was
the fastest-growing vertical for TCS in FY14, with a 28% $US revenue growth).
Well-oiled execution engine justifies rich valuations: We find greater comfort in
TCSs overall growth prospects, driven by the June14 quarter beat (which pulls down
the stiff arithmetic to a more manageable level) along with strong lateral hiring during the
quarter. While TCSs valuations appear punchy at ~21.6x/19x FY15/16, they need to be
weighed in context of its strong and well-oiled execution engine. We have an
Accumulate recommendation, with a target price of Rs2,600.
Catalyst: Faster-than-expected adoption of digital technologies and better-than-
expected economic activities in western countries may lead to positive earning surprises
for the company.
Risks: Rupee appreciation, non-availability of critical resources and cost pressure are

TCS Company Update


Income Statement
Net Sales 629,894 818,094 944,115
1,080,34
1
Growth (%) 28.8 29.9 15.4 14.4
Expenditure 448,982 566,772 659,873 762,056
Employee Cost 332,502 422,065 497,675 579,281
Other Exp 0 0 0 0
SG&A 116,480 144,707 162,198 182,775
EBITDA 180,912 251,322 284,242 318,285
Growth (%) 25.5 38.9 13.1 12.0
EBITDA margin (%) 28.7 30.7 30.1 29.5
Depreciation 10,792 13,243 17,607 17,032
EBIT 170,120 238,079 266,635 301,253
EBIT margin (%) 27.0 29.1 28.2 27.9
Other Income 11,175 15,809 19,779 23,800
PBT 181,295 253,888 286,414 325,053
Tax 40,344 60,712 68,715 78,013
Adjusted PAT 139,457 191,087 216,089 245,440
Growth (%) 31.1 37.1 12.7 13.5
Net Margin (%) 22.4 23.6 23.1 22.9
(Profit)/loss from JVs/Ass/MI -1,494 -2,089 -1,610 -1,600
E/O items 0 0 0 0
Reported PAT 139,457 191,087 216,089 245,440
PAT after MI 139,457 191,087 216,089 245,440
Growth (%) 31.1 37.0 13.1 13.6
Balance Sheet
Net worth 410,560 553,352 668,320 798,904
Secured Loans 2,323 1,273 1,273 1,273
Unsecured Loans 0 1,696 0 0
Loan Funds 2,323 2,969 1,273 1,273
Net deferred tax liability -16,667 -17,504 -17,504 -17,504
Gross Block 173,620 215,069 235,069 255,069
Net block 117,006 145,212 147,605 150,573
Investment 94,369 219,303 219,303 219,303
Current Assets 287,711 290,262 425,613 573,864
Inventories 0 0 0 0
Sundry debtors 172,366 222,360 256,075 293,024
Current lia & Prov 96,311 109,056 131,917 150,952
Provisions 8,797 13,349 15,520 17,759
Misc. exp 0 0 0 0
Total Assets 402,776 545,722 660,604 792,788

Cash Flow
Depreciation 10,792 13,243 17,607 17,032
Chg in working cap -75,324 5,614 -27,478 -27,992
Tax paid -40,344 -60,712 -68,715 -78,013
Free Cash Flow 37,408 154,775 168,049 192,281
Other income 11,175 15,809 19,779 23,800
Investments -373 -124,934 0 0
Investing Cashflow -17,519 -150,574 -221 3,800
Equity Capital Raised 1,012 6 0 0
Loans Taken / (Repaid) 1,169 646 -1,696 0
Others -1,464 20,585 0 0
Net chg in cash -1,405 -3,743 85,011 101,225
Key Ratios
Profitability (%)
EBITDA Margin 28.7 30.7 30.1 29.5
Net Margin 22.4 23.6 23.1 22.9
ROCE 50.6 53.5 47.5 44.7
ROE 38.1 39.6 35.4 33.5
RoIC 69.3 79.1 81.6 84.4
Per Share Data (Rs)
EPS 71.3 97.6 110.4 125.4
CEPS 76.8 104.4 119.4 134.1
BVPS 209.8 282.7 341.5 408.2
DPS 22.0 32.0 44.2 50.2
Valuations (x)
PER 33.4 24.4 21.6 19.0
P/CEPS 31.0 22.8 19.9 17.8
P/BV 11.4 8.4 7.0 5.8
EV / Sales 7.2 5.4 4.6 3.9
EV / EBITDA 25.2 17.6 15.3 13.3
Dividend Yield (%) 0.9 1.3 1.9 2.1
Gearing Ratio (x)
Net Debt/ Equity -0.3 -0.4 -0.5 -0.5
Net Debt/EBIDTA -0.6 -0.9 -1.1 -1.3

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FY13A 143,320 30,631 21.4 22,754 95.9 -75.8 36.3 22.4 15.3 7.4
FY14A 188,313 41,836 22.2 29,088 121.8 27.0 36.3 17.7 10.8 5.6
FY15E 219,064 43,225 19.7 29,193 120.1 -1.4 27.9 17.9 10.5 4.4
FY16E 248,369 48,938 19.7 33,752 138.8 15.6 25.5 15.5 8.9 3.5

Tech Mahindra
Increasing confidence on revenue growth
August 20, 2014
Rating
Accumulate
Previous Reco
Accumulate
CMP
Rs2,150
Target Price
Rs2,200
Nifty 7,649
Sensex 25,640
Price Performance
(%) 1M 3M 6M 12M
Absolute 2 17 21 74
Source: Bloomberg
1200
1405
1610
1815
2020
2225
Rs
-20
-10
0
10
20
30 %
Tech Mahindra (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector IT Services
Bloomberg TECHM IB
Face Value(Rs) 10
52 Week H/L 2,199/ 1,209
Promoters 36.2 36.3 36.3
FII/NRI 39.1 39.1 40.4
Public 12.2 13.5 12.9
Source: Bloomberg

Manik Taneja
+91-22-66121253
Ruchi Burde
+91-22-66121385
About the company:
n Tech Mahindra is a US$ 3.1-billion turnover company, with
92,729 professionals across 51 countries, providing services
to 632 global customers, including Fortune-500 companies.
The companys consulting, enterprise and telecom solutions,
platforms and reusable assets connect across a number of
technologies to deliver tangible business value to all
stakeholders.
Emkays view:
TechM remains focused on revenue growth, while it believes that both telecom business
and Enterprise business will grow well. While acknowledging the sharp decline in
margins in June14 quarter, company believes that utilization improvement along with
lower subcontractor costs could drive an improvement in margins through the next few
quarters. Without giving any formal guidance, company believes that it can maintain
margins at ~20% in the medium term. Acquisitions remain core to TechMs strategy with
Company looking to increase presence in the Financial Services space. TechM also
believes that it can improve its dividend payout ratio to 20% without diluting the focus on
driving growth.
Revenue growth stays on course: While chasing US$5mn revenues by 2015 (i.e.,
FY16), TechM has delivered revenue growth ahead/matching top-5 IT Services vendors
in the last 5 quarters. TechM remains confident of sustaining a strong revenue growth
momentum, given the deal pipeline in verticals like Financial Services and
Manufacturing in the US and Retail and Manufacturing verticals in Europe.
Margins hiccups may take longer to recoup: TechMs EBITDA has declined by
490bps in the last 2 quarters (due to wage increments in the Mar14 quarter, while visa
expenses, strong net hiring, higher onsite mix of revenues adversely impacted margins
in the Jun14 quarter). The company is focusing on utilisation improvement, as the
margin lever in the near term and broadening of employee pyramid as a longer-term
lever. However, we believe, the increasing onsite mix of the business, led by managed
services deals, will limit any meaningful improvement in margins in the near/medium
term.
Accumulate with a target price of Rs2,200: Our Accumulate recommendation for
TechM is based on greater comfort on revenue growth. We have a target price of
Rs2,200 based on 14x FY16E earnings.
Catalyst: Better-than-expected economic activities in western countries may lead to
positive earning surprises for the company.
Risks: Rupee appreciation, non-availability of critical resources and cost pressure are

Tech Mahindra Company Update


Income Statement
Net Sales 143,320 188,313 219,064 248,369
Growth (%) 22.5 31.4 16.3 13.4
Expenditure 112,689 146,477 175,839 199,430
Employee Cost 90,007 117,001 143,683 162,920
Other Exp 0 0 0 0
SG&A 22,682 29,476 32,155 36,510
EBITDA 30,631 41,836 43,225 48,938
Growth (%) -67.7 36.6 3.3 13.2
EBITDA margin (%) 21.4 22.2 19.7 19.7
Depreciation 3,896 5,221 6,049 6,363
EBIT 26,735 36,615 37,177 42,575
EBIT margin (%) 18.7 19.4 17.0 17.1
Other Income 1,199 332 2,382 2,960
PBT 27,934 36,947 39,558 45,535
Tax 6,479 7,523 10,036 11,384
Adjusted PAT 22,754 29,088 29,193 33,752
Growth (%) -77.0 37.1 0.3 15.7
Net Margin (%) 15.0 15.6 13.5 13.8
(Profit)/loss from JVs/Ass/MI -301 -336 -329 -400
E/O items 1,600 0 0 0
Reported PAT 22,754 29,088 29,193 33,752
PAT after MI 21,154 29,088 29,193 33,752
Growth (%) -77.4 37.5 0.4 15.6
Balance Sheet
Net worth 68,535 91,817 117,594 147,397
Secured Loans 3,215 190 0 0
Unsecured Loans 5,311 684 0 0
Loan Funds 8,526 875 0 0
Gross Block 22,318 22,966 28,917 34,553
Net block 22,318 22,966 28,917 34,553
Investment 14,174 14,718 14,718 14,718
Current Assets 95,541 120,137 148,690 181,527
Sundry debtors 40,225 43,486 60,018 68,046
Loans & advances 219 11,774 11,774 11,774
Current lia & Prov 47,396 55,217 64,819 73,490
Provisions 16,203 18,714 21,606 24,497
Misc. exp 0 0 0 0
Total Assets 87,232 102,603 127,506 157,309

Cash Flow
Depreciation 3,896 5,221 6,049 6,363
Chg in working cap -9,050 -18,554 -11,364 -4,175
Tax paid -6,479 -7,523 -10,036 -11,384
Free Cash Flow 1,492 12,485 15,874 27,743
Other income 1,199 332 2,382 2,960
Loans Taken / (Repaid) -2,974 -7,652 -875 0
Dividend paid (incl tax) -750 -3,403 -3,416 -3,949
Others 4,214 -2,673 -6,378 -6,763
Financing Cashflow 502 -13,699 -10,668 -10,712
Net chg in cash 3,669 -1,426 7,588 19,991
Key Ratios
Profitability (%)
EBITDA Margin 21.4 22.2 19.7 19.7
Net Margin 15.0 15.6 13.5 13.8
ROCE 35.7 38.9 34.4 32.0
ROE 36.3 36.3 27.9 25.5
RoIC 95.5 80.9 58.7 55.4
Per Share Data (Rs)
EPS 95.9 121.8 120.1 138.8
CEPS 105.5 143.6 144.9 165.0
BVPS 288.7 384.4 483.6 606.2
DPS 2.7 12.2 12.0 13.9
Valuations (x)
PER 22.4 17.7 17.9 15.5
P/CEPS 20.4 15.0 14.8 13.0
P/BV 7.4 5.6 4.4 3.5
EV / Sales 3.3 2.4 2.1 1.7
EV / EBITDA 15.3 10.8 10.5 8.9
Dividend Yield (%) 0.1 0.6 0.6 0.6
Gearing Ratio (x)
Net Debt/ Equity -0.4 -0.5 -0.5 -0.5
Net Debt/EBIDTA -0.9 -1.1 -1.3 -1.5

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FY11A 5,740 724 12.6 344 10.9 -11.6 8.5 17.1 9.6 1.4
FY12A 6,519 503 7.7 140 4.4 -59.2 3.3 42.0 13.3 1.3
FY13A 8,088 1,224 15.1 714 22.7 409.6 15.2 8.2 5.6 1.2
FY14A 9,395 1,722 18.3 1,214 38.5 69.9 22.7 4.9 3.6 1.0

Technocraft Industries
Deep value pick
August 20, 2014
Rating
Buy

CMP
Rs165

EPS Chg (%) NA
Nifty 7,727
Sensex 25,881
Price Performance
(%) 1M 3M 6M 12M
Absolute -5 51 94 109
Source: Bloomberg
60
93
126
159
192
225
Rs
-30
-6
18
42
66
90 %
Technocraft Industries (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Others
Bloomberg TIIL IB
Face Value(Rs) 10
52 Week H/L 218/ 67
Promoters 75.0 75.0 75.0
FII/NRI 4.2 4.8 4.8
Public 14.2 14.8 14.9
Source: Bloomberg

Tejas Sheth
+91-22-66242482
About the company:
n Blend of four business segments, TIL has potential of 10-12%
CAGR for topline and 18-20% for bottom-line over next 3 years
on a constant currency basis
n Cash generation from business will be much higher going
forward, as the capital invested towards expansion and
working capital would generate growth
n INR appreciation is the biggest risk, as the company derives
most of its revenue from exports. Capital misallocation, seen
through NSEL fiasco, is another risk to growth
n With RoCE and RoE upward of 20%, net cash balance sheet
and scope for steady growth, we believe the stock is trading
cheap at P/E of 5x and P/B of 0.9x on broad FY15 estimates
Meeting summary:
TIIL has a 35% market share of the global drum closure market ex-China. The closest
competitor is Grief Inc., with a 60% market share.
Drum Closure business is high precision engineering that acts as an entry-barrier, as
well as generates margins upward of 30%.
The company expects to double its China plants capacity and eventually make it 3x to
capture higher market share of Chinas drum closure market.
The company expects growth of 10% in the Drum Closure business on the back of 7-
8% industry growth and capacity expansion.
Company is seeing strong growth traction in the Scaffolding business whose revenue
increased by ~100% YoY in Q1FY15E.
Textiles business is under pressure and may not see much profitability in FY15E.
Q1FY15 financials of Textiles are not comparable YoY as the same quarter last year
had extraordinary income. The company expects EBIT of Rs 110-120mn in FY15 as
against Rs 203mn in FY14
EPC designing and consultancy business, which is under the 100% subsidiary,
Technosoft, is expected to grow at a high rate as the company is seeing healthy
traction of services provided in the US shale gas industry
Clarity towards dividend policy is missing, which leads to concerns over capital
misallocation

Technocraft Industries Company Update


Income Statement
Net Sales 5,740 6,519 8,088 8,795
Growth (%) 26.0 13.6 24.1 8.7
Expenditure 5,016 6,017 6,864 7,673
Other Exp 0 0 0 0
SG&A 453 526 613 723
EBITDA 724 503 1,224 1,722
Growth (%) 38.6 -30.6 143.6 40.6
EBITDA margin (%) 12.6 7.7 15.1 18.3
EBIT 360 175 915 1,451
EBIT margin (%) 6.3 2.7 11.3 15.4
Other Income 209 211 236 221
PBT 482 272 1,070 1,626
Tax 148 120 327 406
Adjusted PAT 344 140 714 1,214
Growth (%) -16.4 -54.2 386.2 64.2
Net Margin (%) 5.8 2.3 9.2 13.0
(Profit)/loss from JVs/Ass/MI 10 -13 -28 -6
E/O items 0 0 0 -177
Reported PAT 344 140 714 1,037
PAT after MI 344 140 714 1,214
Growth (%) -11.6 -59.2 409.6 69.9
Balance Sheet
Net worth 4,221 4,373 5,000 5,684
Secured Loans 1,171 1,038 991 1,565
Loan Funds 1,689 1,038 1,206 1,565
Gross Block 3,854 4,117 4,243 4,517
Net block 1,732 1,672 1,497 1,500
Investment 706 476 1,519 1,460
Current Assets 4,263 4,224 4,326 5,716
Inventories 1,693 1,186 1,418 1,794
Sundry debtors 1,345 1,512 2,176 2,792
Loans & advances 489 1,163 456 569
Current lia & Prov 872 1,015 1,189 1,463
Current liabilities 823 942 1,069 1,223
Misc. exp 0 0 0 0
Total Assets 5,894 5,373 6,157 7,217

Cash Flow
Chg in working cap -664 -226 30 -892
Tax paid -148 -120 -327 -406
Operating Cashflow -88 157 927 -354
Free Cash Flow -348 -62 807 -628
Other income 209 211 236 821
Investments -85 230 -1,043 60
Investing Cashflow -136 222 -928 607
Loans Taken / (Repaid) 282 -651 168 359
Others 16 -14 -26 20
Net chg in cash -2 -388 -29 234
Key Ratios
Profitability (%)
EBITDA Margin 12.6 7.7 15.1 18.3
Net Margin 5.8 2.3 9.2 13.0
ROCE 10.2 6.9 20.0 25.0
ROE 8.5 3.3 15.2 22.7
RoIC 9.0 3.8 20.1 29.7
Per Share Data (Rs)
EPS 10.9 4.4 22.7 38.5
CEPS 22.5 14.8 32.5 47.1
BVPS 133.9 138.7 158.6 180.3
DPS 1.0 1.0 3.0 5.0
Valuations (x)
PER 17.1 42.0 8.2 4.9
P/CEPS 8.3 12.6 5.8 4.0
P/BV 1.4 1.3 1.2 1.0
EV / Sales 1.2 1.0 0.9 0.7
EV / EBITDA 9.6 13.3 5.6 3.6
Dividend Yield (%) 0.5 0.5 1.6 2.7
Gearing Ratio (x)

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FY11A 2,904 413 14.2 256 24.4 34.7 26.8 6.1 2.4 1.1
FY12A 3,775 509 13.5 340 32.4 32.6 21.7 4.6 2.4 0.9
FY13A 4,268 561 13.1 323 30.8 -5.0 17.1 4.8 2.5 0.8
FY14A 4,063 291 7.1 69 6.6 -78 3.4 22.7 8.2 0.6

Technofab Engineering
Tough times
August 20, 2014
Rating
Not rated

CMP
Rs149
Target Price
NA
EPS Chg (%) NA
Nifty 7,747
Sensex 25,908
Price Performance
(%) 1M 3M 6M 12M
Absolute -7 82 103 65
Source: Bloomberg
60
83
106
129
152
175
Rs
-40
-24
-8
8
24
40
%
Technofab Engineering (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Engineering & Capital Goods
Bloomberg TECE IB
Face Value(Rs) 10
52 Week H/L 170/ 59
Promoters 47.8 47.8 47.7
FII/NRI 2.3 5.3 5.3
Institutions N/A N/A N/A
Public 22.3 21.6 21.8
Source: Bloomberg

John Perinchery
+91-22-66121374
n Companys order-book stands at around Rs12bn, and the
management expects to execute Rs4-4.5bn worth of orders
in FY15
n Revival in the domestic economy remains a key driver for
earnings performance. The company has been focusing on
increasing the average ticket-size of orders, due to better
profitability in larger-size orders
n One-off exceptional cancellation of order due to seizure of
project funding impacted profitability in FY14. The company
continues to focus on diversifying its customer base and
increasing its presence across geographies
n The management has set a target to achieve Rs10bn in
revenue in the next 2-3 years, which will be dependent on
the revival in domestic growth
Revival in domestic economy a key to growth
Revival in domestic growth remains a key catalyst for a pick-up in order bookings and
revenue growth. The company has an existing order book of Rs12bn, and expects to
execute Rs4-4.5bn worth of order in the current fiscal. However, in order to achieve its
medium-term target of Rs10bn in revenues, a revival in growth for the beleaguered
power sector remains crucial along with a pick-up in domestic investments.
Continues to focus on geographical diversification
The company continues to focus on geographical diversification, as margins in the
international business are relatively better than those in the domestic business. The
company is focused on booking international orders only for projects which are funded
by bilateral agencies in order to reduce the payment risks. Currently, the international
order-book accounts for 29% of the total order-book.
Focus on the water segment to drive growth
The company is also focusing to exploit the niche developed in the water segment in
order to drive growth. The water segment accounts for around 48% of the existing order-
book, where in the company has worked significantly in international geographies, and is
now focusing on the domestic business to drive growth. Apart from water, electricals
remains a critical segment accounting for about 38% of the order-book.
One-off loss impacted FY14 margins, expect profitability to normalize
Profitability of the company was significantly impacted in FY14 on the back of one-off
premature cancellation in order due to seizure of funding. The project was largely funded
by the US Congress and was put on hold at the time of the US shutdown last year. The
write-offs and under-recoveries of cost for the project impacted the overall profitability in
FY14 to the extent of Rs500-600mn. Going forward, the management expects losses
from the said project to impact profitability by Rs150-160mn only, and hence expects
normalization in earnings going forward. However, acceleration in growth will depend on
overall pick-up in economic activity domestically.

Technofab Engineering Company Update


Income Statement
Net Sales 2,015 2,904 3,775 4,268
Growth (%) 0.0 44.1 30.0 13.0
Expenditure 1,677 2,491 3,267 3,707
Other Exp 650 244 308 549
SG&A 0 0 0 0
EBITDA 337 413 509 561
Growth (%) 0.0 22.4 23.1 10.3
EBITDA margin (%) 16.8 14.2 13.5 13.1
EBIT 324 401 485 524
EBIT margin (%) 16.1 13.8 12.9 12.3
PBT 292 382 492 470
Tax 102 125 152 147
Adjusted PAT 190 256 340 323
Growth (%) 0.0 34.7 32.6 -5.0
Net Margin (%) 9.4 8.8 9.0 7.6
E/O items 0 0 0 0
Reported PAT 190 256 340 323
PAT after MI 190 256 340 323
Growth (%) 0.0 34.7 32.6 -5.0
Balance Sheet
Reserves & surplus 427 1,306 1,622 1,949
Net worth 502 1,411 1,727 2,054
Loan Funds 194 158 443 703
Total Liabilities 698 1,575 2,177 2,772
Gross Block 90 114 229 384
Net block 55 114 229 384
Current Assets 1,142 2,490 2,963 3,774
Sundry debtors 575 1,294 1,668 2,120
Current lia & Prov 502 1,403 1,431 1,903
Provisions 117 146 188 186
Net current assets 639 1,087 1,532 1,870
Misc. exp 0 0 0 0
Total Assets 698 1,574 2,177 2,772

Cash Flow
Other Non-Cash items 2 -9 -26 -12
Tax paid -87 -134 -121 -151
Operating Cashflow -97 452 -141 -49
Free Cash Flow -125 381 -261 -202
Investments -1 -375 -39 -106
Others 24 -47 269 239
Financing Cashflow -8 590 229 163
Net chg in cash -134 610 -41 -129
Key Ratios
Profitability (%)
EBITDA Margin 16.8 14.2 13.5 13.1
Net Margin 9.4 8.8 9.0 7.6
ROCE 92.9 36.5 28.2 22.0
ROE 75.8 26.8 21.7 17.1
RoIC 110.9 75.7 60.7 36.1
Per Share Data (Rs)
EPS 18.1 24.4 32.4 30.8
CEPS 19.4 25.6 34.6 34.4
BVPS 47.8 134.5 164.6 195.8
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 8.2 6.1 4.6 4.8
P/CEPS 7.7 5.8 4.3 4.3
P/BV 3.1 1.1 0.9 0.8
EV / Sales 0.0 -0.3 -0.2 -0.1
EV / EBITDA 0.2 -2.2 -1.1 -0.5
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)
Net Debt/ Equity 0.2 -0.6 -0.3 -0.1
Net Debt/EBIDTA 0.2 -2.2 -1.1 -0.5

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FY11A 13761 1282 9.3 602 60.0 - 20.4 6.7 4.5 1.2
FY12A 13237 747 5.6 153 15.3 -75 4.6 26.7 9.8 1.1
FY13A 11243 817 7.3 43 4.3 -72 0.9 93.0 10.4 1.1
FY14A 12595 1063 8.4 99 9.9 130 2.8 40.4 8.6 1.1

TIL India
On the cusp of operating & financial leverage
August 20, 2014
Rating
NA

CMP
Rs406
Target Price
NA
EPS Chg (%) NA
Nifty 7,726
Sensex 25,908
Price Performance
(%) 1M 3M 6M 12M
Absolute -6 135 226 367
Rel. to Nifty -5 104 156 237
Source: Bloomberg
90
162
234
306
378
450
Rs
-10
40
90
140
190
240 %
Til India (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Bloomberg TIL IB
Face Value(Rs) 10
52 Week H/L 452/ 82
Promoters 56.3 56.3 56.3
FII/NRI N/A 2.7 2.7
Public 22.8 21.1 21.5
Source: Bloomberg

Pritesh Chheda
+91-22-66121273
n On ground situation continues to remain difficult as order
bookings have not picked up significantly though some
enquiries have witnessed some pick up
n Focus in the near term to remain on inventory liquidation and
reduction in debtor days
n PIXEF a new mobile crane product launched in FY14 provides
promising outlook. Expect sale of the same to pick up
meaningfully going forward
n New Kharagpur facility continues to remain under utilized. To
continue to focus on improving the utilization levels at the
Kharagpur facility by gradually shifting product lines from the
existing Kamarhatty facility
Demand environment continues to remain challenging: The demand environment for
the company continues to remain challenging as the management has not witnessed any
meaningful improvement on the ground. The management though highlighted that
enquiries have picked up but it has not translated into any meaningful order conversion.
The company continues to focus on reducing inventories and recovering sums due from
debtors in the near term which will aid in improving balancing strength.
The company has currently restricted fresh purchases due to slowdown in order bookings.
Further, as per the new negotiations with Caterpillar, the company has been able to shift
from providing firm orders for a year previously to a mechanism of 1 month firm and 2
month flexible order booking. This new arrangement significantly reduces the inventory
pile-up risk and currency risk.
PIXEF the new product provides promising growth opportunities: The company has
launched a new mobile pick and carry crane PIXEF in FY14 which has witnessed good
response from the customers. The product has also received The Indian Design Mark
award for its excellent product design. PIXEF is a retail market product unlike the other
existing product offerings and the management remains positive as far as revenue growth
from this product is concerned in the medium-to-long term. The company expects the
profitability from this product to be high if it achieves the desired production level which will
allow the company to benefit from scale economies.
Ramp up in Kharagpur plant utilization to drive profitability: The newly commissioned
Kharagpur plant continues to operate at a loss due to low level of plant utilization. The
management has guided that the plant will achieve break-even if the revenue inches up to
Rs3bn with single shift peak revenues pegged at Rs5.5bn, and double shift peak revenues
at Rs 12bn. The company is also focusing on shifting certain existing product lines from its
Kamarhatty facility to the new state of the art Kharagpur plant due to higher operating
efficiencies at the new facility.
Focus on spares and service revenues: The company is also focused on increasing its
revenue mix in favour of spares and service revenues due to significantly better margin
profile compared to sale of Caterpillar products. The management has guided that the
improvement in overall margins will be gradual and will depend on ramp-up in the overall
plant utilization.


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FY11A 5,429 664 12.2 415 3.2 0.0 25.4 61.8 0.2 7.9
FY12A 5,191 240 4.6 100 0.8 -75.9 3.0 256.2 -1.4 7.6
FY13A 5,124 212 4.1 49 0.4 -51.0 1.5 522.9 3.5 7.6
FY14A 7,316 394 5.4 52 0.4 3.1 1.5 507.4 3.6 7.7

TRIL
Stepping up the performance
August 20, 2014
Rating
Not rated

CMP
Rs199
Target Price
NA
EPS Chg (%) NA
Nifty 7,747
Sensex 25,908
Price Performance
(%) 1M 3M 6M 12M
Absolute -9 62 169 218
Rel. to Nifty -9 41 111 135
Source: Bloomberg
50
85
120
155
190
225
Rs
-20
16
52
88
124
160 %
TRIL (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Bloomberg TRIL IB
Face Value(Rs) 10
52 Week H/L 237/ 54
Promoters 74.9 74.9 74.9
FII/NRI N/A N/A N/A
Public 21.2 22.8 22.8
Source: Bloomberg

John Perinchery
+91-22-66121374
About the company:
n Transformers & Rectifiers (India) Ltd (TRIL) is one of the
leading manufacturers of power transformers of up to 765KV
class, with an installed capacity of 33,200 MVA p.a.
n TRIL also manufactures industrial transformers such as
furnace transformers and rectifier transformers, and caters
to wide spectrum of transformer users in various industries
such as petrochemicals, oil refining, cement, paper and pulp,
pharmaceuticals, automobile, steel, power, railway
applications and mining
n Power utilities and power transmission companies are key
customers of the company. TRILs client base includes
various SEBs and PSUs, as well as private sector clients
The current industry size in 765KV is about 350000 MVA. The capacity utilisation of
the industry stands at 80%, taking the total operative capacity to 280000 MVA, of
which total production stands at 250000 MVA
There is no change in the demand sentiments in the 765 KV segment, but with a
clear mandate at the centre, the company is expecting higher tendering in the
transformers space, which could enhance opportunities for companies like TRIL.
The company has guided for 10-15% revenues in FY15.
Current order-book profile stands at Rs4.6bn, of which Power & distribution
transformers to SEB stands at Rs3.5bn, transformers to PGCIL is Rs0.5bn,
Industrial is Rs0.4bn and exports is Rs0.2bn. This order book is executable over the
next 9-12 months. The company has till date executed 15 transformers of 765 KV
capacity.
The company has tendered for two orders worth Rs3.4bn from GETCO (Gujarat
electric transmission company).
Owing to demand moderation and competitive intensity, transformer prices have
corrected from highs of Rs1.2-1.5mn to lows of Rs0.4-0.5mn. With improvement in
the demand sentiment, the company expects pricing scenario to improve.
TRIL is venturing into new vertical of electric arc transformers, which is in the
220KV segment. The size of this market is Rs10bn, and the company is targeting
for revenues of Rs700-800mn from this segment. Currently, margins are expected
to stay at 6-6.5%, but with improved pricing, margins could improve.
The company has debt of Rs1.6bn with the average cost at 11.25%. It has stated
that it would keep debt levels in check.

TRIL Company Update


Income Statement
Net Sales 5,429 5,191 5,124 7,316
Growth (%) 0.0 -4.4 -1.3 42.8
Expenditure 4,765 4,951 4,912 6,922
Other Exp 543 588 554 758
SG&A 0 0 0 0
EBITDA 664 240 212 394
Growth (%) 0.0 -63.8 -11.8 85.8
EBITDA margin (%) 12.2 4.6 4.1 5.4
EBIT 602 175 136 294
EBIT margin (%) 11.1 3.4 2.7 4.0
PBT 620 148 79 93
Tax 200 46 20 33
Adjusted PAT 415 100 49 52
Growth (%) 0.0 -75.9 -41.9 2.1
Net Margin (%) 7.7 2.0 1.2 0.8
E/O items 0 0 0 0
Reported PAT 415 100 49 52
PAT after MI 415 100 49 52
Growth (%) 0.0 -75.9 -51.0 5.8
Balance Sheet
Net worth 3,263 3,360 3,397 3,435
Secured Loans 671 434 990 1,421
Loan Funds 677 436 1,043 1,634
Gross Block 944 1,060 1,538 1,547
Net block 944 1,060 1,538 1,547
Current Assets 4,319 3,962 4,626 6,251
Inventories 1,125 962 1,077 1,269
Sundry debtors 2,253 1,761 2,299 3,820
Current lia & Prov 1,415 1,419 1,760 2,820
Misc. exp 0 0 0 0
Total Assets 4,046 3,916 4,585 5,241

Cash Flow
Tax paid -200 -85 -13 -26
Operating Cashflow -365 897 -427 -323
Free Cash Flow -499 602 -857 -522
Others -35 -245 604 591
Financing Cashflow -162 -411 536 376
Net chg in cash -615 232 -266 -105
Key Ratios
Profitability (%)
Net Margin 7.7 2.0 1.2 0.8
ROCE 33.1 6.0 4.4 6.8
ROE 25.4 3.0 1.5 1.5
RoIC 36.5 5.7 3.9 6.6
Per Share Data (Rs)
EPS 3.2 0.8 0.4 0.4
CEPS 3.7 1.3 1.0 1.1
BVPS 25.3 26.0 26.3 25.9
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 61.8 256.2 522.9 507.4
P/CEPS 53.7 154.8 205.6 173.3
P/BV 7.9 7.6 7.6 7.7
EV / Sales 0.0 -0.1 0.1 0.2
EV / EBITDA 0.2 -1.4 3.5 3.6
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)
Net Debt/ Equity 0.0 -0.1 0.2 0.4
Net Debt/EBIDTA 0.2 -1.4 3.5 3.6

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FY11A 3,290 761 23.1 520 10.5 29.9 42.8 33.2 23.6 12.0
FY12A 4,503 977 21.7 547 11.1 5.2 33.1 31.5 19.1 9.2
FY13A 5,567 1,240 22.3 686 13.9 25.4 32.0 25.1 15.5 7.1
FY14A 6,961 1,529 22.0 862 17.4 25.5 31.3 20.0 11.8 5.6

Vinati Organics
Focus on green chemistry and global competency
August 20, 2014
Rating
NA

CMP
Rs349
Target Price
NA
EPS Chg (%) NA
Nifty 7,603
Sensex 25,481
Price Performance
(%) 1M 3M 6M 12M
Absolute 8 31 57 247
Source: Bloomberg
80
144
208
272
336
400
Rs
-20
22
64
106
148
190 %
Vinati Industries (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Speciality Chemicals
Bloomberg VO IB
Face Value(Rs) 2
52 Week H/L 393/ 74
Promoters 75.0 75.0 75.0
FII/NRI 2.8 2.7 1.8
Public 20.1 20.6 21.3
Source: Bloomberg

Chetan Thacker
chetan.thacker@emkayglobal.com
+91-22-66121272
Rohan Gupta
rohan.gupta@emkayglobal.com
+91-22-66121248

n Established in 1989, Vinati Organics Ltd. (VOL) is a specialty
chemicals company producing aromatics, monomers,
polymers and other specialty products
n Company has achieved global leadership in manufacturing of
IBB (isobutyl benzene) and ATBS on the back of process-
driven cost-efficiency and economies of scale
n Company has enhanced focus on supporting revenue growth
from other co-products/by products, and strengthening R&D
on finding other block-buster product for future growth
n To ensure sustained future growth, the company is focusing
on new products with green chemistry, where it can achieve
global competencies with ROI of 20%-plus
Meeting takeaways:
Existing product portfolio offers revenue potential of Rs 12bn
Vinati Organics has a concentrated product portfolio, with four products contributing
around 90% to revenues. However, on the recently expanded capacity of its two key
products, ATBS and IBB, it can achieve revenue of Rs12bn-plus by FY17, implying a
revenue CAGR of 20% (Rs 6.9bn in FY14). Thrust on improving its existing production
process and improve sales of other products/by-products is likely to support revenue
growth (currently contributes 10% of sales).
Margins are likely to remain at current level
The companys current EBITDA margin at 23% has witnessed an expansion of around
500bps over last 3-4 years, mainly driven by increased sales of ATBS, as it enjoys
higher margins. Though growth in ATBS sales is likely to continue, sales from other
products is likely to cap further expansion in margin.
Markets for ATBS remain strong
Global demand for ATBS, where Vinati enjoys world leadership with a 40% market
share, is likely to remain strong at 15%. The company to benefit from this growth, as no
other supplies are coming. As a result, it targets capacity utilisation of 100% in the next 2
years from 60% currently. It is also focusing on reducing the working capital cycle with
reduction in debtors.
ROI and cash flow generation-led approach to keep return ratios intact
The company has a near-term capex plan of Rs1.5bn, which includes Rs0.5bn on boiler
that will reduce its cost, and Rs1bn on new products to drive near-term growth. For long-
term growth, the company is screening opportunities in globally competitive products
under green chemistry with ROIs potential of above 20%, and 8-10 products are under
its pipeline. We see this ROI-focused approach of product selection and the companys
skill to leverage its R&D and process-driven chemistry will keep the return ratios healthy.

Vinati Company Update


Income Statement
Net Sales 3,227 4,475 5,529 6,873
Growth (%) 39.2 38.7 23.6 24.3
Expenditure 2,529 3,526 4,326 5,432
Raw Material 1,834 2,677 3,350 4,188
Other Exp 546 666 750 970
EBITDA 761 977 1,240 1,529
Growth (%) 24.5 28.4 26.9 23.3
EBITDA margin (%) 23.1 21.7 22.3 22.0
EBIT 697 907 1,141 1,376
EBIT margin (%) 21.2 20.1 20.5 19.8
PBT 625 815 1,026 1,286
Tax 105 268 339 424
Adjusted PAT 520 547 686 862
Growth (%) 29.9 5.2 25.4 25.6
Net Margin (%) 15.8 12.2 12.3 12.4
E/O items 0 0 0 0
Reported PAT 520 547 686 862
PAT after MI 520 547 686 862
Growth (%) 29.9 5.2 25.4 25.6
Balance Sheet
Net worth 1,437 1,870 2,412 3,101
Secured Loans 703 1,370 1,990 1,100
Loan Funds 770 1,727 2,373 1,222
Gross Block 1,487 1,887 3,417 3,769
Net block 1,112 1,443 2,901 3,042
Current Assets 1,074 1,956 2,299 2,351
Sundry debtors 519 857 1,132 1,151
Current lia & Prov 254 300 423 867
Current liabilities 151 160 237 660
Provisions 104 140 186 206
Net current assets 820 1,657 1,877 1,484
Misc. exp 0 0 0 0
Total Assets 2,324 3,746 5,046 4,655

Cash Flow
Chg in working cap -258 -505 -90 578
Tax paid -105 -268 -339 -424
Capital expenditure -354 -608 -1,103 -311
Free Cash Flow -58 -556 -500 1,368
Investments 0 0 0 0
Investing Cashflow -354 -608 -1,103 -220
Loans Taken / (Repaid) 138 957 646 -1,150
Interest Paid -71 -92 -115 -181
Others 0 0 0 0
Financing Cashflow 61 856 518 -1,344
Net chg in cash 2 299 18 116
Key Ratios
Profitability (%)
EBITDA Margin 23.1 21.7 22.3 22.0
Net Margin 15.8 12.2 12.3 12.4
ROCE 34.5 29.9 26.0 30.3
ROE 42.8 33.1 32.0 31.3
RoIC 43.2 38.7 31.6 32.3
Per Share Data (Rs)
EPS 10.5 11.1 13.9 17.4
CEPS 11.8 12.5 15.9 20.6
BVPS 29.1 37.9 48.9 62.8
DPS 0.1 0.2 0.3 0.2
Valuations (x)
PER 33.2 31.5 25.1 20.0
P/CEPS 29.5 27.9 21.9 17.0
P/BV 12.0 9.2 7.1 5.6
EV / Sales 5.6 4.2 3.5 2.6
EV / EBITDA 23.6 19.1 15.5 11.8
Dividend Yield (%) 0.0 0.1 0.1 0.1
Gearing Ratio (x)

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FY11A 2147 194 9.0 63 4.5 - 15.0 81.0 34.0 14.0
FY12A 2810 283 10.1 105 5.8 29 15.0 62.9 24.0 12.0
FY13A 3830 400 10.4 180 10.0 72 21.0 36.5 17.0 5.0
FY14A 5741 545 9.5 252 14.0 40 18.0 26.1 12.0 4.0

V-Mart
Differentiated retail business model
August 20, 2014
Rating
NA

CMP
Rs359
Target Price
NA
EPS Chg (%) NA
Nifty 7,726
Sensex 25,908
Price Performance
(%) 1M 3M 6M 12M
Absolute -5 9 37 118
Rel. to Nifty -5 -5 7 57
Source: Bloomberg
150
200
250
300
350
400
Rs
-10
6
22
38
54
70 %
V Mart (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Others
Bloomberg VMART IB
Face Value(Rs) 10
52 Week H/L 400/ 163
FII/NRI N/A 23.9 15.1
Public N/A 4.0 4.3
Source: Bloomberg

Pritesh Chheda
+91-22-66121273
About the company:
n Differentiated retail player, with a differentiated business model; V-
Mart does apparel retailing with an 89-store presence in tier-2 and
tier-3 towns, and stores expansion on cluster approach
n Extremely prudent in store expansion with close monitoring
of store operating matrix; leverage being capped at 0.8x
clearly indicates discipline and prudence
n V-Mart has scaled-up 5x in 5 years; store network increased
from 22 to 89, revenues increased from Rs1.0bn to Rs5.7bn,
and PAT increased from Rs35mn to Rs250mn - past 5 years
n India offers a humungous opportunity with 600-plus districts
having catchment population of 1.5 mn; V-Mart has presence
in just 45 districts; scaling up 5x in 5 years looks achievable
Operational parameters in Q1FY15 have witnessed an improving trend. I) Footfalls
increased 29% yoy to 4.22mn, ii) transaction size increased 14% yoy to Rs 601, iii)
Average selling price increased 19% yoy to Rs 160, iv) Increase in sales per sq ft by
8% to Rs 795/sq ft, v) sales store sales growth improved from 8% to 8.8% yoy.
Margins in the quarter were impacted by higher shrinkage, which stayed at 1.5% yoy,
owing to shifting of warehouses. The actual shrinkage in stores is just 0.8-0.9%.
Going forward, shrinkages would be kept under control.
The company has maintained sales 5-year CAGR of 30% with SSG of 10% and profit
5-year CAGR of 30%.
Product mix: 25% private labels, 25% exclusive labels and 50% general
merchandise. Company plans to increase the share of private labels in this mix over
the next 2 years.
Store expansion on track, till date in FY15, the company has opened 6 stores and
has targeted to open 25 stores by FY15. It has entailed a capex of Rs 250-280mn for
FY15, which is per store investment of Rs 10-11mn.
The company is setting up a distribution centre, whereby it is moving its warehouses
to a single location, for better utilisation of logistics and effective merchandise
planning.
The company believes there is ample potential in its key markets, UP & Bihar, which
it expects the store count can double from current levels of 46 in UP & 17 in Bihar.
Company is looking at venturing at new geographies like Orissa, West Bengal and
Assam over the next couple of years.
Management is targeting revenues of Rs7.5bn, expects EBITDA margins to improve
to 10% and subsequently PAT of Rs 300mn in FY15.
With healthy earnings growth of 30%-plus, coupled with working capital under control
and capex equivalent to Rs 25mn every year, the company expects to turn free cash
flow positive by FY16. Current ROCE is 20%, which it expects to increase to 25%
over 2 years.
Valuations: Trailing on a 12-month basis, the stock is trading at 24x FY14 on
price/earnings and price-to-book of 3.9x.

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FY11A 80,221 12,645 15.8 6,330 30.9 3.7 20.2 2.8 2.3 0.5
FY12A 89,766 8,571 9.5 2,385 10.5 -66.1 6.4 8.2 4.3 0.5
FY13A 108,701 7,179 6.6 388 1.5 -85.9 0.8 58.4 6.0 0.4
FY14A 77,047 8,439 10.9 733 2.8 86.6 1.7 30.7 6.6 0.7

Welspun Corp
Growing consistently
August 20, 2014
Rating
Not rated

CMP
Rs86
Target Price
NA
EPS Chg (%) NA
Nifty 7,747
Sensex 25,908
Price Performance
(%) 1M 3M 6M 12M
Absolute -6 13 44 163
Rel. to Nifty -6 -2 13 95
Source: Bloomberg
20
41
62
83
104
125
Rs
-30
4
38
72
106
140 %
Welspun Corp (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Bloomberg WLCO IB
Face Value(Rs) 5
52 Week H/L 108/ 25
Promoters 38.2 38.2 37.2
FII/NRI 15.0 14.5 14.0
Public 28.4 28.3 29.2
Source: Bloomberg

John Perinchery
+91-22-66121374
About the company:
n Welspun Corp Ltd (WCL), incorporated in 1995, forayed into
the steel pipes business in 1998, with the commissioning of
the first HSAW mill at Dahej, Gujarat
n In 2000, the company also started producing LSAW pipe by
commissioning its first LSAW mill at the same location. It
also started production of ERW pipes in 2005 at Anjar,
Gujarat
n The company is pre-approved by some of the major
international oil & gas companies as a preferred supplier, as
it follows stringent quality standards specified by American
Petroleum Institute (API)
n The company has a strong presence in key regions like the
US and the Middle East. In the past few years, it has also
started to focus on developing and exploring new markets
like Africa, Southeast Asia and Latin America
Key takeaways:
During the past 3-4 years, no domestic pipeline projects have been awarded in the
oil and gas sector, resulting in severe under-utilization for the domestic pipe
companies. The recent announcement by the Government of India (GoI) to double
capacities by an incremental 15,000km of gas pipelines over the next few years will
help revive the industry.
Competitive pressure is expected to go down in future as many players with highly
leveraged balance sheets are not in a position to bid for additional projects. For
example, the companies like PSL, which used to aggressively bid, have gone for
corporate debt restricting and would be barred from bidding. With the elimination of
weaker players, the industry is expected to witness rational bidding.
Welspun had received a large HSAW order of 420,000 tonnes in Saudi Arabia in
FY14, and the execution of the same would help the Saudi Arabian facility to
operate at optimum levels.
The Little Rock facility in the US is operating at lower utilization levels, as major US
projects are tied up in red-tape. With the recent availability of shale gas, the US is
less likely to import petroleum products from other countries. Going forward, the
focus of the US and Canada would be to export shale gas to other countries
through west coast, which may need new pipe infrastructure. Welspun would be
aggressively bidding for such new projects, and is optimistic of bagging a few of
them.
The Anjar plate mill continues to be mired in high debt and sub-optimal utilizations,
resulting in the shutting down of the facility. The lower utilization of the plate mill is
largely related to sourcing of slabs at competitive rates. The spread between the
slabs and plates have now fallen to around USD25/tonne compared to about
USD200/tonne during FY2007-08, when it was originally set up.

Welspun Corp Company Update


Income Statement
Net Sales 73,637 80,221 89,766 108,701
Growth (%) 0.0 8.9 11.9 21.1
Expenditure 60,451 67,576 81,195 101,522
Raw Materials 47,484 50,053 58,911 71,746
Employee Cost 0 3,909 4,876 6,075
Other Exp 0 0 0 0
EBITDA 13,186 12,645 8,571 7,179
Growth (%) 0.0 -4.1 -32.2 -16.2
EBITDA margin (%) 17.9 15.8 9.5 6.6
Depreciation 2,061 2,439 3,515 4,761
EBIT 11,126 10,205 5,055 2,417
EBIT margin (%) 15.1 12.7 5.6 2.2
Other Income 185 1,139 2,676 3,110
PBT 9,240 9,104 3,732 597
Tax 3,136 2,871 1,503 390
Adjusted PAT 6,104 6,233 2,229 207
Growth (%) 0.0 2.1 -64.2 -90.7
Net Margin (%) 8.3 7.8 2.5 0.2
Adj. PAT After JVs/Ass/MI 6,104 6,330 2,385 388
E/O items 6,459 0 0 -1,091
Reported PAT 12,563 6,330 2,385 -703
PAT after MI 6,104 6,330 2,385 388
Growth (%) 0.0 3.7 -62.3 -83.8
Balance Sheet
Net worth 29,011 33,735 40,933 56,578
Minority Interest 0 2,024 11,316 3,546
Secured Loans 18,730 4,398 7,773 2,043
Unsecured Loans 6,822 32,620 39,714 49,531
Loan Funds 25,551 37,018 47,487 51,574
Gross Block 38,810 41,731 67,322 80,402
Less: Depreciation 5,889 0 0 0
Net block 32,921 41,731 67,322 80,402
Investment 1,596 14,405 19,785 18,671
Current Assets 51,471 45,590 64,678 64,476
Inventories 20,322 18,479 25,632 25,669
Sundry debtors 8,077 12,893 15,260 17,614
Loans & advances 13 5,854 10,942 9,952
Other current assets 6,031 856 2,589 4,197
Current lia & Prov 33,510 32,387 53,270 51,616
Provisions 1,219 2,082 2,056 1,595
Misc. exp 25 0 0 0
Total Assets 57,915 77,111 104,707 117,209

Cash Flow
PBT (Ex-Other income) 9,240 9,104 3,732 -494
Depreciation 2,061 2,439 3,515 4,761
Other Non-Cash items -1,474 -1,043 -1,505 -3,770
Chg in working cap -6,095 -3,546 6,925 -3,068
Tax paid -1,841 -2,181 -1,453 -173
Free Cash Flow 18 -4,369 9,389 -5,497
Other income 384 351 1,277 2,586
Investments -444 -11,891 -18,433 2,320
Equity Capital Raised 4,695 28 5,079 10
Loans Taken / (Repaid) 0 8,700 7,884 -1,813
Interest Paid -2,033 -1,873 -1,556 -3,846
Others 432 -795 -1,298 3,133
Financing Cashflow 2,767 5,585 9,634 -2,648
Net chg in cash 2,725 -10,324 1,867 -3,239
Key Ratios
Profitability (%)
EBITDA Margin 17.9 15.8 9.5 6.6
Net Margin 8.3 7.8 2.5 0.2
ROCE 39.1 16.8 8.5 5.0
ROE 42.1 20.2 6.4 0.8
RoIC 65.7 25.1 8.7 3.1
Per Share Data (Rs)
EPS 29.8 30.9 10.5 1.5
CEPS 39.9 42.9 25.9 19.6
BVPS 141.6 164.8 179.7 215.2
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 2.9 2.8 8.2 58.4
P/CEPS 2.2 2.0 3.3 4.4
P/BV 0.6 0.5 0.5 0.4
EV / Sales 0.1 0.4 0.4 0.4
EV / EBITDA 0.6 2.3 4.3 6.0
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)

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FY11A 22,042 3,221 14.6 942 9.4 -49.2 15.8 24.5 12.5 3.5
FY12A 32,581 3,242 10.0 242 2.4 -74.3 3.4 95.4 12.8 3.1
FY13A 36,541 5,982 16.4 2,316 23.1 856.5 26.7 10.0 6.9 2.3
FY14A 44,954 9,211 20.5 921 9.2 -60.2 8.8 25.1 5.2 2.1

Welspun India
Play on niche textile exports
August 20, 2014
Rating
Not Rated

CMP
Rs230

EPS Chg (%) NA
Nifty 7,684
Sensex 25,723
Price Performance
(%) 1M 3M 6M 12M
Absolute 11 89 152 358
Rel. to Nifty 12 64 98 241
Source: Bloomberg
50
90
130
170
210
250
Rs
-10
32
74
116
158
200 %
Welspun India (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Textiles
Bloomberg WLSI IB
Face Value(Rs) 10
52 Week H/L 244/ 47
Promoters 73.4 73.1 68.8
FII/NRI 0.2 N/A N/A
Public 12.8 10.0 10.5
Source: Bloomberg

Tejas Sheth
+91-22-66242482
About the company:
n WIL is Indias largest manufacturer & exporter of cotton
towels. Structural changes and currency movements have
made Indian textile products highly competitive vs. China
n WIL has planned capex of Rs24bn, of which Rs11bn would be
towards backward-integration and the balance Rs13bn for
capacity expansion. It has spent Rs8bn on the former
n INR appreciation is biggest growth risk, as exports
contribute 95% to the topline. As on FY14, the company had
gross debt of Rs 30.3bn and net D/E of 2.4x
n At CMP, WIL is trading at TTM Adj. P/E of 9x. On adj. RoEs of
more than 25%, the valuations look cheap, as growth would
be sustainable on higher demand and higher capacities
Meeting summary:
The backward-integration with increasing in yarn capacities should lead to reduced
dependence on vendors as well as reduce material costs. The increased yarn
capacity should suffice companys 70% of expanded capacity of finished goods as
well as lead to margin expansion of roughly 300bps at the EBITDA level
The company has already spent Rs 12bn as on Q1FY15E of the planned Rs 24bn
of capex. The capex which will go towards plant modernization, capacity de-bottle
necking and some expansion should lead to revenue potential of Rs 65bn which is
~50% higher of FY14 revenue
The company hedges 60% of the currency risk, partly by sourcing the raw material
which is priced on import parity and partly by taking 1 year currency forwards on
weekly rolling
The capex incurred is on the estimated iRR of at least 18%
The company expects to maintain 20-21% margins at EBITDA level over the
medium term
Loftex and Sunwim are the two sizeable competitors in the global home textiles
market, while Trident Group and Alok Textiles are key peers in India.
The companys growth will be function of addition of new product every 4-5 years.
The company, which started as a mere towel manufacturer, has added three new
product since then with latest being rugs and table carperts
The company expects to maintain higher margins and RoEs despite of higher costs.
Currently, it is enjoying TUF which reduced its borrowings cost to 7-8%, which is
further amplified through 4% interest cost benefit over the next 5 years, leading to
net cost of borrowing at nerely 3%.
15-20% CAGR is expected in revenue over next 3 years, with RoE maintained in
upwards od 30%

Welspun India Company Update


Income Statement
Net Sales 22,042 32,581 36,541 44,954
Growth (%) 21.0 47.8 12.2 23.0
Expenditure 18,821 29,339 30,558 35,743
Employee Cost 1,653 3,050 2,766 3,400
Other Exp 0 0 0 0
SG&A 1,038 4,767 3,652 8,496
EBITDA 3,221 3,242 5,982 9,211
Growth (%) 91.1 0.6 84.5 54.0
EBITDA margin (%) 14.6 10.0 16.4 20.5
Depreciation 1,203 1,378 1,449 6,863
EBIT 2,018 1,864 4,534 2,348
EBIT margin (%) 9.2 5.7 12.4 5.2
Other Income 405 461 492 1,042
PBT 1,345 406 3,049 1,037
Tax 403 193 733 199
Adjusted PAT 942 242 2,316 921
Growth (%) -49.2 -77.4 986.7 -63.8
Net Margin (%) 4.3 0.7 6.3 1.9
Adj. PAT After JVs/Ass/MI 942 242 2,316 921
E/O items 3 466 2 0
Reported PAT 945 708 2,318 921
PAT after MI 942 242 2,316 921
Growth (%) -49.2 -74.3 856.5 -60.2
Balance Sheet
Equity share capital 940 995 1,000 1,004
Net worth 6,690 7,428 9,902 11,096
Secured Loans 16,549 18,632 19,275 27,043
Unsecured Loans 864 1,151 1,101 1,100
Loan Funds 17,414 19,783 20,376 28,143
Net deferred tax liability 1,879 1,502 1,917 434
Gross Block 21,916 25,164 27,828 42,227
Net block 15,600 16,762 18,073 25,609
Capital work in progress 550 1,233 542 0
Investment 1,007 1,205 931 1,115
Current Assets 11,703 16,160 19,033 24,960
Inventories 4,597 7,293 8,205 10,094
Sundry debtors 1,453 2,492 2,750 4,117
Cash & bank balance 389 1,482 1,724 2,332
Loans & advances 3,083 3,081 3,458 5,376
Current lia & Prov 2,879 6,396 6,135 11,694
Provisions 92 404 273 1,390
Misc. exp 0 0 0 0
Total Assets 25,982 28,963 32,444 39,990

Cash Flow
PBT (Ex-Other income) 943 411 2,559 -4
Depreciation 1,203 1,378 1,449 6,863
Chg in working cap -1,200 -223 -2,477 -1,243
Tax paid -403 -193 -733 -199
Free Cash Flow -19 69 705 -6,088
Other income 405 461 492 1,042
Investments -857 -198 274 -184
Loans Taken / (Repaid) 544 2,370 593 7,768
Interest Paid -1,078 -1,919 -1,977 -2,352
Others 0 279 0 149
Financing Cashflow -4 761 -1,228 5,838
Net chg in cash -475 1,093 243 608
Opening cash position 864 389 1,482 1,724
Closing cash position 389 1,482 1,724 2,332
Key Ratios
Profitability (%)
EBITDA Margin 14.6 10.0 16.4 20.5
Net Margin 4.3 0.7 6.3 1.9
ROCE 9.8 8.5 16.4 9.4
ROE 15.8 3.4 26.7 8.8
RoIC 8.7 7.6 16.7 7.1
Per Share Data (Rs)
EPS 9.4 2.4 23.1 9.2
CEPS 21.4 16.1 37.5 77.6
BVPS 66.7 74.0 98.7 110.6
DPS 0.0 0.0 0.0 0.0
Valuations (x)
PER 24.5 95.4 10.0 25.1
P/CEPS 10.8 14.3 6.1 3.0
P/BV 3.5 3.1 2.3 2.1
EV / Sales 1.8 1.3 1.1 1.1
EV / EBITDA 12.5 12.8 6.9 5.2
Dividend Yield (%) 0.0 0.0 0.0 0.0
Gearing Ratio (x)

Emkay

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FY11A 3,734 162 4.3 445 35.0 195.8 30.8 3.4 15.9 0.9
FY12A 4,841 485 10.0 168 13.3 -62.1 9.5 9.1 6.0 0.8
FY13A 6,913 826 11.9 303 17.8 34.5 14.1 6.7 5.8 0.8
FY14A 9,261 1,084 11.7 465 26.4 48.3 18.2 4.5 5.2 0.8

Zicom Security Systems
Huge opportunity for growth avails
August 20, 2014
Rating
Not Rated

CMP
Rs104
Target Price
NA
EPS Chg (%)
NA
Target Price change (%)
NA
Nifty
7,792
Sensex
26,103
Price Performance
(%) 1M 3M 6M 12M
Absolute 1 61 61 76
Source: Bloomberg
40
57
74
91
108
125
Rs
-40
-20
0
20
40
60 %
Ziocom Electronics (LHS) Rel to Nifty (RHS)

Source: Bloomberg
Stock Details
Sector Others
Bloomberg ZSS IB
Face Value(Rs) 10
52 Week H/L 128/ 37
Promoters 24.1 24.1 24.1
FII/NRI 5.9 8.0 8.0
Public 52.4 50.6 51.8
Source: Bloomberg

Tejas Sheth
+91-22-66242482
About the company:
n Need for electronic security solution is gaining pace across
the segments viz. household, business enterprise, housing
societies, public infrastructure, retail stores, banks, etc.
ZESS is well-placed to capitalize the same
n ZESS has shifted its core business strategy from being a
product to a service company. This has widen the market for
the company, although at a cost of high capital requirement
n ZESS also has presence in middle-east market for providing
fire protection solutions. Company sees a huge opportunity
for growth in these markets
n At CMP, ZESS is trading at P/E of 4.5x and P/B of 0.8x on
trailing basis. On RoE of 18% and huge opportunity for
growth, the stock has potential for re-rating
Meeting summary:
Zicom Electronic Security Systems (ZESS) is into business of providing electronic
and digital security and surveillance across the user base in India. The company
has shifted its core business strategy, wherein now the focus is on providing
Security as a Service (SaaS), rather than selling it as an electronic hardware.
The management expects SaaS business to be a key growth driver. The service is
provided to banks, retail stores, housing societies and business enterprises. The
company initially installs hardware, for which it doesnt charge the end-user, while
makes revenue from the monthly charges. The pay-back for the hardware cost is
typically 18 months, which is the lock-in period for the service agreement.
Make your city safe is another initiative of the company towards providing SaaS for
areas and cities. The Telangana state government has recently passed an order,
wherein it has made mandatory for housing societies to have digital security
solutions. The company expects many states to take such initiatives, which will
immensely widen the market for ZESS.
We believe there is huge growth potential for security solutions in India. With the
RBI making mandatory for banks to have their ATMs, as well as state governments
promoting societies to be under surveillance, the market will be grow is multiple
from here. ZESS is well-place to capitalize on this opportunity
ZESS is also looking at high growth opportunity in the overseas market. Through its
subsidiary Unisafe Singapore, company has a presence in providing fire protection
solutions in the UAE and Qatar. The company is guiding for high growth in this
segment of business as well.
The company is not generating free cash flows at this point, as it is high growth
phase, and the business requires huge capital towards funding the working capital
requirement
The promoter stake is low at 24.6%. A large number of shares (~40%) are pledged
to banks for working capital needs.

Zicom Company Update


Income Statement
Net Sales 3,734 4,841 6,913 9,261
Growth (%) -29.3 29.6 42.8 34.0
Expenditure 3,571 4,355 6,088 8,177
Other Exp 4 3 6 0
SG&A 169 161 240 0
EBITDA 162 485 826 1,084
Growth (%) -70.5 198.9 70.1 31.4
EBITDA margin (%) 4.3 10.0 11.9 11.7
EBIT 10 342 645 835
EBIT margin (%) 0.3 7.1 9.3 9.0
PBT 494 219 416 511
Tax 18 9 47 19
Adjusted PAT 445 168 303 465
Growth (%) 167.8 -55.8 75.5 33.4
Net Margin (%) 12.7 4.3 5.3 5.3
E/O items -486 22 1 -46
Reported PAT -41 190 304 419
PAT after MI 445 168 303 465
Growth (%) 195.8 -62.1 80.0 53.5
Balance Sheet
Net worth 1,654 1,885 2,422 2,683
Secured Loans 1,254 1,604 3,183 3,321
Loan Funds 1,359 1,626 3,227 4,164
Gross Block 1,144 984 1,953 2,158
Net block 874 668 1,445 1,811
Current Assets 2,865 3,287 5,183 7,252
Inventories 337 449 830 1,389
Sundry debtors 1,529 2,061 2,813 3,681
Loans & advances 645 497 1,030 1,471
Current lia & Prov 553 352 760 1,925
Current liabilities 520 336 701 1,851
Misc. exp 0 0 0 0
Total Assets 3,197 3,767 6,020 7,282

Cash Flow
PBT (Ex-Other income) -144 204 393 486
Other Non-Cash items -46 50 96 -113
Chg in working cap 350 -664 -1,227 -756
Tax paid 0 0 0 0
Operating Cashflow 467 -129 -306 216
Free Cash Flow 365 -150 -1,231 -387
Investments 0 -68 -21 -2
Investing Cashflow 536 -48 -854 -644
Loans Taken / (Repaid) -882 267 1,601 937
Interest Paid -154 -139 -252 -349
Others 0 0 0 0
Financing Cashflow -1,036 129 1,399 587
Net chg in cash -34 -47 240 159
Key Ratios
Profitability (%)
EBITDA Margin 4.3 10.0 11.9 11.7
Net Margin 12.7 4.3 5.3 5.3
ROCE 19.3 10.3 13.6 12.9
ROE 30.8 9.5 14.1 18.2
RoIC 0.4 11.0 14.8 14.1
Per Share Data (Rs)
EPS 35.0 13.3 17.8 26.4
CEPS 47.0 24.5 28.5 40.6
BVPS 130.3 148.4 142.5 152.5
DPS 1.0 1.0 1.2 1.2
Valuations (x)
PER 3.4 9.1 6.7 4.5
P/CEPS 2.6 4.9 4.2 3.0
P/BV 0.9 0.8 0.8 0.8
EV / Sales 0.7 0.6 0.7 0.6
EV / EBITDA 15.9 6.0 5.8 5.2
Dividend Yield (%) 0.8 0.8 1.0 1.0
Gearing Ratio (x)

Zicom Company Update

DISCLAIMER: Emkay Global Financial Services Limited and its affiliates are a full-service, brokerage, investment banking, investment management, and financing group. We along with our affiliates
are participants in virtually all securities trading markets in India. Our research professionals provide important input into our investment banking and other business selection processes. Investors may
assume that Emkay Global Financial Services Limited and/or its affiliates may seek investment banking or other business from the company or companies that are the subject of this material and that the
research professionals who were involved in preparing this material may participate in the solicitation of such business. Our salespeople, traders, and other professionals may provide oral or written market
commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions
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Emkay Global Financial Services Ltd.
CIN - L67120MH1995PLC084899
7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai - 400028. India
Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com
www.emkayglobal.com

EMKAY GLOBAL FINANCIAL SERVICES LIMITED
Registered Office :
Tel: +91 22 6612 1212; Fax: +91 22 6612 1299
www.emkayglobal.com
CIN - L67120MH1995PLC084899
th
The Ruby, 7 Floor, Senapati Bapat Marg, Dadar (W), Mumbai - 400 028

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