Top Picks

Research Team

Index
Page

Page

Strategy - Dawn after the dusk

Jagran Prakashan

14

Top Picks

JK Lakshmi Cement

16

Bajaj Electricals

KEC Intl.

18

Blue Star

Kirloskar Oil Engines

20

Crompton Greaves

MM Forgings

21

Goodyear India

NCC

22

HSIL

10

South Indian Bank

24

IFB Agro Industries

11

Siyaram Silk Mills

26

India Cements

12

Styrolution

27

Dawn after the dusk

BJP led NDA won 336 seats (62%) in the 543 seats parliament comfortably higher than the 272 mark. This
mandate will ensure a significant change in the governance of central government as for the first time in last
30 yyears,, the g
government is not dependent
p
on coalition p
partners for g
getting
g keyy reforms done. Corporate
p
India, is quite receptive to Modis model of development which will ensure significant increase in allocation of
investments/resources in India.
Historically, any country with the kind of demographics that India has, with the additional ingredients of
good gove
governance
a ce a
and
d leadership,
eade s p, has
as registered
eg s e ed decades o
of sco
scorching
c gg
growth.
ow Acknowledging
c ow edg g the
e ccrucial
uc a
phase of Indias demographic dividend that we are currently in, the new government is focused on
delivering on the aspirations of one of the largest and fastest growing youth populations in the world. This
should catalyze a strong long-term improvement in our GDP growth trajectory and make Indian equities
pp
g asset class g
going
g forward.
the top-performing

Key Agenda for the new government

Accelerate project approvals leading to reversal in slowdown in the capex cycle

Infrastructure push through impetus on power, roads and rail

Tax reforms through a push for GST and restructuring of PSUs managements.

Federal reforms (greater autonomy, funds and hence accountability to states) and e-Governance
initiatives

Dawn after the dusk

The benchmark indices were already trading close to their historic high levels led by defensives and
export oriented stocks and in anticipation of favorable outcome of the general elections.

Nevertheless,
N
th l
th broader
the
b d market
k t especially
i ll the
th cyclical
li l stocks
t k were trading
t di
att lower
l
valuations.
l ti
Despite the recent rally, most of the stocks in the broader market are still trading at reasonable
valuations, which are lower than their average levels. This provides room for further upside in our view
given that the earnings upgrades will follow with the improvement in the macro-economic
en ironment over
environment
o er the next
ne t couple
co ple of years.
ears

A strong developmental focus of the new government coupled with expected turnaround in the
economy are likely to lead our markets to newer heights going forward. Against this backdrop, we
recommend investors to increase focus on domestic cyclical stocks and policy improvement plays in
the banking, capital goods, cement, infrastructure and media sectors. Not only that, going forward,
stocks in the broader market, especially mid-caps are likely to out-perform the large-cap stocks. In
fact, mid-caps trading at 25% while small-caps trading at 65% discount from their respective all-time
high.

Mid Caps await new highs

30,000

Small-cap

Mid-cap

BSE sensex

25,000

20,000
0,000

15,000

10,000

5,000

May-14

May-13

May-12

May-11

May-10

May-09

May-08

May-07

May-06

Top Picks
Stocks

CMP (`)

TP (`)

Upside

Bajaj Electricals

327

441

35%

Blue
l S
Star

2
255

3 4
314

23%

Crompton Greaves

195

225

15%

Goodyear India

416

510

23%

HSIL

204

266

30%

IFB Agro Industries

187

276

48%

India Cements

104

130

25%

Jagran Prakashan

116

140

21%

JK Lakshmi Cement

178

215

21%

KEC Intl.

118

140

19%

Kirloskar Oil Engines

231

290

26%

MM Forgings

146

222

52%

NCC

81

100

23%

South Indian Bank

28

36

29%

Siyaram Silk Mills

390

654

68%

Styrolution

459

566

23%

Bajaj Electricals

(CMP: `327/ TP: `441/ Upside: 35%))

Valuation Snapshot
Y/E
March

Sales
( ` cr)

One year forward P/E

450

Price

3x

10x

17x

24x

400
350
300
250
200
150
100
0
50

Source: Company, Angel Broking

OPM
(%)

PAT
( ` cr)

EPS
( `)

ROIC
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2015E

4,713

6.6

160

16.1

30.8

20.4

3.8

10.7

0.7

FY2016E

5,483

6.6

199

20.0

33.2

16.4

3.2

9.0

0.6

May-14

Nov-13

May-13

Nov-12

May-12

Nov-11

May-11

Nov-10

May-10

0
Nov-09

Valuations:
V
l ti
BEL is
i sett to
t have
h
a clean
l
slate
l t postt
FY2014 with the closure of delayed projects. On the
back of recent developments, we expect the bottomline to grow at a CAGR of 77.8% (due to low base)
respectively over FY2013
FY2013-16E.
16E. Based on target
EV/Sales of 0.8x FY2016E, target price comes at
`441, 34.5% upside from current levels.

Increased ad spends to increase visibility: BEL

celebrated its 75th year in FY2014 by elaborating its
ad spends by almost 50% to `75cr (from `38cr in
FY2013) in order to increase its visibility. The
company has achieved decent growth with limited
advertisements till now, hence, with this increment, it
is expected to create consumer pull, thereby
enhancing the top-line.

May-09

Timely execution in E&P segment to be a game

changer: E&P segment contributes ~25-30% over
FY2010-12 to total revenue of BEL. However, the EBIT
margin for the segment has been contracting
significantly since FY2010 from 10.7% to 3.3% in
FY2012 on account of delayed execution of projects
and cost overruns thereby impacting the bottom-line.
Hence, despite strong order book of `2,100cr as on
d
date,
their
h i timely
i l execution
i
off the
h same is
i off grave
importance. The turnaround in the performance has
been initiated in 3QFY2014 and is expected to
improve going forward.

(`)

Blue Star

(CMP: `255, TP: `314, Upside: 23%)

Valuations: At the current market price, the stock is
trading at EV/sales of 0.7x for FY2016E which we
believe is attractive from its historical level of 1.0x
(fi e year
(five
ear average).
a erage) Hence,
Hence we recommend a Buy
B
rating on the stock with a target price of `314
based on a target EV/sales of 0.9x for FY2016E.

One year forward EV/Sales

May-14

Nov-13

0.4x

May-13

Nov-12

0.8x

May-12

Nov-11

1.2x

May-11

1.6x

May-10

EV

Nov-10

5,500
5,000
4,500
4,000
3,500
3,000
,
2,500
2,000
1,500
1,000
500
0
Nov-0
09

EBITDA Margins to improve: Legacy orders,

which are low or no margin
g orders stood at
`300cr for 3QFY2014 out of total order book of
`1,737cr. These are being cleaned up and the
company plans to begin FY2015 with a cleaner
slate. Owing to this, we expect EBITDA margins
to improve from 3.7% in FY2014E to 5.4% in
FY2016E.

May-0
09

Improvement in macro scenario to drive

growth: Electro Mechanical Projects and
Packaged Air-conditioning Systems (EMPPAC)
Di i i
Division,
which
hi h contributes
t ib t
~60%
60% off total
t t l
revenues
will benefit from the revival in
economy
as
it
caters
mainly
to
institutional/commercial clients. We expect net
sales to grow at CAGR of10% over FY2014-16E
FY2014 16E
to `3,450cr.

EV (` cr)

Source: Company, Angel Broking

Valuation Snapshot
Y/E

Sales

OPM

PAT

EPS

ROE

P/E

P/BV

EV/EBITDA

EV/Sales

March
FY2015E
FY2016E

(` cr)

(%)

(` cr)

(`)

(%)

(x)

(x)

(x)

(x)

3,062
3,450

4.6
5.4

88
112

9.8
12.5

19.1
20.9

26.2
20.4

4.7
3.9

18.1
13.8

0.8
0.7

Crompton Greaves
(CMP: `195, TP: `225, Upside: 15%)

However, international operations are showing

signs of recovery, with 9MFY2014 EBITDA losses
having reduced to `7.5cr from `132cr in
9MFY2013. According to the Management, the
international power segment units at Belgium
g y have alreadyy turned EBITDA
and Hungary
positive.

1,500
11.2 9.5

13

5.1

500

0.5

1.4
0.7

0.2

(1,000)
(1,500)

(0.5)
EBIDTA (`cr)

(0.8)

(4.8)

(0.6)

(10.6)
EBIDTA Margins (%)

2QFY1
14

1QFY1
14

4QFY1
13

3QFY1
13

2QFY1
13

1QFY1
13

4QFY1
12

3QFY1
12

(500)

2QFY1
12

(0.1)
3QFY1
14

1,000

18

1QFY1
12

In the last couple

p of yyears,, CG has underperformed the Sensex mainly on account of
EBITDA losses in international operations (due to
slowdown in Europe and restructuring at
Belgium unit). The GDP slowdown in India and
tough competition in domestic market to bag the
limited orders further worsened the situation.

Operating margin performance of international operations

4QFY1
11

Crompton Greaves (CG), a part of the US$4bn

Avantha Group, is a globally diversified
company and a leading player in power T&D
equipment
i
b i
business
i India.
in
di
The
h company
operates across three segments - Power Systems,
Consumer Products and Industrial Systems.

3QFY1
11

3
(2)
(7)
(12)
(17)

Source: Company, Angel Broking

Moreover, the Managements assurance that

new international orders have been booked at
hi h margins
higher
i indicates
i di
at further
f h recovery in
i
margin next year. Therefore, we are of the
opinion that CGs consolidated operating
margin is likely to improve over the next
12 months.
th

Crompton Greaves

12,000
10,500

32

29

9,000

30
25

7,500

20

10,074

9,7
743

10

9,7
771

9,200

9,400

15
9,172

8,0
000

1,500

8,366

14

4,500
3,000

17

9,126

6,000

15
10

order backlog

3QFY14

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

1QFY13

4QFY12

Growth (yoy)

Source: Company, Angel Broking

Attractive valuations: Given the attractive

valuations (stock trading at 0.8x FY2016E
EV/Sales compared to its 5-year
5 year range of 0.6x
0 6x to
1.6x), we maintain our Buy rating on the stock.
We have assigned an EV/Sales multiple of 1.1x
to arrive at a target price of `225.

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2015E

14,899

6.6

504

7.9

12.9

24.8

3.0

14.2

0.9

FY2016E

16,720

7.2

639

10.0

14.8

19.6

2.7

11.8

0.8

Valuation Snapshot
Y/E
March

35

3QFY12

With expectations of recovery in Indian economy

in 2HFY2015, order intake as well as execution
of domestic power and industrial business is also
likely to improve going ahead. Further, the
domestic consumer business continues to report
consistent
volume
and
value
growth.
Considering all these factors,
factors we expect CG to
post a healthy growth in revenues in FY2015
and FY2016.

Robust order book

(` cr)

Robust order book provides revenue visibility:

CG reported a robust order book of `10,074cr
as at the end of 3QFY2014 (up 10% yoy). The
Management indicates that its global power
transformer factories are running at full
capacities, implying healthy revenue visibility
from international operations, which now form
almost 60% of the companys
p y
total order
backlog.

Goodyear India
((CMP: `416, TP: `510, Upside: 23%))

Improvement in tractor sales to drive growth:

Goodyear is a market leader in tractor tyre
industry, and it accounts for ~60% of its
t
tonnage
off
ff take.
t k Demand
D
d for
f tractor
t t is
i expected
t d
to grow by 7-9% on the back of rise in minimum
support prices and need for higher level of
tractor penetration.

Valuations: At the current levels, the stock is

trading at a PE of 8.0x its CY2015E earnings.
We recommend a Buy rating on the stock with a
t
target
t price
i off `510 based
b d on SOTP valuation.
l ti
SOTP Valuation
CY2015E

Particulars (` cr)

LLower rubber
bb
prices
i
to aid
id EBITDA margins:
i
Rubber prices are expected to be under pressure
in FY2015 and are expected at the levels of
`150 as world Natural Rubber surplus is
expected
t d to
t be
b att 428,000
428 000 metric
t i tonne.
t

C hR
Cash
Reserves

439

Discounted Cash reserves (by 50%) (A)

220

Recurring PBT

144

Strong Balance Sheet: GIL is a debt free-cash

rich company with a RoIC of 61.7%. The
companys cash and equivalents are expected to
b at ` 439cr
be
439 by
b CY2015-end,
CY2015 d which
hi h are ~47%
47%
of the current market cap.

Value based on PE (B)

Net Profit

96

Target PE multiple

10.0
957

Total Market Cap (A+B)

1,176

No of shares ((cr))

2.3

Target Price (`)

510

Valuation Snapshot
Y/E
March

CY2014E
CY2015E

Sales
(` cr)
1,667
1,777

OPM
(%)
9.5
10.0

PAT
(` cr)
104
118

EPS
(`)
45.2
51.1

ROE
(%)
22.5
21.4

P/E
(x)
9.1
8.0

P/BV
(x)
1.9
1.6

EV/EBITDA
(x)
3.6
2.8

EV/Sales
(x)
0.3
0.3

HSIL
(CMP: `204/ TP: `266/ Upside: 30%)

Leading position and extended capacity to be key

drivers: HSIL holds a leading position in the
sanitaryware industry (organized segment) with
~40% market share and well-known brands like
QUEO Hindware Art, Hindware Italian, Hindware,
Raasi, and Benevalve in its basket. Moreover, with
increasing awareness about improving sanitation,
low penetration and changing lifestyles of people,
the sanitaryware industry is witnessing traction. HSILs
greenfield project in its Sanitaryware division is expected to
enable the company to encash on the traction in the
industry and thereby drive its overall growth.

Valuations: On the back of robust growth in the

sanitaryware industry coupled with stable growth in
the glass industry; net profit for HSIL is expected to
post CAGR of 6.4%
6 4% over FY2013-16E.
FY2013-16E With a
target EV/Invested capital at 0.4x to Glassware
division and target PE of 15.0x to Sanitaryware
division (current PE of 11.3x at 75.6% discount to
Cera which we expect to reduce to 33%), we arrive
at target price of `266.

SOTP Valuation
FY2016E

Particulars (` cr)
Glass-ware- division Debt
Capital employed
Target EV/Invested capital
Expected MCAP (A)
Sanitary-ware division- PAT
T
Target
t PE
Expected MCAP (B)
Expected Total MCAP (A+B)
Upside

Glassware division- unlikely to be a drag going

forward : Considering the vast difference in the
profitability's of the Sanitaryware (ROCE of 18-27%)
and Glassware (ROCE of 6-10%); and lack of any
synergy between them,
them we believe the two divisions
will be separated into different entities sooner or later,
which will provide fair valuations to both the entities.

Valuation Snapshot
p

1,074
1,276
0.4
81
112
15 0
15.0
1,674
1,755
30.5%

FY2015E

Sales
(` cr)
1,792

OPM
(%)
13.1

PAT
(` cr)
49

EPS
(`)
7.5

ROE
(%)
6.5

P/E
(x)
27.3

P/BV
(x)
1.2

EV/EBITDA
(x)
9.2

EV/Sales
(x)
1.2

FY2016E

2,105

14.2

90

13.6

9.0

15.0

1.1

7.2

1.0

Y/E March

10

IFB Agro Industries

(CMP: `187, TP: ` 276, Upside: 48%)
Restructuring of Spirit and Liquor business has
started reaping benefits :
IFB has exited two of its low margin
g businesses
namely, IMFL Bottling and Manufacturing. The
company has replaced its existing IMFL bottling
capacity with the higher margin country liquor
(IMIL) bottling business and It has also sold its
IMFL brands to Tilaknagar Industries. As a result,
its margins will improve going forward.

Valuations: At CMP, the company is trading at

an attractive PE of 4.2x and P/BV of 0.7x for
FY2016E.
We
maintain
our
Buy
recommendation on the stock with a target price
of `276 based on a target PE of 6x for FY2016E.

Increasing promoters stake :

The promoters have increased their stake from

55% in Sept.
p 2012 to 65% in March 2014,,
boosting investors confidence in the company.
One year forward P/E
350

Price

2x

4x

6x

8x

300
250
(`)

200
150
100
50
0
May-09

May-10

May-11

May-12

May-13

May-14

Source: Company, Angel Broking

Valuation Snapshot
Y/E
March

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2015E

580

11.2

37

41.5

17.8

5.1

0.8

1.7

0.2

FY2016E

666

11.2

43

47.9

17.5

4.4

0.7

1.2

0.1

11

India Cements
(CMP: `104, TP: ` 130, Upside: 25%)

12

Return ratios to improve: India Cements standalone return ratios have remained subdued over the
yyears due to weak p
profitability.
y However, we expect
p
the companys earnings profile to improve going
ahead due to better demand and realizations,
resulting in higher return ratios. The companys
recently announced merger of two of its subsidiaries
Trinetra Cement and Trishul Concrete Products with
itself which is a corporate move in the right direction
as it would result in healthier Balance Sheet
considering India Cements substantial advances
p
and investment in these companies.

Southern region demand and utilization

40

20

Demand growth (%)

Source: Company, Angel Broking

Utilization (%) - RHS

FY2013

10

FY2012

60

FY2011

15

FY2010

80

FY2009

20

FY2008

100

FY2007

25

FY2006

To be a major beneficiary of expected cement

demand pick-up in south India: South Indias
cement demand growth has lagged that of the
countrys
t growth
th over the
th pastt few
f
years largely
l
l due
d
to de-growth in Andhra Pradesh, which is a key
market in the south. While we expect the countrys
overall cement demand to pick-up going ahead due
p
in economic scenario,, we expect
p
to the improvement
creation of Telangana state w.e.f June 2014 to be
the key catalyst for demand pick-up in South India.
India Cements with ~60% of its cement capacities in
Andhra Pradesh would be a key beneficiary of this
pick-up
i k
i demand.
in
d
d

FY2005

India Cements
Ev/tonne band
120,000

EV/tonne

$40

$60

$80

$100

100,000
80,000
60,000
40,000
20,000
0

Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14

Stock available at attractive valuations: India Cements,

which is south Indias largest cement manufacturer, is
trading at an attractive valuations of US$65/tonne (vs.
replacement cost of US$ 140/tonne),
140/tonne) ie at a huge
discount to valuation of many of its large cap players
peers ( EV/tonne in the range of US$ 115 to US$165)
and its other mid-cap peers like Ramco Cements
(currently trading at US$ 88/tonne). We believe such a
h
huge
di
discount
i unjustified
is
j ifi d considering
id i
the
h expected
d
improvement in demand supply dynamics and the
bottoming out of capacity utilization in south India. We
maintain a Buy on the stock with a Target Price of
`130.

EV (` mn)

Source: Bloomberg,
Bloomberg Angel Broking

Valuation Snapshot
Y/E
March

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/tonne
(US $)

FY2015E

5,317

11.1

102

3.3

3.8

31.3

1.2

10.7

59

FY2016E

6,078

11.9

198

6.4

7.1

16.2

1.1

8.6

58

13

Jagran Prakashan
(CMP: `116, TP: ` 140, Upside: 21%)

14

Advertising growth expected to bounce back to

double digits: After a sluggish 6.8% yoy growth
in advertising revenue in FY2013 (due to
advertising rate cuts as Indian GDP decelerated),
we expect Jagran Prakashans advertising
revenue to bounce back and post strong doubledigit growth in FY2014 and FY2015 (on back of
hik in
hike
i advertising
d
i i
rates and
d inclusion
i l i
off Nai
N i
Dunia financials).
Further, considering Dainik Jagrans status as
the most read Hindi newspaper
p p and its strong
g
presence in rapidly growing Hindi markets of
Bihar, Haryana, Jharkhand, Punjab, Madhya
Pradesh and Uttar Pradesh, we believe, JPL will
benefit the most from an eventual recovery in
the Indian economy.

Advertising revenue
1,200

21.6

1,000

20 2
20.2

800

6.8

25.0
20 0
20.0

10.8

15.7

15.0

600
10.0

400

5.0

200
0

638

767

850

FY2010
FY2011
FY2012
Advertising Revenue (` cr, LHS)

907

1103

0.0

FY2013
FY2014E*
Growth (yoy, RHS)

Source:
So
rce Company,
Compan Angel Broking * FY2014 cannot be directly
directl comparable yoy
o
due to inclusion of Nai Dunia financials

Jagran Prakashan

Robust operating performance of mature

markets expected to continue: JPL reported a
273bp yoy improvement in operating margin to
34.1% for
f
its flagship
fl
h daily
d l Dainikk Jagran in
9MFY2014.

9MFY13

Operating Revenue

945

855

10 6
10.6

Operating Profit

322

268

20.2

Operating Margin (%)

34.1

31.4

273bp

Operating Revenue

245

211

15.9

Operating Profit

(18)

(23)

Operating Margin (%)

(7.2)

(11.0)

375bp

Dainik Jagran

Further, with Mid-Day already earning operating

profit compared
p
p
to `5cr of operating
p
g loss in
FY2013 and with the Managements confidence
in reducing Nai Dunias losses, we expect JPLs
consolidated OPM to expand by at least 280300bp in FY2014 itself.
JPL has also reduced its net debt from `239cr in
9MFY2013 to `152cr in 9MFY2014, thereby
enabling it to reduce interest cost and boost
profitabilityy in coming
p
gq
quarters.

9MFY14

Other Publications

Source: Company, Angel Broking

Attractive valuation: The stock is currently trading

at attractive valuations of 12.9x FY2016E
consolidated EPS of `9.0. Considering the
expected improvement in advertising revenue and
operating margin, we recommend Buy rating on
the stock with a target price of `140.

Valuation Snapshot
Y/E
March

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2015E

1,867

23.4

238

7.5

22.1

15.4

3.2

8.6

2.0

FY2016E

2,074

24.4

283

9.0

23.4

12.9

2.9

7.3

1.8

15

JK Lakshmi Cement
(CMP: `178, TP: ` 215, Upside: 21%)

16

Capacity addition to propel growth: JK Lakshmi

Cement (JKLC) has 60% exposure to high
growth northern region, with the remaining 40%
revenue arising from the western region. JKLC is
embarking on a huge expansion plan which
would double its overall capacity from the
current 5.4mtpa. The companys 2.7mtpa
greenfield
fi ld expansion
i
i expected
is
t d to
t be
b fully
f ll
commissioned by March 2015. The 1.5mtpa
clinker capacity at Durg along with a 1.7mtpa
grinding unit is expected to be commissioned by
December 2014.
2014 The 1mtpa grinding unit in
Odisha is expected to be operational by March
2015. With cement demand expected to pick up
from 2HFY2015 aided by improvement in
economy JK Lakshmi
economy,
Lakshmiss capacity additions are
expected to drive its growth.

Ramping up Capacity
12.0

10.6

10.0
8.0

8.0

(mtpa)

6.0

5.4

5.4

FY13

FY14

40
4.0
2.0
0.0

Source: Company, Angel Broking

FY15E

FY16E

JK Lakshmi Cement
Ev/tonne band
30,000

EV/tonne

$40

$55

$70

$85

25,000
20,000
15,000
10,000
5,000

Source: Company,
Company

Valuation Snapshot
Y/E
March

Sales
S
l
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/tonne
EV/
(US $)

FY2015E

2,318

15.3

104

8.9

7.6

20.1

1.5

9.8

68

FY2016E

2,819

17.2

156

13.3

10.5

13.4

1.4

6.9

65

17

Apr-14

Apr-13

Oct-13

Apr-12

Oct-12

Apr-11

Oct-11

Apr-10

Oct-10

Apr-09

Oct-09

Apr-08

Oct-08

Apr-07

Oct-07

Apr-06

Oct-06

Apr-05

Oct-05

Apr-04

Oct-04

Apr-03

Oct-03

0
Oct-02

Stock available at attractive valuations: We

expect JKLCs top-line and bottom-line to grow
at a CAGR of 20% and 36% over FY2014-16E.
Currently the stock is trading at US$65/tonne
$
(vs. replacement cost of US$ 140/tonne), ie at a
huge discount to valuation of many of its large
cap players peers ( EV/tonne in the range of
US$ 115 to
t US$165) and
d its
it other
th
mid-cap
id
peers like Ramco Cements (currently trading at
US$ 88/tonne). The stock has rallied
considerably over the past few months, but we
still believe there is significant upside in the stock
considering its attractive valuations. We maintain
a Buy on the stock with a Target Price of `215.

EV (` mn)

KEC Intl.
(CMP: `118, TP: ` 140, Upside: 19%)

18

Further, we believe KEC to be well poised and

be among
g the keyy beneficiaries of an eventual
recovery in the Indian economy

12,000

9.9

9.9

11.1

10.3

12

10.5
8.7
63
6.3

10,000

1.0

7.7

10
8

10,200

10,250

10,200

10,056

9,470

10,150

9,386

9,462

8,000

8,572

6
4
2

Order Backlog (` cr, LHS)

So rce Company,
Source:
Compan Angel Broking

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

0
3QFY13

6,000
2QFY13

The strong order accretion over FY2014 has led

to a robust order backlog of `10,200cr,
implying an order book coverage of 1.3x
1 3x its
trailing 4 quarter revenues.

Strong order book

1QFY13

Robust order inflow from international markets

led to strong order book: In spite of slowdown in
investment cycle in India, KEC reported a 13.3%
yoy growth
h in order
d
inflow
fl
to `8,482cr in
FY2014, mainly on account of good ordering
from international markets, which now
contribute almost 57.9% to the companys total
order
d inflow.
i fl

4QFY12

Growth (yoy %, RHS)

KEC Intl.
8.2

7.6
6.3

5.8
5.1

7.0

6.4

5.0

151

EBITDAM (%, RHS)

EBITDA (` cr, LHS)

Source: Company, Angel Broking

Valuation Snapshot

Outlook and valuation: Considering KECs

geographically diversified business model which
insulates it from slowdown in any particular region,
strong order
d book
b k and
d expected
d margin recovery,
we recommend Buy rating on the stock with a target
price of `140.

Y/E
March

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2015E

8,657

7.2

182

7.1

22.9

16.7

2.3

7.4

0.5

FY2016E

9,879

7.5

255

9.9

24.7

11.9

2.0

6.2

0.5

19

9
8
7
6
5
4
3
2
1
0

4QFY14

142

88
1QFY14

3QFY14

89
4QFY13

112

103
3QFY13

2QFY14

86
2QFY13

4.1

103

180
160
140
120
100
80
60
40
20
0

1QFY13

However, the Management has assured that

most of the low margin orders have already
g
been executed,, while a few of such remaining
orders are in final stages and expected to
achieve closure in the next 3 to 4 months.
Hence, we expect overall margins to improve in
FY2015.

Margin pressure is easing

170

Margin pressure expected to ease further in

FY2015:
Although
transmission
segment
margins continue to be good (between 9.0% to
9 5%) power systems,
9.5%),
t
cables,
bl
and
d relatively
l ti l new
segments of railway and water are currently
operating at low/negative margins which is
exerting pressure on the companys operating
margin
margin.

4QFY12

Kirloskar Oil Engines

(CMP: `231/ TP: `290/ Upside: 26%)

O year fforward
One
d P/E
250
200
150
100

10x

Price (`)

12x

14x

16x

Source: Company, Angel Broking

Valuation Snapshot
Y/E
March

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2014E

2,421

12.4

204

14.1

15.3

16.4

2.4

8.7

1.1

FY2015E

2,651

12.6

233

16.1

15.8

14.3

2.1

7.1

0.9

20

May-14

Feb-14

Nov-13

Aug-13

May-13

Feb-13

Nov-12

Aug-12

May-12

Feb-12

Nov-11

50
Aug-11

Increasing promoters
promoters stake and cash rich position:
Promoters have raised their stake from 66.9% in
Dec 2011 to 72.7% in Mar 2014. With zero debt
on books, minimum capex requirement and
subsidy earned on the Kagal plant, the company is
expected have a cash and cash equivalent of
`772cr by FY2016E.

Outlook & Valuations: A revival in the economy

coupled with operating leverage will be strong
driving factors for the companys growth. At CMP,
it is trading at a PE of 14.3x
14 3x for FY2016E.
FY2016E We
maintain our Buy recommendation on the stock
with a target price of `290 with a target PE of
18.0x for FY2016E.

Jun-11

Long term prospects intact on account of operating

leverage: KOEL is the flagship company of the
Kirloskar group. It is one of the worlds largest
generating set (genset) manufacturers,
manufacturers operating at
a capacity utilization level of 55%. With capacity
already in place and minimum capex requirement
in near future, we expect that once the operating
leverage
g starts p
paying
y g off,, it will directlyy shoot up
p
the bottom-line of the company, which is expected
to grow at a CAGR of 14.3% over FY2014-16E at
`233cr.

(`)

MM Forgings
(CMP: `146/ TP: `222/ Upside: 52%)

300
250
200
150
100
50

2x

Price (`)

4x

6x

Jan-14

Sep-13

May-13

Dec-12

Aug-12

Apr-12

Nov-11

Jul-11

Mar-11

Nov-10
0

Jun-10
0

0
0
Feb-10

On the domestic front,

front CV industry faced de-growth
de growth
in FY2012-14 because of the shelved and stalled
infra projects. However, with new government
coming in, we expect the project clearance to
happen
appe a
at faster
as e pace leading
ead g to
o sstructural
uc u a revival
ev va in
the overall CV industry. These factors collectively will
help in driving company's revenue.

O year fforward
One
d P/E

Oct-09

Exports contributed ~70.0% to the revenue in

FY2013 with major export markets as America and
Europe. After the recession, the American economy
is now seeing an upturn, and thus we are witnessing
a growth in CV sales as well.

Outlook & Valuations: Backed by increased capacity and

improvement in the economy of its major export markets America and Europe, we are positive on the company
from a long term perspective. On account of positive
growth outlook and low valuation we recommend Buy on
the stock with a target price of `222 at a target PE of 6.0x
FY2016E earnings.

Jun-09

Sufficient capacity to cater to improving demand

across the globe: MMFL is one of the largest
exporters of forgings from India with a capacity of
40,000MT. It is now focusing on optimum capacity
utilisation to take advantage of the production
capacities that it has created.

(`)

8x

Source: Company, Angel Broking

Valuation Snapshot
Y/E
March

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2014E

469

19.2

36

29.6

17.4

4.9

0.8

3.4

0.7

FY2015E

534

19.3

45

37.0

19.3

16.7

0.7

3.0

0.6

21

NCC
(CMP: `81/ TP: `100/ Upside: 23%)

22

The companys
p y order book stands at `20,956cr
as at the end of FY2014, indicating order book
to sales of 3.4x trailing revenues, which provides
comfort on the revenue visibility front.

21,500
21,000

25.0

18.5

20.0

20 500
20,500

13 0
13.0

15 0
15.0

20,000

10.0

4.3

19,500

5.0

3.1

19,000

0.0

18,500
(11.8)

20,956
6

(14.5)

19,612
2

17,000

(5.0)
20,247
7

17,500

(8 1)
(8.1)

18,098
8

18,000

18,553
3

NCC has secured orders worth `9,385cr in

FY2014, which is higher than our expectation as
well as the Managements guidance of `6,600cr
for the full year. Further, the Management has
assured
d that
h these
h
orders
d
h
have
b
been
b k d at
booked
higher margins due to reduction in competitive
intensity.

Healthy order book

18,799
9

Execution pick up & healthy order book provides

revenue visibility: After weak execution in
1HFY2014 (up 4.5% yoy), execution has picked
up in
i 2HFY2014 (up
(
25 3% yoy).
25.3%
) According
A
di
t
to
the Management, execution pick-up will
continue as the under construction projects are
being executed at a steady pace.

19,639
9

16,500

(10.0)
(15.0)
(20.0)

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

Order Booking (` cr, LHS)

So rce Company,
Source:
Compan Angel Broking

Growth (yoy %, RHS)

NCC

35
30

15

0.9

0.8

1.0

0.6
0.4

0.5

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

0
(5)

PAT (` cr, LHS)

(10)

32

(0.5)
(7)

11

10
5

0.0

4QFY14

(0.5)

PATM (%, RHS)

(1.0)

S
Source:
C
Company,
A
Angel
l Broking
B ki

p
substantial reduction in debt
Hence,, we expect
over FY2015, thereby reducing interest expense
and increasing profitability.

Outlook and valuation: Considering the expected

pick-up in execution and order inflows as well as
likelyy reduction in debt,, we recommend Buyy on the
stock with a target price of `100.

Valuation Snapshot
Y/E
March

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2015E

6,699

7.8

75

2.9

2.9

27.7

0.8

8.5

0.7

FY2016E

7,654

8.0

117

4.6

4.4

17.7

0.8

7.0

0.6

23

2.0
15
1.5

25
20

1.7

1.6

27

Further, the company is also in the process of

further reducing its debt through completion of
stake sale in the Himachal Sorang project and
Nelcast Power Project and stake sale in two of its
road
d BOT projects (Western UP Tollways
ll
and
d
Bangalore Elevated Expressway). It also plans to
raise equity through a rights issue.

Expect profitability to improve going ahead

11

Expect profitability to improve going ahead as

debt and interest reduces: In the last couple of
years, NCCs profitability has been adversely
affected
ff
d by
b higher
hi h
i
interest
expense (due
(d
to
increasing debt and high interest rates).
However, NCC has already pared down its debt
by `250cr to `2,470cr in 4QFY2014 itself.

South Indian Bank

(CMP: `28/ TP: `36/ Upside: 29%)

24

Asset quality witnessed improvement in 2HFY2014

Gross NPAs (` cr)

Net NPA (` cr)

PCR (%, RHS)

62.7
57.9

64.0
59.0

55.8

53.2

53.5

54.0

433
282

49.0

555
392

675
600
525
450
375
300
225
150
75
-

614
440

Asset
quality
showed
improving signs:
After
witnessing
severe
pressures
over
1HFY2014, the banks asset quality improved
during 2HFY2014, aided by lower fresh addition
of stressed assets and healthy recoveries/
upgrades (at `317cr in 2HFY2014 compared

to `148cr in 2HFY2014). Going forward, the

Management
is
optimistic
of
healthy
recoveries/upgrades of stressed loans aiding
further asset quality improvement.

493
348

Attractive bet for Increased Mergers &

Acquisition opportunities in the sector: The RBI
has just granted new banking licenses to two
applicants and with recent guidelines even
allowing foreign banks to take over banks in
India (subject to conditions), M&A activity in the
sector may increase going forward. South Indian
B k (SIB),
Bank
(SIB) a mid-sized
id i d Private
P i t bank
b k with
ith healthy
h lth
return ratios, healthy operating metrics and
decent network presence/customer base is an
attractive bet not only from a standalone
investment point of view but also as a potential
takeover target, keeping in mind current
valuation parameters like P/ABV and Market
cap/Branch.

434
250

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

44.0
39.0

Source: Company, Angel Broking

South India Bank

One year forward P/ABV

0.5x

Price (`)

0.8x

1.1x

1.4x

1.7x

45
40
35
30
25
20
15
10
5

Source: Company, Angel Broking

Valuation: With healthy capital adequacy and

reasonable profitability, the bank currently
trades at relatively moderate valuations of 0.9x
FY2016E ABV. We recommend a Buy rating on
the stock with a target price of `36.

Valuation Snapshot
Y/E
March

Op. Inc
(` cr)

NIM
(%)

PAT
(` cr)

EPS
(`)

ABV
(%)

ROA
(x)

ROE
(x)

P/E
(x)

P/ABV
(x)

FY2015E

1,969

2.7

558

4.2

26.6

0.9

16.2

6.4

1.0

FY2016E

2,241

2.7

653

4.9

30.3

0.9

16.7

5.5

0.9

25

Apr-14

Dec-13

Aug-13

Apr-13

Dec-12

Apr-12

Aug-12

Dec-11

Apr-11

Aug-11

Dec-10

Apr-10

Aug-10

Dec-09

Apr-09

Aug-09

Dec-08

Apr-08

Aug-08

Dec-07

Apr-07

Aug-07

Dec-06

0
Apr-06

Healthy capital adequacy, profitability matrix

provides comfort: Over the past five years, SIBs
loan book grew at a healthy CAGR of 25%,
thereby
h b driving
di i
earnings
i
CAGR off 21% yoy. But
B
in light of current macro challenges, growth in
loan book and earnings has moderated.
However, the banks tier-I CAR stands at a
healthy 10.8%,
10 8% and this is expected to generate
RoEs of ~16% over the next two years, which
gives it enough headroom to grow at a healthy
pace,
with
increased
expectations
of
improvement in business environment.
environment

Aug-06

Siyaram Silk Mills

(CMP: `390/ TP: `654/ Upside: 68%)

One year forward P/E

700
600
500
400
300
200
100

2x

Price (`)

Valuation Snapshot
Y/E
March

4x

6x

8x

Source: Company, Angel Broking

Sales
(` cr)

OPM
(%)

PAT
(` cr)

EPS
(`)

ROE
(%)

P/E
(x)

P/BV
(x)

EV/EBITDA
(x)

EV/Sales
(x)

FY2015E

1,525

10.7

80

85.3

19.7

4.6

0.8

4.1

0.4

FY2016E

1,783

10.8

102

109.0

20.9

3.6

0.7

3.3

0.4

26

May-14

Nov-13

May-13

Nov-12

May-12

Nov-11

May-11

May-10

Nov-10

0
Nov-09

Rigorous advertisement and retail expansion to push

demand: SSML is aggressively spending on advertisements
and has roped
p in celebrities like M S Dhoni ((Siyarams,
y
,
MSD), Neil Nitin Mukesh (Mistair), Saif Ali Khan (Oxemberg)
and Hrithik Roshan (J. Hampstead) as brand ambassadors
for its products, which has helped it in brand building and
improving visibility. Also, the company plans to increase the
number
b off stores to 500 (existing 160) through
h
h franchisees
f
h
by FY2017E.

Outlook & Valuations: SSMLs market leadership in

blended fabrics, strong brand building, wide
distribution channel, strong presence in tier II and
tier III cities and emphasis on latest designs and
affordable pricing points are the growth drivers for
the
company.
We
maintain
our
Buy
recommendation on the stock with a target price
g PE of 6.0x for FY2016E.
of `654 with a target

Jun-09

Demand for blended fabric to drive growth: Being the

largest manufacturer of blended fabric in India, SSML enjoys
a 4% market share in the organized market in this segment.
Increasing demand in this segment places SSML in a sweet
spot. Fabric and garment segments have witnessed growth
of 11.3% and 30.8% yoy in FY2014 and we expect these
divisions to continue its momentum going forward driving
grow at a CAGR of 17.0% to `1,783
,
in
the revenue to g
FY2016E.

(`)

Styrolution
(CMP: `459/ TP: `566/ Upside: 23%)

Valuations: With initiation of revival in the

economy, we expect Styrolutions revenue to post a
CAGR of 7.4% over CY2013-15E. The EBITDA
margins
i are to
t stabilize
t bili with
ith stabilizing
t bili i currency att
7.2% in CY2015E. The net profit is to register a
CAGR growth of 10.6%. We recommend Buy
rating on the stock with the a target price of `566,
based on target PE of 17x for CY2015E.
CY2015E
One year forward P/E
1000

Price

2.5x

8.5x

14.5x

20.5x

800
600

Margins expected to improve : Styrolution imports

about 81% of the total raw materials used for
production. However, with currency stabilizing at
expected lower levels of 57-58, will result in the
improvement in operating margins for the company.

400
200

Source: Company, Angel Broking

Valuation Snapshot
CY2014E

Sales
(` cr)
1,172

OPM
(%)
7.0

PAT
(` cr)
52

EPS
(`)
29.7

ROIC
(%)
13.1

P/E
(x)
15.5

P/BV
(x)
1.5

EV/Sales
(x)
0.7

CY2015E

1,288

7.0

59

33.3

13.9

13.8

1.4

0.6

Y/E Dec

27

May-14

Nov-13

May-13

Nov-12

May-12

Nov-11

May-11

Nov-10

May-10

Nov-09

0
May-09

Persisting ABS short supply coupled with capex to

be key growth driver: The gap between domestic
demand for ABS vis-a-vis the supply has persisted
f long
for
l
and
d the
th same still
till continues
ti
t exist.
to
i t The
Th
unfulfilled demand is being met by the imports of
ABS. Moreover, the revival in economy due to
stable government is expected to drive the growth
in the user industries like automobiles and
consumer durables (60% of ABSs industrial
demand) which will further extend the gap.
Styrolutions recent commencement of a new line
for Absolan, is hence expected to enable the
company en-cash the mounting demand.

(`)

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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recipient and must not be singularly used as the basis of any investment decision.
decision Nothing in this document
should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent
evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to
determine the merits and risks of such an investment.
Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent
with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe
to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to
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