India Equity Analytics-Persistent System: Focusing on the increase IP-led revenues

8/13/2019 India Equity Analytics-Persistent System: Focusing on the increase IP-led revenues

1/20

IEA-Equity

Strategy

13th Dec, 2013

Jyothy Lab : "Efforts for stability" "BUY" 5th Dec 2013

Recent management commentary reveals that the company is planning for inorganic growth with Rs 250 Cr of bank balance (post repayment o

its debt) and especially looking at regionally strong brands. We expect that companysnew management and new strategy of product reach

would energize its growth story in near future. Hence, the management has maintained its guidance of achieving around 22% - 25% revenu

growth and OPM of 14% - 15% for FY14............................... ( Page : 17-19)

Amara Raja Batteries Limited : OPTIMISTIC MANAGEMENT SPEECH "BUY" 6th Dec 2013

Amara Raja had posted its 2QYFY14 sales at Rs 805 Cr up by 12.3 % YoY on the back of the strong demand in the automotive replacement and

industrial battery business. There was double digit growth in both of these segments.The automotive battery business reported double digit

growth in revenues........................................ ( Page : 15-16)

NIIT Tech : "Next Journey to Billion Dollar" "BUY" 9th Dec 2013

NIIT Tech management expressed its confidence of driving growth in the organization and looking at an aspirational goal of USD 1 billion

revenue in next 5 years.its order wins in the recent quarters have been healthy, lending visibility on revenue growth. At a CMP of Rs332, trade

at 7.5x FY14E earnings. We retain buy view on the stock with a price target of Rs360 (revised from Rs310).............................................

-

TATA Steel Ltd : "HOLD" 10th Dec 2013

Over the past two quarters, Tata Steel has reported strong growth in volumes in the domestic operations despite weak demand. Its Europe

operations have been broadly better than expectations indicating some stability and predictability from its Europe operations. Tata Steel

earnings growth is likely to be driven by higher sales volume in FY2014-15 on the back of 2.9mn ton brownfield expansion project in

Jamshedpur and steady improvement in profitability of European operations. We have arrived at "Hold" rating on the stock watching our step

for a target price of Rs.340 in near term. ................... ( Page : 9-12)

LUPIN : "Optimistic Guidance " "BUY" 11th Dec 2013

The management of the company in its latest interaction said that company is confident of logging 15-20 % CAGR in US and India in the days to

come on the back of rich pipeline as well as acquisition based strategy . ( Page : 7-8)

COAL INDIA : "BUY" 12th Dec 2013

We expect modest increase in sales volumes growth during FY2013-15 on account of poor offtake capabilities of CIL. Also, we expect CIL

margins to decline during FY2014 due to lower e-auction realizations and higher staff costs/other expenses.News flows related to further

divestment in CIL by the government is likely to keep the stock price under pressure in our view. we recommend Buy rating on the stock with

our previous target price Rs.350............................................ ( Page : 4-6)

Persistent System : "Persistently innovating.." "BUY" 13th Dec 2013

With the potential revenue growth, strong deal pipeline and multi-year relationships with marquee clientele in the Infrastructure vertical, we

upgrade this stock and expect for better earning visibility across niche IT players.we rateBUYon the stock and we revise our target price from

Rs 890to Rs 960. At a CMP of Rs 876, stock trades at 13.8x FY14E earnings........................ ( Page : 2-3)

email: [email protected], website : www.narnolia.com

Narnolia Securities Ltd,

402, 4th floor 7/1, Lords Sinha Road Kolkata 700071, Ph 033-32011233 Toll Free no : 1-800-345-4000

India Equity Analytics


2/20

Persistent System.

BUY

8%

1M 1yr YTD

bsolute 7.5 83.5 126.6

l. to Nifty 4.9 77.8 107.9

Current 1QFY14 4QFY13

omoters 38.96 38.96 38.96

15.28 14.84 12.39

I 21.23 19.31 21.59

hers 24.53 26.89 27.06

Financials

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

Revenue 432.37 357.29 21.0 326.86 32.3

EBITDA 100.8 76.8 31.3 89.06 13.2

PAT 60.8 57.1 6.5 44.71 36.0

EBITDA Margin 23.3% 21.5% 180bps 27.2% (390bp

PAT Margin 14.1% 16.0% (190bps) 13.7% 40bps

With the potential revenue growth, strong deal pipeline and multi-year relationsh

with marquee clientele in the Infrastructure vertical, we upgrade this stock and expe

for better earning visibility across niche IT players.

Recently , Persistent System reported superlative set of numbers during the 2QFY

with 21%(QoQ) sales growth in INR term and 8.6%(QoQ) growth in USD term led

38%(QOQ) growth on the intellectual property (IP) revenues. PAT growth was at 6.5

(QoQ).

Margin ramp up:During the quarter, Its EBITDA margin improved by 180bps to 23.3

positively impacted by currency gain(270bps), while during the quarter company wa

hike to its off shore employee at a range of 8-9% was impacted margin by 310 badversely. However, management expects to maintain margin at a range of 24-25% f

FY14E.

On segmental front: The Companys cash cow segment Infrastructure and Syste

which contributes 69% on sales, grew by 21% and life science (13% contribution

sales) was up by 57% sequentially. While, Telecom space (17.6% contribution on sale

increased marginally by 3% (QoQ).

Clients Metrics: During the quarter, company added 2 clients at 32 under mediu

category( >$1mn to $3mn) and 1 client at 16 from large ( > $ 3Mn) . Revenue from top

client was improved from 21.2% (1QFY14) to 22.5% . DSO at 62days, almost

quarters low.

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

3505

erage Daily Volume 12139

year forward P/E-x

Rs, Cro

(Source: Company/Eastwi

View and Valuation:Thecompanysfocus is shifting greater proportion to IP led servic

and company has marquee clientele in cutting-edge technologies around clou

mobility, collaboration and analytics; witnessing faster growth. Considering t

companysability to achieve scale and growth, we rateBUYon the stock and we rev

our target price from Rs 890 to Rs 960. At a CMP of Rs 876, stock trades at 13.8x FY14

earnings.

Persistent's management suggests that deal pipeline are looking strong and seegood activity and traction in the market across the board. Its focus on some of new

technologies like cloud, analytics and mobility are gaining a lot of traction because

pickup in demand environment. The emerging themes, (CAMB) Cloud, Analyti

Mobility, and Big data could also see strong demand traction ahead. Because

actively investment in these themes, management is very confident to see healt

growth and also they expressed their confidence to beat the NASSCOM guidance (1

14% revenue growth for FY14E).

arket Data

E Code 533179

SE Symbol PERSISTENT

kt Capital (Rs Crores)

wk Range H/L 906/477

"Persistently innovating.."

ompany update

MP 876

rget Price 960

Persistent Sytems management remains confident of FY14 with deal pipeline bei

strong and remains focused on increasing the share of IP-led revenues in its portfol

The management expects to see more than 15% dollar revenue growth, more th

NASSCOM guidance of 12-14 % for FY14E.

fty

are Holding Pattern-%

6237

ock Performance

ange from Previous

evious Target Price 890

pside 10%

"BUY"13th Dec' 13



3/20

nancials


Persistent S stem.


perating Metrics


2QFY12 3QFY12 4QFY13 1QFY13 QFY13 3QFY13 4QFY13 1QFY14 2QFY1

op1 16.0% 15.9% 17.2% 17.8% 20.7% 21.1% 21.6% 21.2% 22.5%

op 5 38.6% 37.0% 36.6% 33.5% 36.3% 37.3% 36.7% 34.7% 36.4%

op 10 49.4% 48.3% 48.8% 45.3% 47.0% 49.4% 47.9% 46.0% 47.3%

nsite - Linear 12665 12387 12603 12789 12863 12772 14014 14567 1428

ffshore - Linear 3803 3778 3895 3898 3978 4032 4143 4111 4109

eild per Employee(excld- Trainee) 3208 3247 3350 3345 3746 3817 3769 3602 3919

otal Employee 6900 6706 6628 6536 6370 6719 6970 7144 7457

ttrition 17.7% 17.4% 18.3% 18.9% 16.9% 16.0% 14.4% 14.2% 14.0%

tilization rate %(xclude IP Led ) 73.8% 74.1% 71.7% 74.1% 75.2% 77.3% 72.5% 70.0% 71.7%

lling Rate-USD/ppm

mployee Metrics

ient Concentration

s in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

ales 601.16 775.84 1000.3 1294.5 1657.54 2053.93

mployee Cost 368.74 481.62 599.05 719 895.07 1119.39

ost of technical professionals 0 30.67 41.68 54 82.88 102.70

ther expenses 86.05 105.24 135.2 218 290.07 379.98

otal expenses 454.79 617.53 775.93 990.78 1268.02 1602.06

BITDA 146.37 158.31 224.37 303.72 389.52 451.86

epreciation 33.52 42.39 61.1 78 93.54 84.18

ther Income 11.23 34.44 34.44 34.44 66.30 71.89

BIT 112.85 115.92 163.27 225.44 295.98 367.68

nterest Cost 0 0 0.00 0.03 0.00 0.00

rofit (+)/Loss (-) Before Taxes 124.08 150.36 197.71 259.851 362.29 439.57

rovision for Taxes 9.05 10.62 55.09 75.37 108.69 131.87

et Profit (+)/Loss (-) 115.03 139.74 142.62 184.481 253.60 307.70

rowth-% (YoY)ales 1.2% 29.1% 28.9% 29.4% 28.0% 23.9%

BITDA 60.2% 8.2% 41.7% 35.4% 28.3% 16.0%

AT 74.1% 21.5% 2.1% 29.4% 37.5% 21.3%

xpenses on Sales-%

mployee Cost 61.3% 62.1% 59.9% 55.5% 54.0% 54.5%

ther expenses 14.3% 13.6% 13.5% 16.9% 17.5% 18.5%

ax rate 7.3% 7.1% 27.9% 29.0% 30.0% 30.0%

Margin-%

BITDA 24.3% 20.4% 22.4% 23.5% 23.5% 22.0%

BIT 18.8% 14.9% 16.3% 17.4% 17.9% 17.9%

AT 19.1% 18.0% 14.3% 14.3% 15.3% 15.0%

aluation:MP 310.0 366.7 409.2 541.0 876.0 876.0

o of Share 4.0 4.0 4.0 4.0 4.0 4.0

W 639.0 747.1 840.5 1018.3 1234.4 1504.7

PS 28.8 34.9 35.7 46.1 63.4 76.9

VPS 159.7 186.8 210.1 254.6 308.6 376.2

oE-% 18.0% 18.7% 17.0% 18.1% 20.5% 20.4%

/BV 1.9 2.0 1.9 2.1 2.8 2.3

/E 10.8 10.5 11.5 11.7 13.8 11.4


4/20

Coal India LTD.

CCIs Rs 1,773-crore penalty:

289

350

35021%

NA

533278

176226 Coal India to get Rs 2,119 cr extra on coal price revision :

17622

6308

1M 1yr YTD

solute -1.3 -21.2 -21.4

l. to Nifty 2.8 8.8 8.6

2QFY14 1QFY14 4QFY13

omoters 90.0 90.0 90.0

5.5 5.4 5.4

5.3 2.3 2.0

hers 2.2 2.4 2.6

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY1

Net Revenue 15411 5.8 -6.4 14573 1647

EBITDA 2794 -2.4 -29.4 2862 395Depriciation 495 27.8 4.1 387 47

Interest Cost 8 -22.2 7.0 10

Tax 1412 -4.2 -27.9 1475 195

PAT 3052 -0.8 -18.2 3078 373(In Cr

ompany Update

MP The Competition Commission of India (CCI) imposed a Rs 1,773 cr fine on Coal India, th

country' monopoly commercial coal miner, based on a complaint filed by two powe

companies that India's monopoly producer of coal abused its dominance. Thgovernment owns 90% stake in Coal India, and has traditionally drawn hefty dividen

income from the cash rich coal company. In 2012-13, the company paid a total dividen

of Rs 8,843 cr out of which the government's share was Rs 7,959 cr. A Rs 1800-crore fin

could possibly mean less profits for the company and less dividend income for its owner

But as the main owner, the government, will pocket this amount in the form of a fine,

will not be poorer in any way.

rget Price

evious Target Priceside

ange from Previous

arket Data

E Code

E Symbol COALINDIA



erage Daily Volume (Nos.) Coal India Ltd is likely to get additional revenue of Rs 2,119 cr in this fiscal on account o

revision in dry fuel prices.CIL (Coal India Ltd) has revised and rationalized the basi

notified prices of all the grades of non-coking coal except GI, G2 and G5.The estimateadditional revenue due to revision of basic notified price for the current financial year

Rs 2,119 cr.CIL had revised the prices of all grades of coal, barring three, for all its eigh

producing subsidiaries with effect from May 28 this year. Mahanadi Coalfields which

expected to contribute Rs 686 crore, followed by Rs 664 crore from Northern Coalfield

and Rs 495 crore from South Eastern Coalfields.

fty

ock Performance-%


Thecompanys net sales grew 5.8% yoy to 15,411cr (above our estimate of 15,083cr

Sales volumes stood at 109mn ton in 2QFY2014 compared to 102mn ton in 2QFY2013

The blended realizations declined by 1.4% yoy to 1,414/ton (despite price hike) due t

lower realization on FSA coal.Despite 5.8% yoy growth in top-line, EBITDA decreased b

8.2% yoy to 3,176cr due to higher raw material costs (18.1% yoy to 2,251cr) an

contractual expenses (27.6% yoy to 1,394cr). The depreciation expenses increased b

27.8% yoy to 495cr; hence, adjusted net profit was flat yoy at 3,043cr .yr Forward P/B

Coal India 2QFY2014 top-line was above our estimate. The companys net sales grew

5.8% yoy to 15,411cr. Sales volumes stood at 109mn ton in 2QFY2014 compared t

102mn ton in 2QFY2013. The blended realizations declined by 1.4% yoy to 1,414/to

despite price hikes. Its FSA coalsrealizations were lower than expected due to lowe

grade coal. The company liquidated 11mn ton of old stock.

Source - Comapany/EastWind Research


"Buy"12nd Dec' 13



5/20

UTLOOK:

FY10 FY11 FY12 FY13

431 431 436 452

416 425 433 465

1073 1183 1441 1468

404744 390243 377447 364736

1066 1105 1155 1240

FY11 FY12 FY13 FY14E

50234 62415 68303 69864

7573 5123 6556 8383

1755 2013 2333 2595

4580 4901 5802 6057

20481 26705 27943 28943

40390 40857 50219 53738

9843 21558 18084 16126

1673 1969 1813 1860

79 54 45 345595 6484 7623 7332

10868 20588 17356 15870

33 51 36 33.1

Coal India LTD.

oal India 2QFY2014 top-line was above our estimate. The companysnet sales grew

8% yoy to 15,411cr. Sales volumes stood at 109mn ton in 2QFY2014 compared to

2mn ton in 2QFY2013. The blended realizations declined by 1.4% yoy to 1,414/ton

spite price hikes. Its FSAcoalsrealizations were lower than expected due to lower

ade coal. The company liquidated 11mn ton of old stock.

Lse-auction realizations have declined over the past one year on account of decline

international coal price coupled with weak domestic demand. Going forward, we

pectCILsprofitability to be affected due to lower e-auction realizations, sticky staff

sts and other expenses. Moreover, given the price hike taken during 4QFY2013, we

not expect CIL to undertake any further price hikes in the near-term.

e expect modest increase in sales volumes growth during FY2013-15 on account of

or offtake capabilities of CIL. Also, we expect CILsmargins to decline during FY2014

e to lower e-auction realizations and higher staff costs/other expenses.News flows

ated to further divestment in CIL by the government is likely to keep the stock price

der pressure in our view. we recommend Buy rating on the stock with our previous

rget price Rs.350.

et Revenue from Operation

PERATING MATRIX

al Production in MT

oal Offtake in MT

venue Generation From unit Ton

vg Man Power (in numbers)

oductivity Per Man

L PERFORMANCE

OE

ost Of Projects & Contractual

wer and fuel

ntractual expenses

mployee benefit Expence

penditure

ITDA

epriciation

terest Costx

AT



6/20

FY10 FY11 FY12 FY13

6316 6316 6316 6316

20956 26998 34137 42156

27273 33314 40453 48472

343 1334 1305 10781620 33 0 0

2545 22461 28271 31144

772 645 829 837

1404 12387 15595 20447

5443 8490 9785 12385

0 779 759 712

12035 12065 12681 12754

2211 2057 1848 3496

610 845 1017 1181

4402 5586 6071 5618

2169 3419 5663 10480

39078 45806 58203 62236

8066 11180 13478 16189

17921 21646 24688 25479

FY10 FY11 FY12 FY13

0.0 5.7 5.5 4.0

0.0 17.3 32.6 27.5

4.9 22.8 29.2 52.7

1.7 4.3 4.3 4.2

1.0 3.7 3.1 2.8

FY10 FY11 FY12 FY13

10727 12819 16323 15948-131 -3822 3565 -6839

10596 8997 19888 9109

950 697 -10410 -1833

2163 2911 -7382 -7852

13708 12606 2095 -575

Down 21% from its 52week High

Up 14% from its 52 week Low

6

tal equity

Coal India LTD.

S PERFORMANCE

are capital

serve & Surplus

ngible assets

ng-term borrowingsort-term borrowings

ng-term provisions

ade payables

ort-term provisions

tal liabilities

tangibles

pital work-in-progress

ng-term loans and advances

ventories

ade receivables

sh and bank balances

ort-term loans and advances

ebtor to Turnover%

tal Assets

ATIOS

B

S

editors to Turnover%

ventories to Turnover%

ASH FLOWS

sh from Operationanges In Working Capital

sh From Investment

sh from Finance

et Cash Flow during year

rading At :

et Cash From Operation



7/20

BUY

1M 1yr YTD

bsolute -1 46 41

el. to Nifty -4 39 23


omoters 46.8 46.8 46.8

31.5 30.7 28.8

I 12.1 12.4 14.3

hers 9.7 10.1 10.0

Financials Rs, Cro


Revenue 2668 2476 7.8 2301 15.9

EBITDA 660 590 11.9 515 28.2

PAT 417 405 3.0 297 40.4

EBITDA Margin 24.7% 23.8% 90bps 22.4% 240bps

PAT Margin 15.6% 16.4% (70bps) 12.9% 270bps

hange from Previous -


SE Symbol LUPIN

arket DataSE Code 500257

15%pside

We have slightly raise our TP to Rs 1006 on the back management guidance post t

results. The management is quite optimistic for its business outlook going forward a

believes that the company will achieve its set target going forward.

The Net profits for 2QFY14 came at Rs 417 Cr. The higher incidence of tax during t

quarter is due to tax provision of Rs 51 Cr made on dividends received from subsidiaries

Lupin earlier posted slightly better than expected 2QFY14 results ,the company report

its net sales at Rs 2631 Cr up by 18 % YoY on the back of strong business performan

from US and Europe formulation segment. The segment grew by 31% YoY to Rs. 1108

Cr during 2Q FY14, against Rs. 844.4 Cr for Q2, FY 2012

13.This segment contribu

42% to overall Company sales.US brands business contributed 10% of total US sale

whereas the generics business contributed 90% for the quarter under review.

The Indian formulation business contributed 25% of the Company

overall revenues for the quarter.Companys India formulation business grew by 9

recording revenues of Rs. 6,635 m. during Q2, FY 2013

14, as compared to Rs. 6,064

for Q2, FY 2012

13. The companysrest other business geographies to have performrelatively good for the company.

The company has filed 7 ANDAs and received 6 ANDA approvals in the quarter. Cumulat

ANDA filings with the US FDA now stand at 183 with the company having received approvals to date.

ock Performance-%

hare Holding Pattern-%

kt Capital (Rs, Cr)

The operating EBITDA for the 2QFY14 came at Rs 660 Cr and OPM stands at 24.7%.T

RM cost decreased by 7.7% to 32.0% of net sales at Rs. 841.3 Cr during 2QFY14

compared to Rs. 889.8 Cr for 2Q FY 13.Manufacturing & other expenses increased by

30.4% of net sales at Rs. 798.8 Cr during 2Q FY14 as compared to Rs. 591.7 Cr for t

same period last fiscal.Revenue expenditure on R&D stood at 8.3% of net sales at R

217.2 Cr.

fty 6332

ne Year Forward P/E


39101

verage Daily Volume 395892


LUPIN"Optimistic Guidance "

arget Price 1006

evious Target Price -

esult UpdateMP 873

The management of the company in its latest media interaction stated that the company

confident of logging 15-20 % CAGR in US and India in the days to come on the back of ri

pipeline as well as acquisition based strategy. Management further said that company

expecting to launch about 100 new drugs in next three years. This new launch will incluan entire range of oral contraceptives and opthal products.

"BUY"11th Dec' 13



8/20


LUPIN

les and PAT Trend (Rs)

(Source: Company/Eastwind)

PM %

PM %

company reported its net sales at Rs 2631up by 18 % YoY on the back of stro

business performance fr

USandEuropeformulation segment.

The higher incidence of tax during

quarter is due to tax provision of Rs 51

made on dividends received from subsidiar





9/20

TATA Steel Ltd.

420

440

NA

5%

NA

From the Management Corner the key takeaways are :

500470

40863

28604

6363

1M 1yr YTD

solute 21.7 5.5 9.5

l. to Nifty 23.4 0.3 3.5

2QFY14 1QFY14 4QFY13

omoters 31.4 31.4 31.4

13.6 13.2 13.9

26.1 26.3 27.3

hers 29.0 29.2 27.5

Financials : Q2FY14 Y-o-Y % Q-o-Q % Q2FY13 Q1FY1

Net Sales 36645 7.4 11.7 34133 3280

EBIDTA 3705 60.4 0.5 2310 368

Other Income 203 0.5 10.3 202 18

Interest Cost 1067 9.8 7.6 972 99

Depriciation 1444 8.2 2.9 1335 140

Tax 447 -32.4 27.4 661 35

PAT 917 -325.3 -18.2 (407) 112(In C

Focus on Domestic Market: The Management aims to sell incremental sales volume

from Jamshedpur expansion mainly in the domestic market. This is unlike other flat ste

producers such as JSW Steel and Essar Steel who have been opportunistically raisin

exports, considering INR depreciation against the USD alongside low domestic demand.

Odisha Project could provide further upside in long-term: The Company aims to ma

value added steel products at the new facility in Odisha (3mtpa) where the blende

realizations could be potentially higher than existing products by 2015. We believe timeclearance for expansion of iron ore mine is critical for the plant. The company's Odish

plant is highly automated and will require fewer employees/ton compared to i

Jamshedpur facility.

Debt levels to rise:Debt of the company is likely to rise till 2015 as it draws debt fo

Odisha expansion.

arket Data

E Code

TATASTEEL

erage Daily Volume (Nos.)

E Symbol

wk Range H/L


448/195

fty


ock Performance-%


yr Forward P/B

Source - Comapany/EastWind Research

Outlook:Over the past two quarters, Tata Steel has reported strong growth in volumes the domestic operations despite weak demand. Its Europe operations have been broad

better than expectations indicating some stability and predictability from its Europ

operations. TataSteelsearnings growth is likely to be driven by higher sales volume

FY2014-15 on the back of 2.9mn ton brownfield expansion project in Jamshedpur an

steady improvement in profitability of European operations. We have arrived at "Hold

rating on the stock watching our step for a target price of Rs.340 in near term.

On the back of a consistent operational improvement at the companys Europea

operations We are positive on the stock in long run .However, on the back of ongoin

capacity expansion, the gross debt is expected to increase from 66074 crore (FY13) t

76919 crore (FY14E) and 77543 crore (FY15E).

side

ange from Previous

tial Coverage

MP

rget Price

Company Update:

TATASteelsconsolidated net sales increased 7.4% yoy to 36,645Cr. TSE sales volume

grew by 10.0% yoy to 3.46mt .The consolidated EBITDA increased by 60.4% yoy t

3,705cr. Thecompanystax expenses declined 32.3% yoy. There was an exceptional ga

related to deferred tax write-back of 390cr. Adjusting for this, the net profit stood a

527cr, compared to a loss of 407cr in 2QFY2013.

evious Target Price

"Hold"10th Dec' 13



10/20

DIAN Operation:

1

e Indian Steel industry witnessed an increase in crude steel production of 5.4% y-o-y,

here as the real consumption increased only by 3.3% with imports registering a sharp

crease on account of lower import duties applicable to ASEAN countries. The

owdown in fixed asset investment and lackluster automotive demand impacted

argins of steelmakers adversely. In Financial Year 2013-14, Indian operations are

pected to benefit on account of stabilization of the commissioned capacity, sourcing

ke internally and reduced impact of exchange fluctuations because of part liquidation

foreign currency loans. The shift to an enhanced product-mix with new cold rolling

cilities being set up and the collaboration with Nippon Steel to produce high strength

tomotive steels is expected to aid profitability.

UROPIAN Operation:

e apparent steel demand in the European Union continued to deteriorate during

nancial Year 2012-13 having decreased by about 9.7% in 2012. In aggregate, the steel

mand in Europe is currently about 30% below pre-crisis levels, which has impacted

e demand and customer buying behavior significantly. TSEs performance in thenancial Year 2012-13 was also impacted on account of operational issues faced in

building the Blast Furnace at Port Talbot, UK and undertaking of major repairs of the

ast Furnace at Ijmuiden. Even though the market demand was relatively muted. The

building of the Blast Furnace and other management tasks and initiatives may

sition TSE on a better platform for Financial Year 2013-14 even though the market is

pected to be subdued for the next 12 months. The European operations are

dertaking structural improvement measures including supply chain transformation,

fferentiated product strategy, reduction of manufacturing costs and overheads (head

unt currently 25% below pre-crisis levels).

TATA Steel Ltd.

ATA Steel Profile:

ta Steel is among the top ten global steel companies with an annual crude steel

pacity of over 28 mtpa. It is now one of the world's most geographically-diversified

eel producers, with operations in 26 countries and a commercial presence in over 50

untries. The Tata Steel Group, with a turnover of US$ 24.82 billion in FY 2012- 2013,ross five continents and is a Fortune 500 company. Tata Steels larger production

cilities include those in India, the UK, the Netherlands, Thailand, Singapore, China and

ustralia. Operating companies within the Group include Tata Steel Limited (India),

ta Steel Europe Limited (formerly Corus), NatSteel, and Tata Steel Thailand (formerly

illennium Steel).



11/20

FY10 FY11 FY12 FY13

102393 118753 132900 134712

1186 680 1573 479

103579 119433 134473 135191

44092 53283 65745 605365549 6390 6660 7434

16463 15840 17229 18918

94350 102006 120483 122390

8043 16747 12417 12321

4492 4415 4517 5575

3022 3956 4250 3968

1715 9056 5223 3257

2152 3246 3636 3229

-15 60 173 214

-1684 3046 3362 -7390

-2009 8983 5390 -7058

22814 35386 42616 34172

-1.4 16.8 4.8 1.0

257 371 439 352

2.64 0.90 0.98 1.13

FY10 FY11 FY12 FY13

-0.31 4.97 1.51 0.25

3.43 10.33 5.87 4.99

7.76 14.02 9.23 9.11

-185.06 5.38 20.51 116.19

-2.41 9.11 5.18 -6.87

-23 94 55 -73

1

ITDA %

B

PM %

E

OCE%

S Source - Comapany/EastWind Resear

Source - Comapany/EastWind Resear

TATA Steel Ltd.

Source - Comapany/EastWind Researinority Interest

ceptional items

AT

ost Of Projectseight and forwarding

mployee benefit Expence

PERATION & PAT

et Revenue from Operation

her Income

tal Income

tal Expenditure

ITDA

epriciation

terest Cost

ALUATION

PM %

et Worth

OE%

ook value per share

BT

x



12/20

FY10 FY11 FY12 FY13

887 959 971 971

21927 34427 41645 33201

22814 35386 42616 34172

884 889 1091 166928059 49251 45238 46858

25041 3794 4699 8115

53100 53045 49937 54972

1769 2188 2504 3155

3789 4585 4715 5356

22020 18457 20529 21779

2806 3395 3476 2943

109738 135488 146852 146906

1635 1790 2851 2959

14542 15298 17355 13065

31778 34778 39081 51978

12383 13552 20196 14277

3237 4688 2623 2497

4801 8685 6837 7098

18687 24055 25598 24091

11624 14812 14878 13994

6788 10859 10799 9860

1961 3547 3717 4061

2181 3159 1398 760

109738 135488 146852 146906

FY10 FY11 FY12 FY13

5600 13638 10312 10195et Cash From Operation 10502 6463 11385 13324

(4700) (8379) 3705 (12321)

(5135) 5993 (8462) (2045)

et Cash Flow during year 667 4077 6628 (1042)

4.8% Down from its 52week High

112% Up from its 52 week Low

1

sh From Investment

sh from Finance

S Performance

are capital

eserve & Surplus

tangibles

oodwill on consolidation

on-current Investments

ng-term loans and advances

ventories

ade receivables

sh and bank balances

ort-term loans and advances

ng-term borrowings

ort-term borrowings

sh from Operation

ngible assets

pital work-in-progress

tal liabilities

tal Borrowings

eferred tax liabilities (net)

ng-term provisions

ade payables

ort-term provisions

rading At :

rrent investments

tal Assets

sh Flows

TATA Steel Ltd.

tal equity

inority Interest



13/20

NIIT Tech

1M 1yr YTD

solute 18.4 19.5 26.8

l. to Nifty 18.29 6.1 23.1


omoters 31.19 31.23 31.29

29.21 29.04 27.79

19.94 19.67 19.52

hers 19.66 20.06 21.4

Financials


Revenue 587.3 541.9 8.4 500.1 17.4

EBITDA 88.6 78.2 13.3 84.8 4.5

PAT 60.4 52 16.2 43.1 40.1

EBITDA Margin 15.1% 14.4% 70bps 17.0% (190bp

PAT Margin 10.3% 9.6% 70bps 8.6% (170bp

The Company's growth in past 3years gives the confidence of driving growth goi

forward. NIIT Tech has been strong performer from the slowdown with CAGR of 3

in the last 3 years and even we look at it in dollar terms, it has been about 22-23

Next journey to USD 1 billion in next 5 years, company would report at a CAGR of 2

in INR term and 18% in USD term for FY13-19E.

Aggressive in the US market:The company is expecting slight uptrend in the US mark

(Us market contributes 41% of sales) led by recent healthy demand environment. T

companysfocus would be very sharply on those developed markets particularly the

as well as Asian market going forward. That will be one aspect of growth strategy.

Scouting for acquisition:NIITTechsfocus is on strengthening the industry segments meaning full acquisition particularly in the insurance and the travel space.

management has indicated that they are constantly on the lookout and in conversati

with the potential assets. Therefore, certain amount of inorganic initiative is importa

to sustain the growth momentum.

Eyeing on Infrastructure services:NIITTechslarge engagements typically involved w

significant amount of infrastructure management services, which is a strong practice

the organization. The travel vertical and the infrastructure management services li

will be key areas of focus for NIIT, going forward.

Aspects of growth strategy:

Consistent in order addition:Fresh orders of USD 84Mn versus USD 154 mn in Q1 we

secured during the quarter leading to USD 263Mn worth of orders executable over t

next 12 months. In 1QFY14, Company had huge business in the domestic market whiwas USD 65 million intake from the Airports Authority of India (AAI). But in Q2 FY1

order has primarily been in the international market.

ock Performance




fty 6260

2011

erage Daily Volume 20884

arket Data

E Code 532541

E Symbol NIITTECH

Buy

year forward P/E

Rs, Cro



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

but not the same level of the growth, But the BFSI expected to be softer. However, t

MFG and Govt verticals expected to improve going forward. CompanysOrder wins

the recent quarters have been healthy, lending visibility on revenue growth. At a CMP

Rs332, trades at 7.5x FY14E earnings. We retain buy view on the stock with a pr

target of Rs360 (revised from Rs310).

During the 2QFY14, they secured fresh orders of $84 million, leading to $248 milli

worth of orders executable over the next 12 months.

ange from Previous 16%

evious Target Price 310

side 8%

"Next Journey to Billion Dollar"

MP 332

rget Price 360

ompany update In an interview to Media, NIIT Tech management expressed its confidence of drivi

growth in the organization and looking at an aspirational goal of USD 1 billion reven

in next 5 years.

"BUY"9th Dec' 13



14/20



nancials;

NIIT Tech

perating Metrics;


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

anking and Finacial Services 13% 13% 12% 12% 12% 14%

nsurance 21% 20% 19% 19% 18% 19%

ransport 40% 42% 42% 37% 36% 37%Manufacturing 7% 6% 6% 6% 7% 6%

overnment 8% 5% 8% 11% 13% 10%

thers 11% 14% 13% 15% 14% 14%

mericas 36% 38% 37% 38% 39% 41%

MEA 39% 39% 40% 37% 35% 36%

oW 25% 23% 23% 25% 26% 23%

SO-days 84 75 76 82 98 100

op-5 30% 32% 34% 32% 31% 36%

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

o of Headcounts 7444 7617 7882 8158 8207 8017

ales Mix-Geography

evenue Concentration %

eadcounts

ales Mix-Verticles

s in Cr, FY10 FY11 FY12 FY13 FY14E FY15E

ales 913.7 1232.25 1576.48 2021.36 2385.41 2863.75

mployee Cost 503.71 601.36 891.12 1115.1 1347.75 1589.38

ther expenses 239.75 393.1 415.26 576.96 667.91 816.17

otal expenses 743.46 994.46 1306.38 1692.06 2015.67 2405.55

BITDA 170.24 237.79 270.1 329.3 369.74 458.20

epreciation 35.81 31.46 36.42 56.69 65.73 73.49

ther Income 7.64 13.6 30.37 22.75 71.56 71.59

BIT 134.43 206.33 233.68 272.61 304.00 384.71

nterest Cost 0 2.22 3.84 1.91 4.89 3.67


rovision for Taxes 14.42 32.3 63.75 75.05 105.64 131.26et Profit (+)/Loss (-) 127.65 185.41 196.46 218.4 265.03 321.37

rowth-% (YoY)

ales -6.8% 34.9% 27.9% 28.2% 18.0% 20.1%

BITDA 2.3% 39.7% 13.6% 21.9% 12.3% 23.9%

AT 9.6% 45.2% 6.0% 11.2% 21.4% 21.3%

xpenses on Sales-%

mployee Cost 55.1% 48.8% 56.5% 55.2% 56.5% 55.5%

ther expenses 26.2% 31.9% 26.3% 28.5% 28.0% 28.5%

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

Margin-%

BITDA 18.6% 19.3% 17.1% 16.3% 15.5% 16.0%

BIT 14.7% 16.7% 14.8% 13.5% 12.7% 13.4%

AT 14.0% 15.0% 12.5% 10.8% 11.1% 11.2%

aluation:

MP 170.25 184.65 270.9 262.35 332 332

o of Share 5.88 5.93 5.96 6.02 6.02 6.02

W 579.78 752.11 922.2 1094.12 1350.45 1662.62

PS 21.7 31.3 33.0 36.3 44.0 53.4

VPS 98.6 126.8 154.7 181.7 224.3 276.2

oE-% 22.0% 24.7% 21.3% 20.0% 19.6% 19.3%

/BV 1.7 1.5 1.8 1.4 1.5 1.2

/E 7.8 5.9 8.2 7.2 7.5 6.2


15/20

BUY Company hop efu l to maintain doub le dig i ts growth for second h al f of the year .

1M 1yr YTD

bsolute 4.0 29.0 69.0

el. to Nifty 5.0 23.0 53.0


omoters 52.1 52.1 52.1

11.1 10.8 10.1

I 15.0 14.2 15.3

hers 21.9 22.9 22.6

Financials Rs, Cro


Revenue 807 894 (9.7) 719 12.2

EBITDA 142 145 (2.1) 118 20.3

PAT 95 98 (3.1) 70 35.7

EBITDA Margin 17.6% 16.2% 140bps 16.4% 120bps

PAT Margin 11.8% 11.0% 80bps 9.7% 200bps



11%

arket DataSE Code 500008

The stock is currently trading at CMP Rs 328 and it has achieve our first TP Rs 315.T

strong 2QFY14 results , Optimistic management speech and strong business outlook go

forward raises positive view on the stock. We have slightly tweaked our TP up to Rs 365

the back of above fundamental reasons.

SE Symbol

hange from Previous

Amara Raja had posted its 2QYFY14 sales at Rs 805 Cr up by 12.3 % YoY on the backthe strong demand in the automotive replacement and industrial battery business. The

was double digit growth in both of these segments.

The automotive battery business reported double digit growth in revenue, supported

strong volume expansion both in 4 wheeler and 2 wheeler batteries in the replacem

market, however the OEM demand continued to be sluggish. The trading volume in

home UPS business suffered due to unfavorable season on account of mild summer a

ood monsoon.

The net profits for the 2QFY14 came at Rs 95 Cr and NPM at 11.7% .The other income

the quarter came at Rs 7 Cr and Tax rate stands at 29 %.

Amara Raja Batteries Limited

OPTIMISTIC MANAGEMENT SPEECH

esult Update

ne Year Forward P/Bv Band

(Source: Company/Eastw

5,606

verage Daily Volume 163647

fty 6241

AMARAJABAT

ock Performance-%

hare Holding Pattern-%

kt Capital (Rs, Cr)

MP 328

4%

pside

The operating EBITDA for the 2QFY14 came at Rs 142 Cr and OPM at 17.6%.The OP

improves by nearly 118 bps mainly due to decrease in purchase of stock in trade

percentage of sales. The purchase of stock in trade as percentage of sales stands at 3

versus 7% for the same time last fiscal. However RM cost to sales have increased to 6

from 59% due to rise in the price of major component of RM, lead and an employee ben

cost was higher by 60 bps to 4.8% during the period.

The management of the company after results said that company will maintain its margins

17-18 % for the rest of the fiscal with no pricing moderation. The management further s

that company is confident of maintaining double digit growth for the second half of the ye

The company believes that there is improvement in the market share.

The Company's effort to enhance the capacities of Two-wheeler battery in the existing pla

has witnessed some delay and is likely to go on stream by end January 2014. The enhanc

capacities will support the Company to commence business with other major Two-whee

OEM's and to grow the aftermarket business in a big manner. The green field project enhancement of Four-wheeler capacity is progressing as per schedule and is likely

commence production by Q2 of next financial year.

arget Price 365evious Target Price 315

"BUY" 06thDec' 13



16/20

ALES & PAT TREND

The expansion in OPM seems largely due

decrease in purchase of stocks in trade co

by 430 bps to 3% .

Growth in sales came on the back of

strong demand in the automot

replacement and industrial battery busineThere was double digit growth in both

these segments.

Amara Raja Batteries Limited

PM & NPM TREND



M Cost as % Sales


Lead costs which accounts for a major chu

of its expenses were higher than the year a

quarter. As a per cent of sales, raw mater

were at 64 % up 500 bps over the year-a

period.




17/20

Jyothy Lab

200

260-

30%

-

1M 1yr YTD

bsolute 3.5 3.9 -

l. to Nift 6.0 -1.0 -


omoters 63.7 63.7 65.6

16.0 17.0 16.5

I 9.8 9.1 9.6

hers 10.5 10.2 8.4

Financials Rs, Cr


Revenue 306.1 319.2 -4.1% 230.14 33.0%

EBITDA 42.7 48.6 -12% 21.4 100%

PAT 20.9 28.7 -27% 1.4 1393%

EBITDA Margin 13.9% 15.2% (130bps) 9.3% 460bp

PAT Margin 6.83% 8.99% (230bps) 0.61% 620bp

Segments/ Brandwise Performance:In its bread and butter business detergent & so

segment, it has reported a 35% yoy growth led by a strong 77% growth in the Uja

whitener revenues, a 24% growth in dishwash portfolio and 18% - 20% growth in Henk

Home care revenues was up 37%, driven by strong growth in Maxo as well as the oth

smaller brands in this segment. Maxo revenues grew 33% on YoY basis.

Healthy margin rampup: The EBITDA Margin expanded by 466 bps to 13.9%. In

inflationary environment there was an impact of 2% of higher freight charges on t

OPM which would have been absent in a normal business environment.

pside

ompany update BUY

rget Price

wk Range H/L

ange from Previous

yr Forward P/B


51716

fty 6161

Recently, Jyothy Lab witnessed better numbers with 22% sales growth (standalone) l

by 25% volume growth and 8% price/mix led growth. Apart from detergents busine

which grew slower versus other categories due to intense price/promotion war betwe

top-2 players, all other power brands continue to post strong growth which has grow

by 36%. PAT growth was over the head to Rs 21cr from Rs 1.4cr(2QFY13).

View and Valuation:The Companysproducts are available through 2.9 mn outlets

India and have direct reach of 1 mn outlets. Though the company expects the su

stockist will increase by 20% from the current 2000 to 2400 by the end of FY14. W

believe the distribution restructuring would lead to generate sales and compan

presence in highly demanding categories would help to manage high margins a

volume growth simultaneously. We revise our view on the stock from "Neutral" to "Buwith a target price of Rs 260, at a CMP of Rs200, stock trades at 3.7x FY15E P/BV.



ock Performance

Going forward, the company will focus on brand building with extension of curre

brands and continue to adapt to the continuous changes of consumers. Manageme

is confident that these efforts will further strengthen brands and establish bet

consumer connect.

"Efforts for stability"

Jyothy Lab has aggressively raised around Rs 262.5 Cr by issuing shares to Promote

group (Sahyadri Agencies) on preferential basis and Rs400cr of Negotiable Certifica

of Deposits (NCD) coupon payable after 3 years. Now inflow of Rs 662 wouldutilized to pay its outstanding debt of Rs 548cr as on 30th Sept 2013.

Recent management commentary reveals that the company is planning for inorga

growth with Rs 250 Cr of bank balance (post repayment of its debt) and especia

looking at regionally strong brands. We expect that companys new management a

new strategy of product reach would energize its growth story in near future. Hen

the management has maintained its guidance of achieving around 22% - 25% reven

growth and OPM of 14% - 15% for FY14.

verage Daily Volume

3315

evious Target Price

arket Data

211/140

E Code 532926

SE Symbol JYOTHYLAB

kt Capital (Rs Cr)

MP

"BUY"5th Dec' 13



18/20

les Mix-segment (%)




eographical Presence (PAN India)

M Cost and Ad Spend-(% of sales)


Jyothy Lab

argin-%



Region JLL Henkel Total

East 13% 27% 19%

North 22% 22% 22%

South 52% 37% 47%

West 13% 14% 13%


19/20

Jyothy Lab

The company's products are available through 2.9 mn outlets in India and have direct

ach of 1 mn outlets. Now, company does not expects to increase from the current level,

expects the sub-stockist will increase by 20% from the current 2000 to 2400 by the end

FY14.

ake away from management guidance:The management is confident of achieving its target of 22% - 25% revenue growth and

PM of 14% - 15% for FY14E.

The mgmt said that its dishwash brand Pril has seen its market-share taken away by

ettol's newly launch dishwash product. The company is going to double its ad-spend on

il in FY14.The management is confident of maintaining the strong growth rate in Ujala fabric

hitener.

The company is planning to planning to raise up to Rs 400 crore of nonconvertible

benture at zero coupon bonds and also palnning to acquire back IL&FS Trust Company

ake in Jyothy Fabricare Service (JFSL) for about Rs 70 crore. Meanwhile, promoters will

fuse Rs 250 crore by way of a preferential allotment of 1.5 crore shares by the end of

3.


nancials

Source: Com an /EastwiNarnolia Securities Ltd,

s, Cr FY10 FY11 FY12 FY13 FY14E FY15E

ales 596.32 626.39 912.99 1105.96 1349.27 1646.1

aw Materials Cost 317.19 320.27 502.99 584.35 688.13 855.98

mployee Cost 75.38 81.31 113.67 130.48 148.42 172.84

dvertisement and Publicity 26.62 33.99 41.79 95.54 134.93 148.15

ther expenses 85.31 111.52 170.46 165.92 175.41 230.46

otal expenses 504.5 547.09 828.91 976.29 1146.88 1407.4

BITDA 91.82 79.3 84.08 129.67 202.39 238.69

epreciation 12.36 13.03 24.65 22.43 26.10 31.84

ther Income 17.8 16.91 22.73 5.202 53.97 65.84

BIT 79.46 66.27 59.43 107.24 176.29 206.84

nterest Cost 1.7 1.99 23.83 68.22 63.25 49.25


rovision for Taxes 21.48 15.43 19.94 -14.87 31.73 42.45

et Profit (+)/Loss (-) 74.08 65.76 38.39 59.092 135.28 180.99

rowth-% (YoY)

ales 65.3% 5.0% 45.8% 21.1% 22.0% 22.0%

BITDA 88.3% -13.6% 6.0% 54.2% 56.1% 17.9%

AT 93.0% -11.2% -41.6% 53.9% 128.9% 33.8%

xpenses on Sales-%

M Cost 53.2% 51.1% 55.1% 52.8% 51.0% 52.0%

mployee Cost 12.6% 13.0% 12.5% 11.8% 11.0% 10.5%

d spend 4.5% 5.4% 4.6% 8.6% 10.0% 9.0%

ther expenses 14.3% 17.8% 18.7% 15.0% 13.0% 14.0%

ax rate 22.5% 19.0% 34.2% -33.6% 19.0% 19.0%

Margin-%

BITDA 15.4% 12.7% 9.2% 11.7% 15.0% 14.5%

BIT 13.3% 10.6% 6.5% 9.7% 13.1% 12.6%

AT 12.4% 10.5% 4.2% 5.3% 10.0% 11.0%

aluation:

MP 169.85 219.80 155.00 175.00 200.00 200.00

o of Share 7.30 8.10 16.10 16.00 16.00 16.00

W 387.76 631.10 612.42 638.56 726.69 860.53

PS 10.15 8.12 2.38 3.69 8.46 11.31

VPS 53.12 77.91 38.04 39.91 45.42 53.78

oE-% 19.1% 10.4% 6.3% 9.3% 18.6% 21.0%

/BV 3.20 2.82 4.07 4.38 4.40 3.72

/E 16.74 27.07 65.00 47.38 23.65 17.68


20/20

20

k Disclosure & Disclaimer:This report/message is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice t

rnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any action based upon it. This report/message is not for public distribution and has been furnished to you solely fo

ormation and should not be reproduced or redistributed to any other person in any from. The report/message is based upon publicly available information, findings of our research

st wind& information that we consider reliable, but we do not represent that it is accurate or complete and we do not provide any express or implied warranty of any kind, an

se are subject to change without notice. The recipients of this report should rely on their own investigations, should use their own judgment for taking any investment decisions ke

mind that past performance is not necessarily a guide to future performance & that the the value of any investment or income are subject to market and other risks. Further it will b

assume that NSL and /or its Group or associate Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise, individually or otherw

recommended/mentioned securities/mutual funds/ model funds and other investment products which may be added or disposed including & other mentioned in this report/messa

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India Equity Analytics-Persistent System: Focusing on the increase IP-led revenues