India Equity Analytics

Daliy Fundamental Report on Indian Equities

IEA-Equity Strategy 20th Jan, 2014 Edition : 187

20th Jan 2014

TCS :" Strong Fundamentals"

"BUY"

TCS witnessed inline set of numbers with 1.5%(QoQ)of consolidated sales growth led by 1.8% volume growth.We continue to believe that TCS will be star performer in growth sense than other peers. Hence, we are maintaining 18% revenue growth in dollar term for FY14E because of improved demand environment, while NASSCOM expects 12-14% for the Industry.We maintain" BUY" view on the stock and we revised our target price from Rs 2360 to Rs 2510. ...................................... ( Page : 2-4)

HDFC Bank

"BUY"

20th Jan 2014

HDFC Banks profit growth of 25% YoY lowers than its previous quarters growth trajectory that it had witnessed but remain very impressive in challenging macro environment. Bank is well poised in most of operating parameters like CASA ratio of 45%+, higher than industry credit growth, best asset quality among peers, better utilization of cash in form of higher CAR ratio for further growth, consistent delivered margin above of 4%. We continue to believe bank would enjoy valuation premium. We value bank at Rs.760/share which is 4 times of one year FY14Es book value ...................................... ( Page : 5-9)

FEDERAL BANK :

"BUY"

20th Jan 2014

Federal banks profitability grew by 9.2% YoY on the back of lower provisions led by improving asset quality and comfortable high provision coverage ratio. But banks operating and financials metrics remained muted, this has resulted of negative growth at operating profit level. We slightly tweak our book value estimate to Rs.82.2 from earlier of Rs.78. We value bank at Rs.98/share which is 1.2 times of FY14Es book value and 8.5 times of forward earnings........................................... ( Page : 10-14 )

DB CORP : "On Strong Footing"

"BUY"

20th Jan 2014

Considering its long-term growth story with favorable earning scenario and leadership position in key market, we are positive on the stock. We maintain BUY view on the stock with the target price of Rs 340. At a CMP of Rs 301, stock trades at 4.1x of FY15E P/BV. .............................................................. ( Page : 15-17)

ITC : " Accessing the growth"

"BUY"

20th Jan 2014

Strong set of numbers, sales grew by 13.1% (YoY) led by robust sales across its FMCG and Paper and Packaging divisions. Cigarette volume declined by 2%(YoY) because of price hike by 18% in premium brand. PAT up by 16.3%, YoY. ITC offers the best earnings visibility in the sector especially when sector peers are confronting multiple challenges. The premium valuations enjoyed by ITC, at the CMP of Rs 325, the stock trades at 8.2x FY15E P/BV seems justified from a growth point of view. We maintain BUY with a price target of Rs 380. ........................................................................... ( Page : 18-20)

HCLTECH : "Retain confidence"

"BUY"

17th Jan 2014

HCL tech beats expectations with a sustained momentum in volumes and proved its consistency to maintain its margin at 26% mark; Sales grew by 2.8% (QoQ) in INR term and 4% (QoQ) in USD term led by 4.6% of growth from Infrastructure services and BPO services. Considering the increasing discretionary spends across the geographies like US and Europe, we expect healthy earnings performance ahead. At a CMP of Rs 1392, stock trades at 17.5x of FY14E earnings, We retain BUY on the stock and revised our target price from Rs 1194 to Rs1560. ............................................... ( Page : 21-23)

BAJAJ-AUTO LTD: Inline Performance but Market Share lost.

"Neutral"

17th Jan 2014

Bajaj Auto posted its 3QFY14 results with net sales at Rs 5025 Cr down by 6 % YoY. The decline in the net sales came on the back of lower volume in the quarter under review. The company during the 3QFY14 manage to sell 993,690 units of vehicles down by 11 % YoY. ...................................................................... ( Page : 24-25)
Narnolia Securities Ltd,

TCS
" Strong Fundamentals"
Results update
CMP Target Price Previous Target Price Upside Change from Previous

"BUY"
20th Jan' 14

Buy
2216 2510 2360 13% 6%

Street stunned with inline set of number, management is confident to see better growth in near future;

Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 532540 TCS 2384/1300 433985 1011877 6262

Stock Performance
Absolute Rel. to Nifty 1M 9.8 8.1 1yr 64.4 60.1 YTD 67.2 57.1

TCS witnessed inline set of numbers with 1.5%(QoQ)of consolidated sales growth led by 1.8% volume growth and1.2% pricing growth. This volume growth dampened because of holidays and furlough effects. PAT grew by 15.1% (QoQ). We continue to believe that TCS will be star performer in growth sense than other peers. Hence, we are maintaining 18% revenue growth in dollar term for FY14E because of improved demand environment, while NASSCOM expects 12-14% for the Industry. We continue to be positive on demand prospect for TCS. In US dollar terms, revenue was $3438mn compared with USD 3337 mn in Q2FY14. Net profit was at USD 858 mn, compared with USD 748 mn in Q2FY14. Steady Margin growth: On margin front, EBITDA down by 20bps and EBIT 30bps on QoQ basis to 31.4% and 29.8%, during the quarter. The company attributed this fall to reinvestment of gains from margin into the business. Management is very confident to maintain EBITDA margin at a range of 26-28% ahead. Lower volume and stable pricing growth: The volume growth of 1.8% was lower than expectations and what the company has been delivering over the last few quarters. The company attributed this fall to de-growth in India business. The third quarter is generally slow due to holidays, and furloughs. The pricing is expected to be stable overall but expects variability across the quarters going forward. Strong growth across segments: On segmental front, Manufacturing grew by 6.1% (QoQ), and Telecom (including media and entertainment) by 5.1% (QoQ), while, BFSI and Retail (including consumer-packaged goods) reported strong below 1% growth, sequentially. Even, the telecom sector posted excellent quarter than before but still wait to change view on the sector. Growth across the geographies: Among growth markets, Latin America, APAC and MEA registered strong growth. India business suffered from volatility and declined sequentially. Further, US grew by 2.6%, Europe by 2.6% and RoW by 7.1% QoQ. USA contributes 55%, Europe 29.1% and RoW 15.9% of its revenue. View and Valuation: We continue to remain positive on demand outlook and margin profile, the management expects for robust deal pipeline going forward and also expects to materialize its emerging space like Digital as well as Cloud, Mobility, Analytics and Big data. Based on initial discussions with customers, Management believes for stronger 2014 than 2013. We continue to be positive on demand environment and companys strength of efficient deal execution. We advise that TCS now seem to be trading ahead of fundamentals; At a price of Rs 2216, it is trading at 20.3x FY15E earnings, We maintain" BUY" view on the stock and we revised our target price from Rs 2360 to Rs 2510.

Share Holding Pattern-%

Promoters FII DII Others Current 73.9 16.33 5.26 4.51 2QFY14 1QFY14 73.96 73.96 16.09 15.67 5.58 5.90 4.37 4.47

1 year forward P/E

Financials
Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 21294 6686.76 5333.43 31.4% 25.0% 2QFY14 20977.2 6633.0 4633.3 31.6% 22.1% (QoQ)-% 1.5 0.8 15.1 (20bps) 290bps 3QFY13 16069.93 4660.49 3549.61 29.0% 22.1%

Rs, Crore (YoY)-% 32.5 43.5 50.3 240bps 290bps

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

TCS.
Revenue and growth in INR term-(QoQ) The Company remains confident to clock better growth in FY14 than FY13 and aims to exceed upper end of industry body NASSCOMs guidance at 12-14% in FY14. We expect better revenue growth than its peer like Infy

(Source: Company/Eastwind)

Margin-%

The outlook on margins, it indicated that is comfortable in the current level and will be in the range of 26-28% range going forward.

(Source: Company/Eastwind)

Volume and Pricing Growth (QoQ)-% The volumes were strong across the board during the quarter. The pricing is expected to be stable overall but expects variability across the quarters going forward.The volume growth could be improve further because of better demand environment across all geogrpahies and space.
(Source: Company/Eastwind)

Key Facts from Conference Call (attended on 16th Jan,2014): (1)TCS, which does not provide detailed revenue forecasts, The Company remains confident to clock better growth in FY14 than FY13 and aims to exceed upper end of industry body NASSCOMs guidance at 12-14% in FY14. And continued to reiterate its stand that FY15 will be a better year than FY14. (2) The management stated that pricing would be stable for next 12 months. Realization seeing minor fluctuations, but (3) The outlook on margins, it indicated that is comfortable in the current level and will be in the range of 26-28% range going forward. (4) The company has maintained hiring target of 55,000 gross employees for FY14, (5) Demand environment from Domestic market for next 2Qtrs will be adversly impacted because of fortcong general election.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

TCS.
Attrition is low in the Industry Expects to improve Utilizations to 85% and beyond:: At the end of 3QFY14, TCS continued its uptick in hiring and upped the numbers to 55,000 from its earlier stated 50,000. This is reflective of the demand environment. The utilization rate (excluding trainees) was at 84.3% and that including trainees was 77.5 %. The attrition rate in IT was at 10.3 %, while BPS attrition fell to 13.4 %. The attrition rate (LTM) was stable at 10.9% including BPS. Sound clients metrics: TCS sees a robust demand pipeline across markets and a unique opportunity to strategically partner and participate with clients. TCS' USD added total 8 large clients(net).

Financials
Rs, Cr Net Sales-USD Net Sales Employee Cost Overseas business expenses Services rendered by business associates and others Operation and other expenses Total Expenses EBITDA Depreciation Amortisation Other Income EBIT Interest Cost PBT Tax PAT PAT ((Reported PAT)) Growth-% Sales-USD Sales EBITDA PAT Margin -% EBITDA EBIT PAT Expenses on Sales-% Employee Cost Overseas business expenses Services rendered by business associates and others Operation and other expenses Tax rate Valuation CMP No of Share NW EPS BVPS RoE-% Dividen Payout ratio P/BV P/E FY10 6339.0 30029.0 10879.6 4570.1 1262.0 4622.8 21334.4 8694.6 601.8 59.1 272.0 8033.7 16.1 8289.6 1197.0 7092.7 7000.6 FY11 8187.0 37325.1 13850.5 5497.7 1743.7 5054.3 26146.2 11178.9 686.2 49.1 604.0 10443.6 26.5 11021.2 1830.8 9190.3 9068.6 29.2% 24.3% 28.6% 29.6% 30.0% 28.0% 24.6% 37.1% 14.7% 4.7% 13.5% 16.6% 1182.5 195.7 24504.8 47.0 125.2 37.5% 50.8% 9.4 25.2 FY12 10171.0 48894.3 18571.9 6800.5 2391.3 6694.8 34458.5 14435.8 860.9 57.1 428.2 13517.9 22.2 13923.8 3399.9 10524.0 10414.0 24.2% 31.0% 29.1% 14.5% 29.5% 27.6% 21.5% 38.0% 13.9% 4.9% 13.7% 24.4% 1322.0 195.7 29579.2 53.8 151.1 35.6% 37.5% 8.7 24.6 FY13 11569.0 62989.5 24040.0 8701.9 3763.7 8443.9 44949.6 18040.0 1016.3 63.7 1178.2 16960.1 48.5 18089.8 4014.0 14075.7 13917.4 13.7% 28.8% 25.0% 33.7% 28.6% 26.9% 22.3% 38.2% 13.8% 6.0% 13.4% 22.2% 1563.0 196.0 38645.7 71.8 197.2 36.4% 41.2% 7.9 21.8 FY14E 13660.8 81964.9 30327.0 11680.0 4917.9 10655.4 57580.4 24384.6 1282.9 57.5 1434.4 23101.7 35.9 24500.2 5880.0 18620.2 18620.2 18.1% 30.1% 35.2% 32.3% 29.8% 28.2% 22.7% 37.0% 14.3% 6.0% 13.0% 24.0% 2216.0 196.0 49594.4 95.0 253.0 37.5% 41.2% 8.8 23.3 FY15E 16393.8 97543.1 36578.7 14143.7 6340.3 12680.6 69743.3 27799.8 1526.7 76.7 1950.9 26273.1 33.8 28190.2 6765.6 21424.5 21424.5 20.0% 19.0% 14.0% 15.1% 28.5% 26.9% 22.0% 37.5% 14.5% 6.5% 13.0% 24.0% 2216.0 196.0 62192.0 109.3 317.3 34.4% 41.2% 7.0 20.3

8.0% 21.3% 31.8% 29.0% 26.8% 23.6% 36.2% 15.2% 4.2% 15.4% 14.4% 780.8 195.7 18466.7 36.2 94.4 38.4% 28.1% 8.3 21.5

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

HDFC Bank
Result update CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty Stock Performance 1M Absolute 0.1 Rel.to Nifty -0.6 BUY 668 760 720 14 6

"BUY "
20th Jan.,2014

HDFC Banks profit growth of 25% YoY lowers than its previous quarters growth trajectory that it had witnessed but remain very impressive in challenging macro environment. Bank is well poised in most of operating parameters like CASA ratio of 45%+, higher than industry credit growth, best asset quality among peers, better utilization of cash in form of higher CAR ratio for further growth, consistent delivered margin above of 4%. We continue to believe bank would enjoy valuation premium. We value bank at Rs.760/share which is 4 times of one year FY14Es book value. Profit growth of 25% YoY, quite impressive in present economy scenario HDFC banks profitability grew by 25% YoY to Rs.2326 cr against our expectation of Rs.2289 cr. Growth in profit was due to higher growth in revenue, lower cost income ratio and stable asset quality. But growth trajectory of the bank was lower if we compare it from past as bank has been witnessing 30% growth previously. In previous quarter bank reported 27% YoY growth in profit and this quarter reported lower from previous quarter. We believe to maintain 30%+ growth would be tough in present challenging macro environment. Healthy NII growth on the back of stable margin and higher CD ratio HDFC Bank reported another good set of numbers with NII grew by 22% YoY to Rs.4635 cr better than our expectation due to healthy loan growth, stable margin, higher credit deposits ratio and controlled cost of deposits. Total revenue of the bank grew by 21.2% YoY to Rs.6783 cr. Non- interest income registered growth of 19.4% YoY to Rs.2148 cr. Other income comprises fees & commissions of Rs 1,575.0 cr (Rs 1,413.5 cr in 3QFY13), foreign exchange & derivatives revenue of Rs.333.2 cr (Rs 258 cr in 3QFY13), gain on revaluation / sale of investments of Rs 50.9 cr (gain of Rs. 135.8 cr in 3QFY13) and miscellaneous income including recoveries of Rs 189.1 cr (Rs 120.4 cr in 3QFY13). Declined CI ratio along with healthy revenue growth led operating profit growth Cost to income ratio declined to 42.7% from 46% in 3QFY14 largely due to employee expenses. In 3QFY14, employee cost was declined by 3.1% YoY due to hiring soften strategy taken by bank. At the end of quarter, bank has total 68200 employees as against 69700 employees in last quarter. Other operating cost increased by 12.5% YoY largely due to addition of new branches and ATMs. At the end of December quarter, banks added 274 branches taking total network to 3336 branches against 2776 branches in 3QFY13. With the support of healthy NII growth, non interest income and control cost measurement; banks operating profit grew by 28.6% YoY. Rs, Cr Financials 2011 2012 2013 2014E 2015E NII 10543 12885 15811 18713 22944 Total Income 14878 18668 22664 26604 30835 PPP 7725 9391 11428 14516 15572 Net Profit 3926 5167 6726 8453 9119 EPS 84.4 22.0 28.7 36.0 38.9 (Source: Company/Eastwind) 5 Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

500180 HDFCBANK 727/528 160030 4.17 lakhs 6261

1yr 0.0 -3.4

YTD 0.0 -3.4

Share Holding Pattern-% Current 4QFY13 3QFY1 3 Promoters 22.7 22.7 22.7 FII 34.9 33.6 34.9 DII 9.3 9.8 6.6 Others 33.1 33.8 34.2 HDFC Bank Vs Nifty

HDFC BANK
Sequentially stable asset quality despite of challenging macro environment Despite of challenging macro environment, bank reported stable asset quality with GNPA in absolute term grew by mere 3% on sequential basis. As a percentage to gross advance, GNPA stood at 1.02% versus 1.1% in previous quarter. Loan loss provisions were Rs.389 cr versus Rs.386 cr in previous quarter. Consequently net NPA increased by 4% QoQ and in percentage to net advance, it stood at 0.27% versus 0.29%. Provision coverage ratio with technical write-off was stable on sequential basis to 73.8%. Advance grew by 23% YoY and deposits grew by 23% led by FCNR deposits Total advance increased by 23% to Rs.2967 bn. Loan growth was driven by 13.6% YoY increased of retail loan and 22.1%YoY increased of corporate loan. Composition of retail and corporate loan stood at 54:46 ratios. Deposits increased by 23% to Rs.3492 bn in which saving deposits increased by 16% and current deposits grew by 23% taking overall CASA ratio of 43.7%. Deposits growth of 23% included US$3.4 bn of FCNR deposits raised through RBIs special window. Adjusted with same, deposits grew by 15.5% YoY. Credit deposits ratio during quarter stood at 85% which was by and large same in both quarter on quarter and year on year basis. Valuation & View HDFC Banks profit growth of 25% YoY lowers than its previous quarters growth trajectory that it had witnessed but remain very impressive in challenging macro environment. Bank is well poised in most of operating parameters like CASA ratio of 45%+, higher than industry credit growth, best asset quality among peers, better utilization of cash in form of higher CAR ratio for further growth, consistent delivered margin above of 4%. We continue to believe bank would enjoy valuation premium. We value bank at Rs.760/share which is 4 times of one year FY14Es book value. Valuation Band

Narnolia Securities Ltd,

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

HDFC BANK
Fundamental Through Graph

NII growth of 22% led by healthy loan growth, stable margin, higher credit deposits ratio and controlled cost of deposits

Declined CI ratio along with healthy revenue growth led operating profit growth

Profit growth of 25% YoY due to higher growth in revenue, lower cost income ratio and stable asset quality

Source: Eastwind/ Company

Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

HDFC BANK
Quarterly Performance

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

3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation 8183 7692 6722 21.7 6.4 8524 4.2 2309 2292 1893 22.0 0.8 2354 1.9 85 84 68 25.7 1.2 97 14.2 13 25 25 -48.3 -48.4 18 35.7 10591 10093 8708 21.6 4.9 10993 3.8 2148 1844 1799 19.4 16.5 1885 -12.3 12739 11938 10507 21.2 6.7 12878 1.1 5956 5617 4909 21.3 6.0 5798 -2.7 4635 4477 3799 22.0 3.5 5195 12.1 2148 1844 1799 19.4 16.5 1885 -12.3 6783 6321 5598 21.2 7.3 7080 4.4 973 1036 1004 -3.1 -6.1 1115 14.6 1922 1899 1570 22.4 1.2 2071 7.7 2895 2934 2574 12.5 -1.3 3186 10.0 3888 3387 3024 28.6 14.8 3894 0.2 389 386 307 26.6 0.8 426 9.6 3499 3001 2716 28.8 16.6 3468 -0.9 1173 1018 857 36.9 15.2 1179 0.5 2326 1982 1859 25.1 17.3 2289 -1.6

42891 349215 43848 110616 296742

40485 313011 39340 101850 268617

35436 284119 31585 95979 241493

21.0 22.9 38.8 15.3 22.9

5.9 11.6 11.5 8.6 10.5

42774 331291 44639 108215 284134

-0.3 -5.1 1.8 -2.2 -4.2

3017.84 2941.71 797 767 1.0 1.1 0.3 0.3 74 74

2432.2 496 1.0 0.2 80

24.1 60.8

2.6 3.9

Source: Eastwind/ Company

Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

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

2011
15085 4675 148 20 19928 4335 24263 8028 1336 20 9385 10543 25.7 4335 14878 20.3 2836 4317 7153 7725 3799 3926 33.2

2012
21124 6505 137 108 27874 5784 33658 12690 2253 47 14990 12885 22.2 5784 18668 25.5 3400 5878 9278 9391 4224 5167 31.6

2013
26822 7820 282 141 35065 6853 41917 16321 2889 44 19254 15811 22.7 6853 22664 21.4 3965 7271 11236 11428 4701 6726 30.2

2014E
32002 9311 373 65 41751 7891 49642 20281 4571 44 23038 18713 18.4 7891 26604 17.4 4231 7857 12087 14516 1751 8453 25.7

2015E
40213 10952 373 65 51603 7891 59494 24337 4278 44 28659 22944 22.6 7891 30835 15.9 5342 9921 15263 15572 6453 9119 7.9

Key Balance Sheet Data

Deposits Deposits Growth(%) Borrowings Borrowings Growth(%) Loan Loan Growth(%) Investment Investment Growth(%) 208586 24.6 14394 11.4 159983 27.1 70929 21.0 246706 18.3 23847 65.7 195420 22.2 97483 37.4 296247 20.1 33007 38.4 239721 22.7 111614 14.5 355496 20 50785 54 299651 25 114580 3 426596 20 47529 -6 365574 22 156461 37

Eastwind Calculation
Yield on Advances Yield on Investments Yield on Funds Cost of deposits Cost of Borrowings Cost of fund 9.4 6.6 7.7 4.3 9.4 4.2 10.8 6.7 8.9 5.6 9.6 5.5 11.2 7.0 9.3 6.0 8.9 5.8 10.7 8.1 10.1 6.5 9.0 5.7 11.0 7.0 9.9 6.2 9.0 6.0

Valuation
Book Value P/BV P/E 545.5 4.3 27.8 127.5 4.1 23.6 154.3 4.1 21.8 189.4 3.5 18.7 222.3 3.0 17.3

Source: Eastwind/ Company

Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

FEDERAL BANK
Result update CMP Target Price Previous Target Price Upside Change from Previous( Rs) Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty Stock Performance
Absolute Rel.to Nifty 1M -0.6 -1.3 1yr -24.3 -27.7 YTD -24.3 -27.7

"BUY"
20th Jan, 2014

BUY 80 98 87 23 13

500469 FEDERALBNK 104.75/44.25 6792 9.78 lakh 6261

Bank reported net profit growth of 9.2% YoY largely due to lower provision led by improving asset quality. Making lower provision in order to inflate profit is not too bad in our sense as bank has high provision coverage ratio and sequentially improved gross NPA. However at operating profit level, bank reported negative growth of 9.7% due to muted performance all around. We revised our book value estimate to Rs.82.2 from earlier of Rs.78. We believe bank to trade at 1.2 times of book value of FY14E. We value bank at Rs.98/share which is 1.2 times of FY14Es book value and 8.5 times of full year earnings Profit growth on the back of lower provision led by improving asset quality Federal bank continued to deliver moderate growth in net profit on the back of muted growth in operating as well as financial metrics. During quarter banks net growth grew by 9.2% YoY largely due to lower provisions led by improving asset quality. This quarter bank reported improvement in asset quality when most of banks reported deteriorating or stable stress in assets which surprise us positively. Despite of lower loan loss provisions, banks provision coverage ratio remained high against regulatory requirement. Therefore we take it positive as banks strategy to make lower provision in order to inflate profit. But muted growths in balance sheet remain a cause of concern. Flat revenue growth because of negative growth in other income During this quarter banks NII grew by 9.7% on account of muted loan growth along with continuous fall in credit deposits ratio. However bank able to maintain cost of deposits under control. Other income de-grew by 23.4% YoY taking flat revenue growth on year on year basis and quarterly basis. Operating profit de-growth by 9.7% YoY led by flat revenue growth and high CI ratio Cost Income ratio increased by 550 bps YoY to 49.3% but operating leverage (operating cost to total assets) remain flat at 0.45%, indicating comfortable cost management. Employee cost and other operating cost increased by 8.1% and 17.7% respectively. During quarter bank opened 18 new branches and 47 ATMs. Operating profit de-grew by 9.7% YoY on account of muted NII growth and lower other income.

Share Holding Pattern-% Current 1QFY14 4QFY1 3 Promoters FII 42.4 44.1 44.4 DII 21.6 20.6 20.8 Others 36.1 35.3 34.8 FEDERAL Bank Vs Nifty

Financials
NII Total Income PPP Net Profit EPS 2011 1747 2263 1427 902 6.5 2012 1953 2486 1506 734 8.6

Narnolia Securities Ltd,

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

Rs, Cr 2013 2014E 2015E 1975 2206 2543 2639 2893 3230 1460 1520 1777 803 799 1012 9.4 9.3 11.8 (Source: Company/Eastwind) 10

FEDERAL BANK
Provision lower to Rs.7 cr but PCR remain high In 3QFY14, Federal bank made total provisions of Rs.7 cr versus Rs.11 cr in previous quarter and Rs.74 cr in last quarter. Lower provision was due to improving asset quality. Gross NPA improved by 18% QoQ to Rs.1201 cr in absolute term whereas as a percentage to total advance, it stood at 2.88% versus 3.47% in previous quarter. Loan loss provisions were lower by 20% QoQ, taking PCR ratio to 70.3% (without technical write-off). This has resulted net NPA declined to 0.9% versus 1% in previous quarter. NIM declined sequentially due to higher cost of fund than deposits NIM on sequential basis declined by 6 bps to 3.24% due to higher cost of fund (in absolute term) than yield on loan (in absolute term). Higher cost of fund largely came from cost of borrowing than deposits. Borrowings as a percentage of NDTL, sequentially increased to 9.2% from 8.1% taking overall interest expenses up in absolute term. Loan yield improved by 18 bps QoQ to 12.2% from 12% but muted growth in loan, increased interest income by 0.1% QoQ whereas interest expenses increased by 2.4% QoQ. Despite of lower increased in cost of fund (6 bps QoQ), NIM declined sequentially. Loan & deposit grew by moderate pace Federal Banks balance sheet grew by 15% YoY in which loan grew by 5.4% YoY. SME and retail loan registered growth of 38.4% and 11.5% YoY respectively but corporate loan de-grew by 14.4% YoY. Share of corporate loan declined to 33% from 40% in 3QFY14 whereas share of SME and retail loan increased to 24% and 32% from 18% and 30% respectively. Despite of reported higher growth in SME and retail loan, overall loan grew by 5.4% YoY. Deposits witnessed growth of 12% YoY led by CASA growth of 15% YoY while term deposits de-grew by 10% YoY. In percentage term CASA improved by 90 bps YoY to 30.4%. Valuation & View Bank reported net profit growth of 9.2% YoY largely due to lower provision led by improving asset quality. Making lower provision in order to inflate profit is not too bad in our sense as bank has high provision coverage ratio and sequentially improved gross NPA. However at operating profit level, bank reported negative growth of 9.7% due to muted performance all around. We revised our book value estimate to Rs.82.2 from earlier of Rs.78. We believe bank to trade at 1.2 times of book value of FY14E. We value bank at Rs.98/share which is 1.2 times of FY14Es book value and 8.5 times of full year earnings

Narnolia Securities Ltd,

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

11

FEDERAL BANK
Fundamental Through Graph

Valuation Band

Source: Eastwind/Company
Narnolia Securities Ltd,
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12

FEDERAL BANK
Quarterly Result

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

3QFY14 2QFY14 3QFY13 % YoY Gr % QoQ Gr 3QFY14E Variation 1266 1265 1151 10.0 0.1 1348 6.4 461 438 358 28.7 5.3 434 -6.0 11 11 11 -8.2 -5.2 12 15.6 2 1 1 48.7 151.5 -100.0 1740 1714 1522 14.3 1.5 1793 3.1 156 143 204 -23.4 9.0 180 14.9 1896 1858 1726 9.9 2.0 1973 4.1 1194 1166 1024 16.6 2.4 1184 -0.8 546 548 497 9.7 -0.5 609 11.6 156 143 204 -23.4 9.0 180 14.9 702 692 701 0.1 1.5 789 12.4 177 170 163 8.1 3.7 189 7.0 169 167 144 17.7 1.1 182 7.3 346 338 307 12.6 2.4 371 7.1 356 354 394 -9.7 0.6 418 17.4 7 11 74 -90.2 -33.6 90 1132.4 349 343 320 9.1 1.7 328 -5.9 118 117 109 8.9 1.2 98 -16.9 230 226 211 9.2 1.9 230 -0.2

6872 57737 5850 25028 41640

6696 56794 5033 22794 42220

6323 51607 3562 19433 39494

8.7 11.9 64.2 28.8 5.4

2.6 1.7 16.2 9.8 -1.4

6926 59221 5197 23124 44922

0.8 2.6 -11.2 -7.6 7.9

1201 356 2.9 0.9 70

1466 411 3.5 1.0 72

1564 363 4.0 0.9 77

-23.2 -1.9

-18.1 -13.4

Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

13

FEDERAL BANK
Financials & View

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

2011
4052 2305 1747 23.8 517 2263 16.6 836 1427 12.8 525 902 902 94.1

2012
5558 3605 1953 11.8 532 2486 9.8 979 1506 5.6 335 1172 734 -18.6

2013
6168 4193 1975 1.1 664 2639 6.2 1180 1460 -3.1 297 1162 803 9.4

2014E
6989 4783 2206 11.7 687 2893 9.6 1372 1520 4.2 335 1186 799 -0.5

2015E
7707 5164 2543 15.3 687 3230 11.7 1454 1777 16.9 331 1445 1012 26.7

Balance Sheet
Deposits( Rs Cr) Change (%) of which CASA Dep Change (%) Borrowings( Rs Cr) Investments( Rs Cr) Loans( Rs Cr) Change (%) 43015 19 11554 22 1888 14538 31953 19 48937 14 13476 17 4241 17402 37756 18 57615 18 15652 16 5187 21155 44097 17 66257 15 19111 22 5361 23453 47624 8 76196 15 22360 17 6272 26656 55244 16

Ratio
Avg. Yield on loans Avg. Yield on Investments Avg. Cost of Deposit Avg. Cost of Borrowimgs Valuation Book Value CMP P/BV 9.9 6.0 5.0 7.6 11.1 7.6 6.8 6.5 10.5 6.9 6.7 6.9 10.9 7.4 6.6 7.0 10.5 6.9 6.6 7.0

60 84 1.4

67 85 1.3

74 96 1.3

83 80 1.0

85 80 0.9

Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

14

DB CORP
"On Strong Footing"
Result update
CMP Target Price Previous Target Price Upside Change from Previous

"BUY"
20th Jan' 14

Buy
301 340 13%

DBCORP beats the street with 18% (YoY) revenue growth led by healthy Ad- revenue positively impacted by festive and election season during the quarter. PAT (excluding EOI) grew by 28 %(YoY) because of growth in other Income. Consistency on earning performance led by regional growth and strategy on judicious mix of price and promotion energize its strong visibility in near future. Management is also committed for cost control and yield improvement, it will continue its strong market positioning in all aspect.

Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 533151 DBCORP 321.50/210

Robust Margin:
Company witnessed impressive ramp up in margin front because of cost controlling efforts, EBITDA margin up by 170bps (YoY) to 29.67% and PAT margin improved by 140bps (YoY) to 18.1%. Management stated to maintain its margin going forward and clearly indicated for thrust on yield improvement. For few quarters company has been consciously working on improvement of yield and cutting discount.

5521 25750
6261.65

Segmental Performance:
Stock Performance
Absolute Rel. to Nifty 1M 10 8 1yr 28.74 25.06 YTD -0.003 -0.002

During the quarter, company has seen 18.2% revenue growth from its advertisement, 14% from circulation and 25% from Radio business on YoY basis. Management expressed its interest regarding inorganic expansion in near future to maintain its healthy growth across all segments.

Management Commentary:
Share Holding Pattern-%
Promoters FII DII Others Current 74.96 17.73 2.95 4.36 2QFY14 74.97 16.46 4.00 4.57 1QFY14 74.98 14.66 5.34 5.02

According to management, Company will maintain a pragmatic approach towards operational controls and higher efficiency. DBCORP will continue to capitalize its consumption potential of Tier 2 and 3 cities. And they are studying on marketing strategies of niche brands in Tier 2 and 3 cities. Company is expected to launch its Bihar edition on 19 Jan, 2014, and we expect to see some part of additional revenue from Bihar edition by 4QFY14E and also expect to see breakeven in 3 to 4 years.

Stock Performace with Nifty

View and Valuation:

In view of upcoming general election, we expect government ad spending to go up substantially. Provision of TRAIs 12 minutes ad cap would provide revenue visibility to print media players, being one of the largest players DB Corp will be strong beneficiary in near future. Companys continuous efforts towards yield improvement and cutting discounts will lead to margin improvement in future. Considering its long-term growth story with favorable earning scenario and leadership position in key market, we are positive on the stock. We maintain BUY view on the stock with the target price of Rs 340. At a CMP of Rs 301, stock trades at 4.1x of FY15E P/BV.

Financials
Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 518.2 153.8 93.57 29.7% 18.1% 2QFY14 438 112.5 63.2 25.7% 14.4% (QoQ)-% 18.3 36.7 48.0 400bps 370bps 3QFY13 438.9 122.8 73.2 28.0% 16.7%

Rs, Crore (YoY)-% 18.1 25.2 27.9 170bps 140bps

15

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

DB CORP
Sales and Sales growth(%)(yoy)

(Source: Company/Eastwind)

Margin-%

(Source: Company/Eastwind)

PAT and PAT growth(%)(yoy)

(Source: Company/Eastwind)

Segments Printing & Publishing newspaper Radio Event

Sales Growth Margin Change Margin-% 3QFY14 2QFY14 3QFY13 (YoY)-% (QoQ)-% YoY QoQ 488.63 416.17 416.83 17% 17% 28% 200bps 500bps 23.82 17.09 19.08 25% 39% 36% 1200bps 2100bps 1.12 1.76 0.89 26% -36% -66% (3500bps) (7900bps)

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

16

DB CORP
Revenue Geography-wise Revenue Segments

Financials;
Rs,cr Sales RM Cost WIP Employee Cost Ad Spend Other expenses Total expenses EBITDA Depreciation and Amortisation Other Income EBIT Interest PBT Tax Exp PAT Growth-% (YoY) Sales EBITDA PAT Expenses on Sales-% RM Cost Employee Cost Ad Spend Event Expenses consumption of store & spare Distribution expenses Other expenses Tax rate Margin-% EBITDA EBIT PAT Valuation: CMP No of Share NW EPS BVPS RoE-% P/BV P/E FY10 1062.1 327.87 -0.0016 131.81 12.98 161.24 720.03 342.07 37.83 11.15 304.24 35.69 279.70 105.72 173.98 10.5% 132.2% 265.4% 30.9% 12.4% 1.2% 1.1% 4.8% 2.1% 15.2% 10.0% 32.2% 28.6% 16.4% 239 18 649 9.6 36 27% 6.7 24.9 FY11 1265.18 383.91 -0.06 184.56 12.52 185.2 862.13 403.05 43.28 14.18 359.77 15.3 358.65 99.97 258.68 19.1% 17.8% 48.7% 30.3% 14.6% 1.0% 1.3% 4.6% 1.7% 14.6% 7.9% 31.9% 28.4% 20.4% 246 18 829 14.1 45 31% 5.4 17.4 FY12 1451.51 508.04 -0.04 242.93 15.04 216.06 1105.03 346.48 50.57 24.02 295.91 9.23 310.7 98.32 212.38 14.7% -14.0% -17.9% 35.0% 16.7% 1.0% 1.0% 5.8% 1.7% 14.9% 6.8% 23.9% 20.4% 14.6% 219 18 927 11.6 51 23% 4.3 18.9 FY13 1592.32 544.54 0.03 279.5 17.21 234.07 1210.25 382.07 58.06 21.34 324.01 7.99 337.36 113.18 224.18 9.7% 10.3% 5.6% 34.2% 17.6% 1.1% 0.8% 6.0% 1.8% 14.7% 7.1% 24.0% 20.3% 14.1% 212.1 18.33 1029 12.2 56 22% 3.8 17.3 FY14E 1861.91 623.74 -1.86 307.21 22.34 260.67 1371.5 490.5 64.5 27.9 426.0 8.0 445.9 156.1 289.8 16.9% 28.4% 29.3% 32.0% 16.6% 1.2% 0.8% 6.0% 1.8% 14.0% 8.4% 26.3% 22.9% 15.6% 301 18.33 1180 15.8 64 25% 4.7 19.0 FY15E 2176.94 740.16 -2.18 380.97 23.95 315.66 1656.7 520.3 75.4 28.3 444.9 5.1 468.1 163.8 304.3 16.9% 6.1% 5.0% 34.3% 17.0% 1.1% 1.0% 6.2% 1.9% 14.5% 7.5% 23.9% 20.4% 14.0% 301 18.33 1344 16.6 73 23% 4.1 18.1

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

17

ITC
" Accessing the growth "
Result update CMP Target Price Previous Target Price Upside Change from Previous Market Data BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Cr) Average Daily Volume Nifty Stock Performance Absolute Rel. to Nifty 1M 3.7 2.0 1yr 14.5 10.2 YTD 13.8 9.3 BUY 325 380 320 17% 19%

"BUY"
20th Jan' 14

500875 ITC 380/281 257784 3497040 6262

Share Holding Pattern-%

Current 2QFY14 1QFY14

Promoters FII DII Others 1 yr Forward P/B

19.3 34.3 46.4

19.3 34.3 46.1

19.6 33.8 46.6

ITC posted better growth ahead of street expectations, Cigarette business on a strong footing, long-term growth outlook remains strong; Strong set of numbers, sales grew by 13.1% (YoY) led by robust sales across its FMCG and Paper and Packaging divisions. Cigarette volume declined by 2%(YoY) because of price hike by 18% in premium brand. PAT up by 16.3%, YoY. Further, with ITC being the market leader in cigarettes, higher pricing power in Cigarette would continue to maintain higher margins. However, volume growth on cigarette would be on the way of recovery position, previously impacted by price hike on cigarette (king and 74mm size). Price rises in the cigarettes business drove margin, revenue and profit growth. Win- win performance across all Segments: Cigarettes (47.7% of Sales) up by 12.6% , FMCG-others (24.1% of sales up by 16.1%, Hotels (3.7% of sales) up by 2%, Agri business (20.7% of sales) up by 10% and Paper and packaging (15% of sales) up by 19%. FMCG business outside of cigarettes has broken even operationally despite consumers slowing their discretionary spending. Margin status: The Companys EBITDA Margin inched up by 50bps to 37.6% on YoY basis. On segment wise, FMCG margin was positive to 0.5%, Cigarette Margin (EBIT) improved to 64.4% from 61.1% (3QFY13), Hotel business margin up by 170bps to 19.7% and AgriBusiness up by 90bps to 11.5% on YoY basis. While Paper & Paper Product Business margin down by 310bps to 18.4%, and Agri Business margin remains on negative respectively. Volume growth: This was the third consecutive quarter when the companys cigarettes volume fell. Because of increased prices of cigarette, and volume growth declined by 2% YoY. We expect, Volumes will retain its growth by next quarter, but the latest hike would ensure better margins for the company. Sound response from new launches: Its newer launches Sunfeast Delishus gourmet cookies and Candyman confectionery during the quarter grew rapidly. Products strategy: ITC continues to enjoy dominant market share in cigarette while ban on Gutkha by most of state govt- has provided a strong demand. FMCG business is expected to maintain momentum led by distribution linked growth, expected the price hikes to aid cigarettes revenue. View and Valuation: ITCs cigarette volume decline to arrest towards Q4FY14 and recover in FY15E, while non-cigarette business to report EBIT breakeven in FY14E. We are positive on long-term demand growth in cigarette business due to rising affordability and huge demand potential in small towns and rural areas. ITC offers the best earnings visibility in the sector especially when sector peers are confronting multiple challenges. The premium valuations enjoyed by ITC, at the CMP of Rs 325, the stock trades at 8.2x FY15E P/BV seems justified from a growth point of view. We maintain BUY with a price target of Rs 380. Financials Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 8623.11 3284.3 2385.3 38.1% 27.7% 2QFY14 7775.79 3173.3 2227.98 40.8% 28.7% (QoQ)-% 10.9% 3.5% 7.1% (270bps) (100bps) 3QFY13 7627 2857.7 2051.8 37.5% 26.9% Rs, Cr (YoY)-% 13.1% 14.9% 16.3% 60bps 80bs
18

Narnolia Securities Ltd,

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

ITC
Sales and its Growth(%)

Cigarette sales have grown by 13% YoY. However, ITC attributed its performance to the strategy of creating multiple drivers of growth.

(Source: Company/Eastwind)

Margin-%
These cost pressures were, however, mitigated through a combination of improvements in product and process efficiencies, smart sourcing and supply chain initiatives.

(Source: Company/Eastwind)

RM Cost improved by 130bps because of higher prices of Cigarette leaves and imported paper products

(Source: Company/Eastwind) Cigarette Volume Growth-%

ITC clocks cigarettes,

2%

volume

decline

in

(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

19

ITC
Segment-wise Performance-%
Segments Cigarettes FMCG - Others Hotels Agri business Paper and packaging Sales Contribution Sales Gr-YoY EBIT Margin 47.7% 12.6% 64.4% 24.1% 16.6% 0.5% 3.7% 1.9% 19.7% 20.7% 9.7% 11.5% 14.6% 18.5% 18.4% Margin Change(YoY) 330bps 180bps 180bps 90bps (310bps)
Double digit growth in Cigarette, FMCG, Agri and Paper & Packaging, but single digit growthon Hotel business

Financials
Rs in Cr, Sales RM Cost Purchases of stock-in-trade WIP Employee Cost Ad Spend Other expenses Total expenses EBITDA Depreciation and Amortisation Other Income EBIT Interest PBT Tax Exp PAT Growth-% (YoY) Sales EBITDA PAT Expenses on Sales-% RM Cost Ad Spend Employee Cost Other expenses Tax rate Margin-% EBITDA EBIT PAT Valuation: CMP No of Share NW EPS BVPS RoE-% P/BV P/E FY10 19302.1 6045.5 826.0 100.5 1464.0 544.9 3830.9 12811.8 6490.3 643.9 452.7 6299.1 53.4 6245.7 2034.9 4210.8 15.7% 24.7% 25.4% 31.3% 2.8% 7.6% 19.8% 32.6% 33.6% 32.6% 21.8% 263.2 381.8 14458.3 11.0 37.9 29.1% 6.9 23.9 FY11 22575.0 7136.9 1296.8 -272.7 1708.5 654.6 4381.9 14905.9 7669.1 699.1 536.1 7506.1 70.9 7435.2 2365.5 5069.7 17.0% 18.2% 20.4% 31.6% 2.9% 7.6% 19.4% 31.8% 34.0% 33.2% 22.5% 181.5 773.8 16489.9 6.6 21.3 30.7% 8.5 27.7 FY12 26552.2 7810.5 1921.2 -86.4 1944.3 710.1 5042.4 17342.0 9210.1 745.5 784.3 9249.0 80.5 9168.5 2845.8 6322.7 17.6% 20.1% 24.7% 29.4% 2.7% 7.3% 19.0% 31.0% 34.7% 34.8% 23.8% 256.5 779.6 19458.6 8.1 25.0 32.5% 10.3 31.6 FY13 31627.5 9069.8 3305.2 -256.8 2145.6 834.2 5355.1 20453.2 11174.3 859.1 877.6 11192.8 87.2 11105.7 3412.1 7693.6 19.1% 21.3% 21.7% 28.7% 2.6% 6.8% 16.9% 30.7% 35.3% 35.4% 24.3% 335.0 790.2 23157.9 9.7 29.3 33.2% 11.4 34.4 FY14E 35368.9 10433.8 2829.5 -247.6 2475.8 919.6 6647.6 23058.8 12310.2 943.2 1061.1 12428.1 12.9 12415.1 3910.8 8504.4 11.8% 10.2% 10.5% 29.5% 2.6% 7.0% 18.8% 31.5% 34.8% 35.1% 24.0% 325.0 790.2 26808.9 10.8 33.9 31.7% 9.6 30.2 FY15E 40349.1 11903.0 3227.9 -322.8 3026.2 1089.4 7583.6 26507.3 13841.8 968.4 1210.5 14083.9 17.9 14065.9 4430.8 9635.2 14.1% 12.4% 13.3% 29.5% 2.7% 7.5% 18.8% 31.5% 34.3% 34.9% 23.9% 325.0 790.2 31128.5 12.2 39.4 31.0% 8.2 26.7

Narnolia Securities Ltd,

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

(Source: Company/Eastwind) 20

HCLTECH
"Retain confidence"
Result update
CMP Target Price Previous Target Price Upside Change from Previous

"BUY"
17th Jan' 14

Buy
1392 1560 1194 12% 30.7%

Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs Crores) Average Daily Volume Nifty 532281 HCLTECH 1398/653 97287 1193062 6319

Stock Performance
Absolute Rel. to Nifty 1M 17.8 15.4 1yr 109.4 105.1 YTD 149.1 131

Share Holding Pattern-%

Promoters FII DII Others Current 61.84 26.01 5.70 6.45 4QFY13 61.92 24.45 6.49 7.14 3QFY13 61.99 24.32 6.56 7.13

HCL tech beats expectations with a sustained momentum in volumes and proved its consistency to maintain its margin at 26% mark; Following the successive 10th quarter, again company witnessed healthy growth in 2QFY14 than street expectation. Sales grew by 2.8% (QoQ) in INR term and 4% (QoQ) in USD term led by 4.6% of growth from Infrastructure services and BPO services. During the quarter, the company has crossed the landmark of USD5bn. PAT grew by 5.6 %(QoQ) in INR term and 7.1% (QoQ) in USD term. The company continues to lead the industry in profitable growth, with 11 successive quarters of net income margin expansion, having reported 55% growth in Net Income on Yearly basis. Management is confident to focus on vendor consolidation and cost control activities to maintain its growth story. Stable Margin: During the quarter, its EBITDA Margin was almost flat at 26% and good thing is, company has been able to maintain its range of 25-26% for its margin. PAT margin improved by 50bps to 18.3%, sequentially. Segmental Performance: Infrastructure Services (contributes 34% of sales) continued to lead with growth at 4.6%, and BPO services (contributes 5% of sales) grew by 10%(QoQ)followed by Enterprise Application at 1.6%, Custom Application Services at 1.4% and Engineering/ R&D Services at 1%, respectively. Mixed performance across verticals: The Company contributed strong growth in the Retal and manufacturing verticals. Retail & CPG and Manufacturings revenue growth up by 6.5% and 3.7% respectively and Financial Services up by 2.4%. While growth from Healthcare and Other services declined by 5.2% and 16.1% respectively. Healthy deal pipeline: During the quarter, HCL Tech reported an addition of 15 transformational deals in the US and Europe for the December quarter. These wins have been in the momentum markets of manufacturing and Financial Services as well as the emerging momentum markets of life sciences & Healthcare and Public Services. Across the geographies, USA and Europe remain best to drive deal wins during the quarter because of healthy scenario of demand environment. View and Valuation: HCL techs decent level of utilization, focused on cost control and utilization of new market opportunities through vendors consolidation would provide a new shape to the company in near future. On performance front, it continues to be bullish on the rebid market and bullish on short-term to medium term, momentum on deals pipeline also looking robust. Considering the increasing discretionary spends across the geographies like US and Europe, we expect healthy earnings performance ahead. At a CMP of Rs 1392, stock trades at 17.5x of FY14E earnings, We retain BUY on the stock and revised our target price from Rs 1194 to Rs1560.

1 year forward P/E

Financials
Revenue EBITDA PAT EBITDA Margin PAT Margin 2QFY14 8184 2125 1495 26.0% 18.3% 1QFY14 7961 2093 1416 26.3% 17.8% (QoQ)-% 2.8 1.5 5.6 (30bps) 50bps 1QFY13 6273.8 1417 965 22.6% 15.4%

Rs, Crore (YoY)-% 30.4 50.0 54.9 340bps 290bps

21

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

HCLTECH
Sales(USD term) and Sales growth-%(QoQ)

In dollar terms, the revenues grew by 4% QoQ (cc terms 3.1%) to USD 1321mn and net profit grew by 7.1% QoQ to USD 241.6mn.

(Source: Company/Eastwind)

Margin-%

Tha company expects to maintain EBIT margin at 18.5-19.5% in FY14

(Source: Company/Eastwind)

Clients Metrics
Clients Contribution . Top 5 Clients Top 10 Clients Top 20 Clients 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 15.3% 15.8% 16.0% 16.4% 16.2% 15.7% 15.4% 15.4% 24.1% 24.2% 24.3% 24.7% 24.5% 24.2% 24.0% 23.8% 34.2% 33.9% 33.9% 34.1% 33.6% 33.3% 32.8% 33.0% 1QFY14 15.1% 23.8% 33.2% 2QFY14 14.8% 23.8% 33.6%

Employee Metrics
. No of Employee Gross Addition Attrition 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 70321 72055 72474 74675 75621 75226 74226 74912 87196 88332 6927 4931 3303 5274 4479 3291 2933 4316 8061 7593 15.9% 15.7% 15.0% 14.0% 13.6% 13.6% 14.2% 14.9% 16.10% 16.6%

Utilization rate

Utilization down from 84.9% to 84.1%. Further, it's Utilization are at decent levels, indicated can still derive more efficiency .

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

22

HCLTECH
Key facts from Con-Call
The company is expecting to catch up more deal from US and Europe because of better demand environment ahead. Clients are looking vendors consolidation, and company will try to turn this opportunity into deal. The company expects to see margin at a range of 21-22% in near term. The wage hike is spread over two quarters or rather more than two quarters. Q3 and Q4 margin could be impact be 30bps. The infrastructure business is largely under penetrated globally, less than 5% from an Indian (vendor's) standpoint. They expect to see significant growth over there, in that business and expect to raise infrastructure services margins by supporting customers migrating to cloud computing.

Financials;
Rs, Cr Net Sales-USD Net Sales Raw Materials Cost Employee Cost Operation and other expenses Total Expenses EBITDA Depreciation Other Income Extra Ordinery Items EBIT Interest Cost PBT Tax PAT Growth-% Sales-USD Sales EBITDA PAT Margin -% EBITDA EBIT PAT Expenses on Sales-% Employee Cost RM Cost Operation and other expenses Tax rate Valuation CMP No of Share NW EPS BVPS RoE-% Dividend Payout ratio P/BV P/E FY10 2704.6 12136.3 443.6 6253.7 3498.5 10195.7 1940.6 418.1 154.1 0.0 1522.5 204.1 1472.4 213.4 1259.0 24.1% 18.6% 5.9% -4.6% 16.0% 12.5% 10.4% 51.5% 3.7% 28.8% 14.5% 364.9 67.9 6288.8 18.5 92.6 20.0% 25.0% 3.94 19.68 FY11 3545.3 15730.3 522.1 8589.6 4163.2 13274.9 2455.4 459.7 299.7 0.0 1995.7 142.6 2152.8 488.5 1664.3 31.1% 29.6% 26.5% 32.2% 15.6% 12.7% 10.6% 54.6% 3.3% 26.5% 22.7% 493.5 68.9 7653.0 24.2 111.1 21.7% 31.5% 4.44 20.43 FY12 4151.5 20830.6 612.0 11104.6 5418.8 17135.3 3695.2 549.2 206.5 0.0 3146.0 142.6 3209.8 782.7 2427.1 17.1% 32.4% 50.5% 45.8% 17.7% 15.1% 11.7% 53.3% 2.9% 26.0% 24.4% 490.0 69.3 9837.9 35.0 141.9 24.7% 33.1% 3.45 13.99 FY13 4686.5 25581.1 959.3 12574.2 6386.4 19919.9 5661.2 636.8 306.6 44.5 5024.4 105.6 5269.9 1225.3 4044.6 12.9% 22.8% 53.2% 66.6% 22.1% 19.6% 15.8% 49.2% 3.8% 25.0% 23.3% 759.5 69.6 13164.0 58.1 189.1 30.7% 24.2% 4.02 13.07 FY14E 5379.7 32278.2 968.3 16139.1 7101.2 24208.6 8069.5 748.6 511.6 -484.2 7320.9 79.2 7269.1 1744.6 5524.5 14.8% 26.2% 42.5% 36.6% 25.0% 22.7% 17.1% 50.0% 3.0% 22.0% 24.0% 1392.0 69.6 17548.4 79.4 252.1 31.5% 20.6% 5.52 17.54 FY15E 6492.2 38628.3 1158.8 19507.3 8691.4 29357.5 9270.8 903.4 645.6 77.3 8367.3 59.4 9030.8 2212.5 6818.2 20.7% 19.7% 14.9% 23.4% 24.0% 21.7% 17.7% 50.5% 3.0% 22.5% 24.5% 1392.0 69.6 23226.5 97.9 333.7 29.4% 16.7% 4.17 14.21

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

23

BAJAJ-AUTO LTD.
Inline Performance but Market Share lost.
Result Update
CMP Target Price Previous Target Price Upside Change from Previous

"NEUTRAL"
17th Jan' 14.

Neutral
1908 1870 -

Declined Sales Growth ; Loss in Market Share ; Maintained EBITDA Margin; Not so Optimistic guidance..
Bajaj Auto posted its 3QFY14 results with net sales at Rs 5025 Cr down by 6 % YoY. The decline in the net sales came on the back of lower volume in the quarter under review. The company during the 3QFY14 manage to sell 993,690 units of vehicles down by 11 % YoY. The total number of 2W sold during the quarter was 887,671 units down by 10 %YoY. The company during the quarter sold 106,019 units of 3W down by 25 % YoY. The company during 3QFY14 also have lost 3% market share. The operating EBITDA during the quarter came at Rs 1135 Cr and OPM was 22.1 % however the company have gained Rs 95 Cr towards time value of foreign exchange contracts. Therefore adjusted OPM stands at 21 %.The company during the quarter managed to hold its prices across its models which helps to maintain its OPM levels at early twenties range. The realization of dollar for the quarter was at Rs 62. The net profits of the company for 3QFY14 came at Rs 905 Cr and NPM at 17.6 %.The other income for the quarter came at Rs 222 Cr and Tax Rate was 31 %.

Market Data
BSE Code NSE Symbol 52wk Range H/L Mkt Capital (Rs, Cr) Average Daily Volume Nifty 532977 BAJAJ-AUTO 2193/1657 55,208 197712 6318

Stock Performance-%
Absolute Rel. to Nifty 1M 0.2 -1.8 1yr -9.0 -14.0 YTD 13.0 -5.0

The realization per vehicle for the quarter was at Rs 50567 and it was Rs 47060 for the same time last fiscal. Management Commentary The management of the company after results said that they donot look significant change in industry outlook going forward. The management stated that though they have lost nearly 3 % of market share during the quarter however are hopeful to regain it on the back of 125 cc discover bike (Launched way back in Nov 2013) and another forthcoming launch in March 2014.The company further said that they donot see OPM to cross 21% levels in near term. The company reiterated that they will not foray in scooter segments. View & Valuation The stock is trading at Rs 1908 and it has achieved our previous target price of Rs 2100, we have turned to neutral for the stock post our target price achievement .The 3QFY14 results are not much strong to make a convincing thought more over the management of company has not hinted relatively stronger business outlook going forward. Post analysis of 3QFY14 results and management commentary does not make any strong conviction and maintain our NEUTRAL view for the stock with Target Price of Rs 1870.

Share Holding Pattern-%

Promoters FII DII Others Current 2QFY14 1QFY1 4 50.0 50.0 50.0 18.7 17.8 17.4 6.9 7.8 7.7 24.4 24.4 24.8

One Yr Price Movement

Financials
Revenue EBITDA PAT EBITDA Margin PAT Margin 3QFY14 5131 1135 905 22.1% 17.6% 2QFY14 5175 1132 837 21.9% 16.2% (QoQ)-% (0.9) 0.3 8.1 20bps 150bps 3QFY13 5413 1012 819 18.7% 15.1%

Rs, Crore (YoY)-% -5.2 12.2 10.5 340bps 250bps

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(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

BAJAJ-AUTO LTD.
SALES & PAT TREND

The decline in the net sales in the quarter came on the back of lower volume sales.

(Source: Company/Eastwind)

OPM & NPM TREND

The company during the quarter managed to hold its prices across its models which helps to maintain its OPM levels at early twenties range

(Source: Company/Eastwind)

Volume Trend

The total number of 2W sold during the quarter was 887,671 units down by 10 %YoY. The company during the quarter 106,019 units of 3W down by 25 % YoY. sold

(Source: Company/Eastwind)

Narnolia Securities Ltd,

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

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