Stock Investment Tips Recommendation - Buy Stock SWARAJ ENGINES, Kolte-Patil Developers, Kalpatru Power Transmission, Godrej Consumer Product

IEA-Equity
Strategy

India Equity Analytics

4th Feb, 2014

Daily Fundamental Report on Indian Equities

SWARAJ ENGINES: "Long term fundamental continue to remains intact "

"BUY"

Edition : 198
4th Feb 2014

At the CMP of INR610, the stock discounts its FY14E EPS of INR53.20 by 10.8x and FY15E EPS of INR61.2 by 9.8x. Given the strong revenue
growth at a CAGR of 21%; PAT growth at CAGR of 26% post acquisition and stable margins at ~15%, the company is poised to grow further and
capable of ustaining its healthy earnings. Also, Company assurance of 30-60% dividend payout ratio implies an attractive dividend yield of 4-9%.
So taking all this into consideration share looks reasonable at Rs. 610 as long term fundamental continue to remains intact and one can expect
growth of about maybe 10-13% in next eight-twelve months time. We upgrade our rating on stock from "Hold" to "accumulate", with a revised
price target to Rs 648 ................................. ( Page :2-3)

Kolte-Patil Developers: "On track to meet FY14 guidence"

"BUY"

4th Feb 2014

At the CMP of Rs.91, the stock P/E ratio is at 4.6x FY14E and 3.8x FY15E respectively. EPS of the company for the earnings for FY14E and FY15E is
seen at Rs. 19.6 and Rs.23.8 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 68% and 69% over FY13-15E
respectively. On the basis of Intrest coverage ratio, the stock trades at 7.5x for FY14E and 9.1x for FY15E. Price to Book Value of the stock is
expected to be at 0.7x and 0.8x respectively for FY14E and FY15E at current price . We expect that the company surplus scenario is likely to
continue for the next three years, will keep its growth story in the coming quarters also. We maintain ‘Buy’ in this particular scrip with a target
price of Rs 120 for medium to long term investment. .......................... ( Page : 4-5)

Kalpatru Power Transmission : "Missed one……."

"BUY"

4th Feb 2014

At CMP of Rs.75.6, KPTL tradesat 7.6x FY14 EPS and 5.5x FY15 EPS. To factor in robust revenue growth, we revise revenue estimates for
FY14/FY15 by 5.1%/1.0% respectively. On account of continued losses and low margin orders in the infrastructure segment we revise standalone
EBIDTA margins as well to 9.7% for FY14 and 10.0% for FY15. Hence, we maintain "Buy"rating with target price at Rs.95/share.
................................................ ( Page : 6-9)

Godrej Consumer Product :" Strategy Shining"

"BUY"

4th Feb 2014

For 3QFY14, Godrej CP revealed inline set of numbers with 17% sales growth led by 18% domestic and 25% international sales growth, reported
growth across all geographies and segments, respectively. With launching new products in domestic as well as international market, Godrej CP
will explore organic & inorganic growth. Along with its 3x3 strategy, it has 10x10 strategy also, which refers to 10x growth in 10 yrs.
.............................................. ( Page : 10 -12)

Sesa Sterlite Ltd :

"NEUTRAL"

4th Feb 2014

Vedanta group firm Sesa Sterlite reported a consolidated net profit of Rs 1,868.29 crore for the Q3FY14.The company, previously known as Sesa
Goa, had reported a net profit of Rs 496.73 crore in the corresponding period of the previous fiscal.During the quarter, its net sales stood at Rs
19,414.34 crore .The company has resumed iron ore mining operations in Karnataka , 2013 where it has 2.29mn tonne per annum capacity .We
value the stock using forward P/B and here by we recomend Neutral rating on the stock at a target price of Rs.196 from current market price of
Rs.185 ................................................ ( Page : 13-15)

HEROMOTOCO: Average Sales with Flat Profits Growth..

"BUY"

3th Feb 2014

The company registered its 3QFY14 net sales at Rs 6846 Cr up by 11.3% YoY led by healthy volume growth of 7% for the period under review.
The company during 3QFY14 sold 1680940 units including exports. The volume performance was led by a strong 7.8% YoY growth in the
domestic segment. ..................................................................... ( Page : 16-17)

Marico : " Volume slows…"

"NEUTRAL"

3th Feb 2014

Beats the street on profitability and Margin front with poor volume growth;Marico witnessed better numbers than expectation with 10% sales
growth (excluding Kaya Sales) led by 3% volume growth on YoY basis. We believe that slower volume growth could not easily turned out in next
1-2 quarters because of poor discretionary demand environment. Therefore, we downgrade our view from "BUY" to "NEUTRAL".
....................................................................... ( Page : 18-20)
Narnolia Securities Ltd,

SWARAJ ENGINES Ltd.

V-

"Accumulate"
4th Feb' 14

" Long term fundamental continue to remains intact…. "
Result update

Accumulate

CMP
Target Price
Previous Target Price
Upside
Change from Previous

598
648
600
8%
7%

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

500407
SWARAJENG
382/535
742
601
6,002

Stock Performance-%
Absolute
Rel. to Nifty

1M
(6.6)
(2.3)

1yr
24.3
24.7

YTD
51.4
45.3

2QFY14
50.6
1.9
10.4
37.1

1QFY14
50.6
1.5
10.6
37.3

Share Holding Pattern-%
Promoters
FII
DII
Others

3QFY14
50.6
1.9
10.6
36.9

1 yr Forward P/B

Swaraj Engines posted a moderate revenue growth of 20.8% to Rs. 150.2 crore during Q3FY14
over corresponding period of previous year due to 21.2% growth yoy reported in diesel engines
sales volume. Company sold 18,530 diesel engines during the quarter as compared to 15,288
engines sold during corresponding period of previous year. EBITDA of the company marginally
outpaced by the revenue due to unexpected rise in non operating expenses and stands at Rs.
21.8 crore up by 18.6% yoy. Though company managed to control material cost, which
constitutes ~90% of the total expenses; however, employee cost and administration expenses
reported the growth of 22.1% and 23.9% respectively during the quarter. As a result, EBITDA
and PBT margin reported a marginal deterioration of 24bps and 5bps during Q3FY14 yoy
respectively. PAT reflected in-line numbers and reported the yoy growth of 21.4% to Rs. 16.7
crore before extra ordiniary item of Rs. 1.15 crore; while PAT margin improved by 5bps.
Leading supplier to Mahindra & Mahindra Ltd :
Leading supplier to Mahindra & Mahindra Ltd – A key source to growth: SEL enjoys the access to
the India’s largest tractor manufacturer “M&M” (41% market share in Domestic tractor industry),
which has a holding of 33% in SEL. Swaraj Engines Ltd manufactures tractor engines solely for the
“Swaraj Division” of M&M. It caters to ~80% demand of Swaraj division of M&M and rest 20% of
demand is met through Kirloskar Oil Engines, which has a holding of 17% in SEL. The demand
from M&M is estimated to grow further and reach ~85‐90%.
Outlook :
We have modeled a 25% of revenue growth for FY15 yoy respectively, due to SWE’s ability to
maintain growth in product volume and recent enhancement in annual production capacity from
75,000 units to 105,000 units. Company currently operates at TTM EBITDA and net margin of
14.8% and 11.3% respectively, which provides sufficient cushion against operating cost. With
liquidity being moderate and cash flow positive, company has enough cash to finance its
expansion plan of Rs. 38 crore through internal accruals.
Valuations :
At the CMP of INR610, the stock discounts its FY14E EPS of INR53.20 by 10.8x and FY15E EPS of
INR61.2 by 9.8x. Given the strong revenue growth at a CAGR of 21%; PAT growth at CAGR of 26%
post acquisition and stable margins at ~15%, the company is poised to grow further and capable
of ustaining its healthy earnings. Furthermore, despite the capex of INR58crore, the company has
strong cash flows and the company is debt free. Also, Company assurance of 30-60% dividend
payout ratio implies an attractive dividend yield of 4-9%. So taking all this into consideration
share looks reasonable at Rs. 610 as long term fundamental continue to remains intact and one
can expect growth of about maybe 10-13% in next eight-twelve months time. We upgrade our
rating on stock from "Hold" to "accumulate", with a revised price target to Rs 648.

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14A
150.2
21.8
15.6
14.5%
10.8%

2QFY14A
151.6
22.7
17.2
14.9%
11.0%

(Standalone)

(Var)-%
-0.9%
-3.8%
-9.5%
(40) bps
(20) bps

3QFY13A
124.6
18.4
13.8
14.8%
10.7%

Rs, Crore
(YoY)-%
21.7%
23.3%
24.9%
(30) bps
10 bps

(Source: Company/Eastwind Research)

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

2

9

SWARAJ ENGINES Ltd.
Key financials :
PARTICULAR

2009A

2010A

2011A

2012A

2013A

2014E

2015E

208
5
213
32
27
5
0
32
11
21
7
17.2
5.9

282
10
292
50
45
5
0
55
17
37
12
30.1
9.3

361
8
369
61
56
4
0
64
20
44
14
35.4
11.6

449
12
461
69
65
4
0
77
24
53
19
42.5
15.1

479
15
494
71
64
7
0
79
24
55
48
44.6
38.4

602
18
620
87
78
9
0
96
30
66
24
53.5
19.3

750
20
770
109
98
11
0
118
37
81
30
65.4
24.2

15.3%
15.1%
10.0%
8.0%
2.7%
21.9%
21.9%

17.6%
18.7%
12.8%
31.6%
9.8%
30.4%
30.4%

16.8%
17.4%
11.9%
12.2%
4.0%
28.8%
28.8%

15.5%
16.8%
11.5%
9.9%
3.5%
28.4%
28.4%

14.9%
16.1%
11.2%
11.3%
9.7%
28.6%
28.6%

14.5%
16.0%
11.0%
9.0%
3.2%
28.1%
28.1%

14.5%
15.7%
10.8%
10.9%
4.0%
28.3%
28.3%

97
1
214

123
1
95

152
1
290

186
1
429

194
1
395

236
1
598

287
1
598

Performance
Revenue
Other Income
Total Income
EBITDA
EBIT
DEPRICIATION
INTREST COST
PBT
TAX
Reported PAT
Dividend
EPS
DPS
Yeild %
EBITDA %
PBT %
NPM %
Earning Yeild %
Dividend Yeild %
ROE %
ROCE%
Position
Net Worth
No of Share
CMP
(Ammount in crore)
Valuation

Book Value
P/B
P/E
Net Sales/Equity

(Source: Company/Eastwind)

78.3
2.7
3.5
2.1

(Source: Company/Eastwind Research)

98.8
1.0
5.3
2.3

122.6
2.4
5.6
2.4

150.0
2.9
5.1
2.4

156.0
2.5
6.8
2.5

190.2
3.1
11.2
2.5

231.5
2.6
9.1
2.6

(Figures In crore)


3

Kolte-Patil Developers Ltd.

V-

"Buy"
4th Feb' 14

"On track to meet FY14 guidence.........."
Result update

Buy

CMP
Target Price
Upside

74
100
120
35%
0%

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Nifty

532924
KOLTEPATIL
49/115
558
239,587
6,002

Stock Performance-%
Absolute
Rel. to Nifty

1M
(18.8)
(14.5)

1yr
(36.6)
(36.3)

YTD
(16.3)
(22.4)

2QFY14
74.5
1.4
0.8
23.5

1QFY14
74.5
1.5
0.5
23.5

Promoters
FII
DII
Others

3QFY14
74.5
1.4
0.4
23.8

1 yr Forward P/B

The company posted de-growth in its revenue and net profit during the third quarter
compared to same period last year. KPD's net revenue for Q3FY14 dipped to Rs 188 crore
against Rs 225 crore in Q3FY13. The company's net profit also decreased to Rs 20.40 crore in
Q3FY14 against Rs 30.52 crore in Q3FY13. However, the company's net revenues for first nine
months for FY14 grew by 15 per cent to Rs 593 crore against Rs 518 crore in 9MFY13.
Interestingly the company's EBITDA soared up by 45 per cent to Rs 181 crore in 9MFY14 on
yearly basis. This has improved its EBITDA margins by 630 basis points on yearly basis. The PAT
stood at Rs 79 crore in 9MFY14 against the PAT during same period in last financial year. Based
on revised volume guidence by management in range of 1.8-2.0mnsft, we cut our FY14/FY15
earnings by 5%/8% while maintaining BUY with a revised TP of Rs 100 (Rs 120 earlier)
New sales booking recorded in Q3FY14 is 0.44 msf of which about 93% is residential and 7%
commercial projects. The sales value was worth Rs 253 crore. The Average price realization (APR)
for the quarter stood at Rs 5730/sft with average price for residential project stood at Rs
5421/sft and that for commercial project at Rs 9932/sft. The ongoing projects as end of Dec 2013
have a saleable area is 14.1 msf (KPDL's share is 9.3 msf) and of which the company already sold
about 7.8 msf with a sale value of Rs 3157.7 crore. Cumulative collection as end of Dec 2013 in
case of ongoing projects is about Rs 2442.7 crore and the collection in Q3FY14 stood at Rs 230
crore. In January 2014 launched 0.2 msf (of total saleable area of 0.9 msf) of Jazz Phase I at
Aundh. Jan 2, 2014 the company obtained final approval and started pre launch activity and
made 34 units as far as 0.6 msf Mirabilis, Horamavu, Bengaluru project. Gross debt excluding
compulsory convertible debentures (CCD) is Rs 205 crore and the net debt is Rs 127 crore. In
Q3FY14 recorded its first sale in Mumbai of 2,200 sft. at an APR of Rs 34375/sft.
Management Guidence
Management is hopeful of achiveing a topline target of Rs. 800-900 crore for FY14E and new area
sales booking of 1.8 - 2 msf for FY2014 with average price realization of Rs 5300/sft.
Valuations
At the CMP of Rs.91, the stock P/E ratio is at 4.6x FY14E and 3.8x FY15E respectively. EPS of the
company for the earnings for FY14E and FY15E is seen at Rs. 19.6 and Rs.23.8 respectively. Net
Sales and PAT of the company are expected to grow at a CAGR of 68% and 69% over FY13-15E
respectively. On the basis of Intrest coverage ratio, the stock trades at 7.5x for FY14E and 9.1x for
FY15E. Price to Book Value of the stock is expected to be at 0.7x and 0.8x respectively for FY14E
and FY15E at current price . We expect that the company surplus scenario is likely to continue for
the next three years, will keep its growth story in the coming quarters also. We maintain ‘Buy’ in
this particular scrip with a target price of Rs 120 for medium to long term investment.

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
188.1
57.3
20.4
30.4%
15.8%

2QFY14
188.6
60.3
32.2
32.0%
18.3%

(Var)-%
-0.3%
-5.0%
-36.7%
(160) bps
(250) bps

3QFY13
225.4
62.9
30.6
27.9%
16.6%

Rs, Crore
(YoY)-%
-16.5%
-9.0%
-33.2%
252 bps
(80) bps

(Source: Company/ Eastwind Research)


4

Kolte-Patil Developers Ltd.
Key financials :
PARTICULAR

2009A

2010A

2011A

2012A

2013A

2014E

2015E

186
50
236
85
84
1
8
126
40
9
8
11.5
1.0

148
5
153
58
57
2
8
54
16
36
8
5.0
1.0

204
5
209
91
89
2
7
87
30
61
12
7.5
1.6

249
10
260
68
66
2
24
50
14
82
12
4.7
1.6

743
7
750
201
196
5
42
160
55
108
30
16.4
4.0

825
7
832
248
240
8
46
201
69
132
30
17.4
4.0

908
18
925
272
265
8
46
237
81
155
30
20.5
4.0

45.8%
36.7%
58.0%
5.1%
13.2%
10.6%

39.5%
24.7%
9.3%
1.9%
5.6%
4.6%

44.4%
27.3%
16.4%
3.5%
8.2%
6.5%

27.2%
13.8%
12.1%
4.1%
5.0%
3.8%

26.4%
16.2%
18.4%
4.5%
17.3%
13.9%

30.0%
15.9%
23.7%
5.4%
16.1%
12.3%

30.0%
16.8%
27.9%
5.4%
16.4%
13.0%

657
159
816
8
20

675
150
824
8
54

700
175
874
8
46

721
226
947
8
39

717
819
944
173
250
250
891
1069
1194
8
8
8
89
74
74

87.2
0.2
11.2
1.7

89.4
0.6
6.8
10.8

92.3
0.5
13.1
6.1

95.2
0.4
2.7
8.3

94.6
0.9
5.1
5.4

Performance
Revenue
Other Income
Total Income
EBITDA
EBIT
DEPRICIATION
INTREST COST
PBT
TAX
Reported PAT
Dividend
EPS
DPS
Yeild %
EBITDA %
NPM %
Earning Yeild %
Dividend Yeild %
ROE %
ROCE%
Position
Net Worth
Total Debt
Capital Employed
No of Share
CMP
(Ammount in crore)
Valuation
Book Value
P/B
Int/Coverage
P/E
(Source: Eastwind Research)

108.1
0.7
5.2
4.2

124.6
0.6
5.8
3.6

(Figures in crore)


5

Kalpatru Power Transmission

"Buy"
4th Feb' 14

"Missed one……."
Result

Buy

CMP
Target Price
Previous
Target Price
Upside
Change from
Previous

73
95
120
30%
-21%

Market Data
BSE Code
NSE Symbol
52wk Range
H/L Capital
Mkt
(Rs Crores)
Average Daily
Volume (Nos.)
Nifty

522287
KALPATPOWR
64/105
1201
48500
6002

Stock Performance-%
1M
-18
(13)

Absolute
Rel. to Nifty

1yr
-25
(24)

YTD
-11
(17)

Promoters
FII
DII
Others

3QFY14 2QFY14 1QFY14
59
59
58
9.7
9.9
10.9
23.2
23.4
23.2
7.6
7.3
7.8

1 yr Forward P/B

Kalpataru Power Transmission reported a 18% growth in standalone net sales to Rs 1051.34
crore. The growth was driven by Transmission business, which constitute about 96% of total
sales and was up by 25% YoY to Rs 1007.22 crore. Infrastructure segment comprising of
Railways and Pipeline execution reported a 61% fall in net sales to Rs 28.05 crore largely due to
lower execution and excessive rainfall in Eastern region of the country. Other segment
comprising of Biogas reported a 6% growth in net sales to Rs 16.07 crore. OPM was down by
110 bps to 8.9%. While there was a better execution of Transmission sector business including
higher execution of export orders having better margins, continued losses in Infrastructure
segment resulted in fall in OPM. The PBIT of Transmission business stood at Rs 89.51 crore
with PBIT margin of about 9%, where as Infrastructure business reported loss of about Rs 15.23
crore as compared to profit of Rs 5 lakh for Dec'12 quarter. The Other segment PBIT was down
by 11% to Rs 1.80 crore. Thus overall OP was up by 6% to Rs 94.04 crore.
JMC Projects EBITDA margins improve to 5.1%, PAT up 75.6% yoy to Rs.31.4mn:
Standalone PAT grew by 75.1% yoy to Rs.58.3mn upon 8.8% yoy growth in income from
operations to Rs.6651mn, better than our PAT and revenue estimates of Rs.32.1 and Rs.6426mn.
Robust execution of better margin factories and buildings orders and cost optimization
measures,led 40 bps yoy increase in EBITDA margins to5.1%,
Standalone Performance for nine months ended Dec 2013
Kalpataru Power Transmission reported a 26% growth in standalone net sales to Rs 2903.14 crore
for the nine months ended Dec'13 period. The growth was driven by Transmission business,
which constitute about 94% of total sales and was up by 33% YoY to Rs 2720.41 crore.
Infrastructure segment comprising of Railways and Pipeline execution reported a 36% fall in net
sales to Rs 138.48 crore largely due to lower execution and excessive rainfall in Eastern region of
the country. Other segment comprising of Biogas reported a 13% growth in net sales to Rs 44.25
crore.
OPM was down by 30 bps to 9.5%. While there was a better execution of Transmission sector
business including higher execution of export orders having better margins, continued losses in
Infrastructure segment resulted in fall in OPM The PBIT of Transmission business stood at Rs
259.25 crore with PBIT margin of about 9.5%, improvement of 60 bps YoY, where as
Infrastructure business reported loss of about Rs 36.48 crore as compared to profit of Rs 5.45
crore for nine months ended Dec'12 period. The Other segment PBIT was stood at Rs 3.49 crore
as compared to Rs 0.47 crore for nine months ended Dec'12 period. Thus overall OP was up by
23% to Rs 277.15 crore.
Other income was up by 10% to Rs 37.80 crore. Interest was up by about 24% to Rs 114.26 crore
and depreciation was up by 35% to Rs 51.33 crore, after which the PBT was up by 16% to Rs
149.36 crore. After providing total tax of Rs 50 crore, up by 25% YoY, standalone PAT for nine
Financials
Rs, Crore
3QFY14
2QFY14
(QoQ)-%
3QFY13
(YoY)-%
Revenue
1051.3
962.2
9.3
889.7
18.2
EBITDA
94.0
91.1
3.2
88.6
6.2
PAT
33.7
31.0
8.7
35.1
-4.1
EBITDA Margin
8.9%
9.5%
(60) bps
10.0%
110 bps
PAT Margin
3.2%
3.2%
0 bps
3.9%
(70) bps
(Standalone)
6

Kalpatru Power Transmission.
Concall Highlights:
• PGCIL has changed its model on bidding as PGCIL itself needs to be now competitive for winning
future bids. Competition continues to remain as it is, although everybody has become cautious.
Management expects good orders from PGCIL in Mar'14 quarter, which is the normal trend.
• Infrastructure segment comprising of railways and pipelines continue to report losses due to
lower execution, delays for some projects due to ROW issues and high and extended rainfall in
Eastern region of India, where the company has maximum orders.
• Infrastructure business has an order book of around Rs 420 crore of which 80% are legacy
orders. Management expects legacy orders to end by 2 more quarters after which better margins
and better results within the sector will come in. Railways are not making any money and it's been
very disappointing with not much to bid in and legacy orders hurting the margins.
• About 50% of order book is from Government contracts in JMC Projects and rests are private. Q4
will see some more margin improvement due to better execution. Margin improvement of about
50-75 bps will continue in FY'15 for JMC Projects.
• Overall, the management expects to end the year with a 20% net sales growth for FY'14 for KPTL
and about 15% for FY'15. Margins will hover around 10-10.5% for transmission business segment.
• Company has standalone debt of abut Rs 650 crore which it expects to bring down by about Rs
100 crore by end of FY'14. Average interest costs is about 10.5%. Consolidated debt is about Rs
2600 crore.

Healthy order book:
Consolidated order book as end of Dec 2013 was above Rs 12500 crore and of which KPTL's was Rs
7000 crore and that of JMC Project's was Rs 5500 crore. JMC received new order worth Rs 880
crore in Q3 FY'14. About 54% of order book of Transmission business was from international
markets. About 50% of order book is from Government contracts in JMC Projects and rests are
private.

Outlook:
At CMP of Rs.75.6, KPTL tradesat 7.6x FY14 EPS and 5.5x FY15 EPS. To factor in robust revenue
growth, we revise revenue estimates for FY14/FY15 by 5.1%/1.0% respectively. On account of
continued losses and low margin orders in the infrastructure segment we revise standalone
EBIDTA margins as well to 9.7% for FY14 and 10.0% for FY15. Hence, we maintain "Buy"rating
with target price at Rs.95/share.


7

Story in graphs :
T&D Revenue (INR) & T&D EBIT (%) (Q-o-Q) :

Standalone, INR in crores


Revenue (Q-o-Q) :

Standalone, INR in crores


Margin % (Q-o-Q) :

INR in crores


Cost % of revenue :

Cost as a % of sales (Q-o-Q) :



8

Key financials :
PARTICULAR

2009A

2010A

2011A

2012A

2013A

2014E

2015E

3246

4032

4363

5308

6085

7210

8166

Performance
Revenue
Other Income

35

25

31

33

36

30

30

Total Income

3281

4057

4394

5341

6121

7240

8196

EBITDA

329

448

464

500

475

584

692

EBIT

272

373

376

402

352

445

525

DEPRICIATION

58

75

88

99

122

139

167

INTREST COST

137

126

117

158

194

263

263

PBT

170

272

291

277

194

212

293

TAX

42

69

79

73

60

65

90

Reported PAT
Dividend
EPS
DPS

128
23
9.7
1.7

203
23
15.3
1.7

211
27
13.8
1.7

204
27
13.3
1.7

135
27
8.8
1.7

147
27
9.6
1.7

203
27
13.2
1.7

10.1%
3.9%
14.6%
2.6%
14.7%
7.1%

11.1%
5.0%
7.3%
0.8%
19.7%
10.5%

10.6%
4.8%
11.4%
1.4%
12.9%
8.5%

9.4%
3.8%
12.3%
1.6%
11.0%
6.5%

7.8%
2.2%
10.6%
2.1%
6.9%
3.7%

8.1%
2.0%
13.1%
2.4%
7.1%
3.2%

8.5%
2.5%
18.0%
2.4%
9.0%
4.3%

870
945
1815
13
66

1027
901
1929
13
210

1645
831
2476
15
121

1851
1281
3133
15
108

1947
2068
2244
1669
2500
2500
3616
4568
4744
15
15
15
Company/Eastwind)
83 (Source: 73
73

65.6
1.0
2.0
6.8

77.5
2.7
3.0
13.7

107.2
1.1
3.2
8.8

120.7
0.9
2.5
8.1

126.9
0.7
1.8
9.4

Yeild %
EBITDA %
NPM %
Earning Yeild %
Dividend Yeild %
ROE %
ROCE%
Position
Net Worth
Total Debt
Ammount in crores
Capital Employed
No of Share
INR in crores
CMP
Valuation
Book Value
P/B
Int/Coverage
P/E
(Source: Eastwind Research)

134.8
0.5
1.7
7.6

146.2
0.5
2.0
5.5

(Figures in crore)


9

Godrej Consumer Product

"BUY"
4th Feb' 14

" Strategy Shining"
Result update
CMP
Target Price
Upside

BUY
722
960
725
33%
32%

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Nifty

532424
GODREJCP
977/672
24573
120012
6002

Stock Performance
1M
Absolute
-13.8
Rel. to Nifty
-10.3

1yr
1.5
1.4

YTD
5.4
0.6

Current 2QFY14 1QFY14
Promoters
63.3
63.3
63.3
FII
28.9
28.7
28.3
DII
1.4
1.2
1.2
Others
6.5
6.8
7.2
1 yr Forward P/B

Almost inline set of numbers;

For 3QFY14, Godrej CP revealed inline set of numbers with 17% sales growth led by
18% domestic and 25% international sales growth, reported growth across all
geographies and segments, respectively. PAT grew by 14% on YoY basis.
Its strong focus on driving growth in the domestic and international market by
expansion of products and distribution reach, we expect strong earning in near
future. With launching new products in domestic as well as international mkt, Godrej
CP will explore organic & inorganic growth. Along with its 3x3 strategy, it has 10x10
strategy also, which refers to 10x growth in 10 yrs.
Margin decline: The Company has been able to maintain its margin more than 15%
mark. EBITDA margin declined 110bps (YoY) to 15.7%, due to rise in A&P cost by 80 bps
to 11.5%. However, there was decline in RM cost by 500 bps to 38.8% of adjusted net
sales.
On Category wise: During the Quarter, Household insecticides grew by +8%, adversely
impacted by abnormal seasonal slowdown. Both the key brands Hit and Good knight
continue to gain share and strengthen market leadership positions across all formats.
Soap sales growth was +6%, volume growth at +4%, ahead of the category growth, but
down in value and volume term. Strong momentum in hair colours was maintained,
delivering sales growth at +37%. Liquid detergents grew 36%.
Geography wise performance: For 3QFY14, Business from India grew by 18% and
contributed 53% of total revenue, Indonesia grew by +18% and contributed 17% of total
revenue, Africa grew by 29% and contributed 15% of total revenue, Latin America grew
by 15% and contributed 8% of total revenue and Europe’s business continued strong
sales performance on both organic and Soft & Gentle (S&G) product portfolio. Business
reported growth of 124%.
Products strategy: The company continues to gain and enjoy market leader ship position
across all three formats. The company is driving increase in penetration with launch of
"Goodknight Advanced colour play".
Recent developments: The Company has entered into an agreement on Oct 7, 2013, to
acquire a 30% stake in Bhabani Blunt Hair Dressing Pvt Ltd, a premier hair salon
company with one of the strongest consumer franchises in this space.
View and Valuations: Its strong 20%+ growth in the domestic household insecticides
business is the key growth driver. We expect strong momentum to continue in its
international business led by Megasari and consolidation of Darling business. Despite
some concerns related to higher leverage, lost domestic focus, macro uncertainties in
Africa and LatAM, and currency risk, we remain confident of achieving the 20%+ sales
growth with strong PAT growth for FY14E & beyond. At a CMP of Rs722, stock trades
at 5.1x FY15E P/BV. We retain BUY with a price target of Rs 960.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
1982.3
311.1
196
15.7%
9.9%

2QFY14
1961.7
299.8
195
15.3%
9.9%


(QoQ)-%
1.1%
3.8%
0.5%
210bps
220bps

3QFY13
1695.6
284.9
172.2
16.8%
10.2%

Rs, Cr
(YoY)-%
16.9%
9.2%
13.8%
(30bps)
(10bps)
10

Sales and its Growth(%)

India branded business grows 17%,
ahead of the market growth across core
categories.


Margin-%

It expects expansion in gross margin,
which will help it to fund new product
launches.

Region-wise EBITDA Margin

Regions
India
Indonesia
Africa
Latin America
Europe

2QFY12
18.9%
19.4%
26.0%
7.4%
11%

3QFY12
20.4%
20.6%
31%
9%
5%

4QFY12
20.2%
20.7%
19.3%
16.3%
10.5%

1QFY13
15.1%
18%
19%
3%
13%

2QFY13
17.6%
19%
16%
4%
9%

3QFY13
18%
20%
20%
8%
5%

4QFY13 1QFY14 2QFY14 3QFY142
16.7%
15.8%
18.9%
18.5%
19%
15%
17%
16.0%
7%
13%
14%
18.0%
9%
3%
7%
9.0%
13%
9%
10%
6.0%

Domestic and Export sales-(% of Sales)


11

Key facts from Conference call (attended on 3rd Feb 2014);
(1) The management stated that the company is continue to be aggressive in launching
new innovations that have been well accepted by consumers. They are backing new
launches with strong investments.
(2) More focusing on Innovative pipeline and Brand equity to maintain its market share
across brands,They will launch a new product next week, but they did not tell the
segment name.
(3) Q4 will be better quarter for household segments.
(4)The company will continue investing judiciously for the longer term to improve
position, create competitive advantage and emerge stronger than before.
(5) They are not seeing any major impact on Argentina or Africa revenue, because of
economic uncertainties,
Financials and Valuation
Rs in Cr,
Sales
Other Operating Income
Total income from operations
RM Cost
Purchases of stock-in-trade
WIP
Employee Cost
Ad Spend
Other expenses
Total expenses
EBITDA
Depreciation and Amortisation
Other Income
Exceptional Item
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-%
Div- Payout-%
P/BV
P/E

FY10
2041.2
2.5
2043.7
619.59
367.16
-40.45
151.81
132.8
402.98
1633.89
409.81
23.6
44.81
0
386.21
11.1
419.92
80.33
339.59

FY11
3693.6
28.11
3721.71
1458.28
294.12
-45.22
284.51
352.85
695.96
3040.5
681.21
49.92
24.13
41.14
631.29
43.64
652.92
138.21
514.71

FY12
4866.16
45.93
4912.09
2174.67
356.11
-212.26
391.91
449.86
850.47
4010.76
901.33
64.44
6.07
200.17
836.89
65.84
977.29
226.05
751.24

FY13
6390.79
16.58
6407.37
2640.31
451.03
-118.06
590.68
660.35
1196.46
5420.77
986.6
77
67.78
96.12
909.6
77.45
996.05
179.18
816.87

FY14E
7701.26
15.40
7716.66
3028.79
559.46
-23.15
733.08
887.42
1311.8
6497.4
1219.2
92.7
57.9
38.6
1126.5
87.7
1135.3
204.35
930.9

FY15E
9053.82
18.11
9071.93
3719.49
657.71
-90.72
907.19
997.91
1587.6
7779.2
1292.7
100.4
90.7
45.4
1192.3
78.7
1249.7
249.94
999.8

46.3%
95.2%
97.0%

81.0%
66.2%
51.6%

31.7%
32.3%
46.0%

31.3%
9.5%
8.7%

20.5%
23.6%
14.0%

17.6%
6.0%
7.4%

30.3%
6.5%
7.4%
19.7%
19.1%

39.2%
9.5%
7.6%
18.7%
21.2%

44.3%
9.2%
8.0%
17.3%
23.1%

41.2%
10.3%
9.2%
18.7%
18.0%

39.3%
11.5%
9.5%
17.0%
18.0%

41.0%
11.0%
10.0%
17.5%
20.0%

20.1%
18.9%
16.6%

18.3%
17.0%
13.8%

18.3%
17.0%
15.3%

15.4%
14.2%
12.7%

15.8%
14.6%
12.1%

14.3%
13.1%
11.0%

261
30.8
954.7
11.0
31.0
35.6%
30.6%
8.4
23.7

365
32.4
1725.2
15.9
53.2
29.8%
38.3%
6.9
23.0

559
34
2815.2
22.1
82.8
26.7%
22.6%
6.8
25.3

836
34.03
3313.0
24.0
97.4
24.7%
23.0%
8.6
34.8

722.0
34.03
4044.9
27.4
118.9
23.0%
21.4%
6.1
26.4

722.0
34.03
4845.6
29.4
142.4
20.6%
19.9%
5.1
24.6


12

Sesa Sterlite Ltd.
Initial Coverage

Neutral

CMP
Target Price
Upside

185
196
NA
6%
NA

Market Data
BSE Code
NSE Symbol

500295
SSLT

52wk Range H/L
Average Daily Volume (Nos.)
Nifty

213/119
54979
24740
6002

Stock Performance-%
1M
-6.6
-3.3

Absolute
Rel. to Nifty

1yr
4.3
3.6

YTD
-0.6
0.2

Promoters
FII
DII
Others

3QFY14
55.0
17.0
8.4
19.7

2QFY14 1QFY13
55.0
55.0
16.5
16.8
8.1
7.4
20.4
20.9

1 yr Forward P/B

Source - Comapany/EastWind Research

"Neutral"
4th Feb' 14

Q3FY14 Result Update
Vedanta group firm Sesa Sterlite reported a consolidated net profit of Rs 1,868.29 crore
for the Q3FY14.The company, previously known as Sesa Goa, had reported a net profit of
Rs 496.73 crore in the corresponding period of the previous fiscal.During the quarter, its
net sales stood at Rs 19,414.34 crore .Results of the company, however, are not
comparable due to merger of Sterlite Industries, Sterlite Energy, Ekaterina Ltd, Madras
Aluminium and Vedanta Aluminium into itself.The merger had become effective in
August last year.During the quarter EBIDTA% and NPM% increased to 33% and 9.4%
respectively from 24.6% and 7.6% in previous quarter . The company reported a forex
loss of 82cr during the quarter.
Zinc Operations
Production was lower by ~5% YoY to 220kt and FY14E production guidnace was reduced
further to 900kt (from 950kt in Q2 and 1000kt in Q1) due to slower than expected rampup in underground mining.Integrated silver production guidance has been reduced to
290t (vs 335t earlier) due to lower output from Agucha than earlier expected.
Aluminium Operations
VAL alumina refinery utilization increased to 72% in Q3 vs 46% in Q2 and captive alumina
met 43% of total requirements of the aluminium smelter.BALCO volume performance
was stable but costs were lower resulting in increase in profits.Management expects to
tap first metal from 325 ktpa smelter of BALCO in H1FY15 and sees synchronization of 1st
unit of 1200 MW power plant in Q1FY15. Starting of metal tapping from 1.25 mtpa
smelter of VAL has still not been finalized.
Power Operations
Blended realizations fell QoQ to Rs3.4/unit while CoP stood at Rs2.3/unit.Boiler light up
of 1st unit of 660MW of Talwandi Sabo power project was done in Q3 and trial runs are
expected to commence during Q4.
Iron Ore Operations
Operations at Karnataka have resumed and ramp up to a run rate of 0.5 MT/month is
underway.The first iron ore sale through e-auction is expected at the end of current
month.Operations remained in Goa but e-auction of inventory has been allowed.
However, further clarityon the start of auctions is still sought.
Q3FY14 Financials :
Revenue from Operation
EBITDA
Depriciation
Interest Cost
Tax
PAT

Q3FY14
19523
6572
2004
1530
-139
1868

Q-o-Q %
-23
2
-30
-19
-85
-22

Q3FY13
237
-107
35
126
-81
498

Q2FY13
25352
6460
2846
1880
-924
2394
(In Crs)


13

Sesa Sterlite Ltd.
Oil & Gas Operations
In Q2, average gross operated production and working interest production were 224493
boepd and 140830 boepd, respectively, 10% higher YoY. Production at Cambay was
higher by 51% YoY due to new infill wells.
Balance sheet and debt
Gross debt at Sesa Sterlite was Rs840.2bn as at Dec’13. This comprises long term loans
of Rs.650bn and short term working capital loans of Rs. 189.6bn.
Sesa Sterlite's mines in Goa remains a challenge
During 2QFY2013, the Goa government had imposed a ban on iron ore mining in Goa
until further review. Later, the Ministry of Environment and Forest Clearances (MOEF)
also suspended environment clearances to all functional mining leases in Goa. Sesa Goa
operated several mines in the region with an annual production of 12mn tonne. While
we believe the ban could be temporary, there are chances of iron ore production cap by
the government/MOEF which could affect Sesa’s production going forward. This is likely
to be a key overhang on the stock in our view.
Zinc Lead Expansion projects for better growth
Sesa Sterlite’s subsidiary, Hindustan Zinc (HZL) has commenced production at its
underground Kayad mine, which has 11mn tonne of high-grade reserves. The company
expects to increase its capacity from 1.0mn tonne to 5mn tonne over the coming five
years.
OUTLOOK
The company’s actual 3QFY2014 results are not comparable with 3QFY2013 results as
the two companies, Sesa Goa and Sterlite Industries were merged during August
2013.The company has delayed the commissioning of the 325ktpa BALCO-III Aluminium
smelter from 3QFY2014 to 1HFY2015.The company has resumed iron ore mining
operations in Karnataka from December 28, 2013 where it has 2.29mn tonne per
annum capacity and is gradually ramping up the production at the rate of 0.5mn tonne
per month.We expect Sesa Sterlite to benefit from the expansion of Zinc-Lead smelting
capacity during FY2014-15.In the mean time Norwegian government has asked its
sovereign wealth fund not to invest in Sesa Sterlite and two Israeli firms citing ethical
issues.We value the stock using forward P/B and here by we recomend Neutral rating
on the stock at a target price of Rs.196 from current market price of Rs.185.
Company background
Sesa Sterlite is one of the world’s largest diversified natural resource companies. It
produces zinc, lead, silver, copper, aluminium, iron ore, oil & gas and power. Sesa
Sterlite came into existence mainly as a result of merging of two companies Sesa Goa
and Sterlite Industries which were owned by Vedanta Resources. The merger was
announced during January 2012 while it was completed during August 2013. Sesa
Sterlite generates ~80% of its revenues from India, China, East Asia, Africa and the
Middle East.

14

Sesa Sterlite Ltd.
P/L PERFORMANCE
Net Revenue from Operation
Cost Of Projects & Contractual
Employee benefit Expence
Loss on Foreign Currency Transaction
Other expences
Expenditure
EBITDA
Depriciation
Depriciation
Interest Cost
PBT
Tax
PAT WITHOUT Expactional Item
ROE%
EPS
B/S PERFORMANCE
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
Short-term borrowings
Long-term provisions
Trade payables
Short-term provisions
Total liabilities
Intangibles
Tangible assets
Capital work-in-progress
Long-term loans and advances
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
Total Assets
RATIOS
P/B
NPM %
EBITDA %
ROCE%
Weighted Average Cost of Debt %
Debt/Equity (debt/debt+networth or

FY12
8310
973
268
181
1739
4810
3500
106
106
433
3195
1021
2762
14
25.0
FY10
83
7835
7918
44
1916
6
727
405
11238
0
704
79
401
503
338
2392
745
11238
FY10
3.4
41.8
56.9
28.8
2.8
0.2

FY13
2554
567
250
51
756
2089
465
197
197
475
-153
-43
2301
-1
-1.3
FY11
87
12724
12810
31
968
6
1169
425
15604
15
927
729
462
744
683
897
859
15604
FY11
1.1
43.3
59.0
37.7
9.0
0.1

FY14E
66976
25416
3011
705
12791
47412
19564
6939
6939
5107
9422
-1175
6548
8
21.9
FY12
87
15031
15118
1116
2618
4
887
233
20401
10
1390
837
199
875
549
98
369
20401
FY12
1.1
25.4
41.0
14.2
11.6
0.2


FY15E
75013
28294
3311
705
13590
52009
23004
8300
8300
6280
11224
2416
6478
5
21.9
FY13
87
17388
17475
1179
3322
4
547
42
22889
89
1880
723
492
961
142
36
329
22889
FY13
1.0
-4.2
17.8
10.4
10.5
0.3




15

HEROMOTOCO

"BUY"

3rd

Feb' 14.

Average Sales with Flat Profits Growth..
Result Update

BUY

CMP
Target Price
Upside

1979
2100
6%
-

Market Data
BSE Code

500182

NSE Symbol
52wk Range H/L
Mkt Capital (Rs, Cr)
Nifty

HEROMOTOCO
2215
1,434
245841
6089

Stock Performance-%
Absolute
Rel. to Nifty

1M
-5.0
-1.6

1yr
9.5
8.9

YTD
9.3
-4.4

Promoters
FII
DII
Others

4
39.9
39.9
39.9
30.6
30.4
29.9
8.5
8.8
9.3
21.0
20.9
8.7

One Yr Price Vs NIFTY

The company registered its 3QFY14 net sales at Rs 6846 Cr up by 11.3% YoY led by
healthy volume growth of 7% for the period under review. The company during 3QFY14
sold 1680940 units including exports. The volume performance was led by a strong 7.8%
YoY growth in the domestic segment, while export volumes posted a decline of 26.5% YoY,
mainly due to a weak demand environment in major exporting nations. Scooters sales
maintained strong momentum, led by the success of Maestro.
The average realization for the quarter moved up and came around at Rs 41000 verses Rs
39100 for the same time last fiscal. The net average realization for the quarter was driven by
price increases, which were undertaken in April and October 2013.
The operating EBITDA for the 3QFY14 came at Rs 898 Cr and OPM stands at 13.06
%.There is yearly rise in the OPM by nearly 40 bps however on sequential basis it had
shrunk by 150 bps due to led by increase in raw-material costs and significantly higher other
expenditure. Raw material cost as a percentage of sales increased 120bp QoQ due to the
currency impact on indirect imports, which comes with a quarter’s lag. The other expenses
in the quarter rose significantly very high because of higher advertisement expenses due to
festival season and also due to the launch of new products/ refreshes and higher royalty
payments on the back of rising share of new products. Additionally, the ongoing cost
reduction initiatives from the company led to a savings of Rs45 Cr during the quarter.
The net profits for the stands at Rs 525 Cr for the quarter grew by only 7.5% yoy as the tax
rate increased to nearly 27% from 16% earlier due to expiry of tax benefits at the Haridwar
facility.
Post the 3QFY14 result management said that Industry motorcycle sales should be in the
range of 5 % and it will be in that level for the year and HMC will be at par with that.
Company has maintained its ad spend guidance at 2-2.5 % of sales and R&D spends at
nearly 0.75% of sales. The capital expenditure guidance for FY2014 stands at Rs1100 Cr to
Rs1200 Crr.For FY2015 the company has guided for Rs 1,500 Cr to Rs1,800 Cr.
The Management indicated that the current dividend policy of 35-45% payout will continue in
future. The total installed capacity of the company currently stands at 6.9mn units. Post the
commissioning of the Neemrana plant, scheduled by end of March 2014, the installed capacity is
expected to increase to 7.65mn units.

View & Valuation
The stock at its CMP of Rs 1979 which is 17.9x of one year forward FY14E EPS of Rs 110
and upcoming capacity expansion, Rising trend of volume growth of scooter business,
Improvement in operational efficiency are few factors which make us positive for the stock.
We recommend BUY for the stock with Target Price Rs 2100.

Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
6846
898
525
13.1%
7.7%

2QFY14
5696
833
482
14.6%
8.5%

(QoQ)-%
20.2
7.8
8.9
(150bps)
(80bps)

3QFY13
6151
779
489
12.7%
7.9%

Rs, Crore
(YoY)-%
11.3
15.3
7.4
50bps
(30bps)



16

HEROMOTOCO
SALES & PAT TREND

Company registered its 3QFY14 net sales at
Rs 6846 Cr up by 11.3% YoY led by healthy
volume growth of 7%.


OPM & NPM TREND
Rise in the OPM by nearly 40 bps however on
sequential basis it had shrunk by 150 bps due
to led by increase in raw-material costs and
significantly higher other expenditure.


Realization Trend

Profits for the grew by only 7.5% yoy as the
tax rate increased to nearly 27% from 16%
earlier due to expiry of tax benefits at the
Haridwar facility.



17

Marico

"NEUTRAL"
3rd Feb' 14

" Volume slows…"
Result update
CMP
Target Price
Upside

Neutral
214
-

Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Nifty

531642
MARICO
248/188
13829
126142
6090

Stock Performance
1M
Absolute
-3.6
Rel. to Nifty
-10.8

1yr
2.4
-7.9

YTD
0.5
-9.1


Beats the street on profitability and Margin front with poor volume growth;
Marico witnessed better numbers than expectation with 10% sales growth (excluding
Kaya Sales) led by 3% volume growth on YoY basis. PAT grew by 31% (YoY) because of
cost rationalization across various head of expenses like Ad Spend, employee cost etc.
However, the profits of Q3FY14 are not strictly comparable to Q3FY13 due to the
change in the method of depreciation from WDV to SLM carried out in Q4FY13 and
demerger of Kaya business.
The Company maintained its market share across the portfolio, reflecting strong equity
of its brands, even though the rates of category growth have decelerated over the past
few quarters. We believe that slower volume growth could not easily turned out in next
1-2 quarters because of poor discretionary demand.
Margin ramp up: During the quarter, its EBITDA margin of the India FMCG business
during Q3FY14 was 18.7% and PAT margin was at 11.3%. The Company believes that an
operating margin in the band of 17% to 18% is sustainable in the medium term. On YoY
basis margin growth could not computed because of Kaya consolidation in same quarter
previous year.
Poor volume growth: Because of weak demand discretionary environment and socio
political instability in some regions, its volume growth of various segments have come
down during the quarter. The volume growth in India was marginally above 3% for the
quarter, reflecting continued soft consumption trends. Post earning, management
stated that the trend of volume decline has bottomed out based on hypothesis.


Promoters
FII
DII
Others

59.69
27.58
5.72
7.01

1 year forward P/BV-X

59.69
27.6
5.88
6.83

59.72
27.96
5.19
7.13

Mix segmental growth: India FMCG business grew by 10%(YoY). Parachute’s rigid
portfolio (packs in blue bottles), recorded a volume growth of about 2% during Q3FY14
over Q3FY13. Parachute along with Nihar marginally improved its market share over the
same period last year to 56%. The Saffola refined edible oils franchise grew by about 9%
in volume terms during Q3FY14. During the quarter, Saffola average price hiked by 4-5%
to manage its RM cost and Packaging materials. Marico’s hair oil brands (Parachute
Advansed, Nihar Naturals and Hair & Care) grew by 8% (YoY) in volume terms during
Q3FY14.
View and Valuation: The company expects demand scenario to remain challenging
especially in urban areas in India and some of its international market like Bangladesh,
Egypt and MENA. Based on hypothesis, management is expecting regarding the bottom
out of volume decline but they are not ignoring the threat of demand environment
challenges for near future. We believe that slower volume growth could not easily
turned out in next 1-2 quarters because of poor discretionary demand environment.
Therefore, we downgrade our view from BUY to NEUTRAL on the stock, at a price of Rs
214, stock trades at 4.9x FY15E P/BV.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
1089.29
201.81
135.4
18.5%
12.4%

2QFY14
1115.36
168.51
105.9
15.1%
9.5%


Rs, Crore
(QoQ)-%
2QFY13
(YoY)-%
(2.3)
1155.89
-5.8
19.8
165.8
21.7
27.9
102.3
32.4
340bps
14.3%
290bps
8.9%
18

Marico
Sales (cr) and Growth (%) -

For 2QFY14, Marico reported 4% (YoY)
decline in sales growth because of sluggish
volume growth impacted by weaker demand
in urban area.


Margin-%

Because of cost control in ad spend by
200bps and Raw material about 190bps, its
margin gone up by 210 bps to 15.1% on YoY
basis.


Expenses on Sales -%

The demerger of Kaya is on the way, and
new demerged entity would expected to get
listed by November or December.


Geographical challenges: International market recorded a growth of 15%. Because of
political uncertainty, Bangladesh sales declined by 14%(YoY). While, the MENA business
on an average grew by 10% CC basis. The business in Egypt grew by 22% mainly led by
strong volume growth in Haircode and Fiancée. The business in GCC continued to report a
decline. Political environment in Egypt seems to have bettered for the time being with no
major report of violence, however the uncertainty continues. South Africa reported a topline growth of 5%. The business in South East Asia of which Vietnam comprises a
significant portion grew by 24% in constant currency terms.


19

Marico
Key facts from Management guidance;
(1) Management believes that the decline trend of volume growth has turned out, while
the economic environment is still challenging and there will be gradual recovery.
(2) Immediate future could see volume growth rates of 7%- 8%. With the price increases
already in market place the overall sales growth could still be in the region of 12%-14%.
This is expected to improve from early/mid FY15.
(3) Operating Margin could sustain at a range of 17-18% in the medium term.
(4) The Youth brands portfolio is expected to grow by about 20% to 25%.
(5) In near term, Company does not expect to see any price hike decision.

Financials
Rs in Cr,
Sales
Other Operating Income
Total income from operations
RM Cost
Purchases of stock-in-trade
WIP
Employee Cost
Ad Spend
Other expenses
Total expenses
EBITDA
Depreciation and Amortisation
Other Income
Exceptional Item
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
2500.09
160.67
2660.76
1265.48
12.47
-16.35
190.13
351.12
482.76
2285.61
375.15
60.06
18.26
-9.79
323.56
25.69
297.87
64.33
233.54

FY11
3134.99
19.06
3154.05
1712.66
20.36
-115.43
229.98
345.95
523.36
2716.88
437.17
70.80
2.16
48.91
417.44
41.01
376.43
84.98
291.45

FY12
4008.28
30.90
4039.18
2132.04
17.44
-50.78
307.29
448.99
668.90
3523.88
515.30
72.52
1.67
-1.75
442.70
42.39
400.31
78.25
322.06

FY13
4259.53
12.51
4596.86
2212.27
116.59
-127.47
380.56
597.94
791.07
3970.96
625.90
86.62
37.52
33.20
610.00
57.43
552.57
146.18
406.39

FY14E
4740.86
14.22
4755.08
2228.20
48.53
-98.72
380.41
618.16
808.36
3984.94
770.14
145.44
19.17
33.29
677.15
57.43
619.72
163.95
455.78

FY15E
5344.65
16.03
5360.68
2672.32
54.71
-111.29
428.85
643.28
911.32
4599.19
761.49
133.80
21.61
37.52
686.82
57.43
629.39
166.50
462.89

11.4%
29.2%
33.5%

18.5%
16.5%
24.8%

28.1%
17.9%
10.5%

13.8%
21.5%
26.2%

3.4%
23.0%
12.2%

12.7%
-1.1%
1.6%

47.6%
13.2%
7.1%
18.1%
21.6%

54.3%
11.0%
7.3%
16.6%
22.6%

52.8%
11.1%
7.6%
16.6%
19.5%

48.1%
13.0%
8.3%
17.2%
26.5%

46.9%
13.0%
8.0%
17.0%
26.5%

49.9%
12.0%
8.0%
17.0%
26.5%

14.1%
12.2%
8.8%

13.9%
13.2%
9.2%

12.8%
11.0%
8.0%

13.6%
13.3%
8.8%

16.2%
14.2%
9.6%

14.2%
12.8%
8.6%

108.55
60.90
653.96
3.83
10.74
35.7%
10.11
28.31

138.75
61.40
915.44
4.75
14.91
31.8%
9.31
29.23

206.00
61.40
1143.01
5.25
18.62
28.2%
11.07
39.27

216.95
64.48
1981.52
6.30
30.73
20.5%
7.06
34.42


214.00
214.00
64.48
64.48
2399.58
2824.75
7.07
7.18
37.21
43.81
19.0%
16.4%
5.75
4.88
30.28
29.81

20

N arnolia Securities Ltd
402, 4th floor 7/ 1, Lord s Sinha Road Kolkata 700071, Ph
033-32011233 Toll Free no : 1-800-345-4000
em ail: research@narnolia.com ,
w ebsite : w w w .narnolia.com

Risk 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 to you. Narnolia 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 for your information 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 wing “East 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, and also these 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 keeping in 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 be safe to
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
otherwise in the recommended/mentioned securities/mutual funds/ model funds and
other investment products which may be added or disposed including & other mentioned
in this report/message.

Stock Investment Tips Recommendation - Buy Stock SWARAJ ENGINES, Kolte-Patil Developers, Kalpatru Power Transmission, Godrej Consumer Product

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Similar a Stock Investment Tips Recommendation - Buy Stock SWARAJ ENGINES, Kolte-Patil Developers, Kalpatru Power Transmission, Godrej Consumer Product

Similar a Stock Investment Tips Recommendation - Buy Stock SWARAJ ENGINES, Kolte-Patil Developers, Kalpatru Power Transmission, Godrej Consumer Product (16)

Más de NARNOLIA SECURITIES LIMITED

Más de NARNOLIA SECURITIES LIMITED (14)

Último

Último (20)

Stock Investment Tips Recommendation - Buy Stock SWARAJ ENGINES, Kolte-Patil Developers, Kalpatru Power Transmission, Godrej Consumer Product