Stock Advisory for Today - Buy Stock of Dabur India Ltd and CAN FIN HOME

IEA-Equity
Strategy

India Equity Analytics

7th March, 2014

Daily Fundamental Report on Indian Equities

Dabur India Ltd: "Confident tone for growth"

"BUY"

Edition : 220
7th Mar 2014

Dabur expects volume growth at a range of 8-12% for FY15E led by innovation and effective distribution initiatives in chemist channels. If
discretionary demand from urban area improves, then volume growth in double digit would not be a surprise for street. Considering its expected
expressive volume growth than other peers, aggression on new launches through innovation and aggressive distribution reach energize our
positive stance on the stock. ............................................................. ( Page : 2-6)

CAN FIN HOME

"BUY"

7th Mar 2014

We have initiated coverage with Buy rating on the stock with price target of Rs.220 which implies 1 times of FY14E book value. The company has
delivered strong performance all around. During quarter, profitability was up by 60% on the back of healthy NII growth and improvement in
operating leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is expected to remain healthy on the back of improving
operating leverage and aggressive branch expansion. ................................................... ( Page :7-13)

DB CORP : "Waging war on Print media"

"NEUTRAL"

7th Mar 2014

The Supreme Court upheld the constitutional validity of the November 11, 2011 Union government notifications, directing implementation of
the recommendations of the Majithia Wage Boards for journalists and non-journalists of newspapers and news agencies. This judgment will
work as a dampener for newspaper industry as well as DB CORP. Company’s EBITDA margin will be effected very negatively not only in FY15E
but also next few or more years. Therefore we downgrade DB CORP from `BUY’ to `NEUTRAL’ ........................................................................ (
Page : 14-15)

Hindustan Zinc LTD : Good gains ahead

"BUY"

6th Mar 2014

Zinc fundamentals are becoming attractive with suppotive lead prices brings a positive outlook for Hindustan Zinc.With a cash-rich balance sheet
and strong visibility over production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.Being an integrated & dominant
player in the domestic industry with low cost of production, the company is poised to benefit in the long run. Now the stock is trading at 1.6x in
one year forward P/B we estimated it at 1.8x for 2015.At current level we see a significant growth in the stock. We valued & reaffirm our
positive stance on HZL and assign a BUY rating to the stock with a target price of Rs. 148/-. ....................................................... ( Page : 16-18)

Voltas Ltd : Downgrade to "Neutral"…….

"NEUTRAL"

6th Mar 2014

The company has been evaluating strategic alternatives since 2012, we believe the company is not inclined to sell at valuations multiple of 2
times of its FY15E book value. However, If the company if things will going positively we could rationalize valuations near Rs. 145 per share, but
we don't believe buyers would be willing to pay a premium to BVPS more than 2 times at this time. We are downgrading Voltas to Neutral given
the recent rise in its share price following 3QFY14 earnings and revised our price target to Rs. 120. ................................................................ (
Page : 19-20)

SWARAJ ENGINES Ltd :

"BOOK PROFIT"

6th Mar 2014

In our earlier report dated 25-04-13, we had recommended readers to buy the scrip with a view to earn healthy gains. As expected, the counter
have given a premium of 40 per cent over its recommended price. We expect the current price growth rally factored all the fundamental
changes, and we advise our readers to book profits at the current levels. Our bearish attitude on the counter stems from its valuations. At a
P/BV of 2.8x of its annualised FY14E RoE of Rs 28.7%, we believe that the counter is very expensive in comparison of its own past historical data .
...................................................................... ( Page : 21-22)

EROSMEDIA :"Moving to Blockbuster"

"BUY"

5th Mar 2014

Healthy movies pipeline for FY15E; Company is expecting to release more than 8 big budget movies across Hindi and regional languages.
Likewise, company is going to release much awaited Rajnikanth’s movie Kochadaiiyaan on 11 April, 2014. Its well positioned to monetize rich
content of library ensures annuity and regular set of revenue. .......................................... ( Page :23-25)
Narnolia Securities Ltd,

Dabur India Ltd.

"BUY"
7th Mar' 14

"Confident tone for growth"
Company update
CMP
Target Price
Previous Target Price
Upside
Change from Previous

BUY
173
206
19%
-

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

500096
DABUR
185/128
30246
908049
6401

Stock Performance
Absolute
Rel. to Nifty

1M
0.3%
-6.03%

1yr
30%
19%

YTD
33.9%
22.0%

Share Holding Pattern-%
Current

Promoters
FII
DII
Others

68.64
19.94
4.47
6.95

P/BV(x)-1year forward

2QFY14 1QFY14

68.66
20.71
3.96
6.7

68.66
20.4
3.97
7

Analysis on recent management interview to media :
Dabur expects volume growth at a range of 8-12% for FY15E led by innovation and
effective distribution initiatives in chemist channels. If discretionary demand from urban
area improves, then volume growth in double digit would not be a surprise for street.
A mature segment like Hair Oil remains a concern because of competitive intensity,
likely to grow slower than healthcare and home segments.
Consistently, Dabur is aggresively working on innovation activities to launch new
product as well as product development activities. Recently new launches would come
to the people like Vatika Enriched Coconut Oil with hibiscus, Vatika Olive Enriched Hair
Oil.
Considering its expected expressive volume growth than other peers, aggression on new
launches through innovation and aggressive distribution reach energize our positive
stance on the stock.
Expecting for bottomed up sign on volume growth:
Post earning, management of the company expressed hypothetically its view regarding
bottoming out of urban demand. The management of other FMCG bellwether like Marico
had also stated that the trend of volume decline has bottomed out based on hypothesis.
Recent Consumer Confidence Index indicates some upward movement than previous
quarters. At a same point, recent softening in CPI and Food Inflation Index (graph on 3rd
page of this company's report) hint to improve consumer discretionary demand from rural
and urban area.
Aggression on expending distribution reach:
Dabur is working on chemist channel to drive growth of its health care and Personal care
portfolio, and they are planning to distribute personal products through this channel.
Dabur had direct coverage of 55,000 chemist stores, which has now increased to 75,000;
plans to take it to 125,000 by FY15E.
View and Valuation:
Despite signs of weak discretionary demand and increased competitive intensity in the
market, Dabur India has reported comparatively better volume growth in its key
categories. On all operating parameters, its performance was satisfactory. Still,
management is cautious for margin ramp up due to high inflation in India.
The strong momentum in relatively low competition in the core categories with
diversified portfolio, Dabur gets a better place than other peers and its rural distribution
expansion should boost sales volumes. We retain our “Buy” view on the stock with a
target price of Rs206. At a CMP of Rs 173 stock trades at 9x FY15E P/BV.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
1904.28
297.59
243.5
15.6%
12.8%

2QFY14
1748.81
329.24
249.83
18.8%
14.3%

(QoQ)-%
8.9
(9.6)
(2.5)
220bps
150bps

3QFY13
1635.98
274.51
209.87
16.8%
12.8%

Rs, Crore
(YoY)-%
16.4
8.4
16.0
120bps
-

(Source: Company/Eastwind)

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

2

Dabur India Ltd.
Segment-wise snapshot
Segments
Domestic Business

Growth (YoY)-%
24%

Hair Care

6.9%

Health Supplements

19.5%

Oral Care

10.4%

OTC & Ethicals

13.2%

Digestives

17.7%

Home Care

16.0%

Skin Care

13.4%

Foods

18.0%

International Business

26.0%

Key takeaways (3QFY14)
-Launched Vatika Enriched Olive Hair Oil,
-Shampoo grew by 25%(YOY),
-Perfumed hair oils posted 8% YoY growth,
-Dabur Chyawanprash reported healthy growth with a range of 17-18% YoY,
-Launched premium health supplement – Dabur Ratnaprash,
-Dabur Honey performing well on the back of higher demand,
-Toothpastes grew by 14% with premium offerings/added market share,
-Flattish growh in Red Toothpaste,
-Meswak on new packaging launched ,
-Honitus: Honey & Tulsi variant launched,
-Ethicals portfolio grew by 15.5% YoY,
-Hajmola performed well with positve response from Anadana variants,
-Recently launched Pudin Hara Lemon Fizz has received emense response,
-Odonil 1 Touch Freshener launched in South India,
-Odonil and Sanifresh performed well during the quarter,
-Gulabari performed well during the quarter,
-Launch of Fem Fairness Naturals with No Added Ammonia,
-Fem witnessed double digit growth led by good take from Bleaches,
-Real Fruit Juice reported double digit growth,
-Real in a new Diwali Gift packaging launched,
-Organic International Business grew by 29% with 14% constant
currency(CC) growth driven by strong growth in GCC, Egypt & Nigeria,
-Namaste business registered double digit growth in CC term,

Dabur New Launches:
Dabur's New Launches
Ratnaprash
Odonil Variant
Beverage variants
3QFY14
Vatika Shampoo variant
Vatika hair oil
Fem portfolio with no ammonia
Pudin Hara Lemon Fizz
Vatika Hair Oi l with Hibiscus
Q2FY14 OxyLi fe Men
Odoni l re-launched with 2x perfume content
Test launched Real Mi lk Shakes in Delhi and Punjab
Q1FY14

Ratnaprash
Vatika hair oil

Vatika Shampoo

Oxy life Aloe Vera Gel Bleach
Real Activ Drinking Yoghurts in mango and strawberry flavours

Hajmola Anardana
Super Babool + Salt Power
4QFY13 New Ethnic flavour "Kokam" under Real Burrst
Fem brand was introduced in Turkey
Odoni l Gel

Honitus
Fem with no ammonia

Odonil Variants



3

Dabur India Ltd.
Key Takeaways:
Slowdown in Hair Oils segment remains for long term?
On 3QFY14, Hair Oils segment witnessed decline across categories. Marico reported only
2% YoY volume growth in parachute rigid packs and 8% YoY in value-added hair oils, Bajaj
Corp and Navratna oil clocked 1% YoY volume growth. While, Coconut oil segment
reported 3-4% YoY volume decline.
Importantly, Hair Oil segment is adversely impacted by high input cost pressure leading to
frequent price hike. We believe, slowdown in Hair Oil segments could be a short-term
jerk. Dabur management believes that there is some structural change in Coconut Hair Oil
because of consumption shifting from Coconut Hair Oil to Light Hair Oil. Dabur is carrying
small exposures in Coconut Oil; still there is room to report value and volume growth
because of support from new launches. Company is likely to be better placed with valueadded offerings Vatika enriched coconut oil with Hibiscus and Vatika Olive Enriched Hair
Oil.

Pace of innovation continues ‐ Vatika
Enriched Olive Hair Oil
launched during the quarter

We expect that the volume growth in Hair Oil segment has bottomed out and coming
quarter and next spell of growth would come largely from increasing per capita income.
Innovation combined with optimum pricing strategy to maintain market share will be
key growth driver of this category.
How chemist channel would play a role to opportune the gain of market share?
Considering the weak consumer sentiment in urban area, there was less opportunity to
invest in urban growth in the past 2 years. Now, as green shoots are visible and consumer
sentiment is improving, the company is beginning to invest in urban growth with Project
CORE—chemist outlet and range expansion. However, there could be a few quarters of
transitory period. As part of this project, Dabur has recruited 350 people in the front end
and will incur Rs15cr for the first phase.
Project CORE’s primary focus will be the health care portfolio(Chyawanprash, Honey,
Glucose), OTC products (Honitus, Lal Tel) and personal care portfolio which are more
relevant to the chemist channel than to general trade. At present, it increased its
coverage to 75000 from 55000-chemist store and, plans to take it to 125,000 by FY15E.
We expect that project CORE will be favorable to improve margin picture as well as
revenue builder.

Chemist Shope in India



4

Dabur India Ltd.
Conference Call (Q3FY14 ): Key Facts at a glance
Volume Growth
Pricing Growth
Urban and Rural
Growth
Innovation and new
launches
Ad spend
Margin Growth
Hair Care
Health Care
Skin Care
Oral Care:

-Dabur expects to achieve volume growth in the range of 8-12% in FY15%E, and if urban growth revives,
volume growth could be in the range of double digit growth.
-For 4QFY14E, price increase could be at a range of by 1-2% YoY. The company may hike prices by 4-5% in
FY15E and focus will be on pursuing an aggressive and profitable growth strategy.
-Its rural growth has been faster than urban growth since the past few quarters but now this gap has reduced.
Now, Dabur believes that growth will be driven by the urban areas, which is witnessing an uptick. The company
will be shifting its focus to the urban area, which will drive premiumization.
-The company expects to continue with the new launches and innovations, but spread over the year and not
cluttered in one quarter. Dabur could launch a range of summer products in beverages and health supplements.
-Ad expenses to be maintain within the range of 13-15% at the consolidated level for FY15E.
-Dabur expects to improve gross margin in FY15E, its inventory that includes the high cost raw materials
(increased due to high-cost petroleum derivatives) will exist until February 2014. Dabur expects gross margin to
improve by 100bps if the inflation scenario remains benign.
-Dabur expects to maintain growth of high single-digit in this segment.
-Dabur expects that there is huge opportunities for growth in this segment and Project CORE will help to drive
growth for the same.
The company expects to see growth in mid-teens helped by the pickup in winter in Q4FY14.
-Dabur does not believe that launching sensitive toothpaste now will drive growth of this portfolio as big
players are already present in this segment.

International business

Intl‐Business – New Launches

For 3QFY14, The International Business (contributes around one third of consolidated
sales) grew by 26%. Organic business grew by 29% with 14% constant currency growth
rate led by strong performance in GCC, Egypt and Nigeria. The GCC business reported a
21% growth, while sales in Egypt and Nigeria both grew by 16%.
Bangladesh remains an important geography for the company, which was impacted by
political instability and economic uncertainty resulting in slow growth of 10% YoY. Dabur
has organized a strong team and product portfolio for this geography.
Dermoviva Face Wash

Dabur will expand its footprint only in adjacent geographies of its current markets like in
Iran, Iraq and Africa. It believes that Bangladesh and Pakistan together have the potential
to become Rs500cr market each over the long term.
21%

Fem Gold Hair Removal Cream
16%

16%

GCC
EGYPT
Key Growth Markets –Q3FY14(%)

NIGERIA
Dermoviva Hand Wash
(Source: Company)


5

Dabur India Ltd.
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)
Volume
Pricing
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
3391.4
811.0
750
(10)
285
493.5
438.4
2767.3
624.1
50.0
39.4
613.5
12.3
601.2
100.5
500.7

FY11
4104.5
1806.8
252
(122)
309
534.6
524.1
3304.8
799.7
95.2
32.2
736.6
29.1
707.5
139.0
568.5

FY12
5305.4
2278.8
509
(103)
387
659.5
683.1
4415.2
890.2
103.4
57.4
844.2
53.8
790.4
146.4
644.0

FY13
6178.9
2422.1
599
(2)
471
837.0
819.10
5146.6
1032.2
112.7
92.0
1011.5
58.9
952.6
182.62
770.0

FY14E
7070.30
2757.42
742.38
(71)
608.05
996.91
908.53
5942.59
1127.71
111.09
141.41
1158.03
54.69
1103.34
212.39
890.95

FY15E
8203.32
3240.31
820.33
(41)
738.30
1132.06
1066.43
6956.42
1246.90
133.15
164.07
1277.82
51.95
1225.87
232.91
992.95
10.5%
5.0%
16.0%
10.6%
11.4%

20.9%
33.9%
28.1%

21.0%
28.1%
13.5%

29.3%
11.3%
13.3%

16.5%
16.0%
19.6%

9.5%
4.5%
14.4%
9.3%
15.7%

23.9%
14.6%
8.4%
12.9%
16.7%

44.0%
13.0%
7.5%
12.8%
19.6%

43.0%
12.4%
7.3%
12.9%
18.5%

39.2%
13.5%
7.6%
13.3%
19.2%

39.0%
14.1%
8.6%
12.9%
19.3%

39.5%
13.8%
9.0%
13.0%
19.0%

18.4%
18.1%
14.8%

19.5%
17.9%
13.9%

16.8%
15.9%
12.1%

16.7%
16.4%
12.5%

16.0%
16.4%
12.6%

15.2%
15.6%
12.1%

158.6
86.8
935.4
5.8
10.8
53.5%
14.7
27.5

96.1
174.1
1391.1
3.3
8.0
40.9%
12.0
29.4

103.2
174.2
1716.9
3.7
9.9
37.5%
10.5
27.9

131
174.3
2124.38
4.4
12.19
36.2%
10.75
29.7

173.00
174.30
2689.06
5.11
15.43
33.1%
11.21
33.84

173.00
174.30
3335.36
5.70
19.14
29.8%
9.04
30.37



6

CAN FIN HOME

"BUY"
7th March 2014

BUY
189
220
16
-

We have initiated coverage with Buy rating on the stock with price target of
Rs.220 which implies 1 times of FY14E book value. The company has
delivered strong performance all around. During quarter, profitability was up
by 60% on the back of healthy NII growth and improvement in operating
leverage. Return ratio improved from 12% in FY12 to 18% in 3QFY14 which is
expected to remain healthy on the back of improving operating leverage and
aggressive branch expansion.

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

511196
CANFINHOME
196/113
389
15.59 Lakh
6401

Healthy NII growth on the back of robust loan growth
The company’s NII grew by 39% YoY to Rs.40.2 Cr which came from impressive
loan growth of 49% YoY. Margin of the company was however declined by 13 bps
sequentially on account of higher cost of fund. Yield on loan remained same
sequentially which restricted NII growth below than previous quarter (49% YoY).
CanFin Home has about 16-17% of exposure in rural area where spread is lower.
From last two quarters, yield on loan remained same while cost of borrowing
increased by 10 bps which made margin lower sequentially.

Stock Performance
1M
Absolute
8.7
Rel.to Nifty
3.1

1yr
26.9
15.0

Loan book continued to be healthy on account of higher non housing loan
growth
Loan book grew by 49.1% YoY led by strong disbursement in retail segment. The

Company UPDATE
CMP
Target Price
Upside

YTD
26.9
15.0

company’s exposure to non house loan was about 7% of total loan which grew from

Current 4QFY13 3QFY1
3
Promoters
42.4
42.4
42.4
FII
0.6
0.6
0.6
DII
0.5
0.5
0.5
Others
56.5
56.5
56.5
CANFINHOME Vs Nifty

Rs.138 cr in 3QFY13 to Rs.400 cr in 3QFY14. The company remains focus on
salaried segment which account about 90% of loans. Average ticket size loan is Rs.
16 lakhs. Concentration of individual loan segment declined to 92% of total loan
from 94% in March 2013 and this segment shifted towards non housing. Although
revenue contribution from this segment is very low but spread is relatively thicker
than housing segment.
Funding compositions have high credit quality and carried low risk
Funding composition of the company continued to be rate MAA+ by ICRA indicating
high credit quality and carried low risk. The composition comprises 50% from NHB
and 45% from banks, altogether account for 95% of total funding while remaining
come from deposits. Average tenure of funding is 7-10 years due to its loan tenure
portfolio of 10-15 years. From year FY12 to FY13, source of funding composition
saw dramatically changed as share of NHB increased to 50% from previous year of
23% while loan from related party declined to 45% from 70% in FY12. The benefit
was also come at effect as blended borrowing cost came down to 9.2% in FY13 from
9.8% in FY12. At the end of 3QFY14, borrowing cost stood at 9.3% from 9.4% in last
quarter.
Rs, Cr
Financials
2010
2011
2012
2013
2014E
NII
63
72
84
96
162
Total Income
71
77
91
110
162
PPP
54
60
68
74
114
Net Profit
39
42
44
54
80
EPS
19.1
20.5
21.4
26.4
39.3
7

CAN FIN HOME
Aggressive branch expansion drives incremental business growth
The company has opened almost 40 branches from last two years and it became double
to 81 from 41 in March 2011. The company has planned to open 85 braches at the end
of FY14. The incremental business came from additional branches as we got evidence
from revenue growth. The company revenue was Rs.72 cr in FY11 which increased to
Rs.96 cr in FY13 and in 9MFY14, it reached to Rs.115 cr while cost to income ratio was
remained flat at 30% level. The company is planning to open other 25 branches by 2015
in north area which would cater for incremental loan growth outside of southern state.
Being presence in Bangalore would help to get benefit naturally in realty boom
The reality volume in Bangalore is higher than Mumbai, Pune and Delhi-NCR region
according to our real estate analyst as we got evidence from recent result publish. Can
Fin Home’s 16% total branches are in Bangalore region, so it will be natural beneficiary of
this realty boom in Bangalore. At present 4 southern states constitute about 70% of loan
book.
Strong profit growth due to healthy NII growth and improvement in operating
leverage
During quarter, the company reported healthy net profit growth of 60% YoY on the back
of robust loan growth of 50% YoY and declined cost income which led by improvement in
operating leverage. With the improvement in operating leverage, the company’s return
ratio ROE improved from 12.6% in FY12 to 18% in 3QFY14. As discuss above, the
company is more aggressive in branch expansion which would increase incremental
business and profitability and hence return ratio.
Asset quality continues to be healthy.
On asset quality front, the company continues to remain healthy with gross NPA level
came down to 0.3 during quarter from 1.6 in FY07. With the strong recovery and high
coverage ratio, net NPA level has been 0% since FY11. During quarter, Can Fin’s GNPA
was declined to 0.32% from 0.34% in previous quarter whereas net NPA level was at 0%
led by almost 100% provision provided by the company. Asset quality is expected to
remain healthy going forward on the back of strict lending practice and 90%+ exposure to
salaried personal where chances of slippage is relatively low.

Source:Company/Eastwind

8

CAN FIN HOME
About the company
Can Fin Homes Ltd was promoted in 1987 by Canara Bank in association with reputed
financial institutions including HDFC and UTI. Canara Bank holds 42.4% stake in CFHL.
Today, CFHL offers a range of products on housing, such as loans for home purchase,
home construction, home improvement/extension and site purchase as well as nonhousing finance. The company has 81 branches at present with a large presence in
South India.
Concern
Any sharp increase in the interest rate would discourage consumers to purchase home
and thus demand could be impacted. Around 45% of funding source come from banking
and any adverse regulation like hike of interest rate could impact borrowing cost. This
would impact company’s NII, NIM and profitability.
View & Valuation
We have initiated coverage with Buy rating on the stock with price target of Rs.220 which
implies 1 times of FY14E book value. The company has delivered strong performance all
around. During quarter, profitability was up by 60% on the back of healthy NII growth and
improvement in operating leverage. Return ratio improved from 12% in FY12 to 18% in
3QFY14 which is expected to remain healthy on the back of improving operating leverage
and aggressive branch expansion.

Source: Eastwind/Company

9

CAN FIN HOME
CHART FOCUS


10

CAN FIN HOME

Valuation BaND


11

CAN FIN HOME
Quarterly Result
Interest Earned
Interest Expenses
NII
Other Income
Total Income
Operating Expenses
PPP
Provisions
PBT
Tax Expenses
PAT

3QFY14
151.7
111.5
40.2
0.1
40.3
11.4
28.9
0.0
28.9
8.5
20.3

2QFY14
137.9
99.8
38.1
0.0
38.2
12.4
25.7
0.0
25.7
7.0
18.7

3QFY13 % YoY Gr % QoQ Gr
102.8
47.5
10.0
73.9
51.0
11.8
29.0
38.7
5.4
0.1
36.4
144.2
29.0
38.7
5.5
11.3
1.3
-8.3
17.8
62.4
12.2
0.0
17.8
62.4
12.2
5.1
66.1
22.0
12.6
60.9
8.6

Balance Sheet
Capital
Reserves and surplus
Net Worth
Borrowings
TOTAL LIABILITIES
Loans
TOTAL ASSETS

20
428
448
4817
5265
5355
5355

20
407
427
4315
4742
4864
4864

20
366
386
3144
3530
3592
3592

Spread Analysis
Yield On Advances
Cost of Borrowings
Spread
NIM

11.3
9.3
2.1
3.0

11.3
9.2
2.1
3.1

11.5
9.4
2.1
3.2

ROE% Break-Up
ROA
Total Assets/ Total Equity
ROE(%)

1.5
12.2
18.2

1.5
11.6
17.6

1.5
10.3
15.9

0.0

0.0

17.0

5.2

16.1

4.9

53.2

11.6

49.2

11.0

49.1

10.1

49.1

10.1


12

CAN FIN HOME
Financials & Assumption

2010

2011

2012

2013

2014E

208
145
63
9
71
17
54
-1
55
16
39

226
154
72
5
77
17
60
1
58
16
42

279
196
84
8
91
23
68
7
61
17
44

379
283
96
14
110
36
74
-1
75
21
54

586
424
162
0
162
48
114
0
114
34
80

BALANCE SHEET ITEMS( Rs Cr)
Net Worth
Borrowings
Loans

275
1865
2167

311
1904
2250

348
1982
2673

392
3073
4012

463
5309
6600

SPREAD ANALYSIS(%)
Yield On Advances
Cost of Borrowings
Spread
NIM

10.7
9.9
0.8
3.1

10.5
8.1
2.4
3.2

10.7
9.9
0.8
3.1

9.8
9.2
0.6
2.4

11.3
9.3
2.0
3.0

24.4
2.9
116.2

22.3
3.2
118.2

25.2
3.1
134.8

32.8
2.4
130.6

30.0
0.8
111.2

134
0.6
4.2

152
0.7
5.2

170
0.7
5.2

191
0.7
5.2

226
0.8
4.8

PROFIT & LOSS ACCOUNT( Rs Cr)
Interest Earned
Interest Expenses
NII
Other Income
Total Income
Operating Expenses
PPP
Provisions
PBT
Tax Expenses
PAT

EFFICENCY RATIO(%)
Operating Expenses to Total Income ( CI Ratio)
NII to Loan fund
Loan to borrowings
VALUATION
Book Value(Rs)
P/B(x)
P/E(x)


13

DB CORP

"Neutral"
7th March' 14

"Waging war on Print media"
Latest update

Neutral

CMP
Target Price

301

Upside

-

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

533151
DBCORP
321.50/210

5521
25750

The Supreme Court upheld the constitutional validity of the November 11, 2011 Union
government notifications, directing implementation of the recommendations of the
Majithia Wage Boards for journalists and non-journalists of newspapers and news
agencies.
This will act as a huge negative for newspaper industry. They have to pay all arrears up
to March 2014.It will be paid in four equal installments within one year from
November 11, 2011.
This would create huge financial burden to a industry already facing problems of rising
raw material prices. One the other hand most of newspaper venturing into reginal
market in search for better sales volume and margin.
This judgment will work as a dampener for newspaper industry as well as DB CORP.
Company’s EBITDA margin will be effected very negatively not only in FY15E but also
next few or more years. Therefore we downgrade DB CORP from `BUY’ to `NEUTRAL’

6261.65

3QFY14E Earning Performance:
Stock Performance
Absolute
Rel. to Nifty

1M
-6
-7.32

1yr
22
11.3

YTD
0
-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.

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.

Management Commentary:
Promoters
FII
DII
Others

Current
74.96
17.73
2.95
4.36

2QFY14
74.97
16.46
4.00
4.57

Stock Performace with Nifty

View and Valuation:
In view of upcoming general election, we expect government ad spending to go up
substantially. Provision of TRAI’s 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. But Considering latest update regarding directing implementation of
the recommendations of the Majithia Wage Boards for journalists and non-journalists
of newspapers and news agencies, earning visibility could not be promising. Wages
hike and payment of arrers will create huge burden to the profit and loss A/C of the
company as well as margin shape. And it may hamper company's plan for investing in
regional market in future because it needs internal cash flow. Therefore we are
downgrading this stock from`BUY' to `Neutral'.

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



14

DB CORP
Revenue Segments

Revenue Geography-wise

Financials;
Rs,cr
Sales
RM Cost
WIP
Employee Cost
Ad Spend
Other expenses
Total expenses
EBITDA
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

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

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

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

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

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

10.5%
132.2%
265.4%

19.1%
17.8%
48.7%

14.7%
-14.0%
-17.9%

9.7%
10.3%
5.6%

16.9%
28.4%
29.3%

16.9%
6.1%
5.0%

30.9%
12.4%
1.2%
1.1%
4.8%
2.1%
15.2%
10.0%

30.3%
14.6%
1.0%
1.3%
4.6%
1.7%
14.6%
7.9%

35.0%
16.7%
1.0%
1.0%
5.8%
1.7%
14.9%
6.8%

34.2%
17.6%
1.1%
0.8%
6.0%
1.8%
14.7%
7.1%

32.0%
16.6%
1.2%
0.8%
6.0%
1.8%
14.0%
8.4%

34.3%
17.0%
1.1%
1.0%
6.2%
1.9%
14.5%
7.5%

32.2%
28.6%
16.4%

31.9%
28.4%
20.4%

23.9%
20.4%
14.6%

24.0%
20.3%
14.1%

26.3%
22.9%
15.6%

23.9%
20.4%
14.0%

239
18
649
9.6
36
27%
6.7
24.9

246
18
829
14.1
45
31%
5.4
17.4

219
18
927
11.6
51
23%
4.3
18.9

212.1
18.33
1029
12.2
56
22%
3.8
17.3

301
18.33
1180
15.8
64
25%
4.7
19.0

301
18.33
1344
16.6
73
23%
4.1
18.1



15

Hindustan Zinc LTD.

"BUY"
6th March' 14

Good gains ahead
Result Update

BUY

CMP
Target Price
Upside

123
148
148
20%
0%

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

500188
HINDZINC
142/94
51929
5192
6329

Stock Performance-%
1M
4.3
0.0

Absolute
Rel. to Nifty

1yr
-1.7
9.2

YTD
-3.4
11.3

3QFY14
64.9
1.8
31.4
1.8

Promoters
FII
DII
Others

2QFY14 1QFY14
64.9
64.9
1.8
1.5
31.4
31.5
1.8
2.1

450

400
350
300
250
200

150
100
50

Jul-13

Jan-14

Jul-12

Jan-13

Jul-11

Jan-12

Jul-10

Jan-11

Jul-09

Jan-10

Jul-08

Jan-09

Jul-07

0

Jan-08

We believe Zinc price will be the core fundamental behind the Hindustan zinc’s bull story
in the coming years. We see a improving volume of production through FY15.More So
Govt. The attorney-general’s clearance for the Centre’s proposal to divest its residual
stake in Hindustan Zinc Ltd (HZL) lifted the Street’s mood. Again the board delayed this
process and guided investors that disinvestment of government's remaining stake in
Hindustan Zinc will happen next fiscal year. Stake sale in HZL again seems to be back
burner now. We also see gradual and sustainable recovery in global macro Scenario
which supports a positive cycle in industrial metals. So, we believe there exists a strong
case for significant earnings estimate for Hind Zinc in coming months.
Robust Q3FY14 Performance :
Hindustan Zinc’s (HZL) Q3FY14 performance was inline to our estimates on the back of
healthy zinc sales volumes and higher metal premiums. Total operating income for
Q3FY14 stood at Rs. 3450.1 crore higher by 8.6% YoY but lower by 3.1% QoQ. Total zinc
sales in Q3FY14 came in at 196,000 tonne, up 17% YoY and 2% QoQ . The company
realised premium on metal sales amounting to $241/tonne for zinc (Zn) & $305/tonne for
lead (Pb) . Lead sales volume for the quarter stood at 23500 tonnes (lower by 24% QoQ
and 22% YoY), while silver sales volumes stood at 78500 kg (lower by 31% YoY and 14%
QoQ) . EBITDA came in at Rs.1823.8 crore and inline to our estimate of Rs. 1829.6 crore.
Subsequently, net profit stood at Rs. 1722.7 crore .
Valuation & Recommendation
Zinc fundamentals are becoming attractive with suppotive lead prices brings a positive
outlook for Hindustan Zinc.With a cash-rich balance sheet and strong visibility over
production growth of zinc, lead and silver over FY2013-15, we are positive on HZL.Being
an integrated & dominant player in the domestic industry with low cost of production,
the company is poised to benefit in the long run. Now the stock is trading at 1.6x in one
year forward P/B we estimated it at 1.8x for 2015.At current level we see a significant
growth in the stock. We valued & reaffirm our positive stance on HZL and assign a BUY
rating to the stock with a target price of Rs. 148/-.

1 yr Forward P/B

Jan-07

Zinc market was bearish during last consecutive years having surplus in inventory, but
now sentiment is slowly turning positive showing some uptrends in Zinc LME prices.
Visible inventories on the London Metals Exchange, as well as on the Shanghai Futures
Exchange, are down about 30% over the last year. And zinc demand is increasing steadily.

Source - Comapany/EastWind Research

Financials :
Net Revenue
EBITDA
Depriciation
Tax
PAT

Q3FY14
3450
1824
210
305
1723

Y-o-Y %
8.6
22.1
18.6
50.2
6.8

Q-o-Q %
-9.8
-3.1
12.9
20.1
5.1

Q3FY13
3178
1494
177
203
1613

Q2FY14
3826
1883
186
254
1640
(In Crs)


16

Hindustan Zinc LTD.
Silver(rs/ounce)

Nov-13

Dec-13

Nov-13

Dec-13

Nov-13

Dec-13

Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

Apr-13

May-13

B. A reason to wait and watch , is since the government is looking at auction, how much
will Vedanta be able to garner and what price it is willing to pay is not known.

Feb-13

1800
1600
1400
1200
1000
800
600
400
200
0
Mar-13

Key Concerns
A. Volatile Desel Price and high Sulphuric acid price affecting the company,s PAT adversly.

LME Price/Ton

Jan-13

Lower Production Guideline
HZL has marginally downward revised its mined metal production guidance for FY14 from
950,000 tonnes earlier to 900,000 tonnes. This reflects slower-than-expected ramp up of
underground mining projects and some changes in mining sequence wherein preference
has been given to primary mine development during this period.


H. Zinc premium reaches six year high as inventories shrink
I. Fees that zinc smelter charge to refine the metat that probably to increase 5%.


LME Price/Ton
Lead

Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

May-13

Apr-13

Mar-13

Feb-13

Jan-13

160000
140000
120000
100000
80000
60000
40000
20000
0


LME Price/Ton
Zinc

Oct-13

Sep-13

Aug-13

Jul-13

Jun-13

May-13

Apr-13

Mar-13

Feb-13

125000
120000
115000
110000
105000
100000
95000
90000

Jan-13

C. HZL’s revenues are directly linked with the global market for products essentially, Zinc
and Lead which are priced with reference to LME prices and Silver to LBMA (London
Bullion Metal Association) prices.
D. Lower than expected demand by galvanizing industries for zinc and industrial batteries,
car batteries industries for lead would affect the company estimates.
E. Disruptions in mining due to equipment failures, unexpected maintenance problems ,
non-availability of raw materials of appropriate price, quantity and quality for energy
requirements, disruptions to or increased cost of transport services or strikes and
industrial actions or disputes.
Key Triggers for Growth
A. Company is tracking on 95% capacity utilization.
B. Captive plants enjoy the lower Tax rate and company enjoys zero tax from tax free
geographycal areas.
C. Smelting Plants are improvised and management is confident that the smelting plants
will maintain their stance for the coming quarters also.
D. The Rampura Agucha underground mine project is operational via ramps (tunnel driven
downward from the surface) and commercial production already ramp up in Q3 and will
in Q4 of FY14 . The Kayad mine project will also commence commercial production in
the current fiscal year.
E. A cash-rich balance sheet, low cost of production and inexpensive valuations make HZL
an attractive bet at the current price levels.
F. Disinvestment of government's remaining stake in Hindustan Zinc and Bharat
Aluminium (Balco) will happen next fiscal year .
G. In the past Vedanta Group has said it wanted majority control when Vedanta had earlier
offered Rs 149 a share . If this is any benchmark,then investors will stand to gain.


17

Hindustan Zinc LTD.
P/L PERFORMANCE
Net Revenue from Operation
Other Income
Total Income
Power, fuel & water
Repairs
Expenditure
EBITDA
Depriciation
Interest Cost
Net tax expense / (benefit)
PAT
ROE%
B/S PERFORMANCE
Share capital
Reserve & Surplus
Total equity
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

FY11
9912
979
10891
1023
492
4417
5496
475
19
1059
4900
22.0
FY10
423
17701
18124
478
340
20238
109
6071
1113
361
452
152
928
96
20238

FY12
11405
1543
12948
1228
568
5336
6069
611
14
1419
5526
21.0
FY11
845
21688
22533
475
567
25053
109
7145
875
594
762
209
5633
158
25053

FY13
12700
2032
14732
1070
696
6218
6482
647
29
921
6899
21.0
FY12
845
26036
26881
410
504
29485
47
8466
445
876
798
332
5255
233
29485

FY14E
13577
1787
15364
1291
707
6484
7093
718
37
1097
6967
19.0
FY13
845
31431
32276
484
825
35465
10
8474
1082
1898
1111
403
6942
373
35465

RATIOS
P/B
EPS
Debtor to Turnover%
Creditors to Turnover%
Inventories to Turnover%
CASH FLOWS
Cash from Operation
Changes In Working Capital
Net Cash From Operation
Cash From Investment
Cash from Finance
Net Cash Flow during year

FY10

FY11

FY12

FY13

3.2
95.6
1.9
6.0
0.6
FY10
4001
77
4077
-3881
-187
8

2.2
11.6
2.1
4.8
0.8
FY11
4483
-212
4272
-3658
-363
250

2.1
13.1
2.9
3.6
0.7
FY12
4553
-61
4492
-3499
-1242
-248

1.7
16.3
3.2
3.8
0.9
FY13
4935
-183
4752
-3234
-1257
262


Net
Revenue
from
Operatio
n

4000
3500
3000
2500

30.0

Revenue
Growth

4500

15.0

25.0
20.0

2000

10.0

1500

5.0

1000
0.0

500
0

-5.0

ZinC Productions:
250000

Zinc Production
(tons)

200000
150000
100000

50000
0

EBIDTA & Margin :
2500

EBIDTA %

2000

49

49

50

47
43

1500

60

EBIDTA

43

41

40

42

30
1000
20
500

10

0

0

18

Voltas Ltd.

"Neutral"
6th Mar' 14

Downgrade to "Neutral"…….
Company update

Neutral

CMP
Target Price
Previous
Target Price
Upside
Change from
Previous

139
125
95
-10%
32%

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

500575
VOLTAS
65/143
4,609
624,126
6,329

Stock Performance-%
1M
28.5
23.1

Absolute
Rel. to Nifty

1yr
75.2
64.0

Promoters
FII
DII
Others

1 yr Forward P/B

Management comment on above JV :
Water has been identified as a key focus area for the Tata group. With its unrivalled know-how
and technological leadership in the water treatment space, the partnership, will help Voltas
Water Solutions cater to the growing water treatment requirements of the Indian subcontinent.
They further believe that partnership will simultaneously leverage the brand and distribution
strength of Voltas, along with the technology prowess of the water and process solutions division
of the Dow Group.

YTD
84.2
72.9

Our View on said JV :
In today scenario major Water and Waste Water Treatment market is mostly and largely catered
by unorganized players. And the market which is targeted by this new joint venture will provide a
branded and differentiated product line in the sector, with a focus on quality and service
delivery.

2QFY13 1QFY14
30.2
30.2
14.5
18.1
29.8
25.6
25.6
26.1

About Dow Group :
Dow Chemical Pacific (Singapore) Pte Ltd was established in 1992. Catering to customers in Asia
Pacific, particularly South East Asia, Dow Group combines the power of science and technology to
passionately innovate what is essential to human progress. The company is driving innovations
that extract value from the Intersection of chemical, physical and biological sciences to help
address many of the world's most challenging problems such as the need for clean water, clean
energy generation and conservation, and increasing agricultural productivity. The company's
integrated, market-driven, industry-leading portfolio of specialty chemical, advanced materials,
agrosciences and plastics businesses delivers a broad range of technology-based products and
solutions to customers in high growth sectors such as packaging, electronics, water, coatings and
agriculture.
Valuation :
The company has been evaluating strategic alternatives since 2012, we believe the company is
not inclined to sell at valuations multiple of 2 times of its FY15E book value. We estimate that at
the lower end of management's guidance this translates into a 12.1%/12.7% RoE forFY14/15E.
We believe management is attempting to be conservative regarding the guidance for FY14 &
FY15, but even with a 60/90 bps improvement in the operating margin the RoE would be
approximately 12.1%/12.7% for FY14/15E , which we believes would translate into a P/B multiple
of approximately 2.0x – to 2.2x. This translates to a 12 month price target of approximately Rs.
120 based on our FY14E BVPS of Rs. 59. However, If the company if things will going positively we
could rationalize valuations near Rs. 145 per share, but we don't believe buyers would be willing
to pay a premium to BVPS more than 2 times at this time. We are downgrading Voltas to Neutral
given the recent rise in its share price following 3QFY14 earnings and revised our price target
to Rs. 120.”

3QFY14
30.3
15.2
29.8
24.8

What New...???
Voltas Ltd has proposed to form a new joint venture (JV) company named –“ Voltas Water
Solutions” which will have equal capital contribution from “Voltas” and “Dow Chemical Pacific”
(Singapore) Pte (Dow). This JV company will market and distribute standard packaged Water
Treatment Systems and Waste Water Treatment Systems of capacity up to 20 m 3/hour, to
residential and commercial complexes and light industrial markets in the Indian subcontinent.
The entity's operations would include designing, procuring, testing, marketing, selling and
servicing of such standard water treatment systems and waste water treatment systems.


19

Voltas Ltd.
Key financials :
PARTICULAR

2009A

2010A

2011A

2012A

2013A

2014E

2015E

Performance
Revenue

4326

4757

5191

5186

5531

5320

5852

Other Income

94

78

58

98

90

84

100

Total Income

4420

4836

5250

5284

5621

5404

5952

EBITDA

283

460

463

336

245

261

296

EBIT

262

438

442

303

217

237

268

DEPRICIATION

21

21

21

34

28

24

28

INTREST COST

11

10

17

31

40

35

42

PBT

372

532

524

219

280

286

326

TAX
Extra Oridiniary Items
Reported PAT
Dividend (INR)
DPS
EPS

117
26
255
73
2.2
7.7

147
25
385
73
2.2
11.6

172
40
352
73
2.2
10.6

57
-150
162
73
2.2
4.9

73
12
207
73
2.2
6.3

74
0
211
54
61.5
6.4

85
0
241
54
61.5
7.3

6.5%
5.8%
16.2%
4.7%
32.2%
27.3%

9.7%
8.0%
6.5%
1.2%
35.4%
35.2%

8.9%
6.7%
6.2%
1.3%
25.8%
24.6%

6.5%
3.1%
4.4%
2.0%
11.0%
11.4%

4.4%
3.7%
8.3%
2.9%
12.7%
13.1%

4.9%
3.9%
4.4%
42.4%
11.9%
12.3%

5.1%
4.0%
5.0%
42.4%
12.3%
13.0%

790
181
971
33
48

1085
35
1120
33
178

1362
137
1498
33
172

1478
223
1701
33
112

Yeild %
EBITDA %
NPM %
Earning Yeild %
Dividend Yeild %
ROE %
ROCE%
Position
Net Worth
Total Debt
Ammount in crores
Capital Employed
No of Share (Adj)
INR in crores
CMP

1626
1775
1955
261
225
225
1887
2000
2180
33
33
33
75
145
145

Ammount in crores


Valuation
Book Value
P/B
Int/Coverage
P/E
Ammount in crore

23.9
2.0
23.8
6.2

32.8
5.4
44.5
15.3

41.2
4.2
26.7
16.1

44.7
2.5
9.6
22.9

49.1
1.5
5.5
12.1

53.7
2.7
6.8
22.7

59.1
2.5
6.4
19.9



20

SWARAJ ENGINES Ltd.

V-

"Book Profit"
6th Mar' 14

" Book Profits While The Going Is Good…. "
Company update

Book Profit

CMP
Target Price
Upside

648
648
600
0%
7%

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

500407
SWARAJENG
382/672
801
1,015
6,329

Stock Performance-%
Absolute
Rel. to Nifty

1M
5.3
(0.2)

1yr
47.8
36.6

YTD
63.4
52.0

In our earlier report dated 25-04-13, we had recommended readers to buy the scrip with a view
to earn healthy gains. As expected, the counter have given a premium of 40 per cent over its
recommended price. We expect the current price growth rally factored all the fundamental
changes, and we advise our readers to book profits at the current levels.
We are quite positive on the Swaraj Engines, owing to its strong tractor volume growth, capacity
expansion to 1,05,000 engines pa from 75,000 of current level, softening of commodity prices
and company presence in all HP segments. We are upbeat on the stock on the account of core
business momentum remains robust with healthy EPS growth, cash flow generation and high
RoE.
Moreover, we feel that caution is necessary over the recent robust financial as well as
operational performance that the company has delivered over the past year. With 90 per cent of
its turnover generated through parent company, the revenue stream also seems concentrated. In
conclusion, looking at the above mentioned woes, we advise readers to book profits in the
counter at its current levels and fresh buying may be considered at cheaper levels of around Rs.
500-550 a share.
Our bearish attitude on the counter stems from its valuations. At a P/BV of 2.8x of its annualised
FY14E RoE of Rs 28.7%, we believe that the counter is very expensive in comparison of its own
past historical data
Recommendation History

Promoters
FII
DII
Others

3QFY14
50.6
1.9
10.6
36.9

1 yr Forward P/B

2QFY14
50.6
1.9
10.4
37.1

1QFY14
50.6
1.5
10.6
37.3

Date
25th April' 13
17th June' 13
10th July' 13
1st Aug' 13
26th Nov' 13
3rd Feb' 14

Report Type

CMP

Target Price

Change From
Previous in %

Company Update
Company Update
Company Update
Result Update
Result Update
Result Update

460
511
533
484
610
602

515
535
535
535
600
648

NA
3.9%
0.0%
0.0%
12.1%
8.0%

Valuation
At the CMP of INR610, the stock discounts its FY14E EPS of Rs. 54.20 by 12.0x and FY15E EPS of
Rs. 61.7 by 10.5x. 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 Rs. 38 crore, the
company has strong cash flows and the company is debt free. Also, Company assurance of 3060% dividend payout ratio implies an attractive dividend yield of 4-9%.


21

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

600
18
618
89
80
9
0
98
30
67
24
54.2
19.3

680
20
700
102
91
11
0
111
34
77
30
61.7
24.2

15.3%
15.5%
10.2%
8.0%
2.7%
21.9%
21.9%

17.6%
19.4%
13.2%
31.6%
9.8%
30.4%
30.4%

16.8%
17.8%
12.2%
12.2%
4.0%
28.8%
28.8%

15.5%
17.2%
11.8%
9.9%
3.5%
28.4%
28.4%

14.9%
16.6%
11.6%
11.3%
9.7%
28.6%
28.6%

14.8%
16.3%
11.2%
8.4%
3.0%
28.5%
28.5%

15.0%
16.3%
11.3%
9.5%
3.7%
26.6%
26.6%

97
1
214

123
1
95

152
1
290

186
1
429

194
1
395

236
1
648

287
1
648

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


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
3.4
12.0
2.5

231.5
2.8
10.5
2.4

(Figures In crore)


22

EROSMEDIA

"BUY"
5th March' 14

"Moving to Blockbuster"
Initiating Report

Buy

CMP

160

Target Price
Upside

200
25%

Market Data
BSE Code
NSE Symbol

533261
EROSMEDIA

52wk Range H/L
Nifty

195/107

1467
26241
6298

Stock Performance
1M
Absolute
Rel. to Nifty

1yr

YTD

13.1
8.2

-7.3
-17.4

-

Promoters
FII
DII
Others

Current
74.88

2QFY14
74.88

12.45
1.56
11.11

12.16
1.87
11.09

P/BV-1 year forward

1QFY14
74.88
11.35
2.95
10.82

Healthy movies pipeline for FY15E; Company is expecting to release more than
8 big budget movies across Hindi and regional languages. Likewise, company is
going to release much awaited Rajnikanth’s movie Kochadaiiyaan on 11 April,
2014. Apart from this, company is expected to release Dishkiyaaoon, Shadi Ke
Side Effect, Action Jackson, Tanu weds Manu season 2, Sarkar3, Chalo China,
NH-10, Dekho Magar Pyaar Se, Happy Ending and Rana in FY15E.
It has largest Indian content library of films with 1100+ films and digital rights
to an additional 700 films. Its well positioned to monetize rich content of
library ensures annuity and regular set of revenue.
Considering diversified and sustainable Business Model along with well
positioned to monetize rich content of its library and block buster success ratio
of movies (out of the top 10 grossing films in recent years, 3 are from Eros.)
make us positive view on the stock.
About Company: Eros International Media (EROS) is one of the largest films coproduction and distribution company in India and overseas, engage with presales of overseas rights, music rights and broadcasting rights. It recovers 35-40%
of its costs by selling movie rights to channels, recovers another 35-40% from
selling its overseas rights to overseas entities. Similarly, it gets 10-15% of the
cost of movies by selling music rights .
Robust 3QFY14 Result: Company reported better numbers with sales growth of
17% (YoY) led by huge spurt in catalogue monetization, which increase by approx75% (YoY). Its PAT grew by 41%(YoY).
During the quarter, Its EBITDA margin improved by 680bps (YoY) to 31.3%
because of reduction in operational expenses and employee expenses.
Management expects to see EBITDA margin at 25% in FY14E and FY15E than 2022% range of margin in previous 4 years.
Recent initiatives: Eros has struck new deals during the period with MSM
Satellite Singapore private ltd for broadcast of films on Sony as well as with
Viacom18 media for broadcast films on colours.
Recently Eros International media has launched two new movie channels HBO
DEFINED and HBO HITS, which will reduce its dependence on highly
unpredictable revenue streams going forward.
View and Valuation: Management is very excited to invest into different
medium like internet and launching channels to generate revenue. Company’s
optimistic stance towards maintaining margins, strong movies slate and very low
valuation makes attractive. At a CMP of Rs 160, stock trades at 1.1 P/BVx FY15.
We initiate “BUY” with a target price of Rs 200.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin

3QFY14
432.68
135.6
92.0
31.3%
21.3%

2QFY14
201
51.2
37.0
25.4%
18.4%

(QoQ)-%
115.2
165.0
148.8
590bps
290bps

3QFY13
369.3
90.6
65.2
24.5%
17.7%

Rs, Crore
(YoY)-%
17.2
49.6
41.1
680bps
360bps



23

EROSMEDIA
Sales and Sales growth(%)(yoy)
Key Concerns:
1. Piracy is the key concern for the

company. Indian film industry loses
approx. Rs.2000 cr. every year due to
piracy (source: FICCI-KPMG report 2009).
2. Lower consumer discretionary demand.

3. Difficult to predict fate of films.

Margin-%


Upcoming Movies:
Date of Release
Q4FY14E
28-Feb-14
21-Mar-14
28-Mar-14

Upcoming movies

Director

Starcast

Shaadi Ke Side Effects
Dishkiyaaoon
Happy Ending

Saket Chaudhary
Sanmjit Singh Talwar
Raj and DK

Farhan Akhtar,Vidya Balan
Sunny Deol, Harman Baweja
Saif Ali Khan, Ileana D'Cruz

Q1FY15
11-Apr-14
6-Jun-14

Kochadaiiyaan
Action Jackson

Soundarya Ashwin
Prabhu Deva

Rajnikanth, Deepika Padukone
Ajay Devgn, Sonakshi Sinha

Q2FY15
12-Sep-14

NH-10

Navdeep singh

Anushka sharma,Neil bhoopalam

Tanu Weds Manu Season 2
R. Balki Untitled
Aankheen 2
Illuminati Untitled
Dekh Tamasha Dekh
Purani Jeans
Chalo china

Anand Rai
R.Balki
Apoorva Lakhia
Arif Ali
Feroz Abbas Khan
Tanushree Basu
Shashank Ghosh

R.Madhavan,Kangana Ranaut
Amitabh Bachchan, Dhanush
Abhishek Bachchan
Armaan Jain
Satish Kaushik and Others
Aditya Seal
Vinay Pathak, Lara Dutta

FY15E



24

EROSMEDIA
Management Guidance:
1.
2.
3.
4.
5.
6

Catalogue monetization will continue to grow strong in the upcoming quarters.
Company will monetize entire portfolio across different platforms
Catalogue monetization will increase from 13%-14% to 20-25% of overall revenue in coming 3 to 4 years.
Management is looking for more and more free cash flows going forward.
Q4 will be very positive and going forward FY15E will also be very positive for the company.
Management is very confident about its performance going forward and expects EBITDA margin to be around 25% in
FY14E and FY15E.

Financials;
Rs,cr
Sales
RM Cost(Operatinal expenses)
WIP
Employee Cost
Other expenses
Total expenses
EBITDA
Other Income
EBIT
Interest
PBT
Tax Exp
PAT
Growth-% (YoY)
Sales
EBITDA
PAT
Expenses on Sales-%
RM Cost
Employee Cost
Other expenses
Tax rate
Margin-%
EBITDA
EBIT
PAT
Valuation:
CMP
No of Share
NW
EPS
BVPS
RoE-%
P/BV
P/E

FY10
640.88
480.33
0
19.7
27.81
527.84
113.04
4.39
12.62
108.65
9.02
112.25
29.63
82.62

FY11
706.97
495.13
0.84
25.28
29.57
550.82
156.15
3.82
8.95
152.33
9.39
151.89
33.67
118.22

FY12
943.88
665.45
-2.92
22.55
42.96
728.04
215.84
6
19.3
209.84
13.44
215.7
63.14
152.56

FY13
1067.95
765.78
-2.55
27.29
47.47
837.99
229.96
6.45
6.4
223.51
9.22
220.69
61.19
159.5

FY14E
1110.8
766.5
-2.7
29.4
29.4
822.7
288.1
7.7
11.1
280.4
25.4
266.2
77.7
188.5

FY15E
1229.9
860.9
-2.9
36.9
36.9
931.8
298.1
9.2
12.3
288.9
26.0
275.2
80.4
194.8

16.9%
52.8%
72.1%

10.3%
38.1%
43.1%

33.5%
38.2%
29.0%

13.1%
6.5%
4.5%

4.0%
25.3%
18.2%

10.7%
3.5%
3.4%

74.9%
3.1%
4.3%
4.6%

70.0%
3.6%
4.2%
4.8%

70.5%
2.4%
4.6%
6.7%

71.7%
2.6%
4.4%
5.7%

69.0%
2.7%
2.7%
7.0%

70.0%
3.0%
3.0%
6.5%

17.6%
17.0%
12.9%

22.1%
21.5%
16.7%

22.9%
22.2%
16.2%

21.5%
20.9%
14.9%

25.9%
25.2%
17.0%

24.2%
23.5%
15.8%

138.9
9.14
237.55
9.0
26.0
35%
5.3
15.4

138.9
9.14
670.48
12.9
73.4
17.6%
1.9
10.7

181.15
9.17
834.61
16.6
91.0
18.3%
2.0
10.9

180.53
9.19
986.5
17.4
107.3
16.2%
1.7
10.4

160.0
9.2
1158.6
20.5
126.1
16.3%
1.3
7.8

160.0
9.2
1337.0
21.2
145.5
14.6%
1.1
7.5



25

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
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