1. business and industrial

NOVEMBER 11, 2014
Economy News
 In a bid to bring non-banking financial company (NBFC) norms in line with
those of banks, the Reserve Bank of India (RBI) unleashed tighter rules for
NBFCs. According to the new guidelines, NBFCs will require higher
minimum capital, have less time to declare bad loans, and a boardapproved fit and proper criteria for director appointments. (BS)
 India's car sales are set to fall below the earlier growth target for FY15
set by the Society of Indian Automobile Manufacturers (SIAM). Car sales
growth this fiscal year is likely to be below 5 per cent, Sugato Sen, deputy
director-general, SIAM, told reporters. (ET)
 As yields on government bonds are at a low, capital-starved public-sector
banks are looking at it as an opportunity to raise capital by issuing
additional Tier-I (AT-I) bonds - an instrument recently approved by the
Reserve Bank of India (RBI). (BS)
 International ratings agency, Moody's said it expects India to witness
"sustained robust growth" over the next two years. The agency has a
"Baa3" rating with a stable outlook on India, which is the lowest in the
investment grade. (BS)
Corporate News
 Abu Dhabi-based Etihad Airways may infuse an additional $300 million
(Rs.18 bn) through debt or preference shares in Jet Airways to boost the
carrier's financials. (BS)
 Lavasa Corporation, the realty arm of construction major HCC, has
received market regulator Sebi's approval for raising Rs 7.5 bn through an
initial public offer (IPO). The company had filed its draft red herring
prospectus (DRHP) with the Securities and Exchange Board of India (Sebi)
in July this year for the proposed public offer. (ET)
Equity
% Chg
10 Nov 14
1 Day 1 Mth 3 Mths
Indian Indices
SENSEX Index
NIFTY Index
BANKEX Index
BSET Index
BSETCG INDEX
BSEOIL INDEX
CNXMcap Index
BSESMCAP INDEX
27,875
8,344
19,749
10,814
15,784
10,911
12,000
11,135
0.0
0.1
(0.5)
(0.1)
(1.0)
(1.3)
0.0
0.2
6.0
6.2
11.6
1.2
10.0
1.5
6.8
4.9
9.2
9.4
16.2
10.4
10.5
3.8
11.7
12.4
World Indices
Dow Jones
Nasdaq
FTSE
NIKKEI
HANGSENG
17,614
4,652
6,611
16,781
23,745
0.2
0.4
0.7
(0.6)
0.8
6.5
8.8
4.3
10.5
3.4
6.3
5.7
(0.3)
11.7
(3.2)
Value traded (Rs cr)
10 Nov 14
% Chg - Day
3,767
16,679
159,018
(2.3)
(25.0)
7.1
Cash BSE
Cash NSE
Derivatives
Net inflows (Rs cr)
7 Nov 14
% Chg
MTD
YTD
2,976
(110)
184
(74)
5,481
(805)
22,230
14,282
FII
Mutual Fund
FII open interest (Rs cr)
7 Nov 14
% Chg
18,827
61,867
47,969
2,111
1.4
2.0
(0.4)
9.8
 After raising prices of compressed natural gas (CNG) (transport) and piped
natural gas (PNG) for domestic consumers on last week, State-owned
GSPC Gas Company Ltd. has now announced a reduction in PNG prices
for its industrial consumers. (BS)
FII
FII
FII
FII
 Union Coal Secretary Anil Swarup has said that the state-owned Coal
India Ltd (CIL) would mine 1,000 million tonnes of coal by 2019 -doubling its present production of 500 million tonnes. (ET)
Advances / Declines (BSE)
 Jindal Steel and Power is likely to list its Oman-based wholly-owned
subsidiary Shadeed Iron and Steel LLC in Muscat Securities Market for
raising around $ 500 million. (ET)
 Mumbai-based Wockhard plans to open two more hospitals in the
country by 2017, taking its total tally to 11. (ET)
 The government has decided to take back several of ONGC's small and
marginal hydrocarbon fields where it has made little headway and auction
them afresh with attractive incentives, in keeping with its plan to pick
low-hanging fruit for increasing the country's oil and gas output. (ET)
Index
Index
Stock
Stock
Futures
Options
Futures
Options
10 Nov 14
Advances
Declines
Unchanged
A
B
T
139
158
2
1019
1,065
68
316
233
34
Total % total
1,474
1,456
104
Commodity
49
48
3
% Chg
10 Nov 14 1 Day 1 Mth 3 Mths
Crude (NYMEX) (US$/BBL) 77.3
Gold (US$/OZ)
1,161.1
Silver (US$/OZ)
15.7
(0.2)
(0.6)
(0.0)
(10.0)
(5.5)
(9.9)
(21.2)
(11.7)
(21.8)
Debt / forex market
10 Nov 14 1 Day 1 Mth 3 Mths
10 yr G-Sec yield %
Re/US$
8.2
61.5
8.2
61.6
8.5
61.3
8.6
61.2
Sensex
28,000
25,875
23,750
21,625
Source: ET = Economic Times, BS = Business Standard, FE = Financial Express,
BL = Business Line, ToI: Times of India, BSE = Bombay Stock Exchange
19,500
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
MORNING INSIGHT
November 11, 2014
ADANI PORT
RESULT UPDATE
Amit Agarwal
[email protected]
+91 22 6621 6222
AND
SPECIAL ECONOMIC ZONE (APSEZ)
PRICE: RS.290
TARGET PRICE: RS.340
RECOMMENDATION: BUY
FY16E P/E: 19.7X
Stable performance
Adani Ports & SEZ's (APSEZ) consolidated Q2FY15 adjusted PAT (including
derivate loss of Rs 161 mn and forex loss of Rs 231 mn) of Rs 5.77 bn was
marginally below our expectation of Rs 5.95 bn. Sales have increased 44%
YoY and 31% QOQ to Rs 16.6 bn driven by healthy growth in volumes at
35.2 mn tonnes (+25%YoY and -6% QoQ) with healthy contributions from
Dahej, Hazira and Dhamra. The higher interest and depreciation cost on
account of commissioning of assets like Dahej and Hazira impacted the
profitability.
Summary table
(Rs mn)
FY14
FY15E
FY16E
Sales
44,518 59,158 70,635
Growth (%)
24.5
32.9
19.4
EBITDA
30,272 38,954 46,901
EBITDA margin (%) 68.0
65.8
66.4
PBT
21,480 24,654 32,201
Net profit
19,762 22,682 29,625
EPS (Rs)
9.8
11.2
14.7
Growth (%)
21.8
14.8
30.6
CEPS (Rs)
12.4
14.5
18.0
Book value (Rs/share) 40.5
50.8
64.4
Dividend/share (Rs)
1.0
1.0
2.0
ROE (%)
24.2
22.1
22.8
ROCE (%)
12.8
13.5
15.0
(100,100) (120,909) (118,698)
Net cash (debt)
Net WC (Days)
17.2
15.4
16.9
EV/EBITDA (x)
22.6
18.1
15.0
P/E (x)
29.6
25.8
19.7
P/Cash Earnings
23.4
20.0
16.1
P/BV (x)
7.2
5.7
4.5
Source: Company, Kotak Securities - Private
Client Research
We would want to highlight some positives for the company from Q2FY15
numbers (1) strong volume pick-up at Dahej and Hazira (2) strong power
generation at Tata & Mundra and possible compensatory tariff, (3) recent
clearance from Coastal Regulatory Body (4) pick-up in container cargo (CT3)
on constrained west-coast capacity (5) contribution from Dhamra and (6)
Healthy progress on other Port Projects including CT IV. Recommend BUY
with an increased TP of Rs 340 (from Rs 300) for the stock.
Quarterly snapshot (consolidated)
(Rs mn)
Net Sales
OPEX
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
11499
10,798
11,158
12,616
16,551
3319
3170
3,427
3,355
4,509
Employee cost
361
498
424
431
623
Admn cost
522
441
698
512
678
10,741
EBIDTA
7297
6689
6,609
8,318
EBIDTA %
63.5
61.9
59.2
65.9
64.9
Other Income
2573
1638
1,729
1,687
2,100
Depreciation
1828
1834
1,352
1,759
2,323
Gross int
1989
1965
1,878
2,092
3,671
6053
4528
5,108
6,154
6,847
Taxes
764
385
964
666
689
Effective tax rate (%)
12.6
8.5
18.9
10.8
10.1
PAT
5289
4143
4,144
5,488
6,158
Extraordinary
-1864
351
1191
281
-391
Adj PAT
3425
4494
5,335
5,769
5,767
PBT
Source: Kotak Securities - Private Client Research, Company
Highlights of the quarter
 Volumes were reported at 35.2 mn tonnes (+25%YoY and -6% QoQ) with
meaningful contributions from Dahej and Hazira. Dhamra has contributed 3.64
mn tonnes to the total cargo.
 Standalone volumes at Adani Port was reported at 26.6 mn tonnes primarily
aided by coal and containers. With the above volumes, Mundra Port continues to
be the biggest port amongst all commercial ports in terms of cargo handled in
Q2FY15.
 Adani Port also reported strong EBIDTA of Rs 10.74 bn translating into stable
Ebidta margin of ~65%
 The higher interest and depreciation cost on account of commissioning of assets
like Dahej and Hazira impacted the profitability. Depreciation cost was also
higher due change in depreciation policy in Q1FY15 (as per new companies act)
which lowered the useful life of asset
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views,
estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
2
MORNING INSIGHT
November 11, 2014
 Consequently the company reported PAT (including derivate loss of Rs 161 mn
and forex loss of Rs 231 mn) of Rs 5.77 bn was marginally below our expectation
of Rs 5.95 bn.
Robust Volume growth at the port for Q2FY15
Standalone Mundra port handled 26.5 mn tons of cargo in Q2FY15 (Q1FY15 = 28.9
and FY14 = 101.2 mn tonnes), up by a strong 25% YoY driven by coal and container volumes. Today Mundra has become the biggest commercial port in the country in terms of cargo handled. Even Dahej and Hazira have started showing signs of
scaling up. It handled about 1.45 mn tonnes in Hazira and 3.27 mn tonnes in Dahej
in Q2FY15.Dhamra has contributed 3.5 mn tonnes in Q2FY15.
Quarterly volumes for APSEZ
Mn tonnes
Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
Total cargo at Mundra
22.9
23.6
24.6
26.6
26.4
28.9
26.6
Hazira
0.78
0.87
0.98
0.95
0.95
1.60
1.45
Dahej
2.01
2.20
2.48
1.68
1.51
2.85
3.27
Dhamra
0.00
0.00
0.00
0.00
0.00
4.20
3.64
25.69
26.67
28.08
29.2
28.8
37.55
35.17
Others
0.21
Total
Source: Company
Overall volume growth for Adani Port
(million tonnes)
FY11
FY12
FY13
FY14
FY15E
FY16E
Bulk (including coal)
23.13
36.37
37.43
52.00
55.00
60.00
Crude
6.69
9.30
19.21
19.00
22.00
23.00
14.91
18.35
25.52
31.00
36.00
42.00
44.73
64.02
82.16
102.00
113.00
125.00
0.0
0.0
1.0
3.0
4.0
5.0
Dahej
0.0
0.0
7.6
9.0
10.0
11.0
Dhamra + others
0.0
0.0
0.0
0.0
18.0
20.0
Total for Adani
44.73
64.02
90.73
114.00
145.0
161.00
Container terminal
Total handled at Mundra
Hazira
Source; Company, Kotak Securities - Private Client Research
Company has completed acquisition of Dhamra on east coast
Details of Dhamra port
Capacity (Phase 1)
25 mt
Storage
2.2 mt
Draft
17.5 mt
Cargo Handled in FY13/FY12
11 mt/ 5 mt
Phase 2 expansion
Addition of another 75 mt capacity with an investment
of Rs 80 bn
Acquisition price
EV of Rs 55 bn
Source: Company
The project cost of Dhamra Port is about Rs 36bn including about Rs 6.5 bn equity
and Rs 29.5 bn debt. Deducting this total debt from the announced deal EV of
Rs55bn gives an implied equity valuation of Rs 25 bn, implying a P/B multiple of 4 x.
The deal is also expected to increase the debt on the books of Adani Port by Rs 30
bn.
Dhamra is expected to contribute 18 mn tonnes in FY15 and 20 mn tonnes in FY16
to the total volumes.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
3
MORNING INSIGHT
November 11, 2014
Agreement with CMA CGM for CT-IV before commissioning of
JNPT’s 4TH terminal helps to retain monopolistic position
After setting up container terminal (CT-III) MSC, Adani port has signed an agreement with third largest liner CMA CGM for setting up 4th container terminal at
Mundra in a 50:50 JV. The JV will develop and operate the new Fourth Container
Terminal, a state-of-the-art facility with an annual capacity of 1.3 Mn TEUs. Mundra
will become India's largest container port in next 24 months, with a total Container
handling capacity reaching 5.3 Mn TEUs. The construction phase will be initiated
immediately and will be completed in 24 months. Currently CMA CGM gives
200,000-250,000 TEUs at Mundra (CT-II) and has given guidance to ramp up the
utilisation to 100% plus within 3 years of utilisation.
Other projects/terminals in the pipeline
Adani Vizag Coal Terminal Pvt. Ltd (100% subsidiary of ADSEZ) - The company
has developed Port facilities at East Quay for handling imported steam coal at
Visakhapatnam Port (under BOT model). The terminal would have a total capacity of
5 million tonnes and can accommodate ships upto 80,000 dwt. It has started commercial operations in the current quarter.
Adani Kandla Bulk Terminal Pvt. Ltd (51% subsidiary of APSEZL) - Kandla Port
Trust (KPT) has awarded LOA in February 2012 to ADSEZ (under BOT model) for development of proposed dry bulk cargo handling terminal at tuna, off Tekra, near
Kandla port, India. The terminal is expected to have a capacity of 15 million tonnes
and can accommodate ships upto 100,000 dwt. It is expected to start commercial
operations in FY17.
Further expansion of Adani Hazira Port Private Limited (100% subsidiary of
ADSEZ) - Adani Hazira terminal has commenced operations in Q1FY12. 5 Berths has
been developed and operated as part of the first phase. Out of the 5 berths, 2 are
catering to containers, 1 for coal and 2 berths as multi-purpose terminal for handling
vessels of sizes varying from 80,000 DWT to 150,000 DWT. The second phase of expansion is expected to begin shorty.
We recommend BUY on Adani
Port and Special Economic Zone
with a price target of Rs.340
Valuation and recommendation
We have valued ADSEZ based on DCFs for individual projects, arriving at an SOTP
valuation of Rs 340/share. We have valued Mundra Port (core operating asset) at Rs
210 per share (from the earlier Rs190), constituting around 60% of the total value.
We have valued Hazira Port at Rs 20/share (from Rs 15/share) on increasing visibility
in volumes and higher realisations. We continue to maintain (a) 20/Share for SEZ
business (b) 15/ share for Dahej (c) Rs 15/share for Mormugoa, (d) Rs 5/share from
book value of investments in Adani Logistics. Dhamra would contribute Rs 35/share,
while the new port projects including CT- IV would contribute Rs 20/share to the
value of Adani Port
We again would want to highlight some positives for the company: 1) strong volume
pick-up at Dahej and Hazira (3) strong power generation at Tata & Mundra and
possible compensatory tariff, (4) recent clearance from Coastal Regulatory Body (5)
pick-up in container cargo (CT3) on constrained west-coast capacity (6) contribution
from Dhamra and (6) Healthy progress on other Port Projects including CT IV. Recommend BUY with an increased TP of Rs 340 for the stock.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
4
MORNING INSIGHT
November 11, 2014
ENGINEERS INDIA LTD (EIL)
RESULT UPDATE
Ruchir Khare
[email protected]
+91 22 6621 6448
PRICE: RS.237
TARGET PRICE: RS.300
RECOMMENDATION: BUY
FY16E P/E: 12.7X
EIL reported Q2FY15 operating profit and PAT significantly lower than our
estimates; revenues marginally down YoY due to muted activity in
Consultancy division. LSTP division reported operating loss due to cost
overrun in one of the projects.
Over the past few quarters, EIL has observed pick up in revenue booking in
consultancy business space. Management anticipates reasonable order
booking in overseas consultancy business. Domestic business is expected to
witness sluggish growth in FY15 due to delayed execution of company's key
orders.
Summary table
(Rs mn)
FY14
FY15E
FY16E
Sales
18,465
Growth (%)
(27.0)
EBITDA
3,831
EBITDA margin (%) 20.7
PBT
7044
Net profit
4,830
EPS (Rs)
14.3
Growth (%)
(23.6)
CEPS (Rs)
14.8
BV (Rs/share)
74.8
DPS (Rs)
5.6
ROE (%)
20.1
ROCE (%)
19.8
Net cash (debt)
18,273
NW Capital (Days) (106.6)
EV/Sales (x)
3.3
EV/EBITDA (x)
16.1
P/E (x)
16.5
P/Cash Earnings (x)
16.0
P/BV (x)
3.2
18,214
(1.4)
2,550
14.0
6428
4,564
13.5
(5.5)
13.9
81.8
5.6
17.3
17.1
20,335
(111.7)
3.4
24.1
17.5
17.0
2.9
21,327
17.1
4,255
20.0
8827
6,267
18.6
37.3
19.0
93.8
5.6
21.2
21.0
23,679
(103.1)
2.9
14.5
12.7
12.5
2.5
We tweak FY16 earnings estimate downward to build sluggish take off in
key domestic hydrocarbon orders. At the current price, company's stock
looks attractively valued on a discounted cash flow basis. We maintain BUY
rating on company's stock with a DCF based revised target price of Rs.300
(Rs 315 earlier).
Consolidated Quarterly financials
(Rs mn)
Revenues
Q2FY14
YoY (%)
Q1FY15
QoQ (%)
3906
4652
(16.0)
4355
(10.3)
Employee expenses
1450
1453
(0.2)
1490
(2.7)
Sub-Contract Payments
1055
626
68.6
1109
(4.9)
Construction Material
477
1167
(59.1)
380
25.4
Other expenses
846
520
62.5
828
2.1
Total Expenses
3827
3766
1.6
3808
0.5
79
886
(91.1)
547
(85.5)
839
828
1.3
693
21.1
35
22
58.3
54
(34.0)
883
1691
(47.8)
1187
(25.6)
0
0
PBT
883
1691
(47.8)
1187
Total tax
296
573
(48.3)
382
(22.6)
PAT
587
1119
(47.5)
804
(27.0)
1.7
3.3
(47.5)
2.4
(27.0)
EBITDA
Other income
Depreciation
EBIT
Net Interest
Source: Company, Kotak Securities - Private
Client Research
Q2FY15
EPS (Rs)
EBITDA (%)
Tax Rate (%)
0
(25.6)
2.0
19.0
12.6
(83.9)
33.5
33.8
32.2
4.0
Source: Company
Result Highlights
Consolidated revenues de-grew by 16% YoY at Rs 3.9 Bn in Q2FY15 mainly due to
sluggish performance in Consultancy business. Company has reported sharp contraction in operating margin at 2% in Q2FY15 vis-à-vis 19% in Q2FY14 and12.6% in
Q1FY15. LSTP division reported operating loss in the quarter due to provision of Rs
280 mn made with respect to cost overrun in CPCL Coker plant. Management has
stated that further cost overrun of Rs 220 mn can be reported in next two to three
quarters.
We also note that increased execution in lower margin jobs in consultancy segment
have pulled the operating margins down in the quarter.
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views,
estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
5
MORNING INSIGHT
November 11, 2014
Consolidated consultancy division reported 16% YoY revenue de-growth in Q2FY15
(19% YoY de-growth in 1HFY15) at Rs 2.2 Bn and EBIT margin for the segment
stood at 18.7%. We note that the EBIT margin for consultancy has come off considerably from the peak of 38-40% levels. We also note that the company is currently
executing smaller jobs within consultancy business that enjoys lower margins.
Over FY15, company does not expect receiving large high margins consultancy jobs.
We note that these orders typically enjoy EBIT margins to the tune of 25-30%
against large orders that enjoys higher margins of nearly 35-40%.
LSTP division revenues de-grew by 16.3% YoY reported at Rs 1.7 Bn in Q2FY15 (5%
YoY growth in 1HFY15). LSTP division reported operating loss of Rs 200 mn in the
quarter mainly due to the cost over run in CPCL Coker unit (provision of Rs 280 mn
made in this quarter). We also highlight that in turnkey projects of the company,
margins do not accrue uniformly during the year. Hence, the financial performance
of the segment can be determined only on the basis of the figures for the full year.
Segment Results
(Rs mn)
Q2FY15
Q4FY13 YoY (%)
Q1FY15 QoQ (%)
Consultancy & Engineering projects
2204
2619
(15.8)
2381
(7.4)
Lumpsum Turnkey Projects
1702
2033
(16.3)
1974
(13.8)
(54.5)
580
(29.0)
Consultancy & Engineering projects
Consultancy & Engineering projects
Lumpsum Turnkey Projects
412
905
(200)
138
120
18.7
44.3
24.3
(11.8)
7.2
6.1
Segment Margins %
Consultancy & Engineering projects
Lumpsum Turnkey Projects
Source: Company
Large orders like HPCL Rajasthan refinery (Rs 12 Bn consultancy order) has been
getting postponed since several quarters and would likely flow in FY16. Management believes that in the long run, company can from benefit from several pending
orders from various PSU refineries over the next few years.
On overseas business front, EIL continues to maintain positive view and has bid for
over Rs 5 Bn worth of orders. We note that the company has been successful in
expanding its footprints in overseas geographies like Indonesia, Turkey, Angola and
Nigeria, Algeria, Oman and Bahrain.
Revenues to grow on back of investment in XII year plan in Hydrocarbon space and increased focus on international business
over the next two years
EIL's current order book stands close to Rs 37.2 Bn offering eighteen months visibility. Company has been trying to increase contribution from overseas business from
12-15% currently to over 25% going ahead. Management has stated that
company's primary focus would remain in the consultancy jobs in the overseas markets. Consultancy order book stands close to Rs 26.9 Bn and turnkey orders stands at
Rs 10.1 Bn.
Order inflows in the quarter include Rs 1.8 Bn consultancy orders and Rs 2 Bn of
turnkey orders. In 1HFY15, company reported consultancy orders inflow at Rs 14 Bn
(including single large consulting order of Rs 8.5 Bn from Nigeria, executable over
next two years) and Rs 2 Bn of turnkey orders.
We note that the order inflows has remain weak in India and order book currently
stands much lower than 2011 peak of Rs 72 Bn. However, we highlight that with
increasing proportion of consultancy orders, company could still maintain PAT
growth going ahead.
We believe that the operating margins would likely get reduced in FY15 affected by
execution small ticket size consultancy jobs and recover in FY16.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
6
MORNING INSIGHT
November 11, 2014
Order inflow (Rs mn)
Source: Company
Table
Order Book (Rs mn)
Consultancy
FY11
FY12
FY13
FY14
FY15E
FY16E
74843
45444
33175
29108
35627
44561
25840
20058
21012
15717
23576
28291
-22%
5%
-25%
50%
20%
25386
12163
13391
12052
16270
-48%
-52%
10%
-10%
35%
17484
YoY %
LSTP
49003
YoY %
Order flows (Rs mn)
Consultancy
8725
YoY %
LSTP
YoY %
31821
6289
12959
4768
18499
-28%
106%
-63%
288%
-5%
1297
1425
6779
6234.8
12777
-96%
10%
376%
-8%
105%
Source: Company, Kotak Securities - Private Client Research
We project revenue growth at 7% CAGR between FY 14-16 from Rs. 18.4 bn in
FY14 to Rs 21 bn in FY16. Within the revenue streams, we expect consultancy &
engineering business to grow at 6.2% CAGR and Lumpsum turnkey project segment
(LSTP) to grow at 9.5% CAGR between FY14-16 driven by 1) current order book at
Rs 37.2 Bn 2) likely pick up in the domestic Hydrocarbon Industry mainly refining and
petrochemicals through FY16 3) likely pick up in investments in projects in power
and infrastructure space 4) growth in contribution from overseas Hydrocarbon markets mainly Middle East, Africa.
We highlight that the company has a strong balance sheet with net cash amounting
to nearly Rs 24 Bn. Lower capex and negative working capital would boost free cash
flow generation in future. We estimate Free cash flow at Rs 1.3 Bn in FY16E.
We recommend BUY on
Engineers India Ltd with a price
target of Rs.300
Kotak Securities - Private Client Research
Valuation And Recommendation
At the current price of Rs 237, EIL stock is trading at 12.7 x P/E on FY 16E earnings.
We tweak FY16 earnings estimate downward to build sluggish take off in key domestic hydrocarbon orders. At the current price, company's stock looks attractively
valued on a discounted cash flow basis. We maintain BUY rating on company's
stock with a DCF based revised target price of Rs.300 (Rs 315 earlier).
Please see the disclaimer on the last page
For Private Circulation
7
MORNING INSIGHT
November 11, 2014
AIA ENGINEERING LTD. (AIA)
RESULT UPDATE
Ruchir Khare
[email protected]
+91 22 6621 6448
PRICE: RS.973
TARGET PRICE: RS.1180
RECOMMENDATION: BUY
FY16E P/E: 17.8X
 AIA reported Q2FY15 results in line with our estimates on revenue as
well as profitability front. Higher operating margin and other income led
to PAT higher than our estimates. Margins expanded YoY in the quarter
on back of favourable product mix and currency movement.
 We remain positive on company's business and expect volume pick up in
mining segment. We maintain our 'BUY' recommendation with an unchanged target price of Rs 1180 on company's stock.
Consolidated Financials Q2FY15
Summary table
(Rs mn)
2014
2015E
2016E
(Rs mn)
Sales
20,801
Growth (%)
18.8
EBITDA
4,472
EBITDA margin (%) 21.5
PBT
4,361
Net profit
2,702
EPS (Rs)
28.7
Growth (%)
27.7
CEPS (Rs)
32.7
BV (Rs/share)
164.8
Dividend/share (Rs)
6.0
ROE (%)
18.6
ROCE (%)
13.6
Net cash (debt)
1,299
NW Capital (Days) 142.4
EV/Sales (x)
4.3
EV/EBITDA (x)
19.9
P/E (x)
33.4
P/Cash Earnings
29.3
P/BV (x)
5.8
25,214
21.2
5,799
23.0
5,524
3,915
41.5
44.9
45.9
198.4
7.0
22.9
15.2
1,909
142.4
3.5
15.3
23.0
20.9
4.8
31,610
25.4
7,428
23.5
7,267
5,079
53.9
29.7
58.4
243.2
8.0
24.4
16.2
2,824
142.4
2.8
12.0
17.8
16.4
3.9
Net Sales
Source: Company, Kotak Securities - Private
Client Research
Inc/dec in stock
Raw materials
Staff cost
Other exp.
Q2FY15
Q2FY14
YoY (%)
Q1FY15
QoQ (%)
5,724
4,918
16.4
4,921
16.3
(47)
32
2,297
1,757
30.7
2,065
(307)
11.2
232
231
0.7
233
(0.3)
1,764
1,771
(0.4)
1,658
6.4
Total exp.
4,246
3,790
12.0
3,649
16.4
EBIDTA
1,478
1,128
31.1
1,272
16.2
Other income
201
47
Depreciation
218
91
1,461
11
228
(12.1)
138.3
118
84.1
1,083
34.9
1,382
5.7
19
(44.8)
3
256.7
1,451
1,064
36.4
1,379
5.2
368
326
12.9
426
(13.7)
PAT
1,083
738
46.7
953
13.6
adj PAT
1,083
738
46.7
953
13.6
EPS (Rs)
11.5
7.8
46.7
10.1
13.6
Adj EPS
11.5
7.8
46.7
10.1
13.6
EBIT
Interest
PBT
Tax & deferred tax
Raw Materials / Sales (%)
39.3
36.4
35.7
EBITDA (%)
25.8
22.9
25.9
Tax (%)
25.3
30.6
30.9
Source: Company
AIA Engineering Ltd reported record volume sale of 50400 MT of mill internals in
Q2FY15. Company reported revenue at Rs 5.7 Bn up 16.4% YoY. Revenue in the
quarter was mainly driven by the mining segment. Company reported a record sale
of ~ 33000 MT of mill internals in the mining segment in the quarter. In Q2FY15, exports accounted for close to 74% of company's total sales. Average realizations in
the quarter stood at Rs 109/kg.
We note that domestic power and cement sector has grown at a relatively slower
pace over the last few years. We opine that with the recovery in domestic construction space, company would likely observe traction from the cement division.
Margin expanded to 26% in the quarter against 23% in Q2FY14 on back of
favourable product mix and operating leverage. AIA has commendably established
its products in the mining segment where margins appear to be on an increasing
trend.
Company reported EBIDTA at Rs 1.4 bn in Q2FY15 vis-à-vis 1.2 Bn in Q2FY14. Company has also benefited from favourable currency mix. Being a net exporter, it has
benefited from decline in INR exchange rate.
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views,
estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
8
MORNING INSIGHT
November 11, 2014
Management has stated that the response across geographies has been positive in
the mining space and company expects to concentrate on receiving more business
from the existing clients.
AIA would entail a capex of Rs.4.5 bn (through internal accruals) over FY14-FY16
adding 1 Lkh tonne of incremental capacity for the company. AIA has planned
60,000 tonnes of brownfield expansion at Moraiya in FY14 and 40,000 tonnes of
greenfield expansion in GIDC Kerala in FY15. We opine that this is positive in the
long term as it would lead to the next phase of growth for the company going forward in its core cash generating business.
AIA continues to enjoy healthy balance sheet with net cash position at Rs 8.2 Bn
(including investments). Benefitting from the low financial charges and higher other
income at Rs 201 mn (against Rs 47 mn in Q2FY14), AIA reported adj. PAT at Rs
1.08 Bn for the quarter.
Financials
We believe that AIA Engineering is well poised to benefit from the growth in the
high chrome mill internals mining space and impending recovery in the domestic
market. However, given that the company derives more than 60% of its revenue
from the export market, we believe that it is likely to experience a slowdown in
volume off take over FY15-16.
In our projections, we build revenue growth at 23% CAGR between FY14-16E driven
by the mining segment. We note that the company has taken certain pricing measures in last two quarters which is likely to get reflected through 2HYFY15E.
We believe that company would potentially expand margins over the next two years
due to operating leverage. We also believe that the promotional prices in mining to
gain market share would start to firm up in future. We build a gradual expansion in
operating margin over FY15-16E.
We recommend BUY on AIA
Engineering with a price target
of Rs.1180
Kotak Securities - Private Client Research
Valuation and Recommendation
At the current price of Rs 973, company's stock is trading at 17.8x P/E and 12.7x EV/
EBITDA on FY16E earnings.
We remain positive on company's business and expect volume pick up in mining
segment. We maintain our 'BUY' recommendation with an unchanged target price
of Rs 1180 on company's stock.
Please see the disclaimer on the last page
For Private Circulation
9
MORNING INSIGHT
November 11, 2014
VA TECH WABAG
RESULT UPDATE
Sanjeev Zarbade
[email protected]
+91 22 6621 6305
PRICE: RS.1550
TARGET PRICE: RS.1372
RECOMMENDATION: SELL
FY16E P/E: 21.5X
VA Tech Wabag missed expectations on roundabout all fronts. Order intake
in first half has been weaker and it could be challenging for the company to
meet its annual target unless it is able to win few big ticket orders.
We continue to view Wabag favourably given entrenched position in the
water business, increased government focus on preserving water quality
and rising demand for water from urbanization. However, in recent
quarters, we have witnessed some discomforting signs including 1) increase
in interest costs 2) slowdown in order intake.
From a valuation perspective, stock appears close to fully valued in our view
and likely ignores execution risks associated with EPC projects especially in
new geographies.
Quarterly financials
Summary table
(Rs mn)
FY14
FY15E
FY16E
Sales
22386
Growth (%)
38.3
EBITDA
1885
EBITDA margin (%)
8.4
PBT
1,611
PAT
1,083
EPS (Rs)
40.9
Growth (%)
19.9
CEPS
46.5
BV (Rs/share)
269.9
Dividend / share (Rs) 8.0
ROE (%)
13.9
ROCE (%)
19.1
Net cash (debt)
2898
NW Capital (Days)
68.3
EV/Sales (x)
1.7
EV/EBITDA (x)
20.3
P/E (x)
37.9
P/Cash Earnings
33.3
P/BV (x)
4.9
26389
17.9
2467
9.3
2,082
1,452
54.8
34.0
61.0
317.3
9.0
16.1
20.7
3637
70.0
1.4
15.2
28.3
25.4
4.3
30695
16.3
3097
10.1
2,710
1,913
72.2
31.8
79.0
361.6
10.0
18.4
23.9
4286
72.3
1.2
11.9
21.5
19.6
3.7
Source: Company, Kotak Securities - Private
Client Research
(Rs mn)
Q2FY15 Q2FY14 YoY (%) H1FY15 H1FY14 YoY (%)
Net Sales
5061
% quarterly mix
Other operating income
8
Net Sales & Other Op Income
5070
Total Expenditure
4741
(Increase) / Decrease In Stocks
-449
Cost of Services & Raw Materials 4292
Operating & Manufacturing Exp
257
Employee Cost
642
PBIDT (Excl OI)
329
Other Income
0
Operating Profit
329
Depreciation
55
EBIT
273.3
Interest
62
Exceptional Items
0.00
Forex gain/(loss)
17.30
PBT
228.9
Tax
87
Profit After Tax
142.1
Minority Interest
-0.30
Shares of Associates
13.70
Consolidated Net Profit
155.5
EBITDA excl other op income (%) 6.3
Material costs (%)
75.9
Staff costs (%)
12.7
Other expenditure (%)
5.1
Tax rate (%)
37.9
EPS (Rs)
5.36
4646
26%
10
4655
4337
-215
3713
280
559
318
8
326
38
287.7
11
0.00
0.00
276.8
99
177.6
-0.90
5.00
181.7
6.6
75.3
12.0
6.0
35.8
6.70
9.0
-100.0
-16.2
8.9
9.3
108.7
15.6
-8.5
14.9
3.2
-100.0
0.8
44.5
-5.0
466.1
0.0
0.0
-17.3
-12.5
-20.0
-66.7
174.0
-14.4
9042
0
38
9080
8547
-517
7270
593
1201
534
0
534
89
445
120
0
60
385
135
251
0
12
262
5.5
74.7
13.2
6.6
34.9
9.46
7501
0
15
7516
7000
-279
5692
496
1092
516
8
524
71
453
26
0
-72
355
147
208
-1
3
210
6.7
72.2
14.5
6.6
41.4
7.85
20.5
-67.0
154.3
20.8
22.1
85.2
27.7
19.6
10.0
3.4
-100.0
1.9
25.2
-1.8
356.7
0.0
-184.2
8.5
-8.4
20.5
-60.0
300.0
24.8
Source: Company
Estimates
(Rs mn)
Reported
Estimated
Revenue
Comments
5061
6069
EBITDA (%)
6.3
7.5
Revenue lower than estimates
Resulting in reduced margins
PAT
156
284
Significant slippage in PAT
Source: Kotak Securities - Private Client Research
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views,
estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
10
MORNING INSIGHT
November 11, 2014
Q2FY15 results highlights
Consolidated Performance - Weak revenue growth
 Revenue for Q2FY15 stood at Rs 5.0 bn (+9% YoY) and were lower than our
estimate on account of execution sluggishness as subcontractors faced liquidity
crunch. The company's desalination project at Al Ghubrah has been running behind schedule due to Visa issues related to mobilization of labour in Saudi
Arabia.
 EBITDA at Rs329mn (3% YoY) was lower than with estimatedue to revenue miss
and lower gross margins.
 Increase in Interest and Finance charges was mainly due to higher Bank Guarantee & Letter of Credit Charges due to substantial increase in Order Intake during
the previous fiscal.
 Company reported forex gains of Rs17.3mn vs loss of Rs 58.6 mn in Q2FY14.
Forex impact is largely on account of translation losses pertaining to assets/liabilities.
 PAT at Rs 156 mn (-14% YoY), weak due to lower execution coupled with reduced margins and increase in interest costs.
Standalone Performance (Rs mn)
Sep-14
Sep-13
YoY (%)
Net Sales
Other operating income
Net Sales & Other Operating Income
2339
22
2361
2167
32
2199
8
-29
7
Total Expenditure
(Increase) / Decrease In Stocks
Cost of Services & Raw Materials
Operating & Manufacturing Expenses
Employee Cost
PBIDT (Excl OI)
Net Other Income
Operating Profit
Depreciation
EBIT
Interest
Forex fluctuation gain (loss)
Exceptional Items
PBT
Tax
Profit After Tax
EBITDA (%)
Material cost to sales ( %)
O&M Exp to sales (%)
Staff cost to sales (%)
Tax rate (%)
2125
-428
2194
145
214
236
0
236
33
202
20
-7
0
175
59
116
9.1
75.5
6.2
9.2
33
1934
-66
1678
131
192
265
8
272
18
255
0
0
0
255
85
170
10.8
74.4
6.0
8.8
33
10
550
31
11
12
-11
-100
-14
89
-21
-31
-31
-32
Source: Company
 Standalone sales at Rs2.33bn saw a modest increase of 8% YoY and reported an
EBITDA of Rs236mn; margins of 9.1% (-170 bpsYoY).
 Increase in other expenditure is mainly due to 1) increase in provision for receivables (Rs 50 mn in Q2FY15 and Rs 160 mn YTD) as per the policy of the company 2) Additional R&D expenditure to increase focus on R&D.
 Operating expenditure is mainly due to higher personnel cost (increments + hiring). Moreover, India based manpower resources also support business development, engineering and execution in overseas location, whose revenue is partly in
consolidation & partly in standalone.
 PAT was down significantly lower due to EBITDA decline ( -11% yoy) and higher
depreciation.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
11
MORNING INSIGHT
November 11, 2014
Subsidiaries-Weak execution and higher employee costs dents
margins
 Aggregate revenue of subsidiaries stood at Rs2.72bn (+10% YoY).
 Employee costs in overseas subsidiaries has increased due to hiring for a O&M
contract in Turkey (Istanbul Megacity).
 At EBITDA level, margins contracted 150 bps to 3.9% vs 5.4% in Q2FY14, attributed clearly to lower gross margins and higher employee costs.
 Consequently, at the bottomline level, the company reported loss of Rs14.8mn
mainly due to lower EBITDA and higher interest charges.
Order Intake - pace of order intake slowed down in the quarter.
 Group order intake stood at Rs 7.9 bn in the first half with orders coming mainly
from the overseas geographies. Including the framework orders of Rs 8.28 bn,
the order intake stood at Rs 16.2 bn in H1FY15.
 Domestic order intake has been impacted by elections in various states and political uncertainty in TN (affecting awarding of Nemmely II Desalination). The
company also indicated that post the formation of government in Maharashtra,
there could be traction on award of sewage treatment plant in Mumbai. Two
projects have come up for bidding totaling Rs 7.0-7.5 bn.
 On the "Ganga Action Plan", the company has estimated overall investment to
the extent of Rs 500 bn which would include works like industrial water treatment and sewage treatment.
 Consolidated Order backlog stands at Rs52bn, largely flattish on a yoy basis. Revenue visibility is adequate at 26 months of trailing four quarter revenues.
Other highlights -Guidance and Balance sheet highlights
 Revenue guidance maintained at Rs26-27 bn, an increase of 17-21% over FY14.
 Order intake guidance of Rs 32-34 bn, a modest increase over FY14 levels. However, this target appears difficult given that in the first half only about Rs 7.9 bn
of order intake has been achieved.
 Gross cash stood at Rs 3.4 bn at the end of Q2FY15 which is a decline compared
to Rs 4.7 bn at the end of FY14.
 Gross debt stands at Rs 2.5 bn at the end of Q2FY15 vsRs 1.57 bn at end of
FY14. The increase in borrowings has been mainly led by higher working capital
and investment in BOOT project.
 Inventory has increased due to work on few projects wherein due to some milestones, billing could not be achieved. The large part of this inventory would
translate into revenue in the next quarter, the management opined.
We recommend SELL on
Va Tech Wabag with a
price target of Rs.1372
Kotak Securities - Private Client Research
Valuation
We maintain our target price of Rs1372, valuing the stock at 19x FY16 earnings in
line with the valuations for mid-size engineering companies.
Recommend "SELL" in view of 1) limited valuation upside from current levels 2) Potential execution risks in new geographies
Please see the disclaimer on the last page
For Private Circulation
12
MORNING INSIGHT
November 11, 2014
SHREE CEMENTS LTD
RESULT UPDATE
Teena Virmani
[email protected]
+91 22 6621 6302
PRICE: RS.9200
TARGET PRICE: RS.9668
Summary table (June end)
(Rs mn)
FY14
FY15E
FY16E
Sales
58,759 72,495 90,150
Growth (%)
5.5
23.4
24.4
EBITDA
13,784 18,000 24,800
EBITDA margin (%) 23.5
24.8
27.5
PBT
8,152 10,293 15,862
Net profit
7,872
8,440 13,006
EPS (Rs)
226.0
242.3
373.3
Growth (%)
(21.7)
7.2
54.1
CEPS (Rs)
383.8
483.9
652.8
BV (Rs/share)
1,352.1 1,582.4 1,943.7
Dividend / share (Rs) 12.0
12.0
12.0
ROE (%)
18.4
16.5
21.2
ROCE (%)
18.6
18.3
23.2
Net cash (debt)
12,038 14,698 25,255
NW Capital (Days) 113.8
78.0
78.0
P/E (x)
40.7
38.0
24.6
P/BV (x)
6.8
5.8
4.7
EV/Sales (x)
5.3
4.2
3.3
EV/EBITDA (x)
22.4
17.0
11.9
P/CEPS(x)
24.0
19.0
14.1
Source: Company, Kotak Securities - Private
Client Research
RECOMMENDATION: ACCUMULATE
FY16E P/CEPS: 14.1X
 Company's revenues during Q1FY15 were marginally ahead of our estimates led by improvement in cement volumes.
 Operating margin performance was led by improvement in cement realizations and margins stood at 21% for Q1FY15 as against 20% during
same period last year.
 Net profits for the quarter were impacted by higher depreciation charges
but were boosted by tax writeback for the quarter.
 At current market price of Rs 9200, stock is trading at 19x and 14.1x P/
CEPS and 17x and 11.9x EV/EBITDA for FY15 and FY16 respectively. We
revise our estimates to factor in demand and pricing improvement in key
markets of the company and arrive at a revised price target of Rs 9668.
We continue to remain positive on the company and maintain ACCUMULATE rating on the stock as we believe that company is likely to benefit
from volume expansion from its plants as well as cement pricing improvement going forward. We recommend investors to buy the stock on
declines.
Financial highlights
(Rs mn)
Net Sales
Expenditure
Inc/Dec in trade
RM
As a % of net sales
Staff cost
As a % of net sales
Power and fuel
As a % of net sales
Transportation & Handling
As a % of net sales
Other expenditure
As a % of net sales
Operating Profit
Operating Profit Margin (%)
Depreciation
EBIT
Interest
EBT (exc other income)
Other Income
Exceptional items
EBT
Tax
Tax Rate (%)
PAT
Extraordinary Items
Net Profit
NPM (%)
Equity Capital
EPS (Rs / share)
Cash EPS (Rs / share)
Q1FY15
Q1FY14
YoY (%)
16,053
12,677
-66
1,374
8.6
1,128
7.0
4,135
25.8
3,170
19.7
2,937
18.3
3,376
21.0
2,227
1,149
350
12,475
9,981
-48
1,045
8.4
1,013
8.1
3,005
24.1
2,493
20.0
2,474
19.8
2,494
20.0
1,139
1,355
312
29%
800
309
67
1,041
-47
-4.5
1,088
0
1,088
6.8
348.4
31.2
95
1,043
740
11
1,773
50
2.8
1,722
0
1,722
13.8
348.4
49.4
82
35%
-15%
-41%
-37%
-37%
Source: Company
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views,
estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited.
Kotak Securities - Private Client Research
Please see the disclaimer on the last page
For Private Circulation
13
MORNING INSIGHT
November 11, 2014
Revenue growth led by volume improvement
Company's revenues during Q1FY15 were marginally ahead of our estimates led by
improvement in cement volumes. Cement volumes registered a growth of 19% YoY
for the quarter led by demand improvement as well as commissioning of its 2MT
plant in Ras unit during FY14 and split grinding unit in Bihar. Power segment sales
registered animprovement of 19%YoY. For the quarter, company sold 3.877 MT of
cement as against 3.261 MT for corresponding quarter same year while power segment sales stood at 488 mn Units for Q1FY15 as against 417 mn Units for Q1FY14.
For Q1FY15, cement realizations stood at Rs 3655 per tonne and improved by nearly
9.6% YoY. Cement prices stood fairly strong during the quarter till mid-Aug,14 due
to late onset of monsoons and witnessed a decline only after mid-Aug. Northern
region witnessed sharper falls during August as compared to other regions and correspondingly company's average realization were down by 8.8% sequentially.
Power revenues improved to Rs 1910 mn for Q1FY15 as against Rs 1604 mn during
same period last year mainly due to lower demand.
Capex - Company's 2MT plant near Raipur, Chattisgarh is expected to be complete
by March, 2015. On commissioning of Chattisgarh unit, clinker would be supplied to
the Bihar grinding unit. Cement Grinding unit of2.0 MTPA in Bulandshahar of Uttar
Pradesh is also being set upwhich is scheduled to be completed by December 2015.
Company had also announced during last quarter that board has approved the acquisition of 1.5MT cement grinding unit of Jaiprakash Associates situated at Panipat
for a consideration of Rs 3.6 bn. Necessary approvals for the same are awaited.
We revise our estimates to factor in higher volumes and expect revenues to grow at
a CAGR of 24% between FY14-16. We now expect volumes of 16MT (14 MT earlier) and 19MT (16.5MT earlier) respectively for FY15 and FY16.
Operating margins lower than our estimates
Operating margin performance was impacted by higher cost but improvement in
cement realizations offset the impact to some extent. Margins stood at 21% for
Q1FY15 as against 20% during same period last year.
Power and fuel cost and freight has continued to remain on the higher side which
has resulted in moving up overall costs on yearly basis. Sequentially, total costs had
remained largely flat and fall in the margins was mainly on account of fall in cement
realizations on QoQ basis. Power EBIDTA for the quarter stood at Rs.0.43 per unit
and Cement EBIDTA stood at Rs.834 per tonne. Company's margins are likely to improve going forward from the levels seen during Q1FY15 led by improvement in
cement pricing.
We tweak our estimates and expect operating margins of 24.8% and 27.5% for
FY15 and FY16 respectively.
Per tonne analysis
Q1FY15
Q1FY14
Dispatches (mn tonne)
3.877
3.261
Blended Cem Realisation/tonne
3,655
3,334
YoY (%)
9.6
Per tonne analysis
Inc/Dec in trade
-17
-15
Raw material
354
321
Staff cost
291
311
1,066
921
818
765
Power and fuel
Transportation & Handling
Other expenditure
Total costs per tonne
757
759
3,270
3,061
Source: Company and Kotak Securities - Private Client Research
Kotak Securities - Private Client Research
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14
MORNING INSIGHT
November 11, 2014
Net profits impacted by higher depreciation
Net profits for the quarter were impacted by higher depreciation charges but were
boosted by lower than expected tax outgo for the quarter. Depreciation charges
were higher for the quarter on account of commissioning of new units. We revise
our estimates and expect net profits of Rs 8.44 bn (Rs.8.9 bn earlier) and Rs 13 bn
(Rs.12.3bn earlier) for FY15 and FY16 respectively.
Valuation and recommendation
 At current market price of Rs 9200, stock is trading at 19x and 14.1x P/CEPS and
17x and 11.9x EV/EBITDA for FY15 and FY16 respectively.
We recommend
ACCUMULATE on Shree
Cements with a price target
of Rs.9668
Kotak Securities - Private Client Research
 We revise our estimates to factor in demand and pricing improvement in key
markets of the company and arrive at a revised price target of Rs 9668 (Rs.8260
earlier).
 We continue to maintain ACCUMULATE rating on the stock as we believe that
company is likely to benefit from volume expansion from its plants as well as
cement pricing improvement going forward. Company is likely to outperform
other peers in terms of volume growth going forward. We thus recommend investors to buy the stock on declines.
Please see the disclaimer on the last page
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15
MORNING INSIGHT
Bulk deals
November 11, 2014
Trade details of bulk deals
Date
Scrip name
Name of client
Buy/
Sell
Quantity
of shares
Avg.
price
(Rs)
10-Nov
Adhunikind
10-Nov
Adhunikind
Vrindavan Advisory Services Llp
B
1,000,000
149.8
Padmalaya Advisory Services Llp
S
1,000,000
10-Nov
149.8
Angl
Ekparnik Vintrade Pvt Ltd
S
23,179
204.6
10-Nov
Angl
Gangeshwari Traders Pvt Ltd
S
33,767
203.8
10-Nov
Angl
Think Bull Pvt Ltd
B
24,000
203.8
10-Nov
Arvindrem
Marina Dealcom Pvt Ltd
S
400,000
45.8
10-Nov
Bostonbio
Geetaben Radheshyam Mundra
S
38,481
15.3
10-Nov
Camphor-$
Kedar Ramesh Vaze
S
124,123
373.0
10-Nov
Camphor-$
Keva Constructions Pvt Ltd
B
124,123
373.0
10-Nov
Daikaffi
Sharad Kanayalal Shah
S
51,148
31.4
10-Nov
Daikaffi
Gajanan Enterprises
B
111,204
31.3
10-Nov
Deltaltd
Sanjay Kumar Patwari Huf
S
75,000
72.5
10-Nov
Deltaltd
Kritika Talwar
S
64,900
72.8
10-Nov
Deltaltd
Sandeep Kumar
B
106,516
72.7
10-Nov
Ecoplast-$
Jayesh M Parekh
B
20,673
46.5
10-Nov
Fcl
Shaktiman Steel Casting Pvt Ltd.
B
58,317
142.0
10-Nov
Gsauto
Decent Portfolio Services Pvt Ltd
S
190,648
25.3
10-Nov
Indovation
Sabina Anilkumar Sanghvi
B
15,000
90.2
10-Nov
Indovation
Bedi Jasdeep
S
12,558
90.3
10-Nov
Indovation
Mahesh Hirji Jogadia
S
21,013
89.1
10-Nov
Indovation
Kirit Ramanlal Shah
B
20,000
89.1
10-Nov
Jolypls
Prem Bhutani
S
36,000
118.3
10-Nov
Jolypls
Anil Bhutani
S
37,200
118.3
10-Nov
Jolypls
Arvinder Singh Pasricha
B
60,000
118.3
10-Nov
Kserasera-$
Green Venture Sec Mgmt Pvt Ltd
S
1,128,907
13.7
10-Nov
Ndmetal
Gaurav Ajay Garg
B
32,500
24.0
10-Nov
Ndmetal
Kamal Kumar Jalan
S
32,500
24.0
10-Nov
Omeag
Shobhana Narendrakumar Shah
S
41,229
45.6
10-Nov
Onwardtec
Sarvamangal Mercantile Co Ltd
S
82,830
49.7
10-Nov
Onwardtec
Onward Network Tech Pvt Ltd
B
101,200
49.7
10-Nov
Parnaxlab
Vikas Jwalaprashad Gupta
S
104,000
36.0
10-Nov
Redington
Reliance Capital Trustee Co. LtdA/C Reli. Long Term Eq. Fund
B
4,900,000
97.5
10-Nov
Redington
Reliance Capital Trustee Co. LtdA/C Reliance Small Cap Fund
B
2,800,000
97.5
10-Nov
Redington
Reliance Cap. Trustee Co Ltd.
A/C. Reli. Regu Saving Fd-Eq Option B
2,600,000
97.5
10-Nov
Redington
Reliance Capital Trustee Co
A/C Reliance Growth Fund
B
6,000,000
97.5
10-Nov
Redington
Harrow Investment Holding Limited
S
20,000,000
97.6
10-Nov
Sical
Ranford Investments Limited
S
2,088,796
122.4
10-Nov
Steelxind
Mono Herbicides Limited
S
385,998
56.0
10-Nov
Steelxind
Vinod Kumar Darak
B
400,000
56.0
10-Nov
Sumedha
Keshav Narayanaprabhu
S
50,000
18.2
10-Nov
Supremeind
Cartica Capital Ltd
B
2,427,425
590.0
10-Nov
Supremeind
Jwalamukhi Investment Holdings
S
2,427,425
590.0
10-Nov
Upsurge
Yaduka Financial Services Limited
B
200,000
51.0
10-Nov
Upsurge
Navrati Anurag Gupta
S
200,000
51.0
10-Nov
Upsurge
Anurag Gupta
S
327,710
51.0
10-Nov
Upsurge
Soma Gavandhe
B
300,000
51.0
10-Nov
Yogisung
Euro Plus Capital Limited
B
161,598
12.8
10-Nov
Yogisung
Parkfield Developers & Builders Pvt LtdS
162,420
12.5
Source: BSE
Kotak Securities - Private Client Research
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16
MORNING INSIGHT
Gainers & Losers
November 11, 2014
Nifty Gainers & Losers
Price (Rs)
chg (%)
Index points
Volume (mn)
ITC
372
4.5
NA
15.7
Bank of Baroda
985
2.4
NA
1.3
Power Grid
148
2.2
NA
5.8
ONGC
394
(3.8)
NA
6.4
Jindal Steel
156
(3.6)
NA
4.8
Hindalco Ind
152
(2.6)
NA
9.0
Gainers
Losers
Source: Bloomberg
Forthcoming events
Company/Market
Date
Event
11-Nov
3Infotech, Abbot India, Alps Ind, Ballarpur, Eveready, Hind Motors, HMT, ICRA,
IFCI, IL&FS Trans, Lumax Ind, Power Grid, Radico, Rama Petro, Shalimar Paints,
Shreyas, Siticable earnings expected
12-Nov
Apollo Hosp, BPCL, Creative Eye, Datamatics, DCM Shriram, DCW, Dishman,
Eicher Mot, FDC, HEG, ICRA, IGL, India Cement, J&K Bank, JP Associates, MT
Educare, Natco Pharma, Nalco, Oil, Orbit Corp, RCF, Reliance Infra, Renuka, Rolta,
Rel power, Sobha Dev, STC India, Subex, Tata Steel, Time Techno, TNPL earnings
expected
13-Nov
Arvind Remedy, Bajaj Electricals, Balkrishna Ind, Bombay Dyeing, Cipla, DLF,
Elantas, Finolex Ind, Fortis, GIC Housing Finance, Gujarat Gas, Hathway, Hindalco,
HPCL, Hindcopper, IOC, ITI, IVRCL Infra, Magnum, Merck, Modi Rubber, NCC,
SAIL, SCI, Sun Pharma, Tata Power, Voltas earnings expected
14-Nov
ABG, Aegis Logistics, BEML, BHEL, Britannia Industries, CESC, Essar ports,
GE Shipping, GMR Infra, Gujarat Apollo, HDIL, JBF Ind, JK Tyre, Madhucon,
Mangalam Cement, Megasoft, Nalco, ONGC, Patel Engg, PTC, Punj Lloyd,
Rajesh Exports, Rcom, Rel Capital, SBI, Sunil Hitech, Tata Motors, TVS Motors
UB Holdings, earnings expected
Source: Bloomberg
Kotak Securities - Private Client Research
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MORNING INSIGHT
November 11, 2014
Fundamental Research Team
Dipen Shah
IT
[email protected]
+91 22 6621 6301
Saday Sinha
Banking, NBFC, Economy
[email protected]
+91 22 6621 6312
Ritwik Rai
FMCG, Media
[email protected]
+91 22 6621 6310
Jayesh Kumar
Economy
[email protected]
+91 22 6652 9172
Sanjeev Zarbade
Capital Goods, Engineering
[email protected]
+91 22 6621 6305
Arun Agarwal
Auto & Auto Ancillary
[email protected]
+91 22 6621 6143
Sumit Pokharna
Oil and Gas
[email protected]
+91 22 6621 6313
K. Kathirvelu
Production
[email protected]
+91 22 6621 6311
Teena Virmani
Construction, Cement
[email protected]
+91 22 6621 6302
Ruchir Khare
Capital Goods, Engineering
[email protected]
+91 22 6621 6448
Amit Agarwal
Logistics, Transportation
[email protected]
+91 22 6621 6222
Technical Research Team
Shrikant Chouhan
[email protected]
+91 22 6621 6360
Amol Athawale
[email protected]
+91 20 6620 3350
Derivatives Research Team
Sahaj Agrawal
[email protected]
+91 79 6607 2231
Rahul Sharma
[email protected]
+91 22 6621 6198
Malay Gandhi
[email protected]
+91 22 6621 6350
Prashanth Lalu
[email protected]
+91 22 6621 6110
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