India's automobile sales continued to remain on sluggish trajectory as most of the companies reported a decline in sales number due to slowdown in economic activity and increasing fuel prices. You can see the contribution of various segment for the 9MFY14 automobiles sales stands here.

1. IEA-Equity
Strategy
India Equity Analytics
29th Jan, 2014
Daily Fundamental Report on Indian Equities
SECTOR ANALYSIS :2 W and 3W 9MFY14 SALES
Edition : 194
29th Jan 2014
India's auto mobile sales continued to remain on sluggish trajectory as most of the companies reported a decline in sales number due to
slowdown in economic activity and increasing fuel prices. However, two-wheeler segments continued to grow at a healthy rate, led by strong
rural demand ........................................... ( Page : 2-3)
SHREE CEMENT :
"BUY"
28th Jan 2014
Shree Cement Ltd has reported a 47% fall in its December quarter net profit on lower sales as well as 5% degrowth in realization. PAT impacted
due to lower other income (down by 70% YOY), Depriciation burden on EBIDTA (Depriciation increased 41% YOY). Volumes grew by18 %
to3.8mn ton from 3.3mn ton QOQ. After a good monsoon and election ahead management expecting a good performance from shree cement
for the H2FY14, thus at CMP Rs.4460/- we are bull at a target Price Rs.4791/- . ............................................ ( Page :4-6)
ALLAHABAD BANK :
"BUY"
28th Jan 2014
Allahabad reported net profit growth of 4.7% YoY to Rs.325 cr largely due muted NII growth and deteriorated asset quality. Bank’s operating
expenses were stable in absoluter term but as cost income ratio increased drastically on account of lower revenue growth. Asset quality has
deteriorated sequentially. Due to lower corporate demand, loan growth remain muted and bank’s lower its total business (Loan + Deposits)
guidance to Rs.340,000 cr from earlier of Rs.360,000 cr. We value bank at Rs.92/share which is 0.4 times of FY14E’s book value. We are not
impression with bank’s fundament but current price provide 15% upside from our target price. ........................................................... ( Page : 711)
Persistent System: "Persistently innovating.."
"BUY"
28th Jan 2014
Delivered inline set of numbers but better on all aspects than its peers did: For 3QFY14, Persistent System’s sales was almost flat (QoQ) in INR
term, while grew 2.2% (QoQ) in USD term impacted by seasonality and furloughs impacts. Considering the company’s ability to achieve scale and
growth, we upgrade our target price from Rs 960 to Rs 1070 with “BUY” view on the stock. ................................................................ ( Page : 12
- 14)
UCO BANK :
"BUY"
27th Jan 2014
UCO bank reported net profit growth of 207% YoY largely due to robust growth in NII along with higher than industry average loan growth.
Bank’s asset quality improved sequentially despite of challenging macro environment. However bank’s CASA growth has declined marginally in
sequential basis but still at comfortable level. UCO Bank’s operating as well as financials metrics has been improving continuously. We value
bank at Rs.84/share which is 0.5 times of one year forward book and 3.5 times FY14E’s earning.
............................................................ (
Page :15-19)
KPIT Tech: "On billion dollar journey"
"NEUTRAL"
27th Jan 2014
KPIT Technologies Ltd revealed its 3QFY14 earnings with below than expectation, sales declined by 3.5%(QoQ) in INR term and 2.3%(QoQ) in
USD term due to the delay in project kick-off and additional loss of billing days in Q3FY14. Considering delay executions of some projects for
next 2 quarters and ongoing change in organization structure, we have a “Neutral” view on the stock. .............................................................. (
Page :20-22)
Larsen & Toubro Ltd: "On Track of Revival………"
"NEUTRAL"
24th Jan 2014
As per the management, the quarterly margins differ for every quarter as the project completion cycle is different and hence it is difficult to
capture the EBITDA movement every quarter. Though we agree with the management’s comment, we still believe that there would be some
amount of pressure on the margins on a yearly basis due to risks related to competition, inflation, adverse mix and a slowdown. As regards the
results we are of the opinion that, despite the gloomy scenario the results have been good. Consistent order inflow is a major positive factor.
We expect the sector to witness revival in coming quarters, whereas we see a near term earnings growth muted and look for a better entry
point. Currently we have a neutral view on a stock ......................... ( Page :23)
Narnolia Securities Ltd,

2. SECTOR ANALYSIS :2 W and 3W 9MFY14 SALES
Industry Overview:
India's automobile sales continued to remain on sluggish trajectory as most of the companies reported a decline in sales number due to
slowdown in economic activity and increasing fuel prices. However, two-wheeler segments continued to grow at a healthy rate, led by
strong rural demand.The contribution of various segment for the 9MFY14 automobiles sales stands as under :
The graph clearly indicates that of total automobiles sold for 9MFY14
the contribution of two wheelers stand at maximum. This trend shows
that slow down in consumer discretionary expenses. The differential
pricing makes people to spend more towards two wheelers more over
people look for option which gives them more mileage for every unit of
fuel. As stated earlier there is growth in rural economy and trend is
clearly visible from the sales made by two wheelers in total
automobiles sold for the period.
(Source: Company/Eastwind)
Two Wheelers
For December 2013, overall auto industry volumes were led by the two-wheeler industry (4% YoY growth). Two Wheelers segment
contribution has increased to 80.2% of the total auto volume, during first nine months of FY14 from 77% in FY 13.The cumulative volume
for 9MFY14 for 2 Wheelers stands at 12489192 units up 5.3% YoY.
Better monsoon benefitted rural demand, while urban sales remained lackluster, which was higher than offsetting the rural growth. With
the festive season ending early in November 2013 this year, the positive momentum seen October 2013 has cooled off with retail sales
largely lagging wholesales. The two-wheeler segment has again managed to keep its head over water even as all other segments have
shown an annual decline with last years' festive season ending later.
Sub Segment Motorcycle
The analysis of previous year’s sales indicates that the three major players viz Heromoto Corp, Bajaj-Auto,TVS Motors have shown
declining performance along with market share loss to both HMSI and Yamaha. The strong rural demand helps to boost the sales of
commuter sub segment (100-125 CC) of motorcycles. The following table shows yearly performance of some of major motorcycle
players
Companies
Hero MotoCorp
Bajaj Auto
TVS Motors
HMSI
Yamaha
FY12-13
46%
31%
6%
11%
4%
FY11-12
48%
32%
7%
7%
4%
FY10-11
48%
32%
8%
7%
3%
Companies
Hero MotoCorp
Bajaj Auto
TVS Motors
HMSI
Yamaha
FY12-13
5499245
3757094
749806
1291688
437998
FY11-12
5779621
3834405
843338
864183
484891
FY10-11
5040971
3387043
836831
748488
366770
Year Wise Motorcycle Market Share
Year Wise Motorcycle Sales
Sub Segment Scooter
The scooter sub segment grew well led by new launches from Honda (New Activa), Hero (Maestro), TVS (Jupiter) and Suzuki (Swish),
the scooter segment grew at a faster clip of 19% YoY for Apr-Dec'13 period against a flattish (3%) growth in the motorcycle segment.
The faster volume growth of the scooter segment led to a 220bps improvement to 21.2% in its share of the two-wheeler market during
this period. The main drivers for this growth are (a) growing acceptability of gearless scooters, particularly by women, (b) rising
urbanization and increasing proportion of working women and (d) new launches.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
2

3. SECTOR ANALYSIS :2 W and 3W 9MFY14 SALES
Continued…
Scooter sales growth has taken-off since FY10 and has consistently
outgrown that for the motorcycle segment. An increasing population of
working women, mainly in urban markets, has led to rapid sales-volume
growth in this segment. On a longer term perspective, scooter industry
volumes are expected to grow at ~20% CAGR over FY14-20, twice the
growth rate for motorcycles. Overall two wheeler industry volumes are likely
to grow at 12% CAGR during this period. The shares of scooters are
expected to increase to 37% by 2020, with annual sales of 10.7m units
(equal to the current market size of the domestic motorcycle industry).
Three Wheelers
(Source: Company/Eastwind)
In three wheelers universe for the December 2013 Industry domestic volumes were down 21% to 35249 units led by 27% drop in the
passenger segment. There was a 7% rise in the goods carrier segment in Dec 13. Exports registered 11% rise to 33,044 units. This segment
for 9MFY14 registered domestic sales was 364669 units down by 9 % YoY for the same period last fiscal. The exports have done fairly well
for the period with 11 % growth YoY to 33044 units. The three wheeler segment remains flat on YoY to 626749 units for 9MFY14. The three
Wheelers demand largely driven by exports, while domestic sales remained weak.
Bajaj-Auto with 55% market share is the market leader in 3 Wheeler sales in the country. Q1FY14 Domestic 3W sales accounted for 38% of
the company's total 3W sales. Of the total 3W sales, 15-20% came from new permits, while replacement accounts for the rest. On the
domestic 3W front, the outlook remains positive with 20000 permits opening up in Hyderabad (5k already utilized in June-July 2013) and
3000 permits opening up in Maharashtra in Sept-Oct 2013. Also, its plan to launch a renewed range of 3W (RE Compact) promises to drive
replacement demand.
For TVS, 3W sales stood up by 36.8% YoY to 6,137 units with most of it coming from the overseas markets; 3W share to total sales forms
3.8% in December and 3.9% YTD, 150bp higher YoY. The Company is expected to benefit from this as 3W forms a high margin product.On
the other hand, Mahindra & Mahindra's 3w sales were up 7.6% to 5.6k units. Sales were down 5% on a MoM basis.
The YTD performance of Three wheelers for FY14 is tabulated as under:
Month
April
May
June
July
August
September
October
November
December
YTD
Future Outlook
9MFY14 Sales (Volume)
69562
61089
71889
66335
67141
80549
76874
65017
68293
626749
9MFY13 Sales (Volume)
61772
55184
54274
65352
72122
78097
86072
80325
74596
627794
Change %
12.6%
10.7%
32.5%
1.5%
-6.9%
3.1%
-10.7%
-19.1%
-8.4%
-0.2%
(Source: Company/Eastwind)
Given its low ticket size and high rural share, this segment of the auto industry is sure to pick up momentum in the coming months. With
urbanization, rise in women riders, higher fuel efficiency and improving per capita income, the penetration of scooters will continue to
increase and at a pace faster than motorcycles. 2/3 wheeler companies which are the direct beneficiaries of the rural consumption are
expected to remain strong given the buoyant prices for food items, strong monsoon and additional benefits of government doll outs and
largesse.
Conclusion
While the macro-economic environment remains challenging, OEMs have pinned hopes on the bevy of launches that might trigger a
response from customers. Also, the recent cut in the price of petrol might just prove to be a good thing for companies. Additionally, better
crop realization due to a good monsoon and hike in MSP is expected to boost the rural income leading to a sales recovery. Over the long
term, easing macro headwinds in terms of lower interest rates and higher economic growth would be the key driver for volume growth and
profitability.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
3

4. SHREE CEMENT.
Result Update
Buy
CMP
Target Price
Previous Target Price
Upside
Change from Previous
4325
4791
4791
11%
0%
Market Data
BSE Code
NSE Symbol
500387
SHREECEM
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume (Nos.)
Nifty
5210/3413
15502
3875
6136
Stock Performance-%
1M
0.1
0.0
Absolute
Rel. to Nifty
1yr
-4.8
-8.0
YTD
-5.1
-9.2
Share Holding Pattern-%
2QFY14
64.8
8.2
5.9
21.2
Promoters
FII
DII
Others
1QFY14 4QFY13
64.8
64.8
8.2
8.1
5.7
5.9
21.3
21.2
"BUY"
28th Jan' 14
Volumes grew by18 % but prices came down by 5%. So the EBITDA margin has hit
badly:Shree Cement Ltd has reported a 47% fall in its December quarter net profit on
lower sales as well as 5% degrowth in realization. PAT impacted due to lower other
income (down by 70% YOY), Depriciation burden on EBIDTA (Depriciation increased 41%
YOY). Volumes grew by18 % to3.8mn ton from 3.3mn ton QOQ. Net profit decreased by
47% yoy from Rs.217.44 crore (Rs.62.42 per share) in 2Q13 to Rs.115.49 crore (Rs.33.15
per share) in 2Q14.Total net income from operations stood at Rs.1318.13 crore in 2Q14,
a 6% fall yoy from Rs.1401.23 crore in 2Q13.Other income decreased from Rs.30.2 crore
in 2Q13 to Rs.9.9 crore in 2Q14.In the mean time company declares a Rs.10 as interim
dividend/share.
Power Segment: Realization Down By 15% : For power generation the net realization has
come down from Rs 383 to Rs 334 compared to last year same quarter and in the first
quarter it was still better at Rs 397.So the power realization is down by 13 percent and
hence sales also have come down by 35 percent to Rs.290 Cr. At the same time 14%
increase in its profitability from power segment to Rs112.56 crore while its cement
segment reported 79% fall in its profitability to Rs37.65 crore.
MAT Credit support the buttom line :
During the Quarter Company got MAT (minimum alternative tax) credit entitlement of
Rs9.25 crore and deferred tax of Rs1.79 crore. This reduced total tax payable amount to
Rs15.27 crore from Rs26.31 crore.
Company’s EBIDTA/ton decreased 6% to Rs.712 (vs Rs.756 in previous quarter), at the
same time the Expenditure also decreased 9% to Rs.2757 (vs Rs.3025 in Q1).Hence we
believe that company will outperform among its peers ,once Realization get improve.The
exceptional weakness is there in the cement prices. Volumes have grown by about 18
percent but the prices have come down by 5 percent and naturally the cost increase is
there. So the EBITDA margin has been badly hit .
1 yr Forward P/B
6000
PRICE
2x
3x
4x
5000
1.5x
2.5x
3.5x
4.5x
4000
3000
2000
1000
Apr-13
Nov-13
Sep-12
Jul-11
Feb-12
Dec-10
Oct-09
May-10
Mar-09
Jan-08
Aug-08
Jun-07
Apr-06
Nov-06
Sep-05
Jul-04
Feb-05
Dec-03
Oct-02
May-03
Mar-02
0
Source - Comapany/EastWind Research
On the expansion front :
The 2m-ton Line-IX clinker unit at Ras, Rajasthan, was commissioned in Jun’13.Line X of
similar capacity along with 25MW of WHRS (at the same location) is expected by
Jun’14.Two grinding units of 2m tons each, at Ras and in Bihar,are being constructed and
expected by Jun’14.We expect Shree to be a 21.5m-tpa company by Jun’15.It plans to
foray into high demanding eastern.Total capex for these expansion is Rs.3,000 crore
which is spread over next 2 years.
Financials :
Q2FY14
Y-o-Y %
Q-o-Q %
Q2FY13
Q1FY14
Revenue
1318
-7.7
5.6
1428
1248
EBIDTA
271
-24.7
8.8
360
249
Net Profit
115
-46.9
-32.9
217
172
EPS
33
-46.9
-32.9
62
49
EBIDTA%
21
-18.4
3.1
25
20
NPM%
9
-42.5
-36.5
15
14
(In Crs)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
4

5. SHREE CEMENT.
Management Corner : From mid-January there is a big change in demand scenario
because of the Indian calendar, the prices have improved, the demand has also
improved and they think that January to June some impact of elections will be there pre-election demand and other things. So margins should be better than 21 percent.
1500
60
Revenue
1450
50
Growth
1400
40
1350
Outlook :
From the view company Operations in the high utilisation North and Central markets,
capacity expansions underway, low gearing and strong RoE are fundamental positives.
We believe although, near term challenges in terms of a slowdown in demand for
cement would remain, strong balance sheet and better efficiency in terms of cost
remains a key positive for this company to overcome challenges.Company Management
is bull for the rest two quarters of FY2014 as according to them demand has already
buttom out.We are positive on the stock as it always beats its peers group with lower
operational cost.Shree cement follows a multi brand strategy and sells cement under
the highly recognized brands of Shree Ultra, Bangur and Rockstrong which together
enjoy the largest market share in high value markets of Rajasthan, Delhi and Haryana.
After a good monsoon and election ahead we are expecting a good performance from
shree cement for the H2FY14, thus at CMP Rs.4460/- we are bull at a target Price
Rs.4791/-
30
1300
20
1250
10
1200
0
1150
-10
1100
-20
Source - Comapany/EastWind Research
EBIDTA
450
400
INTEREST SERVICE COVERAGE
RATIO
12
10
350
Company Description : Shree Cement (SCL) is a cement producer operating in the two
segments cement and power. As of June 30, 2012, the company had a cement capacity
of 13.5 million tonnes per annum (MTPA) and power capacity of 560 MW. The
company's waste heat recovery power plants have a total capacity of 46 MW. The
company’s brands include Shree Ultra,Bangur Cement and Rockstrong Cement. It has
manufacturing facilities at Beawar and Ras in Ajmer and Pali district and grinding units
at Khushkhera, Suratgarh and Jaipur, respectively, in Rajasthan and Roorkee in
Uttarakhand.
P/L PERFORMANCE
FY11
FY12
FY13
FY14E
Net Revenue from Operation
3454
5898
5590
5798
Other Income
203
163
188
217
Total Income
3656
6061
5779
6015
Power and fuel
905
1500
1513
1409
Freight and forwarding
602
1006
915
1090
Expenditure
2569
4252
4029
4275
EBITDA
885
1646
1561
1523
Depriciation
676
873
436
470
Interest Cost
98
235
193
145
Net tax expense / (benefit)
-99
69
115
118
PAT
365
619
1004
1007
ROE%
20.8
23.1
26.1
21.1
Narnolia Securities Ltd,
300
8
250
6
200
150
4
100
2
50
0
0
Source - Comapany/EastWind Research
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
NPM %
OPM %
EBITDA %
5

6. SHREE CEMENT.
B/S PERFORMANCE
Share capital
Reserve & Surplus
Total equity
Long-term borrowings
Short-term borrowings
Long-term provisions
Trade payables
Short-term provisions
Total liabilities
Intangibles
Tangible assets
Capital work-in-progress
Long-term loans and advances
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
Total Assets
RATIOS
P/B
EPS
Debtor to Turnover%
Creditors to Turnover%
Inventories to Turnover%
FY10
FY11
FY12
FY13
35
1798
1833
1789
318
28
171
472
4906
0
752
967
299
358
82
416
415
4906
FY10
4.4
212.3
2.3
4.7
1.0
35
1951
1986
1472
217
16
185
267
4940
0
1167
729
308
404
108
499
429
4940
FY11
3.6
118.6
3.1
5.3
1.2
35
2699
2734
818
143
17
584
178
5973
0
1521
97
205
503
181
459
363
5973
FY12
3.8
177.5
3.1
9.9
0.9
35
3809
3844
443
534
18
81
87
6160
0
1782
133
378
530
315
369
326
6160
FY13
4.2
288.2
5.6
1.4
0.9
Trading At :
Source - Comapany/EastWind Research
Narnolia Securities Ltd,
6

7. ALLAHABAD BANK
Company UPDATE
CMP
Target Price
Previous Target Price
Upside
Change from Previous
BUY
80
92
121
16
31.5
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Average Daily Volume
Nifty
532480
ALBK
176/65
3975
8.26 LAKH
6136
Stock Performance
1M
Absolute
-14.9
Rel.to Nifty
-12.5
1yr
-55.2
-56.6
YTD
-55.2
-56.6
Share Holding Pattern-%
Current 4QFY13 3QFY1
3
Promoters
58.9
55.2
55.2
FII
8.7
8.0
8.1
DII
18.5
21.1
22.0
Others
13.9
15.6
14.7
Allahabad Bank Vs Nifty
"BUY"
28th Jan, 2014
Allahabad reported net profit growth of 4.7% YoY to Rs.325 cr largely due
muted NII growth and deteriorated asset quality. Bank’s operating expenses
were stable in absoluter term but as cost income ratio increased drastically on
account of lower revenue growth. Asset quality has deteriorated sequentially.
Due to lower corporate demand, loan growth remain muted and bank’s lower
its total business (Loan + Deposits) guidance to Rs.340,000 cr from earlier of
Rs.360,000 cr. We value bank at Rs.92/share which is 0.4 times of FY14E’s
book value. We are not impression with bank’s fundament but current price
provide 15% upside from our target price.
NII growth muted on account of lower loan growth and loan yield
Allahabad bank’s NII grew by 0.4% YoY to Rs.1336 cr versus our expectation of
Rs.1422 cr largely due to lower interest income led by lower than expected loan
growth and loan yield as well. Bank’s deposits growth was also lower than expected
but cost of deposits was almost same in previous quarter. Therefore interest income
was lower than interest expenses which cause muted NII growth. During quarter,
bank’s other income was Rs.542 cr as against Rs.341 cr in last quarter which helped
to report revenue growth of 11% YoY.
CI ratio up drastically in sequential basis but in absolute term it remain
comfortable
Cost to income ratio was higher at 46.3% versus 42.5% in previous quarter largely
due to lower revenue growth. In absolute term operating expenses increased by
2.2% QoQ and 7.3% YoY on which employee cost and other operating expenses
increased by 1% and 22% YoY respectively. With lower operating cost and high
support from other income, operating profit grew by 17.2% YoY to Rs.1008 cr.
Worsen asset quality led by macro environment
During this quarter bank’s asset quality worsen with gross NPA further deteriorated
by 14% QoQ in absolute term while as a percentage to gross advance, this ratio
stood at 5.5% versus 5% in previous quarter. Provisions had increased by 19% on
sequential basis which led net NPA deterioration to 12% QoQ. In percentage term,
net NPA to net advance stood at 4.1% versus 3.8% in previous quarter. Provision
coverage ratio (w/o technical write-off) marginally improved to 24.8% from 23.7% in
2QFY14. During this quarter, bank’s sold Rs.389 cr of non- performing assets to
asset reconstruction companies. Total outstanding restructure at the end of stood at
Rs.12624 cr which is 9.2% of net advance.
Rs, Cr
Financials
2011
2012
2013
2014E
2015E
NII
4022
5163
4866
5426
6715
Total Income
5393
6461
6343
7745
9034
PPP
3055
3770
3385
4361
5150
Net Profit
1423
1867
1185
1290
1522
EPS
29.9
39.2
23.7
23.7
27.9
(Source: Company/Eastwind)
7
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

8. ALLAHABAD BANK
Lower business growth target due to absence of corporate loan
Allahabad Bank’s total deposits grew by 10% YoY and advance grew by 13% YoY to
Rs.1875 bn and Rs.1373 bn respectively. Muted growth in loan was on account of lower
borrowing from corporate segment whereas bank reported retail, MSME and priority
sector registered handsome growth. CASA for the quarter stood at 30.8% versus 31.2%
in previous quarter. Bank management lower its FY14’s total business guidance to
340,000 cr from Rs.360,000 cr earlier. Accordingly we lower our loan and deposits growth
to 12% and 9% from earlier of 15% each. Credit deposits ratio was stable at 73.2%.
Lower profit growth because of muted NII growth and deteriorating asset quality
Net profit of Allahabad bank’s grew by 4.7% YoY to Rs.325 cr largely due to muted NII
growth and high provision led by deteriorating asset quality. Due to lower demand from
corporate borrowing, banks reduce its business growth target by 5.5% for FY14. Asset
quality pressure would likely to persist in FY14 which would result of lower valuation
multiple. We lower our book value estimate to Rs. 229.3 from earlier of Rs.254 primarily
due to equity dilution and lower profit expectation in FY14E.
Valuation & View
Allahabad reported net profit growth of 4.7% YoY to Rs.325 cr largely due muted NII
growth and deteriorated asset quality. Bank’s operating expenses were stable in
absoluter term but as cost income ratio increased drastically on account of lower revenue
growth. Asset quality has deteriorated sequentially. Due to lower corporate demand, loan
growth remain muted and bank’s lower its total business (Loan + Deposits) guidance to
Rs.340,000 cr from earlier of Rs.360,000 cr. We value bank at Rs.92/share which is 0.4
times of FY14E’s book value. We are not impression with bank’s fundament but current
price provide 15% upside from our target price.
Source:Company/Eastwind
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
8

9. ALLAHABAD BANK
Fundamant Through Graph
NII growth muted on account of lower loan
growth and loan yield
With the support from other income and
lower operating expenses, PP grew by 17.2%
YoY
Lower profit growth because of muted NII
growth and deteriorating asset quality
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
9

10. ALLAHABAD BANK
Quarterly Performance (Rs Cr)
Interest/discount on advances / bills
Income on investments
Interest on balances with Reserve Bank of India
Others
Total Interest Income
Others Income
Total Income
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
PBT
Tax
Net Profit
3QFY14
3533
1161
27
42
4762
542
5305
3427
1336
542
1878
569
301
870
1008
555
453
128
325
2QFY14
3422
1131
28
25
4607
696
5303
3298
1309
696
2005
550
301
852
1154
742
411
136
276
3QFY13
3234
1161
29
21
4445
341
4785
3114
1330
341
1671
563
247
811
860
432
428
117
311
% YoY
Balance Sheet ( Rs Cr)
Net Worth
Deposits
Loans
12410
187478
137300
12085
180396
131896
11572
170649
121555
7.2
2.7
9.9
3.9
13.0
4.1
7,512
5651
5.5
4.1
24.8
6,613
5048
5.0
3.8
23.7
3,532
2478
2.9
2.0
29.8
112.7
13.6
128.1
11.9
73.2
46.3
73.1
42.5
0.0
48.5
Asset Quality
GNPA( Rs Cr)
NPA( Rs Cr)
%GNPA
%NPA
PCR(w/o technical write-off)(%)
Operating Metrics
Credit-Deposits Ratio(%)
Cost-Income Ratio(%)
9.2
0.0
-7.9
102.9
7.1
59.2
10.9
10.0
0.4
59.2
12.4
1.0
21.7
7.3
17.2
28.3
5.9
9.2
4.7
% QoQ 3QFY14E Variation
3.2
3669
-3.7
2.6
1199
-3.2
-5.1
33
-18.5
67.8
43
-2.6
3.4
4944
-3.7
-22.1
599
-9.4
0.0
5542
-4.3
3.9
3522
-2.7
2.0
1422
-6.1
-22.1
599
-9.4
-6.3
2021
-7.1
3.4
301
89.3
0.0
558
-46.1
2.2
859
1.3
-12.6
1162
-13.3
-25.2
699
-20.6
10.1
463
-2.2
-5.9
139
-8.2
18.0
324
0.4
12409
192974
139757
6,997
5320
0.0
-2.8
-1.8
7.4
6.2
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
10

11. ALLAHABAD BANK
Financials & Assumption
Income Statement
2011
2012
2013
2014E
2015E
Interest Income
Interest Expense
NII
Change (%)
Non Interest Income
Total Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions
PBT
PAT
Change (%)
11015
6992
4022
51.8
1370
5393
29.4
2338
3055
19.9
1112
1943
1423
18.0
15523
10361
5163
28.3
1299
6461
19.8
2691
3770
23.4
1602
2167
1867
31.2
17436
12569
4866
-5.7
1477
6343
-1.8
2958
3385
-10.2
1865
1520
1185
-36.5
18958
13532
5426
11.5
2319
7745
22.1
3384
4361
28.8
2527
1835
1290
8.8
22529
15814
6715
23.8
2319
9034
16.6
3885
5150
18.1
2976
2174
1522
17.9
131887
24
44156
21
6918
43247
93625
31
159593
21
48668
10
9094
54283
111145
19
178742
12
54930
13
10098
58306
129490
17
194828
9
60397
10
13544
60428
145028
12
222104
14
68852
14
15440
71263
165332
14
8.8
6.2
4.9
7.1
10.5
6.8
6.1
6.8
9.8
7.7
6.7
5.2
9.7
7.5
9.2
7.1
10.0
8.0
9.5
7.1
Balance Sheet
Deposits( Rs Cr)
Change (%)
of which CASA Dep
Change (%)
Borrowings( Rs Cr)
Investments( Rs Cr)
Loans( Rs Cr)
Change (%)
Ratio
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost of Deposit
Avg. Cost of Borrowimgs
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
11

12. Persistent System.
"BUY"
28th Jan' 14
"Persistently innovating.."
Results update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume
Nifty
BUY
994
1070
960
8%
11%
533179
PERSISTENT
1058/477
3974
12139
6136
Stock Performance
Absolute
Rel. to Nifty
1M
1.1
3.4
1yr
76.8
75.8
YTD
85.7
82.3
Share Holding Pattern-%
Current
Promoters
FII
DII
Others
38.96
18.26
18.78
24
1 year forward P/E-x
2QFY14 1QFY14
38.96
15.28
21.23
24.53
38.96
14.84
19.31
26.89
Delivered inline set of numbers but better on all aspects than its peers did :
For 3QFY14, Persistent System’s sales was almost flat (QoQ) in INR term, while grew
2.2% (QoQ) in USD term impacted by seasonality and furloughs impacts. During the
quarter, volume growth from Offshore increased by 3.8% and Onsite volume growth
was flat, sequentially. PAT grew by 5.5% (QoQ)
The management remains confident of FY14 with deal pipeline being strong and
remains focused on increasing the share of IP-led revenues in its portfolio. The
management expects to see more than 15% dollar revenue growth, more than
NASSCOM guidance of 12-14 % for FY14E.
Margin ramp up: During the quarter, Its EBITDA margin improved by 80bps to 24.1%
because of cost rationalization. PAT margin up by 70bps to 14.83%. However,
management expects to maintain margin at 24-25% for FY14E.
On segmental front: The Company’s cash cow segment Infrastructure and System,
which contributes 69% on sales, was flat than previous quarter and Telecom (18%
contribution on sales) was up by 2% sequentially. While, Life Science space (13%
contribution on sales) down marginally by 1% (QoQ).
Geography wise revenue: Because of weak seasonality and furloughs impact, North
America and APAC regions were marginally down by 1-2%(QoQ). The company’s earning
potential from US is 83% and APAC is 11%. While Europe contributes 6% of sales and has
seen tremendous set of growth at 36% (QoQ) led by a large account execution during
the quarter.
Clients Metrics: During the quarter, company added 2 clients(Total 34) under medium
category( >$1mn to $3mn) and no client addition (Total) 16 from large ( > $ 3Mn) .
Revenue contribution from top-1 client declined from 22.5% (2QFY14) to 19.8% and
contribution from top-5 and Top-10 marginally down. DSO at 63days, almost 12
quarters low.
Persistent management suggests that deal pipeline are looking strong and seeing good
activity and traction in the market across the board. Its focus on some of newer
technologies like cloud, analytics and mobility, M2M, digital transformation are
gaining a lot of traction because of pickup in demand environment. Because of actively
investment in these themes, management is very confident to see healthy growth.
View and Valuation: The company’s focus is shifting greater proportion to IP led services
and company has marquee clientele in cutting-edge technologies around cloud,
mobility, collaboration and analytics; witnessing faster growth. Considering the
company’s ability to achieve scale and growth, we upgrade our target price from Rs
960 to Rs 1070 with “BUY” view on the stock. Recently we had advised to book profit
on the stock at a target price of Rs 960. Post 3rd quarter earnings, we upgrade our EPS
for FY15E from Rs 76.9 to Rs 79.1. At a CMP of Rs 994, stock trades at 12.6x FY15E
earnings.
Financials
Rs, Crore
3QFY14
2QFY14
(QoQ)-%
3QFY13
(YoY)-%
Revenue
432.75
432.37
0.1
332.98
30.0
EBITDA
104.3
100.8
3.5
82.4
26.6
PAT
64.2
60.8
5.6
49.5
29.7
EBITDA Margin
24.1%
23.3%
80bps
24.7%
(60bps)
PAT Margin
14.8%
14.1%
70bps
14.9%
(10bps)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
12

13. Persistent System.
Sales (INR) and Sales growth-%(QoQ)
On $term, Sales growth was up by 2.2%
(QoQ) and 0.8% on INR term,
(Source: Company/Eastwind)
Segmental Revenue-%
Persistent's exposure on Infr and System has
increased to 69%, growth in Infra space
indicates more visibility of deal intake in near
future,
(Source: Company/Eastwind)
Margin-%
Its EBITDA margin improved by 80bps to
24.1% because of cost rationalization.
(Source: Company/Eastwind)
Key facts from Concall (attended on 27th Jan,2014)
■Persistent is confident of doing more than 15% revenue growth in$ terms(FY14E).
■They expect to maintain margin at 24-25% for FY14E
■The Company’s focus on newer technologies like cloud, analytics, mobility and digital
transformation are gaining traction.
■ Expects 20-21% growth in the next year from IP led business, which in turn will help
improve margins going forward.
■ The company is optimistic to see more deals on SMACS and IP led business.
■ Services business can continue to keep the growth momentum.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
13

14. Persistent System.
Operating Metrics
2QFY12
Client Concentration
Top1
Top 5
Top 10
Billing Rate-USD/ppm
Onsite - Linear
Offshore - Linear
Yeild per Employee(excld- Trainee)
Employee Metrics
Total Employee
Attrition
Utilization rate %(xclude IP Led )
3QFY12 4QFY13 1QFY13 QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14
16.0%
38.6%
49.4%
15.9%
37.0%
48.3%
17.2%
36.6%
48.8%
17.8%
33.5%
45.3%
20.7%
36.3%
47.0%
21.1%
37.3%
49.4%
12665
3803
3208
12387
3778
3247
12603
3895
3350
12789
3898
3345
12863
3978
3746
12772
4032
3817
6900
17.7%
73.8%
6706
17.4%
74.1%
6628
18.3%
71.7%
6536
18.9%
74.1%
6370
16.9%
75.2%
6719
16.0%
77.3%
21.6%
36.7%
47.9%
21.2%
34.7%
46.0%
22.5%
36.4%
47.3%
19.8%
36.9%
46.9%
14014
4143
3769
14567
4111
3602
14283
4109
3919
14510
4179
3934
6970
14.4%
72.5%
7144
14.2%
70.0%
7457
14.0%
71.7%
7602
13.2%
72.9%
Financials
Rs in Cr,
Sales
Employee Cost
Cost of technical professionals
Other expenses
Total expenses
EBITDA
Depreciation
Other Income
EBIT
Interest Cost
Profit (+)/Loss (-) Before Taxes
Provision for Taxes
Net Profit (+)/Loss (-)
Growth-% (YoY)
Sales
EBITDA
PAT
Expenses on Sales-%
Employee Cost
Other expenses
Tax rate
Margin-%
EBITDA
EBIT
PAT
Valuation:
CMP
No of Share
NW
EPS
BVPS
RoE-%
P/BV
P/E
FY10
601.16
368.74
0
86.05
454.79
146.37
33.52
11.23
112.85
0
124.08
9.05
115.03
FY11
775.84
481.62
30.67
105.24
617.53
158.31
42.39
34.44
115.92
0
150.36
10.62
139.74
FY12
1000.3
599.05
41.68
135.2
775.93
224.37
61.1
34.44
163.27
0.00
197.71
55.09
142.62
FY13
1294.5
719
54
218
990.78
303.72
78
34.44
225.44
0.03
259.851
75.37
184.481
FY14E
1666.59
899.96
91.66
291.65
1283.28
383.32
100.55
55.00
282.76
0.05
337.71
92.03
245.69
FY15E
2061.72
1123.64
113.39
366.99
1604.02
457.70
93.54
72.16
364.16
0.05
436.28
119.98
316.30
1.2%
60.2%
74.1%
29.1%
8.2%
21.5%
28.9%
41.7%
2.1%
29.4%
35.4%
29.4%
28.7%
26.2%
33.2%
23.7%
19.4%
28.7%
61.3%
14.3%
7.3%
62.1%
13.6%
7.1%
59.9%
13.5%
27.9%
55.5%
16.9%
29.0%
54.0%
17.5%
27.3%
54.5%
17.8%
27.5%
24.3%
18.8%
19.1%
20.4%
14.9%
18.0%
22.4%
16.3%
14.3%
23.5%
17.4%
14.3%
23.0%
17.0%
14.7%
22.2%
17.7%
15.3%
310
4
639.0
28.8
159.7
18.0%
1.9
10.8
366.7
4
747.1
34.9
186.8
18.7%
2.0
10.5
409.2
4
840.5
35.7
210.1
17.0%
1.9
11.5
541
4
1018.3
46.1
254.6
18.1%
2.1
11.7
994
4
1212.5
61.4
303.1
20.3%
3.3
16.2
994
4
1477.3
79.1
369.3
21.4%
2.7
12.6
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
14

15. UCO BANK
Company Update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Average Daily Volume
Nifty
BUY
84
82
#####
532205
UCOBANK
86.65/46
5561
2960821
6154
Stock Performance
Absolute
Rel.to Nifty
1M
-0.7
-0.6
1yr
-5.4
-9.0
YTD
-5.4
-9.0
Share Holding Pattern-%
Current 1QFY14 4QFY1
3
Promoters
69.3
69.3
69.3
FII
4.2
3.9
3.2
DII
12.4
12.5
13.0
Others
14.2
14.3
14.6
"BUY"
27h Jan, 2014
UCO bank reported net profit growth of 207% YoY largely due to robust
growth in NII along with higher than industry average loan growth. Bank’s
asset quality improved sequentially despite of challenging macro
environment. However bank’s CASA growth has declined marginally in
sequential basis but still at comfortable level. UCO Bank’s operating as well
as financials metrics has been improving continuously. We value bank at
Rs.84/share which is 0.5 times of one year forward book and 3.5 times
FY14E’s earning.
NII growth of 33% YoY led by higher than industry loan growth and high CD
ratio
During quarter, bank reported NII growth of 33% YoY to Rs.1566 cr below of our
expectation of Rs. 1642 cr largely due to higher cost of fund than anticipated which
led by sequentially declined of low cost deposits(CASA). NII growth of 33% YoY was
much higher than its peers which have delivered result so far. Other income was
Rs.190 cr versus Rs.209 cr in 2QFY14 and Rs.190 cr in 3QFY14. With the lower
support from other income, total revenue growth was 28.5% YoY to Rs.1756 cr.
Healthy NII growth and controlled cost income ratio led operating profit growth
Operating expenses increased by 15.5% YoY in which employee cost and other
operating expenses increased by 12.7% and 21% YoY respectively. Cost income
ratio declined from 39.2% in 3QFY13 to 35.3% inn3QFY14. With the support from
healthy NII growth and lower cost income ratio, bank’s operating profit grew by 37%
YoY to Rs.1137 cr.
Stable asset quality in sequential basis despite of challenging environment
On delinquencies front, bank reported very stable asset quality in sequential basis
UCO Bank Vs Nifty
with GNPA deteriorated by 0.3% to Rs.7353 cr versus Rs.7376 cr in challenging
macro environment. In percentage term GPA improved by 25 bps to 5.2% versus
5.5% in previous quarter. Provisions in absolute term declined by 0.7% in sequential
basis which led net NPA improve to 0.3%. In percentage of gross NPA to gross
advance, it stood at 5.2% versus 5.5% in 2QFY14 while net NPA in percentage term
was improved to 3% from 3.1% in previous quarter. Provisions coverage ratio
(without technical write-off), was 46.4% as against 46.6% in previous quarter.
Rs, Cr
Financials
2011
2012
2013
2014E
2015E
NII
3845
3902
4582
6186
6289
Total Income
4770
4868
5534
7335
7438
PPP
2695
2811
3357
4850
5132
Net Profit
907
1109
618
1585
2101
EPS
16.5
17.7
9.3
23.8
31.6
(Source: Company/Eastwind)
15
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

16. UCO BANK
Loan and deposits reported higher growth than industry average
On balance sheet growth front, bank’s advance grew by 16.5% YoY while deposits grew
by 13.4% YoY led by CASA growth of 23% YoY in absolute term. CASA in percentage of
total deposits improved to 30.5% versus 19.2% in 3QFY13. Saving deposits and current
deposits increased by 13% and 38% YoY respectively. But in sequential basis, CASA
deposits declined to 30.5% from 31.8% and 32.1% in 1QFY14. Credit deposits ratio for
quarter stood at 73.5% as against 71.6% in 3QFY14 and 71.4% in previous quarter. Total
business (Deposits +Advance) grew by 14.7% YoY to Rs.3.34 lakh Cr versus Rs.2.91
lakh Cr.
Marginal expansion of NIM on account of declined loan yield than cost of fund
NIM improved by 60 bps YoY to 3.06% from 2.42% largely due to lower cost of deposits
which was lead by low cost franchise network. Cost of deposits stood at 6.27% versus
6.92% in 3QFY14. Yield on advance (EW calculation) declined from 10.5% to 10% which
has restricted limited NIM growth.
Profit tripled on account of healthy NII growth, lower CI ratio and stable asset
quality
UCO Bank reported net profit growth of 207% YoY to Rs.315 cr as against our
expectation of Rs.338 cr largely due to robust growth in NII, lower cost income ratio,
improving asset quality which led lower provisions and high credit deposits ratio.
Valuation & View
UCO bank reported net profit growth of 207% YoY largely due to robust growth in NII
along with higher than industry average loan growth. Bank’s asset quality improved
sequentially despite of challenging macro environment. However bank’s CASA growth
has declined marginally in sequential basis but still at comfortable level. UCO Bank’s
operating as well as financials metrics has been improving continuously. We value bank
at Rs.84/share which is 0.5 times of one year forward book and 3.5 times FY14E’s
earning.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
16

17. UCO BANK
Fundamental Through Graph
NII growth of 33% YoY led by higher than
industry loan growth and high CD ratio
Healthy NII growth and controlled cost
income ratio led operating profit growth
Profit tripled on account of healthy NII
growth, lower CI ratio and stable asset
quality
Source:Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
17

18. UCO BANK
Quarterly Performance
Quarterly Result
Interest/discount on advances / bills
Income on investments
Interest on balances with Reserve Bank of India
Others
Total Interest Income
Others Income
Total Income
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
PBT
Tax
Net Profit
3QFY14
3543
1138
29
19
4729
190
4919
3163
1566
190
1756
395
225
620
1137
812
325
10
315
2QFY14
3396
1026
8
14
4444
209
4653
2875
1569
209
1779
382
230
612
1166
759
408
7
400
3QFY13
3197
923
30
21
4171
190
4361
2994
1177
190
1367
351
186
536
831
728
103
1
102
% YoY
% QoQ
10.8
4.3
23.3
11.0
-2.7
243.2
-13.7
31.7
13.4
6.4
0.4
-9.0
12.8
5.7
5.6
10.0
33.0
-0.2
0.4
-9.0
28.5
-1.3
12.7
3.3
20.9
-2.4
15.5
1.2
36.8
-2.5
11.5
7.0
215.1
-20.3
1536.5
40.7
206.9
-21.4
Balance Sheet
Net Worth
Deposits
Total Liabilities
Advances
Total Assets
11085
192406
203491
141457
141457
10770
188779
212416
135233
212416
9399
169711
179110
121455
121455
17.9
2.9
13.4
1.9
13.6
-4.2
16.5
4.6
16.5
-33.4
7,353
4217
5.2
3.0
46.4
7,376
4228
5.5
3.1
46.6
6,711
3927
5.5
3.2
41.5
9.6
-0.3
7.4
-0.3
Asset Quality
GNPA
NPA
% GNPA
% NPA
% PCR(Without technical writeoff)
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
18

19. UCO BANK
Income Statement
2011
2012
2013
2014E
2015E
Interest Income
Interest Expense
NII
Change (%)
Non Interest Income
Total Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions
PBT
PAT
Change (%)
11371
7526
3845
65.4
925
4770
45.0
2075
2695
58.0
1788
907
907
-10.4
14632
10730
3902
1.5
966
4868
2.0
2056
2811
4.3
1661
1150
1109
22.3
16752
12170
4582
17.4
952
5534
13.7
2177
3357
19.4
2710
647
618
-44.2
18346
12160
6186
35.0
1149
7335
32.5
2485
4850
44.5
3217
1634
1585
156.4
22476
16186
6289
1.7
1149
7438
1.4
2306
5132
5.8
2798
2334
2101
32.5
99071
32031
6
5475
42927
99071
20
115540
17
34403
7
12901
45771
115540
17
128283
11
55733
62
9492
52245
128283
11
153939
20
67707
21
12315
62692
153939
20
184727
20
81249
20
14777
75231
184727
20
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost of Deposit
Avg. Cost of Borrowimgs
8.6
6.6
4.7
12.5
9.9
7.1
6.5
6.1
10.0
7.1
6.6
7.0
9.0
6.8
7.0
6.0
9.0
7.5
6.4
6.0
Valuation
Book Value
CMP
P/BV
135
107
0.8
137
79
0.6
146
50.1
0.3
173
75.25
0.4
185
75.25
0.4
Balance Sheet
Deposits( Rs Cr)
Change (%)
of which CASA Dep
Change (%)
Borrowings( Rs Cr)
Investments( Rs Cr)
Loans( Rs Cr)
Change (%)
Ratio
Source: Company/Eastwind
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
19

20. KPIT Tech.
"NEUTRAL"
27th Jan' 14
"On billion dollar journey"
Result update
Neutral
CMP
Target Price
Previous Target Price
151
-
Upside
Change from Previous
-
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume
Nifty
532400
KPIT
189/92
2910
144511
6267
Stock Performance
Absolute
Rel. to Nifty
1M
-7.95
-7.65
1yr
32.66
29.16
YTD
-17.1
-18.32
Share Holding Pattern-%
Promoters
FII
DII
Others
Current
22.53
41.96
6.99
28.52
Price Performance
2QFY14 1QFY14
22.87
24.25
36.42
32.79
11.12
10.93
29.59
32.03
KPIT Tech witnessed weak numbers, now..they will miss its earning guidance;
KPIT Technologies Ltd revealed its 3QFY14 earnings with below than expectation, sales
declined by 3.5%(QoQ) in INR term and 2.3%(QoQ) in USD term due to the delay in
project kick-off and additional loss of billing days in Q3FY14. Despite cost optimization
strategy by company, PAT dip by 9% (QoQ).
Now, Company will be in the position of short with its annual revenue guidance. The
shortfall in the revenue is entirely because of deficit in SAP SBU revenue for FY14.
However, on profit they are confident to exceed the higher end of the guidance
despite the challenges faced on SAP SBU profitability.
The company expects better earnings, confident of generating a positive cash flow for
FY14E, after considering the balance payments for existing M&A deals.
Steady set of margin: EBITDA margin almost flat at 15.3% and PAT margin declined by
50bps to 9%, sequentially. Commenting on margin, management stated that the higher
margin growth business coming up apart from revenue growth would improve the
margins going ahead. By next couple of quarter margin from SAP business would inch
up.
Growth inside the Europe: Europe region has been the leading growth market with
9.1%. During the quarter, USA had a marginal de-growth in USD terms and APAC
declined by 18%(QoQ) because of seasonality and furloughs impact. In INR terms,
Europe grew by 7.7%, US down by 2.5% and APAC 19.4%, on QoQ.
Mix growth across verticals: On INR basis, KPIT reported 8% of growth from Energy &
Utilities (15% contribution on sales), while Manufacturing (39% contribution on sales)
down by 4%(QoQ) and Automotive & Transport-(36% contribution on sales) down by
1.5%, sequentially.
Deal Momentum: There has been good momentum during Q3 across the business lines
in terms of deal closure and pipeline building. Though in 3 large deals there has been
almost a quarter’s delay in closure, two in SAP and one in A&E, that got closed during
Q3. Company closed large deals in excess of USD 70 million during the quarter, which
provides a sound platform, going into FY15E.
View and Valuation: Impressive organic growth despite inorganic thrust (acquired 10
companies in the last 10 yrs), Potential option value from success of its hybrid engine
venture Revolo (on trial). KPIT has targeted to reach $1bn sales by 2017. Its
differentiated positioning and competitive edge in its focus areas, imperatives to the
success of smaller-sized IT vendors impress to investors.
Considering delay executions of some projects for next 2 quarters and ongoing change
in organization structure, we have a “Neutral” view on the stock. Already we had
advised to book profit on 8th Jan 2014 at a target price of Rs177(Initiated at Rs115). Our
view on the stock could be change after favorable update on stock and healthy earning
guidance for FY15E. At a CMP of Rs151, stock trades at 9x FY15E EPS.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin
3QFY14
677.93
103.5
66.7
15.3%
9.8%
2QFY14
702.76
108.1
66.7
15.4%
9.5%
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
(QoQ)-%
(3.5)
(4.3)
0.0
(10bps)
30bps
3QFY13
567.02
94.1
48
16.6%
8.5%
Rs, Crore
(YoY)-%
19.6
10.0
39.0
(130bps)
130bps
20

21. KPIT Tech
Sales and Sales growth-%(QoQ)
(Source: Company/Eastwind)
Sales Mix
4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14
Sales Mix (% of Sales) - Geography
USA
UK & Europe
RoW
Sales Mix (% of Sales) - Verticles
Automotive & Transportation
Manufacturing
Energy & Utilities
Others
73.3%
14.4%
12.3%
76.2%
14.6%
9.2%
76.4%
12.1%
11.6%
74.7%
13.9%
11.4%
76.3%
11.3%
12.3%
75.0%
13.1%
11.9%
71.9%
13.8%
14.4%
72.6%
15.4%
12.0%
37.1%
35.0%
11.6%
16.4%
39.6%
32.9%
13.7%
13.8%
38.8%
32.4%
15.3%
13.5%
40.3%
34.0%
14.2%
11.5%
38.5%
35.4%
13.5%
12.7%
35.5%
39.6%
14.1%
10.8%
36.1%
39.7%
13.6%
10.7%
36.4%
38.9%
15.1%
9.7%
Margin-%
(Source: Company/Eastwind)
Revolo: The unit has been in the process of conducting trials in 40 vehicles, which has
been yielding encouraging results, with fuel savings between 30-40%. KPIT is working to
bring the costs down further and attaining regulatory approvals.As per the management,
by next year it could be a part of revenue.
Client Metrics: Amongst the top customer accounts, Cummins has grown by 4.7% on a Qo-Q basis with revenue share at 17.9% during the quarter. The top 5 and top 10
customers had Q-o-Q decline of 3.2% and 1% respectively.
Headcounts Metrics: During the quarter, Considering the ramp up of deals, this quarter
was good for hiring prospect, adding around 300+ people during the quarter.Over the
next few quarters, we expect, company will introduce multiple initiatives to develop
individuals to take on more responsibilities in future. During the quarter, Attrition at 18%
(LTM).
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
21

22. KPIT Tech
Operating Metrics
4QFY12
Client Metrics
No. of Customers Added
No. of Active Customers
Customers with run rate of >$1Mn
Client Concentration
Top Client – Cummins
Top 5 Clients
Top 10 Clients
DSO
Employee Metrics
Total Employee
Onsite Utilization
Offshore Utilization
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4
169
59
3
172
65
4
176
69
2
178
72
5
183
78
6
189
78
3
192
78
3
195
78
19.5%
33.0%
42.2%
90
20.6%
36.3%
44.0%
75
19.7%
35.2%
43.7%
75
19.1%
36.8%
45.2%
70
16.6%
35.2%
44.0%
75
16.8%
38.6%
47.3%
77
16.5%
38.0%
46.3%
75
17.9%
38.2%
47.6%
76
7719
94.5%
74.3%
7873
94.7%
74.1%
8111
94.5%
74.7%
8286
92.8%
72.9%
8321
94.3%
74.1%
8456
94.2%
73.4%
8816
92.4%
72.9%
9136
88.1%
71.3%
Financials
Rs, Cr
Net Sales-USD
Net Sales
Employee Cost
Other expenses
Total Expenses
EBITDA
Depreciation
Other Income
Extra Ordinery Items
EBIT
Interest Cost
PBT
Tax
PAT
PAT (excluding EO Items)
Growth-%
Sales
EBITDA
PAT
Margin -%
EBITDA
EBIT
PAT
Expenses on Sales-%
Employee Cost
Other Exp
Tax rate
Valuation
CMP
No of Share
NW
EPS
BVPS
RoE-%
Dividen Payout ratio
P/BV
P/E
FY10
153.76
731.64
265.92
280.65
570.62
161.02
30.80
1.20
-26.45
130.22
2.74
102.23
16.91
85.32
111.77
FY11
224.07
987.05
529.95
254.81
838.77
148.28
41.12
6.74
0.00
107.16
3.78
110.12
15.49
94.63
94.63
FY12
306.71
1500.00
771.78
430.30
1283.75
216.25
44.49
13.82
10.05
171.76
7.32
188.31
43.67
144.64
134.59
FY13
410.46
2238.63
1140.79
762.32
1903.11
335.52
47.16
11.74
-1.30
288.36
13.99
284.81
76.55
208.26
209.56
FY14E
449.39
2696.33
1367.04
903.27
2270.31
426.02
58.32
13.48
-18.61
367.70
24.31
338.26
94.71
243.55
262.16
FY15E
543.42
3233.33
1649.00
1067.00
2715.99
517.33
77.73
16.17
16.17
439.60
24.59
447.35
123.02
324.33
308.16
-7.8%
-12.2%
129.4%
34.9%
-7.9%
10.9%
52.0%
45.8%
52.8%
49.2%
55.2%
44.0%
20.4%
27.0%
16.9%
19.9%
21.4%
33.2%
22.0%
17.8%
11.7%
15.0%
10.9%
9.6%
14.4%
11.5%
9.6%
15.0%
12.9%
9.3%
15.8%
13.6%
9.0%
16.0%
13.6%
10.0%
36.3%
38.4%
16.5%
53.7%
25.8%
14.1%
51.5%
28.7%
23.2%
51.0%
34.1%
26.9%
50.7%
33.5%
28.0%
51.0%
33.0%
27.5%
115.00
7.90
387.11
10.80
49.00
22.0%
6.4%
2.35
10.65
168.05
8.70
603.19
10.88
69.33
15.7%
6.8%
2.42
15.45
122.90
17.80
712.55
8.13
40.03
20.3%
4.9%
3.07
15.12
99.00
19.28
1036.23
10.80
53.75
20.1%
7.9%
1.84
9.17
151.00
19.28
1263.99
12.63
65.56
19.3%
6.5%
2.30
11.95
151.00
19.28
1565.76
16.82
81.21
20.7%
7.0%
1.86
8.98
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
22

23. Larsen & Toubro Ltd.
V-
"Neutral"
24th Jan' 14
"On Track of Revival………"
Result update
Neutral
CMP
Target Price
Previous
Target Price
Upside
Change from
Previous
1033
NA
NA
NA
NA
Market Data
BSE Code
NSE Symbol
52wk Range
H/L Capital
Mkt
(Rs Crores)
Average Daily
Volume
Nifty
500510
LT
861/114
6
80,145
95,662
6,346
Stock Performance-%
Absolute
Rel. to Nifty
1M
(2.7)
1yr
0.8
YTD
13.5
1.1
4.6
11.6
Share Holding Pattern-%
Promoters
FII
DII
Others
3QFY14
0.0
17.9
36.6
45.5
2QFY14 1QFY14
0.0
0.0
15.3
16.1
37.4
36.9
47.4
47.2
Price Performance V/s NIFTY
Construction & engineering major, L&T posted a surprisingly set of numbers for the quarter
ended Dec, 13. The company's net sales grew by a mere 11.8% on a yearly basis to Rs
14387.5crore. The company recurring bottom line witnessing a upstik of 12.15% , and came in
at Rs. 1136.3 crore. the results have been adjusted for the quarter as it transferred
hydrocarbon business to its subsidiary L&T Hydrocarbon Engineering with effect from April 1,
2013. Accordingly, the company restated suitably its earnings for the previous quarter ended
September 2013 and numbers relating to previous periods. However, if we If we consider the
exceptional gains on dilution of part stake in a subsidiary company, the overall PAT grew by
22.1 % during the quarter. While the operational performance has been good, the company
has witnessed good traction in its order book also. Order inflow for the quarter stood at Rs
21722 crore showing a growth of 21% on Y-o-Y basis. The total order book as on December
31st 2013 stood at Rs 171184 crore showing an increase of 13 % on Y-o-Y basis. EBITDA
margins for the Dec 2013 quarter expanded by 180 bps to 11.6% against 9.8% last year.
However, as per the management, the quarterly margins differ for every quarter as the project
completion cycle is different and hence it is difficult to capture the EBITDA movement every
quarter. Though we agree with the management’s comment, we still believe that there would
be some amount of pressure on the margins on a yearly basis due to risks related to
competition, inflation, adverse mix and a slowdown. As regards the results we are of the
opinion that, despite the gloomy scenario the results have been good. Consistent order inflow
is a major positive factor. We expect the sector to witness revival in coming quarters, whereas
we see a near term earnings growth muted and look for a better entry point. Currently we
have a neutral view on a stock.
Why neutral…???
Contribution margin expansion came as a surprise and in our recent meeting the management
attributed it to quarterly skews rather than improvement in project-level profitability. We build
slightly higher margins for FY2014E at 10.9% (versus 10% earlier). However, we believe margins
face downward trajectory over FY2014-16E (build EBITDA margin of 10.5% in FY2015E and 10.3%
in FY2016E) due to risks related to competition, inflation, adverse mix and a slowdown. L&T
maintained its revenue growth guidance of 15% yoy for FY2014 (9% posted in 9MFY14). We build
lower revenue growth of 12% in FY2014 implying 16% growth requirement in 4QFY14. L&T also
maintained its inflow guidance of 15-20% in FY2014 (strong 23% growth in 9MFY14; but is a bit
wary about maintaining this traction on delayed decision making by customers).
Outlook
We have a Neutral on L&T as we think it will be difficult rate L&T from today’s level without
earnings upgrade and/or uncertanity across sector. Downside risks are project delays, weaker
margins and stronger Rupee. Upside risks are higher than expected order inflow and higher
operating margins a head.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin
3QFY14
14387.5
1674.8
1240.7
11.6%
8.4%
2QFY14
12308.4
1185.7
864.6
9.6%
6.8%
(Source: Company/ Eastwind Research)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
(QoQ)-%
16.9%
41.3%
43.5%
200 bps
160 bps
3QFY13
12869.3
1258.3
1013.2
9.8%
7.5%
Rs, Crore
(YoY)-%
11.8%
33.1%
22.4%
180 bps
90 bps
(Standalone)
23

24. 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
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