Sharekhan Valueguide Dec2013

December 2013
Sharekhan ValueGuide
CONTENTS
From Sharekhans Desk

2013 ends with a bang
After the Diwali fireworks the Indian stock market took a breather in November this year. It has resumed the uptrend in the initial part of December on the back of some encouraging economic data points (especially the upsurge in exports, moderation in gold imports and the significant narrowing down of the current account deficit) and a supportive global environment (most developed markets 06 are hitting a new high).
EQUITY FUNDAMENTALS Stock Ideas Stock Updates Sharekhan Special Viewpoint TECHNICALS Sensex ADVISORY DESK MID Trades COMMODITY 07 12 FUNDAMENTALS Crude Oil Gold Silver TECHNICALS Gold Silver Crude Oil CURRENCY FUNDAMENTALS INR-USD INR-EUR 33 33 INR-GBP INR-JPY 33 33 34 34 28 Copper 29 Lead 29 Zinc 31 Copper 31 Natural gas 31 Cardamom 29 29 30 37 Derivative Ideas 37 11 12 REGULAR FEATURES 23 Report Card 26 Earnings Guide DERIVATIVES 26 View
4 I
27
RESEARCH BASED EQUITY PRODUCTS Top Picks basket Switch Ideas
PMS DESK
ProPrime - Top Equity 35 ProPrime - Diversified Equity 36 ProTech - Index Futures Fund 37 ProTech - Trailing Stops 38
32 32 32
MUTUAL FUNDS DESK Top MF Picks (equity) Top SIP Fund Picks 41 42
TECHNICALS USD-INR EUR-INR
34 GBP-INR 34 JPY-INR
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disclaimer
December 2013
REPORT CARD
STOCK IDEAS STANDING (AS ON DECEMBER 06, 2013)
COMPANY CURRENT PRICE AS ON PRICE RECO 06-DEC-13 TARGET Buy Hold Hold Buy Hold 79.5 16.3 1950.0 945.3 1701.5 12297.4 93.5 62.4 1279.8 738.3 684.0 220.4 150.2 155.8 268.7 79.0 813.8 682.7 1143.9 66.6 596.9 1859.6 127.5 391.9 13363.7 227.8 4624.1 827.2 559.7 311.1 197.6 214.0 290.0 146.2 541.1 6382.2 1357.6 1126.6 3325.8 333.1 852.0 2000.3 493.8 8421.5 171.4 396.7 129.7 67.1 93.4 62.9 672.9 482.6 1706.2 10279.2 86.0 18.0 2342.0 1122.0 ** 52 WEEK HIGH LOW 101.6 29.0 2229.0 1025.9 1777.0 12413.0 191.1 130.0 1549.9 968.0 899.7 393.0 187.9 224.0 495.3 110.2 931.4 727.3 1238.4 118.4 922.1 2551.7 288.0 547.7 15335.9 287.2 6347.8 978.0 725.0 380.0 220.7 251.7 387.0 174.4 755.0 7600.1 1523.0 1178.5 3448.0 344.0 907.1 2258.9 519.8 8812.1 247.8 407.9 131.3 87.0 106.9 81.3 695.0 590.5 2046.1 11385.1 54.6 11.8 1656.0 740.2 1215.0 9656.4 64.8 47.2 763.4 561.0 429.3 126.5 102.0 109.5 239.6 44.3 632.2 528.0 756.9 52.3 400.2 1452.7 97.0 216.1 9535.8 206.3 3482.3 679.0 432.2 272.1 138.8 190.0 237.7 121.6 415.2 5570.0 1091.2 608.1 2186.0 234.3 475.3 1197.0 314.9 5496.0 100.2 252.5 71.7 53.0 56.0 33.2 526.0 405.0 1315.6 6718.8
EQUITY
FUNDAMENTALS
ABSOLUTE PERFORMANCE 1M 3M 6M 12M 6.4 -11.4 -7.3 4.2 4.7 -0.4 -4.2 -9.0 1.2 9.8 0.9 -8.7 -1.9 -7.3 -15.7 -8.3 -3.7 1.8 3.6 -7.7 -0.2 -1.1 -9.7 5.1 1.2 -7.5 0.3 1.8 -5.1 -3.2 6.3 3.8 7.0 -12.5 -1.3 -3.9 0.3 0.7 2.6 18.5 6.3 -2.7 2.7 1.0 20.5 3.3 13.9 3.1 12.6 7.0 7.5 -0.6 3.2 10.8 21.2 26.3 2.1 21.5 30.8 17.5 29.6 20.6 33.9 28.5 33.3 49.5 27.2 0.3 6.5 42.7 10.3 12.9 27.1 15.8 31.5 13.3 11.0 37.4 20.7 -7.1 8.0 3.1 -9.2 -1.1 37.5 5.2 9.5 -0.4 4.8 -1.4 6.5 8.9 12.2 13.9 46.9 0.0 5.1 7.6 27.0 27.2 52.1 15.3 54.2 35.8 23.5 -6.6 18.6 41.3 -13.0 -29.2 13.1 -2.9 9.0 12.4 -21.3 -25.1 -8.9 10.7 5.0 -22.2 6.9 0.7 -30.2 -12.7 -0.5 0.9 0.1 -10.7 -21.0 -8.7 -41.0 -20.9 -4.7 -18.6 -20.6 -4.4 -2.4 -7.6 0.4 -7.1 -3.4 -0.7 -10.2 -5.1 15.0 52.8 37.0 32.1 66.3 37.2 53.8 40.4 -9.8 20.0 42.3 -2.2 31.0 12.6 16.9 1.0 -2.9 9.8 -8.2 -38.7 3.0 3.0 15.7 15.1 -37.4 -42.0 -5.7 -18.0 -11.5 -22.2 4.5 -29.0 -34.9 -16.8 0.2 0.2 3.1 -35.8 -25.8 -16.7 -48.3 -11.2 -4.2 4.5 23.8 16.3 8.4 5.2 9.1 -0.1 -16.6 -10.0 19.2 6.7 22.5 74.8 43.2 23.7 78.0 55.5 47.9 48.0 -25.4 25.9 6.9 -12.4 11.0 -12.9 13.0 -8.4 -14.5 -7.2
1M
RELATIVE TO SENSEX 3M 6M 12M 9.6 14.2 -7.7 9.9 18.3 6.3 17.2 9.0 21.0 16.1 20.5 35.2 15.0 -9.3 -3.7 29.0 -0.3 2.1 14.9 4.7 18.9 2.4 0.3 24.2 9.2 -16.0 -2.4 -6.8 -17.9 -10.6 24.3 -4.9 -1.0 -9.9 -5.2 -10.9 -3.7 -1.5 1.5 3.0 32.8 -9.6 -5.0 -2.7 14.8 15.0 37.5 4.3 39.4 22.8 11.7 -15.5 7.2 27.7 -19.4 -34.4 4.8 -10.0 1.0 4.1 -27.1 -30.6 -15.6 2.5 -2.7 -28.0 -1.0 -6.7 -35.4 -19.1 -7.8 -6.6 -7.3 -17.3 -26.9 -15.4 -45.4 -26.8 -11.7 -24.6 -26.5 -11.5 -9.6 -14.4 -7.0 -13.9 -10.5 -8.1 -16.8 -12.1 6.5 41.6 26.9 22.4 54.0 27.0 42.5 30.0 -16.5 11.2 31.8 -9.4 21.4 4.3 8.3 -6.5 -10.1 1.7 -16.4 -44.2 -6.2 -6.2 5.4 4.8 -43.0 -47.2 -14.1 -25.3 -19.4 -29.2 -4.8 -35.4 -40.7 -24.2 -8.7 -8.8 -6.1 -41.5 -32.5 -24.2 -53.0 -19.2 -12.8 -4.8 12.7 5.9 -1.3 -4.2 -0.7 -9.0 -24.1 -18.0 8.5 -2.8 11.6 59.2 30.4 12.7 62.1 41.6 34.7 34.8 -32.1 14.6 -2.6 -20.3 1.1 -20.7 2.9 -16.5 -22.1 -15.5
AUTOMOBILES
Apollo Tyres Ashok Leyland Bajaj Auto M&M Maruti Suzuki BSE Auto Index BANKS & FINANCE Allahabad Bank Andhra Bank Axis (UTI) Bank Bajaj Finserv Bank of Baroda Bank of India CanFin Homes Capital First Corp Bank Federal Bank HDFC HDFC Bank ICICI Bank IDBI Bank Punjab National Bank SBI Union Bank of India Yes Bank BSE Bank Index CONSUMER GOODS Bajaj Corp GSK Consumers Godrej Consumer Products Hindustan Unilever ITC Jyothy Laboratories NEW Marico Mcleod Russel India TGBL (Tata Tea) Zydus Wellness BSE FMCG Index IT / IT SERVICES CMC HCL Technologies Infosys NIIT Technologies Persistent Systems Tata Consultancy Services Wipro BSE IT Index CAPITAL GOODS / POWER Bharat Heavy Electricals CESC Crompton Greaves Greaves Cotton Kalpataru Power Transmission PTC India Thermax V-Guard Industries BSE Power Index BSE Capital Goods Index 6.5 -11.3 -7.2 4.2 4.8 -0.3 -4.2 -9.0 1.3 9.8 1.0 -8.7 -1.8 -7.2 -15.7 -8.2 -3.7 1.8 3.7 -7.6 -0.1 -1.0 -9.7 5.2 1.3 -7.5 0.4 1.9 -5.1 -3.1 6.3 3.9 7.0 -12.4 -1.2 -3.8 0.4 0.8 2.7 18.6 6.3 -2.6 2.7 1.0 20.5 3.4 14.0 3.1 12.7 7.1 7.6 -0.6 3.3 10.9
Hold Reduce Buy Hold Buy Hold Buy Hold Reduce Buy Hold Hold Buy Reduce Buy Hold Hold Buy
109.0 55.0 1450.0 ** 735.0 230.0 220.0 170.0 260.0 87.0 865.0 712.0 1195.0 62.0 620.0 1950.0 150.0 422.0
Hold Hold Hold Reduce Buy Buy Buy Buy Buy Hold
270.0 4886.0 875.0 540.0 369.0 260.0 236.0 330.0 166.0 626.0
Hold Buy Buy Hold Hold Buy Buy
1500.0 1350.0 3770.0 ** 950.0 2600.0 580.0
Hold Buy Hold Buy Buy Buy Reduce Hold
** 450.0 ** 85.0 115.0 70.0 527.0 520.0
December 2013
EQUITY
FUNDAMENTALS
REPORT CARD
STOCK IDEAS STANDING (AS ON DECEMBER 06, 2013)

COMPANY INFRASTRUCTURE / REAL ESTATE Gayatri Projects ITNL IRB Infra Jaiprakash Associates Larsen & Toubro Pratibha Industries Punj Lloyd Unity Infraprojects CNX Infra Index BSE Real Estate Index OIL & GAS Oil India Reliance Industries Selan Exploration Technology BSE Oil and Gas Index PHARMACEUTICALS W Aurobindo Pharma NE Cipla NEW Cadila Healthcare Dishman Pharma Divi's Labs Glenmark Pharmaceuticals Ipca Laboratories Lupin Sun Pharma Torrent Pharma BSE Health Care Index AGRI-INPUTS Tata Chemicals UPL BUILDING MATERIALS Grasim India Cements The Ramco Cements Shree Cement UltraTech Cement DISCRETIONARY CONSUMPTION Eros International Media Indian Hotel Company KKCL Raymond Relaxo Footwear Speciality Restaurants NEW Sun TV Network NEW W Zee Entertainment NE DIVERSIFIED / MISCELLANEOUS Aditya Birla Nuvo Bajaj Holdings Bharti Airtel Bharat Electronics Gateway Distriparks Max India Ratnamani Metals and Tubes BSE500 Index CNX500 INDEX CNXMCAP INDEX
In Top Picks basket
CURRENT PRICE AS ON PRICE RECO 06-DEC13 TARGET Buy Buy Buy Reduce Buy Hold Hold Buy 60.3 134.9 99.2 55.3 1096.4 24.5 28.7 25.4 2518.4 1365.6 462.1 866.7 314.8 8733.1 306.2 388.8 736.5 87.0 1138.5 525.1 649.8 857.9 581.3 494.1 9510.6 271.6 169.6 2728.3 58.1 175.0 4296.2 1881.4 168.8 50.2 1110.0 277.2 177.7 120.5 371.7 272.4 1239.8 875.9 332.4 1046.3 127.6 212.0 130.1 7694.7 4830.8 7766.5 155.0 201.0 110.0 40.0 1140.0 29.0 ** 30.0
52 WEEK HIGH LOW 130.6 228.9 147.0 106.8 1132.7 58.7 64.1 49.9 2684.7 2326.8 629.9 955.0 339.9 9890.9 312.0 450.4 924.6 122.8 1198.0 613.4 744.4 946.4 651.9 512.0 9979.8 381.5 175.5 3300.1 95.1 273.5 5384.4 2069.1 230.1 68.2 1162.0 488.9 218.0 195.9 494.9 284.9 1291.0 1058.3 373.8 1380.0 147.0 273.0 162.1 7792.7 4877.7 8859.4 46.0 97.1 51.9 28.4 677.2 16.8 20.1 16.1 1829.8 1126.8 415.0 763.9 197.4 7552.2 127.2 354.0 629.0 37.1 905.0 430.1 440.4 567.7 347.0 323.5 7718.6 233.2 111.0 2105.7 43.0 135.2 3400.1 1402.4 106.5 37.5 645.1 175.5 94.0 101.0 324.5 194.3 930.0 743.8 266.6 1041.6 98.1 150.2 116.1 6301.3 3937.7 6330.8
ABSOLUTE PERFORMANCE 1M 3M 6M 12M 9.5 7.1 1.7 12.0 12.3 2.7 -0.9 1.4 4.4 -1.8 -1.6 -4.3 1.2 -2.2 26.2 -7.9 4.8 13.2 15.4 0.1 -3.9 -2.3 -2.6 -0.6 -0.8 0.2 -0.6 -3.2 4.7 -3.4 -1.9 -4.1 -0.6 -6.4 12.5 1.2 3.2 -3.9 -16.4 -5.0 -0.3 3.4 -6.7 -2.1 6.8 11.2 7.1 0.0 0.2 0.0 13.8 17.3 53.6 47.4 49.3 34.1 27.8 41.1 26.1 12.4 8.4 1.0 19.3 4.1 61.1 -7.4 13.5 100.5 17.5 2.7 -7.9 -0.1 11.7 13.1 4.9 12.4 22.7 17.2 21.6 8.5 13.3 21.6 37.9 5.7 55.9 47.0 24.1 -5.8 -5.8 17.0 9.8 10.1 13.2 -9.4 20.8 42.6 5.4 12.7 13.2 15.1 -13.7 -20.9 -12.7 -16.5 16.5 -31.4 -36.6 -11.9 6.7 -18.9 -19.1 8.6 19.6 1.6 63.1 3.7 -4.9 24.9 18.7 -11.8 8.6 12.0 11.7 20.9 5.9 -6.8 2.1 -1.9 -8.2 -25.3 -7.9 1.4 4.3 -2.9 26.8 -2.0 32.5 -30.7 -12.5 14.1 18.8 -2.5 10.9 -20.3 11.1 6.0 -6.9 4.6 4.5 -0.4 -46.0 -29.0 -25.3 -44.5 -0.7 -51.2 -50.8 -44.5 -4.3 -34.3 9.1 5.8 6.6 4.8 57.3 -6.0 -13.0 -27.5 -1.1 25.1 42.0 43.9 64.9 46.7 19.7 -17.7 37.4 -17.4 -32.3 -17.0 0.9 -3.7 -20.5 -23.5 57.0 -40.2 14.1 -33.5 -8.9 26.5 12.3 1.1 1.8 -11.3 4.2 -12.3 4.5 3.5 3.8 -5.4
1M
RELATIVE TO SENSEX 3M 6M 12M 2.9 6.0 38.9 33.3 35.0 21.3 15.6 27.6 14.0 1.7 -1.9 -8.7 7.9 -5.9 45.7 -16.3 2.6 81.3 6.2 -7.1 -16.8 -9.6 1.0 2.2 -5.2 1.7 10.9 5.9 9.9 -1.9 2.4 9.9 24.7 -4.4 41.0 32.9 12.2 -14.8 -14.9 5.8 -0.7 -0.5 2.4 -18.1 9.2 29.0 -4.7 1.9 2.3 4.1 -20.1 -26.7 -19.2 -22.6 8.0 -36.4 -41.3 -18.4 -1.1 -24.8 -25.0 0.6 10.8 -5.9 51.0 -3.9 -11.9 15.7 9.9 -18.3 0.6 3.8 3.5 11.9 -1.9 -13.7 -5.4 -9.1 -15.0 -30.8 -14.7 -6.0 -3.3 -10.0 17.4 -9.2 22.8 -35.8 -19.0 5.7 10.0 -9.7 2.7 -26.2 2.9 -1.8 -13.7 -3.1 -3.2 -7.8 -50.8 -35.3 -32.0 -49.4 -9.6 -55.5 -55.2 -49.5 -12.8 -40.1 -0.7 -3.7 -3.0 -4.6 43.2 -14.4 -20.8 -33.9 -9.9 14.0 29.3 31.0 50.2 33.6 9.0 -25.1 25.1 -24.8 -38.3 -24.4 -8.1 -12.3 -27.6 -30.4 43.0 -45.5 3.9 -39.4 -17.0 15.2 2.2 -7.9 -7.3 -19.2 -5.1 -20.1 -4.9 -5.8 -5.4 -13.8
9.6 7.2 1.8 12.1 12.4 2.8 -0.8 1.5 4.4 -1.7 -1.5 -4.2 1.2 -2.1 26.3 -7.8 4.9 13.3 15.5 0.2 -3.8 -2.3 -2.5 -0.6 -0.7 0.2 -0.6 -3.2 4.8 -3.3 -1.9 -4.0 -0.6 -6.3 12.6 1.2 3.3 -3.8 -16.3 -4.9 -0.2 3.4 -6.7 -2.1 6.9 11.2 7.2 0.1 0.3 0.1
Buy Buy Buy
650.0 1010.0 365.0
Buy Buy Buy Buy Buy Hold Hold Buy Buy Hold
388.0 490.0 886.0 130.0 1265.0 600.0 732.0 978.0 654.0 **
Hold Buy Hold Hold Hold Hold Hold Buy Hold Hold Buy Hold Buy Buy Buy Buy Buy Buy Buy Buy Buy Hold
308.0 180.0 2818.0 65.0 ** 4500.0 2009.0 ** 61.0 1277.0 387.0 196.0 200.0 515.0 300.0 1325.0 1464.0 395.0 1485.0 149.0 296.0 170.0
** Price target under review
December 2013
FROM SHAREKHANS DESK
from sharekhans desk

December 2013
2013 ends with a bang

After the Diwali fireworks the Indian stock market took a breather in November this year. It has resumed the uptrend in the initial part of December on the back of some encouraging economic data points (especially the upsurge in exports, moderation in gold imports and the significant narrowing down of the current account deficit) and a supportive global environment (most developed markets are hitting a new high). But the big push to the investor sentiment has emerged from the spectacular show by Bharatiya Janata Party (BJP), the main opposition party in the country, in the assembly elections of the four key states of India, ie New Delhi, Rajasthan, Madhya Pradesh and Chhattisgarh. It has raised hopes that the May 2014 general election may lead to a change of guard at the centre. Both India Inc and the Street are favourably inclined to BJP coming to power at the centre. The partys prime ministerial candidate, Narendra Modi, is perceived as a decisive leader with progrowth and pro-industry credentials. The euphoria has finally pushed the benchmark indices towards a new high after a gap of close to six years. This is exactly what we had anticipated and indicated in the editorial of the last issue of the ValueGuide. Though December is traditionally a good month for the Indian equity market, but the sustenance of the current rally would be influenced by some important events ahead. The Reserve Bank of India is scheduled to announce its policy review on December 18 and containing inflation trends would be high on its agenda, given the uncomfortable level of consumer inflation (Consumer Price Index) in spite of a good monsoon and agricultural output. The Consumer Price Index has climbed up to 10.6% while the Wholesale Price Index is at an eight-month high of 7%, giving rise to fears that the Indian central bank may hike the repo rates by another 25 basis points at the forthcoming meeting. The apex bank has already hiked the repo rates at the previous two meetings despite the sharp moderation in the economic growth and the tight liquidity adversely affecting the already sagging investment cycle. Meanwhile, around the same time as the RBI will ponder its options to combat inflation, another central bank several miles away will hold a two-day meeting to decide the fate of the US fiscal stimulus. Over a period of two days, December 17 and 18, the US Federal Reserve will take stock of the US economy and will be keenly watched by the financial markets the world over for its stance on the tapering of the quantitative easing (QE) programme. The easy liquidity condition globally caused by QE is seen as a key support for the foreign inflow driven Indian equity market. The foreign institutional investors have pumped in close to Rs99,500 crore into the Indian equity market this year so far whereas the domestic institutions have been net sellers due to redemption pressure from the retail investors. The benchmark indices are set to deliver a high double-digit return in 2013 as well and make it another year of good returns after 2012. However, the broader markets (CNX Mid-cap Index and CNX Small-cap Index) still trade at a significant discount (30-40%) to their respective all-time highs and many investors are saddled with losses due to an unreasonably high exposure to this segment. The trend highlights the importance of having quality companies in ones investment portfolio for stable and consistent returns.
EQUITY
FUNDAMENTALS
SHAREKHAN TOP PICKS
SHAREKHAN TOP PICKS
Sharekhan Top Picks

After a smart rally of close to 15% in the benchmark indices, the Sensex and the Nifty, during the two-month period of September and October 2013, the equity market took a breather in November, ahead of the assembly polls in four key states of the country in central and north India. The Sensex and the Nifty moved in a fairly narrow range throughout the month and ended with a loss of close to 1.6% each since our last update on the Top Picks basket published on November 1, 2013. The Top Picks basket underperformed the market marginally and ended with a loss of 1.9% in the same period. Interestingly, the CNX Mid-cap Index outperformed the benchmark indices with a gain of 1.3% indicating stock pickers are exploring value in the quality mid-cap space. This month, we are making two changes, we are introducing ITC and Aurobindo Pharma into the Top Picks basket in place of HDFC Bank and Bajaj Corp. The introduction of ITC is purely driven by the fact that the recent correction in the stock offers a decent entry point for investors in ITC with a scope for high double-digit gains over the next few quarters. So it is rotation among the defensive stocks in place of HDFC Bank, which is an equally good stock but has relatively lesser upside to our price target as compared with ITC. Aurobindo Pharma is coming in place of Bajaj Corp (which is facing head winds on volume growth front), as the former is still among the most attractively valued mid-cap pharmaceutical stocks (in spite of the sharp run-up in its price recently) and has certain near-term triggers in place.
ABSOLUTE OUTPERFORMANCE
240% 200% 160% 120% 80% 40% 0% -40% YTD CY2013 CY2012 CY2011 CY2010 CY2009 Since Inception (Jan 2009)
CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS IN %)

310% 280% 250% 220% 190% 160% 130% 100% Oct-09 Oct-10 Oct-11 Oct-12 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Nif ty Oct-13
Sharekhan (Top Picks)
Sensex
Nifty
Sharekhan
Sens ex
NAME Aurobindo Pharma Bharti Airtel HCL Technologies ICICI Bank ITC Larsen & Toubro Reliance Industries Selan Exploration Sun Pharma TCS Zee Entertainment Enterprises
* CMP as on December 02, 2013
CMP* (RS) 304 332 1,132 1,089 320 1,067 855 314 596 2,014 268
FY13 19.4 58.3 19.5 15.1 34.0 20.5 13.2 11.7 41.1 28.3 35.8
PER FY14E 11.4 29.7 13.6 14.0 28.8 18.8 13.3 11.2 26.8 20.3 29.2
FY15E 9.7 21.7 12.0 11.8 24.2 17.1 11.7 7.7 23.7 17.0 25.1
FY13 18.5 7.9 36.1 13.1 45.4 16.5 11.0 20.3 25.4 33.1 19.6
ROE (%) FY14E 27.5 4.6 39.1 12.9 46.3 14.5 9.8 18.4 27.6 35.6 20.8
FY15E 26.2 6.0 33.7 14.0 46.5 14.2 10.0 22.6 24.8 33.4 21.3
PRICE TARGET (RS) 388 395 1,350 1,195 369 1,140 1,010 365 654 2,600 300
UPSIDE (%) 28% 19% 19% 10% 15% 7% 18% 16% 10% 29% 12%
December 2013
SHAREKHAN TOP PICKS

NAME CMP (RS) PER FY14E ROE (%) FY14E
EQUITY
FUNDAMENTALS
PRICE TARGET (RS) UPSIDE (%)
FY13
FY15E
FY13
FY15E
AUROBINDO PHARMA Remarks:
304
19.4
11.4
9.7
18.5
27.5
26.2
388
28%
Aurobindo Pharma is set to rebound with the USFDA clearing two of its manufacturing facilities (including one greenfield facility) and removing import-alert on Unit-VI facility. The clearance will help the company to ramp up its product list in the USA, thanks to a strong product pipeline built over a period. With the expected increase in the export-led business after the resolution of the USFDA issues, the favourable tilt in the revenue mix is likely to boost the margin, resulting in a relatively much better growth in earnings as compared with revenues. The company has seen a significant shift from the competition infested tablet and capsule business to a less crowded market of injectibles. The management is also likely to focus on hormonal, oncology, ophthalmic, penems and peptide-based products, which will bring the next spin of growth in the next two to three years. We expect the revenues and profit to grow at a CAGR of 17% and 41% over FY2013-15 respectively. Currently, the stock is trading at 11.4x and 9.7x FY2014E and FY2015E earnings respectively. Our price target price of Rs388 implies 10x average estimated earnings for FY2015E and FY2016E.
BHARTI AIRTEL Remarks:
332
58.3
29.7
21.7
7.9
4.6
6.0
395
19%
The Indian telecom environment is turning favourable with a drop in the competitive intensity and the benefits of consolidation flowing to the incumbent players, as visible in the financial results of the players for the past two quarters. The Q2FY2014 results of the Indian business of Bharti Airtel exhibited a strong pricing power (+1% QoQ), with a robust data revenue growth, aided by a 110-basis-point sequential margin expansion in the India mobile business. The strong performance indicators along with a positive management commentary on maintaining pricing discipline and headroom ahead for price increases make us stick to our estimates and rating In the wake of the improving business fundamentals, relatively less harsh regulatory moves, and the impending mergers and acquisitions in the sector, we maintain our positive stance on Bharti Airtel, with a price target of Rs395 (valued at 7.5x FY2015 EV/EBITDA).
HCL TECHNOLOGIES Remarks:
1,132
19.5
13.6
12.0
36.1
39.1
33.7
1,350
19%
HCL Technologies is an IT services company providing software-led IT solutions, remote infrastructure management services and BPO services. The company has a leading position in remote infrastructure management services which has helped it win large IT outsourcing contracts. Through the Axon PLC acquisition, the company has gained a strong SAP consulting footing. In the current environment, we believe HCL Tech is well placed in terms of its business strategy of consciously targeting the re-bid market. The results of the same are evident in its consistent outperformance in terms of volume and revenue growth. The company has allayed the apprehensions on the margin front by consistently improving its margins despite head winds. The management acknowledged the potential threat of the impending US immigration bill and expressed concern over the outplacement clause in the current form (we, therefore, hope for some dilution in the final bill). Nevertheless, among the top four IT companies, HCL Tech is relatively better placed, as around 50% of its total workforce in the USA holds the H1-L1 visa against a higher percentage of such visa holders for TCS, Infosys and Wipro. In view of an improved operating environment coupled with decent earnings predictability driven by a $4-billion-plus order book, stable margins and sustainable momentum in the IMS vertical, we continue to recommend a Buy on it with a price target of Rs1,350.
ICICI BANK Remarks:
1,089
15.1
14.0
11.8
13.1
12.9
14.0
1,195
10%
ICICI Bank continues to report a strong growth in earnings led by a growth in advances and expansion in margins (2.9% in FY2013). We expect its advances to grow at 17.6% CAGR over FY2013-15. This should lead to a 16.9% CAGR growth in the net interest income (NII) in the same period. ICICI Banks asset quality remains stable as its non-performing assets (NPAs) have declined in the past several quarters led by a contraction in slippages. This has led to a sharp reduction in the provisions and an increase in the profitability. Going forward, we expect the asset quality pressures to be within the manageable limits leading to a healthy the profit growth. Led by a pick-up in the business growth and an improvement in the margins, the RoE is likely to expand to 14.0% by FY2015 while the RoA is likely to improve to 1.6%. This would be driven by a 12.7 % growth (CAGR) in the profit over FY2013-15. The stock trades at 1.6x FY2015E BV. Moreover, given the improvement in the profitability led by lower NPA provisions, a healthy growth in the core income and improved operating metrics, we recommend Buy with a price target of Rs1,195.
December 2013
EQUITY
NAME
FUNDAMENTALS
CMP (RS) PER FY14E ROE (%) FY14E
SHAREKHAN TOP PICKS

FY13
FY15E
FY13
FY15E
ITC Remarks:
320
34.0
28.8
24.2
45.4
46.3
46.5
369
15%
ITCs cigarette business, which contributes around 60% of revenues, continues to be a cash cow for the company. The company endeavours to make a mark in the Indian FMCG market and with successful brands such as Bingo, Sunfeast and Aashirwaad, ITC is already is reckoned among the best in the industry. With the new portfolio of personal care products gaining market share, its FMCG business promises to compete with the likes of Hindustan Unilever and Procter & Gamble. The Government of India has increased the excise duty on cigarettes by about 20% in the finance budget. ITC has already taken a price increase of about 18% in its cigarette portfolio which would help in maintaining the cigarette business margins at around 30%. However, a significant price increase would put pressure on the cigarette business sales volume in the near term. ITCs other businesses of hotels, agri-products, and paper, paperboard and packaging, are expected to provide a good support to the revenues and profitability in the long run. An increase in the taxation and the governments intention to curb the consumption of tobacco products remain the key risks to ITCs cigarette business over the longer term. We expect ITCs bottom line to grow at a CAGR of close to over FY2013-15. At the current market price, the stock trades at 24.2x its FY2015E earnings, which is lower than the current valuation of some of the mid-cap FMCG stocks and above 30% discount to some of its closest large-cap peers. We like the stock from a longer-term perspective and retain it as one of our top picks in the FMCG space.
LARSEN & TOUBRO Remarks:
1,067
20.5
18.8
17.1
16.5
14.5
14.2
1,140
7%
Larsen & Toubro (L&T), the largest engineering and construction company in India, is a direct beneficiary of the strong domestic infrastructure development and industrial capex boom. L&T continues to impress us with its good execution skills, reporting decent numbers throughout despite the slowdown in the industrial capex cycle. Also, we have seen order inflow traction in recent quarters which enhances the revenue visibility. Despite challenges like deferral of award decisions and stiff competition, the company has given a robust guidance of ~15% growth in the future. Moreover, monetisation of assets would help the company to improve the RoE. A sound execution track record, a healthy order book and a strong performance of its subsidiaries reinforce our faith in L&T. At the CMP, the stock is trading at 17.1x its FY2015E earnings.
RELIANCE INDUSTRIES Remarks:
855
13.2
13.3
11.7
11.0
9.8
10.0
1,010
18%
Reliance Industries Ltd (RIL) has a strong presence in the refining, petrochemical and upstream exploration businesses. The refining division of the company is the highest contributor to the companys earnings and is operating efficiently with a better gross refining margin (GRM) compared with its peers in the domestic market due to the ability of its plant to refine more of heavier crude. However, the gas production from the Krishna-Godavari-D6 field has fallen significantly in the last two years. With the government approval for additional capex in its allocated gas fields; we believe production will improve going ahead. Though there is uncertainty prevailing on gas production and pricing of gas from the KG-D6, the traction in volume from shale gas assets is playing positively for the company. Moreover, the petrochemical and refinery businesses are on the driving seat and contributing the lions share of the profitability. Hence, the uncertainty related to the domestic gas production and pricing are likely to limit the impact. The key concerns remain in terms of a lower than expected GRM, profitability of the petrochemical division and the companys inability to address the issue of falling gas output in the near term. At the current market price the stock is trading at a PE of 11.7x its FY2015E EPS.
SELAN EXPLORATION Remarks:
314
11.7
11.2
7.7
20.3
18.4
22.6
365
16%
Selan Exploration (Selan), has rights to develop five small discovered (minimal exploration risk) oil fields (Bakrol, Lohar, Indrora, Karjisan and Ognaj) in Cambay Basin (Gujarat) with proven oil & gas reserves. Recently Selan received approvals from the Directorate General of Hydrocarbons (DGH) for developing two wells in Indrora, two wells in Lohar field and one well in Karjisan. Further, there are seven more wells for which approvals are pending (six wells in Bakrol and one well in Karjisan). Therefore, we expect production ramp-up to start soon which would percolate to the earnings. Moreover, the company would benefit from the rupees depreciation. We like its debt-free position, significant cash on books (which is 24% of the market capitalization) and ability to generate RoE around 20%. At the current market price the stock is trading at 7.7x its FY2015E earnings and 3.5x its EBITDA.
December 2013
SHAREKHAN TOP PICKS

NAME CMP (RS) PER FY14E ROE (%) FY14E
EQUITY
FUNDAMENTALS
FY13
FY15E
FY13
FY15E
SUN PHARMA Remarks:
596
41.1
26.8
23.7
25.4
27.6
24.8
654
10%
The combination of Sun Pharma, Taro Pharma, Dusa Pharma and the generic business of URL Pharma offers an excellent business model for Sun Pharma, as was reflected in the 40% Y-o-Y revenue growth and 39% Y-o-Y profit growth in FY2013. Though pricing pressure in some of the products of Taro Pharma may restrict the growth in the USA, but we expect a better performance from Sun Pharma going forward mainly driven by (1) the contribution from the newly acquired Dusa Pharma and URL Pharma in the USA; (2) launch of generic Prandin under 180-days exclusivity; (3) better traction in sales of Doxil in the absence of key competitors; and (4) the launch of other key generic products in the USA and the emerging markets including India. We expect 23% and 32% revenue and PAT growth (CAGR) respectively over FY2013-15 on an organic basis. With a strong cash balance, Sun Pharma is well positioned to capitalise on the growth opportunities and inorganic initiatives. Its debt-free balance sheet insulates it from the negative impact of the volatility in the currency market. Currently Sun Pharma is trading at 26.8x and 23.7x FY2014E EPS and FY2015E EPS respectively. We maintain our Buy recommendation on the stock, with a price target of Rs654 (post-bonus shares).
TCS Remarks:
2,014
28.3
20.3
17.0
33.1
35.6
33.4
2,600
29%
TCS pioneered the IT services outsourcing business from India and is the largest IT service firm in the country. It is a leader in most service offerings and has further consolidated its position as a full service player by delivering a robust financial and operational performance consistently in the last two years. The consistency and predictability of the earnings performance has put the company in the top of its league. Moreover, the quality of its performance has also been quite impressive, ie it has been able to report a broad-based growth in all its service lines, geographies and verticals consistently over the past two years, thereby justifying its position as a full service player in the IT industry. Going ahead too, we believe the company is well positioned to capitalise on to the opportunities that the marketplace has to offer due to its scale. At the current market price of Rs2,108, the stock is trading at 20.3x FY2014 EPS of Rs99.1 and 17.0x FY2015 EPS of Rs118.3. We maintain our Buy recommendation on the stock with a price target of Rs2,600.
ZEE ENTERTAINMENT Remarks:
268
35.8
29.2
25.1
19.6
20.8
21.3
300
12%
Among the key stakeholders of the domestic TV industry, we expect the broadcasters to be the prime beneficiary of the mandatory digitisation process initiated by the government. The broadcasters would benefit from higher subscription revenues at the least incremental capex as the subscriber declaration improves in the cable industry. On completion of 20 years of operations, ZEEL has issued redeemable preference shares (RPS) aggregating Rs2,000 crore (6% preference dividend) for eight years. The RPS will be issued at a ratio of 21 RPSs for every equity share. The RPS will be redeemable from the fourth year till the eighth year. ZEELs management acknowledged that the recent TRAI recommendation of capping the advertisement time at 12 minutes per hour would have an adverse impact on its advertisement volume. The company will take adequate hikes in the advertisement rates in order to negate the impact of reduced volumes. Thus, we expect a very minimal impact on the blended advertisement growth in FY2014 and FY2015. We believe ZEEL will be the major beneficiary of the digitisation process in the years to come which coupled with a strong balance sheet and high return ratios makes it a compelling long-term growth story. We maintain our Buy rating on ZEEL with a price target of Rs300.
December 2013
10
STOCK IDEA
EQUITY
FUNDAMENTALS
BUY
SUN TV NETWORK
CMP: RS367
DECEMBER 03, 2013
Sun rises in the south

COMPANY DETAILS
Price target: Market cap: 52-week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs515 Rs14,463 cr Rs494/327 0.9 lakh 532733 SUNTV SUNTV 9.9 cr
KEY POINTS
Dominant force, undisputed leader of south India: Sun TV Network (Sun TV) is the undisputed leader in the south Indian entertainment market. With 32 out of the total 66 TV channels present in the market, a leading viewership share and a 30% market share of the total south Indian advertisement market, Sun TV enjoys a dominant position in the south Indian broadcasting market. It has a very healthy operating profit margin (OPM) corridor of 70%, EBIT margin of 51% and dividend pay-out of more than 50%. Digitisation benefits yet to accrue, huge upside potential: Among the key stakeholders of the TV industry, TV broadcasters are expected to be the prime beneficiaries of the mandatory digitisation process initiated by the government. The actual benefits of the digitisation process are likely to be seen beyond FY2015 with almost a sixfold increase in the ARPU of the cable subscribers from Rs4 currently to Rs15-20 (post-DAS regime). The full DAS regime will provide incremental potential upside of around Rs650-750 crore to the subscription revenues, driven by (a) an improvement in subscriber reporting (under-reporting is rampant currently); (b) a four- to five-fold increase in the ARPU from the current levels; and (c) an increase in broadcasters ARPU share with an improvement in subscriber reporting. Healthy earnings with strong return ratios: We expect Sun TV to deliver a 16% compound average growth rate (CAGR) in the stand-alone top line over FY201316. We have built a margin decline of 140 basis points over FY2013-16 and expect the net income to grow at a CAGR of 15% over FY2013-16. We expect the return on equity to improve to 28% by FY2016 and the dividend pay-out to remain healthy at around 53% of the consolidated net income. Valuationdeserves re-rating, bright future prospects: At the current market price of Rs367, the stock trades at 18.2x, 15.5x and 13.4x based on the earnings estimates for FY2014, FY2015 and FY2016 respectively. Sun TV enjoys an industry-leading margin profile, leadership position in its key market, strong dividend pay-out, and healthy balance sheet and return ratios. Hence, it deserves a much better valuation. We value Sun TV at 21.5x FY2015E earnings, our target multiple is based on a 25% discount to ZEEL. We initiate coverage on Sun TV with a Buy rating and price target of Rs515.
VALUATIONS
Particulars Revenues (Rs cr) Y-o-Y growth (%) EBITDA margins (%) EBIT margins (%) Net profit (Rs cr) Y-o-Y growth (%) EPS (Rs) PE (x) EV/EBITDA (x) RoE (%) RoCE (%) FY2012 1,847.2 -8.3 76.6 50.9 692.9 -10 17.6 20.9 10.0 29.1 40.0 FY2013 1,923.0 4.1 73.3 50.3 709.6 2.4 18 20.4 10.0 26.8 37.0 FY2014E 2,260.7 17.6 71.3 49 793.1 11.8 20.1 18.2 8.5 26.7 37.6 FY2015E 2,603 15.1 72.1 50.1 933.9 17.7 23.7 15.5 7.1 27.7 39.1 FY2016E 2,980.5 14.5 71.9 50.5 1,077.2 15.3 27.3 13.4 5.9 28.1 39.8
SHAREHOLDING PATTERN
Public & Others 5% Foreign 16% Institutions 2% Non-promoter corporate 1% Promoters 76%
PRICE CHART
500 470 440 410 380 350 320 Mar-13 Jun-13 Sep-13
6m -10.2 -15.8
Dec-12
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -14.1 -12.9 3m -11.3 -20.0 12m -8.1 -16.3
Dec-13
Source: Company, Sharekhan Research
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.
For detailed report, please visit the Research section of our website, sharekhan.com.
11
December 2013
EQUITY
FUNDAMENTALS
SWITCH IDEA
SHAREKHAN SPECIAL FMCG
O CTOBER 06, 2008 D ECEMBER 03, 2013
Closure of switch call from HUL to Colgate-Palmolive India with absolute gain of 10%
KEY POINTS
Close switch call with around 10% absolute return and 5% outperformance compared with the Nifty: Within the initiation period of two months our Switch Idea to shift from Hindustan Unilever Ltd (HUL) to Colgate-Palmolive India (Colgate; released on September 24, 2013) has given a positive return of about 10% till date while the broader market has moved up by 5% in the same period. In the past two months, the stock price of HUL has corrected by 10% because of the persistent slowdown in the premium categories. The stock has also been affected by the concerns voiced by the parent company, Unilever, over HULs lower growth in the emerging markets in the near term. On the other hand, Colgates stock price has remained stable on the bourses despite the hovering concern over the sustenance of its market share in the domestic toothpaste market. In recent times, its market share has been threatened by the entry of a multinational, ie Procter & Gamble, and the aggression shown by the other players in the toothpaste segment. Thus, with 10% absolute return in less than two months and about 5% outperformance over the broader market indices, we close our switch call because of the belief that the downside in the HUL stock price is capped at the current levels. HULs trading premium over Colgate has narrowed down to 14%: Two months ago, HUL was trading at a valuation premium of 34% to Colgate, which had prompted us to come out with a Switch Idea along with the fundamental reasoning. In the past
SWITCH PERFORMANCE
Switch call Sell HUL Buy Colgate India Gain / (Loss) Nifty 24-Sep-13 643 1275 5892.5 3-Dec-13 579 1274 6201.9 Gain / Loss 10.0 -0.1 9.9 5.3
two months the valuation premium has narrowed down to 14% providing a limited risk-reward ratio from the current levels. The drop in the valuation premium of HUL over Colgate can be attributed to a double-digit drop in HULs stock price. HUL to find support around the current levels: HUL is currently trading at about 32x its FY2015E earnings, which is nearing our one-year target multiple of 30x. Though it will take some time for the company to see a substantial improvement in the financial performance, but we do not see the stock price dropping significantly from the current levels. On the other hand, the management of the company has enhanced its focus and taken decisive steps to improve the sales volume of the company in the coming quarters. Consequently, any improvement in the sales volume growth of the domestic consumer business of HUL would give a sentimental boost to the stock price.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.
ADITYA BIRLA NUVO

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs1,325 Rs14,118 cr Rs1,290/930 1.8 lakh 500303 ABIRLANUVO ABIRLANUVO 5.6 cr
CMP: RS1,174 NOVEMBER 13, 2013 Good performance in Q2 led by lifestyle and telecom verticals
RESULT HIGHLIGHTS
Good results, led by lifestyle and telecom verticals: Aditya Birla Nuvo (ABN) reported overall good results for the quarter with consolidated top line, operating profit and net profit growing by 0.9%, 19.7% and 2.3% YoY respectively. On a normalised basis, the consolidated results posted a growth of 10%, 26% and 13% in the revenues; earnings before interest, tax, depreciation and amortisation (EBITDA); and net profit YoY respectively for the quarter. The normalised results are computed excluding the Pantaloons business that got merged with ABN in July 2013 and excluding the carbon black business that was sold off in April 2013. Key management takeaways: The management maintained its capital expenditure guidance of Rs650 crore for FY2014 and guided for a slightly higher net debt/EBITDA (currently at 2.1x) owing to higher subsidy in the agri business. On the life insurance front, it expects the business to stabilise by the end of FY2014. On the non-banking financial companies business, it continued with its stance to grow the book.
12m 25.0 13.3
Public & Others 10% Foreign 20% Institutions 14% Promoters 53% Non-promoter corporate 3%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -6.5 -5.5 3m -1.1 -7.9 6m 9.0 6.6
Maintain Buy: ABN is amongst the top five players in the insurance, asset management and telecom segments. Given the diverse businesses in which ABN is present, we value the company on a sum-of-the-parts basis and then adjust it with the companys consolidated debt to arrive at a price target. We retain our Buy rating on the stock with a price target of Rs1,325.
December 2013
12
EQUITY
FUNDAMENTALS
STOCK UPDATE
APOLLO TYRES
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs86 Rs3,535 cr Rs102/55 34.0 lakh 500877 APOLLOTYRE APOLLOTYRE 28.5 cr
CMP: RS70 NOVEMBER 12, 2013 Strong Q2 results; upgraded to Buy as Cooper Tire deal on backburner now
KEY POINTS
Q2FY2014 results ahead of estimates on account of lower material cost: Apollo Tyres Ltd (ATL)s Q2FY2014 revenues at Rs3,433.5 crore were in line with our estimates. However, a reduction in the material cost due to lower rubber prices boosted the operating performance during the quarter. ATL reported a margin of 12.3%, which is 300 basis points ahead of our estimate. A lower than expected taxation further boosted the profit. ATL reported a profit after tax (PAT) of Rs219.5 crore, which is significantly ahead of our estimate of Rs115.4 crore. Demand pressure to sustain in near term: The demand in the domestic as well as the South African market, which together constitute about 70% of the overall revenues of the company, is expected to remain subdued. Sluggish commercial vehicle sales in the domestic market and weak automotive sales in South Africa would maintain the pressure on the demand. Raw material outlook stable; margin improvement to sustain: ATL expects the raw material cost to stabilise at the current levels. We expect the margin to sustain at higher levels on account of the benign raw material prices. Valuationupgraded to Buy on earnings upgrades and lower probability of Cooper Tire acquisition: We have fine-tuned our earnings estimates for FY2014 and FY2015 to factor in the margin improvement achieved on the back of the subdued raw material prices. The proposal to acquire Cooper Tire had led to a sharp contraction in the valuation multiple for ATL. Moreover, the valuation gap between ATL and its peers like Ceat has narrowed down significantly. However, given the lower probability of the Cooper Tire deal going through, we have revised the price target for ATL to Rs86 at 5.5x (price/ earnings multiple of FY2015E earnings) and upgrade the recommendation to Buy.
Public & Non promoter Others corp 13% 5% Govt 2% Institutions 2% Foreign 33% Promoters 45%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 11.4 11.5 3m 20.9 10.5 6m -20.3 -22.9 12m -6.3 -15.9
AUROBINDO PHARMA
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs314 Rs7,804 cr Rs265/127 22.4 lakh 524804 AUROPHARMA AUROPHARMA 13.2 cr
CMP: RS268 NOVEMBER 11, 2013 Price target revised to Rs314

RESULT HIGHLIGHTS
Bumper Q2FY2014: Aurobindo Pharma (Aurobindo) reported a 27.6% Y-o-Y rise in net sales to Rs1,914 crore in Q2FY2014 on the back of strong sales in the USA (up 72% YoY) and healthy sales of active pharmaceutical ingredients (APIs) related to semi-synthetic penicillin (SSP) and anti-retroviral drugs (ARV), which grew by 32% YoY and 27% YoY respectively. Though a favourable currency did play a positive role, but the base business itself grew in the key markets like the USA, where the company witnessed expansion in market share of its key products. The operating profit margin (OPM) surprised us positively with an expansion of 622 basis points YoY to 22.9% during the quarter. The net profit excluding the foreign exchange (forex) loss rose by 189.4% YoY to Rs303 crore during the quarter which is significantly better than our estimate. However, including the forex of loss of Rs68.3 crore (verses a forex gain of Rs117.7 crore in Q2FY2013) the reported net profit showed an expansion of 5.6% YoY to Rs235 crore. We revise earnings estimates and price target to Rs314; maintain Buy: The management is confident of achieving a revenue growth of over 20% in the base business while the EBIDTA margin is likely to improve to 20% in FY2014 from 15% in FY2013. We revise our earnings estimates up by 28% and 18% for FY2014 and FY2015 respectively. Accordingly, our price target stands revised up by 18% to Rs314 (10x EPS for FY2015). We maintain our Buy rating on the stock.
Public and others 10% Non-promoter corporate Institutions 4% 12%
Foreign 20% Promoters 54%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 14.1 8.9 3m 50.9 34.8 6m 23.0 15.9 12m 36.9 22.3
13
December 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
BHARTI AIRTEL
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs395 Rs137,171 cr Rs370/267 46.6 lakh 532454 BHARTIARTL BHARTIARTL 139.0 cr
CMP: RS343
NOVEMBER 20, 2013 Upgraded to Buy
RESULT HIGHLIGHTS
Stock correction provides opportunity: Since our last update on Bharti Airtel published on October 30, 2013, the stock has declined by around 5% and currently provides around 15% upside to our price target of Rs395. We believe that the market has punished the company for its poor performance in Africa and the high dollar-denominated loans in its balance sheet. We believe the concerns are overdone and that going forward the operations in Africa are likely to stabilise and grow, albeit at a lower pace as against the level of high double-digit growth envisaged by the management earlier. Upgraded to Buy: Taking cognisance of the improving business fundamentals, the receding regulatory roadblocks and the recent price correction, we upgrade our rating on Bharti Airtel from Hold to Buy, maintaining our price target of Rs395. Our price target provides an upside of about 15% from the current levels. At the current market price the stock is trading at FY2015E enterprise value/earnings before interest, tax, depreciation and amortisation of 6.9x.
Public & Others 1% Foreign 21% Institutions 9% Non-promoter corporate 4%
Promoters 65%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 2.0 3.6 3m -1.0 -6.0 6m 11.8 7.2 12m 14.0 -1.5
CESC
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs450 Rs4,911 cr Rs408/253 2.2 lakh 500084 CESC CESC 6.0 cr
CMP: RS391 NOVEMBER 12, 2013 Upgraded to Buy on strong Q2 results and improving outlook for subsidiaries
RESULT HIGHLIGHTS
Results beat estimates on higher tariff; PAT grew by 26%: CESC reported a very healthy set of numbers for Q2FY2014 and the numbers are much ahead of our as well as the Streets estimates. The reported PAT was 23% higher than estimated and sales were 16% ahead of our estimate due to an 11% higher than estimated tariff. The benefit of the tariff revision also percolated to the bottom line and the net profit grew by 26% YoY and 31% QoQ to Rs171 crore in Q2FY2014. Healthy operational performance of subsidiaries: The store-level profitability of Spencers improved to 5.1% (against 4.7% in Q2FY2013) along with a healthy same-store sales growth of 12.4% YoY in Q2FY2014. Further, First Source Ltd (FSL), in which CESC had acquired a 56.8% stake last year, is doing well. At the end of Q2FY2014 CESC launched a shopping mall which is fully booked and is expected to earn a net profit of around Rs16 crore annually.
12m 45.9 30.9
Others 9% Institutions 18% Promoters 52% Foreign 21%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 15.9 16.0 3m 23.8 13.2 6m 30.1 25.9
Viewupgraded to Buy and price target revised upward: We remain positive on CESC and retain the stock as our top pick in the utility space due to the steady improvement in its retail subsidiary. We like the way the FSL acquisition is shaping up, which is likely to add value to the parent company sooner or later. Hence, we have incorporated FSL in our sum-of-the-parts valuation and revised our price target to Rs450 from Rs385 earlier and upgraded the recommendation from Hold to Buy.
December 2013
14
EQUITY
FUNDAMENTALS
STOCK UPDATE
CROMPTON GREAVES
HOLD
COMPANY DETAILS
Price target: Market cap: 52-week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs110 Rs6,765 cr Rs126/72 24.2 lakh 500093 CROMPGREAVE CROMPGREAVE 36.9 cr

RESULT HIGHLIGHTS
Reported numbers largely in line with estimates; gradual recovery in international operation continues: For Q2FY2014 Crompton Greaves Ltd (CGL) reported slightly better numbers at the operating level compared with our estimate, with a tad higher margin of 5%. Though a higher other income supported the operating performance, but due to higher than estimated depreciation (includes a forex impact of around Rs9 crore) and tax outgo, the consolidated profit after tax was 7% lower than our estimate. We would like to highlight that the international subsidiaries reported a profit at the operating level after four quarters, as the operation in Hungary is stable now; however, the recovery in the other subsidiaries is likely to be slower than expected. Viewturnaround of subsidiaries at net level remains critical; retain Hold: The management retained its top line guidance of a double-digit growth in FY2014 and sounded optimistic regarding an improving market condition in Europe leading to an improvement in the profitability of the international subsidiaries by the end of the year. In our view, though the international subsidiaries moving to the profit zone at the operating level after four quarters is a positive signal, but the likely continuation of the losses of the US and Canadian subsidiaries remains a concern among investors. Currently the stock is trading at 22x FY2014E and 12x its FY2015E earnings, pricing in the positive developments. Thus, it is advisable to take advantage of the recent run-up in the stock price and book partial profits. However, we retain our Hold rating with a price target of Rs110.
Others 17% Promoters 42% DII 24%
FII 17%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 14.1 8.9 3m 21.9 8.9 6m 9.7 3.4 12m -5.3 -15.3
DIVI'S LABORATORIES
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs1,265 Rs14,616 cr Rs1,234/905 1.8 lakh 532488 DIVISLAB DIVISLAB 6.3 cr
CMP: RS1,102 NOVEMBER 11, 2013 Price target upgraded to Rs1,265

RESULT HIGHLIGHTS
Q2FY2014 performance stronger than expected: Riding on favourable currency movement and an uptick in the contract research and manufacturing services (CRAMS) business, Divis Laboratories (Divis) has reported a 19.7% Y-o-Y rise in net revenues to Rs566 crore in Q2FY2014. Its operating profit jumped by 470 basis points YoY to 43.8% in the same period. The adjusted net profit expanded by 25.2% YoY to Rs174 crore. The company provided Rs31.2 crore for foreign exchange (forex) gains during the quarter as compared with a forex loss of Rs20.8 crore in Q2FY2013. This resulted in the reported net profit jumping by 73.7% YoY to Rs204.9 crore. The adjusted net profit is 27% higher than our estimate of Rs136 crore, primarily due to a better than expected operating profit margin (OPM). Outlook remains strongwe fine-tune estimates and upgrade price target to Rs1,265: After witnessing a weak performance in the previous two quarters, the company seems to have bottomed out. Though the benefits arising out of the depreciation of the rupee against the major international currencies may not sustain, but we believe an improvement in the product mix (a higher proportion of revenues from the CRAMS segment) and the commercialisation of the additional production blocks (expected in FY2015) would help Divis achieve a sustainable growth. Taking our cues from the H1FY2014 performance, we have revised our earnings estimates upwards by 7% and 2.8% for FY2014 and FY2015 respectively. Accordingly, our price target stands upgraded to Rs1,265, which implies 19x FY2015E earnings. We maintain our Buy rating on the stock.
Public and others 8% Non-promoter corporate 11% Institutions 13% Foreign 17%
Promoters 51%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -4.7 -9.0 3m 5.8 -5.5 6m -7.8 -13.1 12m -12.4 -21.8
15
December 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
GLAXOSMITHKLINE CONSUMER HEALTHCARE

HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs4,886 Rs19,690 cr Rs6,020/2,980 29,577 500676 GSKCONS GSKCONS 1.2 cr
CMP: RS4,677 NOVEMBER 7, 2013 Price target revised to Rs4,886

RESULT HIGHLIGHTS
Operating performance largely in line with expectations, bottom line grows in mid teens on higher non-core income: GSK Consumer posted a decent performance in Q3CY2013 with the revenues growing by 17.4% and the PAT growing by 14% YoY. The highlight of the quarter was a 12% growth YoY in the companys sales volume (domestic volume grew by 10%) which was ahead of our as well as the Streets expectations for the quarter. Horlicks and Boost registered a value growth of 16% YoY (a volume growth of 9.7% YoY) and 19% YoY (volume growth of 11.6% YoY) respectively in Q3CY2013. The packaged foods segment delivered a stellar performance with a 24% Y-o-Y value growth while Horlicks Oats improved its ranking to two from three earlier in the Indian market. The exports grew strong by 50% YoY while CSDs sales grew by 30% YoY on account of a low base of Q3CY2012. The strategic sourcing of key raw materials and renewed focus on cost control helped the company to maintain the GPM at 62.9% despite an increase in the prices of the key agri-inputs. Maintained Hold due to premium valuation: The company has changed its financial year end from December 2013 to March 2014. Accordingly, we have incorporated 15 months numbers for FY2014 and introduced our earnings estimate for FY2015 in this note. We now value the stock on FY2015 earnings estimate. As a result, our price target has also been revised to Rs4,886 (valued at 32x FY2015E EPS of Rs152.7). Due to limited upside from the current level we maintain our Hold recommendation on the stock. At the current market price the stock trades 30.6x its FY2015E EPS of Rs 152.7.
Others 15%
FIIs 12%
Domestic institutions 1%
Promoters 72%
PRICE PERFORMANCE
IL&FS TRANSPORTATION NETWORKS

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs201 Rs2,148 cr Rs227/98 60,103 533177 IL&FSTRANS IL&FSTRANS 5.4 cr
CMP: RS111 NOVEMBER 13, 2013 Price target revised to Rs201; Buy maintained
RESULT HIGHLIGHTS
Revenues lower than expected due to lower construction income: In Q2FY2014, the consolidated revenues of IL&FS Transportation Networks Ltd (ITNL) declined by 2.2% YoY to Rs1,341 crore led by lower than expected construction revenues. The construction revenues declined by 19.9% YoY to Rs737 crore. However, the revenues from the operational build-operate-transfer (BOT) assets grew at a robust rate of 22%. Favourable revenue mix boosts margins: The operating profit margin (OPM) improved by 419 basis points YoY to 37.2%, which was higher than our estimate. Consequently, the EBITDA grew by 10.2% YoY to Rs499.1 crore. Decline in PBT on account of a surge in interest and depreciation charges, and a lower other income: Though the company reported an increase in the OPM, but a huge surge in the interest charge (up 29.3% YoY) and depreciation charge (up 54.6% YoY) coupled with a decrease in the other income (down 26.7% YoY) led to a 31.1% decline YoY in the profit before tax to Rs135.5 crore. Estimates revised downwards for FY2014 and FY2015: We have revised our net sales estimates for FY2014 and FY2015 downwards after factoring in the lower construction revenues reported for Q2FY2014. Further, our net profit estimates for FY2014 and FY2015 stand revised downwards. Maintain Buy with a revised price target of Rs201: Our sum-of-the-parts based price target has been revised downwards to Rs201. We have maintained our Buy rating on the stock.
FII 3% Institutions 3% Public & others 21%
Promoters 73%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 2.0 3.1 3m -9.4 -15.6 6m -33.2 -34.7 12m -35.6 -41.6
December 2013
16
EQUITY
FUNDAMENTALS
STOCK UPDATE
INDIA CEMENTS
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs65 Rs1,628 cr Rs98/43 12.0 lakh 530005 INDIACEM INDIACEM 22.0 cr

RESULT HIGHLIGHTS
Unfavourable demand environment affects revenues: In Q2FY2014 the net sales of India Cements declined by 3.3% year on year (YoY) to Rs1,086 crore. The revenues from the cement division declined by 8% YoY to Rs1,010.2 crore largely on account of a decline in the volume (down 2.8%) and a lower blended cement realisation (down 5%) during the quarter. The realisation declined on account of a sharp correction in cement prices in the southern market in July 2013 due to poor offtake of cement. Lower realisation along with higher other expenses dents margin: On the margin front, an 8% correction in the average cement realisation coupled with a 9% increase in the cost of production YoY to Rs3,928 per tonne resulted in a 651-basis-point contraction in the operating profit margin (OPM) to 11.7%. The company posted a loss of Rs23 crore for the quarter which includes foreign exchange (forex) translation charges to the tune of Rs23.6 crore (against a forex gain of Rs10 crore during Q2FY2013). Adjusting for the same, the net profit stands at Rs1.1 crore (down 98.2% YoY), which is much lower than our as well as the Streets expectations. Hold maintained with a revised price target of Rs65: We are downgrading our earnings estimates for FY2014 and FY2015 mainly to incorporate the impact of the sluggish demand environment in the southern market and the increased cost of production. Consequently, the revised earnings per share estimates for FY2014 and FY2015 are now Rs3.7 and Rs6.9 respectively. Further, a likely increase in the supply from the upcoming capacity could put downward pressure on cement prices. Therefore, we have revised our price target downwards to Rs65 and maintained our Hold recommendation on the stock.
Public & others 23% Promoter 28%
Foreign 13% MF & FI 36%
PRICE PERFORMANCE
IRB INFRASTRUCTURE DEVELOPERS

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs110 Rs2,940 cr Rs147/52 23.8 lakh 532947 IRB IRB 12.6 cr

RESULT HIGHLIGHTS
Construction and BOT segments drive revenues; higher interest and depreciation charges affect profitability: In Q2FY2014, IRB Infrastructure Developers (IRB)s consolidated revenues grew by 11.1% YoY to Rs939 crore led by a Y-o-Y growth of 11.5% and 10.2% in the construction and build-own-transfer (BOT) segments respectively. The operating profit margin (OPM) remained flat at 44.9% as against 45.0% in Q2FY2013. During the quarter, the depreciation charge increased by 12.0% YoY and the interest expense grew by 19.0% YoY coupled with a higher effective tax rate. Consequently, the consolidated net profit declined by 11.7% to Rs107 crore. Construction segment registers a strong performance: The construction vertical posted a growth of 11.5% YoY in revenues to Rs666 crore led by the execution of the Ahmedabad-Vadodara, Amritsar-Pathankot and Tumkur-Chitradurga projects. BOT division continues its stable performance: The BOT division continued to put up a stable performance with the revenues rising by 10% YoY to Rs273 crore. The growth was largely led by toll revenues in the Surat-Dahisar project.
6m 12m -31.0 -37.2
Promoters 62%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 5.7 7.3 3m 13.2 7.5 -26.5 -29.2
Estimates for FY2014 and FY2015 revised downwards: We have revised our estimates for FY2014 and FY2015 downwards after factoring in the lower than expected toll collection and a lower construction income. Maintain Buy with revised price target of Rs110: On account of a revision in the traffic growth in a couple of BOT projects and a lower construction income, we have lowered our price target to Rs110. We maintain our Buy recommendation on the stock.
17
December 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
JAIPRAKASH ASSOCIATES
REDUCE
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs40 Rs10,674 cr Rs107/28 3.6 lakh 532532 JPASSOCIAT JPASSOCIAT 121.8 cr
CMP: RS48 NOVEMBER 20, 2013 Downgraded to Reduce; balance sheet concerns to weigh on valuation
RESULT HIGHLIGHTS
Q2 results driven by construction business: JP Associates Ltd (JAL) reported a net sales growth of 5.6% to Rs3,149 crore, which was primarily driven by the construction division (revenues up 12.6% to Rs1,453 crore) with flattish cement revenues and a decline in the revenues of the power division (down 17.8%). In addition to the muted revenue growth, the pressure on the margin and higher interest charge led to a decline of 47% in the adjusted earnings. Ballooning debt could trigger additional distress actions: In the last quarter, to deleverage the balance sheet the company sold part of its cement business at a steep discount to the deals done in the cement sector. Given the huge debt burden of Rs25,000 crore on its stand-alone balance sheet, we would not be surprised if the company resorts to more similar actions and exits some real estate or power assets at a discount to the fair value. Outlookremains muted for all its business segments; earnings estimate downgraded with scope for further downgrades: The highly stretched balance sheet in the prevailing tough business environment would continue to create uncertainty and weigh on its valuations. Moreover, the outlook for its key businesses of construction, real estate and power remain challenging prompting us to revise downwards the estimates for FY2014 and FY2015. Viewrecent steep appreciation offers opportunity to exit: We remain cautious and downgrade our rating on the stock to Reduce with a price target of Rs40.
FII 25% Promoters 45%
Institutions 10% Public & others 20%
PRICE PERFORMANCE
MAHINDRA & MAHINDRA

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs1,046 Rs55,140 cr Rs1,026/742 14.5 lakh 500520 M&M M&M 46.0 cr
CMP: RS895 NOVEMBER 13, 2013 Price target revised to Rs1,046; maintain Buy
KEY POINTS
Q2FY2014 results beat estimates due to strong operating performance: The Q2FY2014 results of Mahindra and Mahindra (M&M) were ahead of our as well as the Streets estimates on the back of a robust operating performance. The revenues at Rs8,660.4 crore were in line with estimate. However, the operating profit margin (OPM) at 14.5% was ahead of our estimate of 12.6%. Cost-control initiatives, subdued commodity prices and a richer product mix led to the better than expected operating performance. Lower taxation (tax/profit before tax [PBT] at 21.2%) boosted the profitability. M&M reported a profit after tax (PAT) of Rs1,027.6 crore, which was significantly above our estimate of Rs842 crore. Ssangyong Motors reports profit for the second consecutive quarter: The Korean subsidiary of Mahindra & Mahindra (M&M), Ssangyong Motor Company (SYMC), reported another quarter of profits and sustained the turnaround in its operations. During Q3CY2013, SYMC reported profit of 1.5 billion Korean Won as compared to a loss of 13.7 billion Korean Won in Q3CY2012. ValuationM&M remains our preferred pick with a price target of Rs1,122: M&Ms farm division would continue to drive the volume growth in FY2014 and beyond, with the expectations of a revival in the automobile segment also in FY2015. The subsidiaries, namely SYMC and Tech Mahindra, have also shown a marked improvement in their performance and add to the overall valuation of the consolidated entity. We retain our Buy rating on M&M with a revised price target of Rs1,122. The stock is our preferred pick in the automotive space.
Public & Others Bodies 14% corporate 6%
Promoters 25%
Foreign 38%
Institutions 17%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 0.8 2.0 3m 2.2 -4.9 6m -7.7 -9.8 12m -1.4 -10.7
December 2013
18
EQUITY
FUNDAMENTALS
STOCK UPDATE
MAX INDIA
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs296 Rs4,924 cr Rs267/151 2.1 lakh 500271 MAX MAX 16.2 cr
CMP: RS186 NOVEMBER 11, 2013 Strong performance in tough environment

RESULT HIGHLIGHTS
Max Indias APE saw a growth of 13.0% YoY compared with a 7% growth recorded by the other private insurance players in Q2FY2014. As a result, the GWP grew by 7.8% YoY to Rs1,679 crore. The operating expense ratio also declined to 18.3%, contributing a 19.3% Y-o-Y growth to the shareholders PBT. In Q2FY2014, Max Healthcares revenues were up by 28.2% YoY due to an increase in the number of operational beds and a rise in the average occupancy. The EBITDA grew substantially to Rs31 crore as the EBITDA drag from the new hospitals declined significantly. Max Bupa registered a GWP of Rs71 crore in Q2FY2014. The conservation ratio improved to 83%. The company has tied up with Deutsche Bank for bank assurance and is looking forward to more such tie-ups to boost sales. MSPs revenues increased by 8.3% YoY while its PBT increased to Rs5.2 crore. An increase in the prices contributed to the jump in the revenues and margins during the quarter. Valuations and outlook: In the healthcare business, the company has invested in expanding its facilities which will increase its profitability. The life insurance business is already profitable with a high solvency ratio and the company has a treasury corpus of Rs340 crore, which should be sufficient to fund the healthcare business, health insurance business and the other businesses. We maintain our SOTP based price target of Rs296 and Buy rating on the stock.
Public & others 9% MF & FI 24% Promoter 39%
Foreign 28%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 4.5 -0.2 3m 5.8 -5.5 6m -14.0 -18.9 12m -15.8 -24.8
OIL INDIA
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs650 Rs27,652 cr Rs630/415 4.5 lakh 533106 OIL OIL 19.0 cr
CMP: RS460
RESULT HIGHLIGHTS
NOVEMBER 13, 2013
Retain Buy on attractive dividend yield and valuation

Operating performance largely in line with expectations; profit dented by higher depreciation charge: In Q2FY2014, Oil India Ltd (OIL) reported a net sales growth of 12.6% YoY, which is in line with our estimate, and an EBITDA growth of 8% YoY, which is ahead of expectations. The operating performance was driven by a better net realisation (aided by a weaker rupee and a stable subsidy share of under-recoveries at 13.2%) and a healthy sequential improvement in the production volume. However, the higher than expected depreciation, depletion and amortisation (DD&A) cost of Rs465 crore (against an estimate of Rs281 crore) pushed down the profit after tax (PAT) by 6% in Q2FY2014. Due to a sharp rise in the provisioning for dry wells, the DD&A cost moved up by 82% YoY and 75% QoQ during Q2FY2014. Production of oil and gas to stabilise: The companys oil production fell by 5% YoY because of bandh and blockades in Assam but improved by 1.5% QoQ. Moreover, it has risen in the past few months after the weak production figures in July this year. The production of natural gas also improved sequentially by 1.4% to 0.67 billion cubic metre, though it remained lower by 3.6% YoY. Retain Buy; attractive valuation and dividend yield of 6%: We remain positive on the stock due to the companys huge reserves and a healthy reserve/replacement ratio which indicates stable revenue visibility. Moreover, favourable policy actions (gradual deregulation of diesel price and revision in the price of natural gas) would play as positive triggers for the stock. We have yet to incorporate the likely benefit; which could provide further upside to our earnings estimates. We retain our Buy recommendation and price target of Rs650 (average of PE and EV-EBITDA method). Also, at the current price the stock provides a very healthy dividend yield of around 6%.
FII 10% Public & others 15% DII 7%
Promoters 68%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -0.3 0.8 3m -2.1 -8.8 6m -16.2 -18.1 12m 4.1 -5.7
19
December 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
PERSISTENT SYSTEMS
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs950 Rs3,488 cr Rs906/475 38,646 533179 PERSISTENT PERSISTENT 2.4 cr
CMP: RS872 NOVEMBER 27, 2013 Maintain Hold, with a revised price target of Rs950
We recently interacted with Rohit Kamat, chief financial officer of Persistent Systems Ltd (PSL), to understand the current state of the business environment and also understand the upside opportunity to the margin profile of the company in the mid to long-term period. The managements comments on the demand environment remain positive, backed by a secular cyclical recovery in its largest geography, a larger acceptability of emerging technologies (SMAC: social, mobility, cloud and analytics; more so on cloud and mobility [majority of PSLs SMAC revenues are attained from these two areas]) and strong momentum in the intellectual property (IP) led revenues. These factors will help PSL to comfortably surpass the upper end of the Nasscom growth expectation (14%) for FY2014. More importantly, the management has more than 60% business visibility for FY2015, given the confidence about the spending of its larger clients. The management indicated at a margin corridor of 24-25% for the next two quarters. The company will continue to maintain the best margin profile in the mid-cap information technology space. In the last one year the price-earnings ratio has already been re-rated from 8.6x to 12x currently, which captures most of the positives. In view of our interaction with the management on the earnings visibility, we have increased our earnings estimates for FY2014 and FY2015, and also introduced our FY2016 estimate. Considering the limited material upside in the near to medium term, we maintain our Hold rating on the stock and roll over our target PE multiple to November 2014 arriving at a revised 12-month price target of Rs950.
Public & Others 23% Foreign 21%
Institutions 17% Non-promoter corporate 1%
Promoters 38%
PRICE PERFORMANCE
PTC INDIA
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs70 Rs1,727 cr Rs81/35 8.9 lakh 532524 PTC PTC 24.8 cr
CMP: RS58 NOVEMBER 18, 2013 Positive triggers unfolding; Buy with revised price target of Rs70
RESULT HIGHLIGHTS
Q2 results much ahead of expectations on better margin and hefty dividend income: PTC India (PTC) reported a stellar set of numbers for Q2FY2014 recording a net profit growth of 39% YoY and 109% QoQ, much ahead of our as well as the Streets expectations. The operating profit of Rs68 crore was significantly above our estimate of Rs44 crore due to a better trading margin earned (7 paise per unit against our estimate of 6 paise per unit) and lower than estimated other expenses (around Rs9 crore lower). Below the operating level, it reported other income of Rs19 crore, which is better than our estimate, as the company received dividend to the tune of Rs13.5 crore from PTC Financial Services (PTC Financial; a subsidiary) in this quarter. Consequently, the profit after tax was Rs62 crore against our estimate of Rs35 crore. Revised upward estimates and price target; maintain Buy: In view of better than estimated performance in the first half, we have revised upward our net profit estimates for FY2014 and FY2015 by 17% and 6% respectively. The receipt of significant receivables from the Uttar Pradesh State Electricity Board would result in a significant jump in the other income. Hence, we remain positive on the stock and retain our Buy rating on it. Based on the upward revision in our net profit estimates, we have raised our sum-ofthe-parts based price target to Rs70 per share from Rs65 earlier.
Others 22% Promoters 16%
FII 16%
DII 46%
PRICE PERFORMANCE
December 2013
20
EQUITY
FUNDAMENTALS
STOCK UPDATE
STATE BANK OF INDIA

HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs1,950 Rs116,138 cr Rs2,550/1,453 22.8 lakh 500112 SBIN SBIN 25.7 cr
CMP: RS1,698 NOVEMBER 13, 2013 Earnings remained stressed though slippages moderated
RESULT HIGHLIGHTS
SBIs Q2FY2014 results came in below our estimates as its net profit declined to Rs2,375 crore led by a sharp increase in the provisions. However, the reversal of Rs302 crore of provisions and a lower tax rate cushioned the profits. The NII grew by 11.6% YoY, in line with our estimate. The NIM recovered from 3.44% in Q1FY2014 to 3.48% in Q2FY2014 contributed by an improvement in the yield on advances. The advances grew by 19% YoY in Q2FY2014 but the CASA ratio declined to 43.58% from 44.6% in Q1FY2014. The slippages moderated to Rs8,365 crore while the bank restructured Rs8,585 crore of loans. The non-interest income declined by 2.1% YoY due to a slower growth in the fee income and forex income. The bank opted to amortise the depreciation on investments (total Rs2,103.3 crore) over FY2014 and provided Rs701.1 crore in Q2FY2014. Valuation and outlook: Given the weak economic environment we believe the bank will continue to face challenges in improving its operating performance and in maintaining its asset quality. In addition, the carry-over of investment losses, higher opex and provisioning on NPAs will affect the earnings growth. We largely maintain our estimates and SOTPbased price target of Rs1,950 on the stock. We maintain our Hold rating on the bank as it continues to face asset quality challenges and its earnings profile has weakened.
Public & others 11% MF & FI 18% Foreign 9% Promoter 62%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 1.2 2.3 3m 4.2 -3.0 6m -26.0 -27.7 12m -22.1 -29.4
TATA GLOBAL BEVERAGES

BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs166 Rs8,905 cr Rs182/122 22.4 lakh 500800 TATAGLOBAL TATAGLOBAL 40.1 cr

RESULT HIGHLIGHTS
Revenue growth moderated to low single digits: The consolidated revenues of TGBL grew by 3.7% YoY to Rs1,933.5 crore in Q2FY2014. The lower growth can be attributed to a marginal decline in the consolidated revenues of Tata Coffee and TGBLs underperformance in some of the key international markets, such as Russia and the UK, during the quarter. Also, the restructuring of the Canadian business and higher sales of coffee pods affected the revenue growth by 1-2% in Q2FY2014. Gain from benign input cost invested in advertisements: The raw tea and coffee prices remained benign in Q2FY2014 which resulted in a 141-basis-point Y-o-Y improvement in the GPM to 51.2%. TGBL carried out incremental one-time advertisement spending of Rs37 crore towards launches/relaunches in some of the key markets. This along with a lower sales growth led the OPM to decline by 48 basis points YoY to 8.2% and the operating profit declined by 2.1% YoY to Rs157.9 crore in Q2FY2014. This along with a lower other income, higher interest cost and higher incidence of tax led to a significant decline of 46% YoY in the adjusted net profit to Rs74.1 crore.
6m 6.4 4.0 12m -6.9 -15.7
Others 25% Promoters 35%
Foreign & Institutions 40%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m -3.4 -2.4 3m 6.2 -1.1
Retained Buy because of decent upside: We have revised downwards our earnings estimates for FY2014 and FY2015 by 7% and 5% respectively to factor in the low single-digit growth in H1FY2014. In line with the downward revision in our earnings estimates our revised price target stands at Rs166. In view of the decent upside and the long-term growth prospects of the company, we retain our Buy recommendation on the stock. At the current market price the stock is trading at 20.2x its FY2014E EPS of Rs7.2 and 17.4x its FY2015E EPS of Rs8.3.
21
December 2013
STOCK UPDATE
EQUITY
FUNDAMENTALS
UNITY INFRAPROJECTS
BUY
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs30 Rs169 cr Rs49/16 1.0 lakh 532746 UNITY UNITY 2.8 cr

RESULT HIGHLIGHTS
Q2 much better than Q1; but performance muted YoY: In Q2FY2014, the net sales of Unity Infraprojects (Unity) remained almost flat YoY at Rs402 crore, which is largely in line with expectations. The operating profit margin (OPM) improved by 335 basis points QoQ (but close to 180 basis points lower than the Q2FY2013 margin) to 15.8%, which is as per our expectation. Higher interest expenditure dents PAT: Like most construction companies, the interest cost of Unity continues to bloat with a growth of 20.2% YoY and 25.8% QoQ to Rs49.1 crore in Q2FY2014. Further, the effective tax rate for the quarter stood at 45.3% against 36.8% in Q2FY2013 and 33.7% in Q1FY2014 leading to a 39.0% decline in the profit after tax to Rs10.1 crore. Order book drops sequentially; L1 status improves: During FY2013, Unity had bagged fresh orders worth Rs1,444 crore. This along with the orders worth Rs808 crore secured in H1FY2014 took the total order book to a respectable position of Rs3,508 crore as of November 2013, which is 1.7x its FY2013 revenues.
6m -24.5 -27.2 12m -48.0 -52.7
Promoters 63%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 4.4 6.0 3m 13.9 8.2
Earnings estimates for FY2014 and FY2015 revised downwards: We have revised our earnings estimates downwards for FY2014 and FY2015 to factor in the lower execution of projects in the current macro-economic environment. Maintain Buy with a revised price target of Rs30: We maintain our Buy recommendation on the stock with a revised price target of Rs30 (4x EV/EBITDA on FY2015 estimates).
ZYDUS WELLNESS
HOLD
COMPANY DETAILS
Price target: Market cap: 52 week high/low: NSE volume (no. of shares): BSE code: NSE code: Sharekhan code: Free float (no. of shares): Rs626 Rs2,208 cr Rs749/415 77,463 531335 ZYDUSWELL ZYDUSWELL 1.1 cr
CMP: RS565
RESULT HIGHLIGHTS
NOVEMBER 6, 2013
Downgraded to Hold with a revised price target of Rs626

Revenue growth moderates to single digits: In Q2FY2014 the net sales of Zydus Wellness grew by 6.3% YoY to Rs97.1 crore. The revenue growth moderated to single digits mainly on account of sustained pressure on the discretionary categories (largely personal care) due to persistent inflationary pressure. However, the management has indicated that it has enhanced focus on regaining the double-digit revenue growth trajectory by undertaking adequate media and promotional activities and expanding the distribution reach. GPM remains flat: The GPM stood almost flat on a Y-o-Y basis at 69.6% in Q2FY2014, largely on account of benign input prices and a better revenue mix during the quarter. Going ahead, the GPM wont see any significant deceleration as the company is well stocked with raw materials till March 2014. The third and fourth quarters of every fiscal are seasonally strong for Nutralite sales. Hence, we might see a change in the revenue mix that would result in a sequential drop in the GPM. OPM to sustain in the 23-24% range: The higher advertisement spending and other expenditures resulted in a 76-basis-point drop in the OPM to 26.1% in Q2FY2014. We expect the OPM to sustain in the range of 23-24% in the coming years. Downgraded to Hold: We have marginally revised downwards our earnings estimates for FY2014 and FY2015 to factor in the lower than expected sales of the Everyuth range of products. In line with the downward revision in the earning estimates our price target has been revised to Rs626. We have downgraded our rating from Buy to Hold on the stock. At the current market price the stock is trading at 20.9x FY2014E EPS of Rs26.9 and 17.0x FY2015E EPS of Rs33.0.
Others 11%
FIIs 8% Domestic institutions 8%
Promoters 73%
PRICE PERFORMANCE
(%) Absolute Relative to Sensex 1m 6.2 0.7 3m -10.0 -18.0 6m 26.9 16.8 12m 22.3 7.7
December 2013
22
SHAREKHAN SPECIAL
EQUITY
FUNDAMENTALS
SHAREKHAN SPECIAL Q2FY2014 earnings review

KEY POINTS
Aggregate earnings growth ahead of expectations: In Q2FY2014, the aggregate earnings of the Sensex companies grew by 9.9% year on year (YoY; 12.3% ex energy companies), which is ahead of expectations. Aided by currency gains and a stellar performance from sector heavyweights, automobiles (Maruti Suzuki [Maruti], Mahindra and Mahindra [M&M], Tata Motors), pharmaceuticals (pharma; Sun Pharmaceutical Industries [Sun], Dr Reddys Laboratories) and information technology (IT) services (Tata Consultancy Services [TCS], Wipro), largely contributed to the outperformance at the aggregate level. In addition, Larsen and Toubro (L&T) and Tata Steel surprised positively during the quarter. Disappointment from certain banking, capital goods and metal companies: On the negative side, the biggest disappointment in earnings growth was reported by Bharat Heavy Electricals Ltd (BHEL), State Bank of India (SBI), Bharti Airtel, Hindalco Industries (Hindalco), Coal India Ltd (CIL) and Jindal Steel and Power Ltd (JSPL). However, SBI received a positive response from the market due to improving data points on the asset quality front. Similarly, the operational metrics of Bharti Airtels Indian operations more than made up for the weaker than expected growth in the companys earnings (partly due to foreign exchange [forex] related non-cash provisions).
TREND IN SENSEX (EX ENERGY) EARNINGS GROWTHACTUAL VS ESTIMATE
30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Q2FY 11 Q2FY 12 Es timated Q2FY 13 A c tual Q2FY 14
NOVEMBER 22, 2013
Positive takeawayspick-up in revenue growth, OPM inches up; more upgrades than downgrades in consensus estimates: The revenue growth of the Sensex companies was slightly ahead of our estimates as the revenues grew by 14.0% with only two companies in the Sensex reporting a decline in revenues. Some of the export-driven sectors like pharma (revenues up 32.5% YoY), IT (revenues up 28.9% YoY) and auto (revenues up 22.2% YoY) reported a robust growth in revenues aided by the depreciation in the rupee. But whats more encouraging is the fact that the Q2 results season has put a pause on the downgrade cycle (for the consensus estimate of Sensex earnings). Whats more, the consensus estimates for FY2014 and FY2015 have inched up in the last four to six weeks. OutlookQ2 results spark hope of better corporate earnings; but re-emergence of inflationary concerns and uncertain global macros to weigh on valuations: The better than expected Q2 results (even in case of some of the mid-cap companies) have boosted the possibility of an improving trend in the earnings growth going ahead. But inflation and the uncertain global environment would continue to limit any expansion in the valuation multiples. Currently, the Sensex trades at 14x oneyear forward consensus earnings estimate (as per Bloomberg).
OUTPERFORMERS Axis Bank, ICICI Bank Infosys, TCS, Wipro, Persistent Systems Maruti Suzuki, Tata Motors Sun, Lupin, Aurobindo Pharma KPTL, CESC, PTC India GSK Consumers, Jyothy Lab, GCPL, United Phosphorous NIIT Technologies Ashok Leyland Cipla, Cadila Health BHEL ITC, Tata Global Beverages Tata Chemicals UNDERPERFORMERS PNB, Union Bank, SBI
SECTOR-WISE CONTRIBUTION TO SENSEX EARNINGS GROWTH (%)

14.0 12.0 10.0 8.0 6.0 3.9 9.9 4.7 1.3 0.6 0.6 0.6 0.2 0.1 -0.4 -0.7 -1.1
Source: Company data, Sharekhan Research
EARNINGS GROWTH BY SECTOR (%)

Telecom Cap. goods BFSI Energy Diversified Metal FMCG Pow er IT Pharma Auto -29.0 -23.9 -4.2 0.7 2.1 9.4 10.5 12.9 25.4 37.3 50.9 -20.0 0.0 20.0 40.0 60.0
4.0 2.0 FMCG 0.0 Pharma IT Auto Power Diversified Telecom Metal Energy BFSI goods Sensex Cap.
Source: Company data, Sharekhan Research
-40.0
Source: Bloomberg, Sharekhan Research
23
December 2013
SHAREKHAN SPECIAL
EQUITY
FUNDAMENTALS
SHAREKHAN SPECIAL Monthly economy review

Inflation pressure increases uncertainty over rate hikes
Rising inflation at both retail and wholesale levels has emerged as a major macro-economic challenge which could compel the Reserve Bank of India (RBI) to raise the rates by another 25 basis points at the December 18 mid quarter policy review meeting. This along with currency volatility (due to expectations of early tapering by the US Federal Reserve [Fed]) and fiscal deficit concerns has weighed on bond yields, which have rebounded to 8.72% levels (a high of 9.1% in November 2013). On the positive side, Indias external positioning has improved led by the easing of trade deficit and strong foreign exchange (forex) inflows (from the concessional swap window, up to $25 billion had flown in till November 25, 2013). The government is contemplating cutting the planned expenditure by Rs80,000 crore to retain fiscal targets but the softening of the oil prices after the Iran deal could also help. Going ahead, the RBI will closely watch the Q2FY2014 gross domestic product (GDP) growth and other data releases (inflation, trade data) to take a call on the rates.
SUMMARY OF KEY ECONOMIC DATA May-13 IIP (%) WPI (%) GDP (%) 3M CP rate (%) 10-year G-Sec yield (%) Trade bal. ($ bn) Forex res. ($ bn) INR/USD -2.5 4.6 8.5 7.2 -20.1 287.9 56.5 Jun-13 -1.8 5.2 4.4 8.4 7.5 -12.3 284.6 59.7 Jul-13 2.8 5.9 11.8 8.2 -12.6 280.2 61.1 Aug-13 0.4 7.0 12.7 8.6 -10.9 275.5 66.6 Sep-13 Oct-13 2.0 6.5 10.0 8.8 -6.8 276.3 62.8 NA 7.0 9.1 8.6 -10.6 283.0 61.4
NOVEMBER 28, 2013

15.5% compared with 17.7% on October 4, 2013. On the other hand, the deposit growth, which was lagging the credit growth, has improved to 15.4% contributed by higher term deposits. Global: expectations of early tapering cause jitters: The strong employment data and improved macro numbers in the USA have fueled expectations of an earlier than expected tapering by the Fed. This has unnerved the global markets and contributed to depreciation in the domestic currency. However, the Iran Deal has led to the softening of crude oil prices and had a positive impact on the markets.
Upcoming macro-economic data

GDP (Q2FY2014 ) on November 29, 2013 IIP (for October 2013), trade data (for November 2013) and CPI (for November 2013) WPI (for November 2013) on December 16, 2013 RBI mid-quarter policy review on December 18, 2013C.
Banking stocks outperform market in November 2013

After underperforming for the past few months, the BSE Bankex has marginally outperformed the market, as it declined by 0.02% in November this year as compared with a decline of 1.2% in the Sensex in the same month. This was largely due to the beaten-down valuations of the public sector banks (PSBs) and the better than expected Q2FY2014 numbers of some of PSBs (Bank of Baroda, Bank of India, Canara Bank) which raised hope of a recovery in the coming quarters. Private banks reported better than expected numbers for the same quarter despite a tough environment. However, asset quality pressure continues due to a slower economic growth and margin pressure could persist (due to a rise in the cost of funds) which may limit the upside in case of the PSBs.
BANKING SECTORS PERFORMANCE (AS ON DATE) Company Absolute 1-mth 3-mth Bank of India 15.0 52.6 Punjab National Bank 6.2 14.8 Kotak Mahindra Bank 6.0 21.9 Bank of Baroda 2.9 33.3 Canara Bank 2.8 18.2 State Bank of India 2.7 16.1 ICICI Bank 2.0 29.7 Yes Bank 0.3 51.0 HDFC Bank -2.8 16.6 Federal Bank -3.1 45.4 Indusind Bank -3.6 18.4 IDBI Bank -4.1 19.7 Union Bank of India -5.3 9.1 Axis Bank -5.9 27.4 Bankex 0.0 23.1 Sensex -1.2 13.9 mth - month Relative 1-mth 3-mth 16.4 33.9 7.6 0.8 7.3 7.0 4.2 17.0 4.1 3.7 4.0 1.9 3.3 13.9 1.5 32.6 -1.6 2.3 -1.8 27.6 -2.4 3.9 -2.9 5.1 -4.1 -4.2 -4.7 11.9 1.2 8.0 0.0 0.0
KEY MACRO-ECONOMIC DATA RELEASES

September IIP grew by 2.0%, short of market estimate: In September 2013 the Index of Industrial Production (IIP) grew by 2.0% (vs estimate of 3.5%) largely due to a decline in the capital goods sector (down 6.8%). The August IIP growth figure has been revised slightly downwards to 0.4% from the provisional estimate of 0.6%. Inflation picks up at both WPI and CPI levels: The Wholesale Price Index (WPI)-based inflation for October 2013 inched up to an eight-month high of 7.0% while the August inflation rate was revised upwards to 6.99%. Also, the Consumer Price Index (CPI) inflation increased to 10.06% in October from 9.84% in September this year contributed by food inflation. Rising exports and dip in imports ease trade deficit: During October 2013, Indias trade deficit was $10.6 billion, down 47.8% year on year (YoY). This was contributed by an export growth of 13.5% YoY while the imports declined by 14.5% YoY. Deposit growth catches up with credit growth: With increased activity in the bond market, the credit growth has moderated to
December 2013
24
EQUITY
FUNDAMENTALS
VIEWPOINT
RANBAXY LABORATORIES
VIEWPOINT
Result highlights
Worst case seems factored in current prices; time to look at key growth elements: Ranbaxy Laboratories (Ranbaxy) has witnessed a series of challenges in the recent past due to the actions of the US Food and Drug Administration (USFDA) on three of its India-based facilities which has affected the valuation of its stock. Despite the odds, we see multiple growth triggers for the company, such as: (1) an improvement in the base earnings before interest, tax, depreciation and amortisation (EBIDTA) margin (due to lower expenses on remedial measures, as indicated by the management); (2) an uptick in its Indian and African businesses; (3) branded products in the USA like Absorica gaining further market share; (4) the performance of the newly launched anti-malarial drug Synriam, the new chemical entity (NCE), gaining better traction in India; and (5) an early resolution of the issues related to the facilities in India at Dewas, Paonta Sahib and Mohali. Progress on FTF opportunity; court verdict establishes exclusivity rights on Diovan: While hearing a litigation initiated by Mylan, a US court gave a favourable verdict for Ranbaxy establishing the exclusivity rights on Diovan despite its inability to get the final approval for the abbreviated new drug application (ANDA) from the USFDA within the prescribed time frame.
CMP: RS416
Looking beyond challenges
NOVEMBER 21, 2013
This verdict inculcates hopes of Ranbaxy monetising Diovan and other products having exclusivity rights even if the final approvals are delayed by the USFDA. The company has a few first-to-file (FTF) opportunities in the USA including Diovan, Valcyte and Nexium, which have the potential to change the course of the business for the company. The management is hopeful of capitalising the exclusivity on all three products even though three of the India-based facilities remain shut for remedial measures. Key risks: Apart from the delay in remedial measures at the India-based facilities, the key risks for Ranbaxy include: (1) patent challenges on Absorica, (2) volatility in the currency (it has $740 million outstanding contracts), and (3) delay in approvals from the US-based Ohm facilities. Valuation: The stock is currently trading at 12.8x earnings from the base business in FY2014E (considering a 12-month period) which is at a significant discount to Lupin (-32%) and Sun Pharmaceutical Industries (-46%). We have a positive bias on the stock, though we dont have active coverage on it.
For detailed report, please visit the Research section of our website, sharekhan.com. Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.
TECH MAHINDRA
VIEWPOINT
Result highlights
A strong quarter: Tech Mahindra reported yet another strong quarter with the revenue growth comfortably ahead of the Streets estimate. That the company signed thirteen large deals worth $500 million during the quarter is a pertinent indication that the company is making significant progress towards leveraging its synergies with Satyam Computer Services (Satyam). The robust deal signings not only provide comfort with regard the revenue visibility, but also indicate that the company has achieved the much needed scale to be invited to bidding for large deals. Additionally, the companys outlook across verticals, geographies and service lines remains positive leading us to maintain our positive stance on the company. Revenues ahead of estimate; beat peers: Tech Mahindra reported a 4.7% Q-o-Q (5% in constant-currency terms) revenue growth in dollar terms to $758 million versus the Streets estimate of
CMP: RS1,674
NOVEMBER 8, 2013
Strong show continues, positive bias retained

$746 million. The organic revenue growth was 4.2% while 0.5% growth was inorganic or contributed by the full quarters reconciliation of the revenues of Complex IT (a recent acquisition). Margin in line with expectation: The company reported a 220basis-point improvement in the EBITDA margin to 23.3%, which was in line with the Streets estimate. Forex loss and higher tax rates restrict PAT: A higher forex loss and an increase in the effective tax rate restricted the net income growth for the quarter to 4.6% QoQ to Rs718 crore. Valuationretain our positive bias: The stock has already run up by more than 35% in the last three months and is trading at 13x FY2014 and 11.5x FY2015 consensus earnings estimates. We maintain our positive bias for Tech Mahindra and expect the stock to see further upside in the next 12 months.
For detailed report, please visit the Research section of our website, sharekhan.com. Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.
25
December 2013
TREND & VIEW
EQUITY
TECHNICALS
A new cycle begins

Sensex: daily view
The Sensex has closed above the previous swings high and also formed a new all-time high, which is a very positive sign for the market. The index has broken out of a triangular pattern, forming a double bottom support at around 20137. The momentum indicator is trading in the positive zone and above the zero line. The key support would be around 20602 and resistance would be around 22200-23000 levels. In the short term, the index is expected to trend up till 22200 with reversal around 20840.
Short term Trend Up Trend reversal 20840 Support 20840 Resistance 22200 Target 22200
26 2 10 September 16 23 30 7 October 14 21 28 5 November 11 18 25 2 9 December 16 2 21500 21000
20500
20000
19500
19000
18500
18000
17500
KST (1.62694) 5
-5
Sensex: weekly view

The Sensex is trading above the 20-weekly moving average (WMA), ie 19937, and is expected to trend up for wave 3. According to the Elliott wave theory, the index has completed waves 1 and 2, and wave 3 has already started for a minimum target of 23000. The leg on the upside as wave 3 has been confirmed as the index has formed a new all-time high. On the weekly charts, the momentum indicator has given a positive crossover and is trading above the zero line. As the index has broken out of a range, it is now expected to continue the positive momentum and the strategy should be to buy on declines with reversal around the 20-WMA, ie 19937. The key support would be around 19937 and resistance would be around 22200-23000 levels.
C X
3?
21500 21000 20500
E b
20000 19500
A X a
19000 18500 18000
D
17500
c W
2
17000 16500
16000
Y Z
KST (4.21242)
15500
15000
10 5 0 -5 -10 N D 2010 M A M J J A S O N D 2011 M A M J J A S O N D 2012 M A M J J A S O N D 2013 M A M J J A S O N D 2014
Sensex: monthly view

On the monthly chart the index is trading above the 2120715135 range and has formed a new all-time high, which confirms a new cycle on the upside. The Sensex is trading above the 20-monthly moving average, ie19044, and is expected to form a positive close on the quarterly and monthly charts. The index has taken support at a long-term upward sloping trend line, which is a very bullish sign for the market. The key support would be around 19044-20137 levels and resistance would be around 23000.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
25000
20000
15000
10000
5000
Medium term Trend Up Trend reversal 19937 Support 19937 Resistance 23000 Target 23000
December 2013
26
EQUITY
DERIVATIVES
MONTHLY VIEW
Derivative view: Heading for higher altitude

Extending the gains of the previous Samvat the November series started the new Samvat 2070 by hitting a new life-time high above the mark of 6300. But the market was unable to sustain at the alltime new high for a longer period due to multiple domestic factors, such as high trade deficit, a lower than expected Index of Industrial Production reading, a high Wholesale Price Index and a hawkish monetary policy. The journey in the southward direction continued with deep cuts but after a recovery November finally settled with a loss of almost 2%.
MARKET WIDE VS NIFTY ROLL-OVER
View
On the option front, strike of call 6400 stands with the highest number of shares in open interest (OI) followed by the strikes of 6500 and 6600 whereas on the put side strikes of 6100 and 6000 have a combined OI of 86 lakh shares with a put/call ratio between 0.90 and 1.00. Ahead of some key domestic and international events, the India Volatility Index has shot up significantly. The results of the elections in some of the key states of the country have been announced already. Next, the Reserve Bank of India will meet on December 18 to review its monetary policy. This will be followed by the US Federal Reserves meet in the USA on December 17 and 18. The market participants are expecting a positive outcome of the events lined up during the month and as the events would unfold the implied volatility would cool off. From the above data we conclude that the overall bias for the market is positive and in the coming days 6400-6500 can be targeted. Hence to play this view we recommend forming a Bull Call Spread with a favourable risk/ reward ratio.
Strategy for the month: Bull Call Spread

A Bull Call Spread is generally formed when an index/a stock is expected to move in an upward direction. It is a limited profit and limited loss strategy. A bull call spread can be constructed by buying an out-of-the-money call option and selling even a higher strike of out-of-the-money call option of the same index/stock and expiration.
TYPE CE CE BUY/SELL Buy Sell FORMATION STRIKE 6400 6500 PREMIUM 97.00 59.00 OUTFLOW 38.00
Improved gross domestic product (GDP) numbers turned out to be real saviour as on the very first day of the December series the national index Nifty rose by more than 130 points during the opening bell and ended with gains. The December series started the month with Rs11,358 crore in Nifty futures vs Rs15,360 crore in the previous series, Rs31,566 crore in stocks futures vs Rs28,108 crore in the previous series, Rs58,583 crore in index options vs Rs56,422 crore in the previous series and Rs2,643 crore in stock options vs Rs2,761 crore in the previous series. The roll-over in the Nifty stood at 72.75%, which is significantly higher than its three-month and six-month average roll-over of 63.29% and 61.66% respectively. The marketwide roll-over stood at 82.41%, which is marginally higher than its three-month and six-month average roll-over of 77.87% and 78.70% respectively. Though there was a significant rise in the market, but the roll-over cost has decreased gradually which indicates positions have been rolled on the short side. Top five stock futures with highest open interest in the current series
STOCK FUTURES (SHAREKHAN SCRIP CODE) MCDOWELL-N SBIN TCS INFY ICICIBANK OPEN INTEREST (RS CR) 1,695.29 1,120.13 1,067.08 915.03 887.03
Strategy note: The strategy has an initial outflow of 38 points in the Nifty which amounts to Rs3,800 (38*100) whereas the maximum profit potential for the strategy is of 62.00 points, which amounts to Rs6,200 (62*100). There is only one break-even point in the strategy, which is at 6438 (lower strike price [6400] + gross outflow [38.00 points]).
PAY-OFF DIAGRAM
80 60 40 20 0 5 8 00 5 9 00 6 0 00 6 1 00 6 2 00 6 3 00 6 4 00 6 5 00 6 6 00 6 7 00 6 8 00 6 9 00 -20 -40 -60

P R O F IT / L O S S
Top five stock options with highest open interest in the current series
STOCK OPTIONS (SHAREKHAN SCRIP CODE) SBIN INFY TATAMOTORS RELIANCE ICICIBANK OPEN INTEREST (RS CR) 570.78 459.32 330.12 308.67 294.96
27
December 2013
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Commodities: Down on tapering prospects; industrials likely to recover Macro-economy

Key points All the commodities except natural gas ended lower in November Commodities are facing downward pressure on the possibility of tapering of QE by the Fed Industrial commodities are likely to do better than precious metals US shows slid Q3 growth (2.80%), but spending weakens OECD cuts global growth outlook on slowdown in emerging markets OECD calls Europe's crisis policy unworkable on risk of deflation, slow growth World Banks Kim sees more global impact from Fed tapering German trade surplus could threaten euro zones recovery, says EC French economy shrinks as businesses hold off on investment Euro area manufacturing expands for a fifth month led by Germany 'Experiment' of QE has gone on too long: Fidelitys Richard Lewis Yellen signals further bond purchases until recovery strengthens UK growing at the fastest rate in developed world, says OECD UK manufacturing strengthens to the fastest in almost three years BoE says jobless rate may reach 7% in 2015 on robust growth Consumer Confidence Index in the USA decreased to 70.4 in November US budget deficit falls 24% in October US retail sales post best gains since July despite shutdown Fed QE taper likely in coming months on data, FOMC minutes say Chinas manufacturing gauge declines for the first time in four months PBOC says its no longer in Chinas interest to increase reserves China pledges decisive role for markets after policy summit China's economy doing well in Q3, premier says Japan tests Chinas resolve with military flights in air zone
COMMODITY PRICES IN NOV 2013 (IN $) Commodity Copper Zinc Lead Gold Silver Crude oil High 7298.0 1967.0 211.0 1327.8 22.1 96.7 Low 6910.0 1863.0 2063.0 1225.6 19.6 91.8 Close 7055.0 1887.0 2080.0 1240.9 20.0 92.7 Mon chg % -2.7 -3.3 -4.8 -6.2 -8.8 -3.8
MONTHLY CHANGE IN DOE PETROLEUM STOCKS (OCT-NOV 2013) Crude oil Change in M (000' bbls) 25-October-13 Change in (%) 0.01 0.38 1.82 Dist. -0.01 0.12 -9.76 Gasoline 0.00 0.21 -1.40
Refinary utlisation rate was at 89.40% in the last week of November
MONTHLY CHANGE IN SHFE STOCKS (OCT-NOV 2013) Copper Change (in tonne) 25-October-13 Change (in %) -23476 172146 -13.64 Lead 2257 85610 2.64 Zinc -14991 246522 -6.08
MONTHLY CHANGE IN LME STOCKS (OCT-NOV 2013) Copper Change (in tonne) 25-October-13 Change (in %) -52325 476150 -10.99 Lead -1550 232925 -0.67 Zinc -67750 1030000 -6.58
NoteLME: London Metal Exchange , SHFE: Shanghai Futures Exchange, DOE: Department of Energy (US)
Crude oil: Likely to rise on Libyan production loss, start of TransCanada pipeline
Key points Chinas January-October crude oil imports rise 3.4% YoY EIA lowers WTI forecast for 2013 and 2014 US crude production beats imports for first time since 1995 IEA sees Libya, Iraq as growing risk to oil market balance Chinas October apparent oil demand rises 0.72% Iran nuclear deal to have limited impact in near term Iran expects nuclear agreement implementation by January 2014 OPEC November crude output falls to two-year low in survey TransCanada to begin operating the southern leg of its Keystone XL Start of the pipeline to Gulf Coast in January could reduce the Cushing stocks
WTI NYMEX crude oil
CMP: $96.80
All the commodities except natural gas closed lower in November 2013. The increasing possibility of tapering of quantitative easing (QE) by the US Federal Reserve (Fed) as the US economic data improves, investors showing more interest in equities and concerns about Chinas demand following the third plenum outcome weighed on the commodities complex. Iran reaching a nuclear deal with its west counterparts also helped push oil lower in a knee-jerk reaction. That even the US crude oil inventories continued to bulge added to bulls woes. Going forward, increasing US oil production, tepid demand and the thawing of geo-political tensions would keep the prices capped. However, the six-month interim Iran deal is unlikely to have a material impact in the short term as the comprehensive deal is yet to be reached. Crude oil prices can bounce back a bit as TransCanada Corp. said it will begin operating the southern leg of its Keystone XL pipeline to the Gulf Coast in January. This would reduce the glut at Cushing, the delivery point. Thus, WTI is likely to get a lift on Brent-WTI spread play. Supply losses in Libya (production at 15% of its 1.5mbpd capacity) and Iraq would support the counter. Crude oil is likely to trade between $95 and $102 in the days ahead.
December 2013
28
COMMODITY
FUNDAMENTALS
MONTHLY VIEW
Bullions: Gold to fall further

Key points GFMS sees silver-fabrication demand advancing 3.9% this year Gold benchmarks said to be under review as UK probe widens BofA sees gold hitting $1,100/Oz in 2014 on rates, dollar Chinas net gold imports from Hong Kong in October the second highest level on record Indias gold jewellery exports likely to dip by 50% in FY2014: industry HSBC looks for strong gold jewellery demand HSBC: US mint gold coin sales fall in November despite price slump Silver back in a bear market as prices down 20% from August settlement highs Gold has worst November in 35 years Iran nuclear accord also weighs on gold prices GFMS: global gold mining production to reach a record 2,920 tonne this year Venezuela conducts a swap deal of 1.45 million ounce with Goldman Sachs
Gold
CMP: $1,224 (SPOT)
Rallying equities and a lack of safe-haven demand, talks of the US Fed preparing to taper the stimulus, a recovering Europe and subdued inflation in the developed economies have weighed on the precious metals of late. In a supportive development, Chinas net gold imports from Hong Kong were 129.9 tonne in October this year. The imports were a record 130 tonne in March this year. However, Chinas demand is likely to be subdued in the near term. Consumers of physical gold in India who usually step up buying at these lower prices have been hindered by tighter import regulations. Some support to the metal can come from geo-political tensions due to a stand-off between Japan and China over the islands known as the Diaoyu in China and the Senkaku in Japan. Tepid retail demand even at a lower level is reflected from the fact the US Mint sales of gold bullion coins fell in November 2013. Combined US Mint sales of American Eagle and Buffalo coins fell by 7% month on month to 62,000 ounces in November from 66,500 ounces in October this year. These were also down from 153,000 ounces in the same month of 2012. We suggest selling into rallies. The range is likely to be $1,155-1,300.
Silver
CMP: $19.15 (SPOT)
Silver was hit hard in November and has slipped in a bear market. US Eagle silver coin sales of 2.3 million ounces in November were down compared with 3.1 million in October and 3.2 million in November 2012. We expect silver to do better than gold on account of an improving US economy. The range is likely to be $18.15-21.10.
Base metals: Looking oversold

Key points Chinas January-October copper product imports 3.67mn tonne Chinas October copper output 637,000 tonne: Statistics Bureau Data Zinc demand exceeded production in September, ILZSG says Lead production exceeded usage in September, ILZSG says Chile governments copper statistics Cochilco sees copper at average $3.14/Lb in 2014 Zinc premium steady in past month during supply talks Zinc prices may rebound amid dearth of new mines: Chieftain Metals CEO Codelco said to raise China copper fee 41% in 2014 as demand increases Copper boosted by delays and China buying, Antofagasta says Copper premium paid in the US mid-west seen rising by metal traders Third Plenum: China's metal demand to shift towards consumer products Shanghai banks warned of abnormal leverage in copper financing
Copper
CMP: RS445 (February Contract)
Taper worries and demand concerns in near term after Chinas third plenum pushed the base metal complex down. One of the factors responsible for weakness in copper prices might be mitigated to some extent as the expected refined copper surplus of nearly 2 lakh tonne could be much lower or can diminish. Shanghai Futures Exchange copper inventories slid to 17-month low while London Metal Exchange stocks kept on falling at a rapid pace. Chile has increased the premium of refined copper for 2014 for both South Korea and China on robust demand. We expect the metal to trade between Rs435 and Rs462.
Lead
CMP: RS129 (December contract)
As per WBMS, the refined lead market was in a shortage of 256kt for January-September 2013 vs 2012 surplus of 38.3kt. Refined lead production of 888,700 metric tonne exceeded usage of 878,700 tonne in September this year. Market expectation that lead would move into a deficit next year would support the counter. The expected range is Rs125-133 with an upside risk as the rupee can weaken.
29
December 2013
MONTHLY VIEW
COMMODITY
FUNDAMENTALS
Zinc
CMP: Rs117 (December contract)
The demand for refined zinc at 1.12 million metric tonne in September exceeded the production at 1.106 million tonne, according to the International Lead and Zinc Study Group. As per WBMS, zinc surplus was 92kt for January-September vs 2012 surplus of 265kt. The expected price range is Rs114-120 with an upside risk.
CMP as on December 04, 2013
Events watch: Major economic events in November 2013

Date 02-Dec-13 02-Dec-13 02-Dec-13 02-Dec-13 04-Dec-13 Region China Event HSBC/Markit Manufacturing PMI Survey 50.5 51.5 56.1 54.3 -0.40% Actual 50.8 51.6 58.4 54.7 -0.40% Prior 50.9 51.5 56 54.3 -0.40% Impact Manufacturing continues to be in expansion mode and data tops the forecast; hence supportive for industrial commodities Data slightly better than forecast as the manufacturing sector expanded for the fifth month in a row; supportive for the euro and industrial commodities UK economy continues to be the best performing developed economy. The string of better than expected data continues to support the pound The data increases the possibility of tapering sooner than later, supportive for dollar and bearish for the bullions Data in line with the forecast, no major impact seen; however French economy seems to be heading towards recession, thus data would be closely watched by the traders in future Exports climbing to record highs led to a narrower deficit; however, after accounting for price influence on Q4 GDP is likely to be negligible. No change expected as the UK economy is doing well, focus would be on the assessment of the economy No change expected, but there is a growing possibility that the ECB would take further measures to combat risk of deflation and slow growth; thus, the press conference would be a crucial event; further easing measures would weigh on the euro Stronger than expected data would support the dollar and industrial commodities, and would weigh on bullions tapering possible sooner than expected in that case Weaker data would be bearish for the US Dollar and would support the bullions; however, the impact could be limited ahead of the US non-farm payroll report Data trailing the forecast would be bearish for euro and commodities ADP data showing a figure of 215 indicates strong report, data beating the forecast would be bearish for the bullions and supportive for the dollar and the industrials Both import and export figures need scrutiny to gauge the health of Chinese economy as well as the global economy; lower import or disappointing export figure would weigh on the industrial commodities Larger than expected deficit would be yen bearish Higher than expected data would be somewhat bearish for the industrial commodities as it would reduce the room for easing should there be a need Better than expected number would support the euro and commodities in general Better than expected figure would be positive for industrial commodities Better than expected figure would be positive for industrial commodities Stronger than estimated number would be supportive for the pound and industrial commodities Data topping the forecast would support industrial commodities as Japan is a major consumer of metals and energy Focus would be the assessment of the economy and the insights into the future; important for both the euro and commodities Better than expected data would be supportive for the euro and commodities A subdued figure would be bearish for the bullions Stronger than expected data would increase the possibility of a January taper; currently the markets expect tapering to begin in March 2014 Inflation is subdued. the data is unlikely to surprise; subdued inflation bearish for the bullions Better than expected number would support the dollar and the industrial commodities but would weigh on the bullions Europe is facing a danger of deflation, very subdued data would be bearish for the euro as it would increase the possibility of further easing by the ECB Tapering not expected at this meeting; however, the meeting would be important for clues to tapering Tapering cues would be bearish for the markets in general The housing sector remains a key sector of the economy, data trailing the forecast would be bearish for the dollar and supportive for the bullions Crucial for the pound, better than expected data would support the pound and industrial commodities Ex transport data strips out the volatile component, thus giving a better picture; stronger than expected data would support the dollar and be bearish for the industrial commodities A lower figure would be bullish for gold and bearish for the US Dollar
Euro zone PMI Manufacturing UK USA PMI Manufacturing Markit US PMI Final
Euro zone GDP SA YoY
04-Dec-13 05-Dec-13 05-Dec-13
USA UK
Trade balance BoE asset purchase target
-$40.2B 375B 0.25%
($40.60) -$41.8B --375B 0.25%
Euro zone ECB announces interest rates
05-Dec-13
USA
GDP annualised QoQ Factory orders Factory orders MoM Change in non-farm payrolls Trade balance
3.00% -1.00% -1.00% 183K $23.62B
-----
2.80% 1.70% 3.30% 204K
12/05/2013 USA 06-Dec-13 06-Dec-13 08-Dec-13 Germany USA China
-- $31.11B
09-Dec-13 09-Dec-13 09-Dec-13 10-Dec-13 10-Dec-13 10-Dec-13 11-Dec-13 12-Dec-13 12-Dec-13 12-Dec-13 12-Dec-13 13-Dec-13 16-Dec-13 17-Dec-13 19-Dec-13 19-Dec-13 20-Dec-13 24-Dec-13
Japan China Euro zone China China UK Japan
Trade balance BoP basis CPI YoY Sentix Investor Confidence Industrial production YoY Retail sales YTD YoY Industrial production MoM Machine orders MoM
-3.20% -10.00% ----
-- -874.8B -- 3.20% -----9.3 10.30% 13.00% 0.90% -2.10%
Euro zone ECB publishes monthly report Euro zone Industrial production SA MoM USA Import Price Index MoM USA Retail sales advance MoM USA USA PPI ex food and energy MoM Industrial production MoM --0.70% 0.30% 0.10% -----------------0.50% -0.70% 0.40% 0.20% -0.10% -0.10% 0.25% 5.12M 0.80% -0.10%
Euro zone CPI MoM USA USA UK USA FOMC rate decision Existing home sales GDP QoQ Durables ex transportation
31-Dec-13
USA
Consumer Confidence Index
--
--
70.4
December 2013
30
COMMODITY
TECHNICALS
TREND & VIEW
Gold is near strong supports

In the last few months gold has fallen in a three-wave manner. It has reached near the lower end of the medium-term falling channel. The yellow metal has multiple supports in the range of $1,2001,180. If this range is not broken gold can start moving higher. The short-term momentum indicator is showing a positive divergence and has triggered bullish crossover. From the short- to medium-term perspective, $1,310 and $1,361 will be the key levels on the upside.
Trend Up Trend reversal $1,180 Supports $1,211/1,200 Resistances $1,275/1,300 Target $1,310/ $1,361
May June July Augus t Septem ber October Novem ber 0.0% KST (-2.47608) 5 0
-5
1361
23.6%
38.2%
1310
50.0%
61.8%
78.6%
100.0%
1180
1520 1510 1500 1490 1480 1470 1460 1450 1440 1430 1420 1410 1400 1390 1380 1370 1360 1350 1340 1330 1320 1310 1300 1290 1280 1270 1260 1250 1240 1230 1220 1210 1200 1190 1180 1170 1160 1150 1140 1130
Decem ber
2014
Silver likely to recover

Silver has been falling in a medium-term falling channel for the last few months. It has taken support near the lower channel line. Bulls seem to be providing support to the white metal near the channel line. The short-term momentum indicator has turned bullish suggesting that recovery can be on the cards. The previous low of $18.19 will act as a strong support from the medium-term perspective. On the other hand, the medium-term target will be $21.80.
0.0% KST (-4.28632) 10 5 0 -5 -10 SILVER [CASH] (19.6700, 19.7200, 19.1900, 19.3300, -0.34000) 26.5 26.0 25.5 25.0 24.5 24.0 23.6% 23.5 23.0 38.2% 22.5
21.80
50.0%
22.0 21.5 21.0
61.8% 66.0% 20.5 20.0 78.6% 19.5 19.0 18.5 100.0% 18.0 17.5
Trend Up
Trend reversal $18.19
Supports $18.86/18.5
Resistances $20.89/21.50
Target
18.19
$21.80
June July Augus t Septem ber October Novem ber Decem ber 2014
Crude oil escapes from the channel

From a high of $112.24 NYMEX crude oil tumbled down sharply in the last few months. The entire fall unfolded in a channelised manner. However, the correction halted near the 78.6% retracement mark from where the oil started to move up. Recently it broke out from the falling channel. The short-term momentum indicators are in line with the channel break-out. Thus, the low of $91.77 will act as a major support. The key levels on the upside are $102 and $104.50.
Trend Up Trend reversal $91.77 Supports $95.63/93 Resistances $99.50/103 Target
April May June July Augus t Septem ber October Novem ber Decem ber 20 78.6% 0.0% 0.0% MACD (-0.44060) 3 2 1 0 -1 -2 LIGHT CRUDE CONTINUOUS 1000 BARRELS [NYMEX] (97.3300, 97.9900, 97.0100, 97.3800, +0.18000) 114 100.0% 113 112 111 110 109 108 107 23.6% 61.8% 106
104.50 102
105 104 103 102 101 100 99 98
38.2%
50.0%
38.2% 50.0%
23.6% 61.8%
97 96 95 94 93 92
91.77
91 90 89 88 87
100.0%
86 85 84
$102/ $104.50
31
December 2013
TREND & VIEW
COMMODITY
TECHNICALS
Bulls fancy copper

Copper has formed a multi-month channelised correction, which in terms of price pattern has taken the form of a bullish flag. In terms of Fibonacci retracement, the correction has taken support at the 61.8% retracement mark. The short-term momentum indicators have turned bullish. Thus, the red metal looks set for the next leg on the upside the equality target for which is $3.55. The intermediate target will be the high of $3.388. The level of $3.10 will act as a strong support on a closing basis.
Trend Up Trend reversal $3.10 Supports $3.15/3.12 Resistances $3.30/$3.35 Target $3.388 / $3.55
April May 0.0% KST (0.40508) 5 0
-5 HG COPPER CONTINUOUS 25000 LBS [COMEX] (3.23050, 3.24050, 3.21350, 3.22950, -0.01950)
3.65 3.60
3.55
3.55 3.50 3.45
3.388
3.40 3.35
23.6%
3.30 3.25 3.20 3.15 3.10
38.2% 50.0% 61.8%
3.10
3.05
3.00 100.0% 2.95
2.90 June July Augus t Septem ber October Novem ber Decem ber 2014
Natural gas marching ahead smartly

In the last couple of months MCX natural gas retraced more than 66% of the previous rise. The gas found support near the intermediate channel line and moved up thereon. The daily momentum indicator is in line with the rise.
0.0% MACD (6.17974) 5 0 -5 NATURAL GAS MMBTU - 1 MONTH (247.000, 255.200, 244.500, 254.500, +6.60001)
281
285 280 275 270 265
257.10
260 255 250 245
Recently the gas formed a bullish outside. Thus, the level of Rs244.50 will now act as a key support. The immediate resistance is at Rs257.10. Once that is crossed natural gas can target Rs281, ie the equality target.
Trend Up Trend reversal Rs244.50 Supports Rs250/247 Resistances Rs257.10/275 Target
23.6%
244.50
38.2%
240 235 230
50.0%
225 220
61.8% 66.0%
215 210
78.6%
205 200 195
100.0% 190
Rs281
185 uly Augus t Septem ber October Novem ber Decem ber 2014
Cardamom poised for a fall

NMCX cardamom is trading in a multi-month downward sloping channel. Within that channel it recently faced resistance near the upper channel line. The key weekly moving averages and weekly upper Bollinger Band added to the downward pressure. Consequently, the commodity has started to fall. The weekly momentum indicator has started a new cycle on the downside from the equilibrium line. Thus, unless the level of Rs737 is crossed the price can fall to Rs560 from the medium-term perspective.
Trend Down Trend reversal Rs737 Supports Rs616/600 Resistances Rs712/730 Target
300 KST (-3.04667) 50
CARDAMOM 1KG - 1 MONTH (705.000, 712.700, 680.000, 680.200, -26.4000)
1700 1600 1500 1400 1300 1200 1100 1000 900
737
800
700
600
560
500
400
Rs560
2012
2013
2014
December 2013
32
CURRENCY
FUNDAMENTALS
MONTHLY VIEW
Currencies: Policy expectations will continue to dominate market sentiment

Key points Indias GDP expands 4.8% in second quarter of 2013-14 Inflows in India through special swap windows touch $25bn Draghi says ECB aware that low rates pose a risk to stability UK economic recovery has finally taken hold: Bank of Englands Carney Yen weakens as Bank of Japan to ease policy, Fed to scale back stimulus Bernanke signals Fed target rate to stay low after QE
November 2013 contract price movement
65 USDINR JPYINR 65 64 63 63 62 62
84 100 85 101
CURRENCY LEVELS IN NOVEMBER 2013 (IN RS) Currency USD-INR EUR-INR GBP-INR JPY-INR High 64.19 86.26 102.21 64.50 Low 61.56 83.56 98.70 61.24 Close 62.33 84.67 101.09 61.35 Monthly chg (%) -1.39 0.12 -2.08 2.64
November 2013 contract price movement

86 EURINR GBPINR 102
64
61 60 29-Oct-13 31-Oct-13 2-Nov-13 4-Nov-13 6-Nov-13 8-Nov-13 10-Nov-13 12-Nov-13 14-Nov-13 16-Nov-13 18-Nov-13 20-Nov-13 22-Nov-13 24-Nov-13 26-Nov-13
83 2-Nov-13 4-Nov-13 6-Nov-13 8-Nov-13 10-Nov-13 12-Nov-13 14-Nov-13 16-Nov-13 18-Nov-13 20-Nov-13 22-Nov-13 24-Nov-13 26-Nov-13 29-Oct-13 31-Oct-13 99
61
INR-USD
CMP: Rs61.75 (SPOT)
The rupee fell by 1.2% against the dollar in November this year due to a rise in October retail inflation to 10.09% and strong jobs growth in the USA despite a government shutdown. However, a fall in the trade deficit, rise in foreign exchange reserves and a hawkish Reserve Bank of India (RBI) restricted the losses in the rupee. The inflows under the foreign currency non-resident (FCNR) swap facility were more than $25 billion. The global scenario appears supportive of the rupee as deflating developed economies support the case for more monetary stimulus. The inflows would also remain high due to the extension of the deregulated interest rates for non-resident external and FCNR deposit accounts by the RBI till January 31, 2014. The threat of quantitative easing (QE) Taper persists, though at the moment the markets do not expect the US Federal Reserve to begin Taper before March 2014. Meanwhile, markets may turn euphoric on the Bharatiya Janata Partys win in state elections and we believe the RBI would use the resultant rally in the rupee to shore up its dollar reserves. Strong US jobs data for November may play spoil sport pushing the USD-INR to 63.30 levels. Strength in the rupee is likely to be capped around 60.00 levels.
INR-GBP
CMP: Rs100.76 (SPOT)
The pound rose more than 2% against the dollar finishing November 2013 at the highest level since August 2011. Sterlings stellar rise in the past few months has been a result of economic recovery led by strong consumer spending, which accounts for nearly two-thirds of the UK's economic activity. Meanwhile the Bank of England (BoE) unexpectedly said it was ending incentives for banks to provide mortgages as part of its Funding for Lending Scheme (FLS) and would focus the scheme exclusively on lending to businesses. The decision to end FLS is indicative of the central banks confidence in housing recovery which further bolstered the demand for the pound. However, the markets are currently ignoring the fact that the UK trade gap is widening due to a strong pound, though it helps in curbing imported inflation, a current priority of BoE. We believe that the GBP-USD pair would consolidate in the range of 1.62 to 1.648 in December 2013. We see the GBP-INR in the range of 99.50 to 103.
INR-EUR
CMP: Rs83.80 (SPOT)
The euro fell against the dollar in November 2013 after the European Central Bank (ECB) cut interest rates by 25 basis points to counter the threat of deflation. Speculations went rife that the ECB was considering multiple options which included long-term refinancing operation and negative deposit rates in order to inflate the economy out of recession. The comments from the ECB policy makers over the possibility of negative rates weakened the EUR-USD to 1.3294. However, the pair managed to bounce back above 1.35 levels after the ECB president, Mario Draghi, refrained from indicating the possibility of negative rates and expressed concerns over the negative effects of maintaining low rates in the economy for a prolonged period. Policy expectations remain in favour of the euro as the Feds QE operation makes it appear ultra dovish against its European Union (EU) counterpart. We see the EUR-USD in the range of 1.3450 to 1.3700. We see the EUR-INR in the range of 82.78 to 85.20.
INR-JPY
CMP: Rs60.48 (SPOT)
The yen fell by more than 4% against the dollar in November 2013 as investors expect more stimulus from Bank of Japan. Foreigners have invested about $19.6 billion in stocks since the middle of November this year resulting in a 9.8% rally in the benchmark equity index Nikkei. Many believe that yen weakness is due to the resurgence of carry trades. However, high yielding currencies did not appreciate significantly against the dollar which contradicts the carry trade theory. So far the QE taper expectations have not rattled the risk-on sentiment. However, strong US November jobs data might result in risk aversion and rebound in the yen. We see the USD-JPY in the range of 100.00-104.00. The JPY-INR is likely to trade in the range of 58.50 to 60.60. CMP as on December 05, 2013
33
December 2013
TREND & VIEW
CURRENCY
TECHNICALS
USD-INR: Bears in control

From the high of 68.80 the USD-INR had fallen sharply in September this year. Near the end of the fall it had formed an ending diagonal pattern. The price had broken out on the upside and formed a pull-back thereon. The pull-back had retraced 38.2% of the fall. From there the price has started falling once again. The fall is breaking up into waves of lower degree. The key levels on the downside are 59.70 and 58.69. The reversal of the trend can be placed at 63.90 on a closing basis.
KST (-0.49003) 5
GBP-INR: FALL AROUND THE CORNER

The GBP-INR on its way up had crossed multiple resistances in August this year. It had registered a new all-time high of 106.984. From there the price had seen a decent correction. However, recently it formed a short-term pull-back. To end the pull-back the price seems to have formed an Ending Diagonal pattern. The next leg down is expected to start from here. Unless the level of 103.25 is crossed on a closing basis, the short-term target will be 97.04.
KST (0.95788) 5
0
0
USDINR - INDIAN RUPEE (62.3700, 62.5330, 61.9020, 62.0500, -0.31000)
70.5 70.0 69.5 69.0 68.5 68.0 67.5 67.0 66.5 66.0 65.5 65.0 64.5
100.0% GBPINR (102.214, 102.479, 101.120, 101.650, -0.56400) 109.0 108.5 108.0 107.5 107.0 106.5 106.0 105.5 105.0 104.5 104.0 61.8%
68.80
100.0%
61.8% 50.0% 38.2%
103.25
103.5 103.0 102.5 102.0 101.5 101.0 100.5 100.0
63.90
64.0 63.5
50.0%
23.6%
63.0 62.5 62.0 61.5

23.6% 38.2%
99.5 99.0 98.5 98.0 97.5
0.0%
61.0 60.5
59.70
60.0 59.5 59.0

0.0%
97.04
97.0 96.5 96.0 95.5 95.0 94.5 94.0 93.5 93.0
58.69
58.5 58.0 57.5 57.0 56.5 56.0 55.5

29 5 12 Augus t 19 26 2 9 16 Septem ber 23 30 7 October 14 21 28 4 11 18 Novem ber 25 2 9 16 Decem ber 23 30 6 2014 13
July
Augus t
Septem ber
October
Novem ber
Decem ber
2014
EUR-INR: A bearish stance

In case of the EUR-INR the momentum on the way up was so sharp that the price crossed the upper end of the long-term rising channel in August this year. The price also crossed the upper end of the medium-term rising channel but faltered above the trend line. It turned out to be a reversal from the medium-term perspective. From there the price has tumbled till the long-term channel line, which is acting as a key support. Thus, from that level the price has done a channelised pullback. The price is expected to tumble from this level once again. The targets on the downside are 82.41 and 80.00. The reversal of the trend can be pegged at 85.92 on a closing basis.
KST (0.04223) 5 0
JPY-INR: Tumbling down

As can be seen from the adjacent chart, the JPY-INR had broken out from the ending diagonal pattern as well as the mediumterm falling channel in May this year. From there the price had formed a three-wave rise and achieved the equality as well as the channel targets on the upside. From the high of 0.7081 the currency pair entered the correction mode. It formed an impulse on the downside and broke the lower end of the channel. Recently it formed a small bounce and resumed the larger downtrend. The targets on the downside are 0.5874 and 0.5610 with reversal at 0.6230 on a closing basis.
KST (-2.55278) 5 0
EURINR (84.7350, 84.9570, 83.7840, 84.3450, -0.39600)
100.0%
94.0 93.5 93.0 92.5 92.0 91.5 91.0 90.5 90.0 89.5 89.0 88.5 88.0 87.5 87.0
JPYINR (0.60830, 0.61000, 0.60260, 0.60620, -0.00200) 161.8%
0.76 0.75 0.74 0.73 0.72
100.0%
0.71 0.70 0.69 0.68
61.8% 50.0%
61.8% 50.0% 38.2% 23.6%
0.67 0.66 0.65 0.64
85.92
38.2%
86.5 86.0 85.5 85.0 84.5 84.0 83.5 83.0
23.6%
0.6230
0.0%
0.63 0.62 0.61 0.60 0.59
0.0%
82.5
82.41
82.0 81.5 81.0 80.5 80.0 79.5 79.0 78.5 78.0 77.5 77.0
0.5874 0.5610
0.58 0.57 0.56 0.55 0.54 0.53 0.52
80.00
July
Augus t
Septem ber
October
Nov em ber
Decem ber
2014
May
June
July
Augus t
Septem ber
October
Novem ber
Decem ber
2014
Currency USD-INR GBP-INR EUR-INR JPY-INR
View Down Down Down Down
Reversal 63.90 103.25 85.92 0.6230
Supports 60.93/59.50 99.69/97.90 82.97/81.00 0.5900/0.5850
Resistances 62.64/63.48 102.58/103 85.24/85.57 0.6182/0.6215
Target 59.70-58.69 97.04 82.41-80.00 0.5874-0.5610
December 2013
34
PMS
DESK
PMS FUNDS
Portfolio Management Service

We are pleased to introduce you to Sharekhans Portfolio Management Service (PMS) in which we completely manage your investment portfolio so that you stop worrying about the market volatility and focus your energy on things that you like to do! We have a wide range of strategies that you can choose from. Our strategies are based on fundamental research and technical analysis. We have the following strategies on offer:
ProPrime
(based on fundamental research)
Top Equity Nifty Thrifty Trailing Stoploss
Diversified Equity Diversified
ProTech (based on technical analysis)
PROPRIME - TOP EQUITY

OVERVIEW
The ProPrimeTop Equity PMS strategy is suitable for the long-term investors looking to create an equity portfolio through disciplined investments that will lead to a growth in the portfolios value with low to medium risk.
(In %) 1 month 3 month Since inception*
Product performance as on November 30, 2013

Scheme 1.3 15.0 -3.5 11.8 -10.6 12.7 -12.9 Sensex -1.8 11.7 15.6 11.2 -8.9 12.6 -12.7 Nifty -2.0 12.9 14.4 12.4 -9.3 14.5 -12.5
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough fundamental research. Investments are made primarily in the Nifty Fifty or the BSE 100 scrips. Attempts to have an exposure of minimum of 70% in the Nifty Fifty stocks and that of minimum of 90% in the BSE 100 stocks. Endeavours to create a core portfolio of blue-chip companies with a proven track record and have partial exposure to quality companies in the mid-cap space.
Best month Worst month Best quarter Worst quarter

*16-June-11
Disclaimer: Returns are based on a clients returns since inception and may be different from those depicted in the risk disclosure document.
PRICING
Minimum investment of Rs25 lakh Charges 2% per annum; AMC fee charged every quarter 0.5% brokerage 20% profit sharing after the 12% hurdle is crossed at the end of every fiscal
Top 10 stocks
Bank of Baroda Bharti Airtel Colgate-Palmolive (I) HDFC Bank Larsen & Toubro Mahindra & Mahindra Oil India Sun Pharmaceutical Industries Reliance Industries
Fund Manager: Gaurav Dua

FUND OBJECTIVE
State Bank of India
A good return on money through long-term investing in quality companies
35
December 2013
PMS FUNDS
PMS
DESK
PROPRIME - DIVERSIFIED EQUITY

OVERVIEW
The ProPrimeDiversified Equity PMS strategy is suitable for long-term investors looking to create an equity portfolio through disciplined investments that will lead to a growth in the portfolios value with medium to high risk.
(In %) 1 month

Scheme 3.2 24.1 174.8 50.9 -23.2 71.1 -28.5 S&P CNX 500 -0.7 14.2 252.5 34.4 -27.2 51.2 -28.6
INVESTMENT STRATEGY
Disciplined investment decisions are taken in specific stocks based on thorough fundamental research. A balanced mix of value and growth stocks (mid-cap and small-cap) is created that represents investment opportunities across sectors and market capitalisation. Invests in quality value and growth stocks with good earnings visibility and healthy balance sheet. The fund manager, with the help of extensive, in-house, superior research, identifies fundamentally sound companies to invest in. The fund manager strives to capture the short-term trading opportunities to maximise the potential of the swings in specific stocks.
3 month Since inception* Best month Worst month Best quarter Worst quarter
*27-Aug-04
Top 10 stocks
Bank of Baroda
PRICING
Minimum investment of Rs25 lakh Charges 2% per annum; AMC fee charged every quarter 0.5% brokerage 20% profit sharing after the 12% hurdle is crossed at the end of every fiscal
BHEL Colgate-Palmolive (I) Federal Bank ITNL Reliance Industries Reliance Infrastructure Sesa Sterlite Southern Petrochemical Industries Sun Pharmaceutical Industries
FUND OBJECTIVE
A good return on money through long-term investing regardless of short-term volatility
December 2013
36
PMS
DESK
PMS FUNDS
PROTECH - INDEX FUTURES FUND

If you were searching for "Nifty Thrifty" then you are in the right place, the name of the fund has been changed to "Index Futures Fund", to represent the product better; everything else remains the same. OVERVIEW
The ProTechIndex Futures Fund PMS strategy is suitable for long-term investors who desire to profit from both bullish and bearish market conditions. The strategy involves going long (buying) or going short (selling without holding) on Nifty futures by predicting the market direction based on a back-tested automated model.

(In %) 1 month 3 month Scheme -0.9 2.3 3.7 13.1 9.2 14.7 181.7 28.9 -17.1 33.3 -11.7 Sensex -1.8 11.7 8.2 -10.5 10.9 80.5 105.4 -23.9 0.0 49.3 17.3 Nifty -2.0 12.9 7.3 -9.2 11.1 73.8 104.4 -26.4 0.6 42.0 22.3
INVESTMENT STRATEGY
The strategy has the potential to generate profits irrespective of the market direction by going long or short on Nifty futures. An automated basic back-testing model is used to predict the market direction for the Nifty which then decides the strategy to be deployed in terms of going long or short. The portfolio is not leveraged, ie its exposure never exceeds its value.
FY12-13 FY11-12 FY10-11 FY09-10 Since inception* Best month Worst month Best quarter
PRICING
Minimum investment of Rs25 lakh Charges AMC fees: Brokerage: Profit sharing: 0% 0.05% Flat 20% charged on a quarterly basis
Worst quarter
*01-Feb-2006
Investments in
Nifty Index
FUND MANAGERS VIEW

The Index Futures Fund closed November of 2013 down 1% just like its benchmark index (Nifty) itself. There was no big trend to profit from and so we ended up with a 0.9% loss. The market moved in both directions during the month, first down and later up, but did not make any significant gain or loss. Such range-bound moves can result in drawdowns. The longer the market takes to break out of a range the more difficult it gets. The market had made trending moves up to September, giving rise to the hope that a more trending market was in store but October and November were disappointing. The market is at the fag end of a two-year advance that has been narrow in terms of the trading range. We wait for this to end and this eight-quarter-long cycle should end by the end of this calendar year.
Fund Manager: Rohit Srivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.
37
December 2013
PMS FUNDS
PMS
DESK
PROTECH - TRAILING STOPS

OVERVIEW
Our ProTechTrailing Stops PMS strategy is ideal for Traders and Investors looking for Regular Income from trading and desire to make profits in both bullish and bearish market conditions. It is designed to payout book profits on monthly basis.* It is also for those investors who are looking for better income than Fixed Income or Deposits. This strategy involves going Long (buying) or Short (selling without holding) on stock futures. * Terms and conditions apply
(In %) 1 month

Scheme -3.7 -3.9 14.9 29.0 46.3 9.1 -4.4 9.9 -1.2 Sensex -1.8 11.7 8.2 -6.1 12.2 11.3 -2.0 -12.7 3.0 Nifty -2.0 12.9 7.3 -4.6 11.3 12.4 -1.7 -12.5 2.8
INVESTMENT STRATEGY
This strategy spots the winning trades based on technical analysis vs time framebased portfolios, basically the momentum calls. A risk model has been developed for stock portfolio allocation that reduces the risk and portfolio volatility through staggered building of positions. It is non-leveragedthe exposure will never exceed the value of the portfolio.
3 month FY12-13 FY11-12 FY10-11 FY09-10 Since Inception* Best month
PRICING
Minimum investment of Rs25 lakh Charges AMC fees: Brokerage: Profit sharing: 0% 0.05% Flat 20% charged on a quarterly basis
Worst month Best quarter Worst quarter

*09th May 2011
FUND MANAGERS VIEW

Throughout November of 2013 Trailing Stops tried to establish positions with a trend in the market but the market failed to develop a trend. Our expectation of a trending month cost us 3.7% in losses for the month and we are likely to slow down a bit so that we can get the best out of the next move in the market with a minimal loss. We should have bet on smaller moves instead of waiting for a trend to emerge than expecting a trend and that would have paid off more in this time period. The market had made trending moves up to September this year giving rise to hope that a more trending market was in store but October and November were disappointing. The market is at the fag end of a two-year advance that has been narrow in terms of the trading range. We wait for this to end and this eight-quarterlong cycle should end by the end of this calendar year.
Investments in
Nifty Index Stock futures
Fund Manager: Rohit Srivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.
December 2013
38
ADVISORY
DESK
MONTHLY PERFORMANCE
Advisory Products & Services

The Advisory Desk is a central desk consisting of a Mumbai-based expert team that runs various sample model portfolios (for illustrative purposes only) for clients of all profiles, be they traders or investors. For investors, it has the Portfolio Doctor service under which it reviews an existing portfolio on various parameters and suggests changes to improve its performance. For traders, it has four products in all: MID Intraday, MID Swing, MID Derivatives and Alpha Delivery Picks. All MID products are different from Sharekhans research-based technical and fundamental offerings as these essentially try to capture trading opportunities in liquid stocks where momentum is expected before or after some event including the announcement of results or where some news/event is probable. These calls are rolled out by the Advisory Desk based on the market pulse and before generating an MID call, all market news on the stock as well as its technical and derivative indicators are checked. Advisory products are ideal for those who do not have time to either monitor the market tick by tick or shift through pages of research for data or pour over complex charts to catch a trend. However, all these products require perfect discipline and money management.
FOR TRADERS MID TRADES

There are five different types of MID calls. MID Intraday: These are long/short ideas based on fund flow and technical levels. As is apparent from the name, these calls are meant for intra-day trading. All MID Intraday calls are accompanied by proper stop losses and probable targets. MID Swing: These are positional long/short ideas based on fundamental rationale/events/news as well as market pulse. These ideas come with proper stop losses and probable targets. MID performance# Product Month No. of calls Profit booked Stop loss hit Strike rate (%) MID Intraday Nov 2013 YTD FY14 54 548 37 352 17 196 69 64 MID Swing Nov 2013 YTD FY14 18 268 11 155 7 113 61 58 MID Derivatives Nov 2013 YTD FY14 18 163 5 95 13 68 28 58 Alpha Delivery Picks Nov 2013 YTD FY14 4 12 3 11 1 1 75 92 MID Derivatives: These are directional calls on options based on the analysis of the open interest and put-call ratio in the market. These come with proper stop losses and probable targets. Alpha Delivery Picks: This is a long only, cash market delivery product where ideas are rolled out based on short-term triggers with proper fundamental rationales. These ideas have to be bought in two parts (price range is clearly defined at initiation) and come with proper stop losses and probable targets for a maximum period of two months.
DERIVATIVE IDEA
Derivative Idea is generated by the Sharekhan Derivatives Research Desk based on the analysis of open interest, implied volatility and put-call ratio. It is a leveraged product and ideal for aggressive traders. Calls in Derivative Idea are accompanied by proper stop loss, targets, time frame and quantity to execute.
Derivative Ideas performance# Ticket size (Rs) Month No. of calls Profit and loss (Rs) Returns (%) Nov 2013 6 110 0.04 300,000 YTD FY14 177 29,851 9.95
FOR INVESTORS
PORTFOLIO DOCTOR Portfolio Doctor evaluates an existing portfolio on various parameters and suggests recommendations on a
regular basis to improve its performance. It is targeted at long-term investors with a portfolio value of more than Rs10 lakh. The Portfolio Doctor service involves three simple steps: analysis of an existing portfolio, realignment of the portfolio with Sharekhans creation of a Model Portfolio. recommendations
#Please note there may be some deviation in the actual performance reported in TradeTiger due to a difference in the method of closure of an idea in a particular month.
For more details on any of the Advisory Desk products write to us at info@sharekhan.com READY FOR ROARING ADVICE
39
December 2013
December 2013
40
MUTUAL FUNDS
DESK
MF PICKS
SHAREKHANS TOP MUTUAL FUND PICKS (EQUITY)

Scheme name Star rating NAV (Rs) Absolute 6 months 12.3 19.8 27.3 104.6 17.2 20,666.2 13.9 18.6 38.9 330.0 33.3 6,210.9 128.2 165.1 42.2 64.7 41.9 7,539.5 16.1 163.5 20.4 156.0 22.8 4,725.9 25.6 32.5 14.3 21.4 15.3 6,140.8 59.1 65.5 56.5 354.6 24.9 -1.6 6.2 5.3 3.1 2.0 3.4 3.2 3.6 1.5 2.5 0.5 -5.0 11.6 8.3 5.4 2.4 -2.6 -0.3 5.5 6.9 4.1 4.8 -3.4 -0.6 31.0 0.1 1.3 0.3 -6.0 1.2 4.2 4.7 1.6 1.1 -1.3 0.8
NOVEMBER 13, 2013

Data as on November 08, 2013
Returns (%) Compounded annualised 1 year 3 years 5 years 6.6 11.9 11.3 11.5 7.9 9.7 6.2 5.0 4.8 8.3 4.6 -7.7 14.7 12.9 13.4 7.1 -1.1 3.6 12.4 8.9 7.7 11.0 -3.7 3.9 40.5 10.5 6.5 4.6 1.1 7.0 11.0 5.6 8.2 6.9 1.3 6.9 4.7 3.6 3.0 2.4 -0.7 -0.3 5.4 2.7 2.2 1.4 -2.4 -10.5 4.5 4.1 4.1 2.4 1.7 -3.4 6.3 1.9 1.5 0.4 -1.9 -3.0 10.1 6.8 3.9 1.2 0.4 -0.7 6.8 4.1 3.1 2.3 -0.3 2.3 22.7 18.0 20.1 14.1 15.69 23.4 24.2 21.7 13.09 20.9 18.4 15.9 19.2 24.4 15.34 23.2 20.3 19.1 17.6 15.35 22.7 20.6 18.1 18.1 15.59 18.1 20.0 14.3 19.1 18.4 13.4
Since inception 6.7 13.3 13.3 23.3 7.3 16.5 10.5 10.2 18.2 19.2 27.3 20.0 26.0 20.0 17.1 10.9 18.1 14.6 13.2 21.7 10.9 23.8 10.7 8.4 12.5 15.3 5.9 10.7 10.8 14.1 13.5 15.3 13.2 21.0 11.4 12.7
Large-cap funds Canara Robeco Large Cap+ Fund ICICI Prudential Focused Bluechip Equity Fund - Ret Birla Sun Life Top 100 Fund Birla Sun Life Frontline Equity Fund - Plan A UTI Leadership Equity Fund Indices BSE Sensex Mid-cap funds Mirae Asset Emerging Bluechip Fund HDFC Mid-Cap Opportunities Fund IDFC Premier Equity Fund - Reg Franklin India Prima Fund Principal Emerging Bluechip Fund Indices BSE MID CAP Multi-cap funds ICICI Prudential Dynamic Plan ICICI Prudential Top 100 Fund BNP Paribas Equity Fund UTI Equity Fund Reliance Equity Opportunities Fund Indices BSE 500 Tax saving funds Axis Long Term Equity Fund ICICI Prudential Taxplan Religare Invesco Tax Plan HDFC Long Term Advantage Fund Reliance Tax Saver (ELSS) Fund Indices CNX500 Thematic funds ICICI Prudential Exports and Other Services Fund Birla Sun Life India GenNext Fund UTI India Lifestyle Fund - Growth L&T India Special Situations Fund Canara Robeco FORCE Fund - Reg Indices S&P Nifty (CNX Nifty) Balanced funds ICICI Prudential Balanced HDFC Balanced Fund FT India Balanced Fund Birla Sun Life 95 Reliance RSF - Balanced Indices Crisil Balanced Fund Index
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
41
December 2013
MF PICKS
MUTUAL FUNDS
DESK
SHAREKHANS TOP SIP FUND PICKS

Investment period Total amount invested (Rs) Funds would have grown to (Rs) Large-cap funds Birla Sun Life Top 100 Fund Birla Sun Life Frontline Equity Fund - Plan A ICICI Prudential Focused Bluechip Equity Fund - Ret Reliance Equity Fund UTI Leadership Equity Fund BSE Sensex Multi-cap funds ICICI Prudential Top 100 Fund UTI Equity Fund Templeton India Equity Income Fund Reliance Equity Opportunities Fund PineBridge India Equity Fund - Std BSE 500 Mid-cap funds Franklin India Prima Fund Principal Emerging Bluechip Fund HDFC Mid-Cap Opportunities Fund IDFC Sterling Equity Fund - Reg IDFC Premier Equity Fund - Reg BSE Midcap Tax saving funds ICICI Prudential Taxplan Religare Invesco Tax Plan HDFC Long Term Advantage Fund HDFC Taxsaver Reliance Tax Saver (ELSS) Fund CNX Nifty 163.5 20.4 156.0 243.9 22.8 6,140.8 12,952.0 12,726.1 12,840.6 12,714.3 12,202.9 12,557.8 8.7 6.7 7.7 6.5 1.9 5.1 41,807.2 41,222.7 41,109.3 39,191.1 38,770.2 40,065.9 330.0 33.3 18.6 21.5 38.9 6,210.9 12,575.2 12,526.0 12,676.1 12,652.8 12,367.7 11,944.3 5.3 4.8 6.2 6.0 3.4 -0.5 42,364.7 41,611.3 41,117.4 41,101.1 41,090.4 35,114.8 165.1 64.7 23.4 41.9 13.7 7,539.5 13,050.7 12,594.6 12,483.0 12,160.5 12,561.3 12,378.3 9.6 5.4 4.4 1.5 5.1 3.4 42,840.5 41,395.7 40,921.8 40,243.6 39,555.8 38,765.7 27.3 104.6 19.8 15.5 17.2 20,666.2 12,901.7 12,750.0 12,925.3 12,672.6 12,578.3 12,699.3 8.3 6.9 8.5 6.1 5.3 6.35 42,554.9 42,512.4 42,443.5 41,104.8 40,876.4 40,615.2 NAV 1 year 12,000 Present Avg. annual value (Rs) return (%) 3 years 36,000 Present value (Rs)
NOVEMBER 13, 2013

Data as on November 08, 2013
Avg. annual return (%)
5 years 60,000 Present Avg. annual value (Rs) return (%)
5.9 5.9 5.8 4.6 4.4 4.2
81,306.2 81,880.9 85,028.9 69,976.7 74,764.6 75,284.7
6.4 6.5 7.3 3.2 4.6 4.7
6.1 4.9 4.5 3.9 3.3 2.6
81,694.4 81,220.4 80,840.2 85,530.0 75,525.5 71,832.4
6.5 6.3 6.2 7.5 4.8 3.7
5.7 5.1 4.7 4.6 4.6 -0.8
84,886.3 81,586.8 87,048.3 83,829.2 85,992.7 64,240.4
7.3 6.4 7.9 7.0 7.6 1.4
5.3 4.7 4.6 3.0 2.6 3.7
84,443.4 81,284.3 81,232.6 76,929.0 75,570.4 74,177.2
7.2 6.4 6.4 5.2 4.8 4.4
Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individuals investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.
December 2013
42
EARNINGS GUIDE
EQUITY
FUNDAMENTALS
Prices as on December 06, 2013
Sharekhan Earnings Guide

Company CMP (Rs) FY13 Sales FY14E FY15E FY13 Net profit FY14E FY15E FY13 EPS FY14E (%) EPS growth FY15E FY15/FY13 PE (x)
RoCE (%)
RoNW (%) FY15E
DPS
FY13 FY14E FY15E FY14E FY15E FY14E
Div yield (Rs) (%)
AUTOMOBILES
Apollo Tyres Ashok Leyland Bajaj Auto M&M Maruti Suzuki 79.5 16.3 1,950.0 945.3 1,701.5 12,794.6 12,481.2 19,997.3 38,356.6 43,076.7 13,323.8 11,647.9 22,994.4 39,097.6 44,160.2 14,148.7 16,201.4 27,986.2 45,238.7 52,183.8 596.9 148.2 3,043.6 3,543.8 2,300.0 756.4 (201.0) 3,832.3 3,713.7 2,733.4 785.6 452.6 4,750.2 3,940.3 3,258.1 11.9 0.6 105.2 57.7 79.6 15.0 -0.8 132.5 60.3 90.5 15.6 1.7 164.3 64.0 107.9 14% 68% 25% 5% 16% 6.7 27.1 18.5 16.4 21.4 5.3 -20.3 14.7 15.7 18.8 5.1 9.6 11.9 14.8 15.8 18.6 0.7 52.0 25.2 17.0 17.4 9.5 47.8 23.0 18.3 18.4 -4.7 37.7 18.9 13.3 16.2 10.1 36.6 16.7 14.1 0.5 0.6 45.0 13.0 8.0 0.6 3.7 2.3 1.4 0.5
BANKS & FINANCE

Allahabad Bank Andhra Bank Axis (UTI) Bank Bajaj Finserv Bank of Baroda Bank of India CanFin Homes Capital First Corp Bank Federal Bank HDFC HDFC Bank ICICI Bank IDBI Bank PNB SBI UBI Yes Bank 93.5 62.4 1,279.8 738.3 684.0 220.4 150.2 155.8 268.7 79.0 813.8 682.7 1,143.9 66.6 596.9 1,859.6 127.5 391.9 227.8 4,624.1 827.2 559.7 311.1 197.6 214.0 290.0 146.2 541.1 1,357.6 1,126.6 3,325.8 333.1 852.0 2,000.3 493.8 171.4 396.7 129.7 67.1 93.4 62.9 672.9 482.6 6,343.3 4,804.4 16,217.4 5,072.4 14,945.9 12,790.0 95.7 245.0 5,033.8 2,639.1 5,927.5 22,663.7 22,212.1 8,592.6 19,072.4 60,366.1 10,094.9 3,476.2 606.7 3,079.4 6,390.8 26,317.2 29,901.3 1,106.0 4,596.2 1,629.5 7,351.0 388.0 1,927.6 25,733.7 40,352.0 2,021.4 1,294.5 62,989.5 37,425.6 47,617.7 5,317.0 12,094.4 1,873.8 6,085.0 8,857.0 4,690.9 1,360.2 7,286.6 5,382.5 18,789.5 16,191.9 14,355.6 136.8 311.1 5,640.8 2,943.5 6,972.6 27,430.3 25,889.3 8,617.1 20,272.1 65,918.7 10,762.5 4,188.6 723.7 4,697.8 7,869.1 29,514.8 33,816.4 1,340.8 4,749.7 1,876.7 7,814.9 439.7 2,235.8 33,735.3 51,363.5 2,375.6 1,692.6 84,515.9 43,966.9 38,809.0 5,850.1 13,270.0 1,910.8 7,027.7 10,677.0 4,429.0 1,625.3 8,389.4 6,200.2 21,320.9 19,203.2 16,639.7 165.5 410.9 6,565.6 3,450.2 8,427.5 33,067.5 29,947.8 9,773.9 22,985.6 12,411.8 5,098.2 875.1 4,331.7 9,599.0 33,463.5 40,450.2 1,616.6 5,566.0 2,113.6 8,497.5 520.5 2,673.3 37,965.5 58,609.1 2,716.6 2,010.2 50,217.3 37,385.0 6,234.4 14,701.0 2,159.2 7,811.9 12,096.0 4,828.0 1,946.1 1,185.2 1,289.1 5,179.4 1,573.6 4,480.7 2,749.3 54.1 41.8 1,434.8 842.8 4,848.3 6,726.2 8,326.2 1,882.1 4,747.7 2,158.5 1,300.7 167.4 436.8 667.2 3,233.7 7,418.4 16.1 370.3 274.2 391.5 99.0 230.2 4,098.7 9,421.0 213.2 187.7 6,136.2 6,614.7 618.0 84.6 155.6 129.5 127.0 349.9 62.9 1,398.2 910.0 5,620.3 4,312.2 2,846.8 71.0 47.3 1,006.7 762.1 5,614.8 8,413.0 8,960.9 1,456.7 4,044.8 12,210.4 1,852.2 1,489.8 179.1 682.2 861.6 3,503.0 8,734.6 77.6 474.0 335.9 442.8 105.0 251.9 5,898.2 10,627.2 245.0 254.5 19,389.3 7,723.5 4,175.0 645.9 300.0 144.4 168.2 151.0 264.0 78.9 1,652.8 1,180.2 6,306.4 5,124.0 3,389.2 84.5 91.1 1,489.8 942.9 6,629.2 10,546.6 10,582.0 1,972.1 4,400.4 14,428.0 2,274.5 1,713.8 220.9 642.1 1,099.2 3,917.8 10,414.8 135.6 562.7 401.6 513.7 128.8 312.6 6,684.7 12,313.3 270.3 305.3 23,153.7 8,851.6 3,984.0 660.6 558.0 165.1 200.6 166.0 337.0 96.8 23.7 23.0 110.7 103.0 106.0 46.1 26.4 5.9 93.8 9.9 31.3 28.3 72.2 14.1 134.3 206.2 36.2 36.3 11.3 103.9 19.6 15.0 9.4 1.2 5.7 25.1 6.3 25.3 76.0 58.2 164.7 35.4 46.9 71.2 24.9 27.0 49.2 1.3 6.4 8.4 4.3 29.4 21.1 28.0 16.3 120.1 102.1 44.3 34.6 6.7 60.2 8.9 36.5 35.4 77.9 10.9 114.4 178.5 31.0 41.5 12.1 162.2 25.3 16.2 11.1 4.7 7.3 30.7 7.2 26.9 83.1 83.5 185.8 40.7 63.6 99.1 31.4 17.1 51.4 4.7 5.9 11.0 5.1 24.9 26.4 33.1 21.1 134.8 121.3 52.7 41.2 12.9 97.4 11.0 43.0 44.3 91.9 14.8 124.5 210.9 38.1 43.5 15.0 152.7 32.3 18.1 13.2 8.2 8.7 36.7 8.3 33.0 103.2 94.7 215.3 44.9 76.3 118.3 35.9 16.3 52.6 8.7 6.8 13.1 5.6 28.3 32.4 18% -4% 10% 7% 7% 25% 48% 2% 6% 17% 25% 13% 2% -4% 1% 3% 10% 15% 21% 28% 10% 19% 161% 24% 21% 15% 14% 17% 28% 14% 13% 28% 29% 20% -22% 3% 159% 3% 24% 14% -2% 24% 3.9 2.7 11.6 7.2 6.4 4.8 5.7 26.2 2.9 8.0 26.0 24.2 15.8 4.7 4.4 9.0 3.5 10.8 20.2 44.5 42.2 37.3 33.1 164.7 37.5 11.6 23.2 21.4 17.9 19.4 20.2 9.4 18.2 28.1 19.8 6.3 8.1 99.7 10.5 11.1 14.6 22.9 22.9 3.3 3.8 10.7 6.7 5.0 4.3 23.2 4.5 8.9 22.3 19.3 14.7 6.1 5.2 10.4 4.1 9.4 18.8 28.5# 32.7 34.5 28.0 42.0 29.3 9.4 20.3 20.1 16.3 13.5 17.9 8.2 13.4 20.2 15.7 10.0 7.7 27.6 11.4 8.5 12.3 27.0 18.3 2.8 3.0 9.5 5.6 4.2 3.6 12.0 2.8 7.2 18.9 15.4 12.4 4.5 4.8 8.8 3.3 9.0 15.2 30.3 25.6 30.9 23.6 24.1 24.6 7.9 17.6 16.4 13.2 11.9 15.4 7.4 11.2 16.9 13.8 10.5 7.5 14.9 9.9 7.1 11.2 23.8 14.9 43.1 52.5# 20.6 129.3 46.3 11.5 23.9 19.2 10.5 38.4 30.6 45.1 34.1 29.6 30.9 45.9 21.0 18.8 8.5 9.7 24.9 10.9 8.7 22.1 26.7 45.5 49.1 24.1 101.5 46.5 16.7 26.2 20.1 11.5 36.6 30.4 39.9 33.0 27.2 31.6 42.8 21.5 16.7 8.2 16.3 25.4 10.9 9.2 22.6 26.6 11.8 10.4 15.9 12.8 11.4 16.8 4.8 10.1 11.4 18.0 21.3 12.9 6.7 11.8 11.8 10.4 23.2 34.5 34.5# 25.5 97.2 36.1 12.0 21.7 16.7 8.9 35.7 24.0 39.1 25.4 20.4 22.8 35.6 23.5 12.5 9.6 7.9 17.4 8.3 6.3 15.3 26.7 12.7 12.4 15.6 13.7 12.4 17.4 8.8 13.6 12.9 17.5 22.6 14.0 8.5 11.6 12.7 11.7 20.2 37.5 32.2 27.0 74.1 36.0 19.7 21.3 17.6 9.7 33.8 24.4 33.7 24.6 19.5 22.9 33.4 23.3 11.0 9.1 13.4 17.6 9.1 6.6 15.7 26.0 6.0 5.0 18.0 1.5 21.5 10.0 4.0 1.8 19.0 1.8 12.5 5.5 20.0 3.5 27.0 41.5 8.0 6.0 6.5 45.0 5.0 18.5 5.3 2.5 1.0 7.0 2.2 6.0 17.5 12.0 42.0 8.5 9.0 22.0 7.0 5.4 7.0 0.4 1.6 1.5 1.6 7.0 3.5 6.4 8.0 1.4 0.2 3.1 4.5 2.6 1.2 7.1 2.3 1.5 0.8 1.7 5.3 4.5 2.2 6.3 1.5 2.9 1.0 0.6 3.3 1.7 1.3 0.5 2.4 1.5 1.1 1.3 1.1 1.3 2.6 1.1 1.1 1.4 3.2 1.8 0.3 2.4 1.6 2.5 1.0 0.7
75,300.2 14,105.0
CONSUMER GOODS
Bajaj Corp GSK Consumers* Godrej Consumer Hindustan Unilever ITC Jyothy Lab Marico Mcleod Russel TGBL (Tata Tea) Zydus Wellness
IT / IT SERVICES
CMC HCL Tech** Infosys NIIT Technologies Persistent Systems TCS Wipro
101,060.3 13,941.4
CAPITAL GOODS / POWER

BHEL CESC Crompton Greaves Greaves Cotton Kalpataru Power PTC India Thermax V-Guard Industries
Note: For Grasim and Apollo Tyres we have shifted our estimates to consolidated
43
December 2013
EQUITY
Company CMP (Rs)
FUNDAMENTALS
Sales FY13 FY14E FY15E FY13 Net profit FY14E FY15E FY13 EPS FY14E (%) EPS growth FY15E FY15/FY13 PE (x) RoCE (%)
EARNINGS GUIDE
RoNW (%) FY15E DPS Div yield (Rs) (%)
FY13 FY14E FY15E FY14E FY15E FY14E
INFRASTRUCTURE / REAL ESTATE

Gayatri Projects ITNL IRB Infra JP Associates Larsen & Toubro Pratibha Industries Punj Lloyd Unity Infraprojects 60.3 134.9 99.2 55.3 1,096.4 24.5 28.7 25.4 462.1 866.7 314.8 306.2 388.8 736.5 87.0 1,138.5 525.1 649.8 857.9 581.3 494.1 271.6 169.6 2,728.3 58.1 175.0 4,296.2 1,881.4 168.8 50.2 1,110.0 277.2 177.7 120.5 371.7 272.4 1,239.8 875.9 332.4 1,046.3 127.6 212.0 130.1 2,022.2 6,644.9 3,687.2 13,208.7 74,498.0 2,157.5 11,408.2 2,039.8 9,948.0 397,062.0 97.1 5,855.3 8,279.3 6,358.1 1,267.6 2,139.9 5,012.4 2,738.8 9,461.6 11,238.9 3,054.0 14,718.6 9,194.5 27,640.0 4,597.0 3,831.0 5,590.0 20,174.9 1,067.9 3,743.4 303.0 4,069.0 1,009.8 226.9 1,923.0 3,699.6 9,595.2 336.9 80,311.0 6,103.9 949.7 10,624.0 1,201.0 2,199.5 6,150.5 4,037.5 14,430.1 85,537.9 2,554.3 12,261.4 2,090.7 10,357.1 402,003.9 101.7 7,167.6 9,549.1 7,280.8 1,402.5 2,515.2 5,937.4 3,172.2 11,385.5 14,367.1 3,709.5 15,701.3 10,529.9 29,300.0 4,787.0 4,131.0 6,120.0 21,605.0 1,082.5 4,099.9 368.1 4,477.0 1,196.8 261.2 2,260.7 4,186.1 10,490.5 85,514.0 6,240.5 1,027.4 1,286.0 2,644.6 7,347.0 4,645.0 15,769.2 94,752.4 2,757.1 14,101.9 2,261.6 11,919.1 148.3 8,005.0 11,364.2 8,639.2 1,597.7 3,133.8 6,826.6 3,717.0 13,534.0 16,939.5 4,351.3 16,745.1 11,249.6 33,491.0 5,001.0 4,456.0 6,814.0 24,922.0 1,207.0 4,572.9 435.1 5,044.0 1,420.9 335.4 2,603.0 4,918.0 11,366.1 95,519.0 6,657.9 1,190.8 1,388.0 81.6 520.3 556.7 501.0 4,790.8 82.7 (284.7) 92.6 3,588.0 45.2 457.3 1,544.9 655.2 100.3 590.6 614.8 394.7 1,314.2 3,008.1 470.0 652.5 777.5 2,500.0 185.0 404.0 967.0 2,655.4 154.4 0.2 53.0 40.7 44.8 23.4 709.6 719.6 423.1 1,856.4 2,266.0 889.9 126.7 784.1 136.0 90.9 440.3 501.4 388.0 5,220.4 57.9 (195.4) 63.8 3,769.8 20,726.3 47.2 778.3 1,594.1 841.3 116.9 727.5 729.5 514.3 1,698.6 4,599.3 593.4 559.9 912.9 2,354.0 115.0 316.0 853.0 2,272.0 179.3 24.1 65.2 90.7 52.2 27.2 793.1 879.1 571.5 4,494.0 857.6 127.5 137.0 99.3 431.4 523.2 641.3 5,752.7 52.2 68.2 73.1 4,385.4 23,538.4 68.9 913.0 2,069.9 1,208.5 174.1 883.6 888.0 616.0 2,084.5 5,210.9 684.7 669.4 968.9 2,900.0 212.0 394.0 977.0 2,801.0 198.4 100.2 78.7 142.3 64.1 45.7 933.9 1,030.2 620.3 6,102.0 991.8 145.1 158.0 27.0 26.8 16.7 2.4 52.0 8.2 -8.6 12.5 59.7 64.7 26.9 15.7 18.7 32.0 12.4 44.5 22.7 31.3 29.4 14.5 27.8 25.6 17.5 272.7 6.0 17.0 277.5 96.9 16.8 0.0 43.0 6.6 37.3 5.0 18.0 7.5 32.5 166.8 5.7 111.2 11.7 29.5 29.3 30.1 22.7 15.1 1.8 56.6 5.1 -5.9 8.6 62.7 64.2 28.1 26.7 19.9 41.1 14.5 54.8 26.9 40.8 38.0 22.2 35.1 22.0 20.9 256.8 3.7 13.3 244.7 82.9 19.5 0.3 52.9 14.8 43.5 5.8 20.1 9.2 44.0 11.2 107.2 11.8 29.5 32.9 22.2 15.7 3.0 62.3 4.6 2.1 9.9 73.0 72.9 41.0 31.4 25.8 59.0 21.6 66.6 32.8 48.8 46.6 25.2 40.5 26.3 22.1 316.3 6.9 16.5 280.4 102.2 21.6 1.2 63.8 23.2 53.4 9.7 23.7 10.7 47.7 15.3 124.0 13.4 34.0 10% -9% -3% 13% 9% -25% 0% -11% 11% 6% 23% 41% 17% 36% 32% 22% 20% 25% 26% 32% 21% 1% 12% 8% 7% -1% 1% 3% 13% 22% 87% 20% 39% 15% 19% 21% 64% 6% 7% 8% 2.2 5.0 5.9 23.4 21.1 3.0 -3.3 2.0 7.7 13.4 11.7 19.5 20.7 23.0 7.0 25.6 23.1 20.8 29.2 40.0 17.8 10.6 9.7 10.0 9.7 10.3 15.5 19.4 10.0 25.8 42.0 4.8 24.1 20.6 36.3 38.1 5.3 58.3 9.4 10.9 7.2 4.4 2.0 6.0 6.6 30.3 19.4 4.8 -4.9 2.9 7.4 13.5 11.2 11.5 19.6 17.9 6.0 20.8 19.5 15.9 22.6 26.2 14.1 12.3 8.1 10.6 15.7 13.2 17.6 22.7 8.7 167.3 21.0 18.7 4.1 20.8 18.5 29.6 28.2 29.7 9.8 10.8 4.4 1.8 6.1 6.3 18.3 17.6 5.3 14.0 2.6 6.3 11.9 7.7 9.8 15.1 12.5 4.0 17.1 16.0 13.3 18.4 23.1 12.2 10.3 7.7 8.6 8.4 10.6 15.3 18.4 7.8 41.8 17.4 11.9 3.3 12.4 15.7 25.5 26.0 21.7 8.4 9.5 3.8 12.6 10.1 12.2 10.0 9.0 13.1 6.8 12.4 25.7 9.9 23.3 17.6 21.5 18.9 11.5 32.7 21.4 28.9 31.9 36.3 34.9 11.7 17.0 14.7 5.0 8.0 20.0 16.8 15.8 3.0 30.6 10.2 23.7 12.6 37.6 31.3 9.7 9.1 14.5 13.7 23.4 11.5 10.2 12.3 9.8 9.1 12.8 9.3 12.8 27.6 10.3 29.0 18.9 23.8 23.5 14.6 33.1 24.0 28.4 32.6 34.7 32.8 12.4 16.4 16.1 7.0 9.0 19.0 18.6 15.6 2.7 33.6 12.6 25.2 19.7 39.1 31.4 9.5 10.6 14.6 15.6 22.2 11.5 11.9 15.9 5.0 14.4 8.6 -6.4 7.4 18.6 9.8 18.4 27.5 16.5 22.4 10.4 25.8 21.3 28.5 25.5 27.6 34.7 7.7 17.1 10.5 3.0 13.0 21.0 13.2 16.7 1.1 24.4 6.4 17.8 9.1 26.7 20.8 7.9 6.0 11.0 15.8 19.5 9.9 11.3 16.0 6.8 14.1 7.1 1.6 7.8 19.6 10.0 22.6 26.2 18.4 24.9 13.5 26.0 21.0 26.6 24.3 24.8 29.7 8.7 15.7 11.2 5.0 14.0 21.0 14.1 15.9 4.7 26.5 9.4 19.7 14.0 27.7 21.3 7.9 9.1 11.1 17.2 19.2 3.0 4.0 4.0 0.5 12.3 0.6 0.0 0.2 19.0 9.0 5.0 1.5 2.0 7.5 1.2 15.0 2.0 2.0 4.0 5.0 23.0 10.0 2.5 22.5 2.0 2.5 8.0 8.0 1.5 0.8 17.5 1.0 2.0 1.0 9.5 2.0 6.5 25.0 1.0 22.3 6.0 12.2 4.0 5.0 3.0 4.0 0.9 1.1 2.5 0.0 0.8 4.1 1.0 1.6 0.5 0.5 1.0 1.4 1.3 0.4 0.3 0.5 0.9 4.7 3.7 1.5 0.8 3.4 1.4 0.2 0.4 0.9 1.6 1.6 0.4 1.1 0.8 2.6 0.7 0.5 2.9 0.3 2.1 4.7 5.8 3.1
OIL & GAS

Oil India Reliance Industries Selan Exploration 406,827.7 20,879.0
PHARMACEUTICALS
Aurobindo Pharma Cipla Cadila Healthcare Dishman Pharma Divi's Labs Glenmark Pharma Ipca Laboratories Lupin Sun Pharma Torrent Pharma
AGRI-INPUTS
Tata Chemicals UPL
BUILDING MATERIALS
Grasim India Cements The Ramco Cements Shree Cement** UltraTech Cement Eros Intl. Media Indian Hotels KKCL Raymond Relaxo Footwear Speciality Restaurants Sun TV Network Zee Entertainment Aditya Birla Nuvo Bajaj Holdings Bharti Airtel Bharat Electronics Gateway Distriparks Max India Ratnamani Metals
DISCRETIONARY CONSUMPTION
DIVERSIFIED / MISCELLANEOUS
^Marico estimates excluding Kayas financials *GSK Consumer FY2014 financial numbers are estimated for 15 months as the companyd change its accounting year end to March 2014, hence not comparable #We have annualised these ratios to make them comparable ** June Year Ended
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Automobiles Apollo Tyres Apollo Tyres is the market leader in truck and bus tyre segments with a 28% market share. The demand is expected to remain subdued in the near term, given the sluggishness in the domestic OEM and the European operations. The margins are expected to sustain at higher levels due to subdued raw material prices. The proposal to acquire Cooper Tire had led to a sharp contraction in the valuation multiple (as a leveraged buy-out would have stretched the balance sheet making debt servicing difficult in the event of a margin contraction). Moreover, the valuation gap between the company and its peers like Ceat has narrowed significantly. However, given the lower probability of the Cooper Tire deal going through, we see scope for re-rating of the stock. We have, therefore, upgraded the recommendation on the stock to Buy with a revised price target of Rs86. Ashok Leyland, the second largest commercial vehicle (CV) manufacturer in India, is a pure CV play. The new greenfield facility in Pantnagar in Uttaranchal has provided strategic cost and diversification benefits. The company has ventured into LCV space with the launch of Dost together with Nissan and is witnessing significant ramp-up in volumes. It has also entered into construction equipment space in JV with John Deere. The MHCV volumes are currently under pressure due to a subdued economic environment and increased diesel prices. The heavy discounting in the MHCV space may lead to a loss in FY2014. We have a Hold recommendation on the stock with a price target of Rs18. Bajaj Auto is a leading two-wheeler maker. It is moving up the value chain by concentrating on the executive and premium motorcycle segments. The launch of the new Pulsar and the KTM range would help it maintain its leadership in the premium bike segment as well as its domestic volume growth. Further, the company plans to launch six new Discover models which would help increase its market share in the commuter segment. Exports remain the key for the company to drive its overall volumes. M&M is a leading maker of tractors and utility vehicles in India. Though the automotive demand may moderate due to moderation in the UV demand and increasing competition, but the tractor demand would recover on the back of a normal monsoon and better crop realisation. Associating with world majors in passenger cars and CVs has helped it diversify into various automobile segments. The value of its subsidiaries adds to its sum-of-the-parts valuation. Higher farm incomes, strong rural positioning, lower vulnerability to interest rates make M&M a proxy play on food inflation. Maruti Suzuki is Indias largest small carmaker. Though the demand for diesel cars is witnessing pressure due to a hike in diesel prices, but the petrol segment is witnessing recovery due to narrowing differential between petrol and diesel prices. Recently the company successfully diversified into the MPV segment with the launch of Ertiga. Suzuki of Japan has also identified India as a manufacturing hub for small cars for its worldwide markets. With the merger of SPIL, the diesel engine manufacturing arm of the Suzuki group, we expect synergistic benefits for Maruti. Banks & Finance Allahabad Bank With a wide network of over 2,200 branches spread across India, Allahabad Bank enjoys a strong hold in north and east India. However, the bank has reported a rise in slippages resulting in deterioration of asset quality. It has relatively a higher proportion of stressed loans among its peers. In addition, the low tier-I CAR is also a cause for concern. Andhra Bank, with a wide network of over 1,800 branches across the country, has a strong presence in south India especially in Andhra Pradesh. Though it is trading at an attractive valuation, the concerns on asset quality front and the political situation within the state could affect its operations. Axis bank continues to grow faster than the industry rate and is diversifying its book in favour of retail. Notably, the bank has maintained a delicate balance between balance sheet growth and profitability. Besides the core banking business, the bank has forayed into the asset management business and acquired the securities and investment banking business of Enam Securities. We expect the earnings growth to remain reasonably strong driven by a healthy operating performance while asset quality pressures will be manageable. Bajaj Finserv is actively present in businesses such as vehicle finance, consumer finance, distribution etc, with insurance being the dominant contributor to its revenues. It is one of the top players in the life insurance segment and also has a sizeable presence in the general insurance segment. Its consumer finance business (Bajaj Finance) has shown a robust performance and is likely to boost the earnings of Bajaj Finserv. However, an industry-wide slowdown in the insurance sector and newer regulations could affect its profitability. Bank of Baroda is among the top public sector undertaking (PSU) banks having a sizeable overseas presence (100 offices in 24 countries) and a strong network of over 4,200 branches across the country. It has a stronghold in the western and eastern parts of India. The banks performance metrics remain superior to that of the other PSU banks though the asset quality trends will be the key monitorable. Bank of India has a network of over 4,000 branches, spread across the country and abroad, along with a diversified product and services portfolio, and steadily growing assets. The operating performance has weakened due to margin deterioration. Further, the rising stress on the asset quality and pressure on the margin could affect the return ratios.
Ashok Leyland
Bajaj Auto
M&M
Maruti Suzuki
Andhra Bank
Axis Bank
Bajaj Finserv
Bank of Baroda
Bank of India
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CanFin Homes
CanFin Homes is a housing finance company sponsored by Canara Bank. It was set up in 1987. It offers a range of products on housing, such as loans for home purchase, home construction, home improvement/extension and site purchase as well as non-housing finance. The company has 70 branches of which 65% are based in south India. It has a loan book of around Rs5,000 crore. Its renewed focus on growth and the recent aggressive expansion of its branch network have put it on a high growth path for the next few years. We believe the operational performance and return ratios are improving which should lower the valuation discount to its peers. Capital First (the erstwhile Future Capital Holdings) has been acquired by the global private equity firm Warburg Pincus (a 71.3% stake). The present management has taken several initiatives to tap the high-growth retail product segments, like gold loans, loan against property and loan against shares. It has a strong capital adequacy ratio and a sound asset quality. Its loan book is expected to more than double to over Rs10,000 crore in the next three years. However, the shift to conservative accounting and investment in new business lines could affect the profitability over the next few quarters. Corporation Bank is a mid-sized PSU bank having a relatively higher presence in south India. The bank is predominantly exposed to the corporate segment constituting about 50% of its book. Due to a higher dependence on the wholesale business and a low current and savings account ratio, it lags its peers in terms of operational performance. Also, the rise in NPAs could keep provisioning high and weaken earnings performance. Federal Bank is the fifth largest private sector bank in India in terms of asset size and has traditionally been a strong player in south India, especially Kerala. Under the new management, the bank has taken several initiatives, which would improve the quality of its earnings and asset book. The near-term asset quality issues are manageable while the operating performance is steady. HDFC is among the top mortgage lenders providing housing loans to individuals, corporates and developers. It has interests in banking, asset management and insurance through its key subsidiaries. As these subsidiaries are growing faster than HDFC, the value contributed by them would be significantly higher going forward. Due to dominant and consistent market share, it trades at a premium over the other NBFCs. HDFC Bank was established in 1994 as part of the liberalisation of the Indian banking industry by the RBI. It was one of the first banks to receive an in-principle approval from the RBI to set up a private sector bank. Its relatively high margins (compared with its peers), strong branch network and better asset quality make HDFC Bank a safe bet. ICICI Bank is Indias largest private sector bank with a network of over 3,000 branches in India and a presence in around 18 countries. The bank has once again entered an expansionary mode after making a conscious effort to contract its advances book due to asset quality concerns. The operating profit improved significantly and is the key driver of the earnings growth. The bank offers substantial value unlocking opportunities from the insurance and securities businesses. IDBI Bank is one of leading PSU banks of India. The bank is gradually working towards improving its liability base and expanding the retail book, which is likely to reflect in the form of better margins and return ratios. Due to rising asset quality risks, low tier-I CAR and slower business growth, the stock is likely to underperform in the near term. Punjab National Bank has one of the best liability mixes in the banking space, with low-cost deposits constituting around 40% of its total deposits. This helps it to maintain one of the highest margins in the sector. A strong liability franchise and technology focus will help the bank to increase its core lending operations and fee income related-businesses. In view of the weakness in the economy and relatively higher exposure to troubled sectors, the asset quality has come under stress. State Bank of India is the largest bank of India with loan assets of over Rs10 lakh crore. The loan growth for FY2013 was above industry average while the core operating performance was largely stable. The successful merger of the associate banks and value unlocking from insurance business could provide further upside for the parent bank. While the bank is favourably placed in terms of liability base, the asset quality would remain a key monitorable in the near term. Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become the largest retail bank. Hence, it has ramped up its manpower and infrastructure. The asset quality though initially showed signs of stabilisation but has weakened which can affect the earnings performance. Yes Bank, a new generation private bank, started its operations in November 2004 and is the only greenfield bank approved by the RBI in the last decade. The bank is promoted by Rana Kapoor and Ashok Kapur. It follows a unique business model based on knowledge banking, which offers product depth and a sustainable competitive edge over established banking players. While the operating performance remains healthy, improvement in liability base and capital mobilisation will be the key triggers for the stock.
Capital First
Corp Bank
Federal Bank
HDFC
HDFC Bank
ICICI Bank
IDBI Bank
PNB
SBI
UBI
Yes Bank
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Consumer goods Bajaj Corp Bajaj Corp is the third largest player in the hair oil segment and has emerged as the dominant player in the premium light hair oil category with its Almond Drops hair oil. With its strong brand positioning, distribution strength and healthy balance sheet, it is well poised to ride the strong consumer demand emerging due to the rising disposable income and growing aspirations of the Indians. Bajaj Corp, which was scouting for a strategic acquisition, recently acquired the Nomarks brand. The acquisition will add value to its product portfolio and help it upgrade from a single-brand company to a multi-brand company, thereby improving its growth prospects. GSK Consumer Healthcare is a leading player in the MFD segment with a close to 70% share in the domestic market. Judicious new launches and brand extensions, and the expansion of its distribution reach have helped it to stay ahead of the competition and maintain its pricing power over the years. In a bid to de-risk its business model, it has expanded its product portfolio by entering into new categories such as biscuits, noodles, energy bars, sports drinks and oats in the recent years. With cash balance of close to Rs1,700 crore the company can invest in growth initiatives as well as reward its investors with a healthy dividend payment. The recently concluded open offer by the promoter acted as an additional trigger for the stock, which remained firm on the bourses. We maintain a Hold recommendation on the stock. Godrej Consumer Products is a major player in personal wash, hair colour and household insecticide market segments in India. The recent acquisitions of Darling Group, Tura, Megasari and Latin American companies have helped the company to expand its geographic footprint. We believe the decent sales volume growth in the domestic business coupled with a strong growth in the Indonesian, African and Argentine businesses would help it to achieve an above 20% CAGR top line growth and above 25% bottom line growth over FY2013-15. Hindustan Unilever is Indias largest FMCG company. The subdued volume growth due to the uncertain and inflationary environment is likely to sustain the pressure on its profitability in the near term. Overall, we expect its bottom line to grow at a CAGR of 10% over FY2013-15. The stocks current premium valuation does not justify the true business fundamentals of the company. Hence we recommend a Reduce rating on the stock. In the long term, it will be one of the key beneficiaries of the Indian consumerism story. ITC has a strategy of effectively utilising the excess cash generated from its cash cow, the cigarette business, to strengthen and enhance its other non-cigarette businesses. This would nurture the growth of these businesses some of which are at a nascent stage. Thus, the company will deliver a sustained and steady growth in the coming years. Jyothy Laboratories is the market leader in the fabric whitener segment in India. With the successful integration of Henkel and the induction of a new management team led by S Raghunanadan, it is transforming itself from a onebrand wonder to an aggressive FMCG player. We expect its top line to grow at a CAGR of 21%. A strong improvement in the OPM would help the company to achieve an exponential growth in bottom line over FY201316. We have a Buy rating on the stock with a price target of Rs260. Marico is among Indias leading FMCG companies. Its core brands, Parachute and Saffola, have a strong footing in the market. It follows a three-pronged strategy which hinges on expansion of its existing brands, launch of new product categories (especially in the beauty and wellness space) and growth through acquisitions. While the domestic product portfolio is likely to achieve a steady growth in volumes, the international business is now gaining momentum on the back of an increase in distribution and strong performance by the core brands. Mcleod Russel is the worlds largest tea producer with an annual tea production of close to 100mn kg. With tea estates in India and Africa, it is well poised to take advantage of the current favourable global demand-supply scenario. With the expectation of a substantial improvement in its sales realisation and a volume growth in mid to high single digits (in the domestic market and the international subsidiaries), the companys consolidated top line and earnings are expected to grow at CAGR of 14.0% and over 21.0% respectively over FY2013-15. Over the past few years, Tata Global Beverages (formerly Tata Tea) has transformed itself from a mere tea and coffee company into a complete beverage maker. The recent addition of Mount Everest mineral water to its product portfolio and its tie-up with Pepsico Inc to make a mark in the non-carbonated beverage space are likely to be the new growth drivers in the long run. Also, its JV with Starbucks would help it to explore opportunities in the coffee retailing space. Its intention to acquire companies in the USA, Europe and Russia also augurs well and will enhance its geographical footprint. Zydus Wellness owns three high-growth brands, Nutralite, Sugar Free and EverYuth, in the niche health and wellness segment. It focuses on rampant growth by increasing the distribution of the existing products, scaling up the existing product portfolio through variants and new product launches leveraging the three brands. We expect Zydus Wellness top line and bottom line to grow at a CAGR of 16% and 14% over FY2013-15 respectively.
GSK Consumers
GCPL
HUL
ITC
Jyothy Labs
Marico
Mcleod Russel
TGBL
Zydus Wellness
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IT/IT services CMC Over the years, CMC has gradually transformed itself from a low-margin equipment provider into a well-diversified IT services and solutions provider. Its joint-go-to-market strategy with TCS is also playing a big role in the business transformation, with CMC gaining a strong traction in the international markets. We believe CMC has already set the stage for the next level of growth and is likely to witness a much stronger growth in the coming years. HCL Technologies is one of the leading Indian IT service vendors. It has reported consistent financial performance in the past several quarters on the back of a ramp-up in business from the large deals bagged earlier and strong momentum in the IMS space. It continues to demonstrate a strong growth visibility with a robust backlog of deals and successful execution with market share gain strategy through vendor churns/consolidation. We remain positive on the company in view of its order wins and superior earnings visibility. The company remains the least affected by the impending US immigration bill as compared with its large-cap peers. Infosys is India's premier IT and IT-enabled services company. Its robust performance in the September 2013 quarter and the confident commentary of its management coupled with a much better operating environment in the USA and Europe give us confidence that it will sustain the growth momentum in the coming quarters. With its strong domain expertise in a few niche verticals and competitive advantage in terms of significant contribution from its non-linear initiatives, NIIT Technologies is well placed to benefit from the overall improvement in the demand environment. The two significant pain points for the company, the GIS business and the insurance business, have shown some signs of revival. The company has a robust deal pipeline led by its government vertical which comforts us on the revenue visibility front. Improvement in the margin trajectory remains the key to rerating of the stock. Persistent Systems has proven expertise in the OPD space, a strong presence in the newer technologies, strength to improve its IP base and the best-in-the-class margin profile which set it apart from the other mid-cap IT companies. We maintain our confidence due to an optimistic management outlook driven by acceleration in the product engineering services business, new technologies and increased momentum in the IP space after consolidating the HP Client Automation revenues. Tata Consultancy Services pioneered the IT services outsourcing business in India and is the largest IT service firm in the country. It is a leader in most service offerings and has further consolidated its leadership through the inorganic route. With a strong base it is well placed to garner incremental deals across sectors. Its consistent quarterly performance (better than peers) coupled with the higher predictability of its earnings would keep it the Streets favourite counter in the IT space. Wipro is one of the leading Indian IT service companies. It has lagged the other IT biggies in terms of performance for several quarters. Its September 2013 quarter performance, management outlook and better that expected guidance of 1.8-3.6% for a seasonally weak December 2013 quarter give pertinent signs of a revival in the company. Additionally, a conducive operating environment lends support to the earnings visibility for the coming quarters. Capital goods/Power BHEL Bharat Heavy Electricals, Indias biggest power equipment manufacturer, has been the prime beneficiary of the multifold increase in the investments made in the domestic power sector over the last few years. However, the order inflow has been showing signs of slowing down which would remain a major concern for the company. The key challenge before the company now would be to maintain a robust order inflow and maintain margin amid rising competition and lower order inflow. The current order book of Rs102,300 crore stands at around 2.2x FY2013 sales. CESC is the power distributor in Kolkata and Howrah (backed by 1,225MW of power generation capacity) which is a strong cash generating business. Further, it is adding 1,200MW of generation capacity which would be on stream by FY2015. Moreover, CESC has a high degree of integrated status among peers. Despite that, the stock is currently one of the cheapest in the Indian utility space, trading at a significant discount to its book value primarily on account of the concerns related to the losses from its retail business, Spencers. However, the retail business has started exhibiting a store-level profit since FY2011, which is a sign of revival as per the management. Again, CESC acquired a majority stake in First Source, which is into outsourcing business. We recommend a Buy on CESC with a price target of Rs450. Crompton Greaves key businessesindustrial and power systemshold a high potential in view of the investment opportunities in the power transmission and distribution sector. Its consumer products segment is expected to witness a high growth. Though the domestic operations remain relatively stable, but the international operations went through a restructuring. This has been the major disappointment in the last few quarters adding to the woes of investors. On a positive note, the restructuring in Belgium is over and the key thing to watch out is the stabilisation process.
HCL Tech
Infosys
NIIT Tech
Persistent
TCS
Wipro
CESC
Crompton Greaves
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Greaves Cotton
Greaves Cotton is a mid-sized and well-diversified engineering company. Its core competencies are in diesel/petrol engines, power gensets, agro engines and pumpsets (engine segment) and construction equipment (infrastructure equipment segment). The engine business accounts for 85% of its revenues while the rest comes from infrastructure equipment. The foray in the mini tractor segment and international markets would open new growth avenues. While the subdued economic environment would put pressure on the revenues, the company is likely to outperform the industry on the back of new product launches. We maintain our Buy recommendation on the stock with a price target of Rs85. Kalpataru Power Transmission is a leading EPC player in the transmission & distribution space in India. Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility (also current order book is 2x its FY2013 sales). The OPM of the stand-alone business is likely to remain around 10%. JMC Projects (a subsidiary) is experiencing margin pressure which would affect the overall margin and return ratios of the company. However, on low valuation, we retain our Buy rating with a price target of Rs115. PTC India is a leading power trading company in India with a market share of 39% in FY2013 in the short-term trading market. In the last few years, the company has made substantial investments in areas like power generation projects, power project financing, which will start contributing to its earnings. There is a major positive development as pending receivables from UPSEB was received by the company recently and the management expects repayment from TNSEB soon. Pending receivables was one of the drags in the companys balance sheet and returns ratio. The policy push for the SEB debt restructuring programme has been positive for PTC India. The company converted its high-risk high-margin tolling business into a moderate-margin long-term arrangement. We retain Buy due to positive developments and attractive valuation. The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Incs capex. Thermax group book stands at Rs6,128 crore, which is 1.3x its FY2013 consolidated revenues. However, the company has shown its ability to maintain a double-digit margin in a tough environment. The management sounded cautious on the growth prospect and the companys ability to sustain margins in double digits, given the current environment. Hence, we maintain our Reduce rating. V-Guard Industries is an established brand in the electrical and household goods space, particularly in south India. Over the years, it has successfully ramped up its operation and network to become a multi-product company. It has recently also forayed into non-south India and is particularly focusing on the tier-II and III cities where there is a lot of pent-up demand for its products. We expect a CAGR of 24% in its earnings over FY2013-15 and RoE of 26% during this period. Infrastructure/Real estate Gayatri Projects is a Hyderabad-based infrastructure company with a very strong presence in irrigation, road and industrial construction businesses. The order book stands at Rs7,702 crore, which is 3.8x its FY2013 revenues. It is also expanding its power and road BOT portfolio and plans to unlock value by offloading stake to private equity. The company has potential to transform itself into a bigger player though we expect its net profit to remain flat over FY2013-15. IL&FS Transportation Networks is Indias largest player in the BOT road segment with a pan-India presence and a diverse project portfolio. The fair mix of annuity and toll projects, and state and NHAI projects along with the geographical diversification across 12 states reduce the risk to a large extent and provide comfort. Further, a strong pedigree along with the outsourcing of civil construction activity helps it to scale up its portfolio faster. Thus, it is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector. IRB Infrastructure Developers is the largest toll road BOT player in India and the second largest BOT operator in the country with all its projects being toll based. It has an integrated business model with an in-house construction arm which provides a competitive advantage in bidding for the larger projects and captures the entire value from the BOT asset. Further, it has a profitable portfolio as majority of its operational projects have become debt-free and it has presence in high-growth corridors which provides healthy cash flow. Thus, it is well poised to benefit from the huge opportunity in the road development projects on the back of its proven execution capability and the scale of its operations. Jaiprakash Associates, Indias leading cement and construction company, is all set to reap the benefits of Indias infrastructure spending. The company has also monetised very well the real estate properties of Yamuna Expressway. The marked improvement in the macro environment has improved accessibility to capital and thus eased the concerns of liquidity to some extent. However, higher leverage could act as drag on the valuation. Larsen & Toubro, being the largest engineering and construction company in India, is a direct beneficiary of the domestic infrastructure capex cycle. The strong potential of its international business, its sound execution track record and bulging order book, and the strong performance of subsidiaries further reinforce our faith in it. Recent measures planned by the company to improve its returns ratio would augur well for the company. Hence, we remain positive on the stock.
Kalpataru
PTC India
Thermax
V Guard Ind
Gayatri Proj
IL&FS Trans
IRB Infra
Jaiprakash Asso
L&T
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EARNINGS GUIDE
Pratibha Ind
Pratibha Industries is a dominant player in water & irrigation and urban infrastructure segments. It has also diversified into other high-margin areas like road BOT, power and oil & gas. The current order book stands at Rs8,000 crore, which is 3.7x its FY2013 revenues. The company is facing margin pressure and higher interest expenditure on account of the rising debt to finance working capital needs. We currently remain cautious and await for positive developments on debt and working capital requirements. Punj Lloyd is the second largest EPC player in the country (first being Larsen & Toubro) with a global presence. However, since FY2009, the profitability has come under severe pressure due to cost overruns/ liquidated damages in some of Simon Carves (a subsidiary) projects. Thus it has put Simon Carves under administration. Further Libyan projects will take another few quarters to begin execution. Therefore, the successful execution of its projects along with debt reduction and working capital management will drive its growth as it enjoys a robust order book. With a well-diversified order book, Unity Infrastructure is expected to be the key beneficiary of the governments thrust on infrastructure spending. The order book remains strong at Rs3,508 crore, which is 1.7x its FY2013 revenues. We expect its net profit to post a CAGR of -11% due to higher interest expenses during FY2013-15. Further, it has recently forayed into the road BOT segment and has three BOT projects under its kitty. Oil & gas Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India. The total 1P (proven) and 2P (proven and probable) reserves of the company stood at 473 million barrels (mmbbls) and 941mmbbls respectively as on June 2013. In addition to the huge oil reserves, the companys reserve-replacement ratio is quite healthy at 1.6x, which implies a comfortable level of accretion of oil reserves through new discoveries. Further, it has net cash of around Rs200 per share as on March 2013 and offers healthy dividend yield, which provides comfort to investors. The recent policy reforms in terms of partial deregulation of diesel prices and a likely revision in gas prices augurs well for the company. Reliance Industries holds a great promise in E&P business with gas production from the KG basin. Further, a likely revision in the natural gas prices will be a positive trigger. In the refining space, we expect its GRM to pick up with a likely improvement in the light-heavy crude oil price differential. The company is likely to fetch a premium over Singapore Complex GRM due to its superior refinery complexity and captive use of KG-D6 gas. We expect the petrochem margins to be maintained in the medium term on an uptick in the domestic demand. Currently, the decline in gas output from the KG-D6 basin is weighing on the stock price. Selan Exploration Technology is an oil exploration & production company with five oil fields in the oil-rich Cambay Basin of Gujarat. The initiatives taken to monetise the oil reserves in its Bakrol and Lohar oil fields are likely to improve production. Further, it intends to explore its next field, Indrora, which is the most prolific one with significant reserves. Based on this, we expect it to ramp up production significantly, subject to approval for the new wells. We expect production ramp-up in FY2014 and hence we expect the earnings to grow by 23% (CAGR over FY2013-15). Therefore, we retain our Buy rating on the stock with price target of Rs365. Pharmaceuticals Aurobindo Pharma is set to rebound with the USFDA clearing two of its manufacturing facilities (including one greenfield facility) and removing import-alert on Unit-VI facility, which will help the company to ramp up its product list in the USA, thanks to a strong product pipeline built over a period. With the expected increase in the export-led business after resolution of the USFDA issues, the favourable tilt in the revenue mix is likely to boost the margin, resulting in a relatively much better growth in earnings as compared with revenues. We expect the revenues and net profit to grow at a CAGR of 17% and 41% over FY2013-15 respectively. Cadila Healthcares performance in the US generic vertical is likely to improve on the back of new approvals which was stagnant during FY2013. Besides, its consumer business and exports to the emerging markets will help it to achieve its target of generating revenues of $3 billion by FY2016. It got USFDAs clearance for its Moraiya plant in FY2013, which removes one of the vital concerns for the company. Recently, it got DCGI approval for its first NCE called Lipaglyn to treat type-II diabetes; this will add value to its R&D pipeline. Cipla has brought about a paradigm shift in its business strategy. To revive growth, it has (1) enhanced focus on technology intensive products in the inhalation and nasal spray segments; (2) established front-end presence in the key markets like South Africa and Europe; (3) developed an appetite for inorganic expansions; (4) decided to tap the FTF opportunities through collaboration with major generic players in the regulated markets and (5) invested in future growth areas like biosimilars. Besides, Ciplas base business growth would be fast-tracked in the quarters ahead because of the optimisation of the Indore formulation plants and consolidation of Cipla Medpro in Q2FY2014.
Punj Lloyd
Unity Infra
Oil India
Reliance Ind
Selan Exploration
Aurobindo Pharma
Cadila
Cipla
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December 2013
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EQUITY
FUNDAMENTALS
Dishman Pharma
Dishman Pharmaceuticals and Chemicals is a key player engaged in CRAMS and specialty chemical businesses. It has invested heavily over the past four years (over Rs1,000 crore capex during FY2008-11) to establish a strong foothold in the CRAMS, API and vitamin-D businesses. After witnessing four years of sluggish performance due to a global slowdown (that affected the CRAMS business) and heavy capex (that resulted in a sharp rise in the fixed costs), it is all set to record a strong operating performance on the back of enhanced capacities, the up cycle in the CRAMS business and a substantial reduction in the debt/equity ratio due to stronger free cash flow. Despite a weaker performance in Q1FY2014, we are confident of Divis Laboratories growth potential. The new DSN SEZ facility at Vishakhapatnam that started in June 2011 augurs well for the company. The company is likely to see an improvement in economies of scale which will also lead to tax benefits after USFDA approvals for three additional production blocks expected to come in H2FY2014. A near debt-free balance sheet and strong cash flow are likely to help build a war chest for pursuing strategic investments (biosimilars) and exploit the growth opportunities in niche segments, like oncology and steroids for contraceptives. Glenmark Pharmaceuticals exhibited an impressive operating performance during FY2013 in the core business on key generic launches, but for higher R&D expenses and tax payments, which restricted the profit growth. Through the successful development and out-licencing of six molecules in a short span of eight years, it has become Indias best play on research-led innovation. It has built a pipeline of 14 molecules and clinched six out-licencing deals worth $1,672 million (active deals worth $938). It has received over $200 million as initial milestone payment. Its core business has seen stupendous success due to its focus on niche specialties. Though H1FY2014 has been relatively a weaker, but we are confident of its long-term growth prospects. Ipca Laboratories has successfully capitalised on its inherent strength of producing low-cost drugs to tap the export markets. Its ongoing efforts in the branded formulations business in the emerging economies, the revival in the UK operations, the pan-European initiatives, the likely approval of one additional product under institutional business and a significant scale-up in the US business will drive its formulation exports. It has received USFDAs approval for the Indore SEZ (US supplies expected in H2FY2014) which would help ramp up the sales in the USA. The expected ramp-up in the launch of oral contraceptives, ophthalmic products, branded franchise (with addition of in-licenced product-Alinia) in the USA and a robust pipeline of new launches in the domestic and overseas markets provide strong growth visibility for Lupin. Further, with an expanded field force and therapy focused marketing division, its formulation business in the domestic market has been performing better than the industry. The deal with Eli-Lilly to distribute human insulin would open an incremental revenue stream for Lupin in the Indian market. The combination of Sun Pharmaceuticals, Taro, Dusa Pharma and the generic business of URL Pharma offers an excellent business model, as has been reflected in the 40% Y-o-Y revenue growth and 39% profit growth in FY2013. Though Taro may not show a similar performance in the next quarter, but we expect a better performance from Sun Pharmaceuticals going forward mainly driven by (1) contribution from the newly acquired Dusa Pharma and URL Pharma in the USA and (2) launch of key products (including generic Doxil) which is in short supply and Pradin under 180-day exclusivity) in the USA and emerging markets including India. We expect 18% and 22% revenue and PAT CAGR respectively over FY2012-15 on an organic basis. With a strong cash balance, it is well positioned to capitalise on the growth opportunities and inorganic initiatives. A well-known name in the domestic formulation market, Torrent Pharmaceuticals has been investing in expanding its international presence. With the investment phase now over, it should start gaining from its international operations in the USA, Russia and Brazil. The impending turnaround of its German acquisition, Heumann, will also drive its profitability. Better field force productivity, focus on developed market and stronger balance sheet would result in a sustainable earnings growth. Agri-Inputs With a total capacity of 5.5mmtpa Tata Chemicals is the second largest soda ash producer in the world. It has purchased 25% stake in a urea-ammonia greenfield project at Goban with investment of $290 million. Further changes in urea policy are likely to benefit it further. Soda prices are likely to improve from the current levels because lower cost Chinese players are also finding it tough to break even at current price. So it believes that the price of soda may improve from here. Demand for soda ash in India and North America remains strong. A leading global producer of crop protection products, intermediates, specialty chemicals and other industrial chemicals, United Phosphorus has presence across value-added agricultural inputs ranging from seeds to crop protection products and post-harvest activities. A diversified geography and the recent acquisition of DVA Agro Brazil will help the company to have a strong presence in the Brazilian market and aid in inorganic growth. Its revenues are likely to grow at 12-15% and EBIDTA margin is expected to remain at 18-20% in FY2014. It has also started to focus on premium products in agro-chemicals and will slowly stop selling commodities and lowmargin products.
Divis Labs
Glenmark Pharma
Ipca Lab
Lupin
Sun Pharma
Torrent Pharma
Tata Chemicals
United Phos
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December 2013
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FUNDAMENTALS
Remarks
EARNINGS GUIDE
Building materials Grasim Grasim is better placed compared with the other large players in the cement space due to its strong balance sheet, comfortable debt/equity ratio, attractive valuation and diversified business. The demand for VSF products remains strong in the global market and Grasim being a leading domestic player is well placed to capture the incremental demand. It is in the process of adding another 120,000 tonne capacity in VSF by H2FY2014 at an investment of Rs1,690 crore. India Cements installed capacity has got enhanced to 16mtpa which will result in volume growth and drive its earnings. It is also setting up a 100MW captive power plant, which is expected to come on stream by FY2013 and benefit the company in terms of cost savings. We believe its average cement realisation in FY2014 will remain higher as compared with FY2013. The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from the capacity addition carried out ahead of its peers in the southern region. The 3mtpa expansion will provide the much-needed volume growth in the future. The regional demand remains lacklustre but on account of the improvement in the realisation due to supply discipline and a likely change in the market mix its profitability will improve (marginally) in FY2014. Shree Cements cement grinding capacity has grown to 13.5mtpa which will support its volume growth in the coming years. It has set up 300MW power plant entirely for merchant sale which is expected to support its revenue growth going ahead. Thus, a volume growth of the cement division and the additional revenue accruing from the sale of surplus power will drive the earnings of the company. UltraTech Cement is Indias largest cement company with approximately 52mtpa cement capacity. It has benefited from an improvement in its market mix. Further, the ramping-up of the new capacity and savings accruing from the new captive power plants will improve its cost efficiency. Discretionary consumption Eros Intl Media Eros International Media is one of the largest integrated film studios in India with multi-platform revenue streams and a well-established distribution network across the globe. With its proven track record, an impressive movie slate and alliance with HBO coming into foray, it is well poised to gain from the rising discretionary spending on film entertainment driven by the countrys favourable demographics. Thus, it is a compelling value play on the Indian media and entertainment industry. Indian Hotels is the largest hotelier in India with a vast portfolio of hotel properties around the globe. Over the long term it would benefit from the increase in tourism and corporate travel in India. Also, a turnaround in profitability of its overseas properties would boost its earnings. Kewal Kiran Clothing is a branded apparel play with four brands in its kitty. Killer, its flagship denim brand, has created a niche space in the minds of consumers. With a gross market turnover of over Rs300 crore, Killer is ahead of its rival, Spykar. A strong brand profile, a disciplined management and a consistent track record coupled with a robust balance sheet position put it in a sweet spot. Raymond is present in the fast-growing discretionary & lifestyle category of branded textiles and apparels. With growing incomes, rise in aspirations to lead a luxurious life, greater discretionary spending and favourable demographics, the segment of branded apparels & fabrics presents a good growth opportunity and Raymond with its brands and superior distribution set-up is very well geared to encash the same. Any development with regard to the Thane land in the form of either joint development or disposal would lead to value unlocking and provide significant cash to the company. Relaxo Footwear is present in the fast-growing footwear category, wherein it caters to customers with its four topof-the-mind-recall brands, viz, Hawaii, Sparx, Flite and Schoolmate. It has emerged as an attractive investment opportunity due to its growing scale, strong brand positioning and healthy financial performance. Speciality Restaurants is a leading player in the fine-dining space with a portfolio of well-established brands such as Mainland China and Oh! Calcutta. It is a good proxy on the Indian consumption story as several factors such as demographics, increasing disposable income and the trend of nuclear families are playing in its favour. Sun TV is the undisputed leader in the south Indian TV entertainment market. The broadcasters are one of key beneficiaries of the mandatory digitisation process initiated by the government as its implementation is expected to lead to a six-fold increase in ARPU of cable subscribers from Rs4 currently to Rs15-20 post-DAS regime. The company also enjoys a 30% market share of the total south Indian advertising market making it one of the dominant players in the industry. Given the upside potential from the DAS regime and a gradual recovery in advertising, we believe Sun TVs growth prospects look favourable going ahead.
India Cements
The Ramco Cements
Shree Cement
UltraTech Cement
Indian Hotels Co
KKCL
Raymond
Relaxo Footwear
Speciality Rest.
Sun TV Network
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FUNDAMENTALS
Zee Entertainment
Zee Entertainment Enterprises, part of the Essel group, is one of India's leading TV media and entertainment companies. It has a bouquet of 34 channels across Hindi, regional, sports and lifestyle genres. It is best placed to benefit from the digital addressable system regime rolled out by the government. The recent regulatory change of capping the advertising time on TV to 12 minutes per hour remains a neutral development for the company as it will be able to increase its advertisement rates to negate the fall in advertisement volumes. Diversified/Miscellaneous We like the strong positioning that Aditya Birla Nuvos businesses enjoy in their respective fields. It is amongst the top five players in the insurance, asset management and telecom (Idea Cellular is the fastest growing telecom company, third in ranking) segments. Madura Garments, with its marquee brands, and consistent and resilient growth, is a profitable set-up. In an improving macro-economic environment the company would be well placed to grow. Bajaj Holdings & Investment Limited (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its manufacturing undertaking was transferred to the new Bajaj Auto Ltd (BAL) and its strategic business undertaking consisting of the wind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businesses and properties, assets, investments and liabilities of erstwhile Bajaj Auto, other than the manufacturing undertaking and the strategic business undertaking, now remain with BHIL. BHIL is a primary investment company focused on new business opportunities. It holds more than 30% stake each in BAL and BFS. We have a Buy recommendation on the stock with a price target of Rs1,464. Bharti Airtel is the leader in the Indian mobile telephony space. With the regulatory overhang receding and the industry as well as the company focusing on the quality of revenues rather than volume, better times can be expected ahead for the sector and hence the company. The performance of the African business is slowly stabilised. We remain optimistic on the company. Bharat Electronics, a PSU manufacturing electronic, communication and defence equipment, is benefiting from the enhanced budgetary outlay for strengthening and modernising the countrys security. The growth in revenues is also expected to be aided by the civilian and export orders. The companys current order book of around Rs25,000 crore provides revenue visibility for the next three to four years. The huge cash reserve would also support the stock. With its dominant presence in the container freight station segment and recent forays into the rail freight and cold chain businesses, Gateway Distriparks has evolved as an integrated logistic player. Its CFS business is a cash cow while its investments in the rail and cold storage businesses have started bearing fruits. It is one of the largest players in the CFS business and has also evolved as the largest player in the rail freight business as well as the cold storage business. The proposed capex for all the three segments will strengthen its presence in each of the segments and increase its pan-India presence. We expect its revenue and net profit to grow at 20% and 16% CAGR respectively over FY2013-15. Max India is a unique investment opportunity providing direct exposure to two sunrise industries of insurance and healthcare services. Max New York Life, its life insurance subsidiary, is among the leading private sector players, has gained the critical mass and enjoys some of the best operating parameters in the industry. As the insurance sector is showing signs of stablisation, the companys favourable product mix and a strong distribution channel will result in a healthy growth in the annual premium equivalent. As the company has turned profitable on a consolidated basis and has a treasury corpus of over Rs300 crore, it has announced a dividend of 610% in FY2013 and will continue to pay dividends in the future. Ratnamani Metals & Tubes is the largest stainless steel tube and pipe maker in India. In spite of the challenging business environment due to increasing competition, the stock is attractively valued. The management has maintained a strong outlook on the potential opportunities in the oil & gas sector.
Aditya Birla Nuvo
Bajaj Holdings
Bharti Airtel
BEL
GDL
Max India
Ratnamani Metals
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Sharekhan Valueguide Dec2013

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Sharekhan Valueguide Dec2013

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December 2013

From Sharekhans Desk

RESEARCH BASED EQUITY PRODUCTS Top Picks basket Switch Ideas

TECHNICALS USD-INR EUR-INR

Hold Buy Buy Hold Hold Buy Buy

1500.0 1350.0 3770.0 ** 950.0 2600.0 580.0

Hold Buy Hold Buy Buy Buy Reduce Hold

** 450.0 ** 85.0 115.0 70.0 527.0 520.0

STOCK IDEAS STANDING (AS ON DECEMBER 06, 2013)

Buy Buy Buy

650.0 1010.0 365.0

388.0 490.0 886.0 130.0 1265.0 600.0 732.0 978.0 654.0 **

** Price target under review

FROM SHAREKHANS DESK

from sharekhans desk

2013 ends with a bang

SHAREKHAN TOP PICKS

SHAREKHAN TOP PICKS

Sharekhan Top Picks

CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS IN %)

Sharekhan (Top Picks)

SHAREKHAN TOP PICKS

AUROBINDO PHARMA Remarks:

BHARTI AIRTEL Remarks:

HCL TECHNOLOGIES Remarks:

ICICI BANK Remarks:

SHAREKHAN TOP PICKS

LARSEN & TOUBRO Remarks:

RELIANCE INDUSTRIES Remarks:

SELAN EXPLORATION Remarks:

SHAREKHAN TOP PICKS

SUN PHARMA Remarks:

ZEE ENTERTAINMENT Remarks:

DECEMBER 03, 2013

Sun rises in the south

Source: Company, Sharekhan Research

SHAREKHAN SPECIAL FMCG

O CTOBER 06, 2008 D ECEMBER 03, 2013

ADITYA BIRLA NUVO

CMP: RS268 NOVEMBER 11, 2013 Price target revised to Rs314

Foreign 20% Promoters 54%

NOVEMBER 20, 2013 Upgraded to Buy

CMP: RS105 NOVEMBER 11, 2013 Price target revised to Rs110

CMP: RS1,102 NOVEMBER 11, 2013 Price target upgraded to Rs1,265

GLAXOSMITHKLINE CONSUMER HEALTHCARE

CMP: RS4,677 NOVEMBER 7, 2013 Price target revised to Rs4,886

IL&FS TRANSPORTATION NETWORKS

CMP: RS53 NOVEMBER 7, 2013 Price target revised to Rs65

Foreign 13% MF & FI 36%

IRB INFRASTRUCTURE DEVELOPERS

CMP: RS88 NOVEMBER 14, 2013 Price target revised to Rs110

Institutions 10% Public & others 20%

MAHINDRA & MAHINDRA

CMP: RS186 NOVEMBER 11, 2013 Strong performance in tough environment

NOVEMBER 13, 2013

Retain Buy on attractive dividend yield and valuation

Institutions 17% Non-promoter corporate 1%

STATE BANK OF INDIA

TATA GLOBAL BEVERAGES

CMP: RS144 NOVEMBER 13, 2013 Price target revised to Rs166

Foreign & Institutions 40%

CMP: RS23 NOVEMBER 14, 2013 Price target revised to Rs30

450.0 85.0 115.0 70.0 527.0 520.0