You are on page 1of 15

Dear Investors,    In  the  Union  Budget  2012‐13,  the  Finance  Minister  introduced  a  new  scheme  which  has  the 

dual  benefits  of  understanding  and  investment  in  Select  Equities  and  also  enjoying  tax  benefits  for  select  investors.  The  highlights  of  the  same  are  mentioned  below.     

Rajeev Gandhi Equity Saving Scheme, 2012 
Highlights of the Scheme:     a)   Benefit of this Scheme is available for “new retail investor”.  “New Retail Investor” means:  i. Any individual who has not opened Demat account or  ii. Any  individual  who  has  opened  Demat  account  but  not  made  any  transaction  till  the  date  of  notification of scheme.    b)  The  deduction  under  this  Scheme  shall  be  available  to  individual  investor  whose  Gross  total  income for the financial year is less than or equal to Rs. 10,00,000.    c) Maximum  Investment  Amount:  Rs.50,000.  Further,  Investment  can  be  made  in  eligible    securities in more than one transaction.    d)   e)  Existing  demat  account  holder  shall  submit  a  declaration  in  “Form  A”  to  the  depository  Participant.    f)  There will lock in period of 3 year in which 1 year will be fixed lock in period. During the lock in  period they are not permitted to pledge or hypothecate any eligible securities. Further, in fixed  lock in period investor cannot sell the shares.         

Deduction Allowed: 50% of Investment amount.  

30th January, 2013

Microsec Research

 51/2012 F.  Microsec  Research  has  identified  10  companies  among  the  list  of  securities  approved.g) For  further  details  please  refer  to  Section  80  CCG(1)  of  the  Income  tax  Act.142/35/2012‐ TPL).    h)   Investment  has  to  be  made  to  in  eligible  securities.  We  have  recommended  blue  chip  stocks  which  are  safe  and  carry  fundamental  potential. 2012 ( Notification No.  We  expect  these  stocks  to  return  on  an  average of 18‐21% annualized return in 3 years. Details of Securities are mentioned below.No. 2013)  157 350 1564 1344 345 477 360 285 1145 220   30th January.  1962  and  Rajiv  Gandhi Equity Savings Scheme. 2013 Microsec Research .      Name of Securities  NMDC Limited    Coal India Limited    Larsen & Toubro Limited    Tata Consultancy Services Limited (TCS)    Bharti Airtel Limited    Hindustan Unilever Limited    Tata Chemicals Limited    LIC Housing Finance Limited    Aditya Birla Nuvo Limited    Engineers India Limited              Sector  Mining  Mining  Engineering  IT  Telecom  FMCG  Chemicals  NBFC  Diversified  Consultancy  Services  CMP (as on 30th January.

8%          3.28        17.76           6. ABNL is USD4. Microsec Research.54          10.9%     156. Private Equity.56        822 1. debt-funded growth model.59 FY10 30th Janaury.5% 14.2%     114. 1.387 5.23            0.90 13.40 29-Nov-12 29-Apr-12 29-Sep-12 29-Jan-12 29-Jul-12 29-Dec-12 29-Feb-12 ABNL SENSEX Analyst : Anik Das Email : adas4@microsec.00 1.3% 13. and nearterm funding issues.60           1.8     69.3x and10. Any 0.00 Outlook and Valuations: We see strong growth in almost all major segments.10 Sector. NBFC.791 10.36          14.6     2.02            7. Fashion & Life style and Manufacturing.1%       2.9%       1. Asset management.30           1. Company’s portfolio is best placed in its own way with annual free cash flows of INR5bn.31           6.15        1.15      885. Key Financials Highlights Particulars Net Sales Growth (%) EBITDA EBITDA Margin (%) Net Profit Net Profit Margin (%) Diluted EPS (INR) P/E BVPS P/BV EV/EBITDA RoE FY11  18. however. Bloomberg Microsec Research .194.950 13.08        78.3%       4.145. Company’s financial services business is ranked amongst top 5 private fund managers in India and telecom business is ranked 10th globally with regards to total minutes of use on network.096 4. any demerger or restructure of business verticals can trigger a very strong upward movement in the stock. b) ABNL is a strong contender for new banking licenses to be issued in 20.5%          93.40          14.1%       78.26 triggers for the stock.49            1.51           7.58      16.57            9. Telecom.84      660.84          12.5 bn diversified business conglomerate having presence in Financial services (Life insurance.840 20.30 FY13E      24. 51% FII.53           1.408 11.753 15.0%       1.) 1.473 9. Wealth management and Insurance borking).047.BO company at the subsidiary level.99        6.169.IN transferring the insurance business to 100% subsidiary and bringing in a private equity ABNL. P/E multiple of 12.53          14. 31% Promoters.15 Public & Others.64 positive policy framework (both on telecom & financial sectors front) shall be key 274. which would take care of future growth 113 requirements.55          13. ABNL is trading at FY13E and FY14E. Broking.One of the ways it could be done is through ABNL. Asset Play on fast growing financial services and telecom businesses: ABNL is a direct play on the fast growing insurance and telecom businesses.04 FY15E     29.931 10.84  2.778 16. Shareholding Investment Highlights Balanced portfolio of value business: ABNL has a well-balanced portfolio mix of value and growth businesses.0% 4.11            5. We believe such a move in the insurance or financial services business could significantly unlock value for the company (such a transaction 10.34 FY12     21.2% 1439.8x near future.39      771. We believe the market is overly concerned about its holding company structure. IT & ITes. the stock does not get a high PE rating.25     584.770 5. 2013 29-Aug-12 29-Oct-12 29-Jun-12 29-Jan-13 Source: Company.6%       4. c) New Urea Policy which can give boost to agri and fertilizer business. It also has stable cash generating businesses such as fertilizers and insulators. At current market price.5%           890 4.00 will infuse cash into ABNL's books).188 17.45  1. Its value business is instrumental in funding growth and transformation. multiple triggers for re-rating exist: a) Value ABIRLANUVO unlocking in the insurance business .Diversified We recommend ABNL a BUY. 500303 Multiple triggers for re-rating: In our view.65 737.033. Improving business environment would push EBITDA margins to historic average of 16% with the stand-alone business generating 17% earnings CAGR over FY13-15e.4%          1.6% 154.1x.55        6.50            0. 18% STOCK SCAN BSE Code NSE Code Bloomberg Ticker Reuters Ticker Face Value (INR) Equity Share Capital (In INR Cr) 5 Yr Average P/E Beta vs Sensex Dividend Yield (%) Average Monthly Volume ('000s) 140 120 100 80 60 40 20 0 29-May-12 29-Mar-12 (Figure in Rs Cr) FY14E     26. Due to diversified nature of the company.290 15. Capital requirement would go down considerably after achieving size in insurance and telecom businesses and focusing on profitability and efficiencies.Aditya Birla Nuvo Limited (ABNL) BUY M arket Data Current M arket Price (INR) 52 Week High (INR) 52 Week Low (INR) M arket Capitalization (In INR Crs.

3% 6.259.6% subscribers market share in the Indian telecom market.11 2. 2013 Microsec Research .07 1. over its peers. Bharti – Financials at a glance (all data in INR Crores unless specified) Particulars Net Sales (post Excise Duty) Growth (%) EBITDA EBITDA Margins (%) Net Profit Net Profit Margins (%) Net Profit Growth (%) EPS BVPS P/E P/BV RoE EV/EBITDA Source: Company Data.531.24    30th January.03% 20.18% 3. Ability to generate healthy free cash flows provides an edge: During twelve months ended September 2012.05 2.93 17.40 8.30 33.62% 25.15% 28.70 32.881.30 4. strong free cash flows will help the company reduce its debt burden as well as equip Bharti with better liquidity position while renewing its licenses.903.40 5. which is higher than the industry average of 79. Moreover.19 177.8 Crores.18 9. will remain the key beneficiary of the same.24 FY2013E 80.467.90 238. the company may continue to generate such cash flows. the higher quality of its subscriber base is represented by far higher share in revenues. Bloomberg Sha reholding FII 17. going forward.96 FY2014E 87.28% DII 8. in our view. Furthermore.Telecommunication Services We rate Bharti Airtel Ltd (Bharti) a ‘BUY’.80 33. being the leader in the space.20 42.10 7. Bharti intends to bid for a license in Myanmar.79 36.50 12.17% -33. However.0% of total industry’s gross revenues in Q2FY2013.61Mn subscribers.25% 23.40 6. its ability to generate healthy free cash flows. We believe the leading position in the Indian telecom market coupled with its scale of operations and diversification in other geographies makes the company a better investment bet.667.00 20.3% NA Return (%) 0 -30 -60 1-Feb-12 2-May-12 1-Aug-12 Bharti 31-Oct-12 Sensex 30-Jan-13 Analyst: Nitin Prakash Daga npdaga@microsec. To expand further.75% 6. Emerging regulatory clarity remains positive: The emerging regulatory clarity is likely to be positive for the Indian telecom sector.244 0.10 31.94 11.046.77 24.3% 9.111. 93.43 2. With capital expenditure cycle in the Indian telecom space peaking.16% 4.50% Non Institutions 6.40 30.9% of the company’s subscribers were active.46% 59.022. in the uncertain regulatory environment.90 128.70 10.04% STOCK SCAN BSE Code NSE Code Bloomberg Ticker Reuters Ticker Face Value (INR) Equity Share Capital (In INR Crs) Average P/E Beta vs Sensex Average Daily Volume Dividend Yield PEG Ratio 30 532454 BHARTIARTL BHARTI IB BRTI.678. holds 20.43% -16. the company is attractively priced and can be a good investment bet from a long term perspective.08% 35.97% 15. where Bharti represented 29.4% and second only to Idea. and emerging regulatory clearance in the sector. Investment Highlights Leading position in the Indian telecom market bodes well: Bharti with 183. Bharti generated operating free cash flows of INR12.5% 7.65 400.900.00 FY2015E 94.256.30 9.70 2.74 23.20 133.00 1.27% 9.898.18% Promoter and Promoter Group 68. its high debt levels and expected cash outgo for spectrum impede our optimism a bit.87 Sector.78 13.50 22.74% 7.0x 0.81 FY2012A 71.41 6.508.562. Valuation seems attractive: Bharti is currently trading at EV/EBIDTA of 8.6% 8. Bharti. In addition.  Bharti Airtel Limited BUY Market Data Current Market Price (INR) 52 Week High (INR) 52 Week Low (INR) Market Capitalization (In INR Crs) 344.712.BO 5.11% 20.49% 5.13x.6% 7.50 33.78 033 30512172 FY2011A 59.96% 32.39 142.96% -29.95 157.566. which is lower than its peer group average.56% 11.22% 14. at the end of November 2012.50 130. We believe that at current valuations. Our rating underpins Bharti’s leading position in the Indian telecom space.54 8.071.

00 6.41 2. While further details of quantity of   coal to be imported / price pooling etc are yet to be finalized.99 - Source: Company Data.   Profit Sharing of 26% in MMDR Bill: The proposed benefit sharing framework under the new Bill   will   increase the tax incidence on the mining entities which intends to levy a tax of 26% on coal mining profits.22 350 19000 300 17000 Growth (%) EBITDA 250 2-Feb-12 2-May-12 2-Mar-12 2-Aug-12 2-Oct-12 2-Nov-12 2-Jun-12 2-Apr-12 2-Jul-12 2-Sep-12 2-Jan-12 2-Dec-12 2-Jan-13 15000 EBITDA Margin (%) Net Profit Net Profit Margin (%) Net Profit Growth(%) EPS P/E(x) P/BV(x) ROE(%) EV/EBITDA(x) Coal India Sensex Analyst: Neha Majithia nmajithia@microsec.00% 19638 25.58 10. However.96 35. there is no clarity on price pooling arrangement of the imported coal with for   domestic coal. Investment Highlights: 4.316.09 11.8MT are probable reserves. higher realizations from shift to GCV (Gross Calorific Value).27 3.000kcal.28 32.36 FY15E 85354 10.69 5.6% in Q2FY12.52 37.862.338 0.e. while having a negative impact on two of its subsidiaries i.57 FY12A 62415 24.66 36.267.59% 11.31% 14.69 1.595.33 FY13E 69281 033 3051 2176 30th January.00% 18359 26. 2012. sitting on huge reserves of 18.10% 14788 23. WCL 90% (Western Coal Fields) & ECL (Eastern Coal Fields) (~11% revenue contribution respectively).00% 20951 27.1MT are proved reserves and 8.63% 12.16% 8.5%.94% 17.9MT.23 NA NA 35.00% 21845 25.87% 364.32% 6.12% 15.Coal India Ltd BUY Market Data Current Market Price (CMP) 52 Week High 52 Week Low Market Cap (INR in Cr) 350 386 289 221231 Sector – Mining We recommend Coal India a “BUY”. out of which 10. 2013 . With robust growth in dispatches and better rake availability. thus removing the logistic bottlenecks: Availability of   rakes/day has improved substantially from CY12.2% in   Q1FY12 & 7. But this will help Coal india take the benefit of getting the forest clearance faster.28% FY11A 50233 -6.20 20. This would be an immaterial amount   CIL. 5% for supply between 60%-65%.24% 34.80% 10867 21.08% 23. The targeted sales volume by CIL requires ~193 rakes/day in FY13E. 10-20%   for supply between 50%-60%.200-7. Coal India is the single largest coal producer in the world.00% 21000 penalty of 1. Microsec Research Microsec Research .16 12. we expect CIL to post better margins.38% 7.62% 9.47% 9622 17. price hikes. Given the targeted output.000kcal and above 7. we believe CIL will be able to deliver coal to the power   plants above the 65% level and avoid any meaningful penalty.25% 15668 25.71 FY14E 77595 12. where supply is between 65%-80%. Coal India Ltd Financial Performance (INR in Crore except per share data and %) Particulars Net Sales FY10A 53847 31.1 -1.94% 10482 19.13 3.08 38.41 14. The same has been positive for CIL & has led to improvement in realizations in past two quarters with a YoY increase of 19.00% 23046 27.14 6.36% 5.BO Mining 10. Under the new GCV grading. improved blended realizations from setting up 20 new coal washeries with a combined capacity of 111. coal would be classified under 17 slabs     (300kcal each) from 2. we believe that CIL wouldn’t suffer any financial losses on imports.   Transparency on FSA clauses to emerge as a relative safe haven for Investors: CIL will have to pay   Stock Scan Scrip ID Scrip Code (NSE) Scrip Code (BSE) Bloomberg Ticker Reuters Ticker Industry Face Value ( INR per share) Equity Share Capital ( INR in Cr) Avg 2 years P/E Avg daily volume (Last 1 Year) Beta Vs Sensex Dividend Yield 400 Coal India Ltd COALINDIA 533278 COAL IN COAL.1MT during the 12th plan. CIL   has taken a price increase for ~10-15% in case of WCL and we expect similar kind of action in Central/State Government Others FIIs regard to pricing for other subsidiaries as well.01% 27.64%   Shift from UHV (Useful Heat Value) to GCV (Gross Calorific Value)-In favor of CIL: CIL has changed the pricing mechanism of non-coking coal from UHV based grading system to GCV   based from January. actual availability has been ~182 rakes/day. which will aid CIL in solving the logistics   bottlenecks.   Rake availability to improve in future. and 40% if the supply is less than 50%. Exhibit 1. CIL will meet 80% requirement with 15% imported coal & 65% domestic coal.71% 13462 26.50% 17156 24.69% 10.76% 16.69% 36. increased production and clarity on FSA clauses.188.47% 31.36 17. For the first two months of FY13.90 4.

) Shareholding Public & Others. cash rich status: EIL has an asset light business. EIL is trading at FY13E and FY14E. indicates that Government has realized the severe slow-down in the capex cycle and the need to revive investment cycle in the HydroCarbons space.35 FY11 FY12     2. Government’s announcement of Cabinet Committee on Infrastructure (CCI) where they are likely to review 47 projects (some of them held by ONGC.22          29.49           3. RIL.07      16.92           7. principally focused on the oil & gas and petrochemicals industries in India and Overseas.60          11. pile up huge cash balance of INR17 Bn. EIL has traded at 1-year forward P/E band of 15.93 FII.7%        655           716 23.71            6.01          11.9% 7.29       21.5%            721           773           878 20.5% 17.51 24.8% 21.7% 17. 80% STOCK SCAN BSE Code NSE Code Bloomberg Ticker Reuters Ticker Face Value (INR) Equity Share Capital (In INR Cr) 5 Yr Average P/E Beta vs Sensex Dividend Yield (%) Average Monthly Volume ('000s) 140 120 100 80 60 40 20 0 29-May-12 29-Mar-12 29-Nov-12 29-Apr-12 29-Jul-12 29-Sep-12 29-Jan-12 29-Dec-12 29-Feb-12 29-Aug-12 29-Oct-12 29-Jun-12 29-Jan-13 532178 ENGINERSIN ENGR.9% 13.99           3.63 .2x. we are confident that for any revival in this space. 5% Promoters. power (solar & nuclear).     34.2x 0.2x and10.442.11 (Figure in Rs Cr) FY13E FY14E FY15E          3. specifically in PMC segment. Cairn). is in its long term relationship through MoUs and various agreements with PSUs.9% 440.56      44.35          66.91      34.35           3.09          26.60 EIL SENSEX Analyst : Anik Das Email : adas4@microsec.848       3. through its range of services such as feasibility studies.2%        531           644 18. we believe that PSUs will significantly increase their capex which will prop up the growth of EIL. Asset light business.0%            642           650           730 18. which includes engineering.00      10. planning & scheduling. EIL would be the biggest beneficiary.67          11. respectively.46        10. Investment Highlights Leading Consultancy and EPC Company in Indian hydrocarbon Sector: EIL provides engineering consultancy & turnkey project contracting services across hydrocarbon value chain. water & waste management etc. increased activity in the Hydro-Carbons vertical and given the strong market position of EIL in this vertical.Engineers India Ltd (EIL) BUY M arket Data Current M arket Price (INR) 52 Week High (INR) 52 Week Low (INR) Market Capitalization (In INR Crs. 2013 Source: Company.97        26.2x. EIL is a leading engineering consultancy company.19          56.30 7.90 288.21        81. project management.50      40.20          56.723 41.4% 30.47 21.5% 17. With reform announcements here to stay.99 501. 15% Sector.77       19. Bloomberg Microsec Research -1 . process design & construction management.50 206. and commissioning and construction management services.2% 12.88  30th January.22        5. MOUs and nomination clause with PSUs . Key Financials Highlights Particulars Net Sales Growth (%) EBITDA EBITDA Margin (%) Net Profit Net Profit Margin (%) Diluted EPS (INR) P/E BVPS P/BV EV/EBITDA RoE FY10 2013. P/E multiple of 12.715       4. It is the only player in Indian hydrocarbon sector which provides complete ‘Concept to Commissioning’ services under one umbrella. metallurgy.48 2. fertilizer.32           7.45      15.8% 20.36          38.BO 5.5%          19. Their capex requirements are minimal.48            2.3%     15.a Competitive advantage: EIL’s advantage over other players.00 168 17.00 220.500 people of which 82% are with technical and professional qualifications.0% 19. given the nature of their operations.180 ‐ 6.Consulting Services We rate EIL a BUY.36 198. infrastructure. process design. EIL currently has a highly skilled & professional employee base of 3.466       3.IN ENGI.26        6.11      14. It has also diversified into other sectors including non‐ferrous mining. project management. Microsec Research. Since Government has riding on the reform bandwagon.05       19. As a result the company has been able to maintain debt free status. Outlook and Valuations: At CMP of Rs 221. certification. Historically in the last 3 years.

5% 2.384. face-washes.857. This helps the company to tap the consumers without incurring extra-expenditure required for building new brands.0 17% 4.93% DII 8.8 86. Ponds.18 33.712 13. Vaseline (Lip cream) as therapy heel cream.1% 22% 15. and Foods & Beverages. with leadership in Home & Personal Care Products and Foods & Beverages.0 10.00 216.879 15.0 15% 4. HUL– Historical Financials and Projections Particulars Net Sales Growth (%) EBITDA EBITDA Margins (%) Net Profit (Adjusted) Net Profit Margins (%) Net Profit Growth (%) EPS (Adjusted) BVPS P/E P/BV RoE FY10A 18. Fair & Lovely.0 11.Laundry. 2013 Microsec Research .9% 2.4x 2. Homecare.1% 3.1 84.Hindustan Unilever Ltd BUY Sector – FMCG We recommend Hindustan Unilever LTd.1 position in segments like Soaps.6 36.1 17.5% FIIS 21. Personal care.02% Promoters 52. we think that the company is now Awake and is firing on all cylinders in areas of Homecare.3 28 26. Ponds.967.BO 1. launched AXE(deodorants) as Premium Soaps for young male.7 73. Fall in Palm Oil prices: Palm oil prices have lost 22% so far this year and is further expected to be weaker because of a record build-up in Malaysian Stocks. This is inturn is expected to improve the EBITDA margin of HUL going forward. Surf Excel Wheel.4 28.084.4 17 38. Investment Highlights S har e holding Others 17. Vaseline.00 100. and No. sustained brand power.269.30 n/a HUL SENSEX Analyst: Naveen Vyas nvyas@microsec. with the help of its powerful brands like Lux.5% 29% 12.791 15.6% FY13E 26. Now with the growth accelearation and its sustainability in place.0 12.77% Awake and Firing on all Cylinders: Earlier we have mentioned that HUL has been waking up after a long sleep. Microsec Research (In INR Crores) 30th Source: Company.6 13 49.1 22 31.0 11% 2.00 140.151 15.0 17% 3.6 12 49. body shower gels etc.5x 0.2% FY14E 31.956.000 1. Deodorants etc.075. Pears. HUL's brands spread across 20 distinct consumer categories. cr.0 11% 5. “FMCG market in rural India is tipped to touch $100 bn by 2025 on the back of "unrelenting" demand driven by rising income levels” . Eyeing a long term sustainable growth from Rural India: HUL has a strong association with rural india which consumes 40% of its products thorugh its strong distribution network covering 1. AXE. Entering into Newer and Different Segments of Consumption with the Extension of its Established Brands: HUL has been strategically moving its established brands like Dove.484 14.0 11.8 27 26.436.2% FY12A 23.6% 9. Strong Brand Leadership: HUL has strong brand leadership with No.5% 2.0 12.2 position in Oral care and Tea which clearly denotes its strong brand leadership. Rin etc.7 77. For Example HUL launched Dove(Soap brand) as hair oil in premium brand range.4% 3.8 17.0 2.036. both in topline and bottom-line.Nielsen. continuous product innovation and domestic consumption story.6 11.00 2/1/2012 3/1/2012 4/1/2012 5/1/2012 6/1/2012 7/1/2012 8/1/2012 9/1/2012 10/1/2012 11/1/2012 12/1/2012 1/1/2013 500696 HINDUNILVR HUVR IN HLL. Hindustan Unilever is India's largest fast moving consumer goods company.5% 3. strong distribution newtork.9 39.0 72.6 21. It has strong rural penetration.026.6% FY15E 34.4% 0% 9. The population of rural india is around 80 crores which provides an immense opportunity for HUL .00 80.00 120.) Average 2 Year P/E Beta vs Sensex Average Daily Volmes (6 M) Dividiend Yield PEG Ratio 160.480. (HUL) a BUY. Haircare.7 78.982.270 15.28% STOCK SCAN BSE Code NSE Code Bloomberg Ticker Reuters Ticker Face Value (INR) Equity Share Capital (Rs.3 lakh villages.3% 3% 18. Exhibit 1.7% FY11A 20. skin care.686.etc into newer and different segments as an extension of its brands.3% 18% 17. Lakme. Dove.

770 16.288 EBITDA M argin (%) Net Profit 14.31 342. ports.86 13.91 16. Exports contribute 18% of the order intake. LT is making significant inroads into a diverse range of products and services through its subsidiaries and manufacturing JVs in power BTG.763 (Figure in Rs Cr) FY 1 4 E 85.63% STOCK SCAN BSE Code NSE Code Bloomberg Ticker Reuters Ticker Face Value (INR) Equity Share Capital (In INR CR) Average P/E (3 year) Beta vs Sensex Average Daily Volume Dividend Yield PEG Ratio 140 120 100 80 60 40 20 0 29-May-12 29-Mar-12 Order inflow surprises positively: During 3QFY13. ports. whereas international buffered the slowdown in 3Q.601 Growth (%) EBITDA 18.4% 7.615 FY 1 5 E 98. Key Financials Highlights P a rtic ula rs Net Sales FY 1 0 43969.2% 13.9% 110.00 power.26 rest.Engineering We rate L&T Ltd.2% 9.000 and revival of non-infrastructure businesses over next 2-3 years would be key value 1.791 Net Profit M argin (%) 29-Nov-12 29-Jul-12 29-Apr-12 29-Sep-12 29-Dec-12 29-Jan-12 29-Feb-12 29-Aug-12 29-Oct-12 29-Jun-12 29-Jan-13 12.9% 83. bridges. Microsec Microsec Research .4bn versus loss of 500510 INR 1. With encouraging guidance in its order intake and sales growth for FY13 in this tough market condition.456 13. railways and power.37 Investment Highlights DIIs 36.0x recovery with sustained competitive and scalability advantage that separates it from the 1.98 3.74 19. 0.719.62% FY13.2% 5.81 FY 1 1 52. The stock currently trades at a P/E of 18.158 13.69 624. Real estate orders helped the company in the first half.Other key positives: (1) no further increase in net working capital.1 . hydrocarbons.734 13.16 718.16 16.50 Outlook and Valuations: L&T is the best play on domestic industrial and infrastructure 23. 2. order inflow came in at INR 195bn (up 14%YoY) versus general expectation of INR 152bn.09 6. given domestic infrastructure order wins and overseas diversification initiatives (22% of total inflows for the qtr). sale of non-core business 2.26 17.26 14.Research.17 10.78 2.044 FY 1 2 64.33 3.61 533.7% 93.564.71 7.1x its FY13E & FY14E earnings NA respectively on a consolidated basis.00% Management maintains FY13 guidance: The management maintained its guidance of FIIs 15-20% growth in revenue/order intake and +/-50bp change in E&C EBITDA margin in 15.) Sha re ho ld ing Others 47.835.55 403.6% 8.8% 4. forging and shipbuilding.55 6.26 4. Apart from its core construction activity.60 16.106.96 8.313 FY 1 3 E 74.5% 6.95 2.56 12. Going forward.43 Diluted EPS (INR) P/E BVPS P/BV EV/EBITDA RoE Larsen & Toubro SENSEX Analyst : Anik Das Email : adas4@microsec.74 14.50 1.677 23. While we expect L&T to meet FY13E growth guidance.694 13.4% drivers.339 15. 1.84 2.6% 4. LT IN Best equipped to ride infrastructure capex cycle: L&T is India’s largest infrastructure LART.75% Sector. while highway orders will be weak.6% 72.BO and EPC Company with presence across major verticals like process.246. 2013 .45 21.8x &16. 122.3% 5. fertiliser. core infrastructure like roads.50 11.16 17.11 30.87 18.08 30th January.00 1. Domestic orders fell 1% YoY during 3Q off a high base.8 6439.52 16.92 13. Larsen and Toubro (LT) is India's largest engineering and construction (E&C) company. we rate a BUY on the stock. a BUY.15bn) and (4) pick up in domestic and overseas hydro carbon orders while broad LT industrial and infra segments stayed sluggish. industrial structures etc. (2) IDPL equity commitments stayed flat.6% 5450. Bloomberg Source: Company. we expect an improvement in Promoter hydrocarbons. railways and domestic T&D verticals. The company is also involved in various developmental projects on BOT basis in roads.32 11.40 96. (3) positive CFO generation (INR 2.933 14.52 470.4% 90.5% 11.Larsen & Toubro Ltd (L&T) BUY Market Data Current Market Price (INR) 52 Week High (INR) 52 Week Low (INR) Market Capitalization (In INR Crs.3% 76.57 6.

Operating profit has grown at a CAGR of 30. Generally. All figures in INR Cr except per share and % data 30th January. The main objective of the company is to provide long term finance to individuals for purchase/construction/repair and renovation of new/existing flats. which is in the proportion of 20:01. LICHFL is one of the leading players in the mortgage market.12 crores in FY12.15 crores as against INR51089. 2013 Microsec Research . The company’s total income stood at INR6215. Moreover. company’s move is likely to improve business margins.9% in Source: Microsec Research.NBFC We rate LIC Housing Finance Ltd (LICHFL) a BUY. Company Data. Investment Rationale Robust Business Growth: Despite high inflation coupled with high cost of capital scenario. Whereas. Increasing Market Share in Mortgage Market: Despite an overall slowdown in industry due to high mortgage rates and high price level specially in Tier 1 cities. which has boosted its topline and bottomline growth.88% on total income over the period of 2008-12.08% over the period of 2008-12. project loan stood at INR3404 crores. the company has reported a YoY growth of ~23% in the quarter ended September 2012. Profit After Tax (PAT) grew at a CAGR of 23.65%. Moreover. registered a growth of 23. The outstanding mortgage portfolio of the company in FY12 was INR63080. We expect. A Analyst: Sanjeev Jain 033-3051-2174 sjain@microsec. Robust Growth in Profitability: LICHF’s strong sustainable business structure along with strong parent and thoughtful business activities has helped the company to absorb the standing opportunity in the industry. company’s individual loan portfolio stood INR68077 crores whereas.LIC Housing Finance Ltd BUY Sector . LICHF registered CAGR growth of 29. management expects to bring its loan book back to its historical level. The company which has been in existence since 1989 is promoted by “Life Insurance Corporation (LIC)”. LIC Housing has maintained its earnings growth. as of Q2FY13. developer loans yield are 3-4% higher as compared with the individual loans. Increasing Share of High Yielding Developer Loan: The share of developer loan has declined to 5% in FY12 from 10. LIC Housing has still been able to grow at higher rate than industry and increased its market share.81% over the same period. However.84 crores in FY11. registered a YoY growth of 27.

65 FY11A 11369 82. NMDC’s low cost production is due to its highly mechanized mines i.90 Net Sales Growth (%) EBITDA 19000 17000 15000 EBITDA Margin (%) Net Profit Net Profit Margin (%) Net Profit Growth(%) EPS P/E(x) P/BV(x) ROE(%) EV/EBITDA(x) NMDC Ltd Sensex Analyst: Neha Majithia nmajithia@microsec.53 6.40% 10967 63. The production capacity is expected to reach 51MTPA by FY16e with opening of two new mines in 80% Chattisgarh and Karnataka with mining capacity of 7MTPA each and expansion in existing mines of 2MTPA.15% 19. foray into value added projects and improved realization in future.94% 8926 79. NMDC Ltd Financial Performance (INR in Crore except per share data and %) Particulars FY10A 6230 -19.96 1. So far. capacity addition would lead to higher volumes.32% Sector -Mining We recommend NMDC a “STRONG BUY”.65% 19.69 33.77% 3.26% 9075 78.19% 13622 78. NMDC’s domestic iron ore prices were at more than 100% discount to the international benchmark prices.26% 7266 64.18 8.18 2.47 1.17 24.02% 4. In INR1. 157 206 150 62166 presently producing about 27MT of iron ore from its 3 fully mechanized mines in Chattisgarh and Donimalai Iron Ore Mines in Karnataka.39 17. which has dropped ~20% in FY12.e.79 2.67 1.15% 88.77% 27. 2013 Source: Company Data.49% 22. NMDC.83 8. We NMDC IN expect these projects to add value FY15e onwards. Microsec Research Microsec Research . It has also planned to start producing NMDC coal from its 2 captive mines in Madhya Pradesh to feed these steel plants. Exhibit 1. The difference in both the prices has come down to ~50% at US$80/tonne.34% -21. 0.70% 10647 78.97% 4. substantial high quality iron ore reserves.67 FY12A 11262 -0.80% 7603 66. the average cost of production stood at INR24/tonne (INR1083 crore).00 per Share 396.66 23. with an annual production capacity of 32 million tonnes per annum (MTPA) and total reserves of 1354.NMDC Ltd STRONG BUY Market Data Current Market Price (CMP) 52 Week High 52 Week Low Market Cap (INR in Cr) 15. thus.021 FY11.34 23.16% 8.06 FY15E 17375 28. adding growth significantly to the topline and the bottomline as well.67% 3447 55. addition and expansion of mines leading to higher volume growth.BO High margins backed by Low Cost of Production: NMDC is one of the low cost producers of Iron Metals & Mining Ore in the World.01% 4402 70. superior margins backed by low cost of production. Hence. open cast mines.66 5. It has spent a total capex 526371 of INR 35410.67% in terms of PAT over FY12-16. Central Government/State Government Institutions Non-Institutions Value addition projects and huge capex to foster growth in revenue over FY14-16e: Besides its mining activities in Iron ore.9 Realizations to grow by 23% over FY12-16E to INR5018/tonne: NMDC’s realizations are expected 4.67 crores for setting up 3 steel plants and INR1513.51% 8645 76.85 33. Mining Capacity to grow at a CAGR of 9.62 29.68% 4. with an average cost of production of US$17/tonne (INR857 crore) in FY12.33 8.80% 3. NMDC IS likely to grow at a CAGR of 13. With ~40% market share in the iron ore producing industry. NMDC is India's largest iron ore producer and exporter.04 24.55% 8933 65.82% 9.64 million tonnes (MT). low mining cost on account of its high grade iron ore reserves with Fe content of more than 64% and economical/inexpensive labour.99 FY13E 11516 2.77% to 51MT over FY12-16E: NMDC is India's single largest iron ore producer.50% 16.48% in terms of revenue and 12.04% 6498 57.90% 17.391.29 5.42 crores for the pellet plants.12% 22.50% to improve due to its shift to import parity price mechanism from net back pricing mechanism to 21000 match the international benchmarked iron ore prices.16 FY14E 13554 17. Investment Highlights Substantial high quality Iron ore 033 3051 2176 30th January.71% 1. NMDC has forayed into pelletization and steel manufacturing by Stock Scan Scrip ID Scrip Code (NSE) Scrip Code (BSE) Bloomberg Ticker Reuters Ticker Industry Face Value Equity Share Capital ( INR in Cr) Avg 5 years P/E Avg daily volume (Last 1 Year) Beta Vs Sensex Dividend Yield 210 200 190 180 170 160 150 2-Feb-12 2-May-12 2-Mar-12 2-Aug-12 2-Oct-12 2-Jun-12 2-Nov-12 2-Apr-12 2-Jul-12 2-Sep-12 2-Dec-12 2-Jan-12 2-Jan-13 NMDC Ltd setting up one steel plant in Chattisgarh and 2 in Karnataka.81% 18.51% 11.

.47 FY2012A 13806 6.70% 11. Haldia. The company is in the business of so oda s pulses.9 91% 7.NS 10. TTCH is lik kely to double e its urea capa acity at Babral la unit at an estimated e cost t of 0 Mn that may y help to gene erate stable cas sh flow. TT TCH can access over five lak kh farmers.18% 38 8. UK U and Keny ya.9% 7 7.00 2 254.35 1 1.91 FY201 15E 16635. The acquis sition of UK based b Brunner r Mond and US U based Gene eral mical Industri ial Products (G GCIP) helped the company y to access glob bal markets.00 6.7 79% 2493 3.8x 0.000 dea alers across the e country.26 12 2. Babrala.9 94% 837.96 1. However erratic monso oon and adve erse inve glob bal scenario im mpede our optim mism a bit. urea.23% 43 3. We belie eve that at current valuations.97 11.Fer rtilizers We rate Tata Che emicals Ltd (T TTCH). ce ement & wate er purifier.00 6.5 51% 13.50 2 299.41 16. Inve estment Highli ights Posi itive outlook on o soda ash: TTCH T is the second largest producer of soda s ash with an annu ual production n capacity of over o 50 lakh tonnes t spread over Kenya (Magadi). ( Euro ope and North Americ ca.10 12.00 16.  Tat ta Chem micals Ltd L BUY Y Market Dat ta Current Market Price (INR) INR) 52 Week High (I 52 Week Low (IN NR) Market Capitaliz zation (In INR Cr r) 360.75 369 9. orable Urea In nvestment Pol licy boosts top p line as well as a margins: On account of t the Favo stron ng urea deman nd scenario al long with the assurance of 12%-20% 1 post t tax return from Govt. Microsec rch 30th January. Through t the plan acqu uisition of 50. v th he company is i attractively y priced and can be a go ood estment bet fr rom a long te erm perspectiv ve.9.0 06% stake in Rallis R India.36 5.78 28 86. nts are located d at Mithapu ur.30% 1114.23 0.70    Resear Source e: Company Data.9 90% 1878 8.93 8 8.06 24.78% 3 34.0 09% 39 9.85 251 1.00 16.42 6.33 326 6. Th he manufacturing ash.00 9. Valu uation seems attractive: a Tata a Chemicals is currently trad ding at P/E of 10.14% 5.9 98% 653 3. Pres sence in the consumer segm ments bodes well: w Tata Chemicals is setti ing up a plant t to man nufacture the nutraceutical n c codenamed Na an-1 at Chenn nai to launch low l calorie su ugar subs stitute in 2013-14 at a cost of o INR 50 cr with w the capaci ity of 300 tonn nes per annum m to cater r the rising health h awaren ness middle class c people in n the second largest diabe etic coun ntry like India. complex fertilizers.77 8 85.171.8 85% 26 6.00 12 2.8 82% 2338 8. Tata a Chemicals Lt td – Financials s at a glance (a all data in INR R Crores unless s specified) STOCK SCA AN BSE Code NSE Code Bloomberg Ticke er Reuters Ticker Face Value (INR R) Equity Share Cap pital (In INR Cr) Average P/E Beta vs Sensex Average Daily Volume V Dividend Yield PEG Ratio 500770 5 TATA ACHEM TT TCH IB TT TCH.54 16. H USA.00% 2711.1 19% 1002 2.63 Analyst: Gar rgi Deb gdeb@micro osec. The plant p may com mmission in three $850 year rs.76 11.43 16. a ‘BUY Y’.8% 6 6.8% 1. salt. T The Chem impr roved realizat tion along wit th marginal ca apacity expans sion in the US S by 1 lakh to one may y improve top p line as wel ll as margins but the aggr ressive pricing g by China a and expa ansion plan by b Turkish pl layers.56 6.15% 886 6.529 2.1% 6 6.24 8.1% 6 6.37 14.00 4. 23 300 distr ributors and ov ver 40. adding g additional th hree million tonnes by 20 015 rema ains a threat to o internationa al soda ash pric ces.0 07% 28.00 3 3 381. 2013 Microsec R Research .59 FY20 013E 14423 3.58 12.04 9.89 1 1.58 15. In addition n to that.79 8.15 1.10 214 4.22 Sector.47% 2329 9.40 FY2014E 15403 3.71 10 0.1% 7. Tata Chemical is s planning to expand its fo ood business under i-shakti brand by y setting up a call 022-2285554 44 Parti iculars Reve enue Grow wth (%)   EBIT TDA EBIT TDA Margins (% %) Net Profit P Net Profit P Margins (%) Net Profit P Growth (%) ( EPS BVPS P/E V P/BV RoE EBITDA EV/E FY2011A 11060 0.00 6.

046. Our rating underpins the company’s strong growth in business volumes.63% STOCK SCAN BSE Code NSE Code Bloomberg Ticker Reuters Ticker Face Value (INR) Equity Share Capital (In INR Crs) Average P/E Beta vs Sensex Average Daily Volume Dividend Yield PEG Ratio 30 532540 TCS TCS IB TCS. high employee utilization.88 21. Moreover.85 1.77 254.426. the company is consistently reporting ex-trainees utilization levels of more than 80% since Q3 FY2010.95% 9.83% 18.03 38. Its diverse offerings also place TCS in a better position while negotiating for new deals and retaining business from the existing clients.51 24. and its history of rewarding shareholders.00% 14.12% 32.54 313. Bloomberg 1.3% 1.6% 15. which was its 34th consecutive quarterly dividend.10 28. In addition.07 150.62% 29.189. However.50 22.49 24. Under the model.12 42. and iON may also keep driving TCS’ top line growth. going forward.83 31.39% 88. TCS announced dividend of INR3 per share. The reported attrition level is the lowest in its peer group.28 28.249.45% Promoter and Promoter Group 73.73% 78.73% 15. Furthermore. high utilization supports margins: Key number to pick from TCS’ Q3 FY2013 results was the attrition level of 11.893.60% 12.343.97% 13.00 195. these factors helped TCS to sustain its operating margins above 26% levels since then. enabling the company to collaborate on projects and leverage the asset base of different locations. the company’s diverse service offerings enable it to provide one stop solutions for all customer needs.00 1.438.87 102.01 18. Initiatives to reward shareholders bode well: In Q3 FY2013.91 17.72% 46. GNDMTM for better catering of customers’ needs. Investment Highlights Sustained growth in business volumes strengthens position of industry ‘Bellwether’: Despite higher base.87% 20. recent appreciation of INR vis-à-vis USD could pose near term headwinds for the stock.18 Return (%)    30th January.10 28.30% 11.324.00 28. the company’s incremental business volumes came ahead of most of its peers in last several quarters. GNDMTM. 2013 Microsec Research .80 12.57% 10.9% 12.30 21.07 29.89 6.72 24.88 FY2014E 71.021.25% in Q3 FY2013.27 124.50 28.BO 1.71% 71. focus on potential non linear businesses such as Financial Solutions.336.497.14 204.2%.14 FII 14.425.40 FY2015E 80.70% 10.47% 14.55 263.931.9% 13.69 26.97 15.62 24. non linear businesses add value: TCS’ diverse offerings are well complemented by its Global Network Delivery Model (GNDMTM).59 34.6x 0.61 10.2% 11.89% 22.24% 53.36 FY2013E 033 30512172 FY2011A 37.90 12. This factor helped TCS strengthen its leading position in the industry. industry low attrition levels.836 1. Additionally. Industry low attrition. the company established delivery centers at different geographical locations across the globe.257.96% DII 6.22% 17.80 21. The company’s initiatives to reward shareholders provide its investors consistent periodical returns.650. TCS – Financials at a glance (all data in INR Crores unless specified) Particulars Net Sales Growth (%) EBITDA EBITDA Margins (%) Net Profit Net Profit Margins (%) Net Profit Growth (%) EPS BVPS P/E P/BV RoE EV/EBITDA Source: Company Data. non linear growth drivers. In addition. Platform based BPO.4% 20.988.27 30.16 0 -30 1-Feb-12 2-May-12 1-Aug-12 TCS 31-Oct-12 Sensex 30-Jan-13 Analyst: Nitin Prakash Daga npdaga@microsec.31 FY2012A 48.34 9.18 4.092.06 5. TCS continued to report healthy volumes growth of 1.179.49 29.96% Non Institutions 4.456.  Tata Consultancy Services Ltd BUY Market Data Current Market Price (INR) 52 Week High (INR) 52 Week Low (INR) Market Capitalization (In INR Crs) Sha reholding Sector.Information Technology We rate Tata Consultancy Services Limited (TCS) a ‘BUY’.

in  nvyas@microsec. Head of Research:  Research‐Support                                                                                                                      Subhabrata Boral  Research Support  Asst. 2013 Microsec Research .in     dmittal@microsec. Investment  Ajay Jaiswal:  Recommendation Strong Buy Buy Hold Underperform Sell Expected absolute returns (%) over 12 months >20% between 10% and 20% between 0% and 10% between 0% and ‐10% < ‐10% MICROSEC RESEARCH IS ALSO ACCESSIBLE ON BLOOMBERG AT <MCLI>  -130th  rksaha@microsec.:  91 33 30512100   Email: microsec_research@microsec. Manager  Dealer           Email ID     vpagaria@microsec. Manager     Sr. Market Strategies  Agriculture & Pharma  Economy  BFSI  Mid Cap  Mid Cap  Mid Cap  Mid Cap  Technical & Derivative Research  Vinit Pagaria  Ranajit Saha  Derivatives & Technical  Technical Research     Institutional Equities  Institutional Desk  Institutional Desk  Dhruva Mittal  Puja Shah  PMS Division                                                                                                                                                                              Siddharth Sedani  Ketan Mehta  PMS Research  PMS Sales  AVP  AVP  Research: Financial Planning Division                                                                                  Shrivardhan Kedia  FPD Products  Manager Research  ssingh2@microsec. Manager Technology  s‐  Fundamental Research               Name  Nitin Prakash Daga  Naveen Vyas  Gargi Deb  Sutapa Roy  Sanjeev Jain  Anik Das  Neha Majithia  Soumyadip Raha  Saroj Singh  Sectors  IT.Microsec Research: Phone No. Telecom & Entertainment                       Designation  AVP‐Research  AVP‐Research  Research Analyst  Research Analyst  Research Analyst  Research Analyst  Research Analyst  Executive Research  Executive Research     VP  pdshah@microsec.

2013 Microsec Research .-230th January.

 This document should not be interpreted as an Investment /  taxation/ legal advice.Disclaimer:  This  document  is  prepared  by  the  research  team  of  Microsec  Capital  Ltd.  nor  its  directors.  agents  nor  representatives  shall be -liable  for  any  damages  whether  direct  or  indirect. 2013 Microsec Research .     -  3 Neither  the  Firm. no statement in the  report should be considered to be complete or accurate.    30th January.  incidental.  special  or  consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. from sources considered to be reliable.  (hereinafter  referred  as  “MCL”)  circulated  for  purely  information  purpose  to  the  authorized recipient and should not be replicated or quoted or circulated to any person in any form.    MCL  is  not  soliciting  any  action  based  on  the  report. it should only be relied upon at one’s own risk.  Investors  must  make  their  own  investment  decisions  based  on  their  specific  investment objectives and financial position and using such independent advisors.  employees. Therefore. While the information contained in the report has been procured in good faith.  No  indication  is  intended  from  the  report  that  the  transaction  undertaken  based  on  the  information  contained  in  this  report  will  be  profitable  or  that  they  will  not  result  in  losses. as they believe necessary.