Sunidhis Super Seven-II

Investment Ideas
November 28, 2013
Sunidhis Super Seven-I outperformed the broader index by 9% Amidst concerns over macro recovery, our super seven stocks (Report dated August 12, 2013) outperformed the broader index by 9%, vindicates our confidence on our theme of Quality Investing with key stock selection parameters such as strong earnings visibility over the medium term, compelling valuations, strong cashflows and no corporate governance issues. We do highlight the fact that in contrast to street- we had showed reliance on the 7 stocks in our universe, which have delivered an average return of 18% since our last recommendation against Nifty return of 8% and CNX500 return of 9% during the same period. Sunidhis Super Seven-II is expected to deliver superior return Post bolstered performance of our first edition of Sunidhis Super Seven, we are introducing second edition of Sunidhis Super Seven. In the second edition of super seven we are adding Dhanuka Agritech Ltd and Oil India Ltd, while removing Berger paints and GMDC. We are removing Berger paints from Sunidhis Super Seven due to its strong price performance and trading near to our fair value target and GMDC due to continuous non delivery of the company on volume growth front. Our addition of above mentioned stocks is based on our rigorous stock selection process and fits in our broader theme of Quality Investing. Performance of first edition of Sunidhis Super Seven
Company Name Berger Paints Cadila Federal bank GMDC NMDC Unichem Lab Yes bank Average Return Nifty CNX500
Source: Sunidhi Research

Reco. Price 203 708 63.6 95 102 150 287 5612 4293

Price as on 27-Nov-13 230 735 78 100 125 185 356 6057 4680

Div/per share ---3 7 ---

Total Return 13% 4% 22% 9% 30% 24% 24% 18% 8% 9%

Sunidhi Research |

Sunidhi Super Seven II- Investment Ideas

Cadila Healthcare Financials (`mn) Revenues FY12 52627 FY13 63577 FY14E 70373 FY15E 81364

EBIDTA Net Profit 11238 7685 11251 6960 11602 7252 14507 9282

EPS (`) 37.5 34.0 35.4 45.3

P/E (x) 19.8 21.8 21.0 16.4

EV/ EBIDTA(x) ROAE (%) 13.6 32.4 13.6 25.2 13.2 22.6 10.5 24.5

Cadila Healthcare CMP (`) Price Target (`) 735 860

Dhanuka Agritech Financials (`mn) Revenues EBIDTA FY12 5,292 794 FY13P 5,823 819 FY14E 7,744 1,239 FY15E 9,097 1,503 Federal Bank Financials (`mn) FY12 FY13 FY14E FY15E

APAT 571 644 873 1,062

EPS (`) 11.4 12.9 17.4 21.2

P/E (x) 13.6 12.1 8.9 7.3

EV/ EBIDTA(x) ROAE (%) 9.8 29.7 9.5 27.0 6.3 29.3 5.1 28.3

Dhanuka Agritech CMP (`) Price Target (`)

156 212

NII 19534 19747 23293 26522

PAT 7768 8382 8894 10059

ABV (`) 64.4 69.4 77.1 85.4

P/E (x) 8.5 7.9 7.5 6.6

P/ABV (x) 1.2 1.1 1.0 0.9

ROAA (%) 1.4 1.3 1.2 1.1

ROAE (%) 14.4 13.9 13.3 13.5

Federal Bank CMP (`) Price Target (`) 78 105

NMDC Financials (`mn) Revenues EBIDTA FY12 112619 89259 FY13P 107043 73752 FY14E 116667 77531 FY15E 122337 80483 Oil India Financials (`mn) Revenues EBIDTA FY12 98,632 45,798 FY13P 99,476 46,147 FY14E 103,746 45,993 FY15E 126,096 62,524 Unichem Laboratories Financials (`mn) Revenues FY12 8755 FY13E 10808 FY14E 12200 FY15E 13736 Yes Bank Financials (`mn) FY12 FY13 FY14E FY15E

Adj NP 72654 63405 65167 67815

Adj. EPS(`) 18.5 16.0 16.4 17.1

P.E (x) 6.8 7.8 7.6 7.3

EV/EBIDTA (x) ROAE (%) 3.3 33 3.9 24 3.6 22 3.5 21

NMDC CMP (`) Price Target (`) 125 160

Adj NP 34,469 35,893 34,133 44,300

Adj. EPS(`) 57.3 59.7 56.8 73.7

P.E (x) 8.3 7.9 8.3 6.4

EV/EBIDTA (x) ROAE (%) 3.8 20.7 3.8 19.4 3.2 16.9 2.0 19.6

Oil India CMP (`) Price Target (`) 473 590

EBIDTA 1183 1743 2085 2486

PAT 664 1132 1335 1611

EPS (`) 7.4 12.5 14.8 17.8

P/E (x) 25.7 15.1 12.8 10.6

EV/EBIDTA(x) ROAE (%) 14.8 11.1 10.0 16.3 8.4 17.3 7.0 18.5

Unichem Laboratories CMP (`) Price Target (`) 185 214

NII 16156 22188 26808 33947

PAT 9770 13007 14819 18334

ABV 132.0 161.8 196.0 241.4

P/E (x) 13.1 10.0 8.8 7.1

P/ABV (x) 2.8 2.2 1.9 1.5

ROA (%) 1.5 1.5 1.3 1.4

ROAE (%) 23.1 24.8 23.1 23.4

Yes Bank CMP (`) Price Target (`)

Note: CMP as on 27 Nov, 2013
th

356 410

Sunidhi Research |

Cadila Healthcare Ltd

Multiple triggers ahead; Maintain Outperform
Pharmaceuticals Sector Outlook - Positive
CAGR Growth (FY2013-15E)
25.0% 20.0% 15.0% 10.0% 13.6%

19.7% 15.5%
13.1%

Domestic formulations to recover from FY15 Domestic formulations faced hurdles during H1FY14 on account of inventory adjustment due to pricing policy and trade related concerns but growth will be normalized from Q3FY14. Its key segments like GI, Gynaec, respiratory & Derma continues to do well while it needs to focus on CVS & CNS segments. We expect companys domestic formulation segment to get impacted in FY14E but to recover in FY15E and show around 12% CAGR over FY13-15E. Expect strong growth in Wellness segment Company posted modest growth in Wellness segment in HFY14 due to stiff competition in its Nutralite & Everyuth brand. We believe growth will be back on track in FY15 with double digit growth on account of huge promotional spending. Company maintains its leadership position in Sugarfree (92% mkt share) & revamped entire everyuth brand version. We expect Wellness segment to show 12% CAGR over FY13-15E. US business to see traction from FY15 backed by niche pipeline Cadila is the fastest growing company in US which showed 39% CAGR over FY0813. However growth slowed down in FY14 with just 18% growth in H1FY14 due to delay in new approvals & price erosion in existing products. However shortfall in FY14 will be covered in FY15 where we will see traction in business as the company has strong pipeline in US. Management has guided for 20 approvals in US market in 12-15 months. Cumulatively ANDA filings stand at 179 out of which 78 are approved. Total filings include 4 topicals, 5 nasal sprays & 28 injectables (19through patners & 9-owned) out of which 8 injectables (7 through patners & 1 owned) are approved with 6 launches (5 through partners & 1owned). Launch of Divalproex will also benefit the company in coming quarters. Cadila has also started filing for transdermals (4 filed) & expecting approval in FY15 which will be the next long term growth driver for the US market. Total filings will be around 7 for transdermals by FY15. Nesher acquisition will also prove beneficial in the long run as it is in a niche segment of controlled substances. Till date it has launched 3 products & expecting one approval in Q1FY15. We expect revenue CAGR of 21% over FY13-15E. Emerging markets to continue to show momentum Company has filed cumulatively 102 dossiers in Brazil out of which 40 are approved. Company has filed 6 dossiers with regulatory authority in Mexico taking cumulative filings to 20. We expect Cadila to post steady growth in emerging markets like South Africa, Brazil & Asia Pacific. Retain Outperform rating with the target price of `860 At CMP of `735 the stock is trading at 21xFY14E & 16xFY15E EPS. Going ahead, we believe US business to drive growth on back of niche launches. We continue to remain positive on stock & maintain Outperform rating with the target price of `860 at 19XFY15E of `45.3.
maintain capacity utilization in the range of ~ 60-65% & delivering a topline CACR growth of 18.4% over FY13-15E. Financials Revenues EBIDTA APAT EPS P/E EV/EBIDTA ROAE

5.0%
0.0% Revenue EBIDTA PBT Adj. PAT

Recommendation CMP (`) Price Target (`) Upside (%) 52 Week H / L ` BSE 30 Key Data No. of Shares, Mn. Map, ` Mn Mcap,USD Mn @ `60 2 W Avg Qty (BSE+NSE) Mn Share holding, Sept'13 Promoters FII DII Public & Others Performance Stock Return % Relative Return %
15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0%

Outperform 735 860 17% 925/631 20420

205 151917 2532.0 0.1

74.8 5.7 9.0 10.5 1M 10.8 12.2 3M 12.1 -2.4 6M -6.8 -6.3 12 M -10.3 -16.0

-20.0% -25.0%
Dec-12 Oct-13

Cadila healthcare

NIFTY

`mn Initiatives `mn to develop `mn Brand x drive Sales x % `Image To Aggressive Marketing FY11 46207 10167 6934 33.9 the premium 21.9 15.1 paints market, 36.5 In order to develop a better brand image & penetrate emulsion Berger initiated11238 marketing 7685 & advertising to promote it top brands like FY12 Paints has 52627 37.5spends 19.8 13.6 32.4 Silk, Weathercoat. FY13PBison and 63577 11251 6960 34.0 21.8 13.6 25.2 FY14E FY15E 70373 81364 11602 14507 7252 9282 35.4 45.3 21.0 16.4 13.2 10.5 22.6 24.5

Aug-13

Nov-12

Aug-13

Apr-13

Apr-13

Oct-13

May-13

Rashmi Sancheti Sunidhi Research | rashmi.s@sunidhi.com Phone: +91-22-66318633

Mar-13

Nov-13

Jan-13

Jan-13

Feb-13

Sep-13

Jun-13

Jun-13

Jul-13

Source: Company, Sunidhi Research

Cadila Healthcare Ltd

Balance Sheet (` mn) FY11 33.9 40.1 106.0 6.3 18.5 21.9 7.0 15.1 0.8 22.0 15.0 36.5 28.8 0.4 0.4 1.1 11.4 2.0 25.3 21.2 28.1 FY12 37.5 45.2 125.7 7.5 20.0 19.8 5.9 13.6 1.0 21.4 14.6 32.4 20.7 0.6 0.7 2.0 8.9 2.3 13.9 10.5 10.8 FY13P 34.0 43.0 144.0 7.5 22.1 21.8 5.2 13.6 1.0 17.7 10.9 25.2 16.4 0.6 0.8 2.6 7.5 2.6 20.8 0.1 -9.4 FY14E 35.4 44.9 169.0 8.9 25.0 21.0 4.4 13.2 1.2 16.5 10.3 22.6 15.8 0.5 0.5 2.5 7.4 2.7 10.7 3.1 4.2 FY15E 45.3 55.9 201.1 11.3 25.0 16.4 3.7 10.5 1.5 17.8 11.4 24.5 18.5 0.4 0.4 1.9 9.2 2.5 15.6 25.0 28.0 Year End-March Equity Share Capital Reserves & Surplus Total Shareholders Fund Minority Interest Non- current liabilities Long term Borrowings Deferred tax liabilities Other LT liabilities & prov Current Liabilities Short-term borrowings Trade payables Total Liabilities Assets Non- current Assets Fixed assets Non-current investments Long-term loans & adv Other non-current assets Current assets Current investments Trade receivables Inventories Cash & bank balances Short-term loans & adv Other current assets Foreign Curr Monetary Item Translation Diff A/c Total Assets Cash flow Statement Year End-March PBT Depreciation FY11 46207 36040 10167 131 1269 9029 780 8425 1064 7361 251 -176 6934 FY12 52627 41389 11238 532 1579 10191 1090 7942 1130 6812 286 1159 7685 FY13P 63577 52326 11251 370 1847 9774 1262 8087 1317 6899 364 0 425 6960 FY14E 70373 58771 11602 500 1941 10161 1302 8859 1152 7708 455 0 0 7252 FY15E 81364 66857 14507 604 2175 12936 1346 11590 1738 9851 569 0 0 9282 Interest Exp Others CF before W.cap Inc/dec in W.cap Op CF after W.cap Less Taxes Others Net CF From Operations Inc/(dec) in F.A + CWIP (Pur)/sale of Investments others CF from Invst Activities Loan Raised/(repaid) Equity Raised Dividend CF from Fin Activities Net inc /(dec) in cash Op. bal of cash Cl. balance of cash FY11 8425 1269 586 229 10509 -1753 8756 -1525 -405 6826 -4792 -5 137 -4660 -499 -1222 -1721 445 2507 2952 FY12 7942 1579 1702 -72 11151 -4217 6934 -1435 -480 5019 -12273 25 345 -11903 10351 -1753 8598 1714 2952 4666 FY13P 8087 1828 1615 -448 11101 -1996 9105 -2720 -476 5909 -7031 -880 316 -7595 4648 0 -1790 2061 1172 4666 5838 FY14E 8859 1804 1302 0 12102 163 12265 -1152 0 11114 -1132 -57 0 -1189 -1808 0 -2121 -5446 5995 5838 11833 FY15E 11590 1847 1346 0 15111 -1301 13810 -1738 0 12072 -6300 -60 0 -6360 -2588 0 -2715 -5644 408 11833 12241 FY11 1024 20691 21715 669 10252 8318 1127 807 13470 2598 5706 5166 46106 24853 22636 207 2010 21253 0 7652 8119 2952 2062 468 46106 FY12 1024 24712 25736 904 18389 16022 1185 1182 18732 6871 5455 6406 63761 36161 33318 212 2631 27631 30 8863 10905 4666 2746 421 63761 FY13P 1024 28459 29483 1193 18727 16607 1005 1115 24357 12571 6568 6504 73760 41805 37612 212 3981 0 31917 933 9551 12136 5838 2790 669 38 73760 FY14E 1024 33590 34614 1648 19220 17100 1005 1115 26553 11572 7890 8905 82035 41007 36803 223 3981 0 40990 980 10298 13111 11833 4100 669 38 82035 FY15E 1024 40157 41181 2218 18065 15945 1005 1115 29524 11485 8975 5218 90988 45143 40929 234 3981 0 45806 1029 11951 15158 12241 4759 669 38 90988

Valuations Summary Year End-March Per share (`) EPS CEPS BVPS DPS Payout (%) Valuation (x) P/E P/BV EV/EBITDA Dividend Yield (%) Return ratio (%) EBIDTA Margin PAT Margin ROAE ROACE Leverage Ratios (x) Long Term D/E Net Debt/Equity Debt/EBITDA Interest Coverage Current ratio Growth Ratios (%) Income growth EBITDA growth PAT growth Turnover Ratios F.A Turnover x Inventory Days Debtors Days Payable days Income Statement(` mn) Year End-March Revenues Op. Expenses EBITDA Other Income Depreciation EBIT Interest PBT Tax PAT Minority Sh. of Associates Ex. ordinary Adj Pat 1.6 62 49 63 1.3 66 57 49 1.5 66 53 42 1.4 65 51 45 1.5 63 50 46

Source: Company, Sunidhi Research

Sunidhi Research |

Dhanuka Agritech Ltd

Strong growth potential, attractive valuations; Buy Agrochemicals Sector Outlook- Positive
40.0%
35.0% 30.0% 25.0% 25.0% 20.0% 15.0% 10.0% 5.0%

CAGR Growth (FY2013-15E)

35.5% 33.3%

28.4%

0.0%
Revenue EBIDTA PBT APAT

Stock Recommendation CMP (`) Price Target (`) Upside 52 Week H / L ` BSE 30 Key Data No.of Shares, Mn. Mcap, ` Mn Mcap,USD Mn @ `60 2 W Avg Qty (BSE+NSE) Share holding, Sept'13 Promoters FII DII Public & Others Performance Stock Return % Relative Return %
30.0%
25.0% 20.0% 15.0%

Buy 156 212 36% 166/112 20420

Backed by good monsoons across geographies, Dhanuka reported stellar H1FY14 performance with 33.6% YoY jump in top-line, EBITDA margin expansion by 170bps at 16.4% and 41.6% jump in bottom-line at `494mn. Revenue jump was primarily backed by volumes with 5-6% jump in prices. Management has guided for over 2530% jump in revenues for H2FY14E with YoY EBITDA margin expansion (FY13 EBITDA margin at 14.1%). To cater the incremental demand, the company has earmarked `500mn capex at its upcoming facility in Keshwana, Rajasthan. Construction work has already been started and the facility is likely to be commissioned by Q3FY15E. Apart from new products, the company is likely to transfer products from its Gurgaon facility to Keshwana over the next 2-3 years (and monetization of Gurgaon land). We believe that with new product additions the company is likely to exhibit consistently better performance going ahead with margin expansion. We remain optimistic on the growth prospects of the company and hence recommend Buy with a price target of `212. Stellar H1FY14 performance depicts growth story: Dhanuka reported 33.6% YoY jump in H1FY14 revenues at `4.2bn which was backed primarily by volumes. The company has been focusing on high margin products and cost rationalisation which led to 170bps YoY expansion in EBITDA margins at 16.4%. With higher cash flows the company repaid part of its debt in Q2FY14 thus containing its interest outgo. Volume growth, margin expansion and lower interest outgo led to 41.6% YoY jump in H1FY14 bottom-line at `494mn. New facility to commence operations by Q3FY15E: Dhanuka has started work on its new facility in Keshwana, Rajasthan which is likely to be commissioned by Q3FY15E. Company is expected to spend over `500mn on this facility which would be funded entirely through internal accruals. The new facility would enhance companys production capabilities for newer products. Gurgaon facility would eventually be shifted to the new location and the land would be monetized after about 2-3 years. New product introductions to drive future growth: Dhanuka launched 4 new products in FY13 and 3 this year and is expected to launch about 2 products p.a. going ahead. These high margin products are expected to contribute to the overall performance over the next 2-3 years. Out of the existing portfolio, couple of products has the potential to become next Targa Super (over `1.0bn in sales). Scope for margin expansion, attractive valuations: Outlook for H2FY14E remains positive with industry growth pegged at about 25-30% (equally in terms of volume and price increases). To boost sales, the company has roped in Amitabh Bachchan as a brand ambassador, the effect of which would be felt in medium term. New facility at Keshwana would further enhance production capabilities of the company. We like Dhanuka due to its free cash flows, sustainable high return ratios, margin expansion, low debt and progressive introduction of new products. We expect 25.0% and 28.4% CAGR in revenues and earnings respectively over FY13-15E. The stock is available at attractive valuations of 8.9x and 7.3x FY14E and FY15E EPS of `17.4 and `21.2 respectively. We have assigned 10x multiple for the company and recommend Buy with a price target of `212.
Financials Revenues `mn 4,910 5,292 5,823 7,744 9,097 EBIDTA `mn 759 794 819 1,239 1,503 APAT `mn 511 571 644 873 1,062 EPS ` 10.2 11.4 12.9 17.4 21.2 P/E x 15.3 13.6 12.1 8.9 7.3 EV/EBIDTA x 10.4 9.8 9.5 6.3 5.1 ROAE % 38.2 29.7 27.0 29.3 28.3 5

50.0 7801.6 147.2 82349

75.0 8.3 0.8 16.0 1M 12.9 14.3 3M 16.4 1.9 6M 21.5 21.9 12 M 24.7 19.0

10.0%
5.0% 0.0% -5.0%

-10.0%
Feb-13 Apr-13 Dec-12 Mar-13
Aug-13

Sep-13

Jun-13

Jul-13

Nov-12

Oct-13

Jan-13

May-13

Nov-13

Dhanuka Agritech

NIFTY

Rohit Nagraj rohit.n@sunidhi.com Sunidhi Research Phone:| +91-022-61131320

FY11 FY12 FY13 FY14E FY15E

Source: Company, Sunidhi Research

Dhanuka Agritech Ltd

Valuations Summary Year End-March Per share (`) EPS CEPS BVPS DPS Payout (%) Valuation (x) P/E P/BV EV/EBITDA Dividend Yield (%) Return ratio (%) EBIDTA Margin PAT Margin ROAE ROACE Leverage Ratios (x) Long term D/E Net Debt/Equity Interest Coverage Current ratio Growth Ratios (%) Income growth EBITDA growth PAT growth Turnover Ratios F.A Turnover x Inventory Days Debtors Days Payable days Income Statement(` mn) Year End-March Revenues Op. Expenses EBITDA Other Income Depreciation EBIT Interest Prov., Write offs PBT Tax PAT Minority Prior Period Adj Balance Sheet (` mn) Year End-March Equity and Liabilities Share Capital Reserves and Surplus Total Shareholders funds Minority Interest Non-Current Liability Long Term Borrowings Deferred Tax Liabilities (Net) Long Term Liab/ Provisions Current Liabilities Short Term Borrowings Trade Payables Other Current Liabilities Short Term Provisions Grand Total Assets Non Current Assets Fixed Assets Intangible assets Deferred Tax Assets Non-Current Investments Long Term Loans & Advances Other non-current assets Current Assets Current Investments Inventories Trade Receivables Cash and Cash Equivalents Short Term Loans & Advances Other Current Assets Grand Total Cash flow Statement Year End-March PBT Depreciation Interest Exp Others CF before W.cap Inc/dec in W.cap Op CF after W.cap Less Taxes Excp. & Prior Period Adj Net CF From Operations Inc/(dec) in F.A + CWIP Others CF from Invst Activities Loan Raised/(repaid) Equity Raised Dividend Others CF from Fin Activities Net inc /(dec) in cash Op. bal of cash Cl. balance of cash

FY11 10.2 11.2 34.1 2.0 22.8 15.3 4.6 10.4 1.3 15.5 10.4 38.2 36.7 0.1 0.3 11.0 2.5 20.3 30.2 40.7 12.6 156.7 101.0 57.6 FY11 4,910 4,151 759 26 49 737 65 0 673 161 511 0 0

FY12 11.4 12.3 42.9 2.2 22.4 13.6 3.6 9.8 1.4 15.0 10.8 29.7 30.7 0.0 0.1 13.6 2.6 7.8 4.6 11.8 13.5 145.8 102.9 57.0 FY12 5,292 4,498 794 6 45 755 55 0 700 129 571 0 0 0 0 571

FY13 12.9 13.8 52.5 2.8 25.3 12.1 3.0 9.5 1.8 14.1 10.9 27.0 27.9 0.0 0.1 21.9 2.9 10.0 3.1 12.8 9.1 151.0 93.2 42.5 FY13 5,823 5,004 819 69 45 843 35 0 808 163 644 0 0 0 0 644

FY14E 17.4 18.5 66.5 3.0 20.1 8.9 2.3 6.3 1.9 16.0 11.2 29.3 35.6 0.0 0.1 28.6 2.9 33.0 51.3 35.4 9.2 140.0 90.0 45.0 FY14E 7,744 6,505 1,239 34 53 1,221 41 0 1,179 307 873 0 0 0 0 873

FY15E 21.2 22.5 83.6 3.5 19.3 7.3 1.9 5.1 2.2 16.5 11.6 28.3 35.0 0.0 0.1 34.0 3.2 17.5 21.3 21.7 8.9 145.0 90.0 45.0 FY15E 9,097 7,595 1,503 40 65 1,478 42 0 1,436 373 1,062 0 0 0 0 1,062

FY11 100 1,605 1,705 0 174 28 115 402 522 496 136 3,576

FY12 100 2,046 2,146 0 57 26 133 338 543 564 150 3,956

FY13 100 2,528 2,628 0 0 28 133 330 450 531 105 4,205

FY14E 100 3,225 3,325 0 0 28 133 330 628 531 204 5,180

FY15E 100 4,082 4,182 0 0 28 133 330 732 531 234 6,171

388 2 0 0 128 0 0 1,419 1,377 50 212 0 3,576 FY11 673 49 65 (26) 759 (710) 49 150 0 (101) (43) 27 (17) (96) 0 (117) 359 147 29 20 50

390 3 0 0 182 0 153 1,388 1,512 87 242 0 3,956 FY12 700 45 55 (6) 794 (217) 577 131 0 446 (33) 6 (27) (117) 0 (128) (136) (381) 38 50 87

632 6 0 0 180 3 82 1,599 1,507 54 141 0 4,205 FY13 808 45 35 (69) 819 (209) 610 161 0 450 (269) 69 (200) (57) 0 (151) (77) (284) (34) 87 54

830 8 0 0 180 3 82 1,955 1,936 44 141 0 5,180 FY14E 1,179 53 41 (34) 1,239 (507) 732 307 0 426 (253) 34 (218) 0 0 (176) (41) (217) (10) 54 44

1,016 10 0 0 180 3 82 2,360 2,274 104 141 0 6,171 FY15E 1,436 65 42 (40) 1,503 (610) 893 373 0 520 (253) 40 (213) 0 0 (205) (42) (247) 60 44 104

Sh. of Associates 0 Ex. ordinary 0 Adj PAT 511 Source: Company, Sunidhi Research

Sunidhi Research |

Federal Bank Ltd

Decent growth at attractive valuation Banking Sector Outlook - Neutral
18.5% 18.0% 17.5% 17.0% 16.5% 16.0% 15.5% 15.0% 14.5% 14.0% 13.5% Federal Bank Growth CAGR (FY13-15E)

18.1% 15.7%
15.9%

15.1%
Net Profit

With the RBI looking at issuing new bank licenses, competition in the banking industry is expected to heat up. In such a situation the future of old private banks which are smaller in size and geographically concentrated appears uncertain. In our opinion one of two scenarios are likely to play out 1) old private banks especially those with poor profitability and asset quality concerns could become takeover targets for new private sector banks and 2) larger old private banks could scale up operations and re-engineer business processes to bridge the gap between themselves and new private banks. This in turn could lead to a re-rating in the stock price of these banks. Given its large size and proactive management, we believe that Federal bank is amongst the best placed old private sector banks to make the transformation into a new generation bank. NIM likely to improve to 3.4% in FY15 Federal Bank reported calculated NIM of 3.2% for Q2FY14, which improved sequentially by 24 bps. The NIM improvement came on the back of a reduction in bulk business, lower interest reversals and an improvement in the CASA ratio. Also, the YoA too improved by 48 bps qoq. Going ahead we expect Federal Banks NIM to improve further as the bank continues to focus on reducing bulk deposits and improving CASA. Non-interest income to pick up going ahead Federal banks initiatives such as tying up with foreign banks for raising LCs, installing CRM solutions to identify cross selling opportunities, leveraging on NRI clientele to increase other income etc would lead to a pick up in fee based income going ahead. We expect fee based income to grow by a CAGR of 18% from FY13-15. SME, Agri and Retail slippages are in check Federal Bank revamped its processes to improve asset quality. Some of the measures undertaken by the bank included separation between loan sourcing and sanctions, improving loan appraisal systems and focus on credit monitoring and collection. Post the revamp, the bank has managed to keep in check slippages in the SME, Agri and retail segments. However volatile corporate slippages have impacted asset quality. Once the economy stabilizes, corporate slippages are likely to stabilize. Additionally the bank has a strong provision coverage ratio of 72% including technical write offs. This will act as a buffer in case of asset quality deterioration. Adequately capitalized The bank is adequately capitalized with a capital adequacy ratio of 15% almost entirely comprised of Tier 1 capital. As the bank leverages on its capital, return on equity is likely to improve going ahead. Maintain Buy with a revised price target of `105 At the current market price, the bank trades at 1.0x its FY14E ABV and 0.9x its FY15E ABV. We believe the worst in terms of NIMs compression, asset quality and return ratios is behind us and focus on strong and profitable growth, prudent lending and likely improvement in asset quality will drive earnings growth going forward. Thus we maintain our Buy rating on the stock with a price target of `105 (1.3x FY15E adjusted for slippages from restructuring).

NII

Net total income

PPP

Recommendation CMP (`) Price Target (`) Upside 52 Week H / L ` BSE 30 Key Data No.of Shares, Mn. Mcap, ` Bn Mcap,USD Bn @ `60 2 W Avg Qty, (BSE+NSE) Mn Share holding, Sept13 Promoters FII DII Public & Others Performance Stock Return % Relative Return %
30.0% 20.0% 10.0%

Buy 78 105 35% 110/44 20420

171.1 13.3 0.2 1.9

-44.1 20.6 35.3 1M -3.0 -1.6 3M 45.7 31.1 6M -14.7 -14.2 12 M -15.8 -21.6

0.0% -10.0%
-20.0% -30.0% -40.0% -50.0%

-60.0%
Dec-12 Oct-13 Aug-13
Aug-13

Apr-13

Apr-13

Oct-13

Jan-13

May-13

Mar-13

Nov-13

Nov-12

Jan-13

Feb-13

Sep-13

Jun-13

Jun-13

Jul-13

Federal Bank

NIFTY

we have a Buy rating stock with a price target `547 (1.5x ROAA FY14E ABV ROAE adjusted Financials NII on the PAT ABV P/E of P/ABV for slippages from restructuring). `mn `mn X % % ` x

Amit Jain Amit.j@sunidhi.com Phone: +91-022-6113 1355 Kanika Thacker Sunidhi Research | Kanika.t@sunidhi.com Phone: +91-022-66318632

FY11 FY12 FY13 FY14E FY15E

17468 19534 19747 23293 26522

5872.7 7768 8382 8894 10059

287.5 64.4 69.4 77.1 85.4

9.3 8.5 7.9 7.5 6.6

1.1 1.2 1.1 1.0 0.9

1.2 1.4 1.3 1.2 1.1

Source: Company, Sunidhi Research

12.0 14.4 13.9 13.3 13.5 7

Federal Bank Financials (Standalone) Profit & Loss Account (` Mn) Interest Earned Interest expended Net interest income Non-interest income Net total income Operating expenses Pre- provisioning profit (PPP) Provision & Contingency PBT Tax PAT Balance Sheet (` Mn) Liabilities Equity Capital Reserves Networth Deposits Borrowings Other Liabilities & Provisions Total Liabilities Assets Cash & Balances with RBI Balances with Banks & money at Call Investments Advances Fixed Assets Other Assets Total Assets Growth matrix P&L Interest Earned Interest expended Net interest income Non-interest income Net total income Operating expenses Pre- provisioning profit (PPP) Provision & Contingency PBT Tax PAT Asset quality GNPA (%) NNPA (%) Slippage Ratio (%) NPA accrual net of reduction exl w/off (%) PCR (ex tech write offs) (%) Credit Costs (%) Provisioning / avg assets (%) Provisioning / NPA additions (%) Reductions in provisions / NPA reductions (%) Sunidhi Research | 2011 40522.2 23054.5 17467.7 5168.1 22635.8 8361.4 14274.4 5254.4 9020.0 3147.3 5872.7 2011 1,710 49,376 51,086 430,148 18,884 14,446 514,563 29,351 8,133 145,377 319,532 2,898 9,273 514,564 2011 10.3% 1.9% 23.8% -2.7% 16.6% 23.5% 12.9% 29.6% 4.9% -20.3% 26.4% 2011 3.5% 0.6% 3.2% 54% 83.4% 1.7% 1.1% 55.8% 42.1% 2012 55583.9 36049.9 19534.0 5323.4 24857.4 9792.7 15064.7 3369.7 11695.0 3927.1 7767.9 2012 1,710 55,353 57,063 489,371 42,410 17,423 606,268 24,241 11,084 174,025 377,560 3,261 16,096 606,268 2012 37.2% 56.4% 11.8% 3.0% 9.8% 17.1% 5.5% -35.9% 29.7% 24.8% 32.3% 2012 3.3% 0.5% 2.2% 27% 84.7% 0.6% 0.6% 31.9% 20.1% 2013 61675.7 41929.1 19746.6 6644.4 26391.0 11795.4 14595.6 2658.0 11937.6 3555.9 8381.7 2013 1,710 61,936 63,646 576,149 51,870 18,831 710,495 27,425 9,775 211,546 440,967 3,975 16,808 710,495 2013 11.0% 16.3% 1.1% 24.8% 6.2% 20.5% -3.1% -21.1% 2.1% -9.5% 7.9% 2013 3.1% 1.0% 2.1% 30% 69.1% 0.5% 0.4% 23.5% 26.5% 2014E 71097.0 47804.4 23292.5 7126.0 30418.6 13798.4 16620.2 3913.8 12706.4 3811.9 8894.5 2014E 1,710 68,930 70,640 661,451 62,708 20,116 814,914 31,854 24,531 220,495 515,931 4,227 17,875 814,914 2014E 15.3% 14.0% 18.0% 7.2% 15.3% 17.0% 13.9% 47.2% 6.4% 7.2% 6.1% 2014E 2.9% 0.9% 2.0% 23% 68.7% 0.6% 0.5% 32.9% 45.9% 2015E 81162.0 54640.2 26521.8 7826.5 34348.4 15723.4 18624.9 4255.5 14369.5 4310.8 10058.6 2015E 1,710 77,087 78,797 773,897 62,708 22,600 938,002 36,944 12,740 245,214 619,118 4,587 19,399 938,002 2015E 14.2% 14.3% 13.9% 9.8% 12.9% 14.0% 12.1% 8.7% 13.1% 13.1% 13.1% 2015E 2.7% 0.9% 2.0% 69% 66.9% 0.6% 0.5% 31.3% 31.0% 8

Federal Bank Other operating indicators NIM (%) Cost to income (%) Business per branch (` mn) Business per employee (` mn) Profit per branch (` mn) Profit per employee (` mn) CASA per branch (` mn) CASA ratio (%) Other income / Total income CEB / Other income CEB / average advances 2011 4.0% 36.9% 1009.0 87.8 7.9 0.7 15.4 26.5% 22.8% 22.1% 0.4% 2012 3.8% 39.4% 912.6 79.4 8.2 0.7 14.2 27.5% 21.4% 47.3% 0.7% 2013 3.2% 44.7% 922.1 80.2 7.6 0.7 14.1 26.9% 25.2% 45.9% 0.7% 2014E 3.3% 45.4% 1003.7 87.3 7.6 0.7 17.2 30.4% 23.4% 50.4% 0.8% 2015E 3.2% 45.8% 1094.3 95.2 7.9 0.7 18.9 31.1% 22.8% 54.4% 0.8%

Capital Adequacy ratios CAR (%) Tier 1 (%) Tier 2 (%) Leverage (x) Risk weighted assets / Total Assets (%)

2011 16.8% 15.6% 1.2% 10.1 63.2%

2012 16.6% 15.9% 0.8% 10.6 58.3%

2013 14.7% 14.1% 0.6% 11.2 61.3%

2014E 15.0% 14.4% 0.6% 11.5 58.3%

2015E 14.6% 14.0% 0.6% 11.9 58.3%

Valuation Table Net profit (` mn) Shares in issue (mn) EPS (`) EPS growth (%) PE (x) P/PPP (x) Book value (`/share) P/BV (x) Adj book value (`/share) P/ABV (x) ROAA (%) ROAE (%) ROAE (adj for reval reserve) (%) Dividend Yield (%)

2011 5872.7 855.2 6.9 26.4% 11.3 4.6 59.7 1.3 57.5 1.3 1.2% 12.0% 12.0% 2.2%

2012 7767.9 855.2 9.1 32.3% 8.5 4.4 66.7 1.2 64.4 1.2 1.4% 14.4% 14.4% 2.3%

2013 8381.7 855.2 9.8 7.9% 7.9 4.5 74.4 1.0 69.4 1.1 1.3% 13.9% 13.9% 2.3%

2014E 8894.5 855.2 10.4 6.1% 7.5 4.0 82.6 0.9 77.1 1.0 1.2% 13.2% 13.3% 2.5%

2015E 10058.6 855.2 11.8 13.1% 6.6 3.6 92.1 0.8 85.4 0.9 1.1% 13.5% 13.5% 2.5%

Du pont Decomposition Yield on Assets Less: Cost of Assets Net Interest Income Other Income Less: Operating Exp Less: Provisions Less: Tax ROAA Leverage ROAE
Source: Company, Sunidhi Research

2011 8.5% 4.8% 3.7% 1.1% 1.8% 1.1% 0.7% 1.2% 9.7 12.0%

2012 9.9% 6.4% 3.5% 0.9% 1.7% 0.6% 0.7% 1.4% 10.4 14.4%

2013 9.4% 6.4% 3.0% 1.0% 1.8% 0.4% 0.5% 1.3% 10.9 13.9%

2014E 9.3% 6.3% 3.1% 0.9% 1.8% 0.5% 0.5% 1.2% 11.4 13.2%

2015E 9.3% 6.2% 3.0% 0.9% 1.8% 0.5% 0.5% 1.1% 11.7 13.5%

Sunidhi Research |

NMDC Ltd
Strong balance sheet at compelling valuations Metals & Mining-Ore Sector Outlook - Positive
CAGR (FY13-15E)
8.0%
7.0% 6.9%

6.0%
5.0% 4.0%

4.5% 3.4%
2.7%

After subdued production growth in the past (CAGR of -1.8% in FY08-13), we expect iron ore production to perk up going forward on the back of impressive capacity expansion and relatively firm domestic demand. Going forward, we anticipate production and sales will grow at a CAGR of 5% and 6.5%, respectively, in FY13-15E. We believe that iron ore supply is getting tighter in India, which will help NMDC in maintaining strong margins. We believe, iron ore sales volume pick-up, inexpensive valuations keep the risk-reward trade-off favorable for NMDC. Pricing concerns remain but would fade eventually The pricing concerns have somewhat eased over last few months and the company has been able to take minor price hike recently. The favorable exchange rate has prompted several Odhisa players to look at export market as it yields better realization than domestic sales. Though pricing uncertainty still persists due to pricing gap between Odhisa players and NMDC but we believe the same would fade away BUY eventually once clarity emerges over illegal mining in Odhisa and will prompt genuine 102 players to quote market rates. Improving global demand scenario also augurs well for the sector and 150 the company per say.
17%

3.0%
2.0%

1.0%
0.0% Revenue EBITDA PBT PAT

Recommendation CMP (`) Price Target (`) Upside (%) 52 Week H / L ` BSE 30 Key Data No.of Shares, Mn. Mcap, ` Bn Mcap,USD Bn @ `60 2 W Avg Qty (BSE+NSE) Mn Share holding, Sept'13 Promoters FII DII Public & Others Performance Stock Return % Relative Return %
20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% -50.0%
Dec-12

Neutral 125 160 28% 171/93 20420

3964.7 495.6 8.3 2.3

Capacity expansion 201/93 on track to aim a gain in market share The company has undertaken a capacity addition programme wherein it is on track to 18798 exit FY15 with a mining capacity of 48 MT from 32 MT in FY13. The plan includes increasing the existing capacity of Bacheli Complex in Chhattisgarh from 15 MT to 17 MT, a new mining block in Kirandul complex, Chhattisgarh (capacity :7 MT) and a new mining block in Kumaraswamy, Karnataka (capacity :7 MT). It has also been working on a plan to augment its excavation capacity by increasing the rake loading capacity. NMDC is also mulling over a dedicated slurry pipeline with its major customers that will provide further fillip to its sales volume. Other ventures like pellet plant in offing The company is also setting up a pellet plant with a capacity of 1.2 MT in Donimalai, Karnataka. We believe pellet sales will drive incremental EBITDA for the company on the back of optimal and captive raw material feed. The company proposes to use only 40% of its fines produce as the raw material feed for its pellet plant and intends to use the idle slimes lying at its mining complex in Karnataka as the remainder of raw material feed. Valuation and Recommendation We maintain our positive stance on the company and continue to believe its dominant position in iron supply especially in restricted iron ore supply market. NMDC has robust balance sheet with a healthy liquidity position (cash as of FY13 end at 210bn). We have valued the stock at 5x FY15E EV/EBITDA thus arriving at a target price of 160. Possession of superior quality iron ore reserves, the companys position in the lower quartile of the iron ore cost curve & dominance in domestic market reiterate our faith on the company. Financials Revenues 113689 112619 107043 116667 122337 EBIDTA 86462 89259 73752 77531 80483 Adj NP 64992 72654 63405 65167 67815 Adj. EPS ` 16.4 18.5 16.0 16.4 17.1 P/E x EV/EBIDTA x ROE %
39 33 24 22 10 21

80.0 5.3 10.7 4.0 1M -7.4 -6.0 3M 11.0 -3.6 6M 6.0 6.4 12 M -21.7 -27.4

Oct-13

Aug-13

Aug-13

Apr-13

Apr-13

Oct-13

Jan-13

Jan-13

May-13

Mar-13

Nov-13

Nov-12

Feb-13

Sep-13

Jun-13

Jun-13

Jul-13

` mn FY11 FY12 FY13P FY14E FY15E

NMDC

NIFTY

Chintan J.Mehta Chintan.m@sunidhi.com Phone: Sunidhi Research | +91-022-66106838

7.6 6.8 7.8 7.6 7.3

3.7 3.3 3.9 3.6 3.5

Source: Company, Sunidhi Research

NMDC Ltd

Valuations Summary Year End-March Per share (`) EPS CEPS BVPS DPS Payout (%) Valuation (x) P/E P/BV EV/EBITDA Dividend Yield (%) Return ratio (%) EBIDTA Margin PAT Margin ROAE ROACE Leverage Ratios (x) Total D/E Net Debt/Equity Interest Coverage Current ratio Growth Ratios (%) Income growth EBITDA growth PAT growth Turnover Ratios F.A Turnover x Inventory Days Debtors Days Income Statement (` mn) Year End-March Revenues Op. Expenses EBITDA Other Income Depreciation EBIT Interest PBT Tax PAT FY11 FY12 FY13P FY14E FY15E FY11 FY12 FY13P FY14E FY15E

Balance Sheet (` mn) Year End-March Sources of Funds Equity Share Capital Reserves & Surplus Net Worth Loan Funds Deferred Tax Liability Capital Employed Application of Funds Gross Block Less: Depreciation Net Block WIP Net Fixed Assets Investments Current Assets Debtors Inventory Cash Others Current Liabilities Creditors Provisions Net Current Asset Misc Expenses Total Cash flow Statement FY11 FY12 FY13P FY14E FY15E

16.4 48.4 3.3 20% 7.6 2.6 3.7 3% 76% 57% 39% 39% 0.0 -0.9 10.8 82% 95% 89% 10.3 11.4 13.3

18.5 61.5 4.5 24% 6.8 2.0 3.3 4% 79% 65% 33% 33% 0.0 -0.8 11.1 -1% 3% 12% 9.5 12.6 20.2

16.0 69.4 7.0 44% 7.8 1.8 3.9 6% 69% 59% 24% 24% 0.0 -0.8 8.0 -5% -17% -13% 8.5 17.5 29.6

16.4 77.7 7 43% 7.6 1.6 3.6 6% 66% 56% 22% 22% 0.0 -0.7 5.8 9% 5% 3% 4.6 19.0 30.2

17.1 85.4 8 47% 7.3 1.5 3.5 6% 66% 55% 21% 21% 0.0 -0.6 5.1 5% 4% 4% 4.7 20.0 32.3

3965 188181 192145 0 1029 193174 22728 11736 10993 6772 17764 1357 191716 4854
4154

3965 240099 244064 0 1001 245065 23882 11994 11888 14942 26830 2478 237111 7370
4589

3965 271145 275110 0 1045 276155 25820 13173 12647 32361 45008 2496 261385 10822
6375

3965 303980 307944 0 1045 308989 40530 14997 25532 57651 83183 2496 269936 11022
6948

3965 334843 338808 0 1045 339853 43530 17309 26220 99536 125757 2496 262932 11775
7285

172281 10427 17807 4037 13770 173908 145 193174

FY11

202646 22506 21420 1658 19762 215691 66 245065

FY12

210258 33931 32788 1608 31181 228597 54 276154

FY13P

218036 33931 46680 1718 44962 223256 54 308989

FY14E

209940 33931 51386 1801 49585 211546 54 339852

FY15E

Year End-March PBT Depreciation Interest Exp Others CF before W.cap Inc/dec in W.cap Op CF after W.cap Less Taxes Net CF From Operations Inc/(dec) in F.A + CWIP (Pur)/sale of Investments others CF from Invst Activities Loan Raised/(repaid) Dividend CF from Fin Activities Net inc /(dec) in cash Op. bal of cash Cl. balance of cash

97272 1255
-11075

107595 1878
-19643

94624 1446
-22029

98737 1825
-20731

99727 2312
-18964

-392 87060 -5249 81811 -33195 48616 -5163 -869 11090 5057 0
-9942

45 89875 -8908 80967 -35021 45946 -15088 -1042 19658 3528 0

-19109

-36 74023 -2312 71711 -41000 30711 -19774 -19 22010 2216 0
-23094

13782 91692 -662 91029 -33571 57458 -40000 0 22652 -17348 0

-23094

4622 85492 -1008 84485 -31913 52572 -44885 0 21169 -23717 0

-23094

113689 27227 86462 12057 1215 85247 0 97272 32151 64992

112619 23360 89259 20165 1302 87958 15 107595 34941 72654

107043 33291 73752 22389 1385 72367 132 94624 31219 63405

116667 39137 77531 23031 1825 75706 0 98737 33571 65167

122337 41854 80483 21556 2312 78171 0 99727 31913 67815

Source: Company, Sunidhi Research

-9942 43731 128549 172281

-19109 30365 172281 202646

-25343 7612 202646 210258

-32332 7778 210258 218036

-36951 -8096 218036 209940

Sunidhi Research |

11

Oil India Ltd

FY15E a game changer, Outperform Oil and Gas Sector Outlook - Neutral
CAGR Groth (FY2013-15E)
18.0% 16.4% 12.7% 11.1%

16.0%
14.0% 12.6%

12.0%
10.0% 8.0%

6.0%
4.0% 2.0%

0.0%
Revenue EBIDTA PBT APAT

We believe that FY15E to be a game changer year for Oil India (OIL) with over 30% jump in YoY earnings benefitted from higher natural gas prices and volume growth expected in both crude oil and natural gas. This substantial earnings growth is expected even after considering 4% YoY jump in subsidy sharing at `88.9bn. We believe the production of oil and gas at its Assam blocks to return to normalcy which has been affected due to Bandhs and Blockades since past several quarters. The company is making progress in its international ventures with production rampup in Carabobo, Venezuela, discovery in Gabon and ongoing production in its shale gas asset in the US. We believe these investments in overseas projects would yield value in future. With cash pile of over `125bn OIL is well placed to propel inorganic growth through acquisitions of producing/non-producing assets overseas. Available at attractive valuations and with multiple triggers in FY15E, we remain optimistic on the companys earnings growth and hence recommend Outperform with a price target of `590. Natural gas price hike an earnings kicker for FY15E: The government has decided to almost double the APM natural gas prices from current US$4.2/mmbtu (to about US$8.4/mmbtu) which would benefit earnings of the company. However, we remain skeptical on the entire benefit of natural gas price hike to OIL and hence assumed US$6.8/mmbtu realisations for OIL in FY15E. US$1.0/mmbtu increase/ decrease in natural gas realisations would impact OILs earnings by about 7%. Good domestic and international asset base with consistently high reserve replacement ratio (RRR): OIL boasts of 62 domestic and 14 overseas oil and gas blocks. Although the company has increased its natural gas production capacity, currently production is depressed due to lower off take from consumers. Additionally, the crude and natural gas production has been affected by Bandhs and Blockades in Assam. However, the situation is improving which would benefit FY15E production performance. The company has maintained consistently higher RRR over the past 5+ years with FY13 RRR at 1.6x. Overseas assets to contribute going ahead: Currently the overseas assets are largely in investment phases which shall start contributing to the overall performance going ahead. Carabobo, Venezuela is procuring oil albeit at lower rates along with marginal gas production from the US shale gas asset. Although, the company has been scouting for overseas producing assets since a long time (and with a war chest of over `125bn) a sizable acquisition in medium term cannot be ruled out. FY15E game changer for OIL: OILs operational performance has been affected by external factors i.e. unrest in Assam which should normalize in FY15E thus benefitting the overall production. Companys exploration success has been consistent over the past few years with 1.0x+ RRR. OILs overseas ventures are expected to add value going ahead with ramp up in Carabobo, Venezuela production, successful discovery in Gabon and ongoing production in the US shale gas asset. With expected natural gas price hike from FY15E onwards, OILs earnings are likely to jump substantially. We believe the stock is available at attractive valuations of 8.3x and 6.4x FY14E EPS of `56.8 and FY15E EPS of `73.7. We have valued OIL at 8.0x and have arrived at a price target of `590. Maintain Outperform. Financials Revenues 83,206 98,632 99,476 103,746 126,096 EBIDTA 42,721 45,798 46,147 45,993 62,524 Adj NP 28,877 34,469 35,893 34,133 44,300 Adj. EPS ` 48.0 57.3 59.7 56.8 73.7 P.E x 9.9 8.3 7.9 8.3 6.4 EV/EBIDTA x 4.1 3.8 3.8 3.2 2.0 ROE % 19.7 20.7 19.4 16.9 19.6 12

Recommendation CMP (`) Price Target (`) Upside (%) 52 Week H / L ` BSE 30 Key Data No.of Shares, Mn. Mcap, ` Bn Mcap,USD Bn @ `60 2 W Avg Qty (BSE+NSE) Mn Share holding, Sept'13 Promoters FII DII Public & Others Performance Stock Return % Relative Return %
35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0%
Dec-12

Outperform 473 590 25% 630/415 20420

601.1 284334.5 4738.9 0.5

68.4 10.2 6.6 14.8 1M 4.1 5.5 3M 6.8 -7.8 6M -19.6 -19.1 12 M 3.2 -2.6

Aug-13

Nov-12

Apr-13

Oct-13

May-13

Mar-13

Nov-13

Jan-13

Feb-13

Sep-13

Jun-13

Jul-13

` mn FY11 FY12 FY13P FY14E FY15E

Oil India

NIFTY

Rohit Nagraj rohit.n@sunidhi.com Phone: +91-022-61131320

Sunidhi Research |

Source: Company, Sunidhi Research

Oil India Ltd

Valuations Summary Year End-March Per share (`) EPS CEPS BVPS DPS Payout (%) Valuation (x) P/E P/BV EV/EBITDA Dividend Yield (%) Return ratio (%) EBIDTA Margin PAT Margin ROAE ROACE Leverage Ratios (x) Long term D/E Net Debt/Equity Interest Coverage Current ratio Growth Ratios (%) Income growth EBITDA growth PAT growth Turnover Ratios F.A Turnover x Inventory Days Debtors Days Payable days Year End-March Revenues Op. Expenses EBITDA Other Income Depreciation EBIT Interest Prov., Write offs PBT Tax FY11 48.0 139.9 259.5 15.0 31.2 9.9 1.8 4.1 3.2 51.3 34.7 19.7 21.2 0.0 (0.7) 262.9 4.4 5.0 14.5 10.6 1.5 21.6 40.9 15.1 FY11 83,206 40,485 42,721 8,739 8,197 43,263 131 0 43,132 14,255 FY12 57.3 164.6 294.8 19.0 33.1 8.3 1.6 3.8 4.0 46.4 34.9 20.7 20.2 0.0 (0.6) 394.3 4.2 18.5 7.2 19.4 1.8 19.5 38.9 12.8 FY12 98,632 52,834 45,798 14,167 8,852 51,112 94 0 51,019 16,549 FY13 59.7 69.1 319.6 30.0 50.2 7.9 1.5 3.8 6.3 46.4 36.1 19.4 18.7 0.0 (0.6) 1,452.7 4.8 0.9 0.8 4.1 1.5 23.3 33.1 10.7 FY13 99,476 53,329 46,147 15,088 8,376 52,858 26 0 52,832 16,939 35,893 0 0 0 0 35,893 FY14E 56.8 66.7 353.0 20.0 35.2 8.3 1.3 3.2 4.2 44.3 32.9 16.9 15.8 0.0 (0.6) 26.8 4.6 4.3 (0.3) (4.9) 1.4 22.0 25.3 11.2 FY14E 103,746 57,752 45,993 16,219 9,120 53,092 1,375 0 51,717 17,584 34,133 0 0 0 0 34,133 FY15E 73.7 84.3 400.3 22.5 30.5 6.4 1.2 2.0 4.8 49.6 35.1 19.6 19.9 0.0 (0.7) 23.9 4.7 21.5 35.9 29.8 1.5 22.0 25.3 9.9 FY15E 126,096 63,573 62,524 16,819 10,021 69,322 2,200 0 67,122 22,821 44,300 0 0 0 0 44,300 Balance Sheet (` mn) Year End-March Equity and Liabilities Share Capital Reserves and Surplus Total Shareholders funds Minority Interest Non-Current Liability Long Term Borrowings Deferred Tax Liabilities (Net) Long Term Liab./ Provisions Current Liabilities Short Term Borrowings Trade Payables Other Current Liabilities Short Term Provisions Grand Total Assets Non Current Assets Fixed Assets Net producing properties Expl./ dev. wells-in-prog. (Net) Deferred Tax Assets Non-Current Investments Long Term Loans & Adv. Other non-current assets Current Assets Current Investments Inventories Trade Receivables Cash and Cash Equivalents Short Term Loans & Adv. Other Current Assets Grand Total Cash flow Statement Year End-March PBT Depreciation Interest Exp Others CF before W.cap Inc/dec. in W.cap Op CF after W.cap Less Taxes Exceptional & Prior Period Adj. Net CF From Operations Inc/(dec.) in F.A + CWIP others CF from Invst. Activities Loan Raised/(repaid) Equity Raised Dividend Others CF from Fin Activities Net inc /(dec.) in cash Op. bal of cash Cl. balance of cash FY11 2,405 153,614 156,019 0 88 11,491 3,251 10,055 3,435 18,049 9,924 212,311 FY12 2,405 174,809 177,213 0 0 10,767 4,038 101 3,469 19,682 11,543 226,813 FY13 6,011 186,103 192,115 0 0 12,186 4,481 10,578 2,925 14,161 15,363 251,809 FY14E FY15E

6,011 6,011 206,170 234,645 212,181 240,657 0 0 0 12,186 4,481 0 12,186 4,481

27,500 22,000 3,175 3,425 14,661 15,161 24,756 26,764 298,941 324,674

13,323 32,586 8,757 0 6,304 3,595 194 2,600 5,004 9,322 117,675 8,203 4,751 212,311 FY15E 43,132 4,790 131 (8,739) 39,314 16,540 55,855 12,973 0 42,882 (9,889) 11,029 1,140 9,768 0 (10,497) (11,047) (11,776) 32,245 85,429 117,675

15,690 34,352 6,209 0 7,831 3,110 137 18,311 5,333 10,518 109,355 8,949 7,019 226,813 FY15E 51,019 5,142 94 (14,167) 42,088 746 42,833 17,273 0 25,561 (3,307) 12,640 9,333 (10,042) 0 (13,275) (19,897) (43,214) (8,320) 117,675 109,355

21,316 35,843 10,480 0 8,579 5,269 1,039 9,992 6,443 9,027 121,329 13,587 8,905 251,809 FY15E 52,832 5,671 26 (15,088) 43,442 (5,438) 38,005 15,520 0 22,485 (12,753) 14,339 1,587 10,477 0 (20,992) (1,582) (12,097) 11,975 109,355 121,329

23,441 35,534 14,723 0 8,579 5,269 1,039

25,391 35,250 21,216 0 8,579 5,269 1,039

9,992 9,992 6,340 7,706 7,205 8,757 164,328 178,985 13,587 13,587 8,905 8,905 298,941 324,674 FY15E FY15E

Income Statement(` mn)

51,717 67,122 6,041 6,441 1,375 2,200 (16,219) (16,819) 42,914 58,944 12,069 54,983 17,584 0 37,399 (12,100) 16,219 4,119 16,922 0 (14,067) (1,375) 1,480 42,998 121,329 164,328 (160) 58,784 22,821 0 35,963 (14,600) 16,819 2,219 (5,500) 0 (15,825) (2,200) (23,525) 14,657 164,328 178,985

PAT 28,877 34,469 Minority 0 0 Prior Period Adj. 0 0 Sh. of Associates 0 0 Ex. ordinary 0 0 Adj. PAT 28,877 34,469 Source: Company, Sunidhi Research

Sunidhi Research |

13

Unichem Labs
Poised for strong growth; Maintain Buy
Pharmaceuticals Sector Outlook - Positive
CAGR Growth (FY13-15E)
25.0% 20.0% 15.0% 10.0% 19.4% 19.7% 19.3%

12.7%

5.0%
0.0% Revenue EBIDTA PBT APAT

Stock Recommendation
CMP (`) Price Target (`) Upside 52 Week H / L ` BSE 30 Key Data No.of Shares, Mn. Mcap, ` Mn Mcap,USD Mn @ `60 2 W Avg Qty (BSE+NSE) Mn Share holding, Sept'13 Promoters FII DII Public & Others Performance Stock Return % Relative Return %
15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0%

Buy
185 214 16% 217/138 20420

Domestic growth to be back on track backed by focused promotional strategy Domestic formulation business faced hurdles in the market during H1FY14 mainly on account of inventory adjustment in domestic market due to implementation of drug pricing policy, trade margin related issues & lower industry growth. After implementation of NLEM, domestic portfolio under coverage will be around 20%. Pricing policy impact would be around `200mn. We believe domestic business growth will be back on track gradually as the company has already strengthened its field force domestically is now looking to improve its productivity (currently 2.9mn). Among top 10 brands Losar, Ampoxin Tg-Tor & Trika are continuously struggling in market which the management attributes to matured basket. Company is trying to improve growth in its matured brands through focused promotional strategy on general physicians & also focusing on other high growth brands like Unienzyme & Telsar group to improve its overall domestic growth. Company is also planning to introduce 6 new products in acute segment & 9 products in chronic segment. We expect growth to remain flat in FY14 impacted by drug pricing policy but will be back to double digit growth in FY15 through increased sales force & marketing strategies taken by the management. Contract manufacturing business slowed down but expect momentum in US & EMs Export formulation business is impacted due to pressures in contract manufacturing business (contri-65%) on account of price erosion seen in existing products supplied by the company. However Emerging markets & US markets will continue to do well and show around 30-35% growth. Companys total ANDA filings in US stands at 29 and received 15 approvals out of which 10 products have been commercialized till date. Management has identified 10 molecules to be filed in FY14-15 mainly from CNS, CVS & pain management & 10-15 oral prefilled syringes to be filed beyond FY15. Company sold its Indore SEZ unit to Mylan for `1600mn & proceeds will be used for capex plan at its formulation, API plants & pilot plant in bioscience segment. Company has excess capacity due to delay in ANDA approvals & foresees a long gestation period for SEZ project to effectively contribute to its topline & profits. On the contrary company intends to expand its Goa facility as it is already approved which could be done at a lower cost & lower gestation period which in turn will improve margins. Expect operating margin to improve by 200bps & return ratios to remain healthy Despite single digit revenue growth in past years, company was able to deliver 18% plus margins largely driven by change in product mix in domestic market & high focus on chronic segment. Revenues & margins impacted in FY12 on account of domestic restructuring which got over in FY13 & the company started reaping the benefits from it as a result company delivered 23% revenue growth & 16% margins in FY13. We expect revenues to show 13% CAGR over FY13-15E and operating margins to increase by 200bps from FY13 to FY15E as now the company is focusing more on C&F agents, sales productivity,& promotional strategies undertaken by management. Also, the lower growth in exports will be compensated by the domestic business. Turnaround in its subsidiary, Niche Generics which started contributing profits in FY13 will also help margins to expand. Unichem had strong financial ratios in the past which got impacted at the end of FY12 due to restructuring in domestic business. However, return ratios is back on track in FY13 post restructuring and will improve in FY14E & FY15E through focus on domestic business, US & EMs. Retain Buy rating with the target price of `214 We believe domestic growth to be impacted in FY14 on back of NLEM implementation and trade margin issues but will be back on track in FY15 on account of improved productivity through increased field force & introduction of new products. Overall Margins are expected to improve by 200bps in FY15E from FY13 on back of positive turnaround in UK subsidiary and focus on US & emerging markets. We maintain our Buy rating with the target price of `214 based on 12xFY15E EPS of `17.8. Financials Revenues `mn EBIDTA `mn PAT `mn 940 664 1132 1335 1611 EPS ` 10.4 7.4 12.5 14.8 17.8 P/E x 18.1 25.7 15.1 12.8 10.6 EV/EBIDTA x 11.6 14.8 10.0 8.4 7.0 ROAE % 16.1 11.1 16.3 17.3 14 18.5

90.5 17099 285 0.1

50.2 3.7 10.8 35.3 1M 8.9 10.3 3M 25.1 10.6 6M 9.4 9.8 12 M 3.2 -2.5

-30.0%
Dec-12 Oct-12 Aug-13 Nov-12
Aug-13

Apr-13

Apr-13

Oct-13

May-13

Mar-13

Nov-13

Nov-12

Nov-13

Jan-13

Feb-13

Feb-13

Sep-13

Jun-13

Jun-13

Jul-13

Unichem Lab

NIFTY

Sunidhi Research | rashmi.s@sunidhi.com

Rashmi Sancheti

Phone: +91-22-66318633

FY11 8240 1501 FY12 8755 1183 FY13 10808 1743 FY14E 12200 2085 FY15E 13736 2486 Source: Company, Sunidhi Research

Unichem Labs
Valuations Summary (Conso.) Year End-March Per share (`) EPS CEPS BVPS DPS Payout (%) Valuation (x) P/E P/BV EV/EBITDA Dividend Yield (%) Return ratio (%) EBIDTA Margin PAT Margin ROAE ROACE Leverage Ratios (x) Long Term D/E Net Debt/Equity Debt/EBITDA Interest Coverage Current ratio Growth Ratios (%) Income growth EBITDA growth PAT growth Turnover Ratios F.A Turnover x Inventory Days Debtors Days Payable days Income Statement(` mn) Year End-March Revenues Op. Expenses EBITDA Other Income Depreciation EBIT Interest PBT Tax PAT Minority Sh. of Associates Ex. ordinary Adj Pat
Source: Company, Sunidhi Research

Balance Sheet (` mn) FY11 10.4 13.7 68.5 4.0 38.4 18.1 2.8 11.6 2.1 18.2 11.4 16.1 18.8 0.1 0.1 0.3 129.3 2.4 10.3 -13.3 -25.0 1.5 57.5 78.0 65.4 FY12 7.4 10.7 73.1 3.0 40.9 25.7 2.6 14.8 1.6 13.5 7.6 11.1 12.3 0.1 0.1 0.6 29.4 2.0 6.2 -21.1 -29.4 1.5 64.3 76.8 60.3 FY13 12.5 16.8 80.4 4.5 36.0 15.1 2.4 10.0 2.4 16.1 10.5 16.3 18.6 0.1 0.0 0.3 41.3 1.8 23.5 47.3 70.6 1.6 50.8 65.9 59.8 FY14E 14.8 19.6 89.9 4.5 30.5 12.8 2.1 8.4 2.4 17.1 10.9 17.3 20.3 0.1 0.0 0.3 46.0 2.0 12.9 19.7 17.9 1.5 46.4 66.0 58.3 FY15E 17.8 23.2 102.4 4.5 25.3 10.6 1.8 7.0 2.4 18.1 11.7 18.5 21.8 0.1 0.0 0.2 51.3 2.1 12.6 19.2 20.6 1.6 49.7 66.1 54.5 Year End-March Equity Share Capital Reserves & Surplus Total Shareholders Fund Minority Interest Non- current liabilties Long term Borrowings Deferred tax liabilities Other LT liabilties & prov Current Liabilities Short-term borrowings Trade payables Total Liabilities Assets Non- current Assets Fixed assets Non-current investments Long-term loans & adv Other non-current assets Current assets Current investments Trade receivables Inventories Cash & bank balances Short-term loans & adv Other current assets Total Assets Cash flow Statement Year End-March PBT Depreciation Interest Exp FY11 8240 6740 1501 59 292 1267 9 1268 316 952 2 0 -10 940 FY12 8755 7571 1183 42 304 922 30 940 228 713 0 0 -49 664 FY13 10808 9065 1743 134 383 1494 33 1461 328 1132 0 0 0 1132 FY14E 12200 10115 2085 125 440 1770 36 1734 399 1335 0 0 0 1335 FY15E 13736 11251 2486 130 484 2131 39 2092 481 1611 0 0 0 1611 Others CF before W.cap Inc/dec in W.cap Op CF after W.cap Less Taxes Net CF From Operations Inc/(dec) in F.A + CWIP (Pur)/sale of Investments others CF from Invst Activities Loan Raised/(repaid) Equity Raised Dividend CF from Fin Activities Net inc /(dec) in cash Op. bal of cash Cl. balance of cash FY11 1267 292 24 -41 1542 -548 994 -308 686 -895 404 15 -476 119 3 -417 -295 -85 236 152 FY12 940 304 41 49 1334 135 1469 -228 1241 -1114 79 16 -1018 145 4 -292 -142 81 152 232 FY13 1461 383 24 55 1932 131 2063 -350 1712 -972 -217 4 -1184 -203 6 -316 -514 14 232 246 FY14E 1734 440 41 0 2210 -532 1678 -399 1280 -810 0 0 -810 -9 0 -476 -485 -16 184 231 FY15E 2092 484 33 0 2616 -594 2021 -481 1540 -1103 0 0 -1103 11 0 -476 -465 -28 236 202 4565 4402 0 163 0 4248 213 1851 1503 152 500 30 8813 5472 5212 0 260 0 4393 145 1833 1580 232 560 44 9866 5941 5800 57 84 0 4784 331 2070 1430 246 667 41 10725 6310 6169 57 84 0 5382 331 2340 1671 231 769 41 11692 6929 6788 57 84 0 6143 331 2634 2070 202 866 41 13072 FY11 180 5997 6177 0 874 417 378 79 1761 90 1100 571 8813 FY12 181 6425 6606 0 927 440 385 102 2333 254 1403 676 9866 FY13 181 7090 7271 0 943 461 390 92 2511 62 1566 571 10725 FY14E 181 7949 8130 0 932 450 390 92 2631 100 1663 676 11692 FY15E 181 9083 9264 0 962 480 390 92 2846 120 1695 883 13072

Sunidhi Research |

15

Yes Bank
Growth concerns overdone Banking Sector Outlook - Neutral
Yes Bank CAGR (FY13-15E)

30% 25% 20% 15% 10% 5% 0%

26%

23%

21%

19%

NII

Net Total Income

PPP

PAT

Recommendation CMP (`) Price Target (`) Upside (%) 52 Week H / L ` BSE 30 Key Data No.of Shares, Mn. Mcap, ` bn Mcap,USD bn @ `60 2 W Avg Qty, (BSE+NSE) Mn Share holding, Sept'13 Promoters FII DII Public & Others Performance Stock Return % Relative Return %
30.0% 20.0%

Hold 356 410 15% 547/216 20420

Yes bank is one of the newest private sector banks in the country. Set up in 2004 by Dr Rana Kapoor, the bank rapidly expanded its balance sheet. The bank today, has a total asset base of `1008 bn and a branch network of 475 branches. Despite the disadvantages of being a new bank, such as a small branch network and low CASA base, Yes Bank has consistently managed to maintain its ROA within a narrow band across business cycles. Stable NIM though slowdown in business and tight liquidity Yes Banks NIM was stable around 2.9% in H1FY14 despite slowdown in business and tight liquidity. This is due to the consistent improvement in the banks CASA ratio on deregulation of savings deposit rates. Strong traction is visible in CASA deposit which grew at 52.5% yoy resulting in CASA ratio improving to 20.4% in Q2FY14 (20.2% in Q1FY14). Additionally the bank has a high proportion of floating rate advances at ~ 90%. As a result, advances re-price almost immediately while deposits re-price as and when they reach maturity which will protect its NIM. Management has also clarified that bulk deposits do not pose significant threat of repricing as 86% of its deposits are contributed by less than 0.2% of total deposit base individually and cost pressures would be mitigated through judicious monitoring and lending rate hikes. Asset quality appears comfortable Yes bank has the best asset quality amongst its peers with %GNPAs at 0.28% and NNPAs at negligible levels. The banks slippage rate stood at 0.6% in FY13. The banks knowledge banking approach has helped keep asset quality issues at bay. Going ahead we do not expect asset quality to deteriorate significantly as the bank has a well diversified loan book with limited exposure to risky segments. Additionally the bank has a strong provision coverage ratio of 88.5% which would act as a buffer in case of asset quality deterioration. Total standard Restructured Advances stand too is negligible at `1.25 bn (0.26% of advances) lower than Q1FY14 with no fresh restructuring during the Q2FY14. Loan book to grow at a CAGR of 22% from FY13-15 Due to its small size the bank, has managed to grow its loan book at a rapid pace, well above that of the industry. Loan book grew at a CAGR of 38% from FY08-13. Going ahead we expect the bank to continue growing at a pace faster than that of the industry. We have factored in a loan book CAGR of 22% from FY13-15E. Lower RWA as a proportion of total assets to free up capital Yes bank has managed to bring down its total risk weighted assets to total assets from 67.8% in FY13 from 80.6% in FY09. Going ahead we expect this ratio to improve further to ~ 62% in FY15. Lower risk weighted assets as a proportion of total assets would help free up capital for the bank and reduce the additional capital requirement for the bank.
Hold with a target price of `410

359.7 103.2 1.7 13.0

25.6 35.1 19.4 20.0 1M 0.1 1.6 3M 51.0 36.4 6M -31.4 -30.9 12 M -18.1 -23.8

10.0%
0.0% -10.0% -20.0%

-30.0%
-40.0% -50.0%

-60.0%

Apr-13

Mar-13

Dec-12

Sep-13

Feb-13

Jun-13

Jul-13

Nov-12

Aug-13

Oct-13

May-13

Nov-13

Jan-13

At the CMP, the bank trades at 1.9x its FY14E ABV and 1.5x its FY15E ABV. Due to expected pressure on margins and visible stress on asset quality, we have hold rating on the bank with a price target of Rs 410 (1.7x its FY15E ABV) though the bank is best placed to reap the benefits of easing liquidity in the system. Financials NII `mn PAT `mn ABV `
109.0 132.0 161.8 196.0 241.4

Yes Bank

NIFTY

P/E x
17.3 13.1 10.0 8.8 7.1

P/ABV X
3.3 2.8 2.2 1.9 1.5

ROAA %
1.5% 1.5% 1.5% 1.3% 1.4%

ROAE %
21.1% 23.1% 24.8% 23.1% 16 23.4%

Amit Jain Amit.j@sunidhi.com Phone: +91-022-6113 1355 Kanika Thacker Sunidhi Research | Kanika.t@sunidhi.com Phone: +91-022-66318632

FY11 12469 7271 FY12 16156 9770 FY13E 22188 13007 FY14E 26808 14819 FY15E 33947 18334 Source: Company, Sunidhi Research

Yes Bank
Financials (Standalone) Profit & Loss Account (` Mn) Interest Earned Interest expended Net interest income Non-interest income Net total income Operating expenses Pre- provisioning profit (PPP) Provision & Contingency PBT Tax PAT Balance Sheet (` Mn) Liabilities Equity Capital Reserves Networth Deposits Borrowings Other Liabilities & Provisions Total Liabilities Assets Cash & Balances with RBI Balances with Banks & money at Call Investments Advances Fixed Assets Other Assets Total Assets Growth matrix P&L Interest Earned Interest expended Net interest income Non-interest income Net total income Operating expenses Pre- provisioning profit (PPP) Provision & Contingency PBT Tax PAT Asset quality GNPA (%) NNPA (%) Slippage Ratio (%) NPA reduction rate (%) PCR (ex tech write offs) (%) Credit Costs (%) Provisioning / avg assets (%) Provisioning / NPA additions (%) Reductions in provisions / NPA reductions (%) Sunidhi Research | 2011 40417.5 27948.2 12469.3 6232.7 18702.0 6798.1 11903.9 982.1 10921.8 3650.4 7271.4 2011 3,471 34,469 37,941 459,389 66,909 25,831 590,070 30,760 4,200 188,289 343,636 1,295 21,861 590,070 2011 71% 77% 58% 8% 37% 36% 38% -28% 50% 47% 52% 2011 0.23% 0.03% 0.22% 49.0% 88.6% 0.4% 0.2% 69.9% 53.0% 2012 63073.5 46917.2 16156.3 8571.2 24727.5 9325.3 15402.2 902.1 14500.1 4730.2 9769.9 2012 3,530 43,237 46,766 491,517 141,565 56,773 736,621 23,325 12,530 277,574 379,886 1,771 41,535 736,621 2012 56% 68% 30% 38% 32% 37% 29% -8% 33% 30% 34% 2012 0.22% 0.05% 0.19% 75.8% 79.2% 0.2% 0.1% 62.6% 79.0% 2013 82940.0 60752.1 22187.9 12574.3 34762.2 13345.4 21416.8 2159.5 19257.3 6250.5 13006.8 2013 3,586 54,491 58,077 669,556 209,222 54,187 991,041 33,388 7,270 429,760 469,996 2,296 48,332 991,041 2013 31% 29% 37% 47% 41% 43% 39% 139% 33% 32% 33% 2013 0.20% 0.01% 0.64% 278.2% 92.6% 0.5% 0.2% 179.8% 209.7% 2014E 100835.9 74027.5 26808.4 13641.0 40449.4 15168.5 25280.9 3340.5 21940.4 7121.4 14819.0 2014E 3,586 66,809 70,395 772,596 247,142 117,978 1,208,110 41,470 9,030 527,626 563,995 3,608 62,382 1,208,110 2014E 22% 22% 21% 8% 16% 14% 18% 55% 14% 14% 14% 2014E 0.45% 0.02% 0.70% 178.3% 95.9% 0.5% 0.3% 130.0% 80.0% 2015E 118683.9 84736.8 33947.2 16516.7 50463.8 19176.3 31287.6 4143.7 27143.9 8810.3 18333.6 2015E 3,586 82,641 86,228 958,019 271,661 160,810 1,476,718 49,765 10,836 632,938 699,354 4,583 79,242 1,476,718 2015E 18% 14% 27% 21% 25% 26% 24% 24% 24% 24% 24% 2015E 0.54% -0.05% 0.75% 116.8% 109.3% 0.6% 0.3% 100.0% 60.0% 17

Yes Bank
Other operating indicators NIM (%) Cost to income (%) Business per branch (` mn) Business per employee (` mn) Profit per branch (` mn) Profit per employee (` mn) CASA per branch (` mn) CASA ratio (%) Other income / Total income CEB / Other income CEB / average advances 2011 2.9% 36.3% 3752.5 204.4 34.0 1.9 222.0 10.3% 33.3% 94.2% 2.1% 2012 2.7% 37.7% 2447.8 154.4 27.4 1.7 207.6 15.0% 34.7% 89.6% 2.1% 2013 2.8% 38.4% 2650.1 162.2 30.2 1.9 295.1 18.9% 36.2% 85.6% 2.5% 2014E 2.7% 37.5% 2408.3 147.4 26.7 1.6 278.4 20.0% 33.7% 96.0% 2.5% 2015E 2.8% 38.0% 2350.9 143.9 26.0 1.6 285.4 21.0% 32.7% 96.9% 2.5%

Capital Adequacy ratios CAR (%) Tier 1 (%) Tier 2 (%) Leverage (x) Risk weighted assets / Total Assets (%)

2011 16.5% 9.7% 6.8% 15.6 73.1%

2012 17.9% 9.9% 8.0% 15.8 70.7%

2013 18.3% 9.5% 8.8% 17.1 67.8%

2014E 17.9% 10.0% 7.8% 17.2 62.8%

2015E 16.0% 9.7% 6.3% 17.1 64.3%

Valuation Table Net profit (` mn) Shares in issue (mn) EPS (`) EPS growth (%) PE (x) P/PPP (x) Book value (`/share) P/BV (x) Adj book value (`/share) P/ABV (x) ROAA (%) ROE (%) ROE (adj for reval reserve) (%) Dividend Yield (%)

2011 7271.4 347.1 20.9 48.9% 17.3 10.6 109.3 3.3 109.0 3.3 1.5% 21.1% 21.1% 0.7%

2012 9769.9 353.0 27.7 32.1% 13.1 8.3 132.5 2.7 132.0 2.8 1.5% 23.1% 23.1% 1.1%

2013 13006.8 358.6 36.3 31.0% 10.0 6.1 161.9 2.2 161.8 2.2 1.5% 24.8% 24.8% 1.7%

2014E 14819.0 358.6 41.3 13.9% 8.8 5.1 196.3 1.8 196.0 1.9 1.3% 23.1% 23.1% 1.7%

2015E 18333.6 358.6 51.1 23.7% 7.1 4.2 240.4 1.5 241.4 1.5 1.4% 23.4% 23.4% 1.7%

Du pont Decomposition Yield on Assets Less: Cost of Assets Net Interest Income Other Income Less: Operating Exp Less: Provisions Less: Tax RoA Leverage RoE
Source: Company, Sunidhi Research

2011 8.5% 5.9% 2.6% 1.3% 1.4% 0.2% 0.8% 1.5% 13.9 21.1%

2012 9.5% 7.1% 2.4% 1.3% 1.4% 0.1% 0.7% 1.5% 15.7 23.1%

2013 9.6% 7.0% 2.6% 1.5% 1.5% 0.2% 0.7% 1.5% 16.5 24.8%

2014E 9.2% 6.7% 2.4% 1.2% 1.4% 0.3% 0.6% 1.3% 17.1 23.1%

2015E 8.8% 6.3% 2.5% 1.2% 1.4% 0.3% 0.7% 1.4% 17.1 23.4%

Sunidhi Research |

18

Yes Bank

Sunidhis Rating Rationale

The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next 12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least 5% over the next 12 months. Stocks between these bands are classified as Neutral. (For Mid & Small cap stocks from 12 months perspective) BUY ACCUMULATE HOLD REDUCE SELL Absolute Return >20% Absolute Return Between 10-20% Absolute Return Between 0-10% Absolute Return 0 To Negative 10% Absolute Return > Negative 10%

Apart from Absolute returns our rating for a stock would also include subjective factors like macro environment, outlook of the industry in which the company is operating, growth expectations from the company vis a vis its peers, scope for P/E re-rating/de-rating for the broader market and the company in specific.

SUNIDHI SECURITIES & FINANCE LTD

Member: National Stock Exchange (Capital, F&O & Debt Market) & The Stock Exchange, Mumbai SEBI Registration Numbers: NSE: INB 230676436 BSE: INB 010676436 Maker Chamber IV, 14th Floor, Nariman Point, Mumbai: 400 021 Tel: (+91-22) 6636 9669 Fax: (+91-22) 6631 8637 Web-site: http://www.sunidhi.com

Disclaimer: "This Report is published by Sunidhi Securities & Finance Ltd.("Sunidhi") for private circulation. This report is meant for informational purposes and is not be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. While utmost care has been taken in preparing this report, we claim no responsibility for its accuracy. Recipients should not regard the report as a substitute for the exercise of their own judgment. Any opinions expressed in this report are subject to change without any notice and this report is not under any obligation to update or keep current the information contained herein. Past performance is not necessarily indicative of future results. This Report accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this report. Sunidhi and its associated companies, directors, officers and employees may from time to time have a long or short position in the securities mentioned and may sell or buy such securities, or act upon information contained herein prior to the publication thereof. Sunidhi may also provide other financial services to the companies mentioned in this report."

Sunidhi Research |

19