Ajanta Pharma, : report by Nirmal Bang

Impressive improvement in margins
Ajanta Pharma (APL) has yet again posted better than expected results with Q4FY13 sales growth of 42% yoy. EBITDA margins rose by 481 bps yoy to 27.4% on account of higher economies of scale.
Key Highlights
 Sales grew by 41.6% YoY on account of volume growth which contributed to the 80% of the growth. Price increases contributed 15% to growth and rest by new product launches.
 EBITDA margin rose significantly to 27.4% led by operating leverage and lower cost of materials. This is the third consecutive quarter of improvement in EBITDA margins
 Despite strong operational performance PAT growth got restricted at 14.8% yoy due to one-time exceptional tax expense (of Rs 15.75 cr) resulting in decline in PAT margins. However, adjusting for exceptional expense PAT showed an impressive growth of 81.5% yoy to Rs 42.8 cr.
 Company is undertaking capex of rs 400 cr at Dahej and Salvi to cater to regulated and domestic markets respectively. Both the plants are expected to operation by April’15.
 For FY14 the management seemed more confident and has given guidance of 23% sales growth with 24-25% EBITDA margins which we believe is achievable
 APL has filed three more ANDAs during the quarter taking the total number to 14 out of which 12 are awaiting approval. Going forward, Company intends to file 5-6 ANDAs per year.
Valuation & Recommendation
We had recommended partial book profits at Rs 690. However, considering the continuous outperformance, healthy outlook investors can hold the balance shares at current levels with price target of Rs 840 (12x of FY15E EPS)

Go for City Union Bank deposit :: Business Line

City Union Bank offers 10 per cent interest on its 500-day deposit scheme.

With the 25 basis points repo rate cut by RBI, banks may further slice interest rates on fixed deposit schemes. If you are worried about lower returns on your fixed deposits, here is a good option you can consider. South-based City Union Bank’s special deposit scheme for 500 days offers you the highest interest among other bank FD schemes.

Attractive returns

City Union Bank offers 10 per cent annual interest under its special 500-day deposit scheme with the interest being compounded quarterly. Most other banks offer 9 per cent or less under their 1-2 year FD schemes. The minimum amount you need to deposit under this scheme is Rs 5,000. Interest is paid on a quarterly basis. You can opt for a monthly pay-out too.

Withdrawal penalty

Similar to other FDs, you can avail loan on this scheme too. The interest on the FD loan may be 2 percentage points higher than the deposit interest rates. In case you opt to pre-close your fixed deposit, you will be eligible to receive interest only at the rate applicable for the period until which your money was parked with the bank. In addition, the bank will charge you a penal interest of 1 per cent in case you withdraw the deposit before maturity.

The bank also offers online FD transaction facility for existing customers.

The tax treatment under this scheme is comparable to other FDs. Interest income beyond Rs 10,000 will attract a TDS of 10 per cent if you fail to provide a 15G/15H declaration stating that your interest income is within the exemption limits.

Low risk

A volatile stock market has tempered risk appetite among Indian investors. In the current backdrop of rising corporate fraud, it is pertinent to ensure safety of principal while pursuing attractive returns. Bank FD is the safest investment choice for a conservative investor. Any sum up to Rs 1 lakh is secured by deposit insurance. In the event of the bank going bust, your principal is safe and will be paid by the insurer. Hence deposit of any sum less than a lakh practically carries zero risk.

City Union Bank has strong presence in the South and is aggressively expanding footprint in this market. The bank currently operates through 336 branches across the country.

For the nine month period ending December 2012, its total income grew by over 30 per cent to Rs 1,784 crore driven by a robust rise in the interest income. Net interest margin stood at 3.3 per cent during the same period. Net profit rose 15 per cent during the first nine months to Rs 240 crore. The bank managed a healthy 23 per cent growth in deposits as on December 2012. The net non-performing assets stood at 0.6 per cent as on December 2012.

Jindal Steel and Power: Steel Realizations Weak; Inventory Liquidation ::Citi Research

Jindal Steel and Power (JNSP.BO)
Alert: Steel Realizations Weak; Inventory Liquidation
 4QFY13 PAT 25% below estimates – JSPL’s 4QFY13 consolidated PAT at
Rs7.6bn fell 20% QoQ / 35% YoY and was 25% below Citi (Rs9.9bn). The miss in
PAT was mainly due to (1) sharp decline in blended steel realizations which fell 7%
QoQ / 12% YoY (9% below Citi) due to inventory liquidation in the quarter; (2) higher
opex, depreciation and interest due to the commissioning of the plate mill at Angul
(low capacity utilization as DRI has not been commissioned).
 Steel realizations have already inched up in April – Steel realizations have
already inched up 3-4% in April13 as JSPL has taken price hikes. Our channel
checks suggest that the prices have also improved for other players in the industry.
 Strong steel volumes in 4QFY13 – Steel sales volume at 909k tons was at a
historical high; up 24% QoQ / 19% YoY. Steel and pellet production was more or
less in-line. Due to strong sales, inventory levels at the end of FY13 are flat yoy.
 Jindal Power’s realizations remain depressed – JPL’s 4QFY13 generation
rebounded strongly and PLF at 99.5% was healthy. However the blended
realizations at Rs3.25/ kwh (assuming 9% aux. consumption) fell 5% QoQ; below
Citi est. at Rs3.43/kwh.
 Overseas operations ramping up well – JSPL has started production of coking
coal at its captive mines in Mozambique. 0.5mt of coking coal is expected to be
delivered to India operations in FY14. HBI Production at Oman has increased 23%
YoY to 1.52mtpa.
 A number of projects set to commission over next 6-9 months – Angul project
(1.6mtpa) will start by Sep13. Unit 1 (600MW) of Tamnar 2 (2400MW) will be
commissioned by July-Sep13 and 3 units of Tamnar 2 (1800MW) will come online
by Mar14. The second 4.5mtpa pellet plant will commissioned by Dec13. 2mtpa
steel rolling mill at Oman will also be commissioned by Dec13.
 Utkal-B1 mining lease remains an overhang – The Utkal-B1 mining lease still
remains to be signed; this remains a key overhang on the stock. However JSPL has
already built coal inventory of ~600k tons at Angul and this is likely to go up to ~1mt.
This coal inventory should be sufficient to run the project till June14.

Federal Bank- Buy Q4FY13 Result Update ::Centrum

A weak quarter though better times ahead
As expected, FED’s Q4FY13 core performance was weak with quality of earnings surprising negatively. NIM contracted by 40bps QoQ on reversal of interest income on NPA. Asset quality matrix improved with gross slippage rate easing to 3.8% and %GNPA easing by 40bps QoQ to 3.4%. We look at FY2013 as a year of realignment for the bank and believe that worst on asset quality is behind us. We believe that our thesis revolving around RoE expansion remains intact driven by NIM expansion and contained operating expenses and credit costs. Our estimates imply RoE of 14.6% for FY14 and 16.2% for FY15. We maintain Buy and target price of Rs600 (1.5x Sep’14E).

NIM contracts by 40bps QoQ: NII de-grew by 2% YoY to Rs4.8bn as NIM contracted by 40bps QoQ to 3.05% during the quarter while credit growth stood at 17% YoY. The NIM contraction can be traced to reversal of interest income on NPAs and FITL (15-20bps) and partly due to 25bps reduction in base rate during Feb’13. This outweighed sequential improvement in investment yields and cost of funds. With pipeline of stress assets narrowing down, lower cost of funds and better loan mix, we expect the bank to expand its NIM by ~20bps during FY2014.

Loan growth moderate at 17% but strong traction ahead: Loan growth during the quarter was a tad slower at 17% YoY (19% in the previous quarter) with bank continuing with its portfolio rebalancing exercise. Retail (up 25% YoY) and SME (22% YoY) grew at cost of corporate segment (up 7% YoY). Incrementally, the bank remains comfortable in expanding its SME and retail book given acceptable slippage performance though cautious stance towards corporate segment will stay for the near term. FY14 is likely to see material pick up in credit growth as the management is targeting ~25% YoY rate.

Shree Cement ::Centrum

Lower energy cost helps beat margin estimates
Shree Cement’s Q3FY13 result was above our estimate on op. parameters
(OPM at 27.8% vs. est. 24.7%) despite 2.5% QoQ decline in realization (vs. est.
increase of 2% QoQ) led by steep decline in energy cost. Decline in energy
cost was led by Rs502/tonne QoQ drop in average fuel price to Rs6,378/tonne.
Buoyed by a drop in energy cost, op. profit came at Rs4.1bn (vs. est. Rs3.9bn)
even though revenue at Rs14.6bn was 8.4% below estimated Rs15.9bn.
Higher op. profit coupled with lower tax rate (6% vs. est. 20%) helped the
company post a profit of Rs2.7bn (vs. est. Rs2.3bn). Though, cement price
recently was under pressure due to sluggish demand, we expect demand to
improve in 2HFY14E led by electoral spending (general elections are expected
in May 2014), improvement in capex activities of industries and higher
demand from the housing segment (due to our expectation of a decline in
interest rate). The company aims to double its cement capacity in the next five
years with the help of free cash flows. With net cash of Rs30bn (including
liquid investments) at the end of June ‘12, we expect the company to
generate free cash flow of Rs12.6bn (after factoring in capex of Rs27.5bn)
over FY13-15E. It has industry leading op. margin in the cement business (op.
margin of 28.7% in Q3FY13) and power business’ profitability has also
improved in the last two quarters. We maintain Buy rating on the stock with a
one year price target of Rs5,109 (earlier: Rs5,094).
 Higher revenue from power business leads to better performance: Revenue of
the company increased 5.9% YoY to Rs14.6bn led by 54.2% YoY growth of power
segments’ revenues. Revenue from the cement business was down 0.5% YoY to
Rs11.8bn. Led by 144.2% growth in op. profit from the power business, the
company reported 8.7% YoY growth in op. profit to Rs4.1bn and op. margin
improved 72bps YoY to 27.8%.
 Higher op. profit and lower depreciation and tax rate result in better profits:
Depreciation cost declined 46.1% YoY to Rs1.3bn. Tax rate was at 6% against 33%
in Q4FY12. Led by higher op. profit and lower depreciation and tax rate, profit
increased 136% YoY to Rs2.7bn.

Andhra Bank: Slippages in corporate loans drive weak performance ::Kotak Sec

Andhra Bank (ANDB)
Banks/Financial Institutions
Slippages in corporate loans drive weak performance. Andhra Bank’s PBT declined
17% yoy on the back of subdued NII growth (4% yoy) and high provisions. Margins
declined 30 bps as costs of deposits remained high. Loan impairment ratios were high
on the back of high slippages from a few corporate exposures, a negative impact of the
skewed loan portfolio of the bank. Earnings growth is likely to remain under pressure
from weak NII growth, high operating and credit costs. Maintain ADD on inexpensive
valuations; better return ratios drive our rating; TP at `110 (`125 earlier).

Maruti Suzuki - Buy Q4FY13 Result Update ::Centrum

Stellar performance; Maintain Buy
Maruti Suzuki’s (MSIL) 4QFY13 operating results (pre SPIL merger) were significantly better than our expectations with EBITDA margins at 10.6% compared to our estimate of 9.7%. Driven by better than expected operating performance, PAT stood at Rs.11.4bn vs. our est. of Rs.7.8bn. We expect EBITDA margins to significantly improve further from current levels in FY14E largely driven by favorable Fx ( management indicated that it has hedged 30% of its total Yen exposure at 95 Yen/$ compared to 90 Yen/$ seen in 4QFY13) and merger of SPIL. Management also cited some traction in demand in recent months and discounts trending lower from current levels. We continue to remain positive on the stock and maintain Buy rating with revised target price of Rs.1,946.

Operating performance beats estimates: Revenues (pre SPIL merger) stood at Rs.126bn compared to our estimate of Rs.127bn largely in line with our estimates. While domestic realization remained flat QoQ as expected, export realizations registered a drop of 9% QoQ. Driven by better than expected operating performance, PAT stood at Rs.11.4bn compared to our estimate of Rs.7.8bn.

Management interaction: Key highlights: 1.) Sales of diesel vehicles stood at 112k units (36% of domestic volumes) in 4Q compared to 107k in 3QFY13. 2.) While for the domestic PV industry, Diesel penetration stood at 58% for FY13E, for MSIL it was 37%. Management indicated that lower penetration for MSIL vs. Industry left enough headroom for absorbing its incremental diesel capacity 2.) The current annual diesel engine capacity stood at 400k (300k SPIL and 100k sourced from FIAT). The incremental capacity of 150k engines is likely to come on stream by 2HFY14E taking the total capacity to 550k by the end FY14E 3.) Driven by favorable Fx and localization program, overall imports now stand at 19.5% (8% direct and 11% indirect) vs. 26% in FY13 4.) Export revenues stood at Rs.15.3bn (12% of revenues) and export realization for the quarter registered a drop of 9% QoQ 4.) Discount for the quarter, was lower by ~Rs.1,500 at Rs.10,500 compared to Rs.12,000 in 3QFY13 5.) Revenue/EBITA/PAT for SPIL for FY13 stood at Rs.60bn/Rs.7bn/Rs.920mn respectively 6.) Management has incurred overall capex of Rs.27bn for FY13E and has guided for overall capex of Rs.30bn for FY13E.