Karvy 2018 top picks and ideas

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Karvy 2017 picks

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Wealth Maximizer : Karvy; Diwali Picks: Nov-15

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10 best blue-chip stocks for 2015: Karvy

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Kolte Patil (KPDL) Righttime,ride time? Karvy

Righttime,ride time?
Over last 3M Kolte Patil (KPDL) has outperformed CNX Realty index by
15% still the stock trades at 23.4% discount to its average cross‐cycle
multiple. With new approvals of ~7mn sqft standing at horizon we believe
KPDL is looking at FY15‐16E high‐rise. We roll forward our valuation
estimates to FY15E end and incorporate some new projects into our model.
We maintain our BUYstance with increased NAV of Rs160/share.
Fat approvals pipeline lends – visibility to FY15‐16E launches
KPDL has projects encompassing ~1.1mn sqft saleable area in final
Environmental Clearance (EC) approval phase (expected by 4QFY14E).
Besides ~5.1mn sqft of EC approvals are expected by 1QFY15E. KPDL has
been awaiting new approval since past Jul‐13 and these projects are now in
the final EC appraisal leg. With limited on hand inventory of ~1.5mn sqft,
KPDL is awaiting EC clearances for next leg of growth.
New Townships,Mumbaiforay ‐ may add upto Rs79/share optional value
We expect new Township & Mumbai foray to add about Rs79/share optional
upside to our NAV estimate. The Sanjivani Township project with ~15mn
sqft saleable area has been certified as ‘Green building’ and is currently being
evaluated for EC (can add about Rs21/share to SOTP). Increase in FSI in
township may add Rs44/share and Mumbai foray may add Rs15/share to
SOTP.
Strengthening management bandwidth, improving transparency
KPDL has taken multiple initiaives to improve productivity (i) tied up with
IBM to automate operations and improve margins (ii) hired laterals &
freshers from A‐Grade professional schools to increase management
bandwidth & (iii) changed auditors to Deliotte Haskins to improve
transparency. Besides an investor friendly dividend policy is already in
place. This is a part of overall strategy to be a market leaderin Pune and gain
traction in newer markets.
Maintain BUY: NAV increased to Rs160/share
We maintain our BUY stance on KPDL with an increased SOTP‐based target
price of Rs160/share (previous target Rs140/share). Our valuation is based on
0.9x our end‐FY15E NAV forecast. We have marginally cut our headline
numbers to factorin lagged launches. At CMP the KPDL trades at 4.1xFY16E
EPS and offers ~4.8% dividend yield. Key triggers: (i) success of new
launches (ii) faster pace of project approvals (~7mn sqft).

Madras Cements - Karvy

Profits decline on weak realization
Madras Cements’ 1QFY14 net sales, EBITDA & PAT declined 3%, 36% and
44% YoYto Rs9.6bn,Rs2bn andRs689mn respectively.
Sales volume grew 3% YoY & flat QoQ: Its sales volumes remained flat QoQ
and rose 3% YoY to 2.21mn MT. Higher YoY growth is attributed to the
ramp‐up in its capacity commissioned in FY13. Its cement NSR declined 3%
YoY and 1% QoQ to Rs4239 per MT (3% lower than vs our est). These
resulted in 3% YoYnet sales (~2% lowerthan estimated).
Lower realization dragged down profitability: Operating costs per MT rose
10% YoY (2% QoQ) in‐line with our estimates. Higher costs were driven by
fixed costs per MT which rose 20% YoY but moderated 1% QoQ.
Additionally, the company consumed its high cost linkage coal inventory (vs
pet coke) which resulted in higher raw materials & power/fuel costs.
However, pet coke usage is expected to rise in subsequent quarters. The
impact of higher fuel costs was moderated by lower logistics costs than
estimated. Subsequently, lower NSR resulted in EBITDA decline 36% YoY vs
our estimates of 18% decline. Higher capital charges further resulted in PAT
decline of 44% YoYto Rs689mn vs our est ofRs1.06bn.
Fundamentals intact: We have lowered our NSR growth est for FY14E to
0.4% vs 3.3% earlier to factor in the current weak pricing impact on overall
NSR. Subsequently, we have cut our EBITDA estimates for FY14‐15E by 7%/
4% respectively. We expect MCEM’s profitability to benefit from ramp‐up in
its cement & power capacity which should drive its 7% volume CAGR in
FY13‐15E and also stabilize its operating costs. Higher usage of pet coke
(~70% its fuel mix) would also boost its operational efficiency. With most of
its capex over, MCEM’s balance sheet de‐leveraging drive to gain pace –
leading to its net debt: equity reducing from 1.1x in FY13 to 0.6x by FY15.
Retain “BUY” with a lower TP of Rs256: We maintain our “BUY”
recommendation on the stock with a TP of Rs256 (earlier Rs300 at 7.5x)
valuing it at 7x its FY15E EBITDA (its long term average).

RAYMOND-Karvy

Textiles Improved while Apparel & Engineering
Dragged Profitability; Reiterate BUY
Raymond Q1FY14 revenue grew 4.3% YoY to Rs. 8,739mn, EBITDA
declined marginally by 1.4% YoY to Rs. 305mn while Adj. net loss widens
to Rs. 39.6 mn. Exceptional outflow against VRS payments was Rs. 101mn.
Reported netloss was Rs. 497mn against netloss of Rs. 350mn in Q1FY13.
Textile Segment: Raymond’s textile business grew 12.8% YoY to Rs. 3,825
mn in Q1FY14. Higher exports coupled with Makers & Combo packs aided
revenue growth. ‘Makers’ grew 40% YoY to Rs. 230 mn. Realizations growth
was at 4.5% while rest is attributable to volume. EBITDA margin improved
by 400bpsYoYto 9%, thus EBITDA grew 106% to Rs. 340 mn.
Branded Apparel: Branded Apparel sales declined 14% to Rs. 1,580 mn.
EBITDA margins were reported at  ‐6% compared with 3% in the
corresponding quarter. EBITDA losses stood atRs. 100mn compared to Rs. 50
mn in Q1FY13. The segment has significantly reduced its inventory to Rs.
200mn compared to Rs. 1,200 mn a year ago. We expect Branded Apparel to
become EBITDA positive in FY14 on account of low inventory and excise
duty removal benefits. Gross margins improved 250bps on excise benefits.
Denim & Cotton Shirting: Revenue from Denim and Cotton Shirting grew
4% each to Rs. 116 mn and Rs. 365 mn respectively. Denim EBITDA margin
remained flat at 12% YoY while Cotton Shirting margin declined by 300bps
to 11% in Q1FY14 on higherinput costs and lower exports.
Garmenting: Revenue from garmenting business grew 59% to Rs. 830 mn
driven by higher exports while EBITDA margin declined 500bps YoY to 9%
on account offorex loss (Rs. 97mn) booked on the orders for coming quarters.
However, FY14 looks promising with strong order‐book.
Engineering divisions: Tools & Hardware revenue grew 5% YoY to Rs. 940
mn while EBITDA margin declined 400bps to 9% while Auto Component
division revenue grew 3% to Rs. 650 mn with 500bps margin contraction on
challenging auto industry.
Outlook & Valuation: We revise down expected EBITDA & net income on
slower margin recovery amid challenging apparel & engineering business. At
CMP of Rs.205, the stock trades at 6.3x and 4.7x of FY15E EPS and
EV/EBITDA respectively. We reiterate our “BUY” recommendation and
revise down our target price by 18% to Rs. 316 based on 6.0x FY15E
EV/EBITDA, having a potential upside of 55%.

Ipca Labs - Karvy

Revenues Outperform, Margins Lower due to
higher R & D
Revenues increased by 26.9%YoY to Rs8,056mn compared to Rs6,344mn in
Q1FY13. Operating margins are down by 110bps to 21.2% as against 22.3%
in Q1FY13 due to higher R & D expenses. Net Profit increased by 67%YoY
to Rs718mn in Q1FY14 in line with our expectation of Rs 702mn.
Revenue Details: Ipca’s Export formulation grew by 46.9% YoY to
Rs.3300mn higher than our expectations of Rs2,945mn. However, Domestic
formulation business increased by 12 % YoY to Rs2504mn in line with our
expectation of Rs2511mn. In Exports formulations, Branded promotion
revenues grew by 62%YoY to Rs730mn. Institutional business grew by
40%YoY to Rs839mn while Generic Business showed growth of 47%YoY to
Rs1,730mn. In APIs, Exports increased by 17%YoY to Rs1,666mn while
Domestic grew by 16%YoY to Rs456mn.
Margins Contract: Companyʹs EBITDA Margins stood at 21.2% (our
estimates 22.5%) in Q1FY14 lower than 22.3% reported in Q1FY13. Margins
were lower on account of high material cost due to product‐mix and higher R
& D expenses due to clinical trials conducted for a 505(b)2 product.
Companyʹs net profit stood at Rs718mn in Q1FY14, in line with our estimate
ofRs. 702mn.
Outlook and Valuation: We decrease our revenues by 0.4% to Rs34.7bn for
FY14E and by 1 % to Rs 41.6 bn for FY 15E mainly on account of downgrade
in Export API business. We marginally downgrade EBIDTA margins but our
EPS downgrade is 3.1 % for FY14E to Rs37.8 and by 1.1% for FY15E to Rs45.8.
We reduce our price target by 1 % to Rs687 based on 15x FY15E. Due to
limited upside (3%) we maintain our SELL recommendation on the stock.

Siyaram Silk Mills :Revenue Growth Intact, Margins below Expectation; Reiterate “BUY” : Karvy research

Revenue Growth Intact, Margins below Expectation;
Reiterate “BUY” on Attractive Valuations
Siyaram Silk Mills (SSML) sales, EBITDA and netincome grew by
22%, 12% and 4% YoY respectively during Q1FY14. EBITDA
margin declined 88bps YoY while remained still on QoQ basis

Unichem:: Margins Outperform, Maintain BUY :: Karvy research

Unichem’s revenues decreased by ‐0.4% YoY to Rs. 2,622mn in Q1FY14, as
against our estimates of Rs. 2,633mn. Operating margins improved to
19.1% as compared to 18.0% in Q1FY13. Net Profit has grown by 8.9% YoY
to Rs.361mn.
 Revenue Details: The Company’s Domestic Formulations (DF) business
grew 4.2% YoY to Rs. 1756 mn on account of high base last year, while
Exports Formulations de‐grew by 14.2% YoY to Rs. 563mn. The key
reason is lower offtake in contractual supplies in quarter. International
API Capital has grown 22% YoY to Rs260mn in quarter. There has been
growth YoY in this segment since last 2 quarters. However, Domestic
API has shown de‐growth of 47.5% YoY. According to Awacs, Unichem’s
CVS (+10.8%YoY) and Integra Division (+12.9%YoY) have grown in
excess of 10%YoYforthe quarter.

Oil & Gas Upstream PSUs: Bettertimes ahead, Gas Sector Languishing Further : Karvy

Upstream PSUs: Bettertimes ahead, Gas Sector
Languishing Further
With softening of crude oil price and diesel price getting partially
deregulated, we expect earnings of Upstream PSUs to accrete in FY14 and
FY15. The earnings could be further enhanced by a domestic gas price hike
which seems to be very likely in the near term. However, we expect Gas
players to continue their weak show on account of availability and
affordability issues amongst core users.
Softening Crude Oil Price and Reforms to Boost the
Earnings of Upstream PSUs
We expect crude oil price to average at $ 105/bl and $ 100/bl with rupee at 54
and 52 in FY14 and FY15 respectively. We have assumed underrecoveries for
diesel to stabilize around Rs 3/liter in FY15. This is likely to come down to
zero as well, however we prefer to stay conservative due to policy
uncertainties. We expect under recoveries to come down to Rs 1140 bn in
FY14 and Rs 970 bn in FY15. Thus we assume 23% and 11% increase in the
netrealizations of ONGC and OilIndia respectively in FY14 YoY
Gas Price Hike on the Anvil: Benefits Reducing
down the Value Chain:
The Oil Ministry has proposed to the Cabinet to approve gas pricing formula
($6.77/mmbtu) recommended by the Rangarajan Committee in order to
incentivize producers without hitting the core consumers adversely. We
expect an increase of Rs. 3/shr and Rs. 4.5/shr in the EPS of ONGC and Oil
India resp. for every $1/mmbtu increase in gas price. Further hike (in
accordance with the demand of producers) could dent the volume offtake
from the core consumers.
Upstream PSUs a Better Bet
We still find Upstream PSUs attractive, looking forward to catalysts in the
form of zero under recovery on diesel; lower LPG and Kerosene losses, and
higher gas price and buoyant volumes. Languishing supplies from domestic
fields and lower demand for expensive RLNG will continue to hit the
earnings of Gas distributors. We assign a BUY rating on ONGC and Oil
India viewing possibility of further rerating, whereas we stay cautious on
Cairn India as outlook for crude oil looks grim. Even though the
fundamental outlook is grim, we assign a HOLD rating on RIL, Gail India,
GSPL, and Gujarat Gas due to cheap valuations. Significant correction in
Petronet LNG gives an opportunity to BUY. We also reiterate BUY rating on
IGL.

Rupee to tumble beyond 60? :: Karvy

Rupee to tumble beyond 60? Unlikely
INR depreciated sharply in latter half of May’13 and has continued to remain under pressure. Widening trade deficit
coupled with no respite from the capital inflows has pressurized the currency since May’13. Sharp spike in gold imports
in Apr‐May’13 with weaker exports is one of the main reasons for dwindling of the exchange rate. On anticipation of
ban in gold imports, banks imported significant portion of gold in May’13. Even after sharp INR depreciation of nearly
10.8% since the beginning of May’13, we do not expect any quick recovery in export growth as the growth is more a
function of global demand than currency driven. However, due to sticky nature of aggregate imports, we expect the
import bill to turn costlier and trade gap to widen further.
Currency in Real terms (based on REER 36 Trade weighted 04‐05 series) has depreciated by only 6.9% since the
beginning of the series while in Nominal terms the depreciation has been quite stark at 13.8%. The gap between the two
series is the sharpest gap observed in the entire series. Stagnation in real net inflow of foreign currency assets is the key
reason for rupee depreciation and we can see a new base of INR 56 for FY14. Delay in augmenting stable FX resource
will push rupee to newer lows. FX reserves have declined sharply by USD 26.7bn since 2008. Depleting foreign exchange
reserves have adversely impacted domestic liquidity. This leaves limited room for RBI to intervene and stall the sharp
depreciation of the currency.
Nearly 50% of the CAD financing in Apr‐Dec’12 was through the route of FII inflows. Since reversal of these inflows
can be immediate it augmented the sensitivity of the currency to the global events. Trimming of Fed stimulus package
by the year end has considerably narrowed down the interest rate differential between US and Indian bonds. However,
the rate differential is still large as compared to earlier years. This has triggered major reversals in FII debt investment
and other Interest sensitive instruments.
Our View:
Depreciation in rupee is likely to trigger imported inflation risks. Some of the food items such as pulses and oil seeds;
power & fuel items and precious metals & fertilizers are likely to see upward swing in prices. Adverse impact on
petroleum subsidies is also likely; as with every depreciation in rupee under recoveries increases by INR 75‐80 bn. So
depreciation of INR 5 has augmented the under recovery by INR 300 bn.
Immediate requirement for attracting sustainable long term inflows to finance CAD is necessary to mellow down the
volatility in the rupee. We do not expect government to raise reserves through NRI bonds as the spreads have corrected
sharply and there has been a huge influx in NRI deposits (high interest rates of 8.75%) in past few years. We can expect
influx in inflows in Real estate. However, we expect currency to remain under pressure as significant portion of CAD is
financed through short term inflows. On the trade deficit front, with join efforts taken from the government and RBI to
tackle the burgeoning gold imports we expect gold imports to remain subdued in the remaining months. Gold imports
on an average are nearly 26.0% of trade deficit lowering of gold imports will have positive impact on CAD. We expect
average INR to be at 56 while we expect INR to remain volatile and range in between 55‐59 in FY14.

Real Estate Wake up and smell the game change, er paradigm shift, er coffee:: Karvy

Wake up and smell the paradigm shift, er coffee
To us FY13 was disappointing but then again expectedly the sector
suffered due to: (i) budgetary changes; (ii) delayed approvals; and (iii) high
interest costs. Correction of such magnitude demands confidence to
outweigh caution as fundamentals on ground remains robust, presenting
an opportunity for investors to access high returns through bargain‐
basement purchases. BSE Realty now trades at one‐year forward P/BV of
0.6x and P/E of 11x.We initiate coverage on the sector with BUY.
Rear view not pretty – though rendering sector cheap on historical
Last 6M has seen stock prices of real estate developers getting cratered with
10‐50% absolute underperformance. The correction of such magnitude has
left the sectorlooking cheap relative to its historical valuations, with most of
the stocks trading at touching distance to FY09‐10 recession multiples.
Capex stabilizing ‐ realty an attractive end‐cycle assetreflation play
Our analysis of the real estate players asset portfolio suggest that bulk of the
office/retail assets have become commercially operational during FY13‐14E.
With Capex peaking out being supported by a more conducive interest rate
cycle, reflation shall help ease pressure on the parent’s balance sheet. Likely
beneficiary include DLF, Oberoi, Phoenix Mills & Prestige Estates.
Competitive positioning Real estate players
We have done macro(top down) and micro (bottom ups) competitive
mapping of Indian real estate players and screened developers with firm
grisp of their composure, right mix of defense (annuity assets) and offense
(residential) and relatively high transparency/governance. These developers
are maturing toward mid‐cycle cashflow stage with some of them now
having a stated dividend policy of distributing 20‐25% profits as dividend.
Valuation undemanding – Initiate coverage with BUY
DLF, Oberoi, Prestige & Phoenix are ourtop picks owing to a well balanced
mix of defense (annuity assets) and offense (residential). Sobha, Puravankara
& Kolte Patil are our pure play residential bets owing to strong launch
pipeline, history of meeting expectations & high dividend payouts in case of
the later two. Our stock selection offers high margins of safety owing to a
robust past track record of braving cycles and a more confidentfuture.

Profitability at Peak; Revenue growth intact on Capex Vardhman Textiles :: Karvy

Profitability at Peak; Revenue growth intact on Capex
Vardhman Textiles (VTEX) sales, EBITDA and net income grew 18%, 51%
and 103% YoY respectively during Q4FY13 while sequential growth was
reported at 5%, 19% and 38% respectively.
The Company’s top‐line grew 18.1% YoY to Rs. 11,463 mn (our expectations
Rs. 11,039 mn) during Q4FY13, while sequential growth was registered at
4.9%. Yarn sales grew 24.2% YoY to Rs. 9,933 mn, while revenue from fabric
grew 30.8% YoY to Rs. 4,046 mn during the quarter.

Tractor Recovery to Cushion UV Slowdown Notwithstanding slowdown in tractor segment, Mahindra & Mahindra (M&M)- Karvy

Tractor Recovery to Cushion UV Slowdown
Notwithstanding slowdown in tractor segment, Mahindra & Mahindra
(M&M) has delivered strong operational performance in Q4FY13. Its
operating margins rose 184 bps YoY (87 bps QoQ) to 12.1% vs. our estimate of
11%. Its revenues rose 12% YoY to Rs. 105 bn (vs. our estimate of Rs. 101 bn),
while volume grew 7% YoY to 199,105 units. Price hike and better productmix
resulted in 5% YoY rise in average realization per vehicle. Its RM/Sales
ratio dipped 75 bps YoY (110 bps QoQ) to 74.8%. M&M booked Rs. 900 mn
capital gain on stake sale of its investment in Mahindra Holidays, excluding
which its adjusted PAT rose 28.6% YoY to Rs. 8 bn. Adjusted profit of
combined entity (M&M+MVML) rose 8% YoY to Rs. 8.7 bn on revenues of Rs.
99.8 bn (up 9.6% YoY), while its EBIDTAM rose 239 bps YoY (91 bps QoQ) to
14.4% in Q4FY13.
Recovery in Tractor Segment Suffice to Offset UV Slowdown: We observed
strong positive co‐relation between tractor volume and election period during
past decades. Farm segment always benefits from election money‐flow in rural
India, which coupled with relief to farmers from government would result in
strong demand for tractors in FY15E. We expect UV growth to taper down
from ~50% to 13.5% in FY14‐15 due to high base, increase in excise duty
coupled with declining fuel price differential. We believe that strong tractor
volume would be more than enough to maintain profitability, as Tractor
segment (EBIT margin of 16%) enjoys much higher operating margin than
Auto segment (EBIT margins of 9%). We expect margin improvement of 50
bps over FY13‐15 on account of increasing contribution from Tractor segment.
Outlook & Valuation
In view of UV growth tapering down, we lower our revenue and EPS
estimates by 3% each for FY15E. Based on 8xFY15E EV/EBIDTA, we value
M&M’s standalone business at Rs. 820 (from Rs. 836 earlier). Based on
7xEV/EBIDTA, we value MVML at Rs. 67 and post‐20% Hold Co discount, we
value subsidiary at Rs. 263 per share (from Rs. 247 earlier). We reiterate our
“BUY” recommendation on M&M and maintain our SOTP‐based target price
of Rs. 1,150 per share, primarily on account of increasing value of its
subsidiary supported by their improved financial performance.

BGR Energy Systems- SELL :Karvy research

Lower Sales, High Interest Cost Drag
Performance; Maintain “SELL”
BGR Energy Systems (BGR Energy) has registered 6.5% decline in revenue to
Rs. 11.37 bn in the quarter ended Mar’13, while the Company’s operating
margin rose 110 bps to 13%, which has improved operating profit by 2.3% to
Rs. 1,387 mn. However, due to higher interest cost, its PBT declined 13% to
Rs. 829 mn. Eventually, the Company’s net profit declined by 20% to Rs. 538
mn on account of 550 bps rise in tax rate to 35% on YoY basis.
Segmental Performance: While the contribution of Capital Goods to the topline
of BGR Energy stood at 7.4% in Q4FY13, same as previous corresponding
period. Meanwhile, greater contribution from BoP projects (Chandrapur &
Marwa) has boosted the margin of the Company.
Working Capital Loan: BGR Energy’s working capital loan stood at Rs. 21.5
bn as of Mar’13 and the long‐term loan was at just Rs. 200 mn. The Company
expects a reduction of Rs. 3‐3.5 bn in working capital limits by end of FY14.
Overall Order Inflow Remains Muted sans NTPC Orders: BGR is executing
nine major projects while its current order‐book stands at Rs. 110 bn with
orders worth Rs. 72 bn from NTPC. Hence, the order inflow remains muted
excluding the projects secured from NTPC. We expect lower EBITDA
margins going forward on account of project execution of NTPC orders.
Outlook & Valuation
We expect the financial performance of BGR Energy to deteriorate with the
beginning of JV with Hitachi Again, with capacity utilization likely to remain
low, it seems difficult to win profitable orders amidst stiff competition. We
downgrade earnings for FY14 & FY15 by 2.7% & 13.6% due to delay in
projects execution of NTPC & Krishnapatnam projects. We expect BGR
Energy’s revenue to register 10.5% CAGR, while earning could see ‐8.7%
CAGR in FY12‐15E. Based on 8xFY15E earnings at 40% discount to its mean
multiple of 13x, we maintain our “SELL” recommendation on the stock with
downwardly revised target price of Rs. 188 per share (from Rs. 215 earlier).

Maxwell Industries :: Karvy

Expect Margin Expansion on Excise Benefits
and Premium Products
Maxwell Industries Q4FY13 sales & EBITDA grew 16% & 10% YoY to Rs.
581mn & Rs. 42mn while it reported net loss of Rs. 1.4mn as against net loss
of Rs. 8.6mn in the corresponding quarter. For full year FY13, sales &
EBITDA grew 14% & 11% while it reported net profit at Rs. 29mn vs loss of
Rs 12mn in FY12.
Revenue Growth: The Company’s top‐line grew 16.2% YoY to Rs. 581 mn
(our expectations Rs. 595 mn) during Q4FY13. During FY13, revenue grew
14.0% to Rs. 2,537 mn where realizations grew over 20% YoY. Maxwell has
introduced ~80 new styles in FY13 while some premium products are in final
stages of launch. It is focused on new products under Eminence & VIP
brands to establish itself as a premium innerwear manufacturer. This is
expected to further improve operating margins on higher realizations.
Operating margins: The Company’s EBITDA grew 7.4% YoY to Rs. 41.7 mn
(our expectations Rs. 53.5 mn) during Q4FY13 on account of higher advt.
expenses. EBITDA margin for the quarter stood at 7.2%; slipped 57bps YoY.
Adv. exp were up by 7x YoY to Rs. 44.0 mn for Q4FY13. EBITDA for FY13
grew 11.0% to Rs. 205mn where the Company spent Rs. 133.3mn in Adv. Exp
(Budgeted Rs. 100mn) compared to Rs. 37.7mn during FY12. Going forward,
better operating margins are expected on lower advt. exp and higher
realizations on excise duty removal.
Maxwell reported net loss of Rs. 1.4mn for Q4FY13 compared to loss of Rs.
8.6mn in the corresponding quarter. However for FY13, Maxwell reported
net income of Rs. 28.5mn against net loss of Rs. 12.3mn in FY12.
We revised down our expected Sales by 6.8% and 10.4% & EBITDA by 1.9%
& 14.5% for FY14E and FY15E respectively on slower volume growth. Net
Income revised down by 13.1% and 33.1% for FY14E and FY15E respectively.
Outlook & Valuations
We expect revenues & net income to grow at a CAGR of 16% and 111% over
FY13‐FY15E. At CMP of Rs. 14, the stock trades at 5.3x & 7.0x FY15E
EV/EBITDA and earnings. We reiterate our “BUY” recommendation and
downgrade our target price to Rs. 21 (Rs. 24) per share based on 6.5x FY15E
EV/EBITDA & 10.5x FY15 EPS, having potential upside of 49%.

Siyaram Silk Mills :: Karvy

Results in line, Expect Slower Margin recovery;
Reiterate “BUY” on Attractive Valuations
Siyaram Silk Mills (SSML) sales grew 8% while EBITDA and net income
declined by 9% and 24% YoY respectively during Q4FY13. For the year FY13;
sales grew 14% while EBITDA and net income declined 5% and 3%
respectively on subdued demand.
Revenue Growth: The Company’s top‐line grew 8% YoY to Rs. 2,896 mn (our
expectations Rs. 2,828 mn) during Q4FY13, while sequential growth was
registered at 4%. Amid stable realizations on challenging consumer behavior,
revenue growth is largely attributable to well maintained volume thrust.
Operating margins under pressure: The Company’s EBITDA declined 9%
YoY to Rs. 298 mn (our expectations Rs. 302 mn) during Q4FY13 on account
of higher staff and sales & promotional expenses. EBITDA margins for the
quarter slipped 194bps YoY to 10.3%. Net Income for Q4FY13 declined 23.8%
YoY to Rs. 130 mn (our expectations Rs. 137 mn) on higher tax payments
with effective tax rate of 39% for Q4FY13.
SSMLs total capex plan of 20 MMPA fabrics and 7.2 lac pcs per annum of
readymade garments, ~10MMPA and ~1.8 lac pcs capacity has been installed
while remaining expansion is slowed down keeping in view of the subdued
consumer demand. Also, during Q4FY13, the Company added ~25 stores to
reach approx. 165 stores. SSML is looking to expand its retail stores with ~90
stores additions in FY14 while aiming ~500 stores in the next 4‐5 years.
We revised our sales by 0.5% and 1.8% and EBITDA marginally by (1.2%)
and 0.1% for FY14E and FY15E respectively. Expected net income has been
revised by (0.9%) and 3.3% for FY14E and FY15E respectively, factoring in
higher tax rate going forward.
Outlook & Valuation
SSML’s revenue and net income are expected to grow at a CAGR of 18% and
22%, respectively over FY13‐15E. At CMP of Rs. 261, the stock trades
attractively at 3.0x and 3.3x FY15E EPS and EV/EBITDA respectively. We
reiterate our “BUY” recommendation with revised target of Rs. 390 (Rs. 344),
valuing at 4.5x FY15E EPS and 4.0x FY15E EV/EBITDA, which has a potential
upside of 49%.

Sun Pharma :: Karvy

Revenues Outperform due to URL
Sun Pharma’s revenues grew by 31.5% to Rs30.7bn for the quarter as
against our estimates of Rs29.2bn. EBDITA margins were at 41.5%,
marginally higher than Q4 FY12 due to URL and Dusa overheads. Profits
were at Rs 10.1 bn higher than our estimates of Rs 9.1 bn.
 Revenue Details: Domestic formulations clocked a degrowth of 11% on
account of high base impact last year due to change in accounting in
returns and discounts. US sales grew by 56% to USD 330 mn due to 2
mths impact of URL sales and full impact of Dusa sales. Taro sales were
down QoQ to USD 165 mn due to lower volume offtake. We believe
Doxil did not have a major impact in this quarter.
 Margins impact due to URL and Dusa: The company’s EBDITAM was at
41.5% as against 41.2% in corresponding quarter of the previous year.
Substantial savings of 380 bps in Gross margins was offset by growth in
staff cost by 27% to Rs4.4bn and increase in overheads by 52% to Rs6.2bn.
R & D was also higher at 7% of revenues as against our expectation of
6.5%. Profits for the quarter were higher at Rs10.1bn as against our
expectation of Rs9.1bn for the quarter. Profits were higher on account of
lower tax of 13.8% on account of subsidiary losses and lower minority
interest.
Outlook and Valuation: We upgrade our revenue estimates by 3.5% to
Rs134bn and by 4% to Rs150bn due to incorporation of URL Pharma in our
core financials, while we remove the option value of URL Pharma of Rs33
from our valuation. Our EBDITAM is increasing by 90 bps in FY14E and by
70 bps in FY15E due to better gross margins and savings in overheads. We
upgrade our EPS by 13.1% to Rs39.5 for FY14E and by 10.9 % to Rs46 for
FY15E. We upgrade our price target by 9.4% to Rs1,058 based on 23x FY15E.
At current market price stock trades at 21.6x FY15E offering a 6% upside,
hence we downgrade the stock from BUY to HOLD.

Union Bank of India - Reassuring confidence ::Karvy

Reassuring confidence
This is the second consecutive quarter of improvement in asset quality.
Slippages were contained within 1.4% as against 1.8% in Q2FY13 and 3.8%
in Q1FY13. As a result GNPA improved by 30bps sequentially to 3.4%.
Credit grew at a decent pace of 21% and NIMs are stable sequentially at
3%. They have provided heavily during the quarter, shoring up provision
coverage by 480bps sequentially to 66.2%.
 Healthy respite in asset quality: Slippages were contained within 1.4%
as against 1.8% in Q2FY13 and 3.8% in Q1FY13. As a result GNPA
improved by 30bps sequentially to 3.4%. GNPA has improved by 30 bps
sequentially to 3.4%. Despite lower slippages, it made a higher NPL
provision of Rs5.5bn shoring up provision coverage by 480bps to 66.2%.
Restructured assets were sequentially flat at 5.6% of loan book.
 Decent growth in balance sheet: Advances grew by 22%, whereas,
deposits managed growth of 17%. CASA has bounced back by 75bps
sequentially to 31.3%.
 Stable NIMs sequentially: NIMs are stable sequentially at 3% as yield
on asset as well as cost of funds were almost stable on a sequential basis.
NIMs were however lower by 36bps as against last year.
Outlook & Valuation
At the CMP, the stock trades at 4.6x & 3.9x FY14E & FY15E earnings, and at
0.9x & 0.8x P/ABV FY14E & FY15E, respectively. Based on 10% discount to its
historical mean valuation implying 1.0x P/ABV FY15E, we reiterate our
“BUY” recommendation on Union Bank of India with target price of Rs. 315
per share.