IEA Report 2nd March

IEA Report
2nd Mar 2017

INFY "BUY" 2nd Mar 2017
The Companys' strategy of renewing their existing core buss through a combination of automation and innovation has been making a huge
progress. Execution has reflected well in several metrics, including volume growth, deal wins and pick-up in new initiatives. There are some hiccups
on account of rift with founders and H1B regime which could have negative impact on the company. But we believe that the company is investing
in all the right areas to regain and sustain its growth leadership, compounded by industry-leading margins. The company presently is trading at 3.3
times FY17 price to book. With this we remain positive on the stock and maintain our 'BUY' rating with the unchanged target price of 1210.
............................................................ ( Page : 2-4)
LT "BUY" 1st Mar 2017

L&T is the largest Engineering and Construction Company in India. It has presence in Construction, Hydrocarbon Eng., Power, Heavy Eng.,
Shipbuilding- defense and Merchant, IT, Finance, Realty and Metro. Revenue growth in Q3FY17 was muted but strong operating performance
supported the bottom-line. Despite muted revenue growth in Q3FY17, management is confident to achieve 10% revenue growth in FY17 coupled
with improvement in operating margins based on the operational efficiency. The company has closed out some legacy projects in hydrocarbon
business, which will help to post better margins going ahead. We expects to 33 bps improvement RoE in FY17. Hence, we recommend to BUY
with a target price of Rs.1780. ..................................................... ( Page : 5-8)
HDFCBANK "HOLD" 28th Feb 2017

We continue to like HDFC Bank given its strong fundamentals, steady loan growth, adequate capital, best in assets quality, strong branch network
and intensive digitalization initiatives. While 3Q FY17 saw some uneven activities, we expect the operations of banking to come to its normal
situation. Despite intense competition, we expect margins of HDFCBANK to sustain in the range of 4%-4.3% backed by normal CASA level of 40%
and healthy growth in retail assets. Earning momentum will be maintained with core revenue of 19% plus growth going forward backed by healthy
domestic loan growth with higher yield products. We expect RoE of 19% going forward. Recent rally in the stock has led to achieve our previous
target price of Rs 1400. However despite this rally we dont think to exit the stock at current levels given its strong fundamentals and recommend
must have in the portfolio. Also HDFCBANK has performed much better than its peers in the industry. We maintain HOLD in this stock with the
target price of Rs 1460. ..................................................... ( Page : 9-14)
BRITANNIA "BUY" 27th Feb 2017

BRITANNIA is looking at the micro-snacking space for expansion. As far as international business is concern, management expects International
business to grow to 12-13 % of total sales in the next 5 years. On direct distribution front, BRITANNIA will keep investing in its direct distribution
reach with the plan to add 200000 outlets every year. The company is planning to increase prices by 6-7% in FY18. Considering managements
proactive approach towards maintaining margin, thrust on expansion of direct distribution reach, focus on cost efficiency and plans to launch new
products and category, we are positive on this stock and maintain `BUY rating on BRITANNIA with a target price of Rs3700.
...................................................... ( Page : 15-17)
RELIANCE "HOLD" 23th Feb 2017

Going forward, management of Jio has ambitious plan to cover 99% of population in 2017. Jio has already achieved its target 100 mn customers in
just 170 days of its launch which is commendable. We expect ROE of 11% in FY17E. Considering the future growth prospects in both Jio and
Petrochemicals segment, we recommend Hold rating in this stock while revising our recommended target price to Rs. 1280.
.......................................................... ( Page : 18-21)
LUPIN "HOLD" 21th Feb 2017

Management has guided for US$250mn of sales in FY18 from the Gavis portfolio. Management expects to launch 25 new products in FY18, which
will be the major growth trigger for the company. Customer consolidation and High single-digit Price erosion in US is the major ongoing pressure in
the US market. Considering strong growth from North America on the back of new launches in FY18, we recommend HOLD rating in this stock
while maintaining our target price of Rs. 1690. ........................................... ( Page : 22-25)
JKIL "Under
20th Feb 2017
Review"
JKIL is the one of the best EPC Company with lower Debt to equity. Commencement work on Mumbai metro projects has led to strong revenue
growth in Q3FY17 and we expect to continue it but we need certain clarification regarding execution time line of JNPT road projects and debtors to
make clear cut view on JKIL. Presently we are waiting for further clarification; hence this stock is under our review. As the clarity emerges we will
rate the stock as per its fundamental. ........................................ ( Page : 26-30)
Narnolia Securities Ltd IEA Edition No.- 966

BUY
INFOSYS LTD. 2nd Mar 2017
No structural worry on top accounts, Management reiterated margin
Company Update guidance of 24-25% for FY17 vs. 24.7% in 9MFY17.
CMP 1025 Revenues from top-10 clients declined by 9.1% QoQ (USD terms) because
of RBS project ramp-down, furloughs in top clients. Management has
Target Price 1210 clarified that it is gaining share in these top accounts and there is nothing
Previous Target Price 1285 to worry upon. Optimizing the onsite pyramid and automation will be a
Upside 25% margin levers. AI adoption driving revenue growth for businesses. AI
Change from Previous - adopters expect 39% revenue rise by 2020. The management shared that
it would both partner with third-party automation providers and also build
automation technology in-house.
Market Data On the concern of H1B Visa issue, management said that it would hire
BSE Code 500209 more locals, and leverage automation and digital collaboration
NSE Symbol INFY technologies to get around this problem. Management remain positive on
52wk Range H/L BFSI segment which contributed 33% of revenues in 3QFY17. A 25bps
1278/900
rate hike by the Fed in mid-December and Trumps promise of easing
Mkt Capital (Rs Cr) 2,35,437 regulatory pressures on banks give confidence to the management that IT
Av. Volume(,000) 4644 spending of the US banks will surge.
Nifty 8,946 Recent days, INFY caught an eye of Media, once the issues like (a)
appointment of Dr. Punita Sinha, (b) compensation revision for the CEO (c)
Stock Performance severance pay for the ex-CFO Rajiv Bansal & ex-general counsel, David
1M 3M 12M Kennedy raised by the founder & shareholders. Management proactively
Absolute 8.9 0.2 -6.6 held an investor call on Feb 16 and given a clarification on above issues
Rel.to Nifty 5.2 -8.3 -33.7 which was a welcome step from the management of the company.
Also, according to media reports, INFY is likely to seek shareholders
Share Holding Pattern-% approval to make amendments to its Articles of Association (AOA) to
2QFY17 1QFY17 4QFY16 include provision on buyback amounting to USD2.5bn.
Promoters 12.8 12.8 12.8
Public 86.8 86.8 86.8
Outlook & Valuation
Others 0.49 0.49 0.49
The Companys' strategy of renewing their existing core buss through a
Total 100.0 100.0 100.0
combination of automation and innovation has been making a huge
progress. Execution has reflected well in several metrics, including volume
Company Vs NIFTY growth, deal wins and pick-up in new initiatives. There are some hiccups
on account of rift with founders and H1B regime which could have negative
impact on the company. But we believe that the company is investing in all
the right areas to regain and sustain its growth leadership, compounded by
industry-leading margins. The company presently is trading at 3.3 times
FY17 price to book. With this we remain positive on the stock and maintain
our 'BUY' rating with the unchanged target price of 1210.
Rs,Cr
Financials 2013 2014 2015 2016 2017E
Sales 40352 50133 53319 62441 66812
Net Profit 9429 10656 12372 13678 14362
ROE 24.8% 23.9% 24.4% 23.7% 21.5%
P/B 4.4 4.2 5.0 4.8 3.3
BINEETA KUMARI Div Yield 1.5% 1.9% 2.0% 2.0% 2.5%
bineeta.kumari@narnolia.com
Narnolia Securities Ltd 2
Please refer to the Disclaimers at the end of this Report
INFY
Investment Arguments
The Management has lowered its revenue growth guidance for FY2017. The company has issued 8.4%-8.8% CC growth v/s
8%-9% QoQ CC growth guidance earlier. This implies 4QFY2017, CC revenue growth of 0.3-1.8% QoQ. In 2QFY2017, the guidance was
reduced to factor the impact of ramp-down in RBS, softness/uncertainty in some other clients, and slower growth than anticipated in
some service lines.
The company expects to lead industry growth and reach a milestone of achieving sales of US$20bn by FY2020. The Management
believes the traditional IT services model is dying and a structural change is taking place in the industry. Pricing pressure is being
witnessed in commoditized services, thus necessitating the company to pursue newer growth avenues, including acquisitions in areas
like automation. The outsourcing services provider is therefore looking to
ramp up its productivity through automation and is looking for acquisitions to boost growth.
As part of its Vision 2020 (target to have US$20bn revenues at 30% operating margins and US$80,000 per employee revenue
productivity by CY2020), the Management expects acceleration in revenue growth and margin improvement to reflect ahead of the
increase in revenue productivity.
The company plans to utilize cash properly through increased dividends and acquisitions, so that it can increase its capital
efficiency.
Attrition Rate dropped 18.4% from 20% sequentially
The continued efforts of

Management to improve
employee engagement and
experience resulted in a
reduction in attrition.
Client Contribution to Revenues
The decline in Top Client was

due to due to RBS deal
cancellation and seasonal
weakness.

INFY
Financials Snap Shot

INCOME STATEMENT RATIOS
FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16
Revenue 40352 50133 53319 62441 EPS 164 186 108 60
Other Income 2365 2664 3430 3128 Book Value 662 775 442 252
Total Revenue 42717 52797 56749 65569 DPS 54 55 43 40
COGS Payout (incl. Div. Tax.) 33% 30% 40% 66%
GPM Valuation(x)
Other Expenses 1557 2119 2478 2497 P/E 4 4 10 20
EBITDA 11533 13381 14871 17120 Price / Book Value 1.1 1.1 2.5 4.8
EBITDA Margin (%) 29% 27% 28% 27% Dividend Yield (%)
Depreciation 1099 1317 1017 1266 Profitability Ratios
EBIT 10434 12064 13854 15854 RoE 25% 24% 24% 24%
Interest 0 0 0 0 RoCE 27% 27% 27% 27%
PBT 12799 14728 17284 18982 Turnover Ratios
Tax 3370 4072 4911 5301 Asset Turnover (x) 0.9 0.9 0.8 0.8
Tax Rate (%) 26% 28% 28% 28% Debtors (No. of Days) 64 61 66 66
Reported PAT 9429 10656 12372 13678 Inventory (No. of Days)
Dividend Paid 3122 3144 4935 9062 Creditors (No. of Days) 2 1 1 2
No. of Shares 57 57 115 229 Net Debt/Equity (x) 0.0 0.0 0.0 0.0
BALANCE SHEET CASH FLOW STATEMENT

Share Capital 286 286 572 1144 OP/(Loss) before Tax 12799 14728 17283 18979
Reserves 37708 44244 50164 56682 Depreciation 1099 1317 1017 1266
Net Worth 37994 44530 50736 57826 Direct Taxes Paid -3293 -3874 -6751 -5865
Long term Debt 0 405 50 0 O.profit befo. WC changes -951 -556 -1337 -1105
Short term Debt 0 0 0 0 CF from Op. Activity 7373 9825 8353 9863
Deferred Tax 56 0 0 0 Capital expenditure -2095 -2748 -2255 -2723
Capital Employed 37994 44935 50786 57826 CF from Inv. Activity -3020 -2577 1088 -686
Net Fixed Assets 8279 9339 12122 14140 Repayment of LT Borrow. -89 0 0 0
Capital WIP 1140 961 776 960 Interest Paid
Debtors 7083 8351 9713 11330 Divd Paid (incl Tax) -438 0 0 0
Cash & Bank Balances 21832 25950 30367 32697 CF from Fin. Activity -3210 -3144 -4935 -6813
Trade payables 189 173 140 386 Inc/(Dec) in Cash 1241 4118 4417 2330
Total Provisions 4151 6814 8493 9328 Add: Opening Balance 20591 21832 25950 30367
Net Current Assets 27244 31047 31739 34564 Closing Balance 21832 25950 30367 32697
Total Assets 46331 56966 66289 75141

BUY
Larsen & Toubro Ltd. 1-Mar-17
Result Update L&T reported its Q3FY17 result in line with our estimates. Consolidated
CMP 1470 revenue grew by 1.4% YoY to Rs. 26287 Cr as compared to Rs. 25928 Cr in
Target Price 1780 same period previous year on the back of strong growth of 13% in
Previous Target Price hydrocarbon vertical. Standalone business remained flat YoY to Rs. 15946
Cr as against Rs. 15868 Cr in previous year. However EBITDA margin on
Upside 21%
consolidated basis has improved by 140 bps YoY to 9.6% as against 8.5%
Change from Previous
on account of margin improvement in Heavy Engineering and Hydrocarbon
business. Consolidated Order Inflow during the quarter was Rs. 34900 Cr,
Market Data down by 9% YoY. Unannounced Orders were Rs. 22300 Cr. Mgt. has cut
BSE Code 500510 down the order intake guidance for FY17 to 10% plus from 15%. Reduced
NSE Symbol LT order intake guidance due to deferment in finalization of orders.
52wk Range H/L 1615/1055
Mkt Capital (Rs Cr) 1,20,708
Av. Volume 92026 Muted Revenue growth, Strong Operating Margin:-
Nifty 8880 Revenue growth remained muted due to demonization, however the
operating margin has improved by 140 bps on a back of improved
Stock Performance performance of Heavy Engineering, Hydrocarbon business and Infra
1Month 3 Month 1Year business. Heavy Engineering has reported EBITDA margin of 20.3% as
compared to 1.6% a year back led by operational efficiency. Close out of
Absolute 1.4 7.3 32.4
legacy orders, Operational efficiency and improved project execution have
Rel.to Nifty -1.8 -2.1 6.1
helped to post better numbers in Hydrocarbon business. Infra business
margin improved by 110 bps to 8.3% on account of the execution of better
Share Holding Pattern-% margin projects. Close down of legacy projects, margin improvement scope
3QFY17 2QFY17 1QFY17 in Heavy civil engineering & T&D business and execution of better margin
Promoters 0% 0% 0% projects in infra business will help to post strong operating margin going
Public 100% 100% 100% forward. Management has maintained 50 bps of margin improvement
Others guidance in FY17.
Total 100% 100% 100%
Healthy Order:-
Company Vs NIFTY Order book at the end of the Q3FY17 stands at Rs. 258600 Cr which
140
provides two and half year revenue visibility. However, management has cut
LT NIFTY
down order intake guidance for FY17 to 10%plus from 15% earlier.
130 Management has lower down guidance due to deferment in finalization of
120 some of the projects. We continue to expect healthy order inflow in next
year. Despite muted revenue growth in Q3FY17, management is confident
110
to achieve 10%revenue growth in FY17. It can achieve higher than that if
100 the company gets some clearance in infra business. The situation in terms
of obtaining approval has shown some sign of improvement.
90
Financials Q3FY17 Q2FY17 Q3FY16 YoY % QoQ %
80 Sales 26287 25022 25928 1% 5%
Jul-16
Feb-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
EBITDA 2523 2297 2126 19% 10%

Net Profit 812 1513 768 6% -46%
Sandip Jabuani EBIDTA% 9.6% 9.2% 8.2% 140 bps 40 bps
sandip.jabuani@narnolia.com PAT 3.7% 5.7% 2.7% 100 bps (200 bps)
Result Highlights of Q3FY17
Consolidate Revenue grew by 1.4% to Rs. 26287 Cr as compared to Rs. 25928 Cr in same period previous year.
L&T reported 18.7% growth in EBITDA to Rs. 2523 Cr as against Rs. 2126 Cr in Q3FY16 on back of 140 bps improvement in
margin
PAT during the quarter grew by 38.8% to Rs. 812 Cr as compared to 768 Cr in same period previous year on account of higher
EBITDA and lower tax rate.
Order intake during the quarter was Rs.34900 Cr, out of which Rs.23732 Cr from domestic market and rest from international
business.
Managment / Concall Update
Management lower down sales guidance to 10% from 12-15%. It can do better if it gets some project related clearance.
Order guidance cut down to 10% plus from 15%
Maintained 50n bps margin improvement in FY17
Real estate: Shifting of factories has helped LT to commercially monetize the land bank (Chennai, Bangalore and Mumbai).
Lower interest rate would lead to revival in demand of residential realty.
Toll Collection suspended for the 23 days and lost 100 Cr of toll, will get compensation for the same
Rs. 800 Cr of loss due to demonization at PBT level
Canadian pension fund has subscribed preference share of Rs.2000 Cr and convert based on their option.
Management expects Power business to pick up after two years once manufacturing gets better.
Heavy Eng.:- Better margins in process and defense business
Margin improved in Hydrocarbon as the legacy projects completed.
Mumbai Metro Phase 3 order is stuck due to PIL against MMRDA.
110 bps margin improved in Heavy civil engineering and T&D on account of operation efficiency.
Power :- Lower order book led to lower execution, will tough to get new orders.
Mgt. expects to pick up in Power business after two years once manufacturing picks up
Company look to monetize Nabha Power plant
Seen political and other issues at Hyderabad metro project. 70% of the project is completed and schedule completion is
June 17 but it will extend.
Hydrocarbon:- International business driving the growth and margin improved on close of legacy projects.
Expect to close Kattupali port sale transaction by Q4FY17. L&T has sold Kattuppali port to Adani ports.
Demand in hydrocarbon business is weak due to lower oil price
Outlook and Valuation:-
L&T is the largest Engineering and Construction Company in India. It has presence in Construction, Hydrocarbon Eng., Power,
Heavy Eng., Shipbuilding- defense and Merchant, IT, Finance, Realty and Metro. Revenue growth in Q3FY17 was muted but
strong operating performance supported the bottom-line. Despite muted revenue growth in Q3FY17, management is confident to
achieve 10% revenue growth in FY17 coupled with improvement in operating margins based on the operational efficiency. The
company has closed out some legacy projects in hydrocarbon business, which will help to post better margins going ahead. We
expects to 33 bps improvement RoE in FY17. Hence, we recommend to BUY with a target price of Rs.1780.

Segment Revenue 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Infrastructure 9,841 11,798 15,685 8,504 11,178 12,122 18,655 9,288 11,596 12,735 5% 10%
Power 1,166 1,141 1,448 1,079 1,340 2,116 2,185 1,723 1,745 1,633 -23% -6%
Metallurgical and Material Handling
802 734 953 - - - 924 - - -
Heavy Engineering 860 855 1,021 644 622 929 1,072 734 808 870 -6% 8%
Electrical & Automation 1,301 1,359 1,745 1,114 1,318 1,351 1,599 1,081 1,252 1,356 0% 8%
Hydrocarbon 1,832 1,779 2,235 2,155 1,896 2,118 2,487 2,146 2,501 2,402 13% -4%
IT & Technology Services 1,877 1,989 2,042 2,063 2,270 2,306 2,363 2,375 2,462 2,502 9% 2%
Financial Services 1,606 1,636 1,676 1,782 1,891 1,899 1,996 2,091 2,140 2,108 11% -1%
Developmental Projects 988 1,140 878 1,138 1,146 1,491 1,300 1,383 1,073 906 -39% -16%
Others 1,554 2,077 1,635 2,122 2,386 2,307 2,028 1,818 2,181 2,434 6% 12%
Less:Inter Segment Revenue 494 477 1,045 553 924 711 1,211 764 747 659 -7% -12%
Total 21,331 24,033 28,275 20,048 23,123 25,928 33,399 21,874 25,010 26,287 1% 5%
Order Book (Rs. crore) :-
Domestic International
200000
180000
160000
140000
120000
75600
75300
73000
70000
69255
68348
62500
100000
58175
57888
56450
80000
60000
156512
169350
174525
176500
175752
187245
180000
181900
178800
183300
40000
20000
0
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Order Inflow (Rs. crore):-
Domestic International
35700
33034
40000
29512
28372
35000
26180
23732
30000
20526
18590
18300
25000
16500
13888
13200
20000
12320
11900
11168
10574
10010
15000
8100
6766
6228
10000
5000
0
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

Revenue 74498 85128 92005 102632 EPS 84.6 52.9 51.3 75.6
Other Income 1096 982 1007 1183 Book Value 550.2 406.9 440.1 473.3
Total Revenue 75594 86110 93012 103815 DPS 19.3 14.4 16.7 19.0
EBITDA 9859 10730 11336 14278 Payout (incl. Div. Tax.) 23% 27% 33% 25%
EBITDA Margin (%) 13% 13% 12% 14% Valuation(x)
Depreciation 1637 1446 2623 2756 P/E 10.8 24.1 33.5 20.6
EBIT 8222 9284 8713 11522 Price / Book Value 1.7 3.1 3.9 3.3
Interest 2095 3138 2851 3041 Dividend Yield (%) 2.12% 1.13% 0.97% 1.22%
PBT 7638 7483 7217 10022 Profitability Ratios
Tax 2386 2608 2253 2548 RoE 15% 13% 12% 16%
Tax Rate (%) 31% 35% 31% 25% RoCE 9% 9% 7% 9%
Reported PAT 5206 4902 4765 7026 Turnover Ratios
Dividend Paid 1188 1337 1550 1767 Asset Turnover (x) 0.5 0.5 0.5 0.5
No. of Shares 62 93 93 93 Debtors (No. of Days) 113 113 119 128
Inventory (No. of Days) 70 69 76 55
Creditors (No. of Days) 92 89 99 105
Net Debt/Equity (x) 1.40 1.47 1.60 1.68
BALANCE SHEET CASH FLOW

Net Worth 33860 37712 40909 43992 Direct Taxes Paid 2532 2947 2979 3318
Long term Debt 47400 55445 65278 73754 Op. Profit before WC change10256 11184 10194 12487
Short term Debt 7288 13859 16989 17008 CF from Op. Activity (3760) (7143) (669) (3229)
Deferred Tax 378 618 540 411 Non Current investments 273 674 830 526
Total Capital Employed 81260 93157 106187 117745 Capex 7832 6967 6929 5264
Net Fixed Assets 39620 44440 48047 58600 CF from Inv. Activity (6912) (5510) (5463) (4132)
Capital WIP 4017 4165 5420 6486 Repayment of LTB 6829 10964 20836 21446
Debtors 23015 26385 30089 35990 Interest Paid 2825 3905 3926 3678
Cash & Bank Balances 3572 4097 5756 5902 Divd Paid (incl Tax) 1201 1418 1603 1878
Trade payables 18812 20850 24859 29391 CF from Fin. Activity 10781 13136 7891 7488
Total Provisions 2883 3301 4098 4478 Inc/(Dec) in Cash 109 483 1759 128
Net Current Assets 29106 31263 34272 33108 Add: Opening Balance 3522 3604 4087 5846
Total Assets 143105 169162 194184 227525 Closing Balance 3631 4087 5846 5973

HOLD
HDFC BANK 28-Feb-17
Result Update Recent Development and Result Update.

CMP 1393 Recently RBIs decision on withdrawal of FPI exposure limit on HDFCBANK
Target Price 1460 has led significant rally in the stock; however heavy buying by FPI, forced
RBI to restore the cap as exposure crossed the prescribed limit of 74%.
Previous Target Price 1400
Following this Sebi and RBI are looking at tightening trigger points for
Upside 5% foreign portfolio investment limit breach for entire banking sector. However
Change from Previous 4% we see this as a one-off event. The fundamentals of HDFCBANK remains
intact and has performed significantly better than its peers in the industry.
Market Data
HDFCBANK reported a stable performance. PAT grew by 15% YoY backed
BSE Code 500180 by similar growth in its operating profit. Operating profit growth was
NSE Symbol supported by stringent control over cost to income ratio and healthy NII
HDFCBANK
52wk Range H/L 1450/928 growth. C/I ratio was flat YoY to 42%.Total operating expenses grew by 15%
YoY. Other income grew by 9% YoY. Provisions for loans grew by 9.5% YoY
Mkt Capital (Rs Cr) 356836
and it declined by 4.4% QoQ. Net Interest Margin declined by 20 bps YoY to
Av. Volume (,000) 641 4.1%. NII grew by 18% YoY, mainly due to moderation in advances growth
Nifty 8897 reflecting the impact of repayment of loans linked to FCNR deposits. Total
net advances grew by 13% YoY. Deposit of the bank grew by healthy rate of
Stock Performance 21% despite of redemption of FCNR Deposits. CASA ratio spiked to 45%
1Month 3 Month 1Year mainly due demonetization event. Sequentially assets quality was stable
with GNPA at 1.05% against 1.02%. NNPA was at 0.32% against 0.30% a
Absolute 8.5 43.7 16.4
quarter back.
Rel.to Nifty 5.4 18.6 7.6
Share Holding Pattern-% Domestic Advances growth was backed by Retail Growth.
3QFY17 2QFY17 1QFY17 Advances growth in this quarter moderated to 13% YoY mainly due to
Promoters 26.1 26.4 26.3 repayment in overseas loan linked to FCNR Deposits. The domestic loan
portfolio of bank grew by 17.5% YoY while it saw contraction of 41% YoY in
Public 73.9 73.6 73.7
overseas loan. Now the domestic loan book constitutes 96% of the
Others 0.0 0.0 0.0
advances. Healthy retail loan growth continued in personal loan, credit card,
Total 100.0 100.0 100.0 home and LAS which YoY grew by 32%, 20%, 25% and 36% respectively.
On the vehicle segment auto, commercial vehicle and two-wheeler grew by
Company Vs NIFTY 16% each YoY. On sequential basis some of the loan product got impacted
due to demonetization. Business banking book contracted by 3% QoQ
150 HDFCBANK NIFTY largely due to huge repayment in demonetization period.
140
130
120 CASA Deposits Spiked

110
Overall deposits registered a healthy growth of 21% YoY mainly due to
100 demonetization drive. However this strong growth was despite of FCNR
90 redemption of nearly Rs 20000 Cr (US $3 Bn). CASA deposit grew by 37%
80 YoY backed by 38% and 37% growth in both SA and CA respectively. CASA
ratio spiked to 45% against 40% a quarter back. However we expect the
most of the CASA deposits to outflow from the bank after the increase in
withdrawal limit by RBI and hence expect the CASA at 42% level to sustain.
DEEPAK KUMAR
Deepak.kumar@narnolia.com
HDFCBANK
Stable Assets Quality

Assets quality was broadly stable on sequential basis with GNPA at 1.05% against 1.02% and NNPA at 0.32%
against 0.30%. Provision coverage ratio was 70% against 71% QoQ. Assets quality of HDFCBANK remains one of
the best in the industry. Going forward we are less concerned about the assets quality given its portfolio mix towards
secured retail loans and better rated corporate loan. We expect the credit cost of 65 bps going forward.
NIM Impacted by Demonetization
NIM declined by 20 bps YoY and 10 bps QoQ to 4.10% reflecting the impact of demonetization. NIM got impacted
mostly due to lower loan growth as well as negative carry of interest for fortnight on excess liquidity imposed by RBI.
Going forward CASA will have major impact on NIM. However management believes the NIM to range between 4%-
4.3%.
Fee Income Moderated
Other income growth moderated to 9% YoY. Fee income registered the 10% growth YoY. The fee income was
mainly impacted by the waive-off of card fee during the demonetization period. Management highlighted that the
third party distribution fee growth was also muted largely impacted by muted insurance income. However
management hopes to recover the same in further quarter. FX & Derivatives income grew by 7% YoY. Treasury gain
grew by 22% YoY.
Quarterly Performance (Rs in Crore)

Financials 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ%
Interest Inc. 12396 13006 14041 14773 15411 15997 16516 17070 17606 14% 3%
Interest Exp. 6696 6993 7652 8092 8343 8543 8735 9076 9297 11% 2%
NII 5700 6013 6389 6681 7069 7453 7781 7994 8309 18% 4%
Other Income 2535 2564 2462 2552 2872 2866 2807 2901 3143 9% 8%
Total Income 8235 8577 8851 9233 9941 10319 10588 10895 11452 15% 5%
Ope Exp. 3456 3855 4001 4190 4205 4584 4769 4870 4843 15% -1%
PPP 4779 4722 4850 5043 5736 5735 5819 6025 6609 15% 10%
Provisions 560 577 728 681 654 662 867 749 716 9% -4%
PBT 4218 4145 4122 4362 5082 5072 4952 5276 5893 16% 12%
Tax 1424 1338 1426 1492 1725 1698 1714 1820 2028 18% 11%
Net Profit 2795 2807 2696 2869 3357 3374 3239 3455 3865 15% 12%
Profitability Metrix 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(bps) QoQ(bps)
Yield On Earning Assets % 10.5 10.5 10.6 10.4 10.1 9.9 9.8 9.7 9.6 -0.58 -0.11
Cost of Deposits % 5.9 5.9 6.0 6.0 5.8 5.6 5.5 5.4 5.3 -0.46 -0.10
NIM % 4.4 4.4 4.3 4.2 4.3 4.3 4.4 4.2 4.1 -0.20 -0.10
Other Income as a % of 30.8 29.9 27.8 27.6 28.9 27.8 26.5 26.6 27.4 -1.45 0.82
Total
C/I Net%Income
Ratio 42.0 44.9 45.2 45.4 42.3 44.4 45.0 44.7 42.3 -0.01 -2.42
Provision/PPP % 11.7 12.2 15.0 13.5 11.4 11.6 14.9 12.4 10.8 -0.57 -1.60
Tax % 33.8 32.3 34.6 34.2 33.9 33.5 34.6 34.5 34.4 0.47 -0.09
PAT/Total Net Income % 33.9 32.7 30.5 31.1 33.8 32.7 30.6 31.7 33.8 -0.02 2.04
NII Growth % (YoY) 23.0 21.4 23.5 21.2 24.0 24.0 21.8 19.6 17.6 -6.46 -2.10
Opex Growth % (YoY) 19.4 21.4 25.9 19.8 21.7 18.9 19.2 16.2 15.2 -6.49 -1.07
PPP Growth % (YoY) 22.9 24.9 26.2 24.2 20.0 21.5 20.0 19.5 15.2 -4.81 -4.24
PAT Growth % (YoY) 20.2 20.6 20.7 20.5 20.1 20.2 20.2 20.4 15.1 -4.97 -5.27

HDFCBANK
Yield On Earning Assets % Cost of Deposits % NIM % PAT Growth % (YoY) NII Growth % (YoY)
C/I Ratio %
12.0
30.0 47.0
10.0
25.0 46.0
8.0 45.0
20.0 44.0
6.0
15.0 43.0
4.0 42.0
10.0
41.0
2.0 5.0 40.0
- - 39.0
Other income Break Up (Rs in Crore)

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Fees & Commissions 1807 1835 1713 1869 2005 2172 1978 2104 2207 10% 5%
FX & Derivatives 253 329 348 320 277 283 315 295 297 7% 1%
Profit / (loss) on Invest. 266 196 126 162 328 116 277 284 399 22% 41%
Miscellaneous Income 210 204 275 201 262 295 237 219 240 -8% 10%
Including
Total Other Recoveries
Income 2535 2564 2462 2552 2872 2866 2807 2901 3143 9% 8%
Other Income/Total Net Income % Fee Income/ Advances %

31.0 0.60
30.0 0.50
29.0 0.40
28.0
0.30
27.0
0.20
26.0
25.0 0.10
24.0 -
Outlook & Valuation:
We continue to like HDFC Bank given its strong fundamentals, steady loan growth, adequate capital, best in assets quality,
strong branch network and intensive digitalization initiatives. While 3Q FY17 saw some uneven activities, we expect the
operations of banking to come to its normal situation. Despite intense competition, we expect margins of HDFCBANK to sustain
in the range of 4%-4.3% backed by normal CASA level of 40% and healthy growth in retail assets. Earning momentum will be
maintained with core revenue of 19% plus growth going forward backed by healthy domestic loan growth with higher yield
products. We expect RoE of 19% going forward. Recent rally in the stock has led to achieve our previous target price of Rs
1400. However despite this rally we dont think to exit the stock at current levels given its strong fundamentals and recommend
must have in the portfolio. Also HDFCBANK has performed much better than its peers in the industry. We maintain HOLD in
this stock with the target price of Rs 1460.
11
Narnolia Securities Ltd
HDFCBANK
Concall Highlights:
>> Around Rs 13000 Cr (US $2 Bn) of overseas loan got repayment linked to FCNR Deposits.
>> Around Rs 20000 Cr (US $3 Bn) FCNR Deposits got redemption during the quarter.
>> Domestic loan book is now at 96% of the portfolio. While it grew by 17% YoY.
>> Due to demonetization bank witnessed higher repayment and prepayment in Overdraft and cash credit facility
which affected the loan growth. There was slightly muted disbursement on retail lending.
>> Decline in NIM was due to various factor including the impact of negative carry of interest on excess liquidity
imposed by RBI during the quarter to some extent. However management expect the NIM in the range of 4-4.3% going
forward.
>> Other expenses was lower as commission to dealer got impacted due to muted retail loan disbursement. There
was also reduction in staff number.
>> Fee income was impacted due to waive off of fee on card business. Also third party fee was muted mainly due to
lower insurance business fee.
Assets Quality Performance

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY Ch. QoQ Ch.
GNPA (Rs) 3468 3438 3652 3828 4255 4393 4921 5069 5232 23% 3%
GNPA % 0.99 0.93 0.95 0.91 0.97 0.94 1.04 1.02 1.05 0.08 0.03
NNPA (Rs) 904 896 1028 1038 1261 1320 1493 1489 1564 24% 5%
NNPA % 0.26 0.25 0.27 0.25 0.29 0.28 0.32 0.30 0.32 0.03 0.02
Slippages (Rs) 1164 1720 1390 1300 1551 1700 1761 1440 1948* 26% 35%
Restructured Assets % 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.00 0.00
Specific PCR % 74 74 72 73 70 70 70 71 70 -0.27 -0.53
*3Q FY17 Slippage is Basel disclosure number and hence may not be comaparable.
GNPA % NNPA % Restructured Assets % Specific PCR %
1.20
74
1.00 73
0.80 72
0.60 71
0.40 70
69
0.20
68
- 67

HDFCBANK
Advances 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Net Advances (Rs in Cr) 347088 365495 382010 418541 436364 464594 470622 494418 495043
Advances Growth YoY % 16.97 20.63 22.40 27.89 25.72 27.11 23.20 18.13 13.45
>> Growth QoQ % 6.05 5.30 4.52 9.56 4.26 6.47 1.30 5.06 0.13
Break-up of Advances % (As per internal business classification)

Advances Break Up % 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Auto 13.14 12.79 13.11 12.81 12.91 12.33 12.66 13.03 13.24
Personal Loans 7.20 7.12 7.61 7.75 8.13 8.12 8.72 9.11 9.46
Home Loans 5.76 6.60 7.04 6.81 6.52 6.86 7.14 6.79 7.16
Business Banking 14.05 13.65 13.34 13.74 13.66 13.15 12.84 13.31 12.84
Kisan Gold Card 3.95 4.45 4.42 4.67 4.61 4.94 4.76 5.03 4.83
Credit Cards 4.43 4.42 4.41 4.30 4.51 4.42 4.52 4.32 4.78
CV/CE 7.19 6.83 6.93 6.92 6.82 6.66 6.68 6.79 6.97
Others 2.78 3.02 2.81 2.88 3.06 3.15 3.22 3.29 3.27
Two Wheelers 1.37 1.38 1.38 1.38 1.40 1.37 1.41 1.44 1.44
Gold Loans 1.13 1.11 1.11 1.04 1.01 0.99 1.04 1.03 0.97
Loans against securities 0.35 0.37 0.35 0.36 0.38 0.41 0.40 0.42 0.45
Total Retail Advances 61.33 61.75 62.53 62.66 63.00 62.38 63.39 64.55 65.41
Corp. and Overseas Adva. 38.67 38.25 37.47 37.34 37.00 37.62 36.61 35.45 34.59
Deposits 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Deposits (Rs in Cr) 414128 450796 484175 506909 523997 546424 573755 591731 634705
>> Growth YoY % 18.59 22.72 30.13 29.75 26.53 21.21 18.50 16.73 21.13
>> Growth QoQ % 6.00 8.85 7.40 4.70 3.37 4.28 5.00 3.13 7.26
CA % 13.79 16.32 13.82 13.77 14.13 16.18 13.26 13.38 15.95
SA % 27.11 27.71 25.81 25.95 25.85 27.06 26.61 27.03 29.40
CASA % 40.90 44.03 39.63 39.72 39.98 43.25 39.87 40.41 45.36
>>CASA Growth YoY % 11.00 20.58 19.92 19.41 23.67 19.05 19.24 18.76 37.43
>> Growth QoQ % 0.46 17.18 -3.34 4.94 4.04 12.81 -3.19 4.51 20.40
Credit Deposit Ratio% 83.81 81.08 78.90 82.57 83.28 85.02 82.03 83.55 78.00
CA % (of Deposits ) SA % (of Deposits)

Retail Adv. % Corp. and Overseas Adv. % Adv. Growth YoY %
CASA % >>CASA Growth YoY %
70.0 30.0
50 40.0
60.0 25.0 45 35.0
50.0 40
20.0 30.0
35
40.0 30 25.0
15.0 25 20.0
30.0
10.0 20 15.0
20.0 15
10.0
10.0 5.0 10
5 5.0
- - - -

HDFCBANK

INCOME STATEMENT (Rs in Crore) RATIOS
FY13 FY14 FY15 FY16 Business Ratios FY13 FY14 FY15 FY16
Int./disc. on advances / bills 26,822 31,687 37,181 44,828 Credit-Deposit(%) 80.9 82.5 81.1 85.0
Income on Investments 7,820 9,037 10,706 14,120 CASA % 47.0 45.0 44.0 43.0
Int. on bal.with RBI 282 356 517 362 Efficiency Ratios
Others 141 56 66 912 Emp. Cost as a % of Total Inco. (%) 17.5 15.8 15.1 14.9
Total Interest Income 35,065 41,136 48,470 60,221 Other Exp./Total Inco. (%) 32.1 29.8 29.4 29.4
Total Interest expended 19,254 22,653 26,074 32,630 Cost Income Ratio (%) 49.6 45.6 44.6 44.3
Net Interest Income 15,811 18,483 22,396 27,592 Spread Analysis As Calculated
Other Income 6,853 7,920 8,996 10,752 Yield on Advances (%) 12.3 12.2 11.8 11.5
Total Income 22,664 26,402 31,392 38,343 Yield on Investments (%) 8.5 8.6 8.7 8.9
Total Operating Expenses 11,236 12,042 13,988 16,980 Yield on Earning Assets (%) 10.5 10.4 10.4 10.3
Pre Provisioning Profit 11,428 14,360 17,404 21,364 Cost of Deposits (%) 6.0 5.7 5.7 5.9
Provisions and Contingencies 1,677 1,588 2,076 2,726 Cost of Fund (%) 6.4 6.0 5.8 5.9
Profit Before Tax 9,751 12,772 15,329 18,638 Interest Spread (%) 4.1 4.5 4.6 4.4
Tax 3,024 4,294 5,113 6,342 NIM (%) 4.6 4.4 4.4 4.3
PAT 6,726 8,478 10,216 12,296 Profitability Ratio
RoE % 20.3 21.3 19.4 18.3
RoA % 1.8 1.9 1.9 1.9
BALANCE SHEET (Rs in Crore) Int. Expended / Int. Earned (%) 54.9 55.1 53.8 54.2
FY13 FY14 FY15 FY16 Provisions/PPP (%) 14.7 11.1 11.9 12.8
Capital 476 480 501 506 Other Income/Net Income (%) 30.2 30.0 28.7 28.0
Reserves & Surplus 35738 42999 61508 72172 Tax Rate (%) 31.0 33.6 33.4 34.0
Deposits 296247 367337 450796 546424 Asset Quality Ratio
Borrowings 33007 39439 45214 53018 GNPA (%) 1.01 0.98 0.93 0.94
Other Liabilities & Provisions 34864 41344 32484 36725 GNPA(Rs) 3018 2989 3438 4393
Total Capital & Liabilities 400332 491600 590503 708846 NNPA (%) 0.30 0.30 0.25 0.28
NNPA (Rs) 797 820 896 1320
Cash & Balances with RBI 14627 25346 27510 30058 PCR (%) 74 73 74 70.0
Bal. with Bank&Money at Call 12653 14238 8821 8861 Os. Std. Restr. Assets (%) 0.20 0.20 0.10 0.10
Investments 111614 120951 166460 163886
Advances 239721 303000 365495 464594 Capital Adequacy Ratio
Fixed Assets 2703 2940 3122 3343 Capital Adequacy Ratio (%) 16.8 16.1 16.8 15.5
Other Assets 19014 25125 19095 38104 Tier I Capital (%) 11.1 11.8 13.7 13.2
Total Assets 400332 491600 590503 708846 Tier II Capital (%) 5.7 4.3 3.1 2.3

BUY
BRITANNIA 27th Feb. 2017
Company Update Recent Updates

CMP 3228 Recently, the companys management has indicated in interview that
EBITDA margin can be better going forward and it is looking for every
Target Price 3700
means to cut cost although it will be slightly tough. Secondly, it will take
Previous Target Price 3700 around 3-6 months for the volume to come back to the double-digit terrain.
Upside 15% The company will launch a new category very soon which may be next
Change from Previous NA growth driver for Britannia going forward. BRITANNIA is also looking at the
micro-snacking space for expansion. As far as international business is
concern, management expects International business to grow to 12-13 %
Market Data of total sales in the next 5 years. On direct distribution front, BRITANNIA
BSE Code 500825 will keep investing in its direct distribution reach with the plan to add
NSE Symbol BRITANNIA 200000 outlets every year. The company is planning to increase prices by
52wk Range H/L 3575/2523 6-7% in FY18. Considering managements proactive approach towards
maintaining margin, thrust on expansion of direct distribution reach, focus
Mkt Capital (Rs Cr) 38,741 on cost efficiency and plans to launch new products and category, we are
Av. Volume(,000) 151 positive on this stock and maintain `BUY rating on BRITANNIA with a
Nifty 8,940 target price of Rs3700.
Result Update(Q3FY17)
Stock Performance
1M 3M 12M Sales grew by 6% YoY to Rs 2355 cr led by pricing growth of 5.5-6% in
Absolute 4.8 11.2 18.7 Q3FY17.EBITDA remained flat in this quarter to Rs 313 cr. Gross margin
declined by 193 bps YoY to 39.8% led by inflation in flour (12%),Sugar
Rel.to Nifty -2.3 -0.5 -5.3
(40%), palm oil (20%) and milk(19%) in Q3FY17.EBITDA margin declined
by 74 bps YoY to 13.3%. PAT margin declined by 13 bps YoY to 9.4%.PAT
Share Holding Pattern-% for this quarter grew by 5% YoY to Rs 220 cr.
3QFY17 2QFY17 1QFY17
Promoters 50.7 50.7 50.7 Concall Highlights(Q3FY17)
Public 49.3 49.3 49.3
Market will be back to normal in 3 to 6 months.
Others -- -- -- In next to 2-3 months the company will restart pricing action in different
Total 100 100 100 SKU. The company is planning to 6 to 7% price hike in FY18.
Capex: Rs 350-400 cr Capex in next 18 months which includes plants,
company is putting up in Maharashtra and other places but excluding dairy
Company Vs NIFTY
business.
140 BRITANNIA NIFTY Management expects similar type of volume growth in Q4FY17.Expects to
130 clock mid single digit volume growth after demonetization effect ease off.
Tax rate: 31% for next quarters than it will resume to normal levels.
120
The company is looking to launch a new category of product.
110
Rs,Cr
100 Financials 3QFY17 2QFY17 (QoQ)-% 3QFY16 (YoY)-%
90 Sales 2355 2456 -4% 2220 6%
80 EBITDA 313 339 -8% 311 0%
Net Profit 220 234 -6% 211 5%
EBITDA% 13% 14% (53 Bps) 14% (74 Bps)
Rajeev Anand PAT% 9% 10% (17 Bps) 9% (13 Bps)
rajeev.anand@narnolia.com
Concall Highlights(Q3FY17)
Wholesale and rural was impacted.

The companys effort of expansion of direct reach is paid off. BRITANNIA has lower dependency on whole sale among other
FMCG players.
Volume growth in the core business remained approx. 2% and company gained market share in Q3FY17.
The company witnessed inflation in Flour (12%), Sugar (40%), Palm oil (20%) and Milk (19%) in Q3FY17.
Pricing action has been limited due to impact of demonetization in Q3FY17.
Dairy subsidiary businesss Bottom line impacted negatively due to high milk prices and normal tax rate.
International business is facing headwinds.
Middle East business is showing serious down trend.
The company is focusing on Rusk and Cake business. The company has put up one line in Tamil nadu factory for value added
Rusk manufacturing.
BRITANNIA is looking to set up factory in Nepal in 2017. The company is also assessing opportunities in Africa. The company is
fully concentrating on international business in Next 2years.
BRITANNIA is setting up manufacturing hub in Maharashtra which will house some of Innovation and new product lines other
than serving the demand requirement of base business. It will also serve as hub for dairy business.
Other expenses: company will maintain other expenses at level of 19.62%(Q3FY17 level).
Net Sales and PAT(in cr.)
3000 300
Sales(in cr) PAT(in cr)
270
2500 250
234
219 219 220
211
2000 200
190 190
167
1500 150
137
108 114
1000 98 101 100
89
500 50
1552
1756
1793
1812
1787
1975
2033
2064
2019
2209
2220
2211
2197
2456
2355
0 0
EBITDA and PAT(%)

18.0%
16.0%
14.3% 14.7% 14.0% 14.4%
13.7% 13.8%
13.2% 13.3%
14.0% 12.3%
12.0% 11.1% 10.8%
9.9% 10.0% 9.5%
9.2% 9.3% 9.5% 9.4% 9.5% 9.4%
10.0% 8.9% 8.9% 8.6%
8.1%
8.0% 6.4% 6.8%
5.8% 5.6% 5.6% 5.9%
6.0%
4.0% EBITDA margin PAT margin

2.0%
0.0%
1QFY142QFY143QFY144QFY141QFY152QFY153QFY154QFY151QFY162QFY163QFY164QFY161QFY172QFY173QFY17

FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E
Revenue 8679 9352 10471 11652 EPS 67 71 69 83
COGS 4999 5609 6440 7021 Payout (incl. Div. Tax.) 30% 33% 33% 33%
GPM 42.4% 40.0% 38.5% 39.8% Valuation(x)
EBITDA 1227 1279 1259 1546 Price / Book Value 18 17 14 11
EBITDA Margin (%) 14.1% 13.7% 12.0% 13.3% Dividend Yield (%) 0.8% 0.7% 0.7% 0.8%
EBIT 1113 1153 1110 1302 RoE 45.6% 37.5% 29.9% 29.4%
Interest 5 5 4 4 RoCE 61.6% 49.8% 39.5% 38.3%
Tax 392 411 400 478 Asset Turnover (x) 3 2 2 2
Tax Rate (%) 32.4% 32.4% 32.4% 32.4% Debtors (No. of Days) 7 9 7 7
Reported PAT 806 855 833 995 Inventory (No. of Days) 32 35 32 32
Dividend Paid(including dividend
231 tax) 339 330 394 Creditors (No. of Days) 31 30 30 30
No. of Shares 12 12 12 12 Net Debt/Equity (x) 0 0 0 0

FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E
Share Capital 24 24 24 24 OP/(Loss) before Tax 1,198 1,266 1,233 1,473
Long term Debt 41 33 26 18 Oper. Prof. bef. WC change 1,229 1,396 1,382 1,721
Short term Debt 86 86 86 86 CF from Op. Activity 961 823 1,030 1,227
Deferred Tax 0 0 0 0 Non Current investments (211) - - -
Capital Employed 1807 2316 2809 3402 Capex (251) (269) (572) (270)
Capital WIP 90 90 90 90 Repayment of LT Borrowings (1) - - -
Debtors 171 231 212 233 Interest Paid (5) (5) (4) (4)
Cash & Bank Balances 88 113 55 111 Divd Paid (incl Tax) (231) (339) (330) (394)
Trade payables 742 769 861 958 CF from Fin. Activity (248) (351) (342) (406)
Total Provisions 509 595 718 856 Inc/(Dec) in Cash 8 25 (58) 56

HOLD
RELIANCE INDUSTRIES LTD 23-Feb-17
Company Update Reliance Jio is now finally set to commercialize its operations from 1st April
CMP 1207 2017. As per new plan, which is announced on 21st Feb 2017, customers
can opt for ongoing free calls, free data (subject to 1GB per day) and get
Target Price 1280
access to its media suite for a one-time fee of Rs 99 and Rs 303 monthly
Previous Target Price 1140 plan. We assume that at this competitive pricing, Jio will be able to retain
Upside 6% approx. 40% of its customers base post expiry of Happy new year offer
Change from Previous 12% on 31 March 2017. This will attract additional revenue of approx Rs. 15000
Cr in FY18. On the other hand, Reliance commissioned the first phase of
new Paraxylene(PX) project at Jamnagar in Q3FY17.With the
Market Data commissioning of this plant, PX capacity will more than double from 2.0 to
BSE Code 500325 4.2 MTPA. Further management has guided for re-opening of its 1400
NSE Symbol RELIANCE retail outlets by March 2017 which will boost revenue in petrochemicals
52wk Range H/L 1211/925 segment.
Mkt Capital (Rs Cr) 391744 Outlook
Av. Volume(,000) 532 Going forward, management of Jio has ambitious plan to cover 99% of
Nifty 8926 population in 2017. Jio has already achieved its target 100 mn customers
in just 170 days of its launch which is commendable. We expect ROE of
11% in FY17E. Considering the future growth prospects in both Jio and
Stock Performance Petrochemicals segment, we recommend Hold rating in this stock while
1M 3M 12M revising our recommended target price to Rs. 1280.
Absolute 18.8 27.9 24.3
Rel.to Nifty 15.0 4.1 15.5 Corporate Highlights For The Quarter
Gross Refining Margin (GRM) of USD 10.8/bbl for the quarter
Share Holding Pattern-% In December 2016, RIL commissioned the first phase of new Paraxylene
3QFY17 2QFY17 1QFY17 project at Jamnagar
Promoters 46.5 46.7 46.7 Outstanding debt as on 31st December 2016 was Rs.194,381 cr
Public 53.5 53.3 53.3 compared to Rs. 180388 cr as on 31st March 2016.
Others The capital expenditure for 3Q FY 17 was Rs. 37,791 crore.
Interest cost was at Rs. 1,209 crore in 3QFY17 as against Rs. 945 crore
in corresponding period of FY16, increase is primarily on account of higher
Company Vs NIFTY average exchange rate for the quarter.
130 RELIANCE NIFTY Reliance has operated 1,151 petroleum retail outlets in the country in
125
3QFY17.
120
115 Exports from India operations were higher by 4.0% at Rs. 38,038 crore
110
105 Rs,Cr
100 Financials 2012 2013 2014 2015 2016
95
90 Sales 358501 397062 434460 375435 276544
85
80
EBITDA 34508 33045 34799 37364 44257
Net Profit 19724 20879 22493 23566 27630
Jul-16
Feb-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
EPS 60 65 70 73 85
Aditya Gupta P/E 12.4 12.0 13.4 11.3 12.3
aditya.gupta@narnolia.com
Petrochemical business
3Q FY17 revenue from the Petrochemicals segment increased by 17.8% YoY to Rs. 22,854 crore, primarily due to increase in
prices across polymers and polyester chain.Petrochemicals segment EBIT increased sharply by 25.5% to Rs. 3,301 crore,
supported by favorable product deltas and marginal volume growth.
E&P Business
3Q FY17 revenues for the Oil & Gas segment decreased by 31.0% YoY to Rs. 1,215 crore. The decline in revenue was led by
lower upstream production and lower domestic gas price realization. The unfavorable upstream price environment impacted
segment EBIT which was at Rs. (295) crore, as against Rs. 258 crore in the corresponding period of the previous year. Domestic
production (RIL share) was at 23.1 Bcfe, down 24% YoY. For the accounting quarter, upstream production (RIL Share) in US
Shale business was 41.4 Bcfe, down 19% YoY basis.
Organised Retail:
Revenues for 3Q FY17 grew by 47.2% Y-o-Y to Rs. 8,688 crore from Rs. 5,901 crore. The increase in turnover was led by growth
across all consumption baskets. The business delivered strong PBDIT of Rs. 333 crore in 3Q FY17 as against Rs.237 crore in
the corresponding period of the previous year. During the quarter, Reliance Retail added 111 stores across various store
concepts. Trends crossed a milestone of 300 stores during the quarter. At the end of the quarter, Reliance Retail operated 3,553
stores across 686 cities with an area of over 13.25 million square feet.
Refining and Marketing:
During 3Q FY17, revenue from the Refining and Marketing segment increased by 7.5% YoY to Rs. 61,693 crore ($ 9.1 billion).
Segment EBIT was at Rs. 6,194 crore, down 4.3% YoY on account of lower volumes and decline in GRMs. GRM for 3Q FY17
stood at $ 10.8/bbl as against $ 11.5/bbl in 3Q FY16. Reliance GRM outperformed Singapore complex margins by $ 4.1/bbl.
Reliance Jamnagar refineries processed 17.8 MMT in 3Q FY17, marginally lower on QoQ. As at the end of the quarter, Reliance
operated 1,151 petroleum retail outlets in the country.
Digital service
During the quarter, Jio announced the launch of the Jio Happy New Year Offer (JNO) effective from 4th December 2016.
Under the JNO, all the Jio subscribers are entitled to certain special benefits, which comprise of Jios Data, Voice, Video and the
full bouquet of Jio applications and content, absolutely free, up to 31st March 2017.Till 31st Dec 2016 there were 72.4 million
subscribers on the network.Jio is the only operator in India to deploy pan-India LTE on a sub-GHz band, in addition to pan-India
1800MHz and 2300MHz spectrum band.
Key Operating Metrics:

3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
GRM($/bbl) 7.6 7.6 7.6 7.6 7.6 7.6 7.6 7.6 7.6 7.6 7.6 7.6 7.6
Singapore GRM 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3
Premium 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3
Exchange rate 62 62 62 62 62 62 62 62 62 62 62 62 62
GRM(Rs/bbl) 472 472 472 472 472 472 472 472 472 472 472 472 472
Crude Refined(MT) 17 17 17 17 17 17 17 17 17 17 17 17 17
Crude Oil Price(USD/bbl) 111 111 111 111 111 111 111 111 111 111 111 111 111
Crude Revenue(Rs Cr/MMT) 230,691 230,691 230,691 230,691 230,691 230,691 230,691 230,691 230,691 230,691 230,691 230,691 230,691
Trend of Crude revenue 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Refining Business
2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Refining Revenue 110,045 107,676 96,668 98,081 103,590 81,777 56,442 68,729 60,768 57,385 48,064 56,568 60,527 61,693
Refining EBIT 3,243 3,240 3,962 3,814 3,844 3,267 4,902 5,252 5,461 6,491 6,394 6,593 5,975 6,194
Refining EBIT Margin 3% 3% 4% 4% 4% 4% 9% 8% 9% 11% 13% 12% 10% 10%
Petrochemicals
Petrochemicals Revenue 27,128 27,121 26,541 25,398 26,651 23,001 21,754 20,858 21,239 19,398 20,915 20,718 22,422 22,854
Petrochemicals EBIT 2,381 2,115 2,150 1,863 2,361 2,064 2,003 2,338 2,531 2,639 2,713 2,806 3,417 3,301
Petrochemicals EBIT Margin 9% 8% 8% 7% 9% 9% 9% 11% 12% 14% 13% 14% 15% 14%
Exploration & Production
Oil and Gas Revenue 2,682 2,926 2,798 3,178 3,002 2,841 2,513 2,057 2,067 1,765 1,638 1,340 1,327 1,215
Oil and Gas EBIT 956 607 762 1,042 818 832 489 32 242 90 14 (312) (491) (295)
Oil and Gas EBIT Margin 36% 21% 27% 33% 27% 29% 19% 2% 12% 5% 1% -23% -37% -24%
Retail
Organized Retail Revenue 3,470 3,941 3,653 3,999 4,167 4,686 4,788 4,698 5,091 6,042 5,781 6,666 8,079 8,688
Organized Retail EBIT 70 38 24 81 99 133 104 111 117 147 131 148 162 231
Organized Retail EBIT Margin 2% 1% 1% 2% 2% 3% 2% 2% 2% 2% 2% 2% 2% 3%
Investment Rationale
Massive Capex programme coming onstream: RIL has spent ~70% of the planned USD1850Cr capex (this number was
USD1650Cr earlier) on its four key projects (petcoke gasification, polyester expansion, off-gas cracker and ethane
sourcing). We believe that the three expansion projects: petcoke gasifier, refinery off-gas cracker, and ethane intake
facilities will be fully operational by FY17E.The companys massive capex programme will push future earnings.
Telecom launch in FY18: The commercial launch will give us better visibility on execution, business outlook, and earnings.
About the Company
RIL is the largest private player in the refining, petrochemical and E&P sectors in India.The petrochemicals segment includes
production and marketing operations of petrochemical products which include, polyethylene, polypropylene, polyvinyl chloride,
poly butadiene rubber, polyester yarn, polyester fibre, purified terephthalic acid, paraxylene, ethylene glycol, olefins, aromatics,
linear alkyl benzene, butadiene, acrylonitrile, caustic soda and polyethylene terephthalate. The refining segment includes
production and marketing operations of the petroleum products. The oil and gas segment includes exploration, development and
production of crude oil and natural gas. RIL has made significant investments in US shale gas. In terms of EBIT, Refining
contribute 60% and Petrochemicals 30%. RIL is also expanding its presence in the areas of consumer retailing and telecom.

Revenue (Net of Excise Duty)
397062 434460 375435 276544 EPS 65 70 73 85
COGS 332250 363022 294046 189054 Payout (incl. Div. Tax.) 14% 14% 14% 14%
GPM 84% 84% 78% 68% Valuation(x)
EBITDA 33045 34799 37364 44257 Price / Book Value 1.4 1.5 1.2 1.4
EBITDA Margin (%) 8% 8% 10% 16% Dividend Yield (%) 1% 1% 1% 1%
EBIT 21813 23598 25817 31341 RoE 11% 11% 11% 11%
Interest 3463 3836 3316 3608 RoCE 9% 8% 8% 8%
Tax 5331 6215 7474 8264 Asset Turnover (x) 1.1 1.0 0.7 0.5
Reported PAT 20879 22493 23566 27630 Inventory (No. of Days) 50 48 52 62

Reserves and surplus 179094 195730 215539 240695 Depreciation 13393 11201 11547 12916
Shareholders' funds 182030 198670 218482 243643 Direct Taxes Paid 4824 6213 6435 8264
Long term Debt 70960 101016 120777 142000 Operating profit before WCchanges
34373 38444 38994 52000
Total Borrowings 89322 133808 148742 165954 CF from Op. Activity 36918 43261 34374 104743
Non Current liabilities 12119 13025 23619 31439 Movement in Loans& Advances-2610 -426 -232 1917
Long term provisions 531 290 1554 1869 Capex -30726 -60087 -63364 -101199
Short term Provisions 4557 4446 5392 1636 CF from Inv. Activity -27650 -73070 -64898 -99282
Current liabilities 77912 82364 110588 161916 Repayment of LTB 19182 28215 29413 21223
Total liabilities 362357 428843 504486 606214 Interest Paid -4626 -5619 -6149 -3316
Net Fixed Assets 183439 232911 318523 419722 Divd Paid (incl Tax) -2949 -3123 -3268 -3790.92
Non Current Investments 13979 26867 25437 37005 CF from Fin. Activity 408 13713 8444 10105.1
Current investments 28869 33735 51014 39928 Inc/(Dec) in Cash 9676 -16096 -22080 15566.1
Current assets 155914 151069 136577 126587 Add: Opening Balance 40780 50456 34552 12545
Total Assets 362357 428843 504486 606214 Closing Balance 50456 34360 12472 28111.1
Please refer to the Disclaimers at the end of this Report.

Hold
LUPIN LTD 21st Feb 2017
Company Update Lupin Ltd. has reported Revenue of Rs. 4483 Cr in Q3 FY17(up by 26%
CMP 1461 YoY basis) led by the growth in the North America. Revenue from North
America has increased to Rs. 2176 Cr (up by 57% YoY basis). The
Target Price 1690
Company launched 4 new products in the US market during last quarter
Previous Target Price 1690 and has received approval for 11 products. The company now has 128
Upside 16% products in the US market. Recently Lupin has launched morphine sulfate
Change from Previous 0% ER Tablets in US. The tablets are indicated for the management of severe
pain. As per the IMS MAT September 2016 data, sales of morphine sulfate
was USD 282.9 million. Lupin filed 6 ANDAs and received 11 approvals
Market Data from the USFDA during the last quarter. Cumulative ANDA filings stood at
BSE Code 500257 344 as on 31st Dec 2016.
NSE Symbol LUPIN Result Highlights
52wk Range H/L 1874/1280
Mkt Capital (Rs Cr) 65997 EBITDA margin has improved by 330bps to 27.1% in Q3 FY17.
Av. Volume(,000) 129 India formulation sales grew by 11.9% to Rs. 991 Cr. during Q3 FY2017
Nifty 8879 as compared to Rs. 886 Cr. during Q3 FY2016.
Lupins LATAM sales increased by 32.8% to Rs. 117 Cr during Q3
Stock Performance FY2017 as compared to Rs. 88 Cr. during Q3 FY2016.
1M 3M 12M R&D expenditure for Q3 FY17 was Rs. 568 Cr , 12.9% of sales.
Absolute -0.3 -16.9 2.8 Effective tax rate in the last quarter is Rs. 39%.
Rel.to Nifty -5.9 -42.1 -4.8 Lupin filed 6 ANDAs and received 11 approvals from the US FDA during
last quarter.
Share Holding Pattern-% The Company filed 2 MAA with the European authority during last
3QFY17 2QFY17 1QFY16 quarter.
Promoters 46.71 46.76 46.76
Public 53.29 53.24 53.24 Outlook:
Others
Total 100 100.0 100.0 Management has guided for US$250mn of sales in FY18 from the Gavis
portfolio. Management expects to launch 25 new products in FY18, which
will be the major growth trigger for the company. Customer consolidation
Company Vs NIFTY
and High single-digit Price erosion in US is the major ongoing pressure in
125 LUPIN NIFTY the US market. Considering strong growth from North America on the back
120
of new launches in FY18, we recommend HOLD rating in this stock while
115
maintaining our target price of Rs. 1690.
110
105 Rs,Cr
100 Financials 2012 2013 2014 2015 2016
95 Sales 7097 9669 11403 13010 14396
90
85
EBITDA 1445 2270 3003 3620 3753
80 Net Profit 888 1340 1870 2444 2271
Jul-16
Feb-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
EPS 19 29 41 53 51
May-16
Oct-16
Nov-16
Apr-16
Mar-16
P/E 27.3 21.4 22.8 37.6 39.8

Aditya Gupta
aditya.gupta@narnolia.com
Company Revenue driver
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 QoQ Growth YoY Growth
Formulations
North America 1,154 1,381 2,191 2,189 1,998 2,176 9% 58%
India 888 886 756 931 996 991 0% 12%
APAC 446 463 453 542 552 560 1% 21%
EMEA 222 219 245 219 236 256 8% 17%
LATAM 108 89 92 109 99 118 19% 33%
ROW 41 30 61 37 40 37 -7% 24%
API 333 284 284 287 292 268 -8% -5%
Net Sales 3,193 3,350 4,082 4,314 4,211 4,405 5% 31%
Recent Management Speak
Management has maintained its capex guidance for FY17 is Rs. 1800-2000 Cr and Rs. 1500 Cr for FY18
Forex gain , lower cost & R&D exp. Help the company to improve margins.
Foray into Branded / Specialty segment with the acquisition of Temmler portfolio in Germany in Europe.
Over 25 new launches lined up for FY18,14 products have already been approved.
25+ ANDA launches in FY18E, Plans to file 30 ANDAs in US
Management has guided that higher debt is on account of acquisition and it will be re-paid in longer time frame.
Company is on the track to file 20-25 ANDAs in FY17
EBITDA guidance for FY17 is 16-18%
Tax guidance for FY17 is 19-20%
Quarterly Performance
40%
EBITDA33% PAT
35% 31%
28% 28% 29%
30% 26% 27%
25% 26% 26% 25% 24%
24% 24% 25% 25%
25% 22%
20% 20% 19% 20%
20% 18% 19% 18% 18% 18%
16% 16% 15% 16% 15% 16% 15%
14%
15% 12% 13% 13% 12%
10%
5%
0%

Going Further
400
ANDA filings ANDA Pending
343
350
306 Lupin has 343 including 163
300
pending approvals. The
250 company has 45 FTF
products, which includes 17
192
200 173 176 exclusive opportunities. In
148 FY16, it filed 42 ANDAs and
150 127
received 39 approvals from the
90 USFDA..
100
50
58 87 100 109 98 93 161 163
0
2009 2010 2011 2012 2013 2014 2015 2016
Recent News and Events

Lupin receives USFDA approval for Hydrocodone Bitartrate and Homatropine Methylbromide oral solution.
Lupin receives final USFDA approval for Moxifloxacin Hydrochloride tablets.Lupin has received final USFDA approval for ANDA
Moxifloxacin Hydrochloride Tablets, 400 mg. Generic of Avlox Tablets of Bayer Healthcare Pharmaceuticals, Inc.
Lupin receives FDA approval for Triamcinolone Acetonide cream. Estimated US sales of USD 55.7 million (IMS MAT Sep 16).
Lupin launches Ortho-Cyclen tablets in US.IMS MAT September 2016 data, Lupin said, Ortho-Cyclen 28 tablets had the US
sales of USD 204 million
Key Risks
Regulatory delays affecting key US launches.
Ongoing pricing pressure in the US market
About the Company

Specialty and Complex Generics Areas - Timelines
Lupin over the last decade has established itself as a leading generic
player from India. US and India are its largest markets and contribute
almost 60% of its revenues and boasts of significant presence in Japan
(unlike most other generic players).Lupin is bearing the fruits of
geographical diversification for broad based growth. It has established a
significant presence in the US by 1) focusing on limited competition/FTF
opportunities, 2) concentration on niche therapies such as oral
contraceptives, dermatology, ophthalmology, respiratory, etc, and 3)
acquiring small but profitable brands at the right price. In domestic
formulations, it is improving its presence in lucrative chronic therapies. It is
slowly but surely establishing itself in other geographies such as Japan
and Australia. Higher growth on a fairly consistent basis, a strong balance
sheet with debt-free status and high return ratios are some of the
differentiators for Lupin.
Revenue 9,641 11,287 12,770 44,817 EPS 29 41 53 50
Total Revenue 9,669 11,403 13,010 45,471 DPS 3.8 7.2 7.9 8.8
COGS 3,549 3,817 4,157 16,578 Payout (incl. Div. Tax.) 0.13 0.18 0.15 0.17
GPM 37% 34% 33% 37% Valuation(x)
Other Expenses 2,556 3,002 3,246 12,784 P/E 21.4 22.8 37.6 39.8
EBITDA 2,270 3,003 3,620 6,974 Price / Book Value 5.4 6.0 10.2 8.2
EBITDA Margin (%) 24% 27% 28% 16% Dividend Yield (%) 0.6% 0.8% 0.4% 0.4%
EBIT 1,938 2,742 3,185 6,511 RoE 25% 26% 27% 21%
Interest 41 27 10 37 RoCE 36% 39% 35% 20%
PBT 1,925 2,832 3,415 7,128 Turnover Ratios
Tax 584 962 970 1,154 Asset Turnover (x) 1.1 1.1 1.0 0.6
Reported PAT 1,314 1,836 2,403 2,271 Inventory (No. of Days) 74 69 72 82

Share Capital 90 90 90 90 OP/(Loss) before Tax 1,925 2,832 3,415 3,433
Reserves and surplus 5,174 6,909 8,808 10,926 Depreciation 332 261 435 464
Shareholders' funds 5,264 6,999 8,898 11,016 Direct Taxes Paid (544) (772) (944) (1,166)
Long term Debt 247 151 102 5,374 OP before Wc 2,344 3,242 3,772 3,951
Total Borrowings 974 553 471 7,119 CF from Op. Activity 1,251 2,004 2,733 (369)
Non Current liabilities 396 427 409 660 Current investments (551) (529) (871) (5,816)
Long term provisions 112 132 162 190 Capex (10) (89) (629) (1,228)
Short term Provisions 356 345 574 676 CF from Inv. Activity (522) (859) (1,055) (6,943)
Current liabilities 2,280 2,227 3,360 3,642 Repayment of Debt (147) (198) (69) 5,293
Total liabilities 8,914 10,206 13,138 22,438 Interest Paid (42) (28) (11) (44)
Net Fixed Assets 2,804 3,002 3,296 6,514 Divd Paid (incl Tax) (169) (323) (157) (406)
Non Current Investments 2 2 3 3 CF from Fin. Activity (663) (857) (197) 5,813
Other non Current assets 965 1,102 2,007 2,507 Inc/(Dec) in Cash 66 288 1,482 (1,500)
Current assets 5,143 6,100 7,832 9,779 Add: Opening Balance 245 318 627 2,301
Total Assets 8,914 10,206 13,138 22,438 Closing Balance 311 607 2,108 802

Under Review
J.Kumar Infraprojects Limited 20-Feb-17
Result Update JKIL has reported Q3FY17 numbers largely in line with our estimate. Top
CMP 223 line has clocked ~19% YoY growth to Rs. 369 Cr on back of work
Target Price NA commencement on Mumbai metro projects. Rs.120 Cr of revenue has
Previous Target Price booked in Q3FY17 from 3 Mumbai metro projects. EBITDA during the
quarter has come down by 120 bps to 17.1% due to higher employee cost.
Upside
Employee cost was higher on account of start of new metro projects and it
Change from Previous -
will be normalize as the work start in full swing. Preliminary work on Mumbai
metro projects has completed and we expect to generate healthy revenue in
Market Data Q4FY17 and going forward.
BSE Code 532940
NSE Symbol JKIL Growth Driver:- Mumbai Metro projects
52wk Range H/L 328/105 Mumbai metro projects are the key growth driver for JKIL revenue growth
Mkt Capital (Rs Cr) 1,693 for next 3-4 years. As on 31st December 2016 JKIL order book stands at
Av. Volume 40210 9700 Cr, out this Mumbai metro contributes nearly ~68%. Preliminary work
Nifty 8822 on all 3 metro projects (line 2A, 3 and 7) has completed and execution is on
full swing. According to management Mumbai metro will generate revenue
Stock Performance around Rs. 200-250 Cr in Q4FY17E, Rs.1300-1400 Cr in FY18E and around
1Month 3 Month 1Year
Rs.1700-1800 Cr in FY19E. This will not only support the better revenue
growth but also strengthen the operating margin.
Absolute -7.8 23.6 -23.3
Rel.to Nifty -12.9 14.4 -48.4
No Clarity on JNPT road project, higher level of Debtors is the concern :-
Share Holding Pattern-% JNPT road projects contribute ~11% to current order book. Earlier
3QFY17 2QFY17 1QFY17 management had guided for Rs. 250 Cr of execution in H2FY17 but no
Promoters 44% 44% 43% significant revenue booked during the quarter. Project was already delayed
Public 56% 56% 57% due to land acquisition and still we dont have any clarity about the
execution timeline, which is the concern for JKIL. Management had guided
Others 0% 0% 0%
for normalize level of debtors days based on better payment cycle of
Total 100% 100% 100%
Mumbai metro projects but that was not reflected in the numbers at the end
of Q3FY17. This is the second concern for us regarding JKIL. At the end of
Company Vs NIFTY the Q3FY17 debtors are higher (Rs.563 Cr) compare to what management
140 JKIL NIFTY had guided earlier.
120
100
Q3FY17 Result Highlights:-
80
JKIL reported robust revenue growth of ~19% YoY to Rs.369 Cr as
60
against Rs.310 Cr on account of work commencement on Mumbai metro
40 projects.
20 EBITDA has clocked 10.8% of growth to Rs.63 Cr as against Rs.57 Cr in
0 corresponding period last year led by higher revenue growth.
Jul-16
Feb-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Profit after Tax has grew by 10.8% to Rs. 27 Cr as against Rs. 24 Cr in

Q3FY16.
Sandip Jabuani Order book as on 31st Dec 2017 stands at Rs. 9700 Cr out of this 6850 Cr
sandip.jabuani@narnolia.com in metro ( including Delhi metro project).
Mangment/ Concall Highlights:-
Will Maintain top line of 1600 Cr in FY17 and Rs. 2000 Cr in FY18
Employee expense has gone during the quarter as the JKIL has started metro project in big way and full fledge revenue yet to
come
Preliminary work has completed on Mumbai metro project and work is in full swing
Debtors of 563 Cr at the end of the Q3FY17, but has come down to 440 Cr in Feb
Inventory at the end of Q3FY17: - 106 Cr of RM, 280 Cr of WIP
Protest by localized people against tree cutting but its awarding authority concern and it will not hamper execution.
Advances of 125 Cr has taken from line 3 & 7 and in month time advances will receive from line 2A
Payment cycle for Mumbai metro project is 45 days from date of bill raised
No significant revenue during the Q3FY17 from JNPT project due to utility work is going on
Mgt. expects 200-250 Cr of revenue from Mumbai metro, 200 Cr from other road and flyover projects
Pending work on Delhi metro is tune of 250 Cr at the end of the Q3FY17
Unexecuted portion of JNPT road project is 1050 Cr
Utility revenue of 30 Cr was booked from JNPT road project in Q3FY17
480 Cr of Debt as on 31st Dec 2016
FY18 Top line :- 1300-1400 Cr from Mumbai metro, 400 Cr from JNPT, 200 cr from others
Will maintain 17-18% EBITDA margin going forward
Debt FY17:- 350-400 Cr, FY18 :- 500-550 Cr
Current Working capital days is 174 and expect to bring down to 160 days
1000 Cr of revenue from Line 3, 700-800 Cr of revenue from line 2A &7 in FY19
View and Valuation::-
JKIL is the one of the best EPC Company with lower Debt to equity. Commencement work on Mumbai metro projects has led to
strong revenue growth in Q3FY17 and we expect to continue it but we need certain clarification regarding execution time line of
JNPT road projects and debtors to make clear cut view on JKIL. Presently we are waiting for further clarification; hence this stock
is under our review. As the clarity emerges we will rate the stock as per its fundamental.
Mumbai Metro Projects Details

Metro projects Lenghts(Km) Value Strech Execution Period Type Agency Agency
Line 2A 18.6 1350 Dahisar to DN Nagar 30 Months Elevated DMRC
Line 3 9.2 5001 Dharavi - International Airport 54 Months Underground MMRD
Line 7 5.9 360 Andheri (E) - Dahisar (E) 30 Months Elevated MMRD

About the Company :-
J. Kumar Infraprojects Limited is engaged in construction activities. The Company designs and constructs roads, bridges,
flyovers, subways, over bridges, skywalks and railway terminus/stations, among others. The Company's offerings in civil
construction segment include office/commercial buildings, sports complexes and swimming pools. In Irrigation Projects segment,
the Company builds dams, canals, aqueducts and irrigation tanks, and spillways. The Company has approximately 20 hydraulic
piling rigs, which are used to build pile foundations for buildings and flyovers, marine structures and offshore platforms. Its Piling
segment caters to various real estate and infrastructure companies. The Company's projects include Underground Metro CC-24,
Delhi Metro Tunnel, Ahmedabad Metro, Balewadi Bridge and Dhankawadi Flyover. Its other projects include Kapurbawadi
Flyover, Kherwadi Flyover, Amarmahal Flyover, Amarmahal Flyover, Thakur Flyover, Bhivandi Flyover and Aurangabad Flyover.
JKIL
Transporation Eng. Civil Construction Irrigation Others
Roads Terminus/Stations Earthen Dams Micro Pillings

Flyover Buildings Minor Irrigation Tank Micro Tunneling
Bridges Sports Complexes Spillways Ready Mix Concrete
Skywalk Swiming Pools Canals
GradeSeparator Aqueducts
Pedstrain Subways
ROBs/RUBs
Strom water drainage
Key Clinets
Vidharbh Irrigation
DMRC,MEGA, UPRNN, MCX, Development,
PWDs, Indian Pimpari Irrigation HCC,HDIL, Punj
MSRDC, MMRD, M
railway Division, Bambla Lloyd, JSW, LANCO
CMG
Canal Division

Quartely Performance 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Net Sales 296 297 393 355 322 299 390 391 303 363 21% 20%
Other Operating Income 5 7 10 9 9 11 13 13 7 6 -41% -2%
Net Sales 300 303 403 364 331 310 404 403 310 369 19% 19%
Change in Invenotry 5 17 7 26 18 12 (1) 32 6 23 1 3
RM Cost 169 156 240 218 196 171 247 246 190 220 28% 16%
COGS 173 173 246 244 215 183 247 279 195 243 33% 24%
Employee Expenses 17 18 23 17 18 21 24 19 22 31 49% 38%
Other Expenses 26 27 40 20 21 33 44 21 23 20 -39% -13%
Labour Exp 22 26 26 16 17 16 26 17 13 12 -25% -6%
Total Expenditure 238 244 335 296 271 253 341 335 253 306 21% 21%
EBITDA 62 60 68 67 60 57 63 68 56 63 11% 12%
Depreciation 12 12 13 12 13 13 13 13 13 14 12% 8%
EBIT 50 47 55 55 47 44 50 55 43 49 11% 13%
Intreset 18 18 23 19 16 13 14 18 17 15 21% -11%
PBT 35 31 38 38 34 34 45 43 32 40 15% 25%
Tax 15 7 10 12 12 11 16 13 9 13 24% 49%
PAT 20 24 27 26 22 24 29 30 23 27 11% 15%
Margin Profile 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY (+/-) QoQ (+/-)
Gross Margin 42.3% 43.0% 38.8% 33.0% 35.1% 40.9% 38.9% 30.9% 37.0% 34.2% (670 bps) (280 bps)
EBIDTA 20.8% 19.7% 16.9% 18.5% 18.1% 18.3% 15.7% 16.9% 18.2% 17.1% (120 bps) (110 bps)
EBIT 16.7% 15.6% 13.7% 15.1% 14.3% 14.2% 12.4% 13.6% 13.9% 13.2% (100 bps) (70 bps)
PAT 6.7% 7.9% 6.8% 7.1% 6.6% 7.7% 7.1% 7.3% 7.4% 7.2% (50 bps) (20 bps)
Growth YoY
Sales Growth 27% 11% -11% 8% 10% 2% 0% 11% -6% 19%
EBIDTA Growth 45% 19% -7% 11% -4% -5% -7% 1% -6% 11%
EBIT Growth 44% 14% -10% 9% -6% -7% -9% 0% -9% 11%
PAT Growth 15% 21% -13% 13% 8% 0% 5% 14% 5% 11%
Operating Matrix FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 YoY% Q3FY16 Q3FY17 YoY%
Opening Order Book 737 1219 1480 1266 2512 3661 3122 3024 -3% 3658 10000 173%
Revenue Booking 365 723 878 879 955 1146 1285 1328 3% 310 369 19%
Order Intake 847 984 664 2125 2104 607 1187 1518 28% 32 0 -100%
Closing Order Book 1219 1480 1266 2512 3661 3122 3024 3214 6% 3380 9700 187%
Strong revenue growth of 19% in Q3FY17 was on account of work commencement on Mumbai metro projects.
JKIL will slow and selective in terms of new order intake in order to focus on execution. Management has guided for Rs.2000 Cr
of new order inflow for the next year to maintain 10000 Cr + order book.
We anticipate healthy operating margin in range of 16-18%, margin depend on revenue mix (tunnel work has better margin comparatively)

Robust Order book :-
Order Book Growth %

JKIL will go slow in terms of
10,000
9,700
12000 2.5
new order intake to focus
8,646
10000 2
8000 1.5
more on execution. Avg.
order intake will be in range
3658.3
6000 1
3,380
2915.4
3,214
of Rs.2000 Cr in order to
3198
3100
3024
4000 0.5
2000 0
maintain 10000 Cr plus
0 -0.5
Order book
Quarterly Sales Trend :-
Sales Growth %
450 30%
393 390 391
400 355 369 25%
350 322 20%
296 297 299 303 Mumbai metro projects
300 15%
250 10% will drive the revenue
200 5% growth going ahead
150 0%
100 -5%
50 -10%
- -15%
Strong Operating Margin :-

EBITDA Margin PAT Margin
25%
21%
20%
20% 19% 18% 18% 18%
17% 17% 17%
16%
15%
10% 8% 7% 8% 7% 7% 7% 7%
7% 7% 7%
5%
0%
Healthy Debt to Equity position with strong Intreset covarge ratio:-

D/E Intreset Coverage Ratio
4.00
3.58 3.52
3.50 3.23
2.97
3.00 2.65
2.50 D/E will remain strong in
2.00 range of 0.25 to 0.38
1.50
1.00 0.80
0.55
0.33 0.42
0.50 0.25
-
FY12 FY13 FY14 FY15 FY16
31
Narnolia Securities Ltd
Revenue 1001 1187 1343 1409 EPS 27 30 29 14
Total Revenue 1010 1198 1356 1426 DPS 3.5 3.8 4.0 2.0
EBITDA 167 206 251 248 Payout (incl. Div. Tax.) 13% 12% 14% 15%
EBITDA Margin (%) 17% 17% 19% 18% Valuation(x)
Depreciation 24 35 47 51 P/E 3.6 2.9 11.7 20.2
EBIT 143 171 203 197 Price / Book Value 0.5 0.4 1.4 1.6
Interest 41 58 77 61 Dividend Yield 3% 4% 1% 1%
PBT 111 124 139 154 Profitability Ratios
Tax 35 40 45 51 RoE 15% 15% 12% 8%
Tax Rate (%) 32% 32% 32% 33% RoCE 20% 17% 17% 12%
Reported PAT 76 84 94 103 Turnover Ratios
Dividend Paid 10 10 13 15 Asset Turnover (x) 0.9 0.7 0.8 0.7
No. of Shares 3 3 3 8 Debtors (No. of Days) 42 41 55 77
Inventory (No. of Days) 144 174 148 126
Creditors (No. of Days) 33 56 37 30
Net Debt/Equity (x) 0.42 0.80 0.55 0.25
BALANCE SHEET CASH FLOW

Long term Debt 86 135 53 29 Op. befor WC Change 168 208 253 249
Short term Debt 124 322 380 294 CF from Op. Activity 127 (25) 59 64
Deferred Tax 5 7 13 17 Non Current investments 0 2 0 0
Total Capital Employed 589 710 842 1312 Capex 86 225 43 55
Capital WIP 101 175 63 68 Repayment of LTB 39 123 (101) (75)
Debtors 115 132 201 296 Interest Paid 41 58 77 61
Cash & Bank Balances 112 121 155 174 Divd Paid (incl Tax) 7 11 14 16
Trade payables 91 182 135 114 CF from Fin. Activity (9) 252 3 171
Total Provisions 11 17 20 25 Inc/(Dec) in Cash (2) (12) 8 9

N arnolia Securities Ltd
201 | 2nd Floor | Marble Arch Bu ild ing | 236B-AJC Bose
Road | Kolkata-700 020 , Ph : 033-40501500
email: narnolia@narnolia.com,
w ebsite : w w w .narnolia.com
Risk Disclosure & Disclaimer: This report/message is for the personal information of
the authorized recipient and does not construe to be any investment, legal or taxation
advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any
action based upon it. This report/message is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or
redistributed to any other person in any from. The report/message is based upon publicly
available information, findings of our research wing East wind & information that we
consider reliable, but we do not represent that it is accurate or complete and we do not
provide any express or implied warranty of any kind, and also these are subject to change
without notice. The recipients of this report should rely on their own investigations,
should use their own judgment for taking any investment decisions keeping in mind that
past performance is not necessarily a guide to future performance & that the the value of
any investment or income are subject to market and other risks. Further it will be safe to
assume that NSL and /or its Group or associate Companies, their Directors, affiliates
and/or employees may have interests/ positions, financial or otherwise, individually or
otherwise in the recommended/mentioned securities/mutual funds/ model funds and
other investment products which may be added or disposed including & other mentioned
in this report/message.

IEA Report 2nd March

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IEA Report 2nd March

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IEA Report

2nd Mar 2017

LT "BUY" 1st Mar 2017

HDFCBANK "HOLD" 28th Feb 2017

BRITANNIA "BUY" 27th Feb 2017

RELIANCE "HOLD" 23th Feb 2017

LUPIN "HOLD" 21th Feb 2017

Narnolia Securities Ltd IEA Edition No.- 966

Attrition Rate dropped 18.4% from 20% sequentially

The continued efforts of

Client Contribution to Revenues

The decline in Top Client was

Narnolia Securities Ltd 3

Please refer to the Disclaimers at the end of this Report

Financials Snap Shot

BALANCE SHEET CASH FLOW STATEMENT

Narnolia Securities Ltd 4

Please refer to the Disclaimers at the end of this Report

EBITDA 2523 2297 2126 19% 10%

Managment / Concall Update

Outlook and Valuation:-

Narnolia Securities Ltd 6

Please refer to the Disclaimers at the end of this Report

Order Book (Rs. crore) :-

Order Inflow (Rs. crore):-

Please refer to the Disclaimers at the end of this Report

BALANCE SHEET CASH FLOW

Narnolia Securities Ltd 8

Please refer to the Disclaimers at the end of this Report

Result Update Recent Development and Result Update.

120 CASA Deposits Spiked

Stable Assets Quality

NIM Impacted by Demonetization

Fee Income Moderated

Quarterly Performance (Rs in Crore)

Narnolia Securities Ltd 10

Other income Break Up (Rs in Crore)

Other Income/Total Net Income % Fee Income/ Advances %

Outlook & Valuation:

Assets Quality Performance

GNPA % NNPA % Restructured Assets % Specific PCR %

Narnolia Securities Ltd 12

Please refer to the Disclaimers at the end of this Report

Break-up of Advances % (As per internal business classification)

CA % (of Deposits ) SA % (of Deposits)

Narnolia Securities Ltd 13

Financials Snap Shot

Narnolia Securities Ltd 14

Company Update Recent Updates

Wholesale and rural was impacted.

EBITDA and PAT(%)

4.0% EBITDA margin PAT margin

Narnolia Securities Ltd 16

Please refer to the Disclaimers at the end of this Report

BALANCE SHEET CASH FLOW STATEMENT

Narnolia Securities Ltd 17

Refining and Marketing:

Key Operating Metrics:

About the Company

Narnolia Securities Ltd 20

BALANCE SHEET CASH FLOW STATEMENT

Narnolia Securities Ltd 21

Please refer to the Disclaimers at the end of this Report.

P/E 27.3 21.4 22.8 37.6 39.8