IEA Report

27th Apr 2017

GODREJCP "HOLD" 27th Apr 2017
Recent commentary by management is very encouraging which indicates better recovery after demonetization in Q4FY17E. GODREJCP is present
in less penetrated segment as compared to other FMCG players such as Hair color and Home Insecticide. It will give it enough room to grow
further. As far as international business in concern, we expect better revenue growth from Indonesian market going forward as company is
expanding its distribution reach and launching new products. GODREJCP has achieved our price target of Rs 1760 on 26 April 2017. As GODREJCP
is one of fastest growing company with stable ROE of ~ 20% and now it is recovering after demonetization, Hence before revising our estimates
we need to go through Q4FY17 result which is due on 9May, 2017. At present we recommend `HOLD on this stock.
.................................................. ( Page : 2-6)

S CHAND AND COMPANY LIMITED "AVOID" 26th Apr 2017

S Chand and Company is raising funds to retire its debts in its subsidiaries . The company is being offered at post IPO valuations of 2.3 times P/b
and Return on Equity of 5.5% while its comparable peer Navneet Education Limited is being traded at 5times P/b and has return on Equity of 20%.
We recommend AVOID. .................................................. ( Page : 7-9)

ULTRACEMCO "Neutral" 26th Apr 2017

Major negative came from contraction in EBITDA margin which declined by 186bps YoY led by rise in power and fuel cost. Although
managements tone was bullish and is expecting above than industry growth going forward but we need to see how management maintains
margins going forward. On the other hand, company clocked better volume growth (20% QoQ) in this quarter but it will be too early to draft
conclusions based on that, so we will be watchful about volume growth in upcoming quarters to get more clearer view. Presently company is
trading at 4.5x times of FY18E book value of Rs 950. Considering a slightly stretch valuation we hold Neutral view on this stock with TP of Rs 4260.
................................................... ( Page : 10-13)

RELIANCE "HOLD" 25th Apr 2017

Commissioning of Ethane project and commercialization of Jio has paved a way for long term growth of the company. With the rapid growing
customer base of jio by adding 6 mn customers daily to its network, Jio ha successfully added 100 million customers and it is continuously adding
new customers. Jio can improve the revenue of the company upto a large extent. Growing demand of petro-chemicals products and re-
commissioning of petroleum outlets will further improve the volume of refining segment. Reliance has also added 63 stores across various store
concepts. At the end of the year, Reliance Retail operated 3,616 stores across 702 cities with an area of over 13.5 million square feet which will
improve revenue of organized retail.We expect company to maintain ROE of 13% in FY18. Currently, the stock is trading at 1.89x FY17 P/BV. We
maintain HOLD' with the target price of Rs. 1680. .................................................................. ( Page : 14-18)

SUNPHARMA "HOLD" 24th Apr 2017

US FDA import alert on Dadra unit may dwindle the companys revenue from the US business. In the meanwhile the Synergies from the Ranbaxy
acquisitions are gaining momentum and the company is on track to achieve the targeted benefits. Company has strengthened the branded
ophthalmic pipeline further through acquisition of Ocular Technologies. The management has maintained its guidance of 8-10% sales growth for
FY17E, we are optimistic for healthy growth in the long-term. Considering above arguments we recommend HOLD rating on this stock while
maintaining our previous recommended target price of Rs. 795. We are analysing the financial viewpoint of Mohali and Dadra plant and will
update as more clarity will emerge. .......................................... ( Page : 19-21)

YES BANK "BUY" 21th Apr 2017

Healthy loan growth with one of the best assets quality in the industry has led the earnings of YESBANK to keep buoyant. More than 75% of the
corporate portfolio is rated A & above A, which gives us comfort on assets quality outlook. However we see spike in GNPA in 4Q FY17 as one off
and expect it to recover in 1Q FY18.Recently Yes Bank raised capital of Rs 4900 Cr which increased its CET I to 11.4% and Tier I to 13.3% which will
support the loan growth of 30% plus. Increasing CASA with retail FDs is the key trigger for YESBANK for the margin expansion. Focus of the
management to increase the CASA & retail FDs to 70% till FY20 from current 59% will further help to improve NIM. The increased pace of branch
expansion and headcounts will continue to provide healthy and granular retail fee income. We expect the bank to maintain the RoA of 1.9% and
RoE of 19%. We value Yes bank (2.9x P/B and 123x EPS FY19) at Rs 1936 and maintain BUY. ................................................. ( Page : 22-29)

Narnolia Securities Ltd IEA Edition No.- 1002

 INDUSTRY - Con. Staples
BSE Code - 532424
NSE Code - GODREJCP
27-Apr-17 NIFTY - 9352

Company Data Key Highlights of the Report:

CMP 1725 GODREJCP is one of the fasted growing company in our FMCG universe
Target Price HOLD
with 28% CAGR revenue growth and 22% PAT growth in last 6 years.
Previous Target Price GODREJCP is present in less penetrated segment as compared to other
Upside FMCG players such as hair color.It will give it enough room to grow
further.
52wk Range H/L 1771/1286 Recent commentary by management is very encouraging which indicates
Mkt Capital (Rs Cr) 58,766 better recovery after demonetization in Q4FY17E.
Av. Volume (,000) 165 GODREJCP has achieved our price target of Rs 1760 on 26 April 2017.
As it is one of fastest growing company with stable ROE of ~ 20% and
RoE & ROCE now it is recovering after demonetization, Hence before revising our
estimates we need to go through Q4FY17 result of it which is due on
ROE ROCE
9May, 2017. At present we recommend `HOLD on this stock.
25% 22%
21% 21%
20% 19%
20%
20% 20% 21%
19%
15% 18%

10%
Financials/Valu FY15 FY16 FY17E FY18E FY19E
5%
ation
Net Sales 8,276 8,968 9,523 10,592 11,853
FY15 FY16 FY17E FY18E FY19E EBITDA 1,365 1,639 1,857 2,050 2,235
EBIT 1,275 1,536 1,714 1,886 2,075
Share Holding patterns % PAT 907 1,119 1,251 1,413 1,590
3QFY17 2QFY17 1QFY17 EPS (Rs) 27 33 37 41 47
Promoters 63.3 63.3 63.3 EPS growth (%) 19% 23% 12% 13% 13%
Public 36.7 36.7 36.7 ROE (%) 21% 22% 21% 20% 19%
Total 100.0 100.0 100.0 ROCE (%) 20% 20% 18% 19% 21%
BV 127 150 177 210 246
Stock Performance % P/B (X) 6.4 9.7 9.2 7.8 6.7
1Mn 3Mn 1Yr P/E (x) 30.2 44.3 44.6 39.5 35.1
Absolute 3.6 11.9 26.2
Rel.to Nifty 0.9 3.2 7.8 RESULT PREVIEW:
Overall revenue is expected to grow by 9%YoY to Rs 2473 cr whereas
140 GODREJCP NIFTY PAT will remain to Rs 352.
130
We expect 1% overall volume growth and 3.5% realization growth for
120
GODREJCP in Q4FY17.
110 We expect deterioration in gross margin by 14 bps YoY and 46 bps QoQ

100 in Q4FY17E. Gross margin is expected to remain 57% in Q4FY17E.
EBITDA margin will remain 19.9% in Q4FY17E, an improvement of 6 bps
90
YoY led by better cost management.
80
PAT margin is expected to improve by 55 bps YoY to 14.2%on the back

of lower Tax out go in Q4FY17E.

RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ% FY15 FY16 YoY %
Net Sales 2,286 2,269 2,123 2,439 2,486 9% 2% 8,276 8,968 8%
Other Income 17 14 14 17 19 10% 13% 92 67 -27%
COGS 992 973 982 1,059 1,057 7% 0% 3,842 3,846 0%
Ad & P Expenses 172 215 168 203 192 12% -6%
Employee Cost 236 246 249 241 256 8% 6% 777 960 24%
Other Expenses 345 386 343 391 381 10% -3% 2,293 2,523 10%
EBITDA 455 449 381 466 517 14% 11% 1,365 1,639 20%
Depreciation 26 29 33 36 36 41% 1% 91 103 14%
Interest 30 24 33 35 40 34% 13% 100 100 0%
PBT 427 410 330 412 447 5% 9% 1,266 1,503 19%
Tax 94 98 75 91 99 4% 9% 272 317 16%
PAT 368 310 244 318 352 -4% 11% 907 1,119 23%

International Better revenue growth led by robust international business performance

business grew
by 19% YoY.
Revenue for Q3FY17 grew by 9% YoY to Rs 2486 cr led by 19% YoY growth in the international
business.
Africa business including Strength of Nature grew by strong 54% in constant currency term.
Indonesian business which contributes approx. 17% of total revenue remained flat while Latin
America and Europe grew by 24% and 16% in Constant currency terms in this quarter.
Domestic sales remained flat YoY due to demonetization and domestic volume declined by 3%
YoY.
Gross margin improved by 88 bps YoY to 57.5% supported by lower input prices.

EBITDA for this quarter grew by 14% YoY to Rs 517 cr. EBITDA margin improved by 91
bps YoY 20.8%.
PAT declined by 4% YoY to Rs 352 cr and PAT margin contracted by 194 bps in Q3FY17.

3000 400
Sales(in cr) 368 PAT(in cr) International Business Revenue(in cr.)
352350
2500 1400
310 318
300
1200
2000 264 266
244 250
235 1000
222
1500 200 800

143 150 600

1000
117 400
100
1018

1078

1120
1029

1013

1028

1086

1220

500 200
920

910
889

50
1889

2060

2236

2092

1988

2197

2286

2269

2123

2439

2486

0
0 0

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Margin % 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-) FY15 FY16 YoY(+/-)
Gross Margin 56.6% 57.1% 53.8% 56.6% 57.5% 0.9% 0.9% 53.6% 57.1% 3.5%
EBITDA Margin 19.9% 19.8% 17.9% 19.1% 20.8% 0.9% 1.7% 16.5% 18.3% 1.8%
PAT Margin 16.1% 13.7% 11.5% 13.0% 14.2% -1.9% 1.1% 11.0% 12.5% 1.5%

Gross margin improved by 88 bps YoY to 57.5% supported by lower input prices.

EBITDA grew by 14% YoY to Rs 517 cr in Q3FY17.EBITDA margin improved by 91 bps YoY to 20.8%
on the back of lower COG and employee cost.
PAT de-grew by 4% YoY to Rs 352 cr. PAT margin for this quarter remained 14.2% ,declined by 194
bps YoY.

Domestic Soap Revenue growth YoY Segments Penetration

Domestic Soap Revenue growth YoY Penetration

20% 120%
15% 100%
15% 13% 13% 100%
11%

10% 80%

5% 2%
3%
2%
60% 48%
1% 38%
40%
0%
-6% -6% 20%
-5%
-10%
0%
-10%
Hair colour Household Soap
-15% Insecticides(HI)

Concall Highlights(Q3FY17):
Indonesian business: Non HI (Home Insecticide) portfolio performed better. Improved market share in HI
business. Management is hopeful for better growth from Indonesia next year.
The management is Confident to outpace industry growth going forward(domestic market).
Management is confident of EBITDA growth ahead of the sales growth.
After demonetization, recovery is much faster than what was expected. It will be back to normal in
couple of month.
Took price hike
of 2% in Ad&P Expenses will be in the range of 11%.
domestic soap Going forward, the company will maintain innovation, launch new products, intensify introduction on Lower
Unit Pack(LUP), expand direct reach and work for brand building.
business.
Price hike of 2% taken in the domestic soaps business in 3QFY17.Gained market share in Cinthol.
Scope of Margin improvement in International Market: for Indonesia still chance of some margin expansion,
LA(Latin America) scope of more margin expansion and for African business potential of significant margin
improvement in next 3-5 years.
SON supply issue will be short term issue. The company will localize its factory there in CY2017.Capex in
Africa will be very low.
MT(Modern Trade) grew by 33% in this quarter.
Margin expansion: Gross margin will not as good as this quarter going forwards.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Innovation and new product launches: The Company gets 25% to 40% of sales growth from launch
of new products historically. Going forward, the company will maintain innovation, launch new
products, intensify introduction on Lower Unit Pack (LUP) which will deliver better growth going
forward.

Lower penetration gives opportunity: GODREJCP is present in less penetrated segment as

compared to other FMCG players like Hair Colour(38%) and HI(48%). It will give it enough room to
grow further.
Relatively less impacted by Patanjali: If we see our FMCG basket, GODREJCP has minimum
overlap of products with Patanjali than any other players. Hence we expect very less impact on the
volume of GODREJCP due to expansion of Patanjali.
Expectation of better revenue from Indonesian market: Indonesian market contributes approx.
17% of companys revenue. We expect it to improve going forward as company has plans to launch
several hair care and personal care products in Indonesian market in next 6-12 months which will
improve companys volume going forward. Secondly company is planning to ramp up its distribution
reach to double in next 3-5 year which will translate into better volume growth from Indonesia going
forward.

African business (Potential growth driver): African business grew by 19% YoY in constant currency
(CC) terms and 54%YoY including Strength of Nature in Q3FY17. We expect similar growth in
Q4FY17.Although African business is facing some currency headwinds but by localizing production
facility and increasing prices company is expected to counter it.Going forward management sees
continuous margin improvement from African business in next 3-5 years.

Indonesian Market Constant Currency(CC) growth Africa Constant Currency(CC) growth

Indonesian Market (CC) growth YoY Africa (CC) growth YoY
75%
25% 80%
70%
21%
20% 54%
19% 60% 52%

15% 15%
50%
36%
13% 40% 32% 33%
26%
10% 30% 23%
8% 15% 16%
7% 20% 12%
6%
5%
3% 3% 10%
0% 0% 0%
-2%
-5%

View & Valuation

Recent commentary by management is very encouraging which indicates better recovery after
demonetization in Q4FY17E. GODREJCP is present in less penetrated segment as compared to other
FMCG players such as Hair color and Home Insecticide. It will give it enough room to grow further. As
far as international business in concern, we expect better revenue growth from Indonesian market
going forward as company is expanding its distribution reach and launching new products.
GODREJCP has achieved our price target of Rs 1760 on 26 April 2017. As GODREJCP is one of
fastest growing company with stable ROE of ~ 20% and now it is recovering after demonetization,
Hence before revising our estimates we need to go through Q4FY17 result which is due on 9May,
2017. At present we recommend `HOLD on this stock.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Revenue from Operation 8,968 9,523 10,592 11,853 ROE 22% 21% 20% 19%
Change (%) 8% 6% 11% 12% ROCE 20% 18% 19% 21%
Other Operating Income Asset Turnover 0.9 0.8 0.8 0.9
EBITDA 1,639 1,857 2,050 2,235 Debtor Days 45.50 45.50 45.50 45.50
Change (%) 20% 13% 10% 9% Inventory Days 53.2 53.2 53.2 53.2
Margin (%) 18% 20% 19% 19% Payable Days 42 42 42 42
Dep & Amortization 103 143 165 160 Interest Coverage 15.34 13.19 17.85 25.52
EBIT 1,536 1,714 1,886 2,075 P/E 44 45 40 35
Interest & other finance cost 100 130 106 81 Price / Book Value 9.7 9.2 7.8 6.7
Other Income 67 52 61 71 EV/EBITDA 31 32 28 25
EBT 1,503 1,636 1,841 2,065 FCF per Share 19 34 45 48
Exceptional Item (27) - - - Dividend Yield 0.4% 0.4% 0.4% 0.5%
Tax 317 345 388 436
Minority Int & P/L share of Ass. 39 39 39 39 Assumptions
Reported PAT 1,119 1,251 1,413 1,590 Y/E March FY16 FY17E FY18E FY19E
Adjusted PAT 1,140 1,251 1,413 1,590 Volume Growth(domestic) 10% 2% 6% 7%
Change (%) 24% 10% 13% 13% Realization Growth(domestic) -1% 0% 4% 5%
Margin(%) 13% 13% 13% 13% Capex(Rs crore) 391 262 100 100

Balance Sheet Rs in Crores Cash Flow Statement Rs in Crores

Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Share Capital 34 34 34 34 PBT 1,503 1,557 1,762 1,986
Reserves 5,064 6,007 7,137 8,357 (inc)/Dec in Working Capital (482) (21) (40) (47)
Networth 5,098 6,041 7,171 8,391 Non Cash Op Exp 116 143 165 160
Debt 2631 3517 2617 1717 Interest Paid (+) 100 130 106 81
Other Non Current Liab 37 37 37 37 Tax Paid (336) (345) (388) (436)
Total Capital Employed 7,729 9,558 9,788 10,108 others (41) - - -
Net Fixed Assets (incl CWIP) 1,780 3,495 3,401 3,312 CF from Op. Activities 839 1,459 1,657 1,748
Non Current Investments 34 34 34 34 (inc)/Dec in FA & CWIP (208) (286) (126) (127)
Other Non Current Assets 4,792 4,845 4,845 4,845 Free Cashflow 631 1,173 1,531 1,622
Non Current Assets 6,606 8,375 8,281 8,192 (Pur)/Sale of Investment (330) (147) (150) (200)
Inventory 1,307 1,388 1,544 1,727 others 43 (61) (1) (2)
Debtors 1,118 1,187 1,320 1,478 CF from Inv. Activities (495) (2,059) (222) (273)
Cash & Bank 746 569 688 812 inc/(dec) in NW - - - -
Other Current Assets 376 537 714 945 inc/(dec) in Debt 157 886 (900) (900)
Current Assets 3,547 3,681 4,266 4,962 Interest Paid (119) (130) (106) (81)
Creditors 1,037 1,101 1,225 1,371 Dividend Paid (inc tax) (225) (263) (297) (334)
Provisions 65 69 77 86 others - (70) - -
Other Current Liabilities 1,202 1,276 1,419 1,588 CF from Fin. Activities (187) 424 (1,302) (1,315)
Curr Liabilities 2,303 2,446 2,721 3,044 Inc(Dec) in Cash 157 (177) 133 124
Net Current Assets 1,244 1,235 1,546 1,917 Add: Opening Balance 404 746 569 688
Total Assets 10,153 12,056 12,547 13,154 Closing Balance 561 569 702 812

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 "AVIOD "
S CHAND AND COMPANY LIMITED
25th Apr 2017

IPO Note
Issue Detail Company Overview
Type 100% Book Building S Chand And Company Limited was incorporated in 1970 which operates as an education content
Issue Size Rs. 700 Crore company in India. The company develops and delivers content, solutions, and services in the
Offer Price *Rs (660-670)/Equity Share education K-12, higher education, and early learning segments
Company is involved in publishing, printing, sale, purchase, export, and import of various books
Min App Size 22 Shares
and other literary work; agency ship and distribution of publishers for books and other literary
Issue Open 26-Apr-17 work; selling of educational toys; and publishing books for children, schools, colleges, and
Issue Close 28-Apr-17 universities, as well as digital content and interactive learning systems to schools and running pre-
Shares Offer 1.05 Cr. schools.
Face Value Rs 5 The company also provides digital data management services and digital content books to schools
JM Financial Institutional and colleges; solutions for higher education in colleges, universities, and technical institutes; and
Securities Ltd , Axis Capital Ltd DTP printing, DTP jobs, page making, editing and proof reading, and cover designing services of
Lead Mgrs
, Credit Suisse Securities (India) books, journals, tabloids, magazines, bulletins, brochures, and periodicals in the form of hard copy,
Pvt Ltd compact disks, and e-forms. S Chand And Company Ltd offers 53 consumer brands across
Listing BSE, NSE knowledge products and services including S.chand, Vikas, Madhubun, Saraswati, Destination
Registrar Link Intime India Pvt Ltd Success and Ignitor. The company also exports its printed and digital content to Asia, the Middle
East, Africa, and internationally.
Market Cap
2304.1 Company Strategies
(Post Issue)
> Company has strong presence in the CBSE/ICSE affiliated schools and increasing presence in the
No of shares ( Post & Pre Issue) state board affiliated schools across India. It works closely with the educators and authors, and
No of Shares (Pre Issue) 298,44,496 regularly integrates feedback received from authors, educators and students Company
Comprehensive consumer focused education content player with touch points across education
Offer for Sale 60,23,236 lifecycle
Fresh Issue made 4545455 > Company has Strong integrated in-house printing and logistic capabilities . The printing
capacity was enhanced from 15 tons to 55 ton paper per day from in FY 14 to FY16. By integrating
No of Shares (Post Issue) 34389951
and expanding the printing capabilities, they reduced dependence on third-party vendors, thereby
achieving cost savings and operational efficiencies.
Bid allocation pattern > Company has Pan-India sales and distribution network which driving deep market reach. They
QIB 50% sold their content in 29 states and 7 union territories through their distribution channels. Its
Non-Institutional 15% acquisition of NSHPL enhanced its distribution network in southern India, and acquisition of VPHPL
added to its distribution network in north India
Retail 35% > Company Focused digital and technology platform . The digital offerings are focused on
supplementing our existing strengths in the K-12 and higher education businesses.

Objects of the Issue:

Particulars
Repayment of loans availed by the Company and one of their Subsidiaries, EPHL, which were
utilized towards funding the acquisition of Chhaya
Rubi Burman Repayment/prepayment in full or in part, of certain loans availed of by the Company and their
rubi.burman@narnolia.com Subsidiaries, VPHPL and NSHPL
General corporate purpose

Recommendation
S Chand and Company is raising funds to retire its debts in its subsidiaries . The company is being offered at post IPO valuations of 2.3
times P/b and Return on Equity of 5.5% while its comparable peer Navneet Education Limited is being traded at 5times P/b and has return
on Equity of 20%. We recommend AVOID.

Narnolia Securities Ltd

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

 S CHAND AND COMPANY LIMITED

S Chand Organization Structure

Competitive Risks
> The high degree of seasonality of our K-12 business materially affects operating revenue, margins and cash
flow from quarter to quarter. Company business and the newly acquired business of Chhaya is linked to the
academic cycle. Chhayas sales season has traditionally been across first and fourth quarters of the financial
year with the main sales season starting in December. The the working capital cycle for print content in the
CBSE/ICSE K-12 education industry tends to be unduly high at the fiscal year end on account of high sales in the
last quarter
> Company operate in a highly-competitive and fragmented industry, and our business, results of operations
and financial condition may be adversely affected if we are not able to compete effectively.

> For the past two years, CBSE has issued an advisory circular advising CBSE schools to use only NCERT print
content for all classes and may issue similar advisory circulars in the future. These circulars may reduce
demand for its educational content amongst the CBSE affiliated schools and, accordingly, may adversely affect
its business, results of operations, cash flows and financial condition.

> A significant portion of the companys revenues are derived from titles of its top authors. The loss of all or
any of its top authors could adversely affect its business, results of operation, cash flows and financial
condition.

Narnolia Securities Ltd

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

 S CHAND AND COMPANY LIMITED
Financials Snap Shot
INCOME STATEMENT RATIOS
31 March 31 31 March 31 Dec 31 March 31 31
2014 March 2016 2016 2014 March March
Revenue (Net) 370.0 476.7 537.8 149.5 EPS 12.2 9.8 14.1
Other Income 0.9 1.8 2.9 1.3 Book Value Per share 6.0 6.7 9.7
Total Revenue 371.0 478.5 540.6 150.8 Valuation(x)
Raw materials Cost 149.2 178.2 175.7 98.7 P/E ( Upper Band ) 54.7 68.2 47.4
Purchase and implementation cost 0.3 1.7 4.9 3.7 P/E ( Lower Band ) 53.9 67.1 46.7
Publicationdecrease
Increase)/ expensesin 42.3 48.2 50.3 22.3 Price / Book Value 112.6 100.4 69.3
inventories of finished goods, -13.8 -24.3 -27.9 -68.1 EV 2337 2463 2438
Selling and distribution expenses 34.4 45.6 52.7 40.6 EV/Sales 6.3 5.2 4.5
Employee benefit expenses 52.7 80.3 94.2 83.6 EV/EBITDA 8.0 6.6 5.9
Other expenses 26.2 44.7 62.6 53.5 Profitability Ratios
Total Expenses 291.2 374.5 412.4 234.4 RoE 11% 8% 8%
EBITDA 79.8 104.0 128.2 -83.6 RoCE 18% 20% 17%
Depreciation 12.3 22.5 25.9 20.3 Liquidity Ratios
EBIT 67.5 81.5 102.3 -103.8 Net Debt/Equity 0.043 0.285 0.113
Finance Costs 9.5 28.3 30.6 22.7 Interest Coverage Ratio 6.5 4.6 4.9
Profit before Tax 58.0 53.2 71.7 -126.6 Current Ratio 1.86 1.75 1.87
Total Tax 16.0 19.5 23.3 -39.5
PROFIT AFTER TAX 42.0 33.7 48.4 -87.0
31 March 31 31 March 31 Dec 31 March 31 31 31 Dec
2014 March 2016 2016 2014 March March 2016
Share Capital 0.2 0.2 0.2 14.9 Net Profit/(loss) before tax 58.6 53.7 72.7 (126.3)
Reserves 367.5 394.1 599.0 494.2 Adjustments for:
Minority Interest 3.0 21.5 3.1 8.8 Depreciation and Amortisation 12.3 22.5 25.9 20.3
Net Worth 370.8 415.9 602.3 518.0 Interest expense 9.1 27.4 29.3 20.5
Long-term borrowings 16.0 118.5 67.9 59.5 Amortisation of ancillary borrowing cost 0.0 0.5 0.6 1.8
Trade payables 0.0 0.2 0.9 1.3 Interest income (0.6) (0.4) (0.9) (0.2)
Other non-current liabilities 0.3 0.3 0.1 0.0 Loss/(profit) on sale of fixed assets (0.1) 0.0 0.2 0.5
Long-term provisions 2.1 4.6 5.0 7.0 Loss/(profit) on sale of investments (0.1) (0.0) (1.7) (1.4)
Non - current liabilities 389.1 539.5 676.2 585.7 Provision for sales return 0.0 1.6 4.6 0.0
Short-term borrowings 69.5 96.5 125.8 183.1 Employee stock options expense 0.0 0.0 0.5 0.9
Trade payables 99.2 135.8 151.1 140.1 Provision for bad debts and advances 1.9 1.0 4.6 6.8
Other current liabilities 14.9 40.9 23.2 200.0 Operating profit before working capital 81.2 106.2 135.7 (77.2)
Short-term provisions 4.3 13.3 17.2 31.0 Movements in working capital
Current liabilities 187.9 286.5 317.3 554.1 (Increase)/ decrease in loans and advances 30.3 1.7 (5.7) (10.8)
Total Liabilities 576.9 826.0 993.5 1139.9 (Increase)/ decrease in trade receivables (59.2) (113.5) (59.7) 195.3
Fixed assets 197.5 278.9 337.4 492.9 (Increase)/ decrease in inventories (23.9) (36.0) (20.1) (110.8)
Non Current Investments 7.4 13.0 25.4 25.4 Decrease in other assets 0.0 (0.0) 0.0 (0.0)
Deferred tax assets 5.4 10.4 12.4 56.3 Increase/ (decrease) in provisions 0.5 11.7 (10.2) (2.2)
Loans and advances 15.9 18.7 17.8 25.8 Increase/ (decrease) in trade payables 32.3 36.9 16.0 (10.6)
Other non-current assets 1.7 2.3 3.3 1.2 Increase/ (decrease) in other liabilities 1.1 4.4 (0.5) 10.2
Non-current assets 227.8 323.4 396.2 601.7 Cash flows from operations 62.2 11.4 55.5 (6.0)
Current investments 0.6 4.7 16.4 4.3 Direct taxes paid (net of refunds) 19.8 29.3 18.0 28.5
Inventories 83.9 119.7 139.8 250.6 Net cash flows from operating activities (39.5) (101.6) (136.1) (159.4)
Trade receivables 230.9 341.7 395.1 195.6 Cash flows from investing activities 0.5 122.7 100.9 190.7
Cash and bank balances 17.6 21.3 24.4 24.4 Net cash generated financing activities 5.1 1227.1 1009.3 1906.7
Short-term loans 16.0 13.2 18.5 62.4 Net in cash and cash equivalents (33.9) 1248.2 974.1 1937.9
Current assets 349.0 500.7 594.2 537.4 Cash & cash equivalents at the beginning 13.6 17.4 20.9 23.8
TOTAL Assets 576.8 824.1 990.4 1139.1 Cash & cash equivalents at the end of Year (20.2) 1265.6 995.1 1961.8
 INDUSTRY - CEMENT
BSE Code - 532538
NSE Code - ULTRACEMCO
26-Apr-17 NIFTY - 9307

Company Data Key Highlights of the Report:

CMP 4,235
Target Price 4260
The EBITDA margin contracted by 186bps YoY from 18.9% to 17.04% led by
155bps increase in Power & Fuel cost and 83bps increase in other expenses.
Previous Target Price
Upside 1% The company reported 20% QoQ growth in sales volume in 4QFY17 due to low
52wk Range H/L 4260/3050 base, demand recovery and capacity additions.
Mkt Capital (Rs Cr) 1,16,249 White cement and wall care putty volumes were at 3.86 lakh tonnes against 3.85
Av. Volume (,000) 235 lakh tonnes in same quarter last year. Grey Cement volumes increased 0.2% to
13.35 MT against 13.32 MT YoY.
ULTRACEMCO is trading at its higher
range of P/B Presently company is trading at 4.5x times of FY18E book value of Rs 950.
Considering a slightly stretch valuation we hold Neutral view on this stock with TP
P/B(x)
6.0
of Rs 4260.
5.2
4.8 5.0
5.0 4.3

4.0

3.0

2.0
Financials/Valuation FY14 FY15 FY16 FY17 FY18E
1.0
Net Sales 21,652 24,349 28,392 28,646 25,941
- EBITDA 4,035 4,425 4,901 5,212 5,010
FY14 FY15 FY16 FY17
EBIT 2,896 3,222 3,524 3,864 4,002
Share Holding patterns % PAT 2,206 2,098 2,478 2,715 3,023
4QFY17 3QFY17 2QFY17 EPS (Rs) 76 73 84 94 110
Promoters 62.2 62.3 62.3 EPS growth (%) -21% -3% 15% 11% 17%
Public 37.8 37.8 37.8 ROE (%) 13% 11% 11% 13% 13%
Total 100.0 100.1 100.1 ROCE (%) 14% 14% 13% 16% 19%
BV 624 687 756 850 950
Stock Performance % P/B (X) 5.2 4.8 4.3 5.0 4.5
1Mn 3Mn 1Yr EV/Ton (Cap-USD) 240 217 200 194 183
Absolute 4.3 10.0 29.9
Rel.to Nifty 3.1 6.5 14.4 Acquisition of JP Associates
The company is in process to acquire 21.1 MT of cement capacity. It is at its last
130 ULTRACEMCO NIFTY stage. All approval is done. Once completed it will have capacity expansion
125 of :
120 6.5 MT in UP and Uttrakhand (Infrastructure development will pick up
115 momentum)
110 5 MT in Coastal Andhra Pradesh (well positioned)
105
4.9 MT in Central India
100
5 MT in Himachal Pradesh
95
90 The company is setting up 3.5 MTPA integrated cement plant at Dhar, Madhya
85 Pradesh is on track and commercial production is expected to commence from
80 Q4FY19. During the year, it has commissioned grinding units in Maharashtra and
Bihar.
Jul-16
Apr-16

Feb-17

Apr-17
Sep-16

Mar-17
Dec-16
Jan-17
Jun-16

Aug-16

Oct-16
May-16

Nov-16

With this expansion and the acquisition of cement plants of Jaiprakash

Bineeta Kumari Associates, company's cement capacity will stand augmented to 95.4 MTPA,
bineeta.kumari@narnolia.com including its overseas operations in FY19.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Quarterly Performance
It includes Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Rs.138 crore of Net Sales 7,700 7,400 6,446 6,690 7,924 3% 18% 28,392 28,646 1%
provisions Other Income 141 151 159 97 241 71% 147% 464 648 40%
which is no COGS 1,244 1,209 931 1,047 1,308 5% 25% 4,418 4,493 2%
longer required. Employee Cost 365 373 384 392 373 2% -5% 1,445 1,522 5%
Other Expenses 979 982 987 938 1,066 9% 14% 3,837 3,972 4%
EBITDA 1,464 1,475 1,219 1,182 1,336 -9% 13% 4,901 5,212 6%
Depreciation 379 323 334 336 356 -6% 6% 1,377 1,348 -2%
Interest 128 180 150 144 167 30% 16% 566 640 13%
PBT 1,097 1,124 894 800 1,054 -4% 32% 3,421 3,872 13%
Tax 279 344 280 206 329 18% 59% 942 1,159 23%
PAT 819 763 614 673 682 -17% 1% 2,478 2,715 10%

Reported Net sales for the quarter stood at Rs 7924 Cr (Up 3% YoY) as compared to Rs 7700 Cr in
4QFY16, and Rs 6690 Cr (Up 18% QoQ) in 3QFY17.
Other income for the quarter stood at Rs 241 Cr (71% up YoY & 147% up QoQ). It includes Rs 138
Cr of provisions which is no longer required. This provision was related to royalty on limestone for
AP for last several years for conversion factor.
On the volume front, white cement and wall care putty volumes were at 3.86 lakh tonnes against
3.85 lakh tonnes in same quarter last year.
Grey Cement volumes increased 0.2% to 13.35 MT against 13.32 MT YoY.
Other expenses for the quarter was Rs 1066 Cr (Up14% QoQ) driven by sales volume (20% up
sequentially). The YoY growth of 9% was due to variable expenses.
Tax rate for the quarter stood 329 Cr as compared to Rs 279 Cr in the same quarter of the previous
year. Expected tax rate for FY18 is 32%.
PAT for the quarter declined 17% QoQ to Rs 682 Cr as compared to Rs 819 Cr in the same quarter
of the previous year.

Margins Dissapointed
Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
Gross Margin 81.8% 81.7% 83.9% 82.5% 81.4% 0% -1% 84% 84% 0%
EBITDA Margin 21.5% 22.4% 21.1% 19.7% 19.0% -2% -1% 17% 18% 1%
PAT Margin 12.0% 11.6% 10.6% 11.2% 9.7% -2% -2% 9% 9% 1%

Gross Margin declined by 39bps YoY to 81.4% from 81.8% due to inflation in input prices.
The EBITDA margin contracted by 186bps YoY from 18.9% to 17.04% led by 155bps increase in
Power & Fuel cost and 83bps increase in other expenses.
PAT margin deteriorated by 230bps on the back of higher tax provisioning of 577bps (31.2% Vs
25.4%).

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 EBITDAM% PATM%
23.0% 22.4% 14.0%
12.0% 11.6% 11.2%
22.0% 21.5% 12.0% 10.6%
21.1% 9.7%
10.0%
21.0%
19.7% 8.0%
20.0%
19.0% 6.0%
19.0%
4.0%
18.0% 2.0%

17.0% 0.0%
4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

View & Valuation

Major negative came from contraction in EBITDA margin which declined by 186bps YoY led by rise
in power and fuel cost. Although managements tone was bullish and is expecting above than
industry growth going forward but we need to see how management maintains margins going
forward. On the other hand, company clocked better volume growth (20% QoQ) in this quarter
but it will be too early to draft conclusions based on that, so we will be watchful about volume
growth in upcoming quarters to get more clearer view. Presently company is trading at 4.5x times
of FY18E book value of Rs 950. Considering a slightly stretch valuation we hold Neutral view on
this stock with TP of Rs 4260.

Concall Highlights:

Housing sector has started coming back (Correction in prices of real estate sector, reduction
in interest rate has also made housing finance attractive, 1st home buyer are getting in
investment mode again).
Infrastructure segment continues to grow at robust. However overall demand driver remained
to be small (contributing 20% of overall demand). Roads (3-4%) growing robustly. Irrigation
picking up, Metro, Rail, Inland waterways picking up.
Region Split :
Tamil Nadu, Kerala : Due to Drought it remain under pressure. Also political uncertainties
there. Not positive.
Western market : Demand seen, volume picking up.
North Market : Slow demand, Pressure of liquidity crisis followed by eastern market.
Rural market up due to good monsoon, good crops, Pay commission disbursement.
Affordable Housing Scheme: Very positive move for cement industry.
Commitment of Zero debt: The year ended with negative debt of 2004 Cr and cash surplus
of 2004 Cr. Robust Working capital Management anf prudence capex plan has helped to
achieve the goal. Helped in reducing leverage position from day 1 of acquisition.
Indian economy to grow 70% in coming years. Cement industry to sustained this growth and
ultratech is well positioned to take advantage of this growth.
Capex for Dhar project : 2600 Cr.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Sales break up : For 4QFY17 White cement: 500 Cr Ready concrete mix: 480 Cr and For
FY17 White cement: 1700 Cr Ready concrete Mix: 2000 Cr.
JP Associates operating at 42% of capacity utilization. Target for 1st 12 months is to cross
60% utilization and for next 12 months is to cross 75% utilization.
Expected Tax rate for FY18 is 32%.
Andhra Pradesh & Telangana can show double digit growth.
Ultratech to grow higher than industry growth.
Incremental capacity for next 3 Years : 40MT
North : In FY17 it is 145 MT will be reaching to 160 MT by FY21
South : In FY17 it is 147 MT will be reaching to 155 MT by FY21
East : In FY17 it is 72 MT will be reaching to 88 MT by FY21
West : In FY17 it is 54 MT will be reaching to 65 MT by FY21

White Putty & cement sales in Cr (14% up QoQ) RMC Sales in Cr (1% up QoQ)
700 560 550

600 575 540

500
500 440 440 520
500 500
400 375 500
480
300 480 475

200 460

100 440

0 420
4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

20% QoQ growth in sales volume Realization declined 2% sequentially

Volume (MT) Realisation (INR/ton)

16 5350 5314
13.6 13.68
14 12.9 5300 5257
5242
11.4 5250
12 10.9
5200
10 5127
5150
8 5100
6 5050 5014
4 5000
4950
2
4900
0 4850
4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 INDUSTRY - OIL & GAS
BSE Code - 500325
NSE Code - RELIANCE
25-Apr-17 NIFTY - 9217

Company Data Key Highlights of the Report:

CMP 1417 Reliance commenced commercial production from its Coal Bed Methane
Target Price 1680
(CBM) block Sohagpur (West) and it will gradually ramp-up in the next 15-
Previous Target Price 18 months.
Upside 19% Continuing to re-commission Petroleum outlets improves the marketing
52wk Range H/L 1448/925 volume of Petroleum products.
Mkt Capital (Rs Cr) 4,60,518 Reliance out-performed Singapore GRM by 5.1 USD/BBL and reported
Av. Volume (,000) 409 GRM of 11.5 USD/BBL.

RoE to maintain over 13%

Reliance Retail added 63 stores across various store concepts and now it
is operating 3616 stores in 702 cities.
ROE(%) Currently, the stock is trading at 1.89x FY17 P/BV. We maintain HOLD'
14.0% 13.1% 13.0%
with the target price of Rs. 1680
12.9%
13.0%
11.5% 11.3% 11.3%
12.0%
10.8%
11.0%
10.0% Financials/Valu FY15 FY16 FY17 FY18E FY19E
9.0% ation
Net Sales 3,75,435 2,93,298 3,30,180 4,43,483 4,93,634
8.0%
EBITDA 37,364 41,704 46,194 68,392 76,153
FY13 FY14 FY15 FY16 FY17 FY18E FY19E
EBIT 31,114 33,927 40,142 54,437 60,833
Share Holding patterns % PAT 23,566 29,861 29,833 40,049 44,755
4QFY17 3QFY17 2QFY17 EPS (Rs) 73 92 92 124 138
Promoters 46.3 46.5 46.5 EPS growth (%) 5% 27% 0% 34% 12%
Public 53.7 53.5 53.5 ROE (%) 11% 13% 11% 13% 13%
Total 100.0 100.0 100.0 ROCE (%) 8% 8% 8% 11% 11%
BV 675 715 814 941 1,062
Stock Performance % P/B (X) 1.2 1.5 1.5 1.3 1.2
1Mn 3Mn 1Yr P/E (x) 11.3 11.3 13.5 10.1 9.0
Absolute 10.1 36.4 42.6
Rel.to Nifty 8.9 19.7 34.8 RECENT DEVELOPMENT: Commencement of Ethane Project
Reliance commissions ethane receipt & handling facilities , at its Dahej
140 RELIANCE NIFTY
Manufacturing Facility in Gujarat in a world record time of less than three
130
years
120 RIL commissions final phase of Jamnagar paraxylene project at a cost of $

16 million
110

100 Commercial production of natural gas from coal seams or CBM from its
Madhya Pradesh blocks.Company is targeting 3.5 million SCM per day of
90 peak output from two adjacent CBM blocks in Sohagpur
Reliance Retail may spend Rs 2,500 cr for business expansion in next 3
80
years.The company also has plans to add 500 to 600 fuel stations.
Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16

Apr-17
Mar-17

Reliance Industries has completed sale of its entire 76 percent interest in

its East African company GAPCO to Total SA of France for an undisclosed
sum.
ADITYA GUPTA
aditya.gupta@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Total Volumes ('000) 18 17 18 18 18 -2% -2% 70 70 1%
GRM(USD/BBL) 10.8 11.5 10.1 10.8 11.5 6% 6% 11 11 2%
Net Sales 59,671 71,451 81,651 84,189 92,889 56% 10% 2,93,298 3,30,180 13%
Other Income 1,953 2,378 2,393 2,736 1,936 -1% -29% 7,479 9,443 26%
COGS 37,309 49,519 59,396 60,486 67,697 81% 12% 2,08,113 2,37,098 14%
Employee Cost 1,838 2,111 2,017 1,894 2,366 29% 25% 7,407 8,388 13%
Other Expenses 9,321 8,598 9,062 10,257 10,593 14% 3% 36,074 38,500 7%
EBITDA 11,203 11,223 11,176 11,552 12,233 9% 6% 41,704 46,194 11%
Depreciation 3,110 2,725 2,774 2,793 3,354 8% 20% 11,565 11,646 1%
Interest 842 1,206 893 1,209 556 -34% -54% 3,691 3,849 4%
PBT 9,204 9,670 9,902 10,286 10,259 11% 0% 33,927 40,142 18%
Tax 2,351 2,581 2,708 2,719 2,201 -6% -19% 8,876 10,201 15%
PAT 6,930 7,113 7,206 7,506 8,053 16% 7% 29,861 29,833 0%

Robust volume growth accompanied by highest GRM of 11 USD/BBL

Reliance Reliance reported Rs.92889 crore of net sales in 4QFY17 a growth of 56% over same quarter
previous year. This was driven by growth across all business segments.
outperformed
Singapore GRM EBITDA for 4QFY17 is Rs. 12233 Cr. a growth of 9% over same quarter previous year.EBITDA
by 5.1 USD/BBL margin in 4QFY17 stood at 13.2%
Reliance has reported Gross refining margin of 11.5 USD/BBL in 4QFY17 vs 10.8 USD/BBL as
compared to the same quarter previous year.
Profit after tax for 4QFY17 is Rs. 8053 Cr a growth of 16% over same quarter previous year.
Exports increased by 25.2% to Rs. 38,718 crore in 4QFY17.
The capital expenditure for the year ended 31st March 2017 was Rs. 114,742 crore
Reliance Jamnagar refineries processed 17.5 MMT crude in 4Q FY17, vs 17.8 MMT crude processed
in the previous quarter..
Reliance operated 1,221 petroleum retail outlets in the country in 4QFY17

Refining EBIT(Rs in CR) EBIT Margins(%) RIL GRM(USD/bbl) Singapore GRM(USD/bbl)

7,000 14% 14.0
6,000 12% 11.5 11.5 11.5
12.0 10.8 10.8
10.1 10.4 10.6 10.1
5,000 10% 10.0 8.7 8.3 8.6
8.0 8.0 7.7
4,000 8% 8.0 7.3
6.3 6.3 6.5 6.7
5.8 6.0
3,000 6% 6.0 4.8 5.1
2,000 4% 4.0
1,000 2% 2.0
- 0% 0.0

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Higher expenses and depreciation pressurizes PAT
Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY15 FY16 YoY(+/-)
Gross Margin 37% 31% 27% 28% 27% -0.10 -0.01 29% 28% -0.01
EBITDA Margin 19% 16% 14% 14% 13% -0.06 -0.01 14% 14% 0.00
PAT Margin 12% 10% 9% 9% 9% -0.03 0.00 10% 9% -0.01

Gross Margin contracted to 27% due to mediocre performance of the Oil & Gas exploration business
in 4QFY17
EBITDA grew by 9%QoQ to Rs.12233 crore. But EBITDA Margin declined by 50bps QoQ to 13.2% on
account of higher purchase cost of raw material.
PAT margin degrew by 30bps to 8.7%QoQ on account of higher depreciation cost in 4QFY17

EBITDA(Rs in CR) EBITDA Margins(%) PAT(Rs in CR) PAT Margins(%)

14,000 20%
12,233 10,000 9,345 14%
11,248 11,223
11,203 11,552
11,176 18%
12,000
9,959 16% 9,000 8,053 12%
10,000 9,301 8,000 7,2456,9307,1137,2067,506
14%
7,000 6,024 10%
8,000 12%
6,000 8%
10%
6,000 5,000
8% 4,000 6%
4,000 6% 3,000 4%
4% 2,000
2,000 2%
2% 1,000
- 0% - 0%

Volume Trend

Petrochemicals volume (MMT) Crude Oil Refined

19 18
6.5 6.4 6.4 18
6.4 18 18 18 18
6.3 18
6.3 6.2 6.2 6.2 18 17
6.2 17
6.1 17
6.1 17 17 17
6.0 17 16
5.9 5.8
5.8 16
5.7 16
5.6
15
5.5

Petro-chemicals volume remain flat QoQ to 6.2 MT in 4QFY17 but it slightly degrew by 2% YoY
primarily due to increase in prices across polymers and polyester chain.
Crude oil refined in 4QFY17 is 17.5 MT vs 17.8 MT in the previous quarter of FY17.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Expanding organised retail base- During the quarter, Reliance Retail added 63 stores across
various store concepts. At the end of the year, Reliance Retail operated 3,616 stores across 702 cities
with an area of over 13.5 million square feet.
Re-commissioning of Petroleum outlets- Reliance continue to re-commission its retail petroleum
network; 1221 outlets are now operational. Further,growing Trans-connect customer base, credit
solutions, and e-cash loading facilities have helped Reliance to more than double sales volume in
FY17.
Strong Petro-chemicals Demand- polymer demand registered growth of 7% during FY17.PVC
demand registered highest growth rate of 10% YoY
Commercialisation of Jio- Jio reached 100 Million subscribers in 170 days. This is the fastest
achieved by any start-up technology company in the world.Reliance Retails device distribution
business sold 2.6 million LYF and JioFi devices during the quarter and nearly 10 million units in the
financial year.
Attractive pricing policy of Jio can boost revenue- Within a month of announcing the Jio Prime
Offer, over 72 million Jio customers signed up for JIO PRIME. Recently Jio launched Jio Dhan Dhana
Dhan. The plans start with the most affordable Rs. 309 , which provides Unlimited SMS, calling and
data (1GB per day at 4G speed) for 3 months on first recharge.

Segment performance

Refining business Petro-chemicals business

EBIT Margins(%) Refining EBIT(Rs in CR) EBIT Margins(%) Petro-chemicals EBIT

7,000 14% 4,000 18%

6,000 12% 3,500 16%
3,000 14%
5,000 10%
12%
4,000 8% 2,500
10%
2,000
3,000 6% 8%
1,500
2,000 4% 6%
1,000 4%
1,000 2%
500 2%
- 0% - 0%

View & Valuation

Commissioning of Ethane project and commercialization of Jio has paved a way for long term growth
of the company. With the rapid growing customer base of jio by adding 6 mn customers daily to its
network, Jio ha successfully added 100 million customers and it is continuously adding new
customers. Jio can improve the revenue of the company upto a large extent. Growing demand of
petro-chemicals products and re-commissioning of petroleum outlets will further improve the
volume of refining segment. Reliance has also added 63 stores across various store concepts. At the
end of the year, Reliance Retail operated 3,616 stores across 702 cities with an area of over 13.5
million square feet which will improve revenue of organized retail.We expect company to maintain
ROE of 13% in FY18. Currently, the stock is trading at 1.89x FY17 P/BV. We maintain HOLD' with the
target price of Rs. 1680.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17 FY18E FY19E FY16 FY17 FY18E FY19E
Revenue from Operation 2,93,298 3,30,180 4,43,483 4,93,634 ROE 13% 11% 13% 13%
Change (%) -22% 13% 34% 11% ROCE 8% 8% 11% 11%
EBITDA 41,704 46,194 68,392 76,153 Asset Turnover 0.5 0.5 0.6 0.6
Change (%) 12% 11% 48% 11% Debtor Days 5.56 5.56 5.56 5.56
Margin (%) 14% 14% 15% 15% Inv Days 57.9 57.9 57.9 57.9
Depr & Amor. 11,565 11,646 17,357 19,861 Payable Days 75 75 75 75
EBIT 30,139 34,548 51,035 56,291 Int Coverage 8.17 8.98 12.96 14.29
Int. & other fin. Cost 3,691 3,849 3,939 3,939 P/E 11 14 10 9
Other Income 7,479 9,443 7,341 8,480 Price / Book Value 1.5 1.5 1.3 1.2
EBT 33,927 40,142 54,437 60,833 EV/EBITDA 11 12 8 7
Exp Item 4,574 - - - FCF per Share (30) (204) 26 39
Tax 8,876 10,201 14,388 16,077 Div Yield 1% 1% 1% 1%
Minority Int & P/L share of Ass. 236 (108) - -
Reported PAT 29,861 29,833 40,049 44,755 Assumptions
Adjusted PAT 26,484 29,833 40,049 44,755 FY16 FY17 FY18E FY19E
Change (%) 27% 0% 34% 12% Crude Refined(Million Tonnes) 70 70 74 80
Margin(%) 10% 9% 9% 9% Petrochemicals Production(MMT) 25 25 25 26
Total Oil volume(PMT+KD-D6)(MMBBL)8 8 8 8
Total Gas volume(PMT+KD-D6)(BCF)208 174 174 174
Balance Sheet Rs in Crores
Y/E March FY16 FY17 FY18E FY19E
Share Capital 2,948 2,959 2,948 2,948 Cash Flow Statement Rs in Crores
Reserves 2,28,608 2,60,750 3,01,918 3,41,128 Y/E March FY16 FY17E FY18E FY19E
Networth 2,31,556 2,63,709 3,04,866 3,44,076 PBT 35,979 40,142 54,437 60,833
Debt 165192 183676 181182 181182 (inc)/Dec in Working Capital 41,285 55,529 75,733 84,633
Other Non Cur Liab 2,249 9,025 3,401 3,785 Non Cash Op Exp 12,916 11,646 17,357 19,861
Total Capital Employed 396748 447385 486047.89 525257.82 Int Paid (+) 3,849 3,939 3,939 -
Net Fixed Assets (incl CWIP) 409353 518471 537523.25 564661.96 Tax Paid (10,201) (14,388) (16,077) -
Non Cur Investments 41,512 25,639 25,639 25,639 others 7,128 9,331 (16,410) (8,942)
Other Non Cur Asst 14,061 8,279 8,279 8,279 CF from Op. Activities 39,811 54,659 44,934 59,614
Non Curr Assets 4,71,212 5,59,989 5,79,041 6,06,180 (inc)/Dec in FA & CWIP (49,662) (1,20,764) (36,409) (47,000)
Inventory 46,486 53,460 70,289 78,238 Free Cashflow (9,851) (66,105) 8,525 12,614
Debtors 4,465 8,177 6,751 7,515 (Pur)/Sale of Inv 6,471 - - -
Cash & Bank 11,028 3,023 6,223 9,352 others 3,775 - - -
Other Curr Assets 16,345 19,871 24,715 27,509 CF from Inv. Activities (38,338) (1,20,764) (36,409) (47,000)
Curr Assets 1,27,785 1,46,813 1,70,536 1,95,316 inc/(dec) in NW 284 - - -
Creditors 60,296 76,595 91,171 1,01,481 inc/(dec) in Debt 13,345 18,484 (2,494) -
Provisons 3,006 4,120 5,035 5,338 Int. Paid (9,115) (3,849) (3,939) (3,939)
Other finicial liabilities 89,533 1,04,543 1,04,543 1,04,543 Div Paid (inc tax) (7,259) (3,697) (4,962) (5,546)
Other Curr Liab 10,005 20,882 15,128 16,839 others (14) - - -
Curr Liabilities 1,61,609 2,03,789 2,13,526 2,25,850 CF from Fin. Activities (2,759) 10,938 (11,395) (9,485)
Net Curr Assets (33,824) (56,976) (42,990) (30,535) Inc(Dec) in Cash (1,286) (55,167) (2,870) 3,129
Total Assets 598997 706802 749577.22 801495.69 Add: Opening Balance 12,476 11,028 3,023 6,223
Closing Balance 11,190 (44,139) 153 9,352

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 HOLD
SUN PHARMACEUTICAL INDUSTRIES LTD
24th April 2017

Company Update Recently company has received 11 observations from the US FDA for its
CMP 638 Dadra unit. In the inspection US FDA stated that company fails to produce
appropriate master or control record for each batch of drugs and failure to
Target Price 795
properly investigate batches that don't meet specifications. Dadra unit is
Previous Target Price the second largest manufacturing facility of the company, supplying drugs
Upside 25% to US market. Another unit of company at Halol is already under US import
Change from Previous alert which contributes about 40% of revenue from the US market. Earlier
in the month of March, US FDA indicated that it will lift import ban from its
Mohali unit. Lift of ban will clear the path for Sun Pharma to supply
Market Data approved products from the Mohali facility to the US market.
BSE Code 524715
News Update
NSE Symbol SUNPHARMA
52wk Range H/L 854/571 Sun Pharma opens first production unit in Egypt, total investment of USD
Mkt Capital (Rs Cr) 153562 12.5 million was inaugurated on 21 feb 2017, signalling growing bussines
ties between India and the key Middle East nation.
Av. Volume(,000) 459
Nifty 9,119 On 17 Feb 2017, Sun Pharma gets European Medicines Agency nod for
Tobramycin.
Stock Performance Sun Pharma recalls 2.7 lakh bottles of antidepressant in US.The tablets
1M 3M 12M have been manufactured by Sun Pharma at its Halol plant in India.
Absolute -9.1 -23.1 -23.7 Sun Pharma recalls anti-depressant drug Bupropion Hydrochloride.The
Rel.to Nifty -9.4 -38.4 -30.4 recall is classified as class-III, which means the products are unlikely to
cause any adverse health reactions, but violate FDA labelling or
manufacturing rules.
Share Holding Pattern-% Sun Pharma to sell Ohm Labs site at New Jersey
3QFY17 2QFY17 1QFY17
Promoters 54.4 55.0 55.0 Outlook

Public 45.6 45.0 45.0 US FDA import alert on Dadra unit may dwindle the companys revenue
from the US business. In the meanwhile the Synergies from the Ranbaxy
Others 0.0 0.00 0.00
acquisitions are gaining momentum and the company is on track to
Total 100.0 100.0 100.0
achieve the targeted benefits. Company has strengthened the branded
Company Vs NIFTY ophthalmic pipeline further through acquisition of Ocular Technologies. The
125 SUNPHARMA NIFTY management has maintained its guidance of 8-10% sales growth for
120 FY17E, we are optimistic for healthy growth in the long-term. Considering
115 above arguments we recommend HOLD rating on this stock while
110 maintaining our previous recommended target price of Rs. 795. We are
105 analysing the financial viewpoint of Mohali and Dadra plant and will update
100
as more clarity will emerge.
Rs,Cr
95
Financials 2012 2013 2014 2015 2016
90
85 Sales 8019 11300 16080 27433 27219
80 EBITDA 3204 4896 7002 8064 7431
Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16

Apr-17
Mar-17

Net Profit 2657 2983 3141 4541 3665

EPS 26 29 15 22 18
Aditya Gupta ROE 22% 20% 17% 17% 12%
aditya.gupta@narnolia.com
Narnolia Securities Ltd 2
Please refer to the Disclaimers at the end of this Report
 Segmental Revenue

Latest Events
16 Dec 2016- The necessary formalities for closure of acquisition transaction have been concluded and we have successfully
completed the acquisition of Ocular Technologies.
12 dec 2016- Sun Pharma, Moebius Medical ink pact to develop pain management product.Moebius Medical will conduct
requisite pre-clinical studies and will assume responsibility for product development and manufacturing through the end of Phase-
II studies, as per the pact
7 Dec 2016- Company has undergone an inspection by USFDA recently and post that the health regulator issued a Form-483
observation letter For Halol Plant. The company is in the process of responding to the letter.

Financial Performance

EBITDA EBITDA Margins

50% 46% 44% 46% 46% 3000

44% 44% 44% 44% 44%
45% 41%
40% 2500
31% 33% 32%
35% 31%
27% 28% 27% 2000
30% 26%
25% 1500
20% 14%
15% 1000
10%
1551

1843

2180

2165

2520

1768

1873
1242

1175

1275

1275

2001

1801

1733

1850

1934

2169

2246

500
892

5%
0% 0

About the Company

Sun Pharmaceuticals (SUNP) is one of the fastest growing companies in India as well as globally. It has a highly impressive
track record of organic and inorganic growth. Various US acquisitions augment SUNPs pipeline with differentiated products, and
SUNP has turned around business in a highly profitable manner Taro/ TDPL/ Natcos brands/ etc. It has one of the highest
margins/ return ratios amongst global peers. In Apr 14, SUNP announced its biggest M&A deal ever Ranbaxy (RBXY). SUNP
currently is the second largest player in the domestic market, while the merged entity will become the largest player. Its API
business footprint is strengthened through 11 world class API manufacturing facilities across the globe. Sun Pharma fosters
excellence through innovation supported by strong R&D capabilities comprising about 1800 scientists and R&D investments of
over 7% of annual revenues.

Narnolia Securities Ltd 3

Please refer to the Disclaimers at the end of this Report
 Financials Snap Shot
INCOME STATEMENT RATIOS
FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16
Revenue 11300 16080 27433 27219 EPS 29 15 22 18
Other Income 388 552 452 459 Book Value 145 89 128 152
Total Revenue 11688 16633 27885 27678 DPS 5 3 2 2
COGS 2,073 2,779 6,739 6,483 Payout (incl. Div. Tax.) 17% 19% 8% 10%
GPM 18% 17% 25% 24% Valuation(x)
Other Expenses 2,796 4,225 8,201 8,508 P/E 14 38 47 58
EBITDA 4896 7002 8064 7431 Price / Book Value 3 6 8 7
EBITDA Margin (%) 43% 44% 29% 27% Dividend Yield (%) 1% 1% 0% 0%
Depreciation 336 409 1295 1014 Profitability Ratios
EBIT 4,560 6,592 6,769 6,417 RoE 20% 17% 17% 12%
Interest 43 44 579 477 RoCE 30% 35% 24% 19%
PBT 4,905 7,101 6,642 6,399 Turnover Ratios
Tax 846 702 915 935 Asset Turnover (x) 1 1 1 1
Tax Rate (%) 17% 10% 14% 15% Debtors (No. of Days) 78 50 71 91
Reported PAT 2983 3141 4541 3665 Inventory (No. of Days) 83 71 75 86
Dividend Paid 512 606 363 363 Creditors (No. of Days) 34 30 42 47
No. of Shares 104 207 207 207 Net Debt/Equity (x) 0.0 0.0 0.1 0.1

BALANCE SHEET CASH FLOW STATEMENT

FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16
Share Capital 104 207 207 241 OP/(Loss) before Tax 4,315 4,581 6,403 6,765
Reserves and surplus 14,886 18,318 26,252 31,164 Depreciation 336 409 1,195 1,014
Shareholders' funds 14,990 18,525 26,459 31,404 Direct Taxes Paid 1,073 789 1,740 1,988
Long term Debt 115 49 1,368 3,117 Operating profit before working
4,475capital4,541
changes 7,101 8,492
Total Borrowings 198 2,489 7,596 8,338 CF from Op. Activity 3,357 3,959 5,322 6,769
Non Current liabilities 1,001 2,886 2,817 2,365 Purchase of Non Current investments
(15,672) (28,265) (28,802) (40,089)
Long term provisions 787 2,602 2,532 2,080 Capital expenditure on fixed assets
(845) including
(906)capital
(2,366)
advances
(3,382)
and capital w
Short term Provisions 1,482 1,961 3,336 3,417 CF from Inv. Activity (2,635) (2,367) (2,671) (4,455)
Current liabilities 2,758 3,549 9,256 8,026 Repayment of Long Term Borrowings
(111) (89) (6,662) (9,076)
Total liabilities 20,583 29,371 49,028 54,220 Interest Paid 38 23 251 300
Net Fixed Assets 5,077 5,824 11,020 13,361 Divd Paid (incl Tax) 512 606 363 869
Non Current Investments 1,106 788 599 593 CF from Fin. Activity (665) 507 (1,087) (1,924)
Other non Current assets 8 0 55 96 Inc/(Dec) in Cash 57 2,099 1,563 390
Current assets 11,503 18,686 29,122 30,865 Add: Opening Balance 2,013 2,260 4,479 7,729
Total Assets 20,583 29,371 49,028 54,220 Closing Balance 2,069 4,359 7,286 8,120

Narnolia Securities Ltd 4

Please refer to the Disclaimers at the end of this Report

 INDUSTRY - BANKING
BSE Code - 532648
NSE Code - YESBANK
21-Apr-17 NIFTY - 9136

Comapany Data Key Highlights of the report:

CMP 1545 Strong loan growth at a CAGR of 33% over last 3 years has kept the
Target Price 1936 earnings buoyant for Yes Bank.
Previous Target Price 1936 Remains one of the best in terms of asset quality in the industry despite
Upside 25% aggressive loan book growth. More than 75% of the corporate loan book is
Change from Previous 0% A or above A rated.
52wk Range H/L 1638/871 Liability franchise has been robust with CASA and Retail term deposits
Mkt Capital (Rs Cr) 70531 crossing 60% of the total deposits which augurs well for the margins.
Av. Volume (,000) 182.06 Strong capitalization with CET I level of 11.4% and Tier I of 13.3% provides
Share Holding Pattern % full support for aggressive growth.
4QFY17 3QFY17 2QFY17 We expect the bank to maintain the RoA of 1.9% and RoE of 19%. We
Promoters 20.2 21.8 21.9 value Yes bank (2.9x P/B and 123x EPS FY19) at Rs 1936 and maintain
DII 10.5 11.2 10.4 BUY.
FII 46.7 42.0 42.6
Others 22.7 25.1 25.1 Financials/Valuation FY15 FY16 FY17 FY18E FY19E
100 100 100 NII 3,488 4,567 5,797 8,158 10,633
YESBANK is currently trading at 2.3x PPP 3,250 4,303 5,838 7,692 9,620
P/B FY19 PAT 2,005 2,539 3,330 4,492 5,658
4.50
NIM % 3.1 3.2 3.2 3.6 3.8
4.00 EPS (Rs) 48.0 60.4 73.0 98.4 123.9
3.50
EPS growth (%) 7.0% 25.8% 20.8% 34.9% 26.0%
3.00

2.50 ROE (%) 21.3 19.9 18.6 18.9 20.3

2.00
ROA (%) 1.8 1.8 1.9 2.0 2.0
1.50

1.00 BV 280 328 483 557 663

0.50
P/B (X) 2.9 2.6 3.3 2.8 2.3
-
P/E (x) 17.0 14.3 22.2 15.7 12.5

Stock Performance % Recent Development : Key Highlights of Result Update

1Mn 1Yr YTD GNPA double in absolute term due to one large account slipped into NPA
Absolute 5.1 75.2 35.1 as per RBI directive of Divergence in Asset Classification and Provisioning.
Rel.to Nifty 3.9 59.8 23.4
GNPA ratio increased from 85 bps to 152 bps.
180 YESBANK NIFTY Despite of huge provisioning on slipped account, profitability remained
170
healthy with 30% YoY growth.
160
150 Non-interest income register healthy growth of 57% YoY backed by strong
140
core fee income.
130
120 After raising capital of Rs 4900 Cr through QIP, CET I ratio is 11.4% and
110
Tier I ratio is 13.3%.
100
90
Advances growth accelerated to 35% YoY backed by healthy growth of 40%
80
YoY in corporate banking book.
Dec-16
Jun-16

Oct-16
Nov-16
Jul-16
Apr-16

Apr-17
Sep-16

Feb-17
Mar-17
Jan-17
Aug-16
May-16

CASA ratio to increase to 36.3% sequentially against 33.3%.

DEEPAK KUMAR
Deepak.kumar@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Interest Inc. 3,528 3,862 4,094 4,232 4,349 23.3% 2.8% 13,533 16,425 21.4%
Provisions Interest Exp. 2,287 2,546 2,648 2,724 2,709 18.5% -0.5% 8,967 10,627 18.5%
increased due
to one off NII 1,241 1,317 1,446 1,508 1,640 32.1% 8.8% 4,567 5,797 26.9%
large account Other Income 803 901 888 998 1,257 56.6% 25.9% 2,712 4,157 53.3%
slipped into Total Income 2,044 2,217 2,334 2,506 2,897 41.7% 15.6% 7,279 9,954 36.8%
NPA Ope Exp. 819 910 948 1,052 1,206 47.3% 14.6% 2,976 4,117 38.3%
PPP 1,225 1,307 1,386 1,454 1,691 38.0% 16.3% 4,303 5,838 35.7%
Provisions 186 207 162 115 310 66.1% 168.4% 536 793 47.9%
PBT 1,039 1,100 1,224 1,338 1,381 32.9% 3.2% 3,766 5,044 33.9%
Tax 337 368 423 456 467 38.7% 2.5% 1,227 1,714 39.7%
Net Profit 702 732 802 883 914 30.2% 3.6% 2,539 3,330 31.1%

Despite one off huge provisioning, Profitability remained healthy.

Yes bank reported strong PAT growth of 30% YoY despite huge provisioning of Rs 310 Cr as GNPA
doubled in 4Q FY17.
NII grew by 32% YoY backed by strong loan growth and NIM expansion. Other income also saw robust
growth of 57% YoY driven by all round fee growth.
Operating expenses was also higher and grew by 47%. However due to strong revenue generation C/I
ratio was well within control at 41.6% against 40% a year back. This all led the operating profit to grow
by 38% YoY.

NIM increased by 20 bps YoY to 3.6% mainly due to decline of 70 bps in cost of fund. Yield on
advances declined by 50 bps YoY. Decline in cost was due to spike in CASA ratio.

Profitability Metrix % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
C/I Ratio 40.1 41.1 40.6 42.0 41.6 1.58 -0.35 42.4 42.6 0.18
Empl. Cost/ Tot. Exp. % 43.1 44.7 45.7 44.4 41.2 -1.90 -3.24 43.6 43.8 0.28
Other Exp/Tot. Exp. % 56.9 55.3 54.3 55.6 58.8 1.90 3.24 56.4 56.2 -0.28
Provision/PPP % 15.2 15.8 11.7 7.9 18.3 3.10 10.38 12.5 13.6 1.13
Tax Rate % 32.4 33.5 34.5 34.1 33.8 1.39 -0.24 32.6 34.0 1.41
Int Exp./Int Inc. (%) 64.8 65.9 64.7 64.4 62.3 -2.52 -2.08 66.3 64.7 -1.55
Other Inc./Net Inc. % 39.3 40.6 38.0 39.8 43.4 4.13 3.56 37.3 41.8 4.50
PAT/ Net Income % 34.3 33.0 34.3 35.2 31.6 -2.79 -3.67 34.9 33.5 -1.43
RoE 21.1 20.7 21.4 22.3 21.8 0.70 -0.50 19.9 18.6 -1.36
NIM expanded
due to RoA 1.8 1.7 1.8 1.8 1.8 0.00 0.00 1.8 1.9 0.06
declining cost
of deposits
Margin Performance
Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
Yield On Advances 11.2 11.1 10.9 10.9 10.7 -0.50 -0.20 11.2 10.6 -0.58
Avg Yield on Earning 10.3 10.5 10.2 10.0 9.6 -0.65 -0.34 9.6 9.2 -0.41
Assets
Cost of Fund 7.0 7.0 6.8 6.6 6.3 -0.70 -0.30 6.8 6.5 -0.33
NIM 3.4 3.4 3.4 3.5 3.6 0.20 0.10 3.2 3.2 0.00

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Avg Yield on Earning Assets Cost of Fund NIM

3.6

3.5

3.4 3.4 3.4 3.4

3.3 3.3

3.2
10.9

10.6

10.1

10.3

10.5

10.0
11.0

10.2
7.8

7.6

7.1

7.0

7.0

6.8

9.6
6.3
7.3

6.6
Assets Quality Deterioration spiked as per RBI directive.
Asset quality of Yes Bank deteriorated significantly in 4Q FY17 with GNPA almost doubled in absolute
term QoQ to Rs 2019 Cr.
Rs 912 Cr In terms of ratio GNPA increased to 1.52% against 0.85% sequentially where as NNPA increased to
slippage was 0.81% against 0.29% on sequential basis.
from one
cement Spike in GNPA was due to slip of one account in Cement sector. However this slippage was as per the
company but RBI directive and management is hopeful to recover this account in June quarter. The exposure of Yes
management bank in this account is Rs 911 Cr which is 69 bps of its gross advances.
expect it to Recently RBI also asked banks to increase the standard assets provisioning on telecom sector as pro-
recover in 1Q active measures which raised concerns on trouble of telecom companies in India. Exposure of Yes
FY18. bank in telecom sector is 4.9% out of which 4.2% is A or above rated.

Restructured advances declined to 36 bps from 42 bps sequentially. There was no restructuring in 4Q
FY17.
During the quarter the bank sold Rs 887 Cr of assets. Management said that against these assets,
collateral /security cover is adequate and expected to be realizable.
Standard SDR Advances outstanding at 0.22% to Gross Advances from five accounts of which three
accounts (equivalent to 0.08% of Gross Advances) were restructured during Q4FY17. Total
outstanding Investments in SDR stand at 0.02% of Advances as on 4Q FY17.

Assets Quality 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
GNPA (Rs) 749 845 917 1,006 2,019 169.5% 100.7% 749 2,019 169.5%
GNPA % 0.76 0.79 0.83 0.85 1.52 0.76 0.67 0.76 1.52 0.76
NNPA (Rs) 284 302 323 342 1,072 276.9% 213.1% 284 1,072 276.9%
NNPA % 0.29 0.29 0.29 0.29 0.81 0.52 0.52 0.29 0.81 0.52
Slippages (Rs) 402 300 302 127 1,905 374.0% 1406% 911 2,632 188.9%
Std. Restructured Assets 524 523 512 500 482 -8.1% -3.7% 524 482 -8.1%
(Rs)
Std. Restructured Assets 0.53 0.49 0.46 0.42 0.36 -0.17 -0.06 0.53 0.36 -0.17
%
Total Stress Assets (Rs) 1,273 1,368 1,428 1,506 2,500 96.4% 66.0% 1,273 2,500 96.4%
Specific PCR % 62.0 64.2 64.8 66.0 46.9 -15.14 -19.08 62.0 46.9 -15.14
Prov/Avg Adv% 0.20 0.20 0.15 0.10 0.25 0.04 0.15 0.62 0.69 0.07

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 GNPA % NNPA % Std. Restructured Assets % Specific PCR % Prov/Avg Adv%

80 0.30
0.25
70
0.25
0.20 0.20
60
0.18 0.18
0.20
50 0.15
0.13 0.13

1.52
40 0.15
0.10
30
0.10

0.85
0.83
0.79
0.76 20
0.66
0.61
0.46
0.41

0.05
0.12
0.51

0.13
0.71

0.71

0.22

0.29
0.53

0.29
0.49

0.29
0.46

0.29
0.42
0.20

0.67

0.81
0.36
10
72 71 68 66 62 64 65 66 47
- -

Robust Other Income Growth

Non-interest income register healthy growth of 57% YoY backed by strong core fee income. Retail
banking fee grew by 72% YoY whereas corporate banking fee grew by 61% YoY. Cash management
income saw decline of 17% YoY whereas debt/capital market income register 100% growth YoY.

Other Income Break Up 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Trade & Remittance 58.0 70.9 71.9 58.8 79.1 36.4% 34.5% 207.0 280.7 35.6%
Facility / Processing Fee 24.8 16.4 22.7 23.5 48.2 94.4% 105.1% 71.9 110.8 54.1%
Third Party Sales 30.7 22.2 27.7 30.4 63.3 106.2% 108.2% 96.2 143.6 49.3%
Interchange Income 34.7 36.9 45.6 51.7 77.6 123.6% 50.1% 120.5 211.8 75.8%
General Banking Fees 33.5 31.0 41.5 49.9 44.9 34.0% -10.0% 116.8 167.3 43.2%
Retail Banking Fees 181.6 177.4 209.6 214.3 313.1 72.4% 46.1% 612.3 914.4 49.3%
Corporate Banking Fees 363.8 409.6 275.7 340.6 586.4 61.2% 72.2% 1,170.6 1,612.3 37.7%
Corporate Trade & Cash 141.2 111.2 103.4 99.5 117.8 -16.6% 18.4% 461.1 431.9 -6.3%
Management
Total Fee Income 686.6 698.2 588.7 654.4 1,017.3 48.2% 55.5% 2,244.0 2,958.6 31.8%
Forex, Debt Capital 116.3 202.3 299.2 307.7 232.4 99.8% -24.5% 468.2 1,041.6 122.5%
Markets
Others & Securities - - - 36.2 7.3 - 36.2
Total Other Income 802.9 900.5 887.9 998.3 1,257.4 56.6% 26.0% 2,712.2 4,036.4 48.8%

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

43.4
39.2 39.3 40.6 39.8
0.8 0.8 37.1 37.7 38.0
0.7 35.8
0.7 0.7 34.0
0.6 0.6 0.6
0.5

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Advances growth remained healthy, CASA spiked once again.
Advances growth accelerated to 35% YoY backed by healthy growth of 40% YoY in corporate banking
book. Retail and business banking book also registered the strong growth of 25% YoY.
The composition of retail and banking business increased to 32.3% against 31.1% QoQ. Management
had earlier targeted the portfolio mix of 55:45 between corporate and retail book till FY20.
The A & above A rated corporate portfolio remains healthy with more than 76%.
Deposit of the bank increased by 28% QoQ whereas CASA grew by 66% YoY which led the CASA
ratio to increase to 36.3% sequentially against 33.3%.
The CASA growth was backed by robust growth in both CA and SA by 75% and 61% QoQ
respectively. The retail deposits now increased to 61.5% against 59.2% a quarter back. Management
has target to reach to 70% retail deposits till FY20.

Concall Highlights:
One large account under cement sector slipped into NPA but that account is under merger &
acquisition transaction, so management is hopeful of recovery in June quarter.
RBI direction with respect to discrepancy in recognition of GNPA has been fully accounted for by the
bank in this till FY17.
Raised Rs 4906.65 Crores (USD 750 Mn) through QIP.
NIM should increase by 10 to 20 bps in FY18 as compared to FY17.
Credit cost will follow same current trend.
Advances growth guidance of 25-30%.
Will achieve its earlier guidance of CASA of 40% sooner than FY20.
Saw some strong inflow in currrent account which may not be sustainable.
Will open 250 branches in FY18 which will be 25% growth.
Established Market Leadership in UPI applications for enabling Merchant payments with a market
share of 30%
During the quarter the bank sold Rs 887 Cr of assets. Against these assets, the collateral /security
cover is
adequate and expected to be realizable.

View and Valuation

Healthy loan growth with one of the best assets quality in the industry has led the earnings of
YESBANK to keep buoyant. More than 75% of the corporate portfolio is rated A & above A, which
gives us comfort on assets quality outlook. However we see spike in GNPA in 4Q FY17 as one off and
expect it to recover in 1Q FY18.Recently Yes Bank raised capital of Rs 4900 Cr which increased its
CET I to 11.4% and Tier I to 13.3% which will support the loan growth of 30% plus. Increasing CASA
with retail FDs is the key trigger for YESBANK for the margin expansion. Focus of the management to
increase the CASA & retail FDs to 70% till FY20 from current 59% will further help to improve NIM.
The increased pace of branch expansion and headcounts will continue to provide healthy and granular
retail fee income. We expect the bank to maintain the RoA of 1.9% and RoE of 19%. We value Yes
bank (2.9x P/B and 123x EPS FY19) at Rs 1936 and maintain BUY.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Advances Performance
4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17
Net Advances (Rs in Cr) 75,550 79,666 80,015 84,396 98,210 1,05,942 1,10,216 1,17,087 1,32,263
Adv. Growth YoY % 35.8 35.1 29.0 26.7 30.0 33.0 37.7 38.7 34.7
>> Growth QoQ % 13.4 5.4 0.4 5.5 16.4 7.9 4.0 6.2 13.0

Sectoral Breakup %
Corporate Banking % 64.7 68.0 68.2 67.2 65.1 67.5 67.9 68.9 67.7
Retl. & Busn. Bank % 35.3 32.0 31.8 32.8 34.9 32.5 32.1 31.1 32.3

>Bus. Bank (Medium) 16.1 14.1 13.3 12.7 11.1 11.0 10.7 10.7 10.5
>Micro & Small 10.2 10.6 11.3 10.6 13.0 12.1 12.8 11.8 12.3
Enterprises
>Cons. Bank 9.0 7.3 7.2 9.5 10.8 9.4 8.6 8.6 9.5

Rating breakup of Corporate Banking exposures %

A & Above 76.8 75.7 75.6 75.9 76.5 76.4 77.3 76.2 76.1
B & Below 23.3 24.4 24.4 24.1 23.5 23.6 22.7 23.8 23.8

Deposits Performance
4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17
Deposits (Rs in Cr) 91,176 95,316 99,344 1,01,437 1,11,720 1,22,581 1,28,024 1,32,376 1,42,874
Growth YoY % 22.9 25.2 24.0 23.1 22.5 28.6 28.9 30.5 27.9
>> Growth QoQ % 10.7 4.5 4.2 2.1 10.1 9.7 4.4 3.4 7.9
CASA (Rs in Cr) 21,079 22,268 25,318 27,019 31,340 36,288 38,790 44,126 51,870
CASA % 23.1 23.4 25.5 26.6 28.1 29.6 30.3 33.3 36.3
CASA Growth YoY % 29.0 31.2 40.5 45.1 48.7 63.0 53.2 63.3 65.5
>> Growth QoQ % 13.2 5.6 13.7 6.7 16.0 15.8 6.9 13.8 17.5
Credit Deposit Ratio 82.9 83.6 80.5 83.2 87.9 86.4 86.1 88.5 92.6
CA (% of Deposits) 9.3 8.8 8.6 9.0 9.8 9.1 10.2 11.2 13.4
SA (% of Deposits) 13.8 14.5 16.9 17.6 18.3 20.5 20.1 22.2 22.9

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Robust Advances Growth Composition shifting to retail banking

Corporate Banking Retail & Business Banking

71.4
28.6
68.7
31.3
64.7
35.3
68.0
32.0
68.2
31.8
67.2
32.8
65.1
34.9
67.5
32.5
67.9
32.1
68.9
31.1
67.7
32.3
High composition of better rated book Strong liability franchise
A & Above B & Below Deposits (Rs in Cr) Growth YoY %

1,60,000 35.0
1,40,000 30.0
1,20,000 25.0
1,00,000
20.0
80,000
15.0
60,000
40,000 10.0
75.8
24.2
75.4
24.6
76.8
23.3
75.7
24.4
75.6
24.4
75.9
24.1
76.5
23.5
76.4
23.6
77.3
22.7
76.2
23.8

23.8
76.1

20,000 5.0
- -

CASA growth at high pace Trending to improved CD ratio

CASA % CASA Growth YoY % Credit Deposit Ratio

92.6

87.9 88.5
86.4 86.1
82.9 83.6 83.2
80.5
22.5

22.6

23.1

23.4

25.5

26.6

28.1

29.6

30.3

33.3

36.3

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Balance Sheet Rs in Crores Key Ratios & Assumptions
Y/E March FY16 FY17 FY18E FY19E Y/E March FY16 FY17 FY18E FY19E
Share Capital 421 456 456 456 BALANCE SHEET METRICS
>> Equity Capital 421 456 456 456 Loan Growth (%) 30.0 34.7 30.0 29.0
>> Preference Capital - - - - Deposit Growth (%) 22.5 27.9 26.6 28.7
Reserves & Surplus 13,366 21,598 24,978 29,814 C/D Ratio (%) 87.9 92.6 95.1 95.2
Networth 13,787 22,054 25,434 30,270 CASA (%) 28.1 36.3 38.0 41.0
Deposits 1,11,720 1,42,874 1,80,874 2,32,874 Investment/Deposit (%) 43.7 35.0 32.0 31.0
Change (%) 22.5 27.9 26.6 28.7 CRAR (%) 16.5 17.0 16.6 15.2
>> CASA Deposits 31,340 51,870 68,732 95,478 >> Tier 1 (%) 10.7 13.3 12.8 11.2
Change (%) 48.7 65.5 32.5 38.9 >> Tier 2 (%) 5.8 3.7 3.8 4.0
Borrowings 31,659 38,607 43,666 49,979 Assets Quality Metrics
Other Liabilities & Provisions 8,098 11,525 13,295 16,373 Gross NPA (Rs) 749 2,019 1,646 2,357
Total Liabilities 1,65,263 2,15,060 2,63,269 3,29,497 Gross NPA (%) 0.76 1.52 0.95 1.06
Cash & Bank 8,218 19,549 18,442 19,901 Net NPA (Rs) 284 1,072 560 801
Investments 48,838 50,032 57,880 72,191 Net NPA (%) 0.29 0.81 0.33 0.36
Change (%) 4.8 2.4 15.7 24.7 Slippges (%) 0.92 1.98 0.66 0.66
Advances 98,210 1,32,263 1,71,941 2,21,805 Provision Coverage (%) 62.0 46.9 66.0 66.0
Change (%) 30 34.7 30.0 29.0 Prov./Avg. Advances (%) 0.62 0.69 0.58 0.53
Fixed Assets 471 684 678 813 Margin Metrics
Other Assets 9,526 12,532 14,328 14,787 Yield On Advances (%) 11.2 10.6 10.2 9.8
Total Assets 1,65,263 2,15,060 2,63,269 3,29,497 Yield On Investment (%) 7.4 7.7 7.6 7.1
Yield on Earning Assets (%) 9.6 9.2 8.9 8.7
Income Statement Rs in Crores Cost Of Deposits (%) 7.1 6.3 5.7 5.3
Y/E March FY16 FY17 FY18E FY19E Cost Of Funds (%) 6.8 6.5 5.8 5.4
Interest income 13,533 16,425 20,111 24,604 Spread (%) 2.8 2.7 3.1 3.3
Interest expended 8,967 10,627 11,953 13,972 NIM (%) 3.2 3.2 3.6 3.8
Net Interest Income 4,567 5,797 8,158 10,633 Profitability & Effeciency Metrics
Change (%) 30.9 26.9 40.7 30.3 Int. Expense/Int.Income (%) 66.3 64.7 59.4 56.8
Other Income 2,712 4,157 5,105 5,954 Fee Income/NII (%) 53.8 66.7 56.6 50.6
Change (%) 32.53 53.3 22.8 16.6 Cost to Income (%) 42.4 42.6 43.6 43.5
>> Core Fee Income 2,459 3,868 4,614 5,382 Cost on Average Assets (%) 2.1 2.3 2.5 2.5
>> Treasury Income 261 289 491 572 Tax Rate (%) 32.6 34.0 34.0 34.0
>> Others Valuation Ratio Metrics
Total Net Income 7,279 9,954 13,263 16,586 EPS (Rs) 60.4 73.0 98.4 123.9
Operating Expenses 2,976 4,117 5,570 6,966 Change (%) 13.4 20.8 34.9 26.0
Change (%) 30.3 38.3 35.3 25.1 ROAE (%) 19.9 18.6 18.9 20.3
>> Employee Expenses 1,297 1,805 2,454 3,068 ROAA (%) 1.8 1.9 2.0 2.0
Pre-provisioning Profit 4,303 5,838 7,692 9,620 Dividend Payout (%) 16.6 16.4 14.2 16.0
Change (%) 32.4 35.7 31.8 25.1 Dividend yield (%) 1.3 1.0 0.9 1.0
Provisions 536 793 886 1,048 Book Value (Rs) 328 483 557 663
Change (%) 72.7 47.9 11.7 18.2 Change (%) 50.3 47.4 15.3 19.0
PBT 3,766 5,044 6,806 8,572 P/B (X) 2.64 3.35 2.77 2.33
Tax 1,227 1,714 2,314 2,915 P/E (X) 14.32 22.17 15.70 12.47
Profit After Tax 2,539 3,330 4,492 5,658
Change (%) 26.6 31.1 34.9 26.0

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 N arnolia Securities Ltd
201 | 2nd Floor | Marble Arch Build ing | 236B-AJC Bose
Road | Kolkata-700 020 , Ph : 033-40501500
em ail: narnolia@narnolia.com ,
w ebsite : w w w .narnolia.com

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