Fundamental stock picks:

Transcription

1 Fundamental stock picks: Investors buy or sell shares of companies. To know which shares to buy or sell, they use research. This tells you whether a company's share valuations are cheap or expensive based on the current and expected growth in profit of the company. At the same time, they compare the performance of one company with competitors. Any stock picking done based on financials and fundamentals of the company is called fundamental stock picking. Infosys Technologies CMP: Rs. 3,314 Target Price: Rs. 3,592 Upside: 8. 4% Infosys has recently shown encouraging performance in their realizations in 2Q. This is a result of their revised growth strategy and change in senior management. The risk we hold to our argument is the sharp movement in rupee against various currencies which may directly hit our earnings estimates. Cairn India Ltd. CMP: Rs. 328 Target Price: Rs. 365 Upside: 11.3% CIL has recently made discovery in Nagayalanka-1z, KG-ONN-23/1 block. The overall proven plus probable oil reserves & resources are in excess of 1 billion barrels which equals more than 25 years of production. Cummins India Ltd. CMP: Rs. 414 Target Price: Rs. 435 Upside: 5.1% Company is poised to benefit from the infrastructure spending in the country. The commencement of company s Phaltan plant is expected to contribute to cash flow generation in future. Company has committed a USD 3mn capex funding through internal accruals only. DB Corp. CMP: Rs. 251 Target Price: Rs. 315 Upside: 25.5% Strong presence in MP / Chhattisgarh, Rajasthan, Punjab, Haryana regions with a clear dominant position in the newspaper market. Upcoming elections boast a huge opportunity for DB Corp for growth in circulation. This dominance also gives them bargaining power over political advertisers. Modest declines in market price observed recently offers attractive entry point. ICICI Bank CMP: Rs. 13 Target Price: Rs. 121 Up side: 19.7% CASA mix at 43.2% - one of the best in country. In loan portfolios, ICICI faces lower risk from SME portfolio due to ~5% exposure of total portfolio. Corporate portfolio has been showing consistent performance. Management focus on stable growth with improving structural profitability reinforces positive outlook on the stock.

2 IDFC CMP: Rs. 96 Target Price: Rs. 137 Upside: 42.7% Company has been focusing on the niche infrastructure financing space and enjoys the best asset quality in its space. IDFC carries sufficient provision buffer to provide for any likely future increase in GNPA. Falling wholesale lending rates in addition to improved view on capital market related business may act as future catalyst on the stock. KPIT Cummins Infosystems CMP: Rs. 141 Target Price: Rs. 159 Upside: 12.8% Company management maintains a positive outlook on continued traction in automotive, manufacturing and utility verticals. Revolo, if successfully launched, can provide a significant earnings boost to the company. Management maintains revenue growth expectations at ~15% in FY14. L&T Limited CMP: Rs. 861 Target Price: Rs. 889 Upside: 3.3% The company who has diversified presence in the Indian infrastructure and industrial sector, holds an order backlog of Rs.1.65 trn which provides strong visibility for next 32 months. The company expects a growth of 2% in their order intake in the current year. Maruti Suzuki India CMP: Rs Target Price: Rs Upside : 11% The company among weak domestic vehicles sales is focusing on new export strategies to boost volumes by introducing newer PV models. Increase in localization and SPIL merger benefit will lead to improved margins in FY14. Management expects marginal growth in sales in FY14. Va Tech Wabag CMP: Rs. 511 Target Price: Rs. 57 Upside: 11.5% A zero debt company with a benefit of being a cash surplus position, Va Tech Wabag has experienced an increase of over 25% in its order book over the past 4 years. The company s capacity to own execute large orders is now providing a 32 month order visibility worth Rs bn. Tata Steel CMP: Rs. 31 Target Price: Rs. 358 Ups ide: 15.5% Tata Steel India has delivered commendable H1 sales volume growth of 18% Y/Y and has provided a guidance of similar growth in near future. The Europe division production has reached a 2yr high on the back of improved production rates and value added products. TS is the best play amongst domestic steel companies over medium term and should be accumulated on declines on likely week Q2 results.

3 Technical stock picks: Technical picks as on October 18 th, 213 Analysis here is on the basis of past trends of stock prices, trade volumes and other statistics. The underlying theory is that over time, the movement of stock prices take into account along with the company s fundamentals. This then helps establish a trend over time, which is likely to be followed going forward. You thus buy or sell a stock when parameters are giving buy/sell signal with tight stop losses. We have to keep in mind that nothing is certain either technical or fundamentals. It s a game of probabilities and accordingly we have to trade or invest in the market. Infosys Tech: Buy : CMP The stock has completed one more leg of correction and heading for the target of 5. It will arrest at 35 but again on corrections it will attract value buying. On the down side it has big support at 3. Buy at 335 and 35 with a final stop loss at 27 on a weekly closing basis, for the target 5. Mcdowell: Buy CMP The stock is moving with trendline support. Technically it seems that the stock has good amount of momentum. 275 is the hurdle area for the stock. Sustaining above 275 will be interesting for the higher side target of 37. Buy at current add more if it dips to 235 with a stop loss at 22 on a weekly closing basis. Tata Steel: Buy CMP As per quarterly charts the stock has paused and reversed the prevailing trend of bearishness. It will again bounce back to 42 or 47 in coming few months. Buy at current and balance at 285 with a final stop loss at 255 on a weekly closing basis. Reliance: Buy CMP - 93 It seems that the stock is absorbing selling pressure that it has in the region of 9. Above the level 9 it has next major hurdle in the range of 11 and 115. Buy in three phases, 3% at current, 3% at 83 and balance 4% at 78 with a stop loss at 75 on a weekly closing basis for the target 115. Nestle: Buy CMP-5525 The stock is into consistent and gradual up move. It turned volatile in the first half of the year 213; however it is stabilizing above the level of 49. Based on overall performance it should quote at 7/75 in the long run. Buy 5% at current balance at 49 with a stop loss at 47 on a weekly closing basis.

4 Detailed Fundamental Stock Picks

5 MARUTI SUZUKI INDIA INVESTMENT ARGUMENT Domestic car volumes are under stress due to overall weak sentiments led by slowdown in the economy. While petrol car demand continues to stay subdued, demand for diesel cars have started deteriorating. Management expects the MSIL sales in FY14 to grow by ~-5%. On the export front, the company said that the global situation is weak, but the company is taking steps to improve its export volumes by introducing new models. On foreign currency exposure, the company has taken hedges covering 52% of the balance FY14 UDS/JPY exposure at rate close to the current market rate of On the INR/USD exposure, the company has not taken any hedges. MSIL margins in FY14 is expected to improve on the back of favorable currency, continued focus on localization and SPIL merger benefit. Lower than anticipated growth will jeopardize our revenue and profit estimates. MSIL benefits from yen depreciation. Any unfavorable movement of yen can have significant impact on the company s profitability. MSIL, India s largest passenger car company, is a subsidiary of Suzuki Motor Corporation of Japan. Formed as a government owned company (Maruti Udyog Limited), it entered into a JV with Suzuki Motor Corporation. Over the years the company has been one the most successful player in the Indian car market. CURRENT MARKET PRICE Jul-13 PRICE 1414 TARGET PRICE 1584 ACCUMULATE SHARES OUTSTANDING (Mn) 32 MARKET CAP (Rs mn) 431,83 52 WEEK HIGH / LOW 1777 / 1215 Sales Volumes (Units) Source: Company Market Share (%) FY6 FY7 FY8 FY9 FY1 FY11 FY12 FY13 FINANCIALS (RS MN) FY12 FY13 FY14E 5 Sales 355, , , Growth (%) (3.7) EBITDA 25,287 42,296 51, EBITDA margin (%) PBT 21,462 29,91 39,346 Net profit 16,352 23,921 29,93 38 EPS (Rs) Growth (%) (28.6) FY6 FY7 FY8 FY9 FY1 FY11 FY12 FY13 CEPS (Rs) Book value (Rs/share) s Pledged Percentage of Shares Dividend per share (Rs) Source: Company ROE (%) Share Holding Pattern (%) ROCE (%) Net cash (debt) 67,132 71,72 72,156 Net Working Capital (Days) (7.4) (6.4) (2.) VALUATION PARAMETERS FY12 FY13 FY14E P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) (4.) Source: Bloomberg 8.8% 15.3% 19.7% 56.2%

6 TATA STEEL INVESTMENT ARGUMENT TS India has delivered impressive H1 sales volume growth of 18.8% Y/Y to 4.4MT and has guided to deliver 1mt of higher sales in FY14e. TS Europe production hit a 2 year high in Q1 and is guided to sustain on improved production rate and with higher value added products. China third plenum scheduled for November is likely to kick start next wave of reforms and sustainable growth measures which is likely to support steel demand and prices. Improvement in global steel prices and sharp rupee depreciation has allowed Indian steel companies to raise domestic steel prices in Sep 13. TS Europe is likely to increase steel prices from Nov onwards once weak seasonality is over. EU PMI data has recently hit 26 month high. Tata Steel had commissioned its coke oven batteries of.7mtpa in Dec 212 which would reduce coke purchases and improve margins for Indian operations in FY14. We expect Indian steel demand to improve in H2FY14 driven by increased government spending on infrastructure projects pre parliamentary elections and improved rural demand post good monsoons this year. TS is the best play amongst domestic steel companies over medium term and should be accumulated on declines on likely week Q2 results. Proposed MMDR bill if implemented in current format in coming months. Downturn in EU due to any unexpected development. Established in 197, Tata Steel is world s 12 th largest steel company with crude steel capacity of 27MT. It has employee strength of 81 employees, spread over 5 continents. It is a fortune 5 company. Major steel plant locations are (i) Jamshedpur, India (ii) Ijmuiden, Netherlands (ii) Scunthorpe, UK (iv) Port Talbot, UK (v) Natsteel, Singapore (vi) Thailand. CURRENT MARKET PRICE 31 2-Sep-13 PRICE 311 TARGET PRICE 358 ACCUMULATE SHARES OUTSTANDING (Mn) 971 MARKET CAP (Rs mn) 31, WEEK HIGH / LOW 448 / 195 Hindustan Zinc Product mix (FY14E) Sulphuric acid 2% Zinc refined 67% Net Sales (in Rs bn) Wind 2% 1% Lead refined 13% Silver 12% MIC 3% FINANCIALS (RS MN) FY13 FY14 FY15E Sales 1,328,997 1,347,115 1,44,83 Growth % 11.9% 1.4% 7.% EBITDA 124, , ,95 EBITDA margin % 9.3% 9.1% 1.9% PBT 85,85 (41,33) 59,915 Net profit 51,673 (73,234) 31,52 EPS (Rs) 51. (72.3) 31.1 Growth % -43.2% % -143.% CEPS Book Value (Rs / Share) s Pledged Percentage of Shares 6.57 Dividend per Share (Rs) ROE %.1 (.2).1 Share Holding Pattern (%) ROCE %.1 (.).1 Net cash (debt) 41, ,84 518,862 Net working capital (Days) VALUATION PARAMETERS FY13 FY14 FY15E P/E (x) 6.1 (4.3) 1. P/BV (x) EV/Sales (x) EV/EBITDA (x) Source: Bloomberg TS Thailand Nat Steel Asia TS Europe TS India FY1 FY11 FY12 FY13e FY14e 27.1% 27.2% 13.4% 32.2%

7 VA TECH WABAG INVESTMENT RATIONALE VAW is a pure-play water technology company engaged in endto-end solutions (turnkey projects as well as O&M) in water, waste waste treatment and desalination projects. VAW s order intake has increased from Rs 6.8 bn in FY9 to Rs 22 bn in FY13. The company s improving credentials, expanding reference list and ability to take larger jobs is driving growth in the order intake. At the end of FY13, order backlog (Standalone) was up 15% yoy to Rs 42.8 bn, thereby providing revenue visibility to 32 months of trailing four quarters Zero debt and cash surplus. CURRENT MARKET PRICE Oct-13 PRICE 463 TARGET PRICE 57 BUY SHARES OUTSTANDING (Mn) 27 MARKET CAP (Rs mn) 13, WEEK HIGH / LOW 589 / 374 Projects are on a lumpsum payment basis, including fixed-price, which exposes the company to significant pricing and other related risks. VAW does not own its corporate name. Annual Order Intake (Rs b) 25 2 One of the end to end Water treatment company. Significant player in industrial effluent treatment s are professionals and financial institutions FY9 FY1 FY11 FY12 FY13 Source: Company Revenue mix (%) FINANCIALS (RS MN) FY12 FY13 FY14E 8% India Overseas Sales 14,435 16,189 18,311 Growth (%) % EBITDA 1,3 1,549 1,83 EBITDA margin (%) % PBT 1,11 1,352 1,599 Net profit ,55 2% EPS (Rs) % Growth (%) FY11 FY12 FY13 FY14E FY15E CEPS (Rs) Book value (Rs/share) s Pledged Percentage of Shares Dividend per share (Rs) Source: Company ROE (%) Share Holding Pattern (%) ROCE (%) Net cash (debt) 2,735 3,4 3,252 Net Working Capital (Days) VALUATION PARAMETERS FY12 FY13 FY14E P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) Source: Bloomberg 2.6% 18.7% 29.7% 31.%

8 CAIRN INDIA LTD INVESTMENT ARGUMENT Cairn India Ltd (CIL) is one of the biggest private exploration and production companies in India. MBA have recoverable oil reserves and resources of more than 1 billion barrels, which includes proven plus probable (2P) gross reserves and resources of 636 million barrels of oil equivalent (Mn boe) with a further 38 Mn boe or more of enhanced oil recovery (EOR) potential. This is 25-3 years of production. Cairn is a private E&P company so not liable to share underrecoveries like ONGC, OIL. CIL has made discovery in Nagayalanka-1z, KG-ONN-23/1 block. It has started further exploration and appraisal. Any major commercial discovery will improve the future growth prospects of the Company. Any delays and cost overruns; though cost recoverable, could impact NAV of the project. Any major decline in crude oil prices due to fall in global oil demand, will have a corresponding impact on CIL s realizations. Cairn India is part of the Vedanta Group, a globally diversified natural resources group with wide ranging interests in aluminium, copper, zinc, lead, silver, iron ore, etc. Cairn India is actively exploring for hydrocarbons in basins throughout India and has identified and acquired interest in some of those blocks. CURRENT MARKET PRICE Aug-13 PRICE 38 TARGET PRICE 365 BUY SHARES OUTSTANDING (Mn) 1911 MARKET CAP (Rs mn) 626, WEEK HIGH / LOW 35 / 268 Brent Crude Oil Price (US$/bbls) Jan 13 Feb 13 Mar 13 Apr 13 May 13 Source: Bloomberg Dividend Yield / Payout Ratios (%) FINANCIALS (RS MN) FY12 FY13 FY14E Sales 118,67 175, ,866 Growth (%) EBITDA 98,73 138,14 136,584 EBITDA margin (%) PBT 84, , ,999 Net profit 79, , ,599 EPS (Rs) Growth (%) CEPS (Rs) Book value (Rs/share) s Pledged Percentage of Shares Dividend per share (Rs) Source: Company ROE (%) Share Holding Pattern (%) ROCE (%) Net cash (debt) (7,135) (55,568) (276,148) Net Working Capital (Days) VALUATION PARAMETERS FY12 FY13 FY14E P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) Source: Bloomberg % 14.9% 15.1% Dividend Payout Ratio (%) Dividend Yield (%) Company has started paying dividend from FY13 and onwards Jan 1 Jan 11 Jan 12 Jan %

9 CUMMINS INDIA LTD INVESTMENT RATIONALE CIL reported moderate revenue growth in Q1FY14 due to sluggish spending in infrastructure space in India. Company is well poised to benefit from recovery in the infrastructure spending in the country. Commencement of mega production site at Phaltan is likely to ease out capacity constraints and would add to cash flow generation in future. Company has committed a Capex of USD 3 mn funded mainly through internal accruals. We recommend Accumulate on company s stock with a DCF based one year price target of Rs 435. Slowdown in industrial production and core sector growth Rising interest rate scenario can put further pressure on domestic capex cycle. A Cummins Inc subsidiary. Significant player in domestic market Diversified across power, industrial and automotive sector. CURRENT MARKET PRICE Aug-13 PRICE 396 TARGET PRICE 435 ACCUMULATE SHARES OUTSTANDING (Mn) 277 MARKET CAP (Rs mn) 114, WEEK HIGH / LOW 55 / 365 Export Sales (Rs bn) Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 FINANCIALS (RS MN) FY12 FY13 FY14E Sales 41,172 45,894 48,933 Growth (%) EBITDA 6,972 8,349 8,68 EBITDA margin (%) PBT 8,246 1,513 8,593 Net profit 5,398 6,535 6,273 EPS (Rs) Growth (%) (9.) 21.1 (4.) CEPS (Rs) Revenue mix (%) Book value (Rs/share) s Pledged Percentage of Shares Dividend per share (Rs) ROE (%) Share Holding Pattern (%) ROCE (%) Net cash (debt) 2,235 2,84 (147) Net Working Capital (Days) Automotive 6% Distribution 32% Industrial 18% 13.7% Power 44% VALUATION PARAMETERS FY12 FY13 FY14E P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) (9.9) (17.1) Source: Bloomberg 19.8% 15.5% 51.%

10 DB Corp INVESTMENT ARGUMENT Entrenched, diversified, dominating, urban-focused: DB Corp owns the #2 Hindi newspaper (Dainik Bhaskar), and has a significant presence in Gujarati (Divya Bhaskar) and Marathi (Divya Marathi) newspaper markets. Dainik Bhaskar is a clear #1 in the MP/ Chhattisgarh (MPCG) markets, and competes for #2 slot in various states such as Rajasthan, Punjab, Haryana. The company focuses on regional newspapers, and has a clear strategy to be #1/ #2 player in each of its markets with focus on urban markets. We believe the strategy of the company, and its execution, places it at the top of the table among newspaper plays. Entering an election super-cycle: DB Corp has a dominating position in the MPCG markets and a competitive #2 position in Rajasthan, which implies there is no choice for the political advertiser in the upcoming elections. DB Corp shall also be extremely relevant in the Lo Sabha polls (by May, 214). This means that DB Corp shall see 2-3 quarters of growth well above industry growth rates. It is our belief that DB Corp shall command high bargaining power with the advertiser as well as the reader (rising importance of must know news) in the coming quarters. Valuations reasonable at CMP see fair value at Rs 3: Relatively quiet 2Q has led to modest declines, and CMP offers an attractive entry point in DB Corp. Rise in newsprint prices, further weakening in advertising environment DB Corp s primary business is that of newspaper publishing, although the company also has presence in FM radio (MY FM). CURRENT MARKET PRICE Jul-13 PRICE 265 TARGET PRICE 315 BUY SHARES OUTSTANDING (Mn) 183 MARKET CAP (Rs mn) 46,25 52 WEEK HIGH / LOW 283 / 21 Quarterly growth advertising revenue (YoY) All India Readership (Urban) (AIR ') FINANCIALS (RS MN) FY12 FY13 FY14E Sales 14,638 15,923 18,427 Growth (%) EBITDA 3,55 3,76 4,956 EBITDA margin (%) PBT 3,5 3,313 4,432 Net profit 2,23 2,181 2, EPS (Rs) Growth (%) (22.1) CEPS DB Corp Dainik Jagran The ToI Hindustan Daily Thanthi Book Value (Rs / Share) s Pledged Percentage of Shares Dividend per Share (Rs) ROE (%) Share Holding Pattern (%) ROCE (%) Net cash (debt) Net working capital (Days) VALUATION PARAMETERS FY12 FY13 FY14E P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) Source: Bloomberg 25% 2% 15% 1% 5% % 5% 1 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY % 4.% 4.6% 75.%

11 ICICI BANK INVESTMENT ARGUMENT We like the quality of liability franchise - CASA mix at 43.2% (Q1FY14), one of the best in the industry. NIM is on the improvement trajectory on funding cost gains and improvement in the international spread; for the first time, it has crossed 3% mark for full year (3.11% in FY13; 3.27% in Q1FY14), an improvement of 38bps YoY. Improvement in liability franchise & better ALM are aiding in reported better margins. Lower risk arising from the SME portfolio, as it constitutes only ~5% of total portfolio. While retail piece has witnessed insignificant net slippage, corporate segment continues to perform well. Credit cost has remained within the management s guidance (~7bps in FY13 as against the guidance of 75bps); provision coverage ratio is healthy at ~75% (Q1FY14), providing cushion to its future earnings with any unforeseen deterioration in its asset quality. CURRENT MARKET PRICE Aug-13 PRICE 83 TARGET PRICE 121 BUY SHARES OUTSTANDING (Mn) 1154 MARKET CAP (Rs mn) 1,158,31 52 WEEK HIGH / LOW 1238 / 757 RoA is likely to remain stronger at 1.8% during FY14/15E, driving up the core RoE to ~15% in FY14/15E. Management focus on stable growth Trend in earnings (Rs bn) with improving structural profitability reinforces our existing positive outlook on the stock. 5. NII PAT We have used SOTP method to value the stock, where standalone business comes to Rs.12 (1.6x FY14E ABV) and subsidiaries are 4. valued at Rs.199 (holding co discount: 2%). 3. Retail book stands at ~36% of total book, highly vulnerable to systemwide deterioration in retail asset quality. 2. Deregulation of interest rates on saving deposits (3.5% of deposits) 1. might increase the funding costs and in turn impacting its NIM.. Largest private sector banks (335 branches in Q1FY14) with 4.2% Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 market share in domestic loans. After conscious strategy of de-growing their B/S during recent economic Trend in Asset Quality downturn, bank has started focusing on profitable growth FINANCIALS (RS MN) FY13 FY14E FY15E Gross NPA (Rs bn LHS) Gross NPA (% RHS) Interest income Interest expense Net interest income Growth (%) 29.2% 17.8% 16.9% 3.4 Other income Gross profit Net profit Growth (%) 28.8% 2.5% 17.9% Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Gross NPA (%) Net NPA (%) s Pledged Percentage of Shares Net interest margin (%) CAR (%) Share Holding Pattern (%) RoE (%) RoAA (%) Dividend per share (Rs) EPS (Rs) Adjusted BVPS (Rs) %.% VALUATION PARAMETERS FY13 FY14E FY15E P/E (x) P/ABV (x) % 53.% (1.6) Source: Bloomberg

12 IDFC INVESTMENT ARGUMENT It is present in the niche infrastructure financing space and is well positioned to benefit from India s large infrastructure opportunity. Despite higher proportion of loan growth coming from refinancing opportunities having lower margins, it has managed to improve its spreads on back of declining funding costs. Asset quality is best in class - GNPA/NNPA at.32%/.2% (Q1FY14). Moreover, it carries sufficient provision buffer (1.9% of loans) to provide for any likely future increase in GNPA. Borrowing profile has seen improvement MF s share has gone up while bank s share has declined, +ve from funding perspective. In prevailing macro-environment, higher non-power assets and strong capitalization makes it a lower-risk play. We believe, falling wholesale funding rates along with improvement in the outlook on capital market related business are future catalyst for the stock. Continued moderation in infrastructure capex cycle and delay in project commissioning due to policy/approval delays or due to lack of fuel-availability can impact the lending business. Continued softness in capital markets for a relatively longer period. Established in 1997 as a specialized Infrastructure financier to encourage private sector investments in the infrastructure space. Apart from lending business, it has diversified into non-fund based product offerings like asset management, private equity and debt finance/syndication. CURRENT MARKET PRICE 96 1-Sep-13 PRICE 85 TARGET PRICE 137 BUY SHARES OUTSTANDING (Mn) 1516 MARKET CAP (Rs mn) 145, WEEK HIGH / LOW 185 / 76 Trend in earnings (Rs bn) NII Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Trend in Return Ratios PAT FINANCIALS (RS MN) FY12 FY13 FY14E 2 Net Interest Income 2,96 25,64 29,817 RoA RoE Growth (%) 27.4% 22.3% 16.3% 15 Non-Int Income 8,61 8,83 9,2 Total Income 29,57. 34,47. 39, Operating Profit 24,57 29,44 32,95 Net Profit 15,54 18,36 21,438 5 Growth (%) 21.2% 18.1% 16.8% Gross NPA (%) FY9 FY1 FY11 FY12 FY13 Net NPA (%) NIMs (%) s Pledged Percentage of Shares RoA (%) RoE (%) Share Holding Pattern (%) DPS (Rs) EPS (Rs) BV (Rs) Adj. BV (Rs) %.% VALUATION PARAMETERS FY12 FY13 FY14E P/E (x) P/ABV (x) % 49.5% 1. (24.9) (4.4) Source: Bloomberg

13 INFOSYS TECHNOLOGIES INVESTMENT ARGUMENT The company's strategy of focusing on growth continues to yield results. In 2Q, it has been accompanied by improvement in realisations, which is encouraging. With the change in management, we do expect the company to take further initiatives to improve employee engagement, especially in client facing functions. This may lead to sustained revenue growth rates, going ahead. We have been positive on the long-term demand prospects for quite some time. With the developed economies stabilizing, we do expect the demand scenario to improve over the next few quarters. We accord valuations which are at a marginal premium to the lower end of the valuations band of previous low-growth phase (FY1), as the growth prospects for Infosys have improved. A sharp appreciation in the rupee against various currencies will impact our earnings estimates. Delayed recovery in developed economies will likely impact future revenue growth and profitability of the company. Infosys was incorporated in 1981 by 7 engineers, led by Mr. Narayana Murthy. Infosys had been the proxy for the Indian IT sector since its inception. The company has been an outstanding corporate citizen in terms of corporate governance in India. Infosys services clients in over 3 countries. CURRENT MARKET PRICE Oct-13 PRICE 3275 TARGET PRICE 3592 BUY SHARES OUTSTANDING (Mn) 574 MARKET CAP (Rs mn) 1,92, WEEK HIGH / LOW 3367 / 2186 Number of Employees (Nos) FY13 FY12 FY11 FY1 Geographical Revenue Break up (%) FINANCIALS (RS MN) FY13 FY14 FY15E 8. USA Europe India Sales 43,52 53, ,85 Growth (%) EBITDA 14,29 12, ,564 EBITDA margin (%) PBT 127,88 142, ,764 Net profit 94,21 14,66 118, EPS (Rs) Growth (%) CEPS FY12 FY13 BV (Rs / Share) s Pledged Percentage of Shares Dividend / Share (Rs) ROE (%) Share Holding Pattern (%) ROCE (%) Net cash (debt) 218,32 249,339 38,346 NW capital (Days) % 18.8% VALUATION PARAMETERS FY13 FY14 FY15E P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) Source: Bloomberg 19.% 47.1%

14 KPIT CUMMINS INFOSYSTEMS INVESTMENT ARGUMENT Management commentary echoes the optimism sounded by other leading peers about the continuing traction in automotive, manufacturing and Utilities verticals, the mainstay of KPIT. The company has given a guidance of growing revenues by about 15% in FY14 and PAT by about 18%, which is a positive At our TP, the stock will be valued at about 1.5x FY14E earnings. This is a suitable discount to larger peers. Slower-than-expected recovery in demand from major user economies and a sharper-than-expected appreciation in rupee remain the key risks for earnings. Revolo earnings can provide significant upsides, if successful. Headquartered in Pune, KPIT has been in business for more than 2 years and has served more than 18 clients globally. Cummins Inc is a shareholder in the company and is also a major customer for KPIT. CURRENT MARKET PRICE Sep-13 PRICE 133 TARGET PRICE 159 BUY SHARES OUTSTANDING (Mn) 193 MARKET CAP (Rs mn) 27, WEEK HIGH / LOW 16 / 92 Revenues from customers (%) Top (Cummins) Top 5 Top 1 1 Source: Company Geographical Revenue Break up (%) FINANCIALS (RS MN) FY12 FY13 FY14E 8 USA Europe Rest of World Sales 15, 22,386 25,829 Growth (%) EBITDA 2,181 3,641 4,282 EBITDA margin (%) PBT 1,786 2,86 3,637 Net profit 1,453 1,99 2,596 2 EPS (Rs) Growth (%) FY11 FY12 FY13 CEPS (Rs) BV (Rs/share) s Pledged Percentage of Shares 16.4 Dividend / share (Rs) Source: Company ROE (%) Share Holding Pattern (%) ROCE (%) Net cash (debt) ,113 NW Capital (Days) VALUATION PARAMETERS FY12 FY13 FY14E P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) Source: Bloomberg FY11 FY12 FY13 32.% 1.9% 32.8% 24.3%

15 L&T LIMITED INVESTMENT RATIONALE Diversified play on the Indian infrastructure and Industrial sector. Order backlog of Rs 1.65 trn remains strong providing visibility of 32 months. The company has given guidance of 2% growth in order intake in FY14. Stock performance would be contingent on newsflow on larger order wins, commodity price trends and general economic and policy datapoints (interest rate cuts and mining and power sector reforms), we opine. We expect stock to respond favourably to any reforms moves to address the issues that have plagued the power sector. Mainly project execution and commodity price risks. Project investments has slowed down in recent quarters, which may impact order flow in the coming quarters. Professionally managed engineering company. Presence across Middle East and Central Asia Diversified across Power, Infrastructure, Hydrocarbons, Railways, Shipbuilding, Nuclear etc CURRENT MARKET PRICE Aug-13 PRICE 722 TARGET PRICE 889 BUY SHARES OUTSTANDING (Mn) 925 MARKET CAP (Rs mn) 796, WEEK HIGH / LOW 1147 / 677 Order intake Rs bn 1, FY9 FY1 FY11 FY12 FY13 FINANCIALS (RS MN) FY12 FY13 FY14E Sales 643, ,98 836,584 Growth (%) EBITDA 87,42 98,87 12,229 EBITDA margin (%) PBT 69,735 76,361 71,983 Net profit 46,937 52,39 48,25 EPS (Rs) Growth (%) 8.5 (1.4) 4.4 CEPS (Rs) Source: Company Order Backlog mix (%) Book value (Rs/share) s Pledged Percentage of Shares Dividend per share (Rs) Source: Company ROE (%) Share Holding Pattern (%) ROCE (%) Net cash (debt) (437,723) (584,22) (575,648) Net Working Capital (Days) VALUATION PARAMETERS FY12 FY13 FY14E P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) (12.6) (12.5) Source: Bloomberg Infrastructu re 45% Public 45.8%.% Process 16% Power 29% 15.7% 38.5% O&G 1%

16 This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Kotak Securities Ltd. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients.