2ndFeb,2011

Weekly Wealth
Week Gone By.

BP WEALTH

13th December, 2013

Key benchmark indices dropped as a sharp uptick in consumer price inflation in November 2013. The market breadth, indicating the overall health of the market, was weak. The rupee fell and bonds yields rose after retail inflation spiked, raising bets of a rate hike at the RBI's policy meeting next week. The market edged lower in early trade after weak macroeconomic data announced after trading hours on Thursday, 12 December 2013. The Sensex and the 50-unit CNX Nifty, both, hit their lowest level in more than a week. In the foreign exchange market, the rupee edged lower against the dollar and fell below 62 level after two sets of economic data released after market hours on Thursday, 12 December 2013, which showed a spike in consumer price inflation in November and a worse-than-expected contraction in industrial production in October. Index of industrial production (IIP) declined 1.8% in October 2013, against 2% growth in the previous month September 2013. European stocks rose on Friday, 13 December 2013, after a report showed US retail sales in November 2013 beat market expectations and after US House of Representatives on Thursday, 12 December 2013, passed a federal budget plan.

Week Ahead Corporate advance tax payment for Q3 December 2013, data on inflation based on the wholesale price index, outcome of the ongoing Winter Session of the Parliament, outcome of the Reserve Bank of India's mid-quarter monetary policy review and outcome of the two -day policy meeting of the Federal Open Market Committee will dictate near term trend on the domestic bourses. Trend in investment by foreign institutional investors, trend in other global emerging markets and the movement of rupee against the dollar hold key. The government will unveil data on inflation based on the wholesale price index (WPI) for November 2013 on 16 December 2013. WPI is seen easing a bit at 6.9% in November 2013, from 7% in October 2013, as per the median estimate of a poll of economists carried out by Capital Market. The Federal Open Market Committee (FOMC) holds a two-day policy meeting on interest rates in the United States on 17-18 December 2013. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Minutes of the Fed's October meeting released on 20 November 2013 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated

Technical View Nifty future closed lower with a loss of 1.70% at 6198. Index started the week with a gap up opening and made new all time highs but gave up all the gains in the later part of the week. Index has formed Bearish Engulfing candlestick pattern which requires confirmation in the form of a lower close in the following week. Index is trading in an upsloping channel and is currently placed around the upper trendline, for index to continue its medium term upmove it needs to sustain above the upper trendline of the channel, a failure to surpass this trendline will be a bearish signal for medium term trend. Going ahead index now has support in the range of 6170-6090-5980 while resistance comes at 6240-6320-6390.

Source: Falcon, BP Equities Research

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Weekly Wealth
DOMESTIC INDICES 13-Dec-13 Nifty CNX Nifty Junior CNX 100 CNX 500 CNX Midcap Index -NSE Sensex BSE 100 Index BSE 200 Index BSE 500 Index BSE Mid-Cap BSE Small Cap 6,168.4 12,158.3 6,054.1 4,756.1 7,605.0 20,715.6 6,157.7 2,454.9 7,573.0 6,302.5 6,131.1 6-Dec-13 6,259.9 12,440.2 6,151.6 4,830.8 7,766.5 20,996.5 6,258.0 2,494.6 7,694.7 6,389.0 6,225.8 Weekly Chg (%) -1.5% -2.3% -1.6% -1.5% -2.1% -1.3% -1.6% -1.6% 13-Dec-13 -1.6% -1.4% -1.5% USD/INR GBP/INR Euro/INR 100 JPY/INR 62.1 101.2 85.3 59.9 FII - ACTIVITY Weekly Chg (%) 5.3% 5.1% 4.8% 1.4% 1.4% Date 12/9/2013 12/10/2013 12/11/2013 12/12/2013 MTD Purchases 3111.4 4,863.1 4,574.9 2,983.8 29,218.4 Sales 2247.6 2,389.9 4,179.3 2,009.6 21,255.2 6-Dec-13 61.4 100.4 84.2 59.7 Nikkei index Hang Sang Index Kospi Index Shanghai SE Comp Strait Times Index Dow Jones NASDAQ FTSE WORLD INDICES 13-Dec-13 15,403.1 23,246.0 1,962.9 2,196.1 3,063.8 15,739.4 3,998.4 6,439.7 FOREX Weekly Chg (%) 1.2% 0.8% 1.4% 0.4% ( Rs. Cr.) Net 863.8 2,473.2 395.7 962.7 7,951.7 6-Dec-13 15,299.9 23,743.1 1,980.4 2,237.1 3,114.2 16,023.0 4,062.5 6,552.0 Weekly Chg (%) 0.7% -2.1% -0.9% -1.8% -1.6% -1.8% -1.6% -1.7%

* Closing of Europe and US Indices as per 12th December 2013

NIFTY TOP GAINERS (WEEKLY) 13-Dec-13 Sesa Sterlite Wipro HCL Tech Infosys Lupin 191.9 518.8 1,181.2 3,373.9 869.7 6-Dec-13 182.3 493.8 1,126.6 3,325.8 857.9

NIFTY TOP LOSERS (WEEKLY) 13-Dec-13 BHEL Jindal Steel IDFC NTPC Jaiprakash Asso 154.6 259.8 103.4 137.3 51.1 6-Dec-13 171.4 283.5 112.7 149.0 55.3 Weekly Chg (%) -9.8% -8.4% -8.3% -7.8% -7.5% Date 12/9/2013 12/10/2013 12/11/2013 12/12/2013 MTD

DII - ACTIVTY Purchase 946.6 1,236.3 1,165.9 712.7 8,852.3 Sales 1690.5 2,442.2 1,794.0 1,554.6 14,355.4

( Rs. Cr.) Net -743.9 -1,205.8 -628.2 -842 -5,503.3

* Data for month of December till date

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13/12/2013

BP WEALTH

Weekly Wealth
BSE Weekly Sectoral Performance
2% 1% 0.3% 0% -1% -1.0% -2% -3% -3.0% -4% -4.2% -5% -4.6% -3.2% -1.0% -1.9% -1.9% 1.6%

-2.1%

IT

FMCG

Metals

Healthcare

Realty

Oil & Gas

Auto

Bankex

Con Durables

Capital Goods

Power

Source: BSE, BP Equities Research

TOP OPEN INTEREST GAINERS (WEEKLY) 6-Dec-13 13-Dec-13 Weekly Chg (%) -8.7% 7.3% -1.3% -8.0% -1.5% 6-Dec-13 13-Dec-13 Weekly Chg (%) 93.2% 64.9% 35.1% 33.9% 33.3%

Share Price GODREJIND MRF SIEMENS NTPC COALINDIA 285.5 17824.9 632.5 149.9 288.6 260.8 19127.4 624.0 137.9 284.4

Open Interest 710,000 34,500 900,500 14,840,000 6,722,000 1,372,000 56,875 1,217,000 19,868,000 8,962,000

TOP OPEN INTEREST LOSERS (WEEKLY) 6-Dec-13 13-Dec-13 Weekly Chg (%) -3.1% 4.9% -7.2% 0.9% -4.1% 6-Dec-13 13-Dec-13 Weekly Chg (%) -18.8% -14.7% -13.8% -13.4% -9.8%

Share Price PTC SSLT ADANIPORTS DABUR CROMPGREAV 63.5 183.7 164.5 164.7 130.6 61.5 192.7 152.7 166.3 125.3

Open Interest 2,892,000 29,860,000 5,562,000 3,898,000 8,348,000 2,348,000 25,464,000 4,796,000 3,374,000 7,532,000

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13/12/2013

BP WEALTH

Weekly Wealth
Bulk Deals
Date Scrip Name Client Name Exchange Deal Type BUY Quantity Trade Price 664

11-Dec-13

SKF India Limited

HDFC EQUITY FUND GOLDMAN SACHS INVESTMENTS MAURITIUS

NSE

5,10,000

11-Dec-13

Strides Arcolab Limited

NSE

SELL

4,20,034

876.6

11-Dec-13

United Breweries Limited

CITICORP FINANCE (INDIA) LTD.

NSE

SELL

35,58,030

772.9

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13/12/2013

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Weekly Wealth Learning curve

Analyzing Investments With Solvency Ratios
Solvency ratios are primarily used to measure a company's ability to meet its long-term obligations. In general, a solvency ratio measures the size of a company's profitability and compares it to its obligations. By interpreting a solvency ratio, an analyst or investor can gain insight into how likely a company will be to continue meeting its debt obligations. A stronger or higher ratio indicates financial strength. In stark contrast, a lower ratio, or one on the weak side, could indicate financial struggles in the future. A primary solvency ratio is usually calculated as follows and measures a firm's cash-based profitability as a percentage of its total longterm obligations:

After Tax Net Profit + Depreciation Long-Term Liabilities

Commonly Used Solvency Ratios Solvency ratios indicate a company's financial health in the context of its debt obligations. As you might imagine, there are a number of different ways to measure financial health. Debt to equity is a fundamental indicator of the amount of leverage a firm is using. Debt generally refers to long-term debt, though cash not needed to run a firms operations could be netted out of total long-term debt to give a net debt figure. Equity refers to shareholders equity, or book value, which can be found on the balance sheet. Book value is a historical figure that would ideally be written up (or down) to its fair market value. But using what the company reports presents a quick and readily available figure to use for measurement.Debt to assets is a closely related measure that also helps an analyst or investor measure leverage on the balance sheet. Since assets minus liabilities equals book value, using two or three of these items will provide a great level of insight into financial health. More complicated solvency ratios include times interest earned, which is used to measure a company's ability to meet its debt obligations. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest expense from long-term debt. It specifically measures how many times a company can cover its interest charges on a pretax basis. Interest coverage is another more general term used for this ratio. Solvency Versus Liquidity Ratios The solvency ratio measures a company's ability to meet its long-term obligations as the formula above indicates. Liquidity ratios measure short-term financial health. The current ratio and quick ratio measure a company's ability to cover short-term liabilities with liquid (maturities of a year or less) assets. These include cash and cash equivalents, marketable securities and accounts receivable. The shortterm debt figures include payables or inventories that need to be paid for. Basically, solvency ratios look at long-term debt obligations while liquidity ratios look at working capital items on a firms balance sheet. In liquidity ratios, assets are part of the numerator and liabilities are in the denominator. What Do These Ratios Tell an Investor? Solvency ratios are different for different firms in different industries. For instance, food and beverage firms, as well as other consumer staples, can generally sustain higher debt loads given their profit levels are less susceptible to economic fluctuations. In stark contrast, cyclical firms must be more conservative because a recession can hamper their profitability and leave less cushion to cover debt repayments and related interest expenses during a downturn. Financial firms are subject to varying state and national regulations that stipulate solvency ratios. Falling below certain thresholds could bring the wrath of regulators and untimely requests to raise capital and shore up low ratios. Acceptable solvency ratios vary from industry to industry, but as a general rule of thumb, a solvency ratio of greater than 20% is considered financially healthy. The lower a company's solvency ratio, the greater the probability that the company will default on its debt obligations. Looking at some of the ratios mentioned above, a debt-to-assets ratio above 50% could be cause for concern. A debt-to-equity ratio above 66% is cause for further investigation, especially for a firm that operates in a cyclical industry. A lower ratio is better when debt is in the numerator, and a higher ratio is better when assets are part of the numerator. Overall, a higher level of assets, or of profitability compared to debt, is a good thing. Industry-Specific Examples A July 2011 analysis of European insurance firms by consulting firm Bain highlights how solvency ratios affect firms and their ability to survive, how they put investors and customers at ease about their financial health and how the regulatory environment comes into play. The report details that the European Union is implementing more stringent solvency standards for insurance firms since the Great Recession. The rules are known as Solvency II and stipulate higher standards for property and casualty insurers, and life and health insurers. Bain concluded that Solvency II exposes considerable weaknesses in the solvency ratios and risk-adjusted profitability of European insurers. The key solvency ratio is assets to equity, which measures how well an insurers assets, including its cash and investments, are covered by solvency capital, which is a specialized book value measure that consists of capital readily available to be used in a downturn. For instance it might include assets, such as stocks and bonds, that can be sold quickly if financial conditions deteriorate rapidly as they did during the credit crisis. Advantages and Disadvantages of Relying Solely on These Ratios Solvency ratios are extremely useful in helping analyze a firms ability to meet its long-term obligations; but like most financial ratios, they must be used in the context of an overall company analysis. Investors need to look at overall investment appeal and decide whether a security is under or overvalued. Debt holders and regulators might be more interested in solvency analysis, but they still need to look at a firms overall financial profile, how fast it is growing and whether the firm is well-run overall. Bottom Line Credit analysts and regulators have a great interest in analyzing a firms solvency ratios. Other investors should use them as part of an overall toolkit to investigate a company and its investment prospects.
Source : Investopedia, BP Equities research

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13/12/2013

2ndFeb,2011

PVR Ltd.
Specialty retail | Weekly Pick
Company Background

Buy
BP WEALTH

Stock Rating SELL

BUY HOLD PVR is a leading premium multiplex cinema exhibition company. The company pioneered the multiplex revolution in India by establishing the countrys first multiplex cinema. In January 2013 the company acquired 93.19% of controlling stake in Cinemax India Ltd. Post acquisition the company now > 15% -5% to 15% operates 402 screens spread across 93 cinemas covering 38 cities in India. PVR is a dominant leader with a box office collection share of ~30-35% for Hollywood movies and ~20-25% for Bollywood movSector Outlook ies in India.

< -5%

Positive
578 661 532689 PVR PVRL IN PVRL.BO

Investment Rationale

Stock CMP (Rs)

Enhanced bargaining power and increasing Average Ticket Price (ATP) cushion the companys Target Price (Rs) financials
BSE code

The consolidation in the film exhibition industry has enabled film exhibitors like PVR to strike better deals with movie producers/distributors thereby leading to higher revenue contributions. PVR has constantly been adding new screens at an rampant pace and is expected to set a benchmark in this space by adding 70-80 screens per year. In FY 14 the firm is expected to entertain about 70 million viewers through its cinemas. Alongside, the premium positing of the PVR brand has allowed the company to comfortably pass on price hikes to customers with a constantly increasing ATP that was Rs ~160 last fiscal and is expected to reach Rs ~170 at the end of this fiscal. These factors cumulatively will aid PVR in increasing revenues, improving margins and effectively reducing debt in the coming years. Advertising to contribute significantly to the companys revenues

NSE Symbol Bloomberg Reuters Key Data Nifty 52WeekH/L(Rs) O/s Shares (mn) Market Cap (Rs bn) Face Value (Rs)

6168 650/229 40 23 10

Advertisement revenues are expected to increase by about 25% on yearly basis. This has mainly been supported by various innovative incentives that have been introduced by PVR offering an attractive avenue for advertisers. This strategy has helped the company sign up big names like HUL and Kotak Mahindra bank. Cinema advertising is a Rs 4.5 Bn market of which PVR has a ~60% market share. We believe that going forward, constant screen additions, increasing penetration into smaller towns and cities coupled with versatile advertising schemes will help the company to increase its contribution from this segment. PVR is poised to benefit from a transitioning film landscape

Average volume 3 months 6 months 1 year Share Holding Pattern (%) 100,131 78,029 112,760

The foray of foreign studios into Bollywood has enriched the prospects of viewers on account of a 35.1% large amount of investments being made into quality content. This in turn will lead to higher footfalls for exhibitors and PVR being a leader in this space with a 35% box office share collection for Hollywood and 25% share for Bollywood. With a daily footfall of 450,000 we feel that a slew of new releases in the coming years bolstered by an increasing appetite for movie consumption due to the ris18.8% ing adaption of unconventional content by the youth will help in increasing the footfalls further.PVR Promoter FII has also tied up with cinema format leaders like Imax that further helps the chain to appeal to a much more diverse demographic base. The proliferation of Rs 1 Bn plus movies in the recent years has helped exhibitors like PVR make valuable additions to its top line. Relative Price Chart Outlook and Valuation PVR is a leader in the Indian cinema exhibition space and we are optimistic about the companys future revenue prospects on account of 1)Strong bargaining power with producers/distributors leading to a higher share of revenue collections .2)Increasing ATP helps in improving margin performance.3) High screen additions and strong presence across metros and smaller cities keeps footfalls high, thereby leading to an ever increasing revenue contribution from advertising. The company is also venturing into other entertainment avenues like Blu-O that has healthy EBITDA margin in range of 20%. An ever evolving cinema landscape in India further helps in supporting the companys future revenues. Considering these factors we have given a given a BUY rating on the stock with a target price of Rs 661(10 x FY15 EV/EBITDA) taking into account an investment horizon of 12-15 months.
650 600 550 500 450 400 350 300 250 200 Dec-12 Apr-13

31.0% 15.2%

DII

Others

Aug-13

Dec-13

PVR

Relative Nifty

Research Team research@bpwealth.com 022-61596464

BP WEALTH

Weekly Wealth
Key Financials YE March (Rs. mn) Net Sales Growth% Operating Profit Growth% Net Profit Growth% Diluted EPS Growth% FY11 4,593 37.5% 904 128.8% 82 504.6% 3.0 427.5% FY12 5,177 12.7% 774 -14.3% 254 210.8% 9.5 214.9% Key Ratios OPM(%) NPM (%) RoE (%) BV/Per Share Rs. 19.7% 1.8% 2.5% 125.7 15.0% 4.9% 8.1% 109.3 14.8% 5.5% 9.6% 162.2 18.0% 5.4% 11.0% 181.0 18.5% 6.1% 13.4% 203.1 FY13 8,053 55.5% 1,195 54.4% 445 75.1% 14.9 57.4% FY14E 14,377 78.5% 2,593 117.0% 772 73.6% 19.8 32.2% FY15E 17,358 20.7% 3,208 23.7% 1,064 37.8% 26.3 33.3%

Valuation Ratios P/E (x) EV/EBITDA (x) P/BV (x) Market Cap./ Sales (x) Source : BP Equities research, Bloomberg 29.4x 15.7x 1.9x 1.5x 29.4x 10.9x 3.2x 0.8x 21.5x 8.8x 2.8x 0.7x

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13/12/2013

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Disclaimer Appendix Analyst (s) holding in the Stock : Nil Analyst (s) Certification: We analysts and the authors of this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer (s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation (s) or view (s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the BP Equities Pvt. Ltd. (Institutional Equities).

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