Analysts' corner

Nestle India, MCX, Development Credit Bank & Jaiprakash Associates

NESTLE INDIA
Reco price/date: Rs 4,510/April 15;
Current/target price: Rs 4,619/Rs 4,400
In its CY12 annual report, Nestle saw its blended average volumes decline one per cent, despite a weak base of four per cent volume growth in CY11. Only prepared dishes (which includes noodles) saw positive volume growth of eight per cent. Volume decline was the largest for chocolates (down 10 per cent). In a scenario of declining volumes, unused capacity and expanding margins, the company further cut its already low ad spends. Over CY2000-12, ad spends have come down from eight per cent to 4.3 per cent of revenues. Any recovery will be a painful process, as it would need an increase in ad spends and pricing corrections in some segments. Maintain underperform.

-Credit Suisse

MCX
Reco price/date: Rs 881/April 16;
Current/target price: Rs 867/NA
Gold and silver prices have declined 10 per cent and 14 per cent, respectively, since the end of FY13. This is likely to have significant negative implications for MCX, which not only derives 53 per cent of its total traded volumes (in rupee terms) from gold and silver contracts but also has its transaction fees based on the value of transactions rather than on the number of contracts. Analysts' back-of-the-envelope calculations suggest seven per cent negative impact on consensus FY14 revenues and 12 per cent impact on consensus FY14 Ebitda if gold and silver prices remain at current levels and everything else remains constant for FY14. Also, note that MCX faces additional earnings pressure from the implementation of a new tax (CTT), which will be in effect from the second quarter of FY14. The sharp drop is also likely to test the strength of MCX's margin and settlement system.

-Ambit capital

DEVELOPMENT CREDIT BANK
Reco price/date: Rs 43/April 12;
Current/target price: Rs 47/Rs 60
Development Credit Bank (DCB) reported its 11th consecutive quarter of over 50 per cent year-on-year (y-o-y) earnings growth helped by stronger NIMs, steady asset quality and improved operating leverage. Net profit of Rs 34 crore was 18.6 per cent higher than expected driven by an NII beat of 8.9 per cent. The bank also added five new branches during the quarter, taking FY13 additions to 10 new branches (12 per cent rise y-o-y). DCB currently trades at one time FY14 estimated adjusted book value (ABV). At Nomura's target price, DCB would trade at 1.4 times FY14 estimated ABV. Maintain buy.

-Nomura Equity Research

JAIPRAKASH ASSOCIATES
Reco price/date: Rs 74/April 16;
Current/target price: Rs 74/Rs 80
Analysts undertook a site visit of Jaypee Infratech Ltd's (JIL) marquee project, Yamuna Expressway, land parcels in NCR and JPSI's F1 race track in Greater Noida. While work on the parcel 1 of JIL in Noida (Wish Town) was in full swing, the current toll collection at Yamuna Expressway of Rs 10-11 crore a month is lower than management expectation of Rs 250-300 crore per annum. The management has indicated that it is looking for a debt reduction of Rs 6,000-6,500 crore in FY14 at the consolidated level led by Rs 2,000-crore debt reduction from land sales in JIL land parcels and the remaining from Gujarat cement plant sale. Its plans of cement capacity expansion and other capex remain on hold now. Maintain hold.

-ICICI Securities