Stock Picks

March 11, 2014

Stock Picks

City Union Bank

Alstom T&D India

Whirlpool India

Greaves Cotton

Ramco Cement

Stock Picks 2.0

Stocks that can weather election volatility

Economic reforms to take their own due course

Historically, the impact of general elections on the economy has been
very less as any economic reforms are a long term process to be
implemented at the ground level. Therefore, the market reaction to
the election would be a short-term phenomenon

We highlight that market sentiments could improve only with the start
of the positive outcome of economic reforms coupled with other
economic factor (such as crude price, gold import, higher tax
revenues)
Exhibit 1: Macro indicators show little/no correlation with election year
Year
31 Mar 15E
31 Mar 14E
31-Mar-13
31-Mar-12
31-Mar-11
31-Mar-10
31-Mar-09
31-Mar-08
31-Mar-07
31-Mar-06
31-Mar-05
31-Mar-04
31-Mar-03
31-Mar-02
31-Mar-01
31-Mar-00
31-Mar-99
31-Mar-98
31-Mar-97
31-Mar-96

Real GDP growth (%)

5.4
4.8
5.0
6.2
9.3
8.6
6.7
9.3
9.6
9.5
7.1
8.0
3.9
5.4
4.1
8.0
6.7
4.3
8.0
7.3

Fiscal Deficit % GDP

5.0
4.8
5.2
5.8
4.8
6.5
6.0
2.5
3.3
4.0
3.9
4.3
5.7
6.0
5.5
5.2
6.3
5.7
4.7
4.9

CAD% GDP
2.3
2.6
4.8
4.2
2.8
2.8
2.3
1.3
1
1.2
0.4
-2.3
-1.2
-0.7
0.6
1
1
1.4
1.2
1.6

Source: RBI, Bloomberg, ICICIdirect.com Research

We prefer quality
Our stock selection criterion focuses on companies that possess
quality balance sheets (strong cash flows, low leverage and no/lower
capex intensity) relative to earnings growth (which though it may
have moderated during the ongoing downturn will bounce back
strongly given the uptick in economic recovery).

Exhibit 2: Movement of BSE Sensex in and around election time across years
Year of
election
2009
2004
1999
1998
1996
1991

Result day
18th May 2009
14th May 2004
7th October
24th December
28th April
16th June

Source: Bloomberg, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

1 Month

6 Months

1 Month

6 Months

prior
10%
-8%
-1%
6%
12%
0%

prior
30%
10%
27%
-7%
10%
4%

after
25%
-11%
-2%
12%
-2%
13%

after
38%
11%
11%
40%
-14%
42%

City Union Bank (CITUNI)

Buying Range: | 49 - | 47 Target: | 56.00 Stop loss: | 45.50
Fundamental View:
City Union Bank
NII (| crore)
Growth (YoY)
PPP (| crore)
PAT (| crore)
NNPA
P/E
RoE
RoA

%
x
%
%

FY13
624.0
24.9
523.4
322.0
0.6
1.7
22.3
1.6

FY14E
764.3
22.5
594.1
360.6
0.9
1.5
20.0
1.5

FY15E
896.4
17.3
677.1
409.5
0.8
1.2
19.2
1.4

City union bank (CUB) is a south based, very small sized bank with
a legacy of over 100 years. It has positioned itself as a niche
banker for SME in the southern region providing high yielding
working capital loans. Along with SME, it has a diversified
exposure towards corporate and retail taking its total loan book to
| 15824 crore as on December 2013. We expect growth to
moderate with credit and deposit growing at a CAGR of 15.6%
and 16.7%, respectively

The bank has been able to maintain NIM consistently above 3%.
Asset quality has remained stable with acceptable GNPA and
NNPA ratios of 1.7% and 0.9%, respectively, as on December
2013. We do not expect the asset quality to deteriorate sharply so
as to impact margins and profitability. We expect NII and profit
growth of 19.9% and 12.8% to | 896 crore and | 409 crore,
respectively. Though it is lower than its historical average of 2530% growth till FY12, it is reasonable in the current tough
environment with stable asset quality

CUB has been consistently delivering RoA of 1.5%+ and RoE of

20%+, which makes it an attractive bet. It is currently trading at
1.2x FY15E ABV and we expect the multiple to consistently stay
higher due to stable performance across all parameters.

Source:: ICICIdirect.com Research

Technical Outlook
The share price of City Union Bank remains in a stable
uptrend on long term price charts as it remains
undeterred by the market wide volatility and continues
to slowly inch northwards in a rising peaks and
troughs sequence

Technical View:

Exhibit 3: City Union Bank Weekly Bar Chart

64.60

June13 high & 80%

retracement @ 57

The stock hit an al-time high of | 64.60 in February

2013 and, thereafter, entered a corrective phase
driven by profit bookings at lifetime highs. The said
corrective decline took support precisely at the
confluence of the long term 200 week EMA (39) and
the previous breakout area of major consolidation
during 2010-12
The steady bounce back from | 39 odd levels during
September 2013 justified the presence of key
technical support and signalled resumption of the
upward momentum. The current sideways
consolidation, therefore, provides a fresh entry
opportunity from a medium-term perspective
During last weeks trade the stock formed a bullish
Engulfing candlestick pattern on the weekly chart
indicating bullish momentum. Volumes during last
week (28 lakh shares) were almost double the 52
week average volume of 14 lakh shares indicating
strong participation in the direction of the trend

We believe the stock is well placed to challenge its

July 2013 highs placed around | 57 in the coming
months. The 80% retracement of the 2013 decline
from | 64 to | 39 is also placed around | 57 levels

Among oscillators, the weekly 14 period RSI has

generated a positive crossover above its nine period
average indicating build-up of upward momentum

ICICI Securities Ltd. | Retail Equity Research

39
32

200 week EMA

The stock respected confluence of key technical supports

during the corrective phase and resumed its primary uptrend.
The current sideways consolidation therefore provides fresh
entry opportunity from a medium term perspective

Volumes jump to nearly double than 52 week average during last weeks trade

Bullish crossover on 14 week RSI highlights the positive momentum

Source: Bloomberg, ICICIdirect.com Research

Page 2

Alstom T&D India (GECALS)

Buying Range: |206-- |200 Target: |253 Stop loss: |182
Fundamental View:
Alstom T&D
Revenue (| crore)
Growth (YoY)
EBITDA Margin
PAT (| crore)
P/E
EV/EBITDA
RoE

%
%
x
x
%

CY13E
3151.9
-4.8
8.6
84.1
41.8
14.2
14.1

CY14E
3407.2
8.1
9.5
110.8
46.1
19.7
10.7

CY15E
3766.3
10.5
10.6
177.6
30.8
16.0
14.2

Alstom T&D India is a leading player in the power transmission

business with a product portfolio ranging from medium voltage to
extra high voltage (765 kV) for the utility, industry and
infrastructure markets. Alstom T&D India has a predominant
presence in all stages of the power supply chain, with a wide
range of products that include power transformers, circuit
breakers, gas insulated switchgears, instrument transformers,
protection relays and power system automation equipment. The
company reported revenue of | 3,152 crore in FY13 (-4.8% YoY)
and PAT of | 84.2 crore

The company has a strong order backlog of ~| 6490 crore

implying 6% YoY growth and provides strong revenue visibility
with 1.9x TTM sales. Furthermore, the company repaid debt
amounting to ~| 250 crore in Q3FY14, from the proceeds of the
stake dilution, which would improve the net margin, going ahead

Although the recent trend of refraining from taking tariff hikes

may impact the SEBs capex plan in the short-term, considering
its debt laden balance sheet, we believe the environment post
elections would be more capital intensive than H1CY14. With a
strong order backlog, better product portfolio and cost
competiveness, we believe Alstom T&D is a better proxy play
compared to other T&D players

Source:: ICICIdirect.com Research

Technical Outlook
The share price of Alstom T&D is seen oscillating in a
broad range of | 200-125 for over two years. The
stock appears to be forming a major base in the
vicinity of its 2008 lows (| 123)

Time wise, the 2008-09 rally from | 125 to | 362 took

just six months while the index has taken over four
years to completely retrace the six month rally. The
decline off June 2009 peaks halted near the 2008
lows and the stock has been consolidating between
the broad range of | 125-200 in the last two years
indicating a steady base building near 2008 lows

During the last two year consolidation phase, most

remarkable observation is that since late 2012, the
intermediate declines are becoming smaller and
smaller while the most recent rally from August 2013
lows retraced its preceding decline in faster time
highlighting a change in rhythm of price structure and
indicating build up of positive momentum in the stock

After a brief pause near key resistance of | 200, the

stock price pierced through two year long
consolidation during last week thereby signalling an
end of the basing pattern and resumption of medium
term up trend in the stock

Volumes which were dismal during the past two year

long consolidation, were seen rising above the 30week average (2 lakh) at the time of breakout, thereby
validating the sustainability of the uptrend

Technical View:
Exhibit 4: Alstom T&D India Weekly Bar Chart
362

125

Share price broke past two year long consolidation

during last week signalling end of basing pattern and
opening further upsides in medium term

125

Source: Bloomberg, ICICIdirect.com Research

We expect the stock to rally towards its medium term

target of | 265 levels being 61.8% retracement of
2009-2012 decline (362-130)

ICICI Securities Ltd. | Retail Equity Research

Page 3

Whirlpool India
Revenue (| crore)
Growth (YoY)
EBITDA Margin
PAT (| crore)
P/E
EV/EBITDA
RoE
RoCE

FY13
2772.3
%
%
x
x
%
%

6.9
127.7
22.0
11.4
23.1
32.9

FY14E
2856.4
3.0
7.0
113.2
23.1
12.0
17.5
25.0

FY15E
3215.5
12.6
7.2
136.3
18.5
10.4
17.5
25.4

Whirlpool India (WHIIND)

Buying Range: | 208- | 202
187.00

Whirlpool India (WIL) (a 75% subsidiary of US based Whirlpool

Corporation) is one of the leading players in the white goods
segments (refrigerator, washing machines, AC, kitchen
appliances). Refrigerators contribute ~63% to total revenues with
~22% contributed by washing machines and ~8% by AC
products. WIL has its own manufacturing unit for Refrigerators
and Washing Machines (contributes ~85% in revenues), while all
other products including are outsourced. Net sales and earnings
for FY13 stood at | 2773 crore and | 128 crore, respectively

The company is revamping its product categories and launching

into the domestic markets by leveraging on its parent's product
and marketing expertise. It has lost market share to refrigerators
and washing machines over the last two years mainly due to
consistent price hikes (helped in improving gross margin by ~100
bps YoY in FY13). The company has not focused on gaining
short-term market share by taking a hit on pricing while it has
focused on introducing more innovative products categories in
domestic markets to gain long term market share

Whirlpool is a zero debt company with net cash balance (~| 144
crore in FY13) on the book. With efficient working capital
management, the working capital days is very minimal (about
seven days for FY13), which translates into attractive return ratios
(RoE- 23% for FY13). The company has incurred | 80 crore as a
part of capital expenditure in FY13 for platform upgradation to
produce more energy efficient & superior performing appliances

Revenues recorded abysmal CAGR of 1.3% during FY09-13 due to

lower volume offtake (impacted by a weak macro environment).
This along with higher fixed cost dented EBITDA margins by ~180
bps during the same period

Technical Outlook

The corrective decline in share price from its January

2013 peak of | 286 saw the stock take support near
its historical lows of January 2012 placed around
| 147 during August 2013. The stock price witnessed
a base formation near its historical lows for about
three months before resuming its upward journey
during late November 2013
After forming a higher bottom during November 2013
the stock witnessed steady momentum as rallies have
been faster and larger in magnitude while
intermediate corrections have been a time consuming
affair

The price action during last weeks trade has seen the
stock break out past the key trend line resistance (|
200) in place since December 2012. The breach of
medium-term resistance line signals resumption of
fresh up leg and, therefore, offers a fresh entry
opportunity from a medium-term trend perspective

The validity of a break out and sustainability of the

prevailing uptrend is also gauged from an increasing
participation in the stock over past few weeks. Over
the past couple of months volumes have consistently
risen above their 30-week average along with up
move in prices

Among momentum oscillators, weekly stochastic

continues to rise as the stock held on to its gains and
closed higher portraying underlying strength in the
stock

We expect the stock price to rally towards | 245

being the confluence of 61.8% retracement of January
August decline (265-147) and May 2013 swing high

ICICI Securities Ltd. | Retail Equity Research

Stop loss: |

Fundamental View:

Source:: ICICIdirect.com Research

Target: | 245.00

Technical View
Exhibit 5: Whirlpool India Weekly Candlestick Chart
286

Stock is seen breaking past the key

resistance line indicating resumption
of medium term up trend

Price taking support at historical lows

147
Higher volumes indicate higher participation and validates underlying

Source: Bloomberg, ICICIdirect.com Research

Page 4

Greaves Cotton (GREAVE)

Buying Range: | 63- | 60 Target: | 74.00 Stop loss: | 56.00
Fundamental View:
Greaves Cotton
Revenue (| crore)
Growth (YoY)
EBITDA Margin
PAT (| crore)
P/E
EV/EBITDA
RoE
RoCE

%
%
x
x
%
%

FY13
1867.9
6.7
12.6
132.2
11.3
5.8
18.0
18.1

FY14E
1786.2
-4.4
11.4
137.0
11.6
6.6
17.4
15.1

FY15E
1886.4
5.6
13.1
158.0
10.0
5.4
18.5
16.2

Greaves Cotton (GCL) is a manufacturer of single cylinder

engines, which runs 3Ws and 4W SCVs. Strong technology,
optimum capacities and low turnaround time have augured well
for GCL, as it has earned a place in the books of almost all OEMs
in the 3W industry. With the 3W segment entering a stable growth
phase, we expect the pick-up of the four wheeler (4W) small
commercial vehicles (SCVs) to provide the next leg of growth.
GCL, on the other hand, is also expanding its non-auto business
(~45% of sales: farm equipment, power gensets and infra
equipment) by spending more on R&D, new product launches and
focusing on costs to increase competitiveness. Coupled with this,
GCL boasts a solid balance sheet, efficient working capital cycle,
robust free cash flows and generous dividend payouts, which is
commendable for an engineering company in such challenging
times

Leadership status in three wheeler segment will help keep

fundamentals steady while exposure to SCVs. Although the
current cyclical headwinds faced by GCL, mainly in auto will lead
to medium-term challenges leading to a modest decline in FY14E
auto volumes, the approval for quadricycles can be the next leg of
growth as GCL has already developed a 265 cc engine for the
same and is in talks with a few OEMs

Factoring in the same, even though we expect overall revenue

growth to remain muted over FY13-15E (0.5% CAGR) PAT is likely
to grow at a CAGR of 9.4% over FY13-15E resulting in an RoE of
17-18% over the same period

Source:: Bloomberg, ICICIdirect.com Research

Technical Outlook
The stock registered multifold gains during March
2009 to January 2011 rallying from | 10 to | 104.50
in less than two years. Thereafter the stock entered a
prolonged corrective phase, which has stretched over
the last three years from January 2011 till date

Technical View:
Exhibit 6: Greaves Cotton Weekly Bar Chart
104

An important observation during this corrective phase

is the price wise correction has been limited to 50%
retracement (57) of the major rally (10 to 104) while
time wise the index has already extended the
corrective phase to over three years. An extended
time correction and limited price correction indicate a
healthy trend as the stock works off the excesses
before resuming the direction
The stock approached the 50% retracement support
(57) of the 2009-11 rally during August 2013 and,
thereafter, is seen forming a steady base around the
same. Hectic volume activity over the last four weeks
is indicative of steady accumulation by stronger
hands near an important support

Among oscillators, the 14 week RSI as well as the

Stochastic (5/3/3) have generated a positive
crossover above their respective signal line and
indicate build-up of momentum from a short-term
perspective

We believe the stock offers a good risk/reward set up

for medium term players to ride the up move to retest
the major overhead trend line resistance placed at
| 74 levels

ICICI Securities Ltd. | Retail Equity Research

Base formation at 50% retracement

of 2009-2011 rally

The stock has consumed more than three years to retrace 50% of the
major rally of 2009-2011. Slower pace and limited magnitude of
correction highlights the overall positive structure.
10

Positive crossover on 14-week RSI suggests build up of momentum

Source: Bloomberg, ICICIdirect.com Research

Page 5

Ramco Cement (MADCEM)

Buying Range: | 187-| 182
164.00
Ramco Cement
FY13
FY14E
Revenue (| crore)
3788.4
3702.8
Growth (YoY)
%
17.1
-2.3
EBITDA Margin
%
27.0
18.2
PAT (| crore)
403.7
179.8
EV/EBITDA
x
6.5
9.9
EV/Tonne
$
88
76
RoE
%
18.3
7.5
RoCE
%
13.7
7.0
Source:: Bloomberg, ICICIdirect.com Research

FY15E
4228.8
14.2
20.0
291.9
7.8
71
11.2
10.4

Technical Outlook

The price correction off life highs of | 265 got arrested

at the August 2013 lows of | 135. Incidentally, the
August 2013 lows are placed at 61.8% retracement of
entire 2011-2013 rally, making this a value area. After
an initial pullback off August lows, the stock went into
consolidation for past five months, indicative of a
steady base formation between 160 and 190
The entire basing pattern of last five months is rested
upon the confluence of long term 200-week EMA
(156) and the long term rising trend line formed by
connecting the major troughs of July 2011,
September 2011 and August 2013. The price rally in
last weeks trade pierced through the falling trend
resistance (placed at | 185) drawn by connecting
swing highs of March 2013, May 2013, June 2013
and January 2014 thereby signalling breakout from
five month basing pattern and resumption of medium
term up trend

Volume expansion at the time of breakout (above 30week average 6 lakh) highlights larger participation in
the direction of the trend and validates the break out

The overall technical picture and break out from

basing pattern projects an upside towards | 220 as
measured based on width of the pattern (190-160=
30 points ) as added to the break out level (19030=220)

Among momentum oscillators, the 14-week RSI held

above reading of 40 during past five month
consolidation and generated a positive cross over
above its nine -period average during last week
thereby signalling positive momentum in the stock

ICICI Securities Ltd. | Retail Equity Research

Target: | 220.00

Stop loss: |

Fundamental View:

Ramco Cement is one of the most cost efficient players in the

southern region with capacity of 14.4 MT. This is primarily on
account of strategic plant locations, captive power plants (157
MW) and a low fixed-cost base. All this makes the company less
vulnerable to any steep fall in realisations compared to peers

Although 90% of its installed capacity is in Tamil Nadu and

Andhra Pradesh, the sales exposure to AP (suffering from weak
demand and oversupply) market is below 10%, with higher
exposure to stable markets like Tamil Nadu, Karnataka and Kerala
providing an opportunity to the company to grow at a higher rate

As the south market is currently facing a power shortage

situation, the recent commissioning of 85 MW of incremental
thermal power has made the company 100% self sufficient for its
power requirement on an expanded cement capacity of 14.4 MT.
Consequently, the company was able to reduce its dependence
on purchased power from ~37% in FY11 to only 13% in FY13.
Apart from this, it has also cut electricity requirement from 84
units/tonne in FY11 to 81 units/tonne in FY13

With no major future capex plans and expected pick-up in

demand led by political stability in Andhra Pradesh (after clarity
on the Telangana issue), traction in infra projects in Tamil Nadu
and Karnataka, we expect healthy operating cash flows, going
forward, which would aid in reducing the debt burden of the
company. This will de-leverage its balance sheet (from net debtequity ratio of 1.0x in FY14 to 0.5x in FY16E) and improve the
returns ratio (from RoE of 7.0% in FY14 to 16.2% in FY16E).
Hence, we remain positive on the stock

Technical View:
Exhibit 7: Ramco Cement Weekly Bar Chart
265
Stock price is seen breaking past five
month consolidation zone and expected to
rally towards 220 in medium term

200-week EMA
135
Volume Expansion at the breakout level above 30 week average

RSI stayed above positive territory during consolidation

Source: Bloomberg, ICICIdirect.com Research

Page 6

Strategy Follow up
Date

Scrip

28-Feb VA Tech Wabag

28-Feb Voltas

RP

Target

SL

Gain/Loss %

Comment

Cash

Buy

645.00

750.00

570.00

16.00

Target almost achieved

Cash
28-Feb Container Corporation Cash
28-Feb Ultratech Cement
Cash
28-Feb Tata Motors DVR
Cash

Buy

132.00

160.00

114.00

12.00

Book 50% profit at 148

Buy

760.00

895.00

695.00

11.00

Book 50% profit at 846

Buy

1830.00

2050.00

1710.00

7.00

Book 50% profit at 1955

Buy

199.00

235.00

183.00

Open

9200.00 11000.00

8150.00

Open

464.00

Open

28-Feb Bosch
28-Feb Cummins India

ICICI Securities Ltd. | Retail Equity Research

Product Strategy

Cash

Buy

Cash

Buy

498.00

575.00

Page 7

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC
Andheri (East)
Mumbai 400 093
research@icicidirect.com

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ICICI Securities Ltd. | Retail Equity Research

Page 8