India Strategy 2qfy17 20161010 Mosl RP Pg300
India Strategy 2qfy17 20161010 Mosl RP Pg300
India Strategy 2qfy17 20161010 Mosl RP Pg300
India Strategy
Backbenchers Return!
Research Team ([email protected])
Contents
India Strategy - Backbenchers Return! ................................................................................... 3-41
2QFY17 Highlights & Ready Reckoner ...................................................................................... 42-55
Sectors & Companies ............................................................................................................... 56-296
1. Automobiles 56-72 IDFC Bank 135 Indraprastha Gas 214
Amara Raja Batteries 60 Indian Bank 136 MRPL 215
Ashok Leyland 61 IndusInd Bank 137 O il India 216
Bajaj Auto 62 Kotak Mahindra Bank 138 ONGC 217
Bharat Forge 63 Oriental Bank of Commerce 139 Petronet LNG 218
Bosch 64 Punjab National Bank 140 Reliance Industries 219
Eicher Motors 65 State Bank of India 141 10. Real Estate 220-232
Escorts 66 Union Bank 142 DLF 225
Exide Industries 67 Yes Bank 143 Godrej Properties 226
Hero MotoCorp 68 5b. Financials - NBFC 144-155 Indiabulls Real Estate 227
Mahindra & Mahindra 69 Bajaj Finance 146 Mahindra Lifespaces 228
Maruti Suzuki India 70 Dewan Housing 147 Oberoi Realty 229
Tata Motors 71 HDFC 148 Phoenix Mills 230
TVS Motor 72 Gruh Finance 149 Prestige Estate Projects 231
2. Capital Goods 73-87 Indiabulls Housing 150 Sobha Developers 232
ABB 76 LIC Housing Finance 151 11. Retail 233-238
Alstom T&D Power 77 M & M Financial Services 152 Jubilant Food 236
BHEL 78 Muthoot Finance 153 Shoppers Stop 237
Bharat Electronics 79 Repco 154 Titan Company 238
Crompton Greaves 80 Shriram Transport 155 12. Technology 239-257
CG Consumer 81 6. Healthcare 156-173 Cyient 245
Cummins India 82 Alembic Pharma 158 HCL Technologies 246
Havells India 83 Alkem Labs 159 Hexaware Technologies 247
Larsen & Toubro 84 Aurobindo Pharma 160 Infosys 248
Siemens 85 Biocon 161 KPIT Technologies 249
Thermax 86 Cadila Healthcare 162 Mindtree 250
Voltas 87 Cipla 163 MphasiS 251
3. Cement 88-98 Divis Laboratories 164 NIIT Technologies 252
ACC 92 Dr Reddys Labs. 165 Persistent Systems 253
Ambuja Cement 93 Glenmark Pharma 166 TCS 254
Grasim Industries 94 Granules India 167 Tech Mahindra 255
India Cements 95 GSK Pharma 168 Wipro 256
Ramco Cement 96 IPCA Laboratories 169 Zensar Tech 257
Shree Cement 97 Lupin 170 13. Telecom 258-265
UltraTech Cement 98 Sanofi India 171 Bharti Airtel 263
4. Consumer 99-119 Sun Pharmaceuticals 172 Bharti Infratel 264
Asian Paints 102 Torrent Pharma 173 Idea Cellular 265
Britannia Industries 103 7. Media 174-186 14. Utilities 266-275
Colgate Palmolive 104 D B Corp 178 Coal India 272
Dabur India 105 Dish TV 179 JSW Energy 273
Emami 106 Hathway Cable 180 NTPC 274
Godrej Consumer Products 107 HT Media 181 Power Grid Corp. 275
GSK Consumer 108 Jagran Prakashan 182 15. Others 276-296
Hindustan Unilever 109 PVR 183 Allcargo 276
ITC 110 Siti Cable 184 Arvind 277
Jyothy Labs 111 Sun TV Network 185 Bata India 278
Marico 112 Zee Entertainment 186 Castrol India 279
Nestle India 113 8. Metals 187-202 Concor 280
P&G Hygiene 114 Hindalco 194 Coromandel International 281
Page Industries 115 Hindustan Z inc 195 Dynamatic Tech 282
Parag Milk Foods 116 Jindal Steel & Power 196 Gateway Distripark 283
Pidilite Industries 117 JSW Steel 197 Indo Count Industries 284
Radico Khaitan 118 Nalco 198 Info Edge 285
United Spirits 119 NMDC 199 Inox Leisure 286
5a. Financials - Banks 120-143 SAIL 200 Interglobe Aviation 287
Axis Bank 126 Tata Steel 201 Jain Irrigation 288
Bank of Baroda 127 Vedanta 202 Just Dial 289
Bank of India 128 9. Oil & Gas 203-219 Kaveri Seeds 290
Canara Bank 129 BPCL 208 MCX 291
DCB Bank 130 Cairn India 209 Monsanto India 292
Equitas 131 GAIL 210 PI Industries 293
Federal Bank 132 Gujarat State Petronet 211 SRF 294
HDFC Bank 133 HPCL 212 Tata Elxsi 295
ICICI Bank 134 IOC 213 TTK Prestige 296
Note: All stock prices and indices for companies as on 3 October 2016, unless otherwise stated
Investors are advised to refer through important disclosures made at the last page of the Research Report.
India Strategy | Backbenchers Return!
India Strategy
BSE Sensex: 28,243 S&P CNX: 8,738
Backbenchers Return!
Expect growth acceleration in corporate earnings
Sources
October 2016of exhibits in this report include RBI, CMIE, Bloomberg, IMF, Industry, Companies, and MOSL database 3
India Strategy | Backbenchers Return!
October 2016 4
India Strategy | Backbenchers Return!
2QFY17E PAT gr. YoY (%) Excluding State-Owned Banks and OMCs, MOSL Universe Sales, EBITDA and PAT growth is
estimated at 3.2%, 13.1% and 7.3%, respectively. While EBITDA margin would expand
30.9
~300bp YoY to ~22.3% (multi-year high), PAT margin is likely to expand ~90bp YoY to
10.5%, driven by sharp 380bp and 160bp expansion in EBITDA and PAT margins of global
cyclicals.
Domestic
Cyclicals
2. Moderation in interest rates: 10-year G-Sec is down by 250bp over the last three years
Cyclicals
Global
to 6.8%, with ~100bp reduction happening in CY16YTD. This is expected to drive lower
interest cost, higher treasury gains and help demand for several Retail products.
3. Low base effect: Several sectors PSU Banks, Metals, Cement etc. have a favorable
base to grow upon, driving sharp earnings growth from 2HFY17 onwards.
October 2016 5
India Strategy | Backbenchers Return!
Exhibit 1: WPI and CPI about to converge Exhibit 2: Gap between WPI and CPI has narrowed
CPI % YoY WPI % YoY Difference in CPI-WPI Chg pp
12.0 12.0
9.0
7.0 8.0
5.0
2.0 3.7 4.0
1.1 1.3
-3.0 0.0
-1.2
-8.0 -4.0
Jan-11
Aug-11
Aug-12
Aug-13
Aug-14
Aug-15
Aug-16
Aug-12
Aug-13
Aug-14
Aug-15
Aug-16
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Jan-11
Aug-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
2] Softening in interest cost ahead; will drive financial leverage: 10-year G-Sec is
down by 250bp over the last three years to 6.8%, with ~100bp reduction happening
in CY16YTD. This is expected to drive lower interest cost, higher treasury gains and
help demand for several Retail products. This would benefit:
Banks bond portfolio would see trading gains.
Demand for consumer discretionary (Autos, real-estate, consumer durables etc)
would benefit from lower interest rates.
Financial leverage playing out for geared balance sheets, especially for cyclicals
like Metals, Cement etc. This reflects in ~25% PAT growth in FY18 for cyclicals, as
against EBITDA growth of ~16%.
NBFCs benefitting from lower rates in bond markets than the base rates
(currently lower by 100-150bps), though banks could see sustained pressure on
credit growth.
October 2016 6
India Strategy | Backbenchers Return!
Exhibit 3: 10-year G-Sec (%) yield down 100bp in CYTD16 Exhibit 4: India corporate Bond Curve AAA (%)
10 Year G-Sec (%) India Corporate Bond Curve AAA 1 Year (%)
10.0 13.0
9.3 12.2
8.8 11.0
7.5 9.0
6.8
6.3 7.0 7.4
Jul-14
Jul-14
Nov-11
Nov-12
Jun-13
Nov-11
Nov-12
Jun-13
Apr-11
May-12
Apr-11
May-12
Jan-08
Aug-08
Feb-09
Sep-09
Mar-10
Dec-13
Jan-15
Aug-15
Feb-16
Sep-16
Jan-08
Aug-08
Feb-09
Sep-09
Mar-10
Dec-13
Jan-15
Aug-15
Feb-16
Sep-16
Oct-10
Oct-10
Source: MOSL Source: MOSL
3] Favorable base effect for cyclical sectors: Muted earnings performance for the
last 7-8 quarters has resulted in favorable earnings base for several cyclical sectors.
Auto, Cement, Capital Goods, Metals, State-Owned Banks and Oil & Gas are the
prominent sectors that would benefit from low base in 2QFY17. Among these, while
Metals and State-Owned Banks would still witness earnings decline, the pace of
decline would moderate. State-Owned Banks earnings would decline 13% v/s 53%
in 1QFY17 while Metals earnings would decline 16% v/s 25% in 1QFY17. Domestic
Cyclicals as a pack should report 11% PAT growth, the first double-digit print in 8
quarters. Global Cyclicals as a pack should report 31% PAT growth.
-23.7
-0.9
-13.1 -9.9 -5.5
-57.2 -26.8 -33.8 -25.8
Jun-14
Jun-15
Jun-16
Jun-14
Jun-15
Jun-16
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
October 2016 7
India Strategy | Backbenchers Return!
21.0 47.9
14.5 35.8
12.4 31.0
4.5 11.8
1.7 4.1 4.8 1.1
-0.8 -0.1
-2.6 -4.4 -3.9 -0.9
-6.7 -8.1 -7.3 -13.3
-11.3 -18.7
Jun-14
Jun-15
Jun-16
Jun-14
Jun-15
Jun-16
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Exhibit 10: 2QFY17 EBITDA margin (ex-OMCs, Financials) at Exhibit 11: 2QFY17 PAT margin (ex-OMCs, Financials) would
20.7% (+170bp YoY) expand 40 bps to 10.4% led by Metals Cement and Oil & Gas
14.5
12.7
12.6
22.1
21.8
12.1
12.0
21.5
11.7
21.1
20.7
20.6
11.1
11.1
10.9
10.8
20.3
20.2
10.7
10.6
10.6
10.4
10.2
10.0
10.0
10.0
10.0
19.3
19.2
19.1
19.0
9.9
18.7
18.6
18.6
18.4
18.2
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2QE
3QE
4QE
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2QE
3QE
4QE
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
October 2016 8
India Strategy | Backbenchers Return!
Exhibit 12: Sales growth of Defensives trending in the 8-12% Exhibit 13: PAT growth for Defensives expected to be flattish
band in 2QFY17
18.2
20.4
12.2 16.4
11.0 11.3 11.1 13.0
9.0 8.7 9.1 8.2 8.2 8.1 10.5 10.1 11.2
7.1 8.8
6.7 6.5
4.9
3.2
0.1
Jun-14
Jun-15
Jun-16
Jun-14
Jun-15
Jun-16
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Exhibit 14: ...largely driven by muted performance of Exhibit 15: Domestic Cyclicals sales growth to remain in
Technology sector; first decline on YoY basis steady at 7-8%
16.4
36.0 38.6
35.0 33.5 12.4
30.5 11.5
25.2 9.7
19.3 17.0 9.2
15.1 13.3 8.2 8.7 7.7 7.9
11.2 11.6 6.3 7.0 7.4
11.6
6.4 7.0 6.5 8.3 5.6
1.9
-2.6
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-14
Jun-15
Jun-16
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Exhibit 16: Domestic Cyclicals to register double-digit PAT Exhibit 17: Sharp moderation in decline in sales of Global
growth after seven quarters Cyclicals
210.3 29.3
15.0 14.3
71.5
0.2
9.7 14.9 9.1 1.8 0.7 3.4 10.9
-3.7
-0.9 -7.4 -7.9
-23.7 -11.8
-15.9 -19.3 -17.6
-57.2 -22.4
Jun-14
Jun-15
Jun-16
Jun-14
Jun-15
Jun-16
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
-9.9 -5.5
-13.1
-26.8 -33.8 -25.8
Jun-14
Jun-15
Jun-16
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
October 2016 9
India Strategy | Backbenchers Return!
15 15 14 14 9 21
7 7 2 2 2 1 0
7 6 6 5 3 3 3 2 2 1 1 0 0
-1 -9
-19
-39 -2 -4
Healthcare
Utilities
Healthcare
Capital Goods
Telecom
Metals
Banks-PSU
Capital Goods
Utilities
Telecom
NBFC
Others
Banks-PSU
NBFC
Others
Metals
Consumer
Consumer
Technology
Cement
Media
Cement
Technology
Automobiles
Banks-Pvt
Real Estate
Automobiles
Banks-Pvt
Real Estate
Media
Retail
Retail
Oil & Gas
Exhibit 20: Cyclicals PAT expected to grow significantly ahead of MOSL Universe average in 2HFY17
60 1HFY17 PAT growth (%) LP
593 2HFY17 PAT growth (%)
41
24 22 21
16 14 11
6 6 4 4 3 2
66 57 42 41 25 23 23 23 15 15 12
-2 -7 4 4 2
-20
-36 -6 -47
Healthcare
Utilities
Capital Goods
Healthcare
Utilities
Capital Goods
Telecom
Telecom
Metals
Banks-PSU
Banks-PSU
Metals
NBFC
Others
NBFC
Others
Consumer
Cement
Consumer
Cement
Technology
Media
Technology
Real Estate
Automobiles
Banks-Pvt
Real Estate
Automobiles
Banks-Pvt
Media
MOSL
Retail
Oil & Gas
Oil & Gas
Retail
MOSL
Eicher Motors
Maruti
Sun Pharma
Hero Moto
Infosys
Bharti Airtel
Grasim Inds
Bosch
Tata Motors
ICICI Bank
Dr Reddy's
Idea Cellular
Ambuja Cem.
IndusInd
HDFC Bank
Wipro
Yes Bank
Nifty
ACC
Bharti Infratel
Asian Paints
NTPC
Bajaj Auto
TCS
SBI
BPCL
HDFC
Reliance Ind.
ITC
Adani Ports
Zee Ent
Axis Bank
Tech Mah.
ONGC
Cipla
Coal India
Tata Steel
BHEL
Hindalco
Ultratech Cem.
Power Grid
M&M
HCL Tech.
BOB
Tata Power
GAIL
Lupin
Aurobindo
HUL
Source: MOSL
October 2016 10
India Strategy | Backbenchers Return!
-3 -3 -4 -11 -19
-15 -24
Kotak Mah. Bk PL
Eicher Motors
L&T
ICICI Bank
Maruti
Dr Reddy's
Hero Moto
Infosys
Tata Motors
Bosch
Sun Pharma
Idea Cellular
Grasim Inds
Wipro
SBI
Ambuja Cem.
Yes Bank
IndusInd
Nifty
HDFC Bank
NTPC
Bharti Airtel
Tata Steel
HDFC
Bajaj Auto
ACC
Cipla
Zee Ent
Asian Paints
ONGC
TCS
Bharti Infratel
Axis Bank
Tech Mah.
Tata Power
HCL Tech.
Coal India
Hindalco
Power Grid
ITC
Reliance Ind.
HUL
BPCL
Adani Ports
BHEL
BOB
Ultratech Cem.
M&M
GAIL
Lupin
Aurobindo
Defensives passing on baton to cyclicals
Defensives solely drove MOSL Universe PAT growth over FY14-16, as cyclicals
(both domestic and global) were under pressure. The share of defensives in
MOSL Universe PAT had risen to ~36% by FY16.
However, we expect cyclicals to be key driver of aggregate PAT growth over
FY17-18. Over 75% of the increase in MOSL Universe PAT during the period
would be driven by cyclicals.
We expect the share of cyclicals in MOSL Universe PAT to increase from ~64% in
FY16 to ~70% by FY18.
The key growth drivers among the cyclicals and part of our model portfolio are:
State-Owned Banks: SBI and Union Bank
Autos: M&M, Maruti
Metals: Hindalco
Cement: UltraTech, Shree Cement, JK Lakshmi Cement
Exhibit 23: Cyclicals to drive ~75% of the increase in FY18E MOSL Universe PAT
64 63 57 54 51 30 18 16 3 2
115 96 91 75
163 121
5,471
4,454
Healthcare
Banks-PSU
Utilities
Telecom
MOSL FY17E
Metals
NBFC
MOSL FY18E
Auto
Consumer
Banks-Pvt
Technology
Cement
Cap. Goods
Media
Real Estate
Oil & Gas
Retail
PAT (INRb)
PAT (INRb)
October 2016 11
India Strategy | Backbenchers Return!
Exhibit 25: PAT share of domestic cyclicals continues to trend up while share of defensives trending down
100%
Defensives
32 26 23 27
35 39 39 37 34 32
75%
Global cyclicals
25 33 40 30 28
45 40 37 36 27
50% 25 26 26
0%
June-09
June-10
June-11
June-12
June-13
June-14
June-15
June-16
Mar-09
Sep-09
Dec-09
Mar-10
Sep-10
Dec-10
Mar-11
Sep-11
Dec-11
Mar-12
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
Dec-16E
Mar-17E
Defensives include Consumer, Healthcare, Technology, Telecom and Utilities
Global cyclicals include Metals, Oil & Gas and JLR
Domestic cyclicals include Automobiles, Banks, Capital Goods, Cement, Media, NBFCs, Real Estate and Retail
13 18
21 24 23 26
% of MOSL Universe companies
25 24 31 26
32 35 31 27 30 27 34 30
38 39 42 41 37 38 35 35 38 36 39 35 34 35
42 41 42 40 45 45 21
14 23
19 24 9 10 20 18 18
9
26 14 14 27
13 24 19 27 17 16 17 19
21
11 17 13 16 20 24 22 25 20 26 17
22 18 22 18 16 18 21 25 22
18 10 23 16 19
22 21
18 17 21 19 21
14 24 25 18 22 18 19 16 18 22
10 18 22 23 16 14 25 14
51 13 19
44 45 41 43 38 32 39 35 40 43
35 30
26 27 32 21 21 24 25 25
28 26 24 26 25 20 20 26 18 21 21 20 24
30 28 24
19
Dec 07
June 08
June 13
June 14
Mar 08
Sep 08
Dec 08
June 09
Mar 09
Sep 09
Dec 09
June 10
June 11
June 12
Mar 10
Sep 10
Dec 10
Mar 11
Sep 11
Dec 11
Mar 12
Sep 12
Dec 12
Mar 13
Sep 13
Dec 13
Mar 14
Sep 14
Dec 14
June 15
June 16
Mar 15
Sep 15
Dec 15
Mar 16
Sep 16E
Dec 16E
Mar 17E
46% of the companies would grow at >15% YoY, and almost 1/4th of the universe
would report >30% PAT growth.
Nearly 1/3rd of the universe would report PAT de-growth.
October 2016 12
India Strategy | Backbenchers Return!
0
-2 -4 -4 -3
-6 -6
-8
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2QE
3QE
4QE
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Exhibit 28: 2QFY17 Nifty (ex BPCL) PAT to grow 6% YoY, highest in nine quarters
44
38
29 30 30
26 24 21 28 25 24 23 23
20 23 23 23
21 16 LPA: 11%
13 14 18
12 11 14 11
7 7 7 8 9
3 5 6
2
0
-3 -5 -2 -2
-6 -7
-10 -9 -12
-14
-20
-24
1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3QE
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Exhibit 29: 2QFY17 Nifty (ex BPCL) PAT to grow 6% YoY, highest in nine quarters
30.5
28.9
27.7 27.0
26.9 26.8
27.1 26.2 25.4 25.3 25.9
27.0 26.6 25.0 25.5 LPA: 25% 25.2 25.7 24.9 26.5
26.0 24.524.2
25.0 25.4 23.4 23.6 22.5 25.3
24.3 23.0 24.1 23.2 23.3 24.7
22.6 23.8
23.6 23.1 23.7 23.6
22.8 22.3
23.1 22.4
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2QE
3QE
4QE
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
October 2016 13
India Strategy | Backbenchers Return!
October 2016 14
India Strategy | Backbenchers Return!
Cement is expected to continue strong momentum and report PAT growth of ~40%.
Key PAT de-growth sectors
State-Owned Banks would post another quarter of PAT decline (down 13%) but
this decline is a sharp moderation from the 53% decline posted in 1QFY17.
Metals sector would report 16% fall in PAT (7th quarter of decline). However,
Hindalco would report ~54% growth in PAT.
Telecom sector would report PAT decline (-18%) after posting a growth in two
consecutive quarters.
Exhibit 31: 2QFY17 sectoral sales Exhibit 32: 2QFY17 sectoral PAT Exhibit 33: 2QFY17 sectoral
growth (%) growth (%) EBITDA margin (%)
21 62 36 36
50
13 40 30 29
10 10 9
8 7 24 24 23 23
5 3 21 20
3 3 2 18 16
1 18
11 15
6 6 6 3
9 7
-3 -4
-11 -16-16
-17 -18
Telecom
Utilities
Health Care
Metals
Consumer
MOSL Ex Fin.
Real Estate
Media
Technology
Cement
Auto
Cap Goods
Retail
MOSL Ex. OMCs
Utilities
Health Care
Telecom
Metals
Oil Ex. OMCs
Consumer
Auto
Cement
Media
Technology
Cap Goods
Real Estate
Retail
Financials
Utilities
Health Care
Oil Ex. OMCs
Metals
Telecom
Consumer
Auto
Cement
Cap Goods
Media
Technology
Real Estate
Retail
Financials
October 2016 15
India Strategy | Backbenchers Return!
October 2016 16
India Strategy | Backbenchers Return!
October 2016 17
India Strategy | Backbenchers Return!
October 2016 18
India Strategy | Backbenchers Return!
October 2016 19
India Strategy | Backbenchers Return!
October 2016 20
India Strategy | Backbenchers Return!
October 2016 21
India Strategy | Backbenchers Return!
Oil & Gas Benchmark Singapore GRMs were down 19% YoY and -6.6 37.8 48.6 4.1 BPCL, HPCL and IOCL
up 2% QoQ and averaged USD5.1/bbl. YoY fall was led (+ve).
by 44% decline in gasoline cracks.
OMC's core earnings will be stable with QoQ increase
in marketing margins. However reported numbers wil
be lower QoQ as 1QFY17 had significant higher
inventory gains
Excl. Brent prices averaged USD45.8/bbl (-8% YoY; flat -10.8 4.4 10.7 3.4 ONGC/OINL (+ve; Oil
OMCs QoQ). Upstream earnings will continue to remain producer countries'
under pressure. Expect subsidy sharing to be nil. efforts to cap production
Expect RIL's PAT to be up +12% YoY led by petchem could revive the oil price
and largely flat refining profit benefited by exchange realization).
rate. IGL (+ve; Expect double
CGD companies (IGL) volume growth revived led by digit volume growth to
policy support on account of increased pollution continue).
awareness. However, gas transmission companies' PLNG (+ve; Capacity
volumes (GAIL, GSPL) are subdued led by expansion + take-or-pay
unfavourable oil-gas economics. GAIL's petchem contracts to boost
business turned profitable and will boost earnings. earnings).
Real Weak presales to continue, expect flattish to marginal -16.9 -2.0 5.7 5.5 Prestige presales on the
Estate uptick QoQ. back of new launches
Net debt to go up on the back of negative cash flow. Impact of RentCo
restructuring in DLF
Retail Jewelry industry demand is likely to decline 15-20% in 21.5 22.4 17.8 0.1 We expect Jubilant
2QFY17 due to gold price volatility and low consumer Foodworks sales to be at
confidence, affecting Titan. Brick and mortar retail 11% with 2% SSSG.
companies continue to face the onslaught of online Shoppers Stops LTL
retailers. Titan has called out a consumption fatigue growth is likely to come
due to spate of deals throughout the year driven by in at 13% off a weak base
online and offline players. which had flat LTL.
Titans sales and PAT
growth will be healthy
but on the back of poor
base of 25%/39% decline
in sales/PAT in 2QFY16.
October 2016 22
India Strategy | Backbenchers Return!
October 2016 23
India Strategy | Backbenchers Return!
EARNINGS FY16-18 FY17 Sensex EPS growth at 12%; no downgrades over the quarter
Baton being passed to Cyclicals; earnings acceleration ahead
We expect MOSL Universe PAT to grow 26% in FY17 (6% decline in FY16) and at a
CAGR of ~24% over FY16-18. Recovery in earnings of cyclical sectors coupled with base
effect would drive performance in FY17.
We expect Sensex EPS CAGR of 17% during FY16-18, significantly higher than the 6%
CAGR witnessed during FY08-16. We estimate Sensex EPS at INR1,493 in FY17 (growth
of 12%) and INR1,810 in FY18 (growth of 21%). Key contributors to FY17 expansion
would be Maruti, M&M, Lupin, Sun Pharma, Asian Paints, HDFC Bank, Tata Motors
and Tata Steel.
Cyclical sectors are expected to outperform the defensives over FY16-18, with
Financials, Cement, Metals, Capital Goods and Autos estimated to deliver 46%, 55%,
53%, 32% and 26% PAT CAGR, respectively.
Earnings growth in FY17 would be aided by recovery in sales growth, as WPI has now
moved into positive territory and is driving pricing/realization growth for consumer
facing industries. Expected softening in interest rates (moderation in CPI inflation) is
likely to moderate interest costs, and in-turn, drive PAT growth.
Earnings are also supported by low base effect playing out in several sectors State-
Owned Banks (worst of NPA cycle behind), Metals (commodity prices have recovered),
th
Cement and Capital Goods. Normal monsoons coupled with 7 Pay Commission
awards are expected to provide fillip to consumption in 2HFY17 and FY18.
Exhibit 37: Recovery in cyclicals expected to drive robust 17% CAGR (FY16-18) in Sensex EPS
Sales Gr. / EBIDTA EBIDTA EBITDA margin PAT PAT delta
Sector PAT Gr. / CAGR (%)
CAGR (%) Margin (%) CAGR (%) change (bp) (INR B) Share (%)
(No of Companies) (FY16-18) FY16 (FY16-18) FY16-18 FY16 FY16 FY17E FY18E (FY16-18) FY16-18
High PAT CAGR (>25%) 11 25.9 18 342 1,319 -26 52 31 41 70
Cement (13) 13 16.8 34 687 77 4 66 45 55 6
Metals (9) 9 12.3 36 668 134 -55 88 25 53 10
Financials (35) 13 79.3 13 17 620 -36 62 31 46 37
PSU Banks (10) 9 70.9 11 173 -70 PL LP 77 LP 24
Private Banks (12) 17 87.7 15 -354 406 6 16 20 18 9
NBFC (13) 16 90.0 15 -51 283 11 13 17 15 5
Real Estate (9) 10 31.7 16 356 24 3 21 53 36 1
Capital Goods (16) 12 9.1 25 233 93 -12 43 23 32 4
Media (11) 16 27.8 26 511 33 55 19 46 32 1
Auto (13) 11 14.5 15 120 338 11 24 29 26 11
Medium PAT CAGR (20-25%) 14 21.9 17 120 277 13 18 31 24 8
Healthcare (16) 13 24.9 16 119 197 13 18 32 25 6
Others (29) 16 17.7 20 139 80 12 17 28 22 2
Low PAT CAGR (up to 20%) 11 24.6 14 122 1,798 5 6 16 11 22
Retail (3) 15 7.9 21 85 9 -12 12 27 19 0
Oil & Gas (12) 10 11.9 17 164 763 19 20 13 16 14
Excl. OMCs (9) 10 20.3 16 204 546 2 11 15 13 8
Consumer (18) 12 22.8 15 117 241 10 15 18 17 5
Technology (13) 15 24.1 13 -68 585 6 6 15 10 7
Telecom (3) 7 36.0 8 87 101 -6 2 2 2 0
Utilities (4) 10 31.2 16 351 317 8 -9 22 6 2
MOSL Excl. OMCs (201) 11 25.1 16.4 232.9 3,395 -10 25 24 24 100
MOSL (204) 11 21.5 16.6 224.6 3,612 -6 26 23 24 NA
Sensex (30) 11 24.7 15.8 213.2 1,199 3 14 21 18 NA
Nifty (50) 10 24.1 13.6 143.4 1,414 -1 18 22 20 NA
October 2016 24
India Strategy | Backbenchers Return!
Headwinds turning into tailwinds; to drive 12% growth in FY17 Sensex EPS
We believe that headwinds of FY15/FY16 are turning into tailwinds for FY17 and
would drive earnings growth. For example, two consecutive years of drought,
which dragged consumption spending, have made way for normal monsoons.
This along with 7th Pay Commission awards should drive consumption in 2HFY17.
After staying in negative territory for 17 months, WPI turned positive in April
2016. This augurs well from the perspective of topline growth.
Commodity prices, which were deflationary and exerted pressure on topline
growth, are recovering from their multi-year lows. This will provide a catalyst for
growth in commodity-oriented sectors.
Interest rate environment is benign 10-year G-Sec yield is down 100bp in
CYTD16. This would help drive financial leverage for debt-heavy companies and
amplify EBITDA growth.
Exhibit 38: Monsoons were normal after two years of drought Exhibit 39: CPI trending in 5-6% band
SW monsoon % deviation from LPA
7.9
7.6
Agri GDP (%) - RHS
7.7
8.1
7.4
26.0 24.0
7.3
7.0
6.8
5.8
6.1
5.7
5.6
5.6
5.8
5.4
5.4
5.4
12.0 16.0
5.2
5.5
5.0
5.3
5.0
4.9
5.2
5.3
5.0
4.6
4.8
4.9
4.3
4.4
3.7
-2.0 8.0
3.3
3.7
-16.0 0.0
-30.0 -8.0
FY1981
FY1984
FY1987
FY1990
FY1993
FY1996
FY1999
FY2002
FY2005
FY2008
FY2011
FY2014
FY2017E
Jul-14
Jul-15
Jul-16
Apr-14
Apr-15
Apr-16
FY17E
Jan-14
Jan-15
Jan-16
Oct-14
Oct-15
8.3 95
85
7.5 70
6.8 6.8 47
45
38
6.0 6.25
20
Jul-14
Jul-15
Jul-16
Apr-14
Apr-15
Apr-16
Jan-14
Jan-15
Jan-16
Oct-14
Oct-15
Oct-16
Jul-13
Jun-14
Apr-11
May-15
Apr-16
Mar-12
Sep-12
Feb-13
Jan-14
Dec-14
Sep-16
Oct-11
Oct-15
October 2016 25
India Strategy | Backbenchers Return!
Exhibit 42: Auto (ex JLR) showing sequential sales pick-up Exhibit 43: Petro product consumption growth healthy at 7%
Auto Ex JLR Sales growth YoY (%) Qtrly petro products consumption growth YoY (%)
18.7
15
16.0
15.8
15.4
13.4
12.9
12.1
12.1
11.4
11
9.5
9.4
9
9.1
8.1
7.1
6.8
7 7 11 8
6.4
5 6 6
5
4 3 4 5 5 4 5 4 5
6.8
2 1 1 7
5 1
1
-0.2
-2.7
Dec-13 -3.6
-3.4
(0)
June-14-6.0
(1)
June-11
June-12
June-13
June-15
June-16
Dec-11
Dec-12
Dec-14
Dec-15
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Sep-16
Exhibit 45: Cement volume growth moderation due to
Exhibit 44: Consumer revenue growth at two-year high monsoons; especially in North and Central regions
Consumer sales growth YoY (%) Cement Volume growth (%)
16.9
14.4 9.3
12.6 8.9
11.1 11.4 11.5 10.2 6.3 5.5 5.1 5.7
7.7 7.9 7.2 3.2 3.7
1.2
4.5
2.2 1.9 2.1
-5.0 1.6
-0.6
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
Jun-14
Jun-15
Jun-16
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16E
October 2016 26
India Strategy | Backbenchers Return!
Exhibit 46: PAT contribution of State-Owned Banks to rise, Exhibit 47: Contribution of Metals would also rise, but would
but remain well below historical average still be below long-period average
PSU Banks PAT (INR b) % to MOSL Universe PAT Metals PAT (INR b) % to MOSL Universe PAT
12.6 12.3 15.3 14.6 15.4
11.3 11.5 11.5
10.5 9.2 9.9 8.6 8.5 13.1 12.1
10.7
6.7 9.1 9.0 7.8 7.7
4.7 5.5 5.6
3.7
-1.9
128 151 206 267 303 341 392 410 328 327 212 375
160 251 303 325 226 365 364 322 298 296 134 252 315
-70
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
Exhibit 48: OMCs emerged as a new sector, with promise of Exhibit 49: ~46% of FY17 incremental PAT contributed by
more stability in earnings State-Owned Banks and Oil & Gas
Banks-PSU
6.8
5.9 6.0 6.0 Oil & Gas
5.5 Average of 13 Technology
5.1
4.4 4.0% 4 30 Banks-Private
3.7 4.0 4
2.9 2.8 Automobiles
5
2.0 Healthcare
1.7 4
4 Capital Goods
9 16 Cement
7 4 Consumer
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
NBFC
Others
October 2016 27
India Strategy | Backbenchers Return!
Exhibit 50: MOSL Universe absolute PAT change (FY17 YoY; INR b)
65 51 40 37 37 37 35 6 5 2 1
118 80
153
282 -28
4,454
3,532
Healthcare
Banks-PSU
Utilities
Metals
NBFC
Telecom
PAT (INRb)
MOSL FY17E
Auto
Consumer
Cement
Cap. Goods
Banks-Pvt
Technology
Media
Real Estate
Oil & Gas
Retail
MOSL FY16
PAT (INRb)
Exhibit 51: MOSL Universe absolute PAT change (FY18 YoY; INR b)
75 64 63 57 54 51 30 18 16 3 2
115 96 91
163 121
5,471
4,454
Healthcare
Banks-PSU
Utilities
Telecom
MOSL FY17E
Metals
NBFC
MOSL FY18E
Auto
Consumer
Banks-Pvt
Technology
Cement
Cap. Goods
Media
Real Estate
Oil & Gas
Retail
PAT (INRb)
PAT (INRb)
FY17/18 estimates: Contributors to sectoral earnings change in last three
months
In the last three months since our 1QFY17 Strategy, sectors that contributed to
upward earnings momentum include Metals, Autos ex JLR and Oil & Gas. This is
a significant change the Metals sector has been a key drag for overall earnings
in the last few quarters.
While State-Owned Banks have still seen earnings cuts over the last three
months, Technology, unsurprisingly, emerges as a new drag for incremental
earnings. The cut in Technology estimates is driven by macro headwinds
coupled with guidance cuts/warnings from corporates.
Exhibit 52: FY17 PAT estimate change contributors in last three months (INR b)
122 34 26 18 15 6 3 2 0
0 1 2 4 4 4 6 11 11 12 33 89
4,473
4,522
FY17 Cur. PAT
Coal India
Metals
Telecom
NBFC
Others
Banks-PSU
FY17 PAT in June
OMCs
Auto Ex JLR
Consumer
Cement
Media
Cap. Goods
Technology
Real Estate
Banks-Pvt
Utilities (Ex Coal)
Retail
Sun Pharma
JLR
October 2016 28
India Strategy | Backbenchers Return!
Exhibit 53: FY18 PAT estimate change contributors in last three months (INR b)
38 16 12 9 4 2 1 0 0 0
1 1 2 4 6 10 12 12 13 20 41
5,561 5,560
Coal India
Metals
NBFC
OMCs
Others
Telecom
Banks-PSU
Consumer
Auto Ex JLR
Cement
Real Estate
Media
Cap. Goods
Banks-Pvt
Technology
Utilities (Ex Coal)
Sun Pharma
JLR
Retail
Exhibit 54: Companies with strong growth in last four quarters, which would continue in FY17
PAT growth (%)
Company 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17E 3QFY17E 4QFY17E FY17E FY18E
Bharat Financial 24.0 37.2 93.6 108.4 285.8 80.2 89.3 94.7 128.2 -3.3
Glenmark Pharma -1.1 21.4 48.1 1301.5 24.0 27.3 49.4 363.8 72.3 16.3
Maruti Suzuki 58.5 65.3 68.2 18.6 23.0 29.4 22.4 22.7 50.3 31.2
Bajaj Finance 30.4 41.7 58.1 36.4 53.8 51.4 29.1 51.7 44.9 27.8
Sanofi India 11.7 16.9 171.9 66.5 32.9 29.9 20.2 17.9 43.8 18.2
TVS Motor 38.4 22.8 19.4 30.1 21.2 40.3 46.8 36.1 39.5 41.8
Ashok Leyland LP 607.2 533.6 93.0 130.0 7.3 72.2 40.5 38.9 38.1
Muthoot Finance 1.7 2.2 20.9 60.6 47.6 53.5 40.4 19.3 38.0 20.2
Ultratech Cement -3.4 -3.9 39.6 10.8 28.3 38.0 52.1 27.8 36.2 53.1
Yes Bank 27.7 26.5 25.1 27.4 32.8 30.3 30.1 31.0 30.9 28.1
TTK Prestige -7.4 21.7 32.6 131.2 10.8 27.1 30.2 36.4 28.3 23.3
Eicher Motors 50.7 54.8 76.1 84.3 58.6 58.1 59.6 39.1 28.0 37.3
Repco Home Fin 21.8 21.2 25.5 21.3 30.8 15.0 33.8 27.7 26.6 30.6
Aurobindo Pharma 15.8 22.7 32.3 38.7 21.0 20.2 15.6 29.9 26.6 22.7
SRF 21.3 31.4 37.3 80.5 24.1 18.3 14.6 37.7 25.8 23.6
IndusInd Bank 24.7 30.2 29.9 25.3 26.0 25.1 25.9 25.4 25.6 26.6
Pidilite Inds. 35.5 41.4 48.6 83.9 16.4 24.1 28.0 19.1 23.7 18.2
Power Grid Corp. 14.7 19.7 28.8 13.2 31.9 24.5 16.5 13.1 23.1 18.6
Godrej Consumer 57.4 37.3 25.6 20.5 17.2 18.1 18.2 23.2 22.9 25.8
GRUH Finance 20.0 19.9 20.0 18.5 19.6 26.9 20.7 22.1 22.3 26.3
Exide Inds. -16.0 24.1 37.8 29.1 25.9 23.8 24.0 14.4 21.8 16.4
LIC Housing Fin 18.6 20.6 21.7 18.5 6.7 20.2 24.9 31.9 21.7 25.4
Asian Paints 34.0 17.3 40.6 22.4 17.9 21.2 22.4 22.8 21.1 15.9
HDFC Bank 20.7 20.5 20.1 20.2 20.2 20.2 20.2 20.2 20.2 20.2
October 2016 29
India Strategy | Backbenchers Return!
Exhibit 56: Top earnings upgrade in last 3 months: FY17E Exhibit 57: Top earnings downgrade in last 3 months: FY17E
% Upgrade in CY16YTD % Downgrade in CY16YTD
PAT (INR b) PAT (INR b)
last 3mths Price last 3mths Price
FY17E FY18E FY17E FY18E Chg (%) FY17E FY18E FY17E FY18E Chg (%)
Tata Steel 31.5 53.2 217.8 -18.0 47.5 IDBI Bank 3.2 13.3 -71.1 -20.0 -20.1
Shree Cement 19.8 25.7 93.3 46.4 56.5 Idea Cellular 6.8 8.5 -56.4 -46.1 -43.7
Vedanta 66.3 83.9 73.0 64.1 98.0 Jubilant Foodworks 0.9 1.6 -42.8 -31.6 -34.4
Bharat Financial 6.9 6.7 57.8 7.3 84.5 Dr Reddy s Labs 15.3 23.7 -36.4 -19.7 1.9
JSW Steel 46.1 47.9 36.9 16.3 71.2 Punjab National Bank 21.2 25.2 -31.1 -35.5 24.2
NMDC 28.4 26.3 23.6 64.2 20.6 Mindtree 5.0 6.8 -28.9 -19.3 -32.0
Maruti Suzuki 70.6 92.7 22.3 24.2 23.1 State Bank 110.6 191.3 -26.4 1.2 13.7
Federal Bank 7.4 8.9 15.9 15.9 33.0 Bharat Forge 6.4 8.7 -19.9 -15.2 5.7
Dalmia Bharat 3.9 6.5 15.3 9.3 122.7 Canara Bank 14.6 20.0 -18.9 -13.1 36.7
Petronet LNG 13.9 17.1 15.0 9.1 38.7 Bata India 1.7 2.0 -14.9 -20.4 -4.9
Indraprastha Gas 6.1 6.7 13.2 12.5 49.4 Tech Mahindra 27.6 33.5 -14.9 -11.6 -19.3
Voltas 4.4 5.3 12.4 6.8 20.1 Ashok Leyland 15.4 21.3 -11.8 -11.6 -5.8
Bajaj Finance 18.5 23.7 12.3 16.0 80.8 Coal India 107.4 133.1 -10.4 -8.5 -0.3
ONGC 173.4 209.0 11.5 8.4 7.6 Wipro 84.2 97.1 -9.6 -9.4 -14.5
IPCA Labs. 2.5 4.1 11.3 11.0 -18.2 Axis Bank 75.9 89.0 -8.9 -8.9 22.6
Pidilite Inds. 9.4 11.1 8.0 8.7 30.6 Eveready Inds. 0.8 1.1 -8.7 -9.0 -16.7
Eicher Motors 17.1 23.5 6.9 6.0 52.9 United Spirits 5.4 8.2 -8.7 -8.1 -18.8
Asian Paints 21.8 25.2 5.6 10.0 34.8 Infosys 140.5 162.4 -7.5 -7.0 -6.0
October 2016 30
India Strategy | Backbenchers Return!
Exhibit 58: Sensex EPS: Expect rebound in FY16-18, with 17% CAGR versus 6% CAGR witnessed during FY08-16
FY16-18E:
FY93-96: FY96-03: FY03-08: FY08-16:
17% CAGR
45% CAGR 1% CAGR 25% CAGR 6% CAGR
1,810
FY93-FY16:
1,493
13% CAGR 1,337 1,356 1,330
1,181
1,120
1,024
720 833 820 834
540
266 291 278 280 272 361 446
181 250 216 236
81 129
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
Exhibit 59: Nifty EPS: Expect rebound in FY16-18, with 19% CAGR versus 4% CAGR witnessed during FY08-16
FY97-03: FY03-08: FY08-16: FY16-18E:
3.5% CAGR 25% CAGR 4% CAGR 19% CAGR
22%
16%
-4% 556
FY97-FY16: 455
401 410 394
9% CAGR 365
281 315 347
236 251 247
169 184
131
75 84 71 75 73 78 92
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
October 2016 31
India Strategy | Backbenchers Return!
Exhibit 60: FY17E Sensex EPS is unchanged Exhibit 61: FY18E Sensex EPS up/downgrade
FY17 EPS (INR) FY17 EPS Growth YoY (%) FY18 EPS (INR) FY18 EPS Growth YoY (%)
23.3
21.6 21.7
20.3 23.2 24.2 21.3
22.2 21.8 19.7
21.2 21.6 21.9
17.7 21.0
1,493
1,493
16.4 14.2
12.3 12.3
2,057
2,021
1,979
1,907
1,845
1,790
1,718
1,643
1,550
1,554
1,998
1,890
1,880
1,872
1,854
1,810
May 16 1,519
Nov 15
May 15
June 15
Aug 15
June 16
Feb 15
Mar 15
Sep 15
Dec 15
Feb 16
Mar 16
Sep 16
May 16
Dec 15
June 16
Feb 16
Mar 16
Sep 16
Exhibit 62: Exhibit: Top Sensex companies EPS upgrades/downgrades since 1QFY17 review (%)
Company FY17 Company FY18
Tata Steel 8.4 Tata Steel 11.6
ONGC 7.8 Maruti 11.4
Maruti 6.5 ONGC 10.3
L&T 5.0 Hero Moto 3.9
Tata Motors 3.8 GAIL 2.5
GAIL 2.3 SBI 1.6
Wipro -2.0 Asian Paints 1.5
Coal India -3.0 Bajaj Auto 1.2
M&M -3.1 Infosys -1.8
SBI -3.4 M&M -2.8
Sun Pharma -4.4 Reliance Ind. -4.2
Cipla -5.7 Cipla -5.1
Dr Reddys -27.8 Dr Reddys -16.7
October 2016 32
India Strategy | Backbenchers Return!
October 2016 33
NIFTY FY17E 3203 NIFTY FY16 2794
87
81
SBI BOB
37
Tata Motors Reliance Ind.
October 2016
36
ONGC Tata Motors
34
TCS HDFC Bank
35 26 25 24
Reliance Ind. Tata Steel
HDFC Bank Maruti
Sun Pharma HCL Tech.
Coal India Bharti Airtel
24 22 20 20
NTPC BHEL
33 30 29 26 23 22
Maruti ITC
Infosys TCS
22 22
Tata Steel Sun Pharma
17
ITC Kotak Mah. Bk
17 17 16 14 14 13 12 11
Power Grid Hindalco 3179.049726
BOB M&M
Kotak Mah. Bk Ultratech
Axis Bank Yes Bank
16 14 13 13
Wipro L&T
16 15 14 13 12
Bajaj Auto Lupin
Hindalco Tata Power
12 11
HDFC IndusInd Bk
Exhibit 65: Nifty stock absolute PAT change (FY18 YoY; INR b)
Exhibit 64: Nifty stock absolute PAT change (FY17 YoY; INR b)
10
against ~50% in FY18.
9
GAIL Hero Moto
9
Yes Bank Aurobindo
9
L&T HDFC
BPCL BPCL
Grasim Bharti Infratel
Dr Reddys Zee Ent.
Ambuja Cem Asian Paints
IndusInd Bk Eicher Mot.
Hero Moto Ambuja Cem
Lupin ICICI Bank
Earnings breadth for Nifty improving in FY18
3 2 0 -1
Aurobindo ONGC
HUL Bosch
Zee Ent. Tech Mah.
Bharti Airtel Wipro
BHEL NTPC
Asian Paints Axis Bank
We expect 10 companies in the Nifty to report PAT decline for FY17.
34
incremental PAT contributors accounting for 30% of total incremental PAT
Nearly 50% of the incremental Nifty PAT in FY17E is driven by five companies
For FY18, breadth of earnings is expected to turn better, with top five
India Strategy | Backbenchers Return!
India Strategy | Backbenchers Return!
Indian equities delivered positive return for the second consecutive quarter despite
weak global cues and geopolitical concerns. After declining 5% last year, returns in
CY16 YTD have been positive.
In CY16 YTD, Brazil (+37%), Russia (+14%), UK (+12%), Taiwan (+11%) and India (+8%)
were the best performers among the key global markets in local currency.
In India, Cement (+41%), Metals (+35%), Media (+28%) and Auto (+23%) sectors were
the top performers for CY16 YTD. Telecom (-20%), Technology (-7%) and Healthcare
(-3%) were the only losers. Midcaps outperformed large caps, delivering 18% positive
return.
Stock breadth was positive in CY16 YTD, with 36 Nifty stocks trading higher. All
Technology and Telecom stocks in the Nifty gave negative returns.
In CY16 YTD, Hindalco (+82%) was the top performer, followed by Yes Bank (+75%),
Eicher Motors (+53%), Tata Steel (+48%) and Ultratech (+41%). Idea (-44%), Tech
Mahindra (-19%), BHEL (-19%), Lupin (-19%) and Bharti Infratel (-15%) were the worst
performers.
Valuations of Indian equities remain attractive. The Sensex trades at 16.8x one-year
forward earnings, at its long-period average of 16.9x. Sensex P/B is at 2.6x, near its 10-
year average of 2.7x. Market-cap-to-GDP ratio of 75% (FY17E GDP) is below the long-
period average of 78%.
Midcaps now trade at a 17% premium to Sensex on a P/E basis. In the last 12 months,
midcaps have delivered 22% positive return, as against 8% return by the Sensex. Also,
in the last five years, midcaps have outperformed the Sensex by 58%.
FIIs invested USD7.5b in CY16 YTD, compared to USD3.3b in CY15. However, DII flows
have been muted in recent months.
Exhibit 66: CY16 returns have been positive so far, with significant volatility, post a decline of 5% in CY15
Sensex annual return YoY (%)
-1 -1 -5
-16 -16
-21 -21 -18 -25
-52
CY80
CY81
CY82
CY83
CY84
CY85
CY86
CY87
CY88
CY89
CY90
CY91
CY92
CY93
CY94
CY95
CY96
CY97
CY98
CY99
CY00
CY01
CY02
CY03
CY04
CY05
CY06
CY07
CY08
CY09
CY10
CY11
CY12
CY13
CY14
CY15
CY16YTD
October 2016 35
India Strategy | Backbenchers Return!
Exhibit 67: Positive return for the second consecutive quarter (Sensex returns, % QoQ)
0 -1 0
-3 -3
-6
Jun-12
Jun-14
Jun-15
Jun-16
June-13
Mar-12
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
Source: Company, MOSL
Exhibit 68: World equity indices (CY16YTD)-local currency (%) Exhibit 69: World equity indices (CY16YTD) USD (%)
Brazil 68
Brazil 37
UK 12 MSCI EM 15
Japan -13
UK -2
October 2016 36
India Strategy | Backbenchers Return!
would be hurt. Good monsoon after two years of drought would lead to
increase in rural demand, making a favorable base for 2HFY17.
Telecom (-20%), Technology (-7%) and Healthcare (-3%) were the only losers for
CY16 YTD.
In CY16 YTD, midcaps outperformed large caps, delivering 18% positive return.
Exhibit 70: Sectoral performance for CY16 YTD (% return)
41
35
28
23 22
18 18 16 16 13 10 8
8 6 4
Telecom,
Technology and
-3
Healthcare only -7
-20
negative
performers
Healthcare
Metal
Nifty
Capital Goods
Utilities
Telecom
NBFC
Midcap 100
Pvt - Banks
Oil
Consumer
Sensex
Cement
Auto
Technology
Media
Real Estate
PSU - Banks
Source: Company, MOSL
Exhibit 71: Best and worst Nifty performers for CY16 YTD (%)53% companies outperformed the benchmark
82
75
53 48
41 41 38
35 33 31 31
28 27 27 23 23
22 20 19 19
15 14 14 13 13 13 11 10 10
8 8 8 3 2
2 1 1
0 -1 -1 -2 -5
-6 -6 -8 -9
-15-15-19-19-19
-44
Hero Moto
Axis Bank
Reliance Ind.
Wipro
BPCL
Nifty
Dr Reddy's
Coal India
TCS
Lupin
Hindalco
Asian Paints
Grasim Ind.
Kotak Mah.Bk
Tata Steel
Maruti
Tata Mot.-DVR
L&T
Tata Power
NTPC
GAIL
Adani Ports
HUL
ICICI Bank
HCL Tech
Bharti Airtel
Cipla
Idea Cellular
Zee Ent.
IndusInd Bk
Tata Motors
Power Grid
Aurobindo
Infosys
BHEL
Yes Bank
Eicher Mot.
UltraTech
Ambuja Cem.
Bosch
HDFC Bank
SBI
M&M
HDFC
BoB
Sun Pharma
Bharti Infratel
ACC
Bajaj Auto
ITC
ONGC
Tech Mah.
October 2016 37
India Strategy | Backbenchers Return!
Exhibit 72: Yearly FII flows (USD b) fifth year of positive Exhibit 73: Quarterly FII flows (USD b) third consecutive
flows quarter of inflows
29.3
24.5 10.4
17.8 20.0 8.4
17.6 16.2 6.9 6.6 6.2 6.0
10.8
8.1 4.1 4.6
7.5 3.2 3.5
3.3 2.3
1.2 1.7
0.2
-0.5
-0.1 -0.3
-12.2 -2.6
CY05
CY06
CY07
CY08
CY09
CY10
CY11
CY12
CY13
CY14
CY15
CY16 YTD
Jun-13
Jun-14
Jun-15
June-16
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
Exhibit 74: Yearly domestic MF flows (USD b) flows muted Exhibit 75: Quarterly domestic MF flows (USD b) 10
after highest ever inflows in CY15 quarters of inflows
11.2
3.7 3.9
2.7
2.4 2.1
3.4 3.3 3.9 1.5
1.7 2.4
1.3 1.0 1.0
0.4
0.1
-1.2
-3.9 -3.7 -0.6-0.8
-1.2 -1.0
-6.1 -1.4-1.4 -1.3
CY06
CY07
CY08
CY09
CY10
CY11
CY12
CY13
CY14
CY15
CY16 YTD
Jun-13
Jun-14
Jun-15
June-16
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Exhibit 76: Yearly DII ex-MF flows (USD b) 5th year of Exhibit 77: Quarterly DII ex-MF flows (USD b) heavy selling Sep-16
outflows in 2QFY17
13.6 1.3
0.3 0.5
6.5
3.7 4.7 -0.1
-0.3-0.2 -0.6
0.3 1.4 -0.9
-2.2-2.1 -2.0 -2.2
-1.0 -2.4
-2.3 -2.8-3.0
-3.9
-7.0
-9.3 -8.8 -4.9
CY06
CY07
CY08
CY09
CY10
CY11
CY12
CY13
CY14
CY15
CY16 YTD
Jun-13
Jun-14
Jun-15
June-16
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
October 2016 38
India Strategy | Backbenchers Return!
21 3.6
10 Year Avg: 10 Year Avg:
16.9x 2.7x
17 16.8 2.9
2.6
13 2.2
10.7
9 1.6
1.5
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Exhibit 80: 12-month forward Sensex RoE (%) Exhibit 81: Indias market cap to GDP (%)
25.0
23.0 103
95 Average of 78%
22.0 88 for the period
82 83 81
71 75
64 66 70
19.0 10 Year Avg: 17.0% 55
16.0 15.3
15.8
13.0
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
Midcaps continue to outperform; trade at premium to Sensex P/E
Midcaps now trade at a 17% premium to Sensex on a P/E basis.
In the last 12 months, midcaps have delivered 22% positive return, as against 8%
return by the Sensex.
Exhibit 82: Midcaps significantly outperformed large caps in Exhibit 83: Midcaps outperformed large caps by 58% in last
last 12 months five years
Sensex Rebased Nifty Midcap 100 Rebased Sensex Rebased Nifty Midcap 100 Rebased
128 235
122 218
116 195
108 160
104 155
92 115
80 75
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Oct-16
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
October 2016 39
India Strategy | Backbenchers Return!
Exhibit 84: Midcaps v/s Sensex PE (x) 12-month forward Exhibit 85: Midcaps trading at 17% premium to Sensex
Midcap PE (x) Sensex PE (x) Midcap Vs Sensex PE Prem/(Disc) (%)
23.0 40
Sensex Avg: 16.8x
Midcap Avg: 15.9x 19.8 17
19.5 20
Average: -5%
16.0 16.8 0
12.5 -20
9.0 -40
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Sector valuations: Growth to pick up in 2HFY17
Oil & Gas trades at a P/B of 1.3x (17% discount to historical average) and P/E of
10.5x (10% discount). OMCs (HPCL, BPCL and IOCL) continue to outperform, led
by improvement in GRM and attractive valuations. RIL was strong in September,
led by news flow on Jio trial subscription along with rebound in GRM.
PSU Banks trade at a 26% discount to historical average P/B. The sector has
been significantly outperforming for four months, driven by equity capital
infusion by GoI and possible revival in asset quality position. Overall, we expect
stress addition in FY17 to be lower than FY16; however, credit costs and core
earnings are likely to remain under pressure in FY17.
Auto sector trades at 17x, above its historical average P/E of 14.2x. Normal
monsoon boosts 2W demand. Expect rural demand to recover in 2HFY17. Broad-
based recovery in PV is yet to be seen, with growth driven by new launches.
On an EV/EBITDA basis, Telecom trades at 5.1x (39% discount to historic
average). Bharti holds strong competitive position in the telecom market. We
expect Bharti to deliver over a 2-3 year horizon. Idea remains a structural sell,
given its weak competitive position and stretched balance sheet.
October 2016 40
India Strategy | Backbenchers Return!
WEIGHT
SECTOR WEIGHT / BSE MOST EFFECTIVE
MOSL model PORTFOLIO PICKS 100 WEIGHT
RELATIVE TO
SECTOR STANCE
BSE100
portfolio Financials 30.6 31.0 0.4 Overweight
Private 18.3 16.0 -2.3 Underweight
HDFC Bank 6.8 7.0 0.2 Buy
ICICI Bank 3.9 4.0 0.1 Buy
Yes Bank 1.1 3.0 1.9 Buy
Federal Bank 0.3 2.0 1.7 Buy
NBFCs 9.1 8.0 -1.1 Underweight
LIC Housing 0.5 3.0 2.5 Buy
Max Financial 0.0 3.0 3.0 Buy
Bharat Financial 0.0 2.0 2.0 Buy
PSU 3.2 7.0 3.8 Overweight
SBI 2.1 5.0 2.9 Buy
Union Bank 0.1 2.0 1.9 Buy
Auto 11.9 15.0 3.1 Overweight
M&M 1.8 4.0 2.2 Buy
Maruti 2.0 4.0 2.0 Buy
Tata Motors 2.8 3.0 0.2 Buy
Ashok Leyland 0.3 2.0 1.7 Buy
TVS Motors 0.0 2.0 2.0 Buy
Consumption / Retail 12.4 12.0 -0.4 Neutral
ITC 5.4 3.0 -2.4 Buy
Indigo 0.0 3.0 3.0 Neutral
Britannia 0.5 2.0 1.5 Buy
Jubilant Food 0.0 2.0 2.0 Neutral
United Beweries 0.2 2.0 1.8 Buy
Energy 8.7 10.0 1.3 Overweight
Reliance 4.7 4.0 -0.7 Neutral
HPCL 0.6 3.0 2.4 Buy
BPCL 0.9 3.0 2.1 Buy
Cap Goods, Infra & Cement 8.0 8.0 0.0 Neutral
Larsen & Toubro 3.1 4.0 0.9 Buy
Ultra Tech 1.1 2.0 0.9 Buy
Shree Cement 0.0 2.0 2.0 Buy
Technology 11.5 7.0 -4.5 Underweight
Infosys 5.5 5.0 -0.5 Buy
HCL Tech 1.2 2.0 0.8 Buy
Healthcare 6.6 4.0 -2.6 Underweight
Sun Pharma 2.2 2.0 -0.2 Buy
Aurobindo 0.6 2.0 1.4 Buy
Utilities / Metals 6.6 4.0 -2.6 Underweight
Power Grid 1.0 2.0 1.0 Buy
Hindalco 0.5 2.0 1.5 Buy
Others 3.7 9.0 5.3 Overweight
Exide 0.2 1.0 0.8 Buy
Manpasand Beverages 0.0 1.0 1.0 Buy
JK Lakshmi Cement 0.0 1.0 1.0 Buy
SRF 0.0 1.0 1.0 Buy
Bharat Electronics 0.0 1.0 1.0 Buy
Parag Milk Foods 0.0 1.0 1.0 Neutral
Arvind 0.0 1.0 1.0 Buy
MCX 0.0 1.0 1.0 Buy
Crompton Greaves Consumer 0.0 1.0 1.0 Buy
TOTAL 100.0 100.0
October 2016 41
MOSL UNIVERSE
MOSL Universe:
2QFY17 Highlights
&
Ready Reckoner
Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year
numbers. This is because of differences in classification of account heads in the companys quarterly and annual
results or because of differences in the way we classify account heads as opposed to the company.
All stock prices and indices as on 3 October 2016, unless otherwise stated.
October 2016 42
MOSL UNIVERSE
Quarter-wise sales growth ex OMCs (% YoY) Quarter-wise net profit growth ex OMCs (% YoY)
0.4%
-1.6%
-10.5%
-14.4%
-3.7%
Dec-15 Mar-16 Jun-16 Sep-16E
Dec-15 Mar-16 Jun-16 Sep-16E
Sectoral sales growth - quarter ended Sept-16 (%) Sectoral net profit growth - quarter ended Sep-16 (%)
21 62
13 10 10 50
9 8 40
7 5 3 3 3 2 1 18 16 11
6 6 6 3
-3 -4 -16 -16
-11 -17 -18
MOSL Ex. OMCs
Utilities
Utilities
Health Care
Telecom
Metals
Health Care
Oil Ex. OMCs
Metals
Telecom
Consumer
Auto
Cement
Consumer
Media
Auto
Cement
Technology
Cap Goods
Real Estate
Cap Goods
Media
Technology
Real Estate
Retail
Retail
Financials
Financials
October 2016 43
MOSL UNIVERSE
SECTOR Sales Change YoY (%) EBITDA Change YoY (%) PAT Change YoY (%)
FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Auto (13) 5,415 5,792 6,655 7.9 7.0 14.9 783 871 1,042 6.7 11.2 19.7 338 419 539 10.6 23.7 28.8
Capital Goods (16) 2,052 2,256 2,553 0.8 9.9 13.2 187 236 292 -9.3 26.4 23.6 93 133 163 -12.4 42.9 22.6
Cement (13) 1,154 1,279 1,477 5.3 10.8 15.5 194 260 350 18.0 33.6 34.9 77 128 185 3.6 66.1 45.0
Consumer (18) 1,543 1,694 1,940 0.4 9.8 14.5 352 396 465 9.9 12.7 17.3 241 278 328 9.7 15.3 18.2
Financials (35) 3,003 3,284 3,829 9.6 9.3 16.6 2,381 2,714 3,043 10.8 14.0 12.1 620 1,004 1,317 -35.8 61.9 31.2
Private Banks (12) 903 1,048 1,244 18.8 16.0 18.7 792 942 1,047 20.1 19.0 11.1 406 471 567 6.0 16.0 20.4
PSU Banks (10) 1,579 1,637 1,889 2.6 3.7 15.4 1,120 1,235 1,372 2.5 10.3 11.1 -70 212 375 PL LP 76.7
NBFC (13) 521 599 696 18.0 15.0 16.3 469 537 623 18.2 14.5 16.1 283 320 374 11.0 13.0 16.9
Healthcare (16) 1,336 1,484 1,705 11.4 11.1 14.9 333 363 445 19.8 9.0 22.7 197 232 307 13.5 17.9 32.2
Media (11) 253 291 339 14.1 15.2 16.6 70 87 112 22.2 23.0 29.2 33 39 57 55.5 19.0 45.6
Metals (9) 4,100 4,398 4,907 -13.2 7.3 11.6 506 830 933 -37.2 64.2 12.4 134 252 315 -54.8 88.2 24.8
Oil & Gas (12) 12,255 12,732 14,732 -21.9 3.9 15.7 1,457 1,759 1,994 12.4 20.7 13.4 763 916 1,031 19.0 20.0 12.5
Excl. OMCs (9) 5,034 5,356 6,110 -25.1 6.4 14.1 1,022 1,173 1,365 -3.0 14.8 16.3 546 607 697 2.4 11.2 14.7
Real Estate (9) 272 285 331 18.6 4.7 16.4 86 90 117 14.3 3.8 30.6 24 29 45 2.5 21.0 52.9
Retail (3) 170 192 225 -0.1 12.5 17.6 13 16 20 -16.1 17.0 25.4 9 10 12 -11.7 11.5 26.9
Technology (13) 3,065 3,525 4,023 10.5 15.0 14.2 739 814 943 6.8 10.1 15.9 585 622 713 5.7 6.3 14.7
Telecom (3) 1,448 1,551 1,663 7.1 7.1 7.2 522 572 614 10.9 9.6 7.3 101 103 105 -6.4 2.1 2.3
Utilities (4) 1,857 1,949 2,232 3.3 5.0 14.5 579 618 774 13.1 6.9 25.1 317 289 353 8.4 -8.7 22.0
Others (29) 969 1,099 1,294 5.6 13.4 17.8 172 200 248 17.0 16.4 23.7 80 94 120 12.0 16.9 27.8
MOSL (204) 38,894 41,809 47,906 -6.3 7.5 14.6 8,374 9,825 11,390 5.7 17.3 15.9 3,612 4,548 5,591 -6.5 25.9 22.9
Excl. OMCs (201) 31,672 34,434 39,285 -2.6 8.7 14.1 7,939 9,239 10,762 3.4 16.4 16.5 3,395 4,239 5,257 -9.6 24.8 24.0
Sensex (30) 9,851 10,656 12,157 -9.2 8.2 14.1 2,431 2,854 3,259 3.1 17.4 14.2 1,199 1,373 1,665 2.8 14.5 21.3
Nifty (50) 12,764 13,638 15,554 -2.3 6.8 14.0 3,072 3,450 3,967 7.1 12.3 15.0 1,414 1,670 2,039 -1.4 18.1 22.1
For Banks : Sales = Net Interest Income, EBIDTA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.
October 2016 44
MOSL UNIVERSE
Capital Goods
ABB 1,170 Neutral 21,003 6.7 -0.1 1,854 19.0 9.0 825 40.5 6.6
Bharat Electronics 1,273 Buy 17,280 17.7 98.3 2,161 23.2 LP 2,153 4.1 496.7
BHEL 137 Sell 66,200 11.5 17.7 1,700 LP 139.4 1,795 LP 130.8
CG Consumer Elect. 158 Buy 8,891 NA -20.7 864 NA -44.3 461 NA -49.9
Crompton Greaves 79 Neutral 13,630 -39.9 -4.3 995 13.4 -17.5 293 LP -26.9
Cummins India 929 Neutral 12,965 8.2 3.0 2,208 10.0 7.0 2,045 3.0 12.9
GE T&D India 342 Neutral 10,500 16.3 22.9 1,030 0.4 380.9 460 -0.6 -16.8
Havells India 431 Neutral 15,279 13.2 4.2 2,206 17.6 10.1 1,580 29.9 8.9
Larsen & Toubro 1,470 Buy 250,000 6.9 14.3 23,450 -9.5 23.1 7,650 11.5 25.5
Siemens 1,255 Neutral 32,971 -0.1 25.8 3,755 33.3 60.6 2,958 71.8 127.5
Thermax 879 Sell 9,171 -13.2 12.6 873 -12.3 37.0 576 -11.1 27.4
Voltas 389 Neutral 11,148 4.9 -39.9 735 18.0 -63.2 540 21.1 -65.5
Sector Aggregate 460,146 4.8 12.9 40,966 18.0 30.3 20,876 50.4 34.3
Cement
ACC 1,634 Neutral 25,495 -7.0 -11.2 3,073 16.5 -24.9 1,513 29.3 -36.4
Ambuja Cements 259 Buy 20,431 -2.5 -19.6 3,356 14.0 -42.3 2,051 33.5 -48.7
Grasim Industries 4,903 UR 25,102 18.3 4.8 4,617 37.8 -9.1 3,868 8.0 20.5
India Cements 151 Neutral 11,765 9.0 12.2 2,157 -5.6 7.1 493 14.3 12.1
Ramco Cements 614 Buy 9,256 5.9 -1.8 2,740 0.1 -0.4 1,577 13.7 1.2
Shree Cement 17,956 Buy 19,708 14.4 -10.4 5,742 47.8 -21.4 3,765 187.3 -25.8
Ultratech Cement 3,927 Buy 53,970 -4.0 -12.7 10,664 14.9 -22.3 5,435 38.0 -29.9
Sector Aggregate 165,727 2.0 -8.8 32,349 19.3 -20.7 18,702 40.0 -23.4
Consumer
Asian Paints 1,192 Neutral 39,126 14.0 7.6 6,603 21.2 -19.5 4,936 21.2 -7.7
Britannia 3,483 Buy 23,804 12.0 13.0 3,419 11.2 21.4 2,481 13.5 13.2
Colgate 983 Buy 10,726 13.0 6.7 2,804 9.3 32.7 1,723 11.8 37.1
Dabur 276 Neutral 20,017 4.0 4.0 4,364 9.0 26.7 3,684 8.0 25.8
Emami 1,182 Buy 6,140 16.0 -4.7 1,735 14.0 17.9 1,310 7.5 11.5
Godrej Consumer 1,639 Neutral 25,868 18.0 22.0 4,975 23.1 31.8 3,490 18.1 37.5
GSK Consumer 6,193 Neutral 11,157 4.0 18.2 2,602 6.3 27.8 2,095 12.3 30.4
Hind. Unilever 869 Neutral 80,020 3.5 -1.6 15,035 12.5 -8.1 10,757 8.2 -4.6
ITC 242 Buy 97,056 9.0 -3.5 39,290 10.4 11.4 27,601 13.5 15.7
Jyothy Labs 359 UR 4,339 11.0 -1.4 556 10.8 -30.0 294 81.3 -35.9
October 2016 45
MOSL UNIVERSE
Media
D B Corp 396 Buy 5,523 15.5 -3.2 1,374 21.9 -24.2 738 22.8 -29.1
Dish TV 97 Buy 8,051 7.0 3.4 2,911 14.1 10.0 715 -17.8 75.0
Hathway Cable 31 Buy 3,177 15.9 5.2 487 42.6 9.5 -480 Loss Loss
HT Media 84 Neutral 6,129 1.9 -0.3 576 -8.0 -10.4 227 -37.7 1.3
Jagran Prakashan 191 Buy 5,542 9.4 -0.7 1,490 5.3 -3.6 777 -9.6 -7.5
PVR 1,236 Buy 5,316 12.0 -6.8 930 2.7 -20.3 270 -34.3 -39.2
Siti Networks 35 Buy 2,720 16.1 -3.5 425 -0.7 0.1 -341 Loss Loss
Sun TV 530 Not Rated 6,428 13.2 -15.5 4,911 13.6 12.5 2,568 17.6 10.2
Zee Entertainment 579 Buy 16,521 19.3 5.1 4,618 30.3 1.9 3,321 18.4 53.1
Sector Aggregate 59,407 12.6 -1.1 17,723 16.1 0.8 7,795 6.4 22.0
Metals
Hindalco 154 Buy 250,296 1.1 10.4 31,146 41.5 4.1 8,945 54.2 19.0
Hindustan Zinc 255 Neutral 32,518 -19.4 28.5 16,460 -18.7 45.6 13,901 -35.2 34.0
JSPL 79 Neutral 53,913 7.0 14.8 12,827 31.4 30.4 -4,048 Loss Loss
JSW Steel 1,768 Buy 129,235 18.5 10.4 29,476 70.5 -9.8 7,636 591.1 -31.1
Nalco 46 Buy 17,772 -2.1 14.7 3,085 -9.1 58.5 1,662 -26.5 23.1
NMDC 108 Buy 16,393 5.6 -4.7 8,339 -11.2 2.1 7,243 -15.5 1.8
SAIL 48 Sell 96,579 4.3 4.5 -401 Loss PL -12,190 Loss Loss
Tata Steel 383 Sell 274,135 -6.5 8.7 40,260 119.9 24.2 12,967 -38.0 281.4
Vedanta 179 Neutral 167,361 1.1 15.9 43,995 14.0 27.9 13,527 62.2 119.9
Sector Aggregate 1,038,202 0.6 10.7 185,188 41.0 13.6 49,643 -15.7 32.8
October 2016 46
MOSL UNIVERSE
Real Estate
DLF 153 Buy 16,850 -9.7 -9.8 7,961 -15.2 6.9 1,180 -10.3 -54.9
Godrej Properties 352 Neutral 4,903 -66.4 61.4 995 -39.8 150.3 531 -50.0 22.1
Indiabulls Real Estate 94 Buy 6,453 6.5 -26.0 1,466 10.7 -51.1 794 5.9 -32.0
Mahindra Lifespace 439 Neutral 1,054 -13.6 18.6 120 -41.4 -3.5 223 -33.3 45.9
Oberoi Realty 293 Buy 2,507 32.5 -21.7 1,340 22.9 -19.6 832 14.8 -23.6
Phoenix Mills 395 Buy 4,976 17.8 12.5 2,289 23.1 13.1 567 131.0 31.8
Prestige Estates 203 Buy 10,942 -9.1 15.8 3,699 36.5 116.9 1,697 68.5 255.1
Sobha 298 Buy 4,798 6.2 -15.8 1,133 -3.0 13.6 345 -13.9 -3.8
Sector Aggregate 52,483 -16.9 -3.0 19,003 -2.0 9.5 6,169 5.7 -8.3
Retail
Jubilant Foodworks 974 Neutral 6,522 11.0 7.1 605 0.2 4.9 178 -18.9 -6.2
Shopper's Stop 372 Neutral 10,553 18.0 39.6 668 9.4 806.8 161 25.3 LP
Titan Company 408 Neutral 33,184 25.0 19.3 2,465 34.0 -10.6 1,785 22.7 -20.2
Retail Sector Aggregate 50,258 21.5 21.2 3,738 22.4 9.7 2,124 17.8 -7.2
Technology
Cyient 482 Buy 8,627 11.8 3.9 1,063 -8.6 -2.5 798 -19.0 7.8
HCL Technologies 809 Buy 115,393 14.3 1.8 23,832 7.8 -5.5 18,505 1.5 -9.4
Hexaware Tech. 191 Neutral 9,130 11.6 5.0 1,483 1.5 9.6 1,088 -2.4 8.9
Infosys 1,038 Buy 170,474 9.0 1.6 45,217 3.9 1.7 33,468 -1.5 -2.6
KPIT Tech. 127 Neutral 8,039 -1.0 0.1 889 -21.5 3.9 471 -37.2 -14.4
Mindtree 489 Neutral 13,225 13.1 -0.4 1,777 -17.9 -8.9 1,069 -32.5 -13.5
MphasiS 538 Neutral 15,039 -3.4 -0.8 2,486 6.0 1.7 2,100 10.5 2.8
Persistent Systems 640 Neutral 7,221 33.1 2.9 1,044 2.6 -1.3 609 -15.3 -16.9
Tata Elxsi 1,403 Buy 3,230 22.5 9.7 765 24.9 10.8 490 28.6 16.9
TCS 2,412 Neutral 297,913 9.7 1.7 80,597 3.0 2.8 61,782 2.0 -2.2
Tech Mahindra 421 Neutral 70,828 7.1 2.3 10,229 -7.1 -0.6 6,184 -21.3 -5.7
Wipro 479 Neutral 135,759 8.5 -0.2 25,948 -4.9 -2.2 20,139 -9.9 -1.8
Zensar Tech 1,009 Buy 7,851 3.8 3.0 1,047 -10.6 -0.6 726 -20.6 -4.9
Sector Aggregate 862,728 9.6 1.4 196,378 1.6 0.5 147,429 -2.6 -3.3
October 2016 47
MOSL UNIVERSE
Utilities
Coal India 328 Neutral 161,899 -4.5 -9.0 9,193 -62.9 -74.7 12,761 -49.3 -58.4
JSW Energy 74 Buy 19,299 -23.8 -21.2 8,098 -18.9 -27.5 1,113 -70.5 -69.6
NTPC 151 Buy 187,377 5.7 0.0 50,838 31.9 -0.1 23,276 5.0 -3.2
Power Grid Corp. 181 Buy 63,381 29.2 4.4 56,623 31.5 5.5 18,021 24.5 0.0
Sector Aggregate 431,955 2.6 -4.1 124,752 7.2 -17.9 55,172 -15.9 -27.8
Others
Allcargo Logistics 188 Buy 15,033 2.6 7.6 1,376 0.4 6.1 692 -4.6 13.4
Arvind 354 Buy 22,956 9.5 9.1 2,914 11.5 20.7 1,073 14.6 46.1
Bata India 496 Sell 6,156 7.0 -8.7 540 10.1 -34.2 296 32.2 -41.2
Castrol India 487 Buy 8,157 4.4 -15.7 2,576 21.1 -18.1 1,705 19.1 -17.6
Concor 1,382 Neutral 14,332 -4.6 7.0 2,997 -5.2 14.4 2,086 -10.7 16.8
Coromandel
International 247 Buy 35,288 -1.0 71.3 2,647 -15.6 198.7 1,321 -23.9 1561.2
Dynamatic Tech. 3,138 Buy 3,889 5.0 -1.5 447 32.3 -6.7 101 3113.2 -21.0
Gateway Distriparks 255 Buy 2,770 6.7 -0.4 594 -7.4 7.0 297 -3.0 19.8
Indo Count Inds. 732 Buy 6,403 10.0 30.0 1,422 14.2 28.9 832 26.2 38.1
Info Edge 862 Buy 2,056 18.1 4.0 532 59.5 11.3 528 55.6 19.0
Inox Leisure 270 Neutral 3,324 8.0 -1.3 608 7.8 -2.0 262 27.8 4.9
Interglobe Aviation 945 Neutral 43,610 23.2 -4.8 9,985 14.8 -34.7 1,112 -1.3 -81.2
Jain Irrigation 95 Buy 14,341 9.0 -13.4 1,864 17.4 -20.1 135 LP -77.0
Just Dial 436 Buy 1,850 8.0 4.9 290 -26.9 -0.8 252 -45.7 -35.4
Kaveri Seed 380 Neutral 1,261 35.0 -74.5 14 LP -99.1 -31 Loss PL
MCX 1,368 Buy 595 5.6 2.1 175 29.1 0.6 331 6.7 0.9
Monsanto India 2,392 Buy 567 50.0 -76.4 -57 Loss PL -39 Loss PL
P I Industries 839 Buy 5,353 20.0 -21.7 1,120 32.1 -32.4 742 34.9 -41.5
Sintex Inds. 80 Buy 23,345 22.1 37.7 3,865 17.8 35.8 1,649 13.1 116.9
SRF 1,907 Buy 11,937 2.5 -2.1 2,722 9.8 -4.2 1,277 18.3 -8.4
TTK Prestige 5,318 Neutral 4,884 16.0 28.8 684 29.9 44.9 433 27.1 59.0
Sector Aggregate 228,108 9.5 6.5 37,315 12.2 -12.2 15,053 12.2 -26.5
PL: Profit to Loss; LP: Loss to Profit; UR: Under Review; NR: Not Rated
October 2016 48
MOSL UNIVERSE
October 2016 49
MOSL UNIVERSE
Capital Goods
ABB 1,170 Neutral 15.8 17.7 27.1 74.2 66.1 43.2 36.3 31.6 21.5 11.1 11.1 14.5
Bharat Electronics 1,273 Buy 56.9 61.7 69.0 22.4 20.7 18.5 15.0 15.5 13.3 15.6 15.2 15.3
BHEL 137 Sell -3.7 4.3 5.8 -37.0 31.7 23.5 -8.8 19.5 11.4 -2.7 3.2 4.1
CG Consumer Elect. 158 Buy 1.9 4.5 6.0 83.1 34.8 26.3 21.0 16.5 52.1 99.5 90.0
Crompton Greaves 79 Neutral 2.1 3.2 4.6 38.0 24.2 17.0 10.6 10.3 8.3 3.0 4.3 6.0
Cummins India 929 Neutral 27.2 28.6 31.6 34.1 32.4 29.4 29.6 29.4 25.6 24.9 24.2 23.9
GE T&D India 342 Neutral 3.0 6.9 9.6 112.8 49.8 35.4 50.9 23.4 18.6 5.9 12.7 16.6
Havells India 431 Neutral 7.8 10.6 13.1 55.4 40.7 32.8 23.2 27.1 21.2 19.0 23.1 25.4
Inox Wind 209 Neutral 20.7 20.1 22.0 10.1 10.4 9.5 9.8 7.7 7.0 27.9 21.9 19.9
K E C International 126 Buy 7.4 9.7 12.0 16.9 13.0 10.5 7.9 7.1 6.3 13.5 15.5 16.7
Larsen & Toubro 1,470 Buy 50.6 58.8 68.7 29.1 25.0 21.4 16.1 16.8 14.0 11.1 11.9 12.7
Siemens 1,255 Neutral 16.9 18.1 28.4 74.1 69.2 44.2 37.8 39.3 28.8 11.8 9.5 13.6
Solar Inds. 654 Buy 18.4 26.0 31.1 35.6 25.2 21.0 22.2 14.5 12.1 20.2 24.1 23.6
Thermax 879 Sell 23.5 24.7 29.0 37.4 35.6 30.3 20.1 22.7 19.1 12.5 12.2 13.1
Va Tech Wabag 566 Buy 16.3 25.5 33.9 34.6 22.2 16.7 13.3 11.2 8.6 9.7 13.3 15.9
Voltas 389 Neutral 11.7 13.4 15.9 33.3 28.9 24.5 17.6 19.3 16.3 15.3 17.4 18.1
Sector Aggregate 41.6 29.1 23.7 21.2 18.7 15.1 8.0 10.6 11.9
Cement
ACC 1,634 Neutral 32.0 46.4 82.2 51.1 35.2 19.9 20.8 18.6 11.6 7.2 10.1 17.1
Ambuja Cements 259 Buy 5.5 7.8 12.8 47.4 33.4 20.3 21.6 18.6 12.3 8.3 11.1 17.2
Birla Corporation 720 Buy 20.4 58.6 70.8 35.3 12.3 10.2 9.4 6.9 5.3 5.9 14.5 14.7
Dalmia Bharat 1,909 Buy 21.5 44.4 72.8 88.9 43.0 26.2 8.8 12.6 10.0 5.5 9.7 14.2
Grasim Industries 4,903 UR 241.7 380.2 472.4 20.3 12.9 10.4 6.1 6.0 4.5 9.2 12.9 14.1
India Cements 151 Neutral 4.4 5.8 9.0 34.4 25.9 16.9 7.6 10.2 8.8 3.9 5.7 7.7
J K Cements 885 Buy 14.5 34.6 57.4 61.0 25.6 15.4 15.0 12.7 9.6 6.3 14.0 20.1
JK Lakshmi Cem. 497 Buy 0.4 9.4 30.5 1334.1 52.7 16.3 20.9 16.6 9.6 0.3 8.1 23.5
Orient Cement 222 Buy 3.0 3.2 7.5 73.0 69.5 29.5 25.2 19.9 13.1 6.2 6.3 13.6
Prism Cement 106 Buy 0.1 2.8 7.0 769.8 37.5 15.1 21.1 13.5 8.3 0.7 13.4 27.4
Ramco Cements 614 Buy 23.4 26.2 31.7 26.2 23.4 19.3 11.1 13.9 11.5 19.5 18.5 19.1
Shree Cement 17,956 Buy 168.0 568.2 737.6 106.9 31.6 24.3 24.8 21.0 14.6 10.2 27.9 27.9
Ultratech Cement 3,927 Buy 79.3 108.0 165.3 49.5 36.4 23.8 20.4 19.6 13.4 11.0 13.4 17.9
Sector Aggregate 45.6 27.5 18.9 14.3 13.7 9.9 8.7 13.1 16.5
October 2016 50
MOSL UNIVERSE
Healthcare
Alembic Pharma 669 Neutral 38.2 25.0 31.9 17.5 26.8 21.0 11.0 18.9 14.2 38.8 26.6 27.7
Alkem Lab 1,685 Neutral 64.7 71.3 84.6 26.0 23.6 19.9 18.5 20.0 15.0 23.8 22.2 22.1
Aurobindo Pharma 869 Buy 33.9 42.9 52.6 25.7 20.3 16.5 14.6 14.1 11.5 32.5 30.4 28.3
Biocon 964 Sell 23.2 27.7 30.6 41.5 34.8 31.5 11.3 19.2 16.1 11.9 12.3 13.0
Cadila Health 391 Buy 15.4 15.9 20.0 25.3 24.5 19.6 14.6 17.6 14.0 32.8 27.4 27.9
Cipla 589 Neutral 18.8 21.1 28.4 31.3 27.9 20.7 17.9 17.6 13.4 12.8 12.7 14.9
Divis Labs 1,299 Neutral 41.9 46.8 55.2 31.0 27.8 23.5 18.0 20.2 16.5 28.6 27.4 28.2
Dr Reddy s Labs 3,162 Neutral 132.3 90.0 139.0 23.9 35.1 22.8 13.0 19.0 13.2 18.8 11.4 15.7
Glenmark Pharma 928 Neutral 24.9 42.9 49.8 37.3 21.7 18.6 18.6 11.6 10.2 16.4 21.2 19.1
Granules India 120 Buy 5.5 6.8 9.8 21.9 17.5 12.3 10.6 8.9 6.9 21.6 19.9 22.4
GSK Pharma 2,813 Neutral 44.2 50.1 61.2 63.7 56.2 46.0 68.3 47.3 37.7 22.1 29.5 40.7
IPCA Labs. 608 Neutral 10.5 19.7 32.4 57.8 30.9 18.8 22.7 15.6 11.7 5.9 10.4 15.3
Lupin 1,494 Buy 50.4 64.3 80.3 29.7 23.2 18.6 19.4 14.8 12.1 22.9 23.7 24.1
Sanofi India 4,229 Buy 103.2 148.4 175.4 41.0 28.5 24.1 18.8 16.2 13.6 14.2 18.5 19.5
Sun Pharma 758 Buy 19.6 26.3 38.5 38.7 28.8 19.7 23.9 17.5 13.7 16.5 19.3 24.4
Torrent Pharma 1,662 Buy 59.3 67.1 85.0 28.1 24.8 19.5 8.8 17.0 14.1 34.1 30.2 30.3
Sector Aggregate 31.7 26.9 20.3 18.0 17.0 13.5 18.5 18.9 20.8
Media
D B Corp 396 Buy 16.2 21.8 25.8 24.4 18.2 15.3 10.6 9.9 8.4 22.6 27.8 29.0
Den Networks 75 Neutral -11.0 1.1 8.2 -6.8 66.5 9.1 15.9 5.9 3.0 -11.1 1.2 8.3
Dish TV 97 Buy 6.5 2.6 3.9 14.9 37.0 24.6 9.9 9.3 7.4 NM NA 48.3
Hathway Cable 31 Buy -1.9 -0.8 2.4 -16.5 -38.6 13.1 13.2 7.9 4.5 -11.3 -5.2 14.3
Hindustan Media 288 Buy 24.6 26.6 29.9 11.7 10.8 9.6 5.6 5.6 4.3 21.9 19.4 18.1
HT Media 84 Neutral 7.3 5.9 7.4 11.5 14.2 11.4 3.5 3.5 2.3 7.7 5.7 6.6
Jagran Prakashan 191 Buy 10.5 11.3 13.1 18.2 17.0 14.6 9.1 9.4 8.2 24.7 21.5 21.6
PVR 1,236 Buy 25.5 27.1 43.5 48.4 45.6 28.4 11.5 16.3 12.2 18.7 13.7 18.8
Siti Networks 35 Buy 0.0 0.5 4.0 - 74.8 8.7 11.9 7.6 3.2 0.1 4.8 29.4
Sun TV 530 Not Rated 21.1 26.1 30.6 25.1 20.3 17.3 7.9 9.9 8.4 23.4 26.2 27.9
Zee Entertainment 579 Buy 10.6 14.6 19.7 54.7 39.7 29.4 23.6 26.2 19.7 27.3 30.4 32.8
Sector Aggregate 35.4 29.7 20.4 12.4 13.0 9.7 18.2 19.1 23.1
October 2016 51
MOSL UNIVERSE
Real Estate
DLF 153 Buy 3.1 3.9 4.6 49.6 39.0 33.1 11.4 14.8 13.3 1.9 2.4 2.8
Brigade Enterprises 175 Buy 11.0 11.3 16.9 15.9 15.4 10.3 7.2 8.0 6.3 8.8 8.4 11.6
Godrej Properties 352 Neutral 10.7 10.3 17.5 32.9 34.2 20.1 25.6 22.9 14.8 11.5 9.9 15.2
Indiabulls Real Estate 94 Buy 7.3 8.1 10.4 12.9 11.5 9.0 9.9 11.9 9.6 4.1 4.3 5.3
Mahindra Lifespace 439 Neutral 22.7 30.6 37.5 19.4 14.3 11.7 20.1 12.0 9.2 6.1 7.7 8.6
Oberoi Realty 293 Buy 13.0 17.8 39.9 22.6 16.5 7.3 12.7 9.6 4.3 8.6 10.5 20.6
Phoenix Mills 395 Buy 9.3 16.3 26.5 42.7 24.2 14.9 9.5 9.9 7.1 7.6 12.1 16.9
Prestige Estates 203 Buy 9.4 9.2 9.8 21.6 21.9 20.6 11.3 12.1 10.9 8.8 8.1 8.0
Sobha 298 Buy 14.1 17.9 34.7 21.2 16.6 8.6 10.8 9.5 6.3 5.5 6.7 12.8
Sector Aggregate 28.5 23.5 15.4 11.6 12.7 9.6 4.4 5.1 7.4
Retail
Jubilant Foodworks 974 Neutral 15.0 14.0 24.5 65.1 69.4 39.7 31.3 22.6 15.6 13.4 11.3 18.8
Shopper's Stop 372 Neutral 5.8 8.7 11.4 63.8 42.8 32.7 14.8 12.4 10.2 6.3 8.8 10.6
Titan Company 408 Neutral 8.0 9.0 10.8 50.7 45.5 37.6 34.9 34.6 28.3 21.3 20.4 21.2
Sector Aggregate 53.0 47.6 37.5 30.9 28.8 22.8 16.8 16.4 18.3
Technology
Cyient 482 Buy 30.7 34.2 41.6 15.7 14.1 11.6 9.6 9.5 7.3 16.5 16.2 17.4
HCL Technologies 809 Buy 40.1 55.3 61.7 20.2 14.6 13.1 15.2 10.0 8.3 21.5 25.9 24.8
Hexaware Tech. 191 Neutral 12.9 13.6 16.1 14.8 14.0 11.9 14.3 9.6 7.5 28.9 26.6 26.7
Infosys 1,038 Buy 59.0 61.5 71.1 17.6 16.9 14.6 14.3 10.6 8.8 24.7 22.7 23.5
KPIT Tech. 127 Neutral 14.1 13.2 16.1 9.0 9.6 7.9 5.6 4.1 2.8 21.0 17.4 17.8
Mindtree 489 Neutral 35.9 29.6 40.3 13.6 16.5 12.1 13.0 10.1 7.3 27.4 19.7 23.5
October 2016 52
MOSL UNIVERSE
Telecom
Bharti Airtel 319 Buy 12.3 17.3 18.3 25.9 18.4 17.5 6.5 5.4 4.8 7.7 10.1 9.8
Bharti Infratel 363 Buy 11.8 14.1 12.5 30.6 25.8 29.1 12.3 10.7 9.4 12.7 14.6 12.5
Idea Cellular 81 Sell 8.1 1.9 2.4 10.0 42.7 34.3 6.2 5.3 4.9 11.9 2.6 3.1
Sector Aggregate 22.4 21.9 21.4 7.0 5.9 5.3 9.2 8.8 8.4
Utilities
Coal India 328 Neutral 22.6 17.0 21.1 14.5 19.3 15.6 8.9 14.5 11.0 42.2 30.7 36.7
JSW Energy 74 Buy 7.6 7.0 8.0 9.8 10.7 9.3 6.8 6.2 5.9 15.5 12.9 13.4
NTPC 151 Buy 12.3 11.7 14.4 12.2 12.9 10.4 11.1 10.8 8.7 11.9 10.5 12.1
Power Grid Corp. 181 Buy 11.5 14.2 16.8 15.8 12.8 10.8 9.6 9.1 7.8 14.7 16.0 16.6
Sector Aggregate 13.8 15.1 12.4 9.7 10.5 8.7 18.1 15.4 17.2
Others
Arvind 354 Buy 14.0 17.6 23.0 25.2 20.1 15.4 9.5 10.1 8.8 12.9 14.2 15.9
Allcargo Logistics 188 Buy 11.4 11.1 14.0 16.4 16.9 13.4 7.8 8.1 6.5 14.0 14.0 18.2
Bajaj Electrical 256 Buy 10.5 15.4 18.4 24.4 16.6 13.9 8.5 8.3 7.2 14.6 18.8 19.2
Bata India 496 Sell 11.2 12.9 15.3 44.3 38.4 32.4 22.9 20.8 17.7 13.2 14.1 15.8
Castrol India 487 Buy 12.8 14.3 15.7 37.9 34.1 31.0 19.3 21.7 20.0 118.4 115.8 113.9
Century Plyboards 260 Buy 7.5 8.1 11.0 34.6 32.0 23.7 14.2 19.5 14.7 36.3 30.1 32.0
Concor 1,382 Neutral 40.6 42.0 50.7 34.0 32.9 27.2 18.0 19.9 16.2 10.2 10.0 11.3
Coromandel Internl. 247 Buy 11.8 14.1 21.3 20.9 17.4 11.6 9.3 9.4 6.9 14.9 16.3 22.0
Dynamatic Tech. 3,138 Buy 19.4 83.5 125.4 162.0 37.6 25.0 11.5 13.1 10.8 4.7 18.3 22.1
Eveready Inds. 251 Buy 9.2 11.0 15.2 27.2 22.9 16.5 15.1 14.3 11.4 16.2 34.2 37.1
Gateway Distriparks 255 Buy 11.4 11.5 17.9 22.4 22.2 14.2 11.7 10.6 8.1 10.1 9.9 14.4
Indo Count Inds. 732 Buy 67.6 82.5 105.8 10.8 8.9 6.9 8.7 5.7 4.5 49.4 39.5 34.4
Info Edge 862 Buy 13.0 17.2 22.1 66.4 50.1 39.0 52.9 46.3 34.3 9.2 11.6 13.7
Inox Leisure 270 Neutral 8.4 8.1 11.2 32.0 33.4 24.0 10.8 13.2 10.7 14.9 11.8 14.4
Insecticides India 497 Buy 32.2 44.7 57.4 15.4 11.1 8.7 6.6 7.0 5.8 19.0 21.8 22.4
Interglobe Aviation 945 Neutral 55.2 59.1 72.4 17.1 16.0 13.0 5.3 5.0 3.8 176.5 106.4 109.9
Jain Irrigation 95 Buy 2.2 5.5 8.2 43.7 17.4 11.7 7.1 7.5 6.0 4.0 8.5 12.5
Just Dial 436 Buy 20.4 16.4 19.7 21.3 26.6 22.2 27.0 17.5 13.0 21.1 15.8 16.5
Kaveri Seed 380 Neutral 24.9 20.3 26.2 15.2 18.7 14.5 11.2 13.2 10.3 20.7 15.1 18.6
Kitex Garments 437 Buy 23.6 32.8 42.7 18.5 13.3 10.2 10.3 7.7 5.6 35.5 36.3 35.5
MCX 1,368 Buy 23.4 29.4 46.8 58.5 46.6 29.2 68.3 67.5 29.5 3.5 12.0 17.8
Monsanto India 2,392 Buy 60.4 67.2 90.2 39.6 35.6 26.5 25.0 30.1 22.4 26.5 28.3 37.0
P I Industries 839 Buy 22.1 28.4 36.1 37.9 29.5 23.2 18.1 20.4 16.1 29.2 29.2 29.3
Sintex Inds. 80 Buy 14.2 15.9 21.4 5.7 5.1 3.8 6.4 5.3 4.5 12.4 12.1 14.4
SRF 1,907 Buy 73.7 92.6 114.5 25.9 20.6 16.7 9.4 11.0 9.4 17.0 18.4 19.4
Symphony 1,167 Sell 15.6 26.7 34.1 74.6 43.8 34.2 59.6 32.4 25.3 33.8 56.2 62.0
TTK Prestige 5,318 Neutral 100.7 129.3 159.4 52.8 41.1 33.4 27.2 25.6 20.8 17.2 19.6 21.3
V-Guard Inds 185 Neutral 3.7 5.0 5.8 49.8 37.3 31.9 14.7 24.4 20.7 26.3 28.2 26.6
Wonderla Holiday 380 Neutral 10.6 11.5 14.6 35.9 33.1 26.1 24.8 18.9 14.7 15.8 15.1 16.8
Sector Aggregate 26.9 23.0 18.0 10.9 11.1 8.8 18.6 19.6 21.9
October 2016 53
MOSL UNIVERSE
October 2016 54
MOSL UNIVERSE
Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year
numbers. This is because of differences in classification of account heads in the companys quarterly and
annual results or because of differences in the way we classify account heads as opposed to the company.
All stock prices and indices as on 3 October 2016, unless otherwise stated.
October 2016 55
September 2016 ResultsSeptember
Preview |2016
Sector: Automobiles
Results Preview s
Automobiles
Company name Volume buoyancy all across, except M&HCVs
Amara Raja Batteries Profitability to remain strong as operating leverage offsets RM inflation
Ashok Leyland We expect the Indian automobiles industry performance to be mixed. While 2W
(+16.5% YoY) and PV (+13.2% YoY) volumes would benefit from festive season
Bajaj Auto demand, LCV (+9% YoY) and Tractor (over 30% YoY growth) volumes would see a
Bharat Forge
cyclical recovery. However, M&HCV (-5% YoY) volumes would be impacted by an
adverse base.
BOSCH EBITDA margin for our auto OEM (ex-JLR) coverage universe is likely to remain stable
YoY, with commodity cost inflation offsetting benefits of operating leverage.
Eicher Motors
We have lowered our FY18 EPS estimates for AL (-11%), MM (-3%) and BOS (-6%), and
Escorts upgraded for MSIL (+11.5%), TVSL (+12%), HMCL (+4%) and AMRJ (+3%).
Our top picks are MM, MSIL and TTMT among large caps, and AL, AMRJ and BHFC
Exide Industries
among midcaps.
Hero MotoCorp
2Ws on strong footing, new launches driving PVs; M&CV volumes decline
Mahindra & Mahindra Growth in the auto sector was primarily led by pre-festive inventory build-up for
Maruti Suzuki 2Ws (+16.5% YoY) and PVs (+13.2% YoY), as improved sentiment and benefit of
normal monsoon/7th Pay Commission are expected to drive strong demand during
Tata Motors
the festive season. On the other hand, LCVs (+9% YoY) and Tractors (over 30% YoY
TVS Motor Company growth) continued to recover. However, M&HCV (-5% YoY) volumes were impacted
by an adverse base (2QFY16 witnessed weak monsoon and pre-buy before
mandatory ABS from Oct-15). PV volumes are driven by new launches as broad-
based recovery is not yet visible.
Benefits of operating leverage to be offset by rising raw material costs
EBITDA margin for our auto OEM (ex-JLR) coverage universe is likely to expand just
~10bp YoY (+20bp QoQ), with operating leverage diluted by higher raw material
costs. We expect considerable margin expansion for TTMT JLR (+270bp YoY, led by
operating leverage), EIM (+330bp YoY for RE) and HMCL (+70bp YoY), while MSIL (-
110bp due to adverse currency movement) and BJAUT (-100bp due to adverse mix
and FX in some of its key markets) are likely to witness a decline.
Exhibit 3: Trend in segment-wise EBITDA margins (%) Exhibit 4: Commodity prices recover from lows (index)
2QFY15 1QFY16 2QFY16 3QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
4QFY16 1QFY17 2QFY17
100
124
123
132
100
106
105
108
126
100
107
107
100
112
126
119
85
96
95
89
October 2016 57
September 2016 Results Preview | Sector: Automobiles
Exhibit 5: Trend in key currencies v/s INR Exhibit 6: Continued improvement in EBITDA margins (%)
USD GBP JPY 18 Aggregate (excld JLR) Aggregate (incl JLR)
160
140 15
120 12
100 9
80 6
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Mar-11
Sep-11
Dec-11
Mar-12
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
Source: Bloomberg, MOSL Source: Company, MOSL
October 2016 58
September 2016 Results Preview | Sector: Automobiles
Exhibit 9: Relative performance Three months (%) Exhibit 10: Relative performance One year (%)
Sensex Index MOSL Automobiles Index Sensex Index MOSL Automobiles Index
120 140
112 125
104 110
96 95
88 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Mar-16
Sep-15
Jan-16
Feb-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Source: Bloomberg, MOSL Source: Bloomberg, MOSL
October 2016 59
September 2016 Results Preview | Sector: Automobiles
October 2016 60
September 2016 Results Preview | Sector: Automobiles
Ashok Leyland
Bloomberg AL IN
CMP: INR83 TP: INR97 (+17%) Buy
Equity Shares (m) 2,845.9
M. Cap. (INR b)/(USD b) 236 / 4
Overall volumes declined by 10.5% YoY as M&HCV volumes fell
52-Week Range (INR) 113/75
15% YoY. However, 8% growth in LCVs arrested further decline in
1,6,12 Rel Perf. (%) 1/-37/-20 overall volumes.
We expect realization to improve 3.9% YoY (flat QoQ) on price
increase and higher contribution from Defense business.
Financial Snapshot (INR b)
As a result, net revenue is likely to decline ~5% YoY (+26% QoQ),
Y/E March 2016 2017E 2018E 2019E
due to a fall in volumes.
Sales 188.2 215.5 257.4 306.5
EBITDA margin is likely to contract 50bp YoY (+30bp QoQ),
EBITDA 21.7 26.1 33.4 39.2
NP 11.1 15.4 21.3 26.2
impacted by higher RM costs on a YoY basis and negative operating
Adj. EPS (INR) 3.9 5.4 7.5 9.2 leverage.
EPS Gr. (%) 375.1 38.9 38.1 22.9 EBITDA should decline 9% YoY (-9% QoQ) to ~INR5.4b.
BV/Sh. (INR) 19.4 23.2 28.3 34.8 Further, lower interest and higher other income would boost
RoE (%) 20.9 25.5 29.1 29.2 adjusted PAT growth by 7% YoY (+7% QoQ) to INR3.1b.
RoCE (%) 12.8 18.7 22.9 23.9 The stock trades at EV of 9x FY17E and 6.8x FY18E EBITDA. Buy.
Payout (%) 25.6 27.7 26.7 24.4 Key issues to watch
Valuations Current demand environment and discounting trend, as well as
P/E (x) 21.2 15.3 11.1 9.0 plant and channel inventory for MHCVs.
P/BV (x) 4.3 3.6 2.9 2.4 Industry growth and market share guidance for FY1718.
EV/EBITDA (x) 11.4 9.1 6.8 5.3 Raw material cost outlook and margin guidance for FY1718.
Div. Yield (%) 1.2 1.8 2.4 2.7 Capex and investment guidance for FY17.
October 2016 61
September 2016 Results Preview | Sector: Automobiles
Bajaj Auto
Bloomberg BJAUT IN CMP: INR2,833 TP: INR3,496 (+21%) Buy
Equity Shares (m) 289.4
Overall volumes declined 2% YoY (+4% QoQ) to 1.03m units due to
M. Cap. (INR b)/(USD b) 834 / 13
a 27% YoY fall in exports, while domestic sales arrested further
52-Week Range (INR) 3122/2173
decline with 22% YoY growth. Total 2W sales declined 1% YoY in
1,6,12 Rel Perf. (%) -3/7/17
2QFY17, while 3W volumes slid 12% YoY, primarily due to a fall in
exports.
Financial Snapshot (INR b)
We expect realization to grow 1% YoY (+3% QoQ). However, net
Y/E MAR 2015 2016 2017E 2018E
revenues are expected to decline 1% YoY to INR 60.2b, as fall in
Sales 216.1 226.9 258.5 290.3
EBITDA 41.2 47.8 53.8 59.3
volumes is likely to outpace marginal rise in realizations.
NP 30.5 36.5 43.2 50.0 EBITDA margin should contract 100bp YoY (-20bp QoQ) to 20.6%
Adj. EPS (INR) 105.3 126.2 149.1 172.8 due to a marginal increase in RM costs (+50bp) and staff expenses
EPS Gr. (%) -6.0 19.8 18.1 15.9 (+70bp)
BV/Sh. (INR) 369.5 424.8 495.8 578.4 We expect PAT to grow ~15% YoY (+10% QoQ) to INR10.8b.
RoE (%) 30.0 31.8 32.4 32.2 The stock trades at 20.2x FY17E and 15.7x FY18E EPS; maintain Buy.
RoCE (%) 29.4 31.0 31.3 31.0
Key issues to watch
Payout (%) 56.9 52.4 52.4 52.2
Valuations
Update on demand environment at retail level, channel inventory;
P/E (x) 25.1 21.0 17.7 15.3 outlook for FY17.
P/BV (x) 7.2 6.2 5.3 4.6 Ramp-up of Avenger and V-15.
EV/EBITDA (x) 16.3 13.9 11.5 10.0 Outlook for export demand and pricing, especially Nigerian
Div. Yield (%) 1.9 2.1 2.5 2.8 market (sharp currency depreciation); outlook for FY17.
Update on RE60 launch in export markets.
October 2016 62
September 2016 Results Preview | Sector: Automobiles
Bharat Forge
Bloomberg BHFC IN CMP: INR940 TP: INR1137 (+21%) Buy
Equity Shares (m) 232.8
We expect BHFCs shipment tonnage to decline 6.4% YoY to 51,062
M. Cap. (INR b)/(USD b) 219 / 3
tons, impacted by inventory destocking in the US truck market
52-Week Range (INR) 970/687
(Class 8 trucks) and continued weakness in the export industrial
1,6,12 Rel Perf. (%) 9/-3/-6
business. Net realization is likely to dip ~9% YoY to ~INR186k/ton.
Net revenue would decline 15% YoY (+5% QoQ) to ~INR9.5b.
Financial Snapshot (INR b)
EBITDA margin is likely to decline 100bp YoY (+80bp QoQ) to
Y/E Mar 2016 2017E 2018E 2019E
27.8%, as negative operating leverage due to a decline in volumes
Sales 76.5 74.0 82.3 92.3
is likely to put pressure on margins (rise in staff and other
EBITDA 14.2 13.7 16.4 18.8
NP 6.6 6.4 8.7 10.6
expenses).
EPS (INR) 28.1 27.7 37.4 45.5
PAT is likely to decline ~21% YoY (+13% QoQ) to INR1.4b.
EPS Gr. (%) -10.9 -1.6 35.0 21.6 The stock trades at 33x FY17E and 24.4x FY18E EPS; maintain Buy.
BV/Sh. (INR) 153.6 171.6 197.0 230.4
RoE (%) 18.7 17.0 20.3 21.3 Key issues to watch
RoCE (%) 12.5 11.6 14.7 16.3 Outlook for US Class 8 Trucks for CY1617.
Valuations Outlook for oil & gas and mining segments, primarily with regard
P/E (x) 32.4 32.9 24.4 20.1 to price recovery.
P/BV (x) 5.9 5.3 4.6 4.0 Update on ramp-up of new orders under commercial vehicles,
EV/EBITDA (x) 16.4 16.5 13.4 11.2
PVs, aerospace and rail.
Consolidated
Update on Alstom JV plant and execution timeline for existing
and new orders.
October 2016 63
September 2016 Results Preview | Sector: Automobiles
Bosch
Bloomberg BOS IN CMP: INR22,851 TP: INR24,839 (+9%) Neutral
Equity Shares (m) 31.4
Net revenue is likely to grow ~3% YoY (+7% QoQ) to INR26.9b, led
M. Cap. (INR b)/(USD b) 718 / 11
by growth in the domestic business (Tractors). However, exports are
52-Week Range (INR) 25650/15753
likely to pull down overall growth.
1,6,12 Rel Perf. (%) -4/3/11
EBITDA margin should decline 60bp YoY (-120bp QoQ) to 16.7% on
Financial Snapshot (INR b) account of higher other expenses and lower exports.
Y/E Mar FY16 FY17E FY18E FY19E EBITDA is projected to remain flat YoY (flat QoQ) at ~INR4.5b.
Sales 98.8 110.0 136.6 159.8
Adjusted PAT is likely to grow 20% YoY to INR3.7b, boosted by
EBITDA 20.5 19.7 28.7 33.8
higher other income.
NP 17.1 16.0 22.3 27.4
EPS (INR) 545.9 508.6 709.7 871.9 We are cutting our EPS estimate for FY17 by ~3% and for FY18 by
EPS Gr. (%) 26.3 -6.8 39.5 22.9 6% on account of sluggish growth in exports.
BV/Sh. (INR) 2,639.8 3,021.3 3,553.5 4,207.4 The stock trades at 44.7x FY17E and 32x FY18E EPS; maintain
RoE (%) 21.9 18.0 21.6 22.5 Neutral.
RoCE (%) 29.0 25.5 30.6 30.8
Valuations Key issues to watch
P/E (x) 41.6 44.7 32.0 26.1 Rollout of BS-IV emission norms and implication on Boschs
P/BV (x) 8.6 7.5 6.4 5.4 revenue.
EV/EBITDA 34.0 34.7 23.3 19.4 Implementation of BS-VI norms for 2-wheelers and underlying
(x)
EV/Sales (x) 7.0 6.2 4.9 4.1 opportunity for Bosch.
Consolidated Advancement of BS-VI implementation and its impact on Bosch.
Capex plans for FY17.
October 2016 64
September 2016 Results Preview | Sector: Automobiles
Eicher Motors
Bloomberg EIM IN
Equity Shares (m) 27.2
CMP: INR25,773 TP: INR28,807 (+12%) Buy
M. Cap. (INR b)/(USD b) 700 / 11 Royal Enfields volume growth moderated to 31% YoY (+13% QoQ)
52-Week Range (INR) 26602/14818 to 166,941 units. Net realization is expected to remain flat QoQ
1,6,12 Rel Perf. (%) 14/22/33 (+4% YoY), supported by rising share of exports. EBITDA margin
should expand 330bp YoY to 31.1% (+30bp QoQ), driven by lower
Financial Snapshot (INR b)
commodity prices.
Y/E March FY16* FY17E FY18E FY19E VECVs volume grew 15% YoY (-17% QoQ). Net realization should
Net Income 61.7 70.9 88.4 104.8
decline by 6% YoY (+10% QoQ). Margin is expected to reach 7.7%,
EBITDA 16.9 22.1 28.1 32.9
up 40bp YoY (-140bp QoQ).
Net Profit 13.4 17.1 23.5 28.5
Consolidated revenue would decline ~43% YoY (+14% QoQ) to
Adj. EPS (INR) 492.9 630.7 865.8 1,048.4
INR17.7b. Consolidated margin is likely to be 31.1%. Consolidated
EPS Gr. (%) 73.7 60.0 37.3 21.1
BV/Sh. (INR) 1,275.5 1,766.0 2,462.1 3,314.2
PAT is estimated to rise 58% YoY (+7% QoQ) to INR3.8b.
RoE (%) 35.8 41.5 41.0 36.3 The stock trades at 33x FY17E and 23.6x CY18E EPS. Maintain Buy.
RoCE (%) 21.3 27.1 29.2 27.5
Payout (%) 0.4 0.5 0.6 0.7
Valuations Key issues to watch
P/E (x) 52.3 40.9 29.8 24.6 Update on demand and waiting period for Royal Enfield.
P/BV (x) 20.2 14.6 10.5 7.8 New launches and timelines under Royal Enfield business.
EV/EBITDA (x) 32.5 25.3 19.2 15.6 Update on current demand trends for commercial vehicles,
Div. Yield (%) 0.4 0.5 0.6 0.7 discount levels and channel inventory.
*15m ended.
October 2016 65
September 2016 Results Preview | Sector: Automobiles
Escorts
Bloomberg ESC IN CMP: INR407 TP: INR421 (+3%) Buy
Equity Shares (m) 119.3
We expect ~21% YoY growth (-7.7% QoQ) in revenue (on a very low
M. Cap. (INR b)/(USD b) 49 / 1
base) to INR9.7b.
52-Week Range (INR) 410/113
1,6,12 Rel Perf. (%) 24/180/157
EBITDA margin is likely to expand 370bp YoY to 7.4%, translating
into EBITDA growth of 143% YoY to INR718m.
Financial Snapshot (INR b) We expect PAT to grow 154% YoY to INR433m.
Y/E March 2015 2016 2017E 2018E Tractors volume growth has been healthy at 21% YTD, with 35% YoY
Sales 35.4 35.4 39.6 44.7
growth in 2QFY17.
EBITDA 1.5 1.5 2.6 3.8
NP 0.9 0.9 1.5 2.5
EPS (INR) 11.1 11.1 18.3 30.0
EPS Gr. (%) -16.6 -16.6 64.9 63.7
BV/Sh. (INR) 184.3 184.3 193.6 218.4
RoE (%) 6.1 6.1 9.7 14.6
RoCE (%) 7.4 7.4 9.7 14.1
Valuations Key issues to watch
P/E (x) 36.6 36.6 22.2 13.6 Revision in guidance for tractors business.
P/BV (x) 2.2 2.2 2.1 1.9 Updates on VRS planned.
EV/EBITDA (x) 21.9 21.9 12.1 7.9 Outlook for construction equipment business.
EV/Sales (x) 0.9 0.9 0.8 0.7
October 2016 66
September 2016 Results Preview | Sector: Automobiles
Exide Industries
Bloomberg EXID IN CMP: INR188 TP: INR230 (+25%) Buy
Equity Shares (m) 850.0
We expect net revenue to grow 12% YoY (-3% QoQ) to INR19.5b on
M. Cap. (INR b)/(USD b) 160 / 2
the back of robust OEM demand (4Ws and 2Ws).
52-Week Range (INR) 200/116
1,6,12 Rel Perf. (%) 2/22/16 EBITDA margin is likely to expand 110bp YoY (+20bp QoQ) to 15.9%
due to lower RM costs (spot lead prices declined in 1QFY17 QoQ).
Financial Snapshot (INR b) EBITDA is estimated to increase 20% YoY (-2% QoQ) to ~INR3.1b.
Y/E MARCH 2015 2016 2017E 2018E
PAT is likely to grow by 24% YoY (-1.5% QoQ) to INR1.9b.
Net Sales 68.7 68.1 76.9 87.7
EBITDA 9.1 10.2 12.2 13.9 The stock trades at 20.5x FY17E and 17.6x FY18E EPS; maintain Buy.
Adj. PAT 5.5 6.2 7.6 8.8
Adj. EPS (INR) 6.4 7.3 8.9 10.4
EPS Gr. (%) 12.1 14.1 21.8 16.4 Key issues to watch
BV/Sh. (INR) 47.7 52.2 58.5 66.3 Update on demand environment for OEMs, auto replacement and
RoE (%) 13.5 14.0 15.3 15.7
industrial battery segments.
RoCE (%) 14.0 14.5 15.8 16.4
Update on market share in autos and non-autos.
Payout (%) 34.3 32.8 24.7 21.2
Outlook for raw material cost trend, recent pricing action and
Valuations
currency hedges, if any.
P/E (x) 28.5 25.0 20.5 17.6
P/BV (x) 3.8 3.5 3.1 2.8
Update on technological upgradation.
EV/EBITDA (x) 15.0 12.7 10.6 9.1 Update on capacity expansion plans across product segments.
Div. Yield (%) 1.2 1.3 1.2 1.2
October 2016 67
September 2016 Results Preview | Sector: Automobiles
Hero MotoCorp
Bloomberg HMCL IN CMP: INR3,523 TP: INR3,811 (+8%) Neutral
Equity Shares (m) 199.7
Sales volumes grew 16% YoY (+4% QoQ) to 1.82m units, led by
M. Cap. (INR b)/(USD b) 704 / 11
strong growth from the rural market on the back of normal
52-Week Range (INR) 3740/2375
monsoon.
1,6,12 Rel Perf. (%) -1/8/38
Realization is expected to decline 1% YoY (+1% QoQ) to INR42.815
Financial Snapshot (INR b) per unit as the share of scooter and entry-level motorcycle
Y/E March 2016 2017E 2018E 2019E increased YoY.
Sales 284.4 317.9 368.0 409.3 Net revenue is likely to grow 16% YoY (~+7% QoQ) to INR79.2b.
EBITDA 44.6 51.9 61.8 63.5 EBITDA margin is expected to expand 70bp YoY (-10bp QoQ) to
NP 31.6 37.0 44.5 46.7 16.5% on lower raw material costs and benefit of operating
Adj. EPS (INR) 158.3 185.4 223.0 233.9
leverage.
EPS Gr. (%) 26.6 17.1 20.3 4.9
BV/Sh. (INR) 397.8 486.8 601.3 726.8
EBITDA is likely to grow 21% YoY (+6% QoQ) to ~INR13.0b.
RoE (%) 43.6 41.9 41.0 35.2 We expect PAT to increase 22% YoY (+7% QoQ) to INR9.4b.
RoCE (%) 42.9 40.9 40.2 34.6 The stock trades at 19x FY17E and 15.8x FY18E EPS; Neutral.
Payout (%) 52.3 49.6 46.4 44.2
Valuations Key issues to watch
P/E (x) 22.3 19.0 15.8 15.1 Update on demand environment (especially rural areas) at retail
P/BV (x) 8.9 7.2 5.9 4.8 level, channel inventory.
EV/EBITDA (x) 14.8 12.4 10.2 9.6 Performance of scooters and impact on HMCLs market share.
Div. Yield (%) 2.0 2.3 2.6 2.6 Guidance on export plans and new launches along with timelines.
Update on cost-saving initiatives.
October 2016 68
September 2016 Results Preview | Sector: Automobiles
October 2016 69
September 2016 Results Preview | Sector: Automobiles
Maruti Suzuki
Bloomberg MSIL IN CMP: INR5,682 TP: INR6,416 (+13%) Buy
Equity Shares (m) 302.1
Volumes grew ~18% YoY (+20% QoQ) in 2QFY17 to ~418,470 units,
M. Cap. (INR b)/(USD b) 1,716 / 26
primarily led by incremental volumes of new launches (Brezza and
52-Week Range (INR) 5,707/3,202
Baleno) as well as growth in the mid-size segment.
1,6,12 Rel Perf. (%) 11/41/16
Net realization is likely to improve 9.7% YoY (+1% QoQ) to
INR432,684 per unit, boosting net revenue by 30% YoY (+21% QoQ)
Financial Snapshot (INR b)
to INR181.1b. Growth in realization is likely to be driven by newly
Y/E MARCH 2016 2017E 2018E 2019E
launched compact UV, Vitara Brezza, and premium hatchback,
Sales 576.5 686.4 820.9 941.7
EBITDA 89.0 103.3 128.7 146.8
Baleno.
Adj. PAT 53.7 69.1 91.0 107.8 We expect margin to contract 110bp YoY (+40bp QoQ) to 15.2% on
EPS (INR) 155.5 233.8 306.8 362.8 account of higher RM costs due to adverse FX movement YoY.
EPS Gr. (%) 23.4 50.3 31.2 18.2 EBITDA is estimated to grow 21% YoY (+24% QoQ) to INR27.4b.
BV/Sh. (INR) 894.0 1,068.61,297.7 1,570.3 We expect PAT to grow 29% YoY (+24% QoQ) to INR18.4b.
RoE (%) 19.9 21.4 23.2 22.7 We are raising our EPS estimate by ~7% for FY17 to ~INR238 and by
RoCE (%) 27.2 29.0 31.1 30.0 11.5% for FY18 to ~INR307 to factor in higher EBITDA growth.
Payout (%) 23.7 23.7 23.9 23.6 The stock trades at 24.3x FY17E and 18.5x FY18E EPS. Maintain Buy.
Valuations
P/E (x) 36.5 24.3 18.5 15.7 Key issues to watch
P/CE (x) 22.8 17.7 14.3 12.3 Update on retail demand scenario, channel inventory, discounting
EV/EBITDA (x) 17.3 14.5 11.1 9.2 trends.
Div. Yield (%) 0.6 0.8 1.1 1.2 Update on new launches in 2HFY17 (Ignis).
*Consol. & adjusted Guidance on FY17 volume growth, margins, forex hedges, and
localization efforts.
Progress on commissioning of Gujarat plant.
October 2016 70
September 2016 Results Preview | Sector: Automobiles
Tata Motors
Bloomberg TTMT IN CMP: INR541 TP: INR655 (+21%) Buy
Equity Shares (m) 3,395.9
We expect JLRs (including JV) volumes to grow 18% YoY (+3% QoQ).
M. Cap. (INR b)/(USD b) 1836 / 28
Net realization is expected to rise 4% YoY (flat QoQ), with
52-Week Range (INR) 599/266 improvement in product mix. EBITDA margin would increase 270bp
1,6,12 Rel Perf. (%) -1/31/74 YoY (+260bp QoQ) to 14.9%. Adjusted PAT is likely to surge ~628%
YoY (and ~42% QoQ) to GBP376m.
Financial Snapshot (INR b) S/A volumes grew 15% YoY (+6.3% QoQ), led by a 9% YoY increase
Y/E March 2015 2016 2017E 2018E (flat QoQ) in commercial vehicles. PV volumes increased 30% YoY
Net Sales 2,631.6 2,755.6 2,910.7 3,275.0 on the back of newly launched Tiago. Margin is likely to rise 80bp
EBITDA 421.1 402.4 430.8 498.8 YoY (+90bp YoY) to 6.6%, driven by operating leverage. Adjusted
NP 140.5 125.2 151.6 188.6 PAT should decline 27% YoY to INR(1.37b) (vis--vis INR(1.9b) in
Adj. EPS (INR) 43.6 36.9 44.6 55.5 2QFY16).
EPS Gr. (%) -1.1 -15.5 21.1 24.4 Consolidated PAT would rise 475% YoY (+67% QoQ) to INR31.6b.
BV/Sh. (INR) 174.8 237.9 281.5 333.8 We upgrade our consolidated EPS estimate by 4% in FY17 to factor
RoE (%) 23.1 18.3 17.2 18.0 in stronger EBITDA margins for JLR.
RoCE (%) 15.7 14.3 12.3 13.2 The stock trades at 12.1x FY17E and 9.7x FY18E EPS. Buy.
Payout (%) 0.0 0.7 8.1 8.7
Valuations
P/E (x) 12.4 14.7 12.1 9.7 Key issues to watch
P/BV (x) 3.1 2.3 1.9 1.6 Impact of Brexit on JLR business.
EV/EBITDA (x) 4.6 4.8 4.6 3.8 Current demand trends for JLR and outlook, particularly in China
Div. Yield (%) 0.0 0.0 0.6 0.7
and the US.
Update on Chery JV operations and CV business outlook.
Quarterly Performance (INR m)
Y/E March FY16 FY17 FY16 FY17E
(Consolidated) 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
JLR vols. (incl JV) 114,452 116,745 150,461 162,427 134,334 138,192 166,500 188,315 544,085 627,341
JLR Realizations (GBP/unit) 45,206 43,460 42,004 43,991 45,216 45,171 45,848 45,127 43,602 45,346
JLR EBITDA (%) 16.4 12.2 14.4 16.2 12.3 14.9 16.0 16.2 14.9 15.0
JLR PAT (GBP m) 492 52 414 560 265 376 571 661 1584 1872
S/A vol. (units) 117,160 117,439 122,377 146,766 126,839 134,869 136,600 170,845 511,712 569,153
S/A Realizations (INR/unit) 795,852 894,173 817,198 856,454 813,594 829,866 842,314 891,147 2 11
S/A EBITDA (%) 6.1 6.8 5.7 8.1 6.7 7.6 7.4 8.9 6.5 7.8
S/A PAT (INR m) 333 -1,870 -395 5,014 996 -1,372 898 2,760 -1,629 3,631
Net Op Income 604,009 613,182 722,564 806,844 658,950 630,745 749,724 871,242 2,755,611 2,910,661
Growth (%) -6.6 1.1 3.3 19.4 9.1 2.9 3.8 8.0 4.7 5.6
EBITDA 110,068 68,804 93,800 113,872 76,129 92,151 116,085 110,930 365,160 395,294
EBITDA Margins (%) 18.2 11.2 13.0 14.1 11.6 14.6 15.5 12.7 13.3 13.6
Interest Expenses 11,496 11,594 10,915 12,552 11,694 7,000 6,500 10,950 46,234 36,145
PBT before EO Exp 63,398 15,383 41,300 59,567 20,663 38,751 61,385 59,159 158,602 179,958
EO Exp/(Inc) -6,338 26,529 -457 -6,044 -4,851 0 0 0 18,794 -4,851
PBT after EO Exp 69,736 -11,146 41,757 65,611 25,514 38,751 61,385 59,159 139,809 184,809
Tax 16,485 -7,036 6,513 13,546 7,200 10,718 16,979 12,025 28,726 46,922
Tax rate (%) 23.6 63.1 15.6 20.6 28.2 27.7 27.7 20.3 20.5 25.4
PAT 53,251 -4,111 35,244 52,065 18,314 28,032 44,406 47,135 111,083 137,887
Minority Interest -232 -226 -204 -383 -240 -250 -175 -316 -1,059 -982
Share in profit of Associate -708 39 36 89 4,290 3,785 4,604 5,593 213 18,272
Reported PAT 52,310 -4,298 35,075 51,771 22,364 31,568 48,835 52,411 110,238 155,177
Adj PAT 47,470 5,486 34,690 46,975 18,882 31,568 48,835 52,411 125,170 151,558
Growth (%) (10.9) (83.3) (10.2) 158.4 (60.2) 475.4 40.8 11.6 -11.3 21.1
E: MOSL Estimates
October 2016 71
September 2016 Results Preview | Sector: Automobiles
EPS Gr. (%) 24.2 39.5 41.8 26.5 benefit of operating leverage and moderation in marketing spends.
BV/Sh (INR) 40.8 50.2 64.5 83.7 We expect PAT to increase ~40% YoY (+35% QoQ) to INR1.6b.
RoE (%) 24.1 27.9 31.4 30.7 We are upgrading our EPS estimates for FY17 by 4% and for FY18 by
RoCE (%) 23.3 28.9 33.1 33.6 12% to factor in higher volume growth and improvement in
Payout (%) 33.7 26.0 20.0 15.8 margins.
Valuations The stock trades at 29.8x FY17E and 21x FY18E EPS; maintain Buy.
P/E (x) 41.5 29.8 21.0 16.6 Key issues to watch
P/BV (x) 9.3 7.5 5.9 4.5 Guidance on capex and margins.
EV/EBITDA (x) 24.9 18.1 13.1 12.0 Launch of motorcycle with BMW in 4QFY17.
Div. Yield (%) 0.7 0.7 0.8 0.8
October 2016 72
September
March2016
2016Results
2015 ResultsPreview
Preview ||Sector:
September Sector:Capital
2016 Results Goods
CapitalPreview
Goods
Technology
Capital Goods
Guarded optimism
Company name
Successful implementation of structural reforms to help commence
ABB investment cycle
Bharat Electronics Domestic investment cycle: Guarded optimism, exports hamstrung by weak
BHEL global demand
Crompton Greaves Improved business confidence following economic activity revival in India has
created favorable conditions to restart the investment cycle, in our view. However,
Crompton Greaves Consumer
the near-term outlook continues to remain cautious, given challenges such as
Cummins India restrained capex activity by private players. Policy initiatives and efforts are
GE T&D underway for: i) expediting government approvals and ii) establishing monetary
conditions conducive to industrial revival in the medium term.
Havells India
We believe investment revival would be triggered by: i) sustained recovery in
Larsen & Toubro consumption demand and thus capacity utilization and ii) investment push by
Siemens the public sector, leading to a virtuous cycle of cash flow generation in the
Thermax system. Simultaneously, sustained progress in reviving stalled projects is
imperative for attracting new investments and providing the much-needed
Voltas
stimulus to aggregate demand.
By initiating GST, labor and energy sector reforms, the government has partly
addressed concerns about the pace and extent of reforms. Successful
implementation of substantive reforms is essential for structured investment
growth.
Indian machinery exports have decelerated due to factors such as weak global
demand, geopolitical concerns and sharp currency volatility across several
markets. Also, falling crude prices had an adverse impact on global trade and
thus investment demand. Project awards in the Middle East have been muted
in fact, revenue estimates for global industrial players suggest that sluggishness
has continued for around nine quarters.
16.1
16.0
15.6
15.5
17.9
14.5
14.0
13.8
13.5
13.5
12.3
16.9
12.2
12.1
12.0
12.0
12.0
11.7
11.6
11.6
11.3
16.3
15.3 11.0
16.1
10.2
16.0
16.6 10.0
10.0
15.6
15.5
11.7 9.9
1.3 9.2
14.5
8.4
8.3
7.9
14.0
2.7 7.3
13.8
13.5
13.5
12.3
2.8 3.8
12.2
12.1
12.0
12.0
12.0
11.7
11.6
11.6
11.3
19.6
18.2
15.6
26.3
11.0
16.8
21.7
20.9
6.6
3.1
10.2
20.5
12.8
16.4
10.0
10.0
29.0
22.0
28.8
9.9
16.9
7.5
31.8
27.5
9.2
9.2
3.7
2.8
8.4
8.3
7.9
7.3
3.8
-5.2
1QFY14 -3.5
3QFY15 -1.0
-0.8
1QFY16 -1.4
1QFY09
3QFY09
1QFY10
3QFY10
1QFY11
3QFY11
1QFY12
3QFY12
1QFY13
3QFY13
1QFY14
3QFY14
1QFY15
3QFY15
1QFY16
3QFY16
1QFY17
1QFY09
3QFY09
1QFY10
3QFY10
1QFY11
3QFY11
1QFY12
3QFY12
1QFY13
3QFY13
3QFY14
1QFY15
3QFY16
1QFY17
October 2016 74
September 2016 Results Preview | Sector: Capital Goods
Exhibit 15: Book-to-bill stable at 3.3x Exhibit 16: Order intake growth continues to remain muted
Order book (INR b) BTB (x) Order intake YoY %
58
3.3
56
3.3
3.3
3.3
3.2
3.1
52
3.0
39
2.9
2.9
2.8
2.6
2.6
22
31
20
2.4
2.4
17
2.3
2.3
2.3
15
2.3
2.2
2.2
2.1
14
9
-36
-2
-1
-1
3,295
3,367
3,263
3,112
3,168
3,127
2,964
2,893
2,958
2,989
3,028
2,943
3,230
3,482
3,594
3,605
3,813
3,717
3,920
3,869
3,922
-11
-12
-23
-24
-34
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
4QFY12-47
4QFY11
2QFY12
2QFY13
4QFY13
2QFY14
4QFY14
2QFY15
4QFY15
2QFY16
4QFY16
Source: MOSL, Company Source: MOSL, Company
Exhibit 17: Relative performance Three-month (%) Exhibit 18: Relative performance One-year (%)
Sensex Index MOSL Capital Goods Index Sensex Index MOSL Capital Goods Index
107 120
105 110
103 100
101 90
99 80
97 70
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Mar-16
Sep-15
Jan-16
Feb-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
October 2016 75
September 2016 Results Preview | Sector: Capital Goods
ABB
Bloomberg ABB IN CMP: INR1,170 TP: INR1,260 (+8%) Neutral
Equity Shares (m) 211.9
ABB continues to focus on increased localization and cost
M. Cap. (INR b)/(USD b) 248 / 4
optimization, whereby its direct RM costs have declined to 65.4% of
52-Week Range (INR) 1433/963
revenue, from a peak of 81% in 4QCY10. The company has set an
1,6,12 Rel Perf. (%) 3/-21/4
internal target to reduce it to 65% over next few years. This has
aided margins, despite negative operating leverage.
Financial Snapshot (INR b)
The company has inaugurated a new solar inverter manufacturing
Y/E Dec 2014 2015 2016E 2017E
facility, doubling its existing capacity for solar inverters to 2GW.
Net Sales 77.3 81.4 87.3 101.1
EBITDA 6.0 7.5 7.8 11.3
The facility will manufacture ABB's PVS800 central inverter series.
Adj PAT 2.3 3.0 3.7 5.7 ABB inverter range starts from 2kW to 2MW, and can be utilized for
Adj EPS (INR) 12.8 15.8 17.7 27.1 residential rooftops and also cost-efficient megawatt power plants.
EPS Gr (%) 35.0 22.8 12.3 53.0 ABB has also commissioned solution for shore to ship power supply
BV/Sh (INR) 132.7 142.0 159.3 186.4 at V.O. Chidambaranar port on plug-and-play basis, which will
RoE (%) 9.7 11.1 11.1 14.5 eliminate emissions from burning diesel when ships are birthed. For
RoCE (%) 15.4 17.5 16.5 22.1 average docking time of 60 hours for a commercial vessel at a port,
Payout (%) 28.8 23.5 25.6 26.1 diesel generators produce 360 MT of carbon dioxide. Maintain
Valuations Neutral
P/E (x) 91.1 74.2 66.1 43.2
Key issues to watch:
P/BV (x) 8.8 8.2 7.3 6.3
Management commentary suggests cautious optimism; continued
EV/EBITDA (x) 36.6 32.6 25.1 19.3
Div. Yield (%) 0.3 0.3 0.4 0.6
focus on exports and services to be an important driver, with
projection of strong double-digit growth in top and bottom line.
Continued preference for cash generation vis--vis profits.
Quarterly Performance
Y/E December CY15 CY16 CY15 CY16E
1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE
Sales 18,146 19,316 19,690 24,251 20,003 21,015 21,003 25,404 80,152 86,052
Change (%) (0.7) 6.0 6.7 8.3 10.2 8.8 6.7 4.8 5.0 7.4
EBITDA 1,436 1,610 1,557 2,697 1,571 1,701 1,854 2,754 7,465 7,796
Change (%) 5.0 15.2 15.3 41.2 9.4 5.6 19.0 2.1 24.6 4.4
As % of Sales 7.9 8.3 7.9 11.1 7.9 8.1 8.8 10.8 9.3 9.1
Depreciation 422 375 359 442 359 357 400 482 1598 1598
Interest 208 246 250 207 206 180 250 249 912 886
Other Income 7 10 5 108 148 44 44 10 130 230
PBT 813 999 954 2,155 1,154 1,208 1,248 2,032 5,086 5,543
Tax 270 315 366 796 364 434 388 607 1,747 1,793
Effective Tax Rate (%) 33.2 31.5 38.4 36.9 31.5 35.9 31.1 29.9 34.4 32.4
Reported PAT 543 575 587 1,294 710 774 825 1,443 2,999 3,670
Adj. PAT 543 685 587 1,359 790 774 825 1,443 3,339 3,750
Change (%) -13.4 12.8 4.9 42.8 45.5 13.1 40.5 6.2 22.8 12.3
Order Intake 18,560 18,950 22,920 20,580 18,300 20,400 24,000 52,010 81,000 114,710
Order Book 79,730 79,560 82,750 79,460 78,040 77,520 81,387 104,546 79,460 106,799
BTB (x) 1.0 1.0 1.0 1.0 0.9 0.9 0.9 1.2 1.0 1.2
E: MOSL Estimates,*: As reported by ABB
October 2016 76
September 2016 Results Preview | Sector: Capital Goods
Bharat Electronics
Bloomberg BHE IN
CMP: INR1,273 TP: INR1,450 (+14%) Buy
Equity Shares (m) 240.0
M. Cap. (INR b)/(USD b) 306 / 5 Bharat Electronics plans to establish defense system integration
52-Week Range (INR) 1,417/1,009 complex with capex of USD120m, which will help to manufacture
1,6,12 Rel Perf. (%) 5/-5/4 missile systems like navigation, seeker, radar, fire control and
guidance.
Financial Snapshot (INR b) BHE expects order inflow of INR120-150b in FY17, led by finalization
Y/E March 2015 2016 2017E 2018E of key projects like Akash missile.
Net Sales 68.4 73.0 82.3 93.2 BHE has guided for revenue growth of 10-12% YoY in FY17, led by
EBITDA 11.4 14.6 15.1 16.9 execution of key orders in hand like Akash missile, WLR, hand-held
NP 11.7 13.7 14.8 16.6 thermal device, tactical control radar, etc.
EPS (INR) 48.6 56.9 61.7 69.0 EBITDA margins in FY17 are guided to be in the range of +/- 100bp
EPS Gr. (%) 25.3 17.1 8.4 11.9 over FY16 (20%).
BV/Sh (INR) 329 364 405 450 BHE plans to explore opportunities in critical infrastructure
RoE (%) 14.8 15.6 15.2 15.3 protection, air traffic management radars, intelligent traffic
RoCE (%) 15.6 16.5 16.0 16.1 management systems, solar power plants and smart city elements.
P/E (x) 15.8 22.4 20.6 18.5
BHE has planned capex of INR23b over next five years toward
P/BV (x) 2.3 3.5 3.1 2.8
modernization and expansion of existing facilities to support the
EV/EBITDA (x) 11.0 15.9 15.5 13.3
governments Make in India initiative. Majority of capex would be
EV/ Sales (x) 1.9 3.2 2.9 2.4
spent on developing BMS test bed, TCS test bed, test bed for missile
system, etc. Maintain Buy
Key issues to watch:
Revenue growth: Key orders (Akash missile, intake INR67b in
FY1112) are currently under execution for Army and Air Force.
Operating at 60% capacity utilization; possibility of strong
operating leverage.
October 2016 77
September 2016 Results Preview | Sector: Capital Goods
BHEL
Bloomberg BHEL IN CMP: INR137 TP: INR120 (-12%) Sell
Equity Shares (m) 2,447.6
BHEL is expected to post improvement in its operational
M. Cap. (INR b)/(USD b) 336 / 5
performance during the quarter on the back of weak 2QFY16
52-Week Range (INR) 220/90
performance. We estimate revenues to register 11.5% YoY growth,
1,6,12 Rel Perf. (%) 1/6/-39
operating profit at INR17b as against loss of INR47b, and net profit
at INR18b as against loss of INR21b in 2QFY16. Loss during 2QFY16
Financial Snapshot (INR b)
was led by execution of JDU clause orders, where raw material cost
Y/E March 2015 2016 2017E 2018E was significantly higher than other orders in the order backlog. We
Net Sales 301.8 256.3 295.5 336.6 expect gross margins to improve 540bp YoY to 39.6%.
EBITDA 21.0 -19.6 13.0 21.6 During the quarter, BHEL secured orders for setting up 80MW solar
PAT 14.3 -9.1 10.6 14.3 photovoltaic power plant on EPC basis for INR4.4b. BHEL has also
EPS (INR) 5.8 -3.7 4.3 5.8 received a 30MW solar photovoltaic power plant order of INR1.7b.
EPS Gr. (%) -58.8 -163.6 -216.7 34.5 BHEL now has sizeable order backlog of 330MW in the solar
BV/Sh. INR 139.3 135.0 138.4 142.9 segment.
RoE (%) 4.3 -2.7 3.2 4.1 BHEL is L1 in 12+GW of orders, of which it expects 7GW of orders to
RoCE (%) 2.7 -4.1 1.4 2.9 be finalized in FY17. Incremental order inflow of INR100b can be
Payout (%) 19.9 -10.8 20.0 20.0 expected from 16GW of projects under execution on account of
Valuations implementation of new emission norms; maintain Sell.
P/E (x) 23.5 -37.0 31.7 23.5
P/BV (x) 1.0 1.0 1.0 1.0
Key issues to watch:
EV/EBITDA (x) 11.4 -12.1 20.0 11.7
Continued constraint on execution due to operational issues.
Div Yield (%) 0.8 0.3 0.6 0.8
Trends in provisions, particularly for liquidated damages on
* Consolidated
project completion.
Quarterly Performance
Y/E March FY16 FY17 FY16 FY17E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Sales (Net) 43,617 59,380 53,256 100,048 56,225 66,200 61,300 111,804 256,300 295,528
Change (%) -15.0 -3.4 -14.1 -21.1 28.9 11.5 15.1 11.8 -15.1 15.3
EBITDA -2,093 -4,742 -16,387 3,638 710 1,700 -4,700 15,257 -19,597 12,967
Change (%) -196.1 -262.6 -657.8 -78.4 -133.9 -135.9 -71.3 319.4 -193.4 -166.2
As a % Sales -4.9 -8.0 -30.8 3.6 1.3 2.6 -7.7 13.6 -7.6 4.4
Interest 33 44 52 140 57 55 55 102 268 268
Depreciation 2,425 2,249 2,255 2,428 2,182 2,350 2,500 2,902 9,356 9,933
Other Income 4,924 3,733 1,706 4,139 2,493 2,800 1,800 4,283 14,501 3,308
PBT 373 -3,302 -16,989 5,209 965 2,095 -5,455 16,537 -14,721 14,142
Tax 34 -1,253 -5,969 1,555 188 300 -1,500 4,548 -5,633 3,536
Effective Tax Rate (%) 9.1 37.9 35.1 29.8 19.4 14.3 27.5 27.5 38.3 25.0
Reported PAT 339 -2,049 -11,020 3,596 778 1,795 -3,955 11,989 -9,088 10,607
Change (%) -82.5 -264.1 -618.3 -59.5 129.5 -187.6 -64.1 233.4 -164.0 -216.7
Adj. PAT 339 -2,049 -11,020 3,655 778 1,795 -3,955 11,989 -9,088 10,607
Change (%) -82.5 -264.1 -618.3 -61.7 129.5 -187.6 -64.1 228.1 -163.6 -216.7
October 2016 78
September 2016 Results Preview | Sector: Capital Goods
Crompton Greaves
Bloomberg CRG IN CMP: INR79 TP: INR85 (+8%) Neutral
Equity Shares (m) 626.8
Operational performance during the quarter might suffer as
M. Cap. (INR b)/(USD b) 49 / 1
Cromptons facility at Kanjurmarg was impacted by fire, while
52-Week Range (INR) 89/39
production at Mandideep facilities had been impacted by water
1,6,12 Rel Perf. (%) -3/49/28
logging on account of heavy rains.
The board of Crompton Greaves (which had accepted the revised
Financial Snapshot (INR b)
sale offer for the overseas T&D business from First Reserve
Y/E March 2015 2016 2017E 2018E
International, a US-based private equity firm, for an enterprise
Net Sales 140.1 52.7 57.0 63.0
EBITDA 6.4 3.7 4.8 5.6
value of EUR115m on a debt-free, cash-free basis) has entered into
Adj PAT 1.8 1.3 2.0 2.9 a share purchase agreement with Pauwels Spaco Ltd (SPV of First
EPS(INR) 2.9 2.1 3.2 4.6 Reserve) to complete the transaction before 31st October 2016.
EPS Gr. (%) 21.2 -29.6 56.8 42.7 With this sale, management plans to focus on the Indian power and
BV/Sh. (INR) 60.9 73.3 75.9 79.5 industrial businesses.
RoE (%) 4.9 3.0 4.3 6.0 The company has appointed investment banker to sell-off its
RoCE (%) 7.3 5.1 5.8 7.3 automation business company, ZIV.
Payout (%) 24.0 0.0 18.5 18.5 Management intends to monetize ~INR10b of non-core assets,
Valuations including additional land at Kanjurmarg, to lower standalone
P/E (x) 24.9 35.3 24.2 17.0 business debt. Maintain Neutral.
P/BV (x) 1.2 1.0 1.0 1.0
Key issues to watch
EV/EBITDA (x) 10.3 14.7 10.3 8.3
Lowering debt in demerged business through asset sale.
Div Yield (%) 1.0 0.0 0.8 1.1
Further concrete development on plans to sell ZIV in FY17.
* Consolidated
October 2016 79
September 2016 Results Preview | Sector: Capital Goods
CG Consumer Electricals
Bloomberg CROMPTON
IN
CMP: INR158 TP: INR190 (+20%) Buy
Equity Shares (m) 626.8
We expect Crompton to register revenues of INR8.9b in 2QFY17., Of
M. Cap. (INR b)/(USD b) 99 / 1
the total revenues, 70% would be contributed by the electrical
52-Week Range (INR) 176/126
consumer durables segment and the balance 30% by the lighting
1,6,12 Rel Perf. (%) -
segment.
We expect operating profit of INR864m in 2QFY17., Operating
Financial Snapshot (INR b)
margins are expected to stand at 9.7% in 2QFY17, as against 13.8%
Y/E March 2016 2017E 2018E
in 1QFY17. Net profit is expected to be INR461m in 2QFY17, as
Net Sales 18.1 41.2 47.3
against INR920m in 1QFY17.
EBITDA 2.1 4.9 6.2
Adj PAT 1.1 2.8 3.8
EPS (INR) 1.9 4.5 6.0
EPS Gr. (%) (70.3) 138.6 32.1
BV/Sh. (INR) 3.6 5.5 7.9
RoE (%) 52.1 99.5 90.0
RoCE (%) 28.8 34.9 39.0
Payout (%) - 50.0 50.0
Valuations Key issues to watch
P/E (x) 83.1 34.8 26.3 Details of segmental sales:, as Crompton intends to improve sales
P/BV (x) 43.3 28.9 20.1 of the premium category products.
EV/EBITDA (x) 53.5 22.5 17.7 Ad spends incurred by the company during the quarter: as
Div Yield (%) - 1.3 1.8 Crompton intends to position itself as an electrical consumer
* Consolidated durables brand from the current positioning of a fans brand.
October 2016 80
September 2016 Results Preview | Sector: Capital Goods
Cummins India
Bloomberg KKC IN CMP: INR929 TP: INR850 (-9%) Neutral
Equity Shares (m) 277.2
We expect revenue improvement of 8.2% YoY, supported by growth
M. Cap. (INR b)/(USD b) 257 / 4
in the industrial (31%) and automotive (67%) segments. Industrial
52-Week Range (INR) 1132/747
segment growth would be driven by a pick-up in the infrastructure
1,6,12 Rel Perf. (%) 2/-4/-22
(roads and metros) and data center segments. Pick-up in the
domestic demand environment and various pricing actions taken by
Financial Snapshot (INR b)
KKC to regain lost market share post CPCB-2 compliance will help
Y/E March 2015 2016 2017E 2018E
domestic revenues grow 9% YoY in 2QFY17.
Net Sales 44.1 47.0 50.8 57.8
EBITDA 7.4 7.7 8.6 9.9
We expect export revenues to improve 7% YoY to INR4.7b in
Adj PAT 7.9 7.5 7.9 8.8
2QFY17. Exports have witnessed a decline of 22% in 1QFY17, led by
EPS (INR) 28.3 27.2 28.6 31.6 weak demand in LatAm, Europe and China.
EPS Gr. (%) 31.0 -4.0 5.2 10.3 EBIDTA margins are expected to remain stable YoY at 17.0%; expect
BV/Sh. (INR) 104.1 114.4 125.9 138.5 net profit growth of 3% YoY to INR2.1b. Maintain Neutral.
RoE (%) 28.8 24.9 24.2 23.9
RoCE (%) 29.0 25.2 24.1 24.1
Payout (%) 49.4 51.5 51.5 51.5
Valuations Key issues to watch:
P/E (x) 32.8 34.1 32.5 29.4 Cost optimization possibilities in power gen business, given
P/BV (x) 8.9 8.1 7.4 6.7 increased localization due to a significant decline in imports post
EV/EBITDA (x) 33.5 31.8 28.4 24.7 CPCB-2 implementation.
Div Yield (%) 1.6 1.6 1.7 1.8 Performance of exports segment as exports declined 22% YoY in
1QFY17 on weak demand in LatAm, Europe and China.
October 2016 81
September 2016 Results Preview | Sector: Capital Goods
GE T&D
Bloomberg GETD IN CMP: INR342 TP: INR345 (+1%) Neutral
Equity Shares (m) 256.1
We expect Alstom T&D to register robust revenue growth of 16%
M. Cap. (INR b)/(USD b) 87 / 1
YoY to INR10.5b in 2QFY17. Revenue growth would be driven by
52-Week Range (INR) 560/311
execution of Champa Kurukshetra phase I project.
1,6,12 Rel Perf. (%) 8/-34/-40
We expect operating profit to remain flat YoY at INR1.0b in 2QFY17,
primarily on account of prevailing adverse revenue mix. Gross
Financial Snapshot (INR b)
Y/E March 2015 2016 2017E 2018E margins are expected to decline by 470bp to 30.5% from 35.2% in
Net Sales 37.0 34.1 40.5 45.1 2QFY16.
EBITDA 3.1 2.3 3.5 5.4 Net profit is expected to remain flat YoY at INR460m. Maintain
Adj PAT 1.2 0.8 2.1 2.9 Neutral.
EPS (INR) 4.7 3.0 8.1 11.5
EPS Gr. (%) 5.6 -35.7 167.3 41.7
BV/Sh. (INR) 51.2 52.1 56.3 62.2
RoE (%) 9.4 5.9 14.9 19.3
RoCE (%) 14.9 10.1 16.7 24.2
Payout (%) 38.2 59.5 40.0 40.0
Valuations
P/E (x) 72.6 112.8 42.2 29.8
P/BV (x) 6.7 6.6 6.1 5.5
EV/EBITDA (x) 29.0 39.5 25.4 16.3 Key issues to watch
EV/ Sales (x) 2.4 2.7 2.2 2.0 Progress in the Champa-Kurukshetra Phase I project.
Div Yield (%) 0.5 0.5 0.9 1.3
October 2016 82
September 2016 Results Preview | Sector: Capital Goods
Havells India
Bloomberg HAVL IN CMP: INR431 TP: INR435 (+1%) Neutral
Equity Shares (m) 623.9
Havells has launched premium segment intelligent water heaters
M. Cap. (INR b)/(USD b) 269 / 4
and expects to capture 15% market share of the INR15b water
52-Week Range (INR) 434/236
heater segment.
1,6,12 Rel Perf. (%) 2/26/64
Standalone revenue growth is expected to be 13.2%, supported by
low base effect (2QFY16 revenue decline of 1.1%).
Financial Snapshot (INR b)
We expect double-digit sales growth to be witnessed across all
Y/E March 2015 2016 2017E 2018E
business segments. Operating margins are expected to improve
Net Sales 85.7 77.1 64.5 75.7
45bp YoY to 14.4% in 2QFY17, led by better operating leverage.
EBITDA 7.2 8.0 9.3 11.7
Adj PAT 5.2 4.8 6.6 8.2
Net profit growth is expected to be 31% YoY, aided by improvement
Adj EPS (INR) 8.3 7.8 10.6 13.1 in non-operating income, driven by incremental cash infusion on
EPS Gr. (%) -4.7 -6.0 36.2 24.2 account of sale of Sylvannia to Sanghai Fielo for EUR149m. Maintain
BV/Sh(INR) 29.1 41.0 45.7 51.8 Neutral.
RoE (%) 28.4 19.0 23.1 25.4
RoCE (%) 17.0 20.4 23.1 26.2
Payout (%) 57.6 93.0 55.3 53.4
Valuations
P/E (x) 52.1 55.4 40.7 32.8
P/BV (x) 14.8 10.5 9.4 8.3
Key issues to watch
EV/EBITDA (x) 21.6 31.6 27.2 21.2
Performance of Reo and Standard brands; commentary on new
Div Yield (%) 0.7 0.9 1.2 1.4
product launches.
* Consolidated
Guidance on deployment of cash received from the sale of
Sylvannia to Sanghai Feilo.
October 2016 83
September 2016 Results Preview | Sector: Capital Goods
October 2016 84
September 2016 Results Preview | Sector: Capital Goods
Siemens
Bloomberg SIEM IN CMP: INR1,255 TP: INR1260 Neutral
Equity Shares (m) 356.1
Siemens Ltd has received orders of INR2.2b for Power Grid
M. Cap. (INR b)/(USD b) 447 / 7
Company of Bangladesh Limited (PGCB) project from Siemens AG,
52-Week Range (INR) 1395/969
which involves supply of 400KV/230KV switch yard equipment,
1,6,12 Rel Perf. (%) 1/0/-14
reactors, power transformers, firefighting systems, air-conditioning
systems, auxiliary power system, building management systems,
Financial Snapshot (INR b)
illumination systems, AC control and protections, engineering for
Y/E September 2015 2016 2017E 2018E
civil and plant for 500MW High Voltage Direct Current (HVDC)
Net Sales 105.1 110.2 112.3 125.9
station.
EBITDA 9.8 10.4 13.9 15.9
Adj PAT 6.0 6.5 10.1 11.8
We expect Siemens to register muted revenue growth YoY of
Adj EPS (INR) 17.0 18.1 28.4 33.2 INR26.2b, as we exclude the healthcare division revenue which it
EPS Gr (%) 36.3 7.1 56.7 16.7 sold in 3QFY16. Excluding health care, we expect robust revenue
BV/Sh. (INR) 144.0 191.4 209.6 230.8 growth of 19% YoY, led by strong performance from the industrial
RoE (%) 11.8 9.5 13.6 14.4 and energy segments.
RoCE (%) 18.2 15.5 19.1 20.1 We expect EBIDTA growth of 33% YoY to INR3.7b and net profit
Payout (%) 35.4 30.1 30.1 30.0 growth of 72% YoY to INR2.9b on account of better product mix and
Valuations higher other income. Maintain Neutral.
P/E (x) 73.2 68.4 43.6 37.4 Key issues to watch:
P/BV (x) 8.6 6.5 5.9 5.4 Raw material imports account for 55% of raw material cost;
EV/EBITDA (x) 43.1 38.9 28.6 24.7 Siemens AGs network comprises 82% of imports; Euro
Div. Yield (%) 0.8 2.7 0.7 0.8
appreciating 2% vs. INR YoY could dent product competitiveness
and margin profile.
October 2016 85
September 2016 Results Preview | Sector: Capital Goods
Thermax
Bloomberg TMX IN CMP: INR879 TP: INR730 (-17%) Sell
Equity Shares (m) 119.2
During the quarter, Thermax has increased its stake in First Energy
M. Cap. (INR b)/(USD b) 105 / 2
Limited from 33% to 54.7% with incremental investment of INR60m
52-Week Range (INR) 970/691
in the company. First Energy Limited operates in the alternative
1,6,12 Rel Perf. (%) 8/4/-3
energy space.
Revenue is expected to register de-growth of 13% YoY, led by
Financial Snapshot (INR b)
constrained execution environment prevailing in the energy
Y/E March 2015 2016 2017E 2018E
segment. Operating margins are expected to remain stable YoY at
Net Sales 54.0 52.6 46.7 49.5
EBITDA 4.6 4.1 4.2 4.9
9.5%.
Adj PAT 2.6 2.8 2.9 3.5 Ordering activity continues to remain muted on a weak macro
EPS (INR) 21.8 23.5 24.7 29.0 environment. We believe domestic orders have remained at the
EPS Gr. (%) -6.0 8.2 5.0 17.4 base level (~INR57b per quarter) as the company has not
BV/Sh. (INR) 180.1 197.7 212.5 230.6 announced any meaningful order during the quarter.
RoE (%) 12.4 12.5 12.2 13.1 Increased internationalization of the business is a vital part of
RoCE (%) 8.5 11.3 10.9 12.7 Thermaxs ongoing strategy. The company also announced plans to
Payout (%) 39.8 32.9 34.3 32.1 partly localize operations in SE Asia by setting up subsidiaries.
Valuations Thermax is planning to set up a boiler facility in Indonesia with capex
P/E (X) 40.4 37.4 35.6 30.3 of USD50m. Thermax expects the facility to generate revenue of
P/BV (X) 4.9 4.4 4.1 3.8 USD100m over 3-4 years post commissioning of the plant. Maintain
EV/EBITDA (X) 23.0 26.1 25.0 21.1 Sell.
Div Yield (%) 0.8 0.9 1.0 1.1
Key issues to watch:
Demand environment in domestic and overseas markets.
Sustainability of margins in energy (11.0% in 2QFY16) and
environment (8.0% in 2QFY16) segments.
October 2016 86
September 2016 Results Preview | Sector: Capital Goods
Voltas
Bloomberg VOLT IN CMP: INR389 TP: INR360 (-8%) Neutral
Equity Shares (m) 330.8
Unitary cooling division (UCP) is likely to report strong revenue
M. Cap. (INR b)/(USD b) 129 / 2
growth on the back of low base effect of 2QFY16. AC demand had
52-Week Range (INR) 402/211
been impacted in 1HFY16 given: i) weak summer ii) sluggish
1,6,12 Rel Perf. (%) 1/25/37
consumer spends and iii) high base effect. We model in UCP
revenue growth of 18% YoY.
Financial Snapshot (INR b)
Y/E March 2015 2016 2017E 2018E We expect revenue growth of 5% YoY in the MEP segment, led by
Net Sales 51.8 58.6 64.7 72.0 high base effect (18% YoY growth in 2QFY16). However, key
EBITDA 4.1 4.4 5.7 6.7 monitorable would be margins in the segment. Voltas had booked
Adj PAT 3.4 3.9 4.4 5.3 loss of INR86m in 3QFY16 on account of cost overrun getting
EPS(INR) 10.2 11.7 13.4 15.9
booked for the UAE project, while the acceleration claim is yet to be
EPS Gr. (%) 37.5 14.0 15.3 18.1
BV/Sh. (INR) 63.6 72.4 82.0 93.3 booked.
RoE (%) 17.2 15.3 17.4 18.1 Sharp decline in crude prices has raised apprehensions over the
RoCE (%) 16.6 14.8 16.4 16.9 pace of order awards and also execution in the Middle East. Even in
Payout (%) 23.3 28.6 28.6 28.6
the domestic market, new project awards have continued to remain
Valuations
P/E (x) 22.6 37.3 28.9 24.5 constrained. Maintain Neutral.
P/BV (x) 3.6 5.4 4.7 4.2
EV/EBITDA (x) 18.3 29.6 22.0 18.6 Key issues to watch:
Div Yield (%) 1.0 0.7 0.9 1.0
Revenue contribution from air cooler business post launch of 11
models with honey comb technology.
Progress on legacy projects and also capital employed in MEP
business.
October 2016 87
September 2016 Results Preview
Cement
Company name
Cement prices firm despite monsoon impact
Volume growth to be muted
ACC
Ambuja Cements
Sluggish volumes in 2QFY17 as monsoon sets in: Cement demand was strong in
Grasim Industries the last two quarters, led by (1) a boost in infrastructure spending in north/central
India Cements regions, (b) stabilization of rural demand and (c) favorable base. However, the onset
Shree Cement on monsoon is expected to have hurt demand in 2QFY17, with core industry data
revealing subdued volume growth of 2.3% YoY in July-Aug-16. The MOSL coverage
Ramco Cement
universe is likely to record weak volume growth of 2.1% YoY (-13% QoQ) in 2QFY17.
UltraTech Cement
We expect (a) pan-India players to post 2% to 5% YoY volume decline (UTCEM >
ACC, ACEM), (b) players with better capacity headroom (SRCM, JKLC) to deliver -2%
to +9% YoY growth and (c) south-based companies to deliver +15% YoY growth.
Good monsoon after two years of drought, however, would lead to an increase in
rural demand and provide a favorable base for 2HFY17. Higher budget allocation to
cement-intensive sectors and the rural economy too offer good growth visibility for
2HFY17.
which should aid profitability: Stable ASPs, despite weak volumes, are likely to
aid profitability, in our view. The MOSL coverage universe EBITDA/ton stands at
INR865 (-6% QoQ, +22% YoY).
Exhibit 21: MOSL universe set to grow at 2.1% in 2QFY17 (%) Exhibit 22: MOSL universe volume at 41mt
Volumes (MT) - RHS Volume growth (%)
MOSL Universe
20
15
9.3
8.9
8.3
16.9
10
6.3
5.7
5.5
5.1
3.7
5
3.2
2.5
2.1
1.8
1.6
1.2
0.4
-1.3
0
-5.0
-5 39 36 38 42 39 37 38 44 43 39 40 42 43 40 42 49 47 41
-10
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
337
331
310
300
300
299
296
296
296
296
291
285
285
283
281
278
248
68
70
78
72
65
71
80
73
65
68
78
70
65
67
76
73
67
65
71
71
66
65
76
72
65
4QFY11
2QFY12
4QFY12
2QFY13
4QFY13
2QFY14
4QFY14
2QFY15
4QFY15
2QFY16
4QFY16
2QFY17E
prices
(INR/bag)
October 2016 89
September 2016 Results Preview | Sector: Cement
Exhibit 25: MOSL coverage to post QoQ uptick in average Exhibit 26: Profitability to dip QoQ led by weak volume
realizations in 2Q show
Realization (INR/ton) EBITDA (INR/ton)
4,487
4,483
4,426
4,426
4,397
1,130
4,387
4,377
4,357
4,325
4,320
4,295
4,216
4,192
4,189
4,177
4,170
4,138
4,133
1,007
4,062
4,019
3,936
988
966
3,772
3,735
915
903
865
833
831
814
806
788
780
3,380
759
717
714
711
705
681
600
578
489
566
570
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
Source: Company, MOSL Source: Company, MOSL
Exhibit 27: Relative performance3 months (%) Exhibit 28: Relative performance1 year (%)
Sensex Index MOSL Cement Index Sensex Index MOSL Cement Index
120 160
115 140
110
120
105
100
100
95 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
October 2016 90
September 2016 Results Preview | Sector: Cement
October 2016 91
September 2016 Results Preview | Sector: Cement
ACC
Bloomberg ACC IN CMP: INR1,634 TP: INR1,795 (+10%) Neutral
Equity Shares (m) 188.0
Dispatches in 3QCY16 are estimated at 5.33mt (-5% YoY). Average
M. Cap. (INR b)/(USD b) 307 / 5
realizations are expected to remain flat QoQ (-1.9% YoY) at
52-Week Range (INR) 1,738/1,173
INR4,267/ton.
1,6,12 Rel Perf. (%) -1/4/12
Revenues are expected to de-grow 7% YoY to INR25.5b. EBITDA
Financial Snapshot (INR Billion) margin is expected to be 12.1%, down 2.2pp QoQ (+2.5pp YoY).
Y/E Dec 2014 2015 2016E 2017E EBITDA/ton is estimated at INR721 (+INR270 YoY, +INR140 QoQ).
Sales 114.8 114.3 116.9 137.2 Pure cement EBITDA/ton is estimated at INR577 (-INR92 QoQ) due
EBITDA 12.5 11.7 15.6 24.3 to weak volumes. PAT is likely to grow 6% YoY to INR1.5b. We
NP 8.6 6.0 8.7 15.5 believe subsiding headwinds in its east operations would improve
Adj. EPS (INR) 45.9 32.0 46.4 82.2 cost structure and volume growth.
EPS Gr. (%) -5.6 -30.3 45.2 77.2
BV/Sh (INR) 438 449.3 465.6 493.6
The stock trades at 19.9x CY17E EPS, 11.4x CY17E EV/EBITDA and
RoE (%) 10.7 7.2 10.1 17.1
FY17E EV/ton of USD125/ton. Maintain Neutral.
RoCE (%) 10.9 7.4 10.2 16.7
Payout (%) 63.6 65.1 64.9 65.9 Key issues to watch out for
Valuations
Cement pricing recovery.
P/E (x) 35.6 51.1 35.2 19.9
Volume growth and demand revival.
P/BV (x) 3.7 3.6 3.5 3.3
EV/EBITDA (x) 21.5 23.8 18.4 11.4
Update on cost-saving measures.
EV/Ton (x) 131 136.2 129.4 125.2
Visibility on seamless operation of plants in the east.
October 2016 92
September 2016 Results Preview | Sector: Cement
Ambuja Cements
Bloomberg ACEM IN CMP: INR259 TP: INR309 (+19%) Buy
Equity Shares (m) 1,551.9
Dispatches in 3QCY16 are estimated to decline 5.1% YoY to 4.65mt.
M. Cap. (INR b)/(USD b) 402 / 6
Average realizations are expected to improve 2.7% YoY (+1.2% QoQ)
52-Week Range (INR) 282/185
to INR4,394/ton. Revenue is estimated at INR20.4b (+2.5% YoY).
1,6,12 Rel Perf. (%) -5/-2/16
EBITDA margin is expected to be 16.4% (-6.5pp QoQ, +2.3pp YoY).
Financial Snapshot (INR Billion) EBITDA/ton is estimated at ~INR722 (-INR272/ton QoQ, +INR121/ton
Y/E DEC 2014 2015 2016E 2017E YoY).
Sales 99.1 93.7 97.9 114.5 Adjusted PAT is estimated to grow 33.5% YoY to INR2.1b.
EBITDA 18.6 14.4 18.5 26.6
NP 13.2 8.5 12.0 19.8 The stock trades at 17.8x CY17E EPS, 12.8x EV/EBITDA and CY17E
Adj. EPS (INR) 8.5 5.5 6.1 10.0
EV/ton of USD172/ton. Maintain Buy.
EPS Gr. (%) 25.9 -35.9 11.0 64.6
BV/Sh. (INR) 65.6 66.9 96.6 103.1
RoE (%) 13.4 8.3 6.3 10.0
RoCE (%) 14.3 8.9 8.5 10.3
Payout (%) 61.8 44.9 57.3 35.2
Key issues to watch out for
Valuations
Volume growth recovery and outlook.
P/E (x) 30.4 47.4 29.3 17.8
Cement pricing outlook and sustainability.
P/BV (x) 3.9 3.9 1.8 1.7
Update on ACC-ACEM restructuring timeline.
EV/EBITDA (x) 18.8 24.0 19.4 12.8
EV/Ton (USD) 182 180 182 172
October 2016 93
September 2016 Results Preview | Sector: Cement
Grasim Industries
Bloomberg GRASIM IN CMP: INR4,903 Under review
Equity Shares (m) 93.4
We expect VSF volumes to grow 18% YoY (+6% QoQ) to 128,421
M. Cap. (INR b)/(USD b) 458 / 7
tons in 2QFY17, while realizations are expected to improve 8.9%
52-Week Range (INR) 5,349/3,242
YoY (-0.8% QoQ) to INR 127,039/ton.
1,6,12 Rel Perf. (%) 7/15/31
Standalone EBITDA margin is estimated at 18.4%, +2.6pp YoY (-
Financial Snapshot (INR Billion) 2.8pp QoQ).
Y/E March 2015 2016 2017E 2018E EBITDA is estimated to de-grow -9% QoQ (+38% YoY) to INR4.6b,
Sales 324.4 365.9 408.2 459.6 translating into PAT of INR3.8b (+8% YoY).
EBITDA 47.3 60.2 79.8 101.5
Adj. PAT 17.5 22.6 35.5 44.1
The stock trades at 10.2x FY18E consolidated EPS, 6.7x FY18E
EV/EBITDA and implied cement EV/ton of USD124/ton.
Adj. EPS (INR) 190.5 241.7 380.2 472.4
EPS Gr. (%) -11.4 26.8 57.3 24.3
BV/Sh. (INR) 2,519 2,767 3,121 3,568
RoE (%) 7.8 9.2 12.9 14.1
RoCE (%) 8.8 10.0 13.2 15.6
Payout (%) 9.7 11.0 6.9 5.3 Key issues to watch out for
Valuations Pick-up in cement demand and pricing thereon.
P/E (x) 25.4 20.0 12.7 10.2 Outlook on VSF business, and strategy to utilize upcoming
P/BV (x) 1.9 1.7 1.5 1.4 capacities globally.
EV/EBITDA (x) 15.7 11.3 8.9 6.7
EV/Ton (x) 178 143 126 124
October 2016 94
September 2016 Results Preview | Sector: Cement
India Cements
Bloomberg ICEM IN CMP: INR151 TP: INR154 (+2%) Neutral
Equity Shares (m) 307.2
M. Cap. (INR b)/(USD b) 46 / 1
India Cements volumes are expected to grow 16% YoY (-8% QoQ)
to 2.51mt in 2QFY17. We estimate realizations to de-grow 6% YoY
52-Week Range (INR) 156/64
1,6,12 Rel Perf. (%) 0/59/76
(+2.2% QoQ) to INR4,605/ton. Revenue is estimated at INR11.7b
(+9% YoY, +12% QoQ).
Financial Snapshot (INR Billion) EBITDA is estimated at INR2.1b, and EBITDA margin is likely to
Y/E March 2015 2016E 2017E 2018E decline 0.9pp QoQ to 18.3%, translating into blended EBITDA/ton of
Sales 44.2 42.3 44.6 48.9 INR859 (-INR197/ton YoY). PAT is expected at INR493m (v/s +INR
EBITDA 6.8 7.7 7.7 8.7
431m in 2QFY16).
NP 0.3 1.4 1.7 2.5
Adj. EPS (INR) 0.0 4.4 5.8 9.0 Valuations stand at 16.9x FY18E EPS and 8x FY18E EBITDA. Maintain
EPS Gr. (%) -100 -11,446 32.8 53.6 Neutral.
BV/Sh (INR) 117.0 118.8 76.2 132.4
RoE (%) 0.8 3.9 5.7 7.7
RoCE (%) 6.5 5.9 7.2 8.0
Payout (%) 0.0 25.9 0.0 0.0
Valuations Key issues to watch out for
P/E (x) -2915 34.4 25.9 16.9 Visibility on AP demand recovery.
P/BV (x) 0.7 1.3 2.0 1.1
Demand and pricing outlook, especially in south India.
EV/EBITDA(x) 8.2 9.7 9.4 8.0
Timeline and capex plan for TN expansion of 2.6mt.
EV/Ton (USD) 62 77 77 75
October 2016 95
September 2016 Results Preview | Sector: Cement
Ramco Cements
Bloomberg TRCL IN CMP: INR614 TP: INR713 (+16%) Buy
Equity Shares (m) 238.0
2QFY17 volumes are estimated to grow 15% YoY (-5% QoQ) to
M. Cap. (INR b)/(USD b) 146 / 2
1.97mt. Average realizations are expected to decline 9.5% YoY
52-Week Range (INR) 623/327
(+2.8% QoQ) to 4,551/ton.
1,6,12 Rel Perf. (%) 11/41/75
EBITDA margin is expected to increase 0.4pp QoQ to 29.6%.
Financial Snapshot (INR Billion) EBITDA/ton (ex-windmill) is estimated at INR1,249 (-~INR44 QoQ, -
Y/E MARCH 2015 2016 2017E 2018E INR185 YoY).
Sales 35.9 35.9 38.2 43.1
PAT is estimated to grow 13.7% QoQ to INR1.6b.
EBITDA 6.6 10.5 11.6 13.6
NP 2.4 5.6 6.2 7.6 The stock trades at 19.3x FY18E EPS, 11.2x EV/EBITDA and FY18E
Adj EPS 10.2 23.4 26.2 31.7 EV/ton of USD141. Maintain Buy.
(INR)
EPS Gr. (%) 106.8 130.3 11.7 21.2
BV/Sh. (INR) 111.1 129.9 152.6 179.7
RoE (%) 9.5 19.5 18.5 19.1
RoCE (%) 7.0 13.2 13.1 14.6
Payout (%) 17.1 14.9 13.3 14.6
Key issues to watch out for
Valuations
Volume growth recovery and outlook.
P/E (x) 60.3 26.2 23.4 19.3
Cement pricing outlook and demand sustainability in south (AP
EV/EBITDA (x) 25.7 15.8 13.7 11.2
and Tamil Nadu).
EV/Ton (USD) 174 159 148 141
October 2016 96
September 2016 Results Preview | Sector: Cement
Shree Cement
Bloomberg SRCM IN CMP: INR17,956 TP: INR20,400 (+14%) Buy
Equity Shares (m) 34.8
We expect 2QFY17 cement volumes to grow 8.2% YoY (-12% QoQ)
M. Cap. (INR b)/(USD b) 626 / 9
to 4.53mt (including clinker), and realizations to grow 8.7% YoY
52-Week Range (INR) 18,519/9,350
(+2% QoQ) to INR3,962/ton.
1,6,12 Rel Perf. (%) 5/34/42
Merchant power sale is expected to be 500m units (v/s 608m units
Financial Snapshot (INR Billion) in 1QFY17) at ~INR3.5/unit (v/s INR3.52 in 1QFY17). Power EBITDA
Y/E March 2015 2016 2017E 2018E is estimated at INR450m (v/s INR784m in 1QFY17).
Sales 64.4 72.9 91.3 112.5
Revenue is estimated at INR19.7b (+14.4% YoY) and EBITDA at
EBITDA 13.3 16.7 27.9 38.3
INR5.7b, translating into margin of 29.1% (-4.1 QoQ, +5.9pp YoY).
NP 4.6 5.9 19.8 25.7
Adjusted PAT is likely to be INR3.7b (v/s INR1b in 2QFY16).
Adj EPS (INR) 133.2 168.0 568.2 737.6
EPS Gr. (%) -40.0 26.1 238.3 29.8 Valuations stand at 24.3x FY18E EPS, 14.6x FY18E EBITDA and FY18E
BV/Share (INR) 1,515 1,774 2,302 2,993 EV/ton at USD275/ton. Maintain Buy.
RoE (%) 9.3 10.2 27.9 27.9
RoCE (%) 10.0 10.6 26.3 26.9
Payout (%) 22.8 17.4 7.2 6.3
Key issues to watch out for
Valuation
Volume and pricing recovery for north India.
P/E (x) 134.8 106.9 31.6 24.3
Update on scale-up of recently commissioned Chhattisgarh units.
P/BV (x) 11.9 10.1 7.8 6.0
New expansion plan.
EV/EBITDA (x) 46.2 36.3 21.0 14.6
EV/Ton (USD) 374 343 308 275
October 2016 97
September 2016 Results Preview | Sector: Cement
UltraTech Cement
Bloomberg UTCEM IN
CMP: INR3,927 TP: INR4,675 (+19%) Buy
Equity Shares (m) 274.4
M. Cap. (INR b)/(USD b) 1,077 / 16
2QFY17 cement volumes are estimated to de-grow 2.4% YoY (-18%
52-Week Range (INR) 4,130/2,581 QoQ) to 10.54mt. Realizations are estimated to de-grow 3.4% YoY
1,6,12 Rel Perf. (%) -3/11/34 (+1.2% QoQ) to INR4,133/ton.
We estimate grey cement EBITDA/ton at INR840 (-INR115 QoQ).
Financial Snapshot (INR Billion) EBITDA margin is expected to increase 3.3pp YoY (-2.4pp QoQ) to
Y/E March 2015 2016 2017E 2018E 19.8%.
Sales 226.6 238.4 262.9 309.3
EBITDA is estimated to decline 22% QoQ (+15% YoY) to INR10.6b,
EBITDA 39.2 43.5 54.3 76.9
translating into PAT de-growth of 30% QoQ (to INR5.4b).
NP 20.1 21.7 29.6 45.4
Adj EPS(INR) 73.4 79.3 108.0 165.3 The stock trades at 23.3x FY18E EPS, 12.7x FY18E EV/EBITDA and
EPS Gr. (%) -2.8 7.9 36.2 53.1 FY18E EV/ton of USD216. Maintain Buy.
BV/Sh (INR) 687.3 755.8 852.2 1,000.0
RoE (%) 11.2 11.0 13.4 17.9
RoCE (%) 9.9 9.3 11.5 15.2 Key issues to watch out for
Payout (%) 14.2 13.9 10.8 10.5 Volume growth recovery and outlook.
Valuation Cement pricing outlook and sustainability.
P/E (x) 52.5 48.7 35.7 23.3
Update on scale-up of newly commenced Rajasthan plant.
P/BV (x) 5.6 5.1 4.5 3.9
Update on financial performance of Star Cement, UAE.
EV/EBITDA (x) 27.0 24.1 18.8 12.7
Acquisition of JPA assets.
EV/Ton (USD) 252 232 226 216
October 2016 98
September
September 2016 2016 Results
Results Preview Preview
| Consumer
Consumer
Company name No greenshoots yet
Asian Paints Demand environment remains soft; input prices inching up QoQ
Britannia Industries
Volumes not yet out of woods; margin expansion to taper
Colgate We expect our Consumer universes revenue and PAT to increase 10.2% and 15.8%,
Dabur respectively in 2QFY17. Demand across our Staples universe remains steady, with no
Emami meaningful pick-up. Rural demand remains under stress, with newfound hope
Godrej Consumer
following near-normal monsoon after two years of drought. MOSL Consumer
universe EBITDA is likely to grow 13.7%, with 70bp margin expansion. We expect
GSK Consumer
ITCs sales to grow 9% (2% increase in cigarette volumes) and PAT to grow 13.5%.
Hindustan Unilever HUVRs sales growth is estimated at 3.5% (volume growth of ~3%), with 150bp
ITC EBITDA margin expansion over a low base in 2QFY16. We expect Asian Paints, GCPL,
Jyothy Labs Pidilite, P&G Hygiene and United Spirits to register robust PAT performance. Nestle
Marico
numbers appear strong because of Maggi issue in the base.
Nestle India
YoY RM trends still benign; sequential inflation seen in some commodities
Page Industries PFAD and TiO2 prices saw YoY inflation of 33.8% and 1.5%, respectively. LLP and
Parag Milk Foods HDPE prices still remained benign, with correction of 15% and 5%, respectively.
Pidilite Industries Pricing has been broadly flattish across segments, with companies (selectively in our
P&GHH
coverage) continuing with price/volume offers to boost incipient volume growth;
yet, some have started taking selective price hikes following sequential increase in
Radico Khaitan
raw material (RM) cost.
United Spirits
Exhibit 33: Relative performance 3m (%) Exhibit 34: Relative performance 1Yr (%)
Sensex Index MOSL Consumer Index Sensex Index MOSL Consumer Index
106 120
104 110
102 100
100 90
98 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Exhibit 35: PFAD prices up 33.8% YoY but down 0.7% QoQ Exhibit 36: Palm oil prices rise 27.8% YoY
Palm Fatty Acid price (INR/MT) Palm Oil (Malaysian Ringgit Per Metric Tonne)
60,000
3,100
2,747
Malaysian Ringgit\MT
51,000
40,778 2,700
42,000
2,300
33,000
24,000 1,900
15,000 1,500
May-14
May-15
May-16
Sep-13
Jan-14
Sep-14
Jan-15
Sep-15
Jan-16
Sep-16
May-14
May-15
May-16
Sep-13
Jan-14
Sep-14
Jan-15
Sep-15
Jan-16
Sep-16
Source: Bloomberg, MOSL Source: Bloomberg, MOSL
Exhibit 37: Mentha prices down 3% YoY but up 5% QoQ Exhibit 38: TiO2 prices up 1.5% YoY
1,250 Mentha Oil prices INR / kg TiO2 price (INR/kg)
310
270
1,000 945 250
230 250 210
210
750
190 208
500 150
Jun-14
Jun-15
Jun-16
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
May-14
May-15
May-16
Sep-13
Jan-14
Sep-14
Jan-15
Sep-15
Jan-16
Sep-16
Source: Bloomberg, MOSL Source: Bloomberg, MOSL
Asian Paints
Bloomberg APNT IN CMP: INR1,192 TP: INR1,160 (-3%) Neutral
Equity Shares (m) 959.2
We expect Asian Paints (APNT) revenue to grow 14% to INR39.1b
M. Cap. (INR b)/(USD b) 1,143 / 17
in 2QFY17, with a ~16% rise in domestic decorative volumes.
52-Week Range (INR) 1,213/785
1,6,12 Rel Perf. (%) 3/25/34 We note crude prices are up just 1% YoY (down 1% QoQ). The
magnitude of price movement in crude derivatives is lower vis--vis
Financial Snapshot (INR b) crude prices. Operating margin should expand 100bp to 16.9% in
Y/E March 2015 2016 2017E 2018E
2QFY17. We estimate 21.2% PAT growth for 2QFY17.
Sales 140.1 140.9 160.5 187.8
EBITDA 20.6 25.8 31.2 36.1
The stock trades at 45.3x FY18E EPS of INR26.3; maintain Neutral.
Adj. PAT 14.2 18.0 21.8 25.2
Adj. EPS.INR 14.8 18.7 22.7 26.3
EPS Gr. (%) 15.8 26.3 21.1 15.9
BV/Sh.(INR) 49.4 58.4 68.7 81.5
RoE (%) 32.4 34.7 35.7 35.0
RoCE (%) 28.6 30.6 32.1 31.8
Payout (%) 41.1 40.4 44.1 43.7
Valuations Key issues to watch for
P/E (x) 80.3 63.6 52.5 45.3 Volume growth trends and demand scenario in urban and rural
P/BV (x) 24.1 20.4 17.3 14.6 geographies.
EV/EBITDA (x) 54.9 43.5 35.7 30.6 Demand outlook for industrial paints.
Div. Yield (%) 0.6 0.8 1.0 1.1
Outlook for raw materials/pricing actions.
Britannia Industries
Bloomberg BRIT IN CMP: INR3,483 TP: INR4,000 (+15%) Buy
Equity Shares (m) 120.0
We estimate Britannia (BRIT)s sales to increase 12% YoY to
M. Cap. (INR b)/(USD b) 418 / 6
INR22.2b, with around 8% volume growth.
52-Week Range (INR) 3,575/2,507
1,6,12 Rel Perf. (%) 5/18/4 Continued distribution and portfolio gains, especially in identified
central geographies will aid BRITs volume outperformance, in our
Financial Snapshot (INR b) view.
Y/E March 2015 2016 2017E 2018E
Sales 77.8 83.3 94.2 110.7 Due to increase in wheat and sugar costs, we expect 10bp
EBITDA 7.8 11.5 12.9 16.2 contraction in operating margin YoY. We project EBITDA and PAT to
Adj. PAT 5.7 8.4 9.5 11.8 grow 11.2% and 13.5%, respectively.
Adj. EPS. INR 47.9 70.1 78.8 98.5 The stock trades at 35.4x FY18E EPS of INR98.5; maintain Buy.
EPS Gr. (%) 47.3 46.3 12.5 25.0
Britannia is one of our top picks in the Tier-II Consumer space.
BV/Sh.(INR) 103.5 147.2 192.0 250.4
RoE (%) 56.4 55.9 46.5 44.5
RoCE (%) 43.9 46.0 38.5 37.8
Payout (%) 33.4 28.5 35.0 35.0
Valuations
P/E (x) 72.7 49.7 44.2 35.4 Key issues to watch for
P/BV (x) 33.6 23.7 18.1 13.9 Volume growth in biscuits.
EV/EBITDA (x) 52.8 35.6 31.4 24.6 Outlook for raw materials.
Div. Yield (%) 0.5 0.6 0.8 1.0 Performance of subsidiaries.
Colgate
Bloomberg CLGT IN CMP: INR983 TP: INR1,190 (+21%) Buy
Equity Shares (m) 272.0
We expect Colgate (CLGT)s sales to grow 13% YoY to INR10.7b.
M. Cap. (INR b)/(USD b) 267 / 4
Toothpaste volume growth is likely to be ~5.5%.
52-Week Range (INR) 1,033/788
1,6,12 Rel Perf. (%) 4/6/-6 We estimate gross margin expansion of 80bp and EBITDA margin
Financial Snapshot (INR b) contraction of 50bp to 25.8%. Hence, we have modeled an EBITDA
Y/E March 2015 2016 2017E 2018E growth of 9.3% and adjusted PAT growth of 11.8% in 2QFY17.
Sales 39.5 38.0 42.8 49.1 The stock trades at 32.8x FY18E EPS of INR29.9; we have a Buy rating
EBITDA 8.3 9.5 10.2 13.1 on the stock.
Adj. PAT 5.6 6.1 6.2 8.1
Adj. EPS (INR) 20.6 22.3 22.8 29.9
EPS Gr. (%) 13.9 8.7 2.2 31.1
BV/Sh.(INR) 28.3 37.5 41.7 45.2
RoE (%) 81.6 67.9 57.7 68.9
RoCE (%) 82.5 67.0 56.6 67.6
Payout (%) 60.6 49.1 70.0 70.0 Key issues to watch for
Valuations Volume growth in toothpaste and market share movement.
P/E (x) 47.8 44.0 43.0 32.8 Ad spends and competitive intensity in toothpaste, especially from
P/BV (x) 34.7 26.2 23.6 21.7 Patanjali.
EV/EBITDA (x) 31.9 27.9 25.9 20.0
Div. Yield (%) 1.3 1.1 1.6 2.1
Dabur
Bloomberg DABUR IN CMP: INR276 TP: INR300 (+9%) Neutral
Equity Shares (m) 1,759.1
We expect sales to rise 4% YoY to INR20b, led by ~6% domestic
M. Cap. (INR b)/(USD b) 486 / 7
organic volume growth.
52-Week Range (INR) 320/231
1,6,12 Rel Perf. (%) -6/-1/-9 We expect Daburs EBITDA margin to expand 100bp.
Emami
Bloomberg HMN IN CMP: INR1,182 TP: INR1,380 (+17%) Buy
Equity Shares (m) 227.0
We project Emami (HMN)s sales to grow 16% YoY to INR6.1b, led by
M. Cap. (INR b)/(USD b) 268 / 4
~13% volume expansion. Excluding Kesh King, like-to-like organic
52-Week Range (INR) 1,248/901
volume growth would be 3-4%.
1,6,12 Rel Perf. (%) 3/16/-7
The management had guided for INR2.8b Kesh King turnover in FY17
Financial Snapshot (INR b) as per Ind-AS.
Y/E March 2015 2016 2017E 2018E
We expect gross margin to expand 50bp to 66.8% and EBITDA
Sales 22.2 23.9 28.0 32.9
EBITDA 5.4 6.8 8.1 9.6
margin to contract 50bp to 28.3%. Thus, EBITDA is liekly to increase
NP 4.9 5.7 6.3 7.8
14% YoY to INR1.7b.
EPS (INR) 21.4 25.2 27.7 34.3 PAT is expected to rise only 7.5% YoY to INR1.3b due to low tax rate
EPS Gr. (%) 20.7 17.7 10.0 23.9 of 10.2% in the base quarter, 2QFY16.
BV/Sh. (INR) 54.2 61.8 86.1 105.5
The stock trades at 34.4x FY18E EPS of INR34.3; maintain Buy.
RoE (%) 44.9 43.4 37.5 35.8
Emami remains one of our preferred ideas.
RoCE (%) 44.0 37.9 34.5 38.6
Payout (%) 32.7 27.9 39.7 35.0
Valuations Key issues to watch for
P/E (x) 55.2 46.9 42.6 34.4 Volume growth and broad consumer demand across categories.
P/BV (x) 21.8 19.1 13.7 11.2 Outlook for mentha oil prices.
EV/EBITDA (x) 48.6 40.0 33.2 27.5 Update on Kesh King integration.
Div. Yld (%) 0.6 0.7 0.9 1.0 Competitive intensity, especially from Patanjali.
Godrej Consumer
Bloomberg GCPL IN CMP: INR1,639 TP: INR1,570 (-4%) Neutral
Equity Shares (m) 340.5
We expect Godrej Consumers revenue to rise 18% to
M. Cap. (INR b)/(USD b) 558 / 8
INR25.9b, led by Home Insecticide business, due to good
52-Week Range (INR) 1,710/1,120
monsoon and cases of dengue and chikungunya.
1,6,12 Rel Perf. (%) 6/6/26
Demand trends in international business remain weak,
Financial Snapshot (INR b) primarily driven by macroeconomic trends.
Y/E March 2015 2016 2017E 2018E
Sales 82.8 89.7 101.0 116.7 We estimate operating margin to expand 80bp YoY to 19.2%.
EBITDA 13.7 16.2 19.7 24.2 We have modeled EBITDA and PAT growth of 23.1% and
Adj. PAT 9.1 11.3 13.9 17.5 18.1%, respectively.
Adj. EPS (INR) 26.7 33.2 40.8 51.3
EPS Gr. (%) 22.0 24.4 22.9 25.8 The stock trades at 32x FY18E EPS of INR51.3. We have a
BV/Sh.(INR) 131.4 152.2 181.1 220.6 Neutral rating on the stock.
RoE (%) 21.4 23.4 24.5 25.5
RoCE (%) 15.9 16.7 16.7 17.6
Key issues to watch for
Payout (%) 26.7 29.3 28.9 23.0
Valuations
Growth trend in soap volumes.
P/E (x) 61.5 49.4 40.2 32.0
Competitive intensity across categories.
P/BV (x) 12.5 10.8 9.1 7.4 Outlook for international business demand outlook in Indonesia
EV/EBITDA (x) 42.2 35.7 29.6 23.9 and margin guidance for LatAm.
Div. Yield (%) 0.4 0.6 0.7 0.7
GSK Consumer
Bloomberg SKB IN CMP: INR6,193 TP: INR5,990 (-3%) Neutral
Equity Shares (m) 42.1
We expect GSK Consumer to report net sales of INR11.2b, up 4%
M. Cap. (INR b)/(USD b) 260 / 4
YoY, led by 2% volume decline in MFD. In our view, discretionary
52-Week Range (INR) 6,800/5367
demand in the core MFD category is yet to witness an uptrend.
1,6,12 Rel Perf. (%) 0/-9/-5
We estimate EBITDA margin to expand 50bp YoY to 23.3%, and PAT
Financial Snapshot (INR b) growth of 12.3% YoY.
Y/E December 2015 2016 2017E 2018E
Sales 43.5 41.9 43.4 47.7 The stock trades at 32x FY18E EPS. We have a Neutral rating on the
EBITDA 7.8 9.4 9.2 10.2 stock.
Adj. PAT 5.8 7.0 7.4 8.1
Adj. EPS (INR) 138.8 167.1 175.1 192.6
EPS Gr. (%) -13.5 20.4 4.8 10.0
BV/Sh. (INR) 502.4 581.5 687.6 790.5
RoE (%) 29.7 30.8 27.6 26.1
RoCE (%) 29.8 30.8 27.6 26.1
Payout (%) 32.4 33.7 35.0 40.0
Valuations Key issues to watch for
P/E (x) 44.6 37.9 34.5 32.0 Growth in MFD volume.
P/BV (x) 12.3 10.6 9.0 7.8 Outlook for market growth and raw materials.
EV/EBITDA (x) 30.5 25.3 26.9 22.7 Performance of non-MFD portfolio.
Div. Yield (%) 0.7 0.9 1.0 1.2 Competitive intensity, especially from Patanjali.
Hindustan Unilever
Bloomberg HUVR IN CMP: INR869 TP: INR860 (-1%) Neutral
Equity Shares (m) 2,163.5
We expect Hindustan Unilevers revenue to increase 3.5%, with an
M. Cap. (INR b)/(USD b) 1,880 / 28
underlying ~3% volume growth. Volume growth pick-up would be
52-Week Range (INR) 954/765
contingent on recovery in rural consumption demand, in our view.
1,6,12 Rel Perf. (%) -5/-11/-1
PFAD prices have gone up by 33.8% YoY (down 0.7% QoQ) and LAB
Financial Snapshot (INR b) prices are down 5% YoY (down 4% QoQ).
Y/E March 2015 2016 2017E 2018E
Sales 301.7 305.0 320.1 350.3
We expect operating margin to expand 150bp YoY to 18.8% in
EBITDA 52.1 57.3 61.7 69.4
2QFY17.
Adj. PAT 36.5 41.2 44.1 49.8 We estimate EBITDA and PAT growth at 12.5% YoY and 9.5% YoY,
Adj. EPS (INR) 16.9 19.0 20.4 23.0 respectively. The stock trades at 37.8x FY18E EPS of INR23;
EPS Gr. (%) 2.7 12.9 7.1 12.8 maintain Neutral.
BV/Sh.(INR) 17.2 29.0 29.1 29.5
RoE (%) 104.3 82.4 70.2 78.5
RoCE (%) 140.6 108.1 92.6 103.6
Payout (%) 88.9 84.0 93.2 89.1
Valuations
Key issues to watch for
P/E (x) 51.5 45.6 42.6 37.8
Comments on volume growth and consumer demand
P/BV (x) 50.5 29.9 29.8 29.4
environment.
EV/EBITDA (x) 35.5 32.3 29.9 26.6
Div. Yield (%) 1.7 1.8 2.2 2.4
Competitive intensity in S&D and Shampoos.
ITC
Bloomberg ITC IN CMP: INR242 TP: INR300 (+24%) Buy
Equity Shares (m) 12,070.8
We expect net sales to grow 9% YoY to INR97.1b, with cigarette
M. Cap. (INR b)/(USD b) 2,922 / 44
volume growing 2% YoY. In the base quarter, there was 14% volume
52-Week Range (INR) 266/179
decline. The demand scenario is improving in 1QFY17; cigarette
1,6,12 Rel Perf. (%) -7/-4/3
volume had grown ~3% YoY.
Financial Snapshot (INR b) We expect cigarette EBIT to grow 8.9% YoY. We have factored in
Y/E March 2015 2016 2017E 2018E EBITDA growth of 10.4% YoY to INR39.3b.
Sales 360.8 362.2 395.8 446.3
We expect Other FMCG to post revenue growth of ~9%.
EBITDA 134.9 137.2 153.6 177.0
Adj. PAT 96.1 93.1 109.8 127.0 We estimate a muted 13.5% YoY PAT increase to INR27.6b.
Adj. EPS (INR) 8.0 7.7 9.1 10.5
The stock trades at 23x FY18E EPS of INR10.5; maintain Buy.
EPS Gr. (%) 8.5 -3.5 17.9 15.6
BV/Sh.(INR) 25.6 27.3 31.9 36.7
RoE (%) 33.7 29.3 30.8 30.7
RoCE (%) 32.2 27.8 29.6 30.0
Payout (%) 62.8 88.4 64.4 64.4
Valuations
P/E (x) 30.3 31.4 26.6 23.0 Key issues to watch for
P/BV (x) 9.5 8.9 7.6 6.6 Trends in cigarette volume.
EV/EBITDA (x) 20.5 19.9 17.6 15.0 Demand outlook for FMCG categories and segmental profitability.
Div. Yield (%) 2.1 2.8 2.4 2.8
Jyothy Labs
Bloomberg JYL IN CMP: INR359 Under Review
Equity Shares (m) 181.0
We expect Jyothy Labs net sales to grow 11% to INR4.3b, driven
M. Cap. (INR b)/(USD b) 65 / 1
mainly by volume growth.
52-Week Range (INR) 368/253
1,6,12 Rel Perf. (%) 14/9/6 EBITDA margin is likely to remain flat YoY at 12.8%.
Financial Snapshot (INR b) We have factored in EBITDA growth of 10.8% YoY to INR556m.
Y/E March 2015 2016 2017E 2018E The stock trades at 39.5x FY18E EPS of INR9.1. The stock has run up
Net Sales 15.1 16.6 18.4 21.1 by 18% since 1QFY17 results. Speculation around Henkel deal will
EBITDA 1.6 2.2 2.6 2.9 overshadow fundamentals in FY17, in our view.
Adj PAT 1.3 0.7 1.4 1.6
Adj PAT for NCD 1.3 0.1 0.7 1.0
Adj.EPS (INR) 7.0 4.1 7.6 9.1
EPS Gr. (%) -41.6 85.0 19.9
BV/Sh (INR) 43.1 46.7 49.8 54.5
RoE (%) 16.8 9.1 15.7 17.4
RoCE (%) 9.7 7.2 13.4 16.3
Valuations
Key issues to watch for
P/E (x) 51.1 87.5 47.3 39.5
Update on new launches and innovations.
P/BV (x) 8.3 7.7 7.2 6.6
EV/EBITDA 42.7 31.3 26.6 23.0
Update on Henkel call option.
Dividend Yield (%) 1.1 1.1 1.1 1.1 Pick-up in Henkel brands performance.
Marico
Bloomberg MRCO IN CMP: INR282 TP: INR305 (+8%) Neutral
Equity Shares (m) 1,289.6
We expect sales to increase 3% YoY to INR15b, with ~10% domestic
M. Cap. (INR b)/(USD b) 364 / 5
volume growth. In our opinion, Parachute, Saffola and VAHO
52-Week Range (INR) 307/190
volumes would expand 6%, 11% and 7%, respectively.
1,6,12 Rel Perf. (%) -2/5/34
We observe copra prices have corrected 29% YoY (two months data
Financial Snapshot (INR b) available for 2QFY17), while kardi oil prices are up 1% YoY. We are
Y/E March 2015 2016 2017E 2018E modeling 200bp YoY gross margin expansion and 100bp EBITDA
Sales 57.2 60.1 63.0 75.3
margin expansion for 2QFY17.
EBITDA 8.6 10.4 11.8 14.3
Adj. PAT 5.7 7.2 8.3 10.2 PAT is projected to grow by 16.2% YoY to INR1.7b.
Adj. EPS (INR) 4.4 5.6 6.4 7.9 The stock trades at 35.8x FY18E EPS of INR7.9; maintain Neutral.
EPS Gr. (%) 18.1 26.1 14.6 22.8
We like MRCOs franchise, portfolio strength, management quality
BV/Sh.(INR) 14.1 16.3 18.5 21.6
and its multiple growth driver model. However, expensive
RoE (%) 36.0 36.9 37.0 39.3
valuations underscore our Neutral stance.
RoCE (%) 27.7 31.4 32.2 34.3
Payout (%) 28.1 60.2 42.0 39.9
Valuations
P/E (x) 63.5 50.3 43.9 35.8
Key issues to watch for
P/BV (x) 19.9 17.4 15.2 13.1
Comments on volume growth trends across key categories.
EV/EBITDA (x) 42.4 34.6 30.6 25.1
Div. Yield (%) 0.4 1.2 1.0 1.1
Outlook for raw materials.
Margin expansion and guidance for the international business.
Nestle India
Bloomberg NEST IN CMP: INR6,597 TP: INR6,846 (+4%) Neutral
Equity Shares (m) 96.4
We expect Nestle Indias net sales to rise 29% YoY to INR22.4b,
M. Cap. (INR b)/(USD b) 636 / 10
largely owing to Maggi impact in the base. Maggi re-launch has
52-Week Range (INR) 7,390/4,990
been successful, with several new variants. It has already clawed
1,6,12 Rel Perf. (%) 3/5/-5
back to 57% market share.
Financial Snapshot (INR b) We estimate EBITDA margin to expand 120bp YoY to 17.8%. EBITDA
Y/E December 2014 2015 2016E 2017E and PAT are projected to increase by 38.4% YoY (to INR4b) and
Sales 98.1 81.2 92.1 109.3
39.2% YoY (to INR2.3b), respectively.
EBITDA 20.5 15.9 18.2 22.6
Adj. PAT 12.5 11.6 10.9 13.7 The stock trades at 46.4x CY17E EPS; maintain Neutral.
Adj. EPS (INR) 129.4 119.9 113.2 142.1
EPS Gr. (%) 6.1 -7.3 -5.5 25.5
BV/Sh.(INR) 294.3 292.3 331.0 385.8
RoE (%) 47.9 40.9 36.3 39.7
RoCE (%) 39.2 40.7 36.3 39.6
Payout (%) 48.7 40.5 48.6 45.7
Valuations
P/E (x) 51.0 55.0 58.3 46.4 Key issues to watch for
P/BV (x) 22.4 22.6 19.9 17.1 Volume trends and management commentary on demand
EV/EBITDA (x) 30.4 38.8 33.8 26.9 environment.
Div. Yield (%) 1.0 0.7 0.8 1.0 Recovery in sales and market share of Maggi.
Page Industries
Bloomberg PAG IN CMP: INR15,453 TP: INR17,800 (+15%) Buy
Equity Shares (m) 11.2
We expect Page to report net sales of INR5.8b, up 25% YoY, led by
M. Cap. (INR b)/(USD b) 172 / 3
double-digit volume growth.
52-Week Range (INR) 15,599/9,770
1,6,12 Rel Perf. (%) 3/16/8 We expect EBITDA margin to remain flat YoY at 22.1% and PAT to
post 35.8% YoY growth to INR828m.
Financial Snapshot (INR b)
Y/E March 2015 2016 2017E 2018E
The stock trades at 42.2x FY18E EPS of INR366.3; maintain Buy.
Sales 15.4 17.8 22.5 28.6
EBITDA 3.2 3.8 4.7 6.3
Adj. PAT 2.0 2.3 3.0 4.1
Adj. EPS (INR) 175.7 208.6 267.4 366.3
EPS Gr. % 27.5 18.7 28.2 37.0
FCF to PAT 0.6 0.8 0.7 0.5
BV/Sh.INR 346.8 453.0 586.7 769.8
RoE (%) 50.7 46.0 45.6 47.6
RoCE (%) 41.6 42.6 46.5 51.3
Key issues to watch for
Payout (%) 48.9 49.1 50.0 50.0
Valuations
Volume trends and management commentary on demand
P/E (x) 87.9 74.1 57.8 42.2 environment.
EV/EBITDA (x) 54.5 45.9 37.0 27.4 Update on foray into kidswear segment.
GST impact.
Quarterly Performance 25% 26% 25% 24% 25% 26% 25% 24% (INR Million)
Y/E MARCH FY16 FY17 FY16 FY17E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Net Sales 4,489 4,621 4,408 4,343 5,719 5,776 5,510 5,458 17,840 22,463
YoY Change (%) 27.4 25.0 25.0 25.7 15.6 25.9
COGS 1,783 1,802 1,653 1,630 2,570 2,282 2,067 2,030 6,913 8,948
Gross Profit 2,705 2,818 2,755 2,712 3,149 3,494 3,444 3,427 10,927 13,515
Gross margin (%) 60.3 61.0 62.5 62.5 55.1 60.5 62.5 62.8 61.2 60.2
Other Expenditure 1,701 1,798 1,852 1,811 2,057 2,218 2,298 2,279 7,150 8,852
% to sales 37.9 38.9 42.0 41.7 36.0 38.4 41.7 41.8 40.1 39.4
EBITDA 1,004 1,021 904 901 1,092 1,276 1,146 1,149 3,776 4,663
Margins (%) 22.4 22.1 20.5 20.7 19.1 22.1 20.8 21.0 21.2 20.8
YoY Change 8.8 25.0 26.8 27.5 18.5 23.5
Depreciation 56 57 57 69 59 51 51 59 238 221
Interest 50 35 34 36 39 21 20 16 153 96
Other Income 56 5 2 3 59 15 5 12 62 90
PBT 953 934 814 800 1,053 1,218 1,079 1,086 3,448 4,436
Tax 327 324 241 241 373 390 345 328 1,116 1,436
Rate (%) 34.3 34.7 29.5 30.2 35.5 32.0 32.0 30.2 32.4 32.4
PAT 626 610 574 558 679 828 734 758 2,332 3,000
YoY Change (%) 8.5 35.8 27.9 35.8 19.0 28.6
E: MOSL Estimates
Pidilite Industries
Bloomberg PIDI IN CMP: INR723 TP: INR850 (+18%) Buy
Equity Shares (m) 512.7
We expect Pidilite (PIDI)s revenue to grow 15% YoY, led by double-
M. Cap. (INR b)/(USD b) 371 / 6
digit volume growth in Consumer and Bazaar segment.
52-Week Range (INR) 770/521
EBITDA margin is expected to expand 150bp YoY to 24.3%. Base
1,6,12 Rel Perf. (%) 5/11/17
quarter 2QFY16 had witnessed 640bp EBITDA margin expansion
Financial Snapshot (INR b) YoY.
Y/E March 2015 2016 2017E 2018E We expect EBITDA and PAT to grow 22.6% and 24.1% YoY,
Sales 48.8 54.1 60.7 73.8 respectively.
EBITDA 8.0 12.2 14.0 16.5 The stock trades at 33.5x FY18E EPS of INR21.6; maintain Buy.
Adj. PAT 5.1 7.6 9.4 11.1 Pidilite is one of our preferred ideas. Dominant leadership position
Adj. EPS (INR) 10.0 14.8 18.3 21.6 in core Adhesives segment imparts strong pricing power. This
EPS Gr. (%) 13.2 47.3 23.7 18.2 coupled with its strategy of building adjacencies in portfolio and
BV/Sh.(INR) 44.3 54.3 66.2 84.2 potential gains from distribution outreach drives our long-term
RoE (%) 24.3 29.9 30.3 28.7 preference for Pidilite.
RoCE (%) 23.6 28.5 28.7 27.4
Payout (%) 28.7 28.5 26.6 13.9
Valuations Key issues to watch for
P/E (x) 72.2 49.0 39.6 33.5 Volume growth in Fevicol.
P/BV (x) 16.3 13.3 10.9 8.6 Outlook for VAM prices.
EV/EBITDA (x) 45.6 29.9 25.7 21.5 Outlook for industrial and construction chemical segments.
Div. Yield (%) 0.4 0.6 0.7 0.4 Progress on Elastomer project (if any).
Radico Khaitan
Bloomberg RDCK IN CMP: INR122 TP: INR130 (+7%) Neutral
Equity Shares (m) 132.6
We expect Radicos (RDCK)s revenue to increase 9% to INR4.3b,
M. Cap. (INR b)/(USD b) 16 / 0
aided by 3% volume growth. Karnataka price hike impact will be
52-Week Range (INR) 131/84
witnessed in 2QFY17.
1,6,12 Rel Perf. (%) 22/15/33
The premium segment should continue to accelerate, aided by
Financial Snapshot (INR b) uptrading (premiumization) and RDCKs strategy to defocus on
Y/E March 2015 2016 2017E 2018E regular brands (given the harsh taxation environment and
Sales 14.9 16.4 17.6 20.1
unfavorable raw material scenario).
EBITDA 1.9 2.1 2.0 2.3
Adj. PAT 0.9 0.9 0.9 1.1 We expect operating margin to contract 100bp YoY to 13%.
Adj. EPS (INR) 6.6 6.9 6.4 8.3 PAT is estimated to grow 2.8% YoY to INR238m.
EPS Gr. (%) 4.2 3.9 -7.2 29.7
BV/Sh.(INR) 64.7 70.2 75.5 82.3 The stock trades at 14.7x FY18E EPS of INR8.3. The stock has run up
RoE (%) 10.5 10.2 8.8 10.5 by 31% since 1QFY17 results; we downgrade it to Neutral.
RoCE (%) 9.0 8.7 7.6 8.5
Payout (%) 11.5 10.8 15.0 15.0
Valuations
P/E (x) 18.4 17.7 19.1 14.7
P/BV (x) 1.9 1.7 1.6 1.5 Key issues to watch for
EV/EBITDA (x) 12.8 11.7 11.4 9.7 Further price hikes, if any.
Div. Yield (%) 0.6 0.6 0.8 1.0 Price trend and outlook for ENA.
United Spirits
Bloomberg UNSP IN CMP: INR2,424 TP: INR3,070 (+27% Buy
Equity Shares (m) 145.3
We expect United Spirits (UNSP)s revenue to increase 11.5% YoY to
M. Cap. (INR b)/(USD b) 352 / 5
INR21.8b and have built-in 2% YoY volume growth. In addition, we
52-Week Range (INR) 3,645/2,120
forecast Prestige+ portfolio to grow in high single digit to double
1,6,12 Rel Perf. (%) 5/-15/-29
digits. Addition of Diageo portfolio does aid revenue performance.
Financial Snapshot (INR b) We build in EBITDA margin contraction of 40bp YoY to 13.5% and
Y/E March 2015 2016 2017E 2018E 8.3% EBITDA growth YoY to INR2.9b. We estimate 68.2% PAT
Sales 85.8 83.4 93.3 106.6
growth in 2QFY17 mainly due to low interest costs and low other
EBITDA 6.8 8.8 11.3 14.7
income in the base quarter.
PAT -0.2 2.4 5.4 8.2
EPS (INR) -1.6 16.7 37.5 56.5 Maintain Buy. UNSP is among our long-standing top ideas in the
EPS Gr. (%) NA LP 124.0 50.8 large cap Consumer space. We expect benefits of premiumization
BV/Sh.(INR) 45.4 123.1 163.1 219.9 and cost cutting, driven by the new management, to bolster
RoE (%) -1.2 19.8 26.2 25.7 margins in the medium term.
RoCE (%) -6.1 8.5 12.8 16.4
Payout (%) 0.0 0.0 0.0 4.4
Valuations Key issues to watch for
P/E (x) -1,551.9 144.9 64.7 42.9 Trends in volume growth, premiumization and margins.
P/BV (x) 53.3 19.7 14.9 11.0 Price trend and outlook for ENA.
EV/EBITDA (x) 53.3 40.7 30.8 23.1
Impact of ban on alcohol in certain states.
Div. Yield (%) 0.0 0.0 0.0 0.1
Financials - Banks
Technology
Company name Trading gains and lower cost of funds to drive earnings
Axis Bank
PSBs asset quality to show improvement; PBs to utilize one off gains to clean up
Bank of Baroda
Bank of India
We expect earnings to improve sequentially, as 2HFY16 and 1QFY17 earnings
Canara Bank
were marred by (a) AQR related issues, and (b) accelerated stress addition and
DCB Bank
provisioning. While provisions are likely to remain elevated (due to the lag
Equitas Holdings
impact of NPL addition), we believe increased activity on monetization of non-
Federal Bank
core assets, reduction in COF, and bond gains would support earnings.
HDFC Bank
ICICI Bank
NIMs should largely be stable QoQ (but fall YoY for private banks), as (a) banks
IDFC Bank
have refrained from cutting the base rate/MCLR in 1HFY17, which would
Indian Bank support loan yields, (b) cost of deposits has continued to fall, and (c) base has
IndusInd Bank been reset in 2H, led by high slippages from the RBIs AQR. While there are
Kotak Mahindra Bank positive factors at play for NIMs, intense competition in the refinancing business
Oriental Bank of Commerce and in retail loans is likely to keep incremental lending yields under pressure
Punjab National Bank Gross stress addition is likely to moderate sharply QoQ for state-owned banks
State Bank of India but would still be at elevated levels. We expect large private banks in the
Union Bank of India corporate lending segment to take advantage of strong profits on sale of
Yes Bank investments to clean up their balance sheets. Hence, provisioning for them
should stay elevated. For some state-owned banks, recoveries have improved;
however, ageing of NPAs would weigh on earnings.
The governments focus on fiscal discipline and addressing policy roadblocks,
the RBIs support to address stress issues in the system (S4A, SDR, 5:25, etc),
banks intense efforts on recoveries, and deleveraging of corporate balance
sheets augur well for Financials. Improving auto/CV sales, higher cement
dispatches, the RBIs consumer confidence survey, and rising activity in stalled
projects point to a gradual recovery. Our key picks are ICICIBC, YES and HDFCB
among private sector banks. We like SBIN and BOB among state-owned banks.
Share of trading gains in Yields down sharply QoQ; profit on sale of investments to support earnings
overall earnings to remain During the quarter, bond yields declined ~50bp, which should benefit trading
high during the quarter
income. Trading gains are likely to be meaningful. To provide for balance sheet
stress, banks have monetized strategic investments, may repatriate profit on foreign
operations and book trading gains on the sale of HTM security in OMO.
MTM/realized losses on equity exposure (taken via SDRs) would marginally negate
gains on the investment portfolio.
5.0
6.5
8.0
9.5
11.0
0.2
0.8
1.4
2.0
Sep-05 1QFY13 47.6 16.5
Sep-06
October 2016
2QFY13 48.1 15.9
Sep-06 3QFY13 50.3 15.1
14.0 Dec-07
Sep-07 4QFY13 53.5
1QFY14 54.0 13.5
Sep-08 17.5 Mar-09
2QFY14 56.5
3QFY14 57.6 14.5
Sep-09 Jun-10
Loans (INR t)
4QFY14 60.1 14.3
1.9
Dec-12
Sep-12 4QFY15 65.4 9.0
Sep-13 Mar-14
7.2
2QFY16 68.3 9.5
9.2
Chg YoY (%)
Sep-14 3QFY16 70.2 11.1
Sep-15
Exhibit 43: State-owned banksone-year forward P/BV
6.8
Sep-16
3.7 Mar-09
4QFY13 2.9 2QFY14 73.3 14.4
3.7
1QFY14 2.8 3QFY14 75.0 15.9
3.7 Jun-10
2QFY14 2.8 4QFY14 77.4 14.6
3.8
PSU
Deposits (INR t)
Private
2QFY15 2.7 Dec-12
4.1 4QFY15 85.3 10.7
3QFY15 2.7
4.0
4QFY15 2.6 1QFY16 87.1 11.0
4.0 Mar-14
1QFY16 2.6 2QFY16 91.6 11.3
4.0
2QFY16 2.6 3QFY16 91.8 10.9
4.0
Chg YoY (%)
2.4 Jun-15
3QFY16
Exhibit 46: Deposit growth remains at sub-10% levels
4QFY16 2.5
4.0 1QFY17 96.0 9.7
Exhibit 44: Private sector banksone-year forward P/BV
124
2QFY17E 2.6 4.0
September 2016 Results Preview | Sector: Financials - Banks
September 2016 Results Preview | Sector: Financials - Banks
Exhibit 49: State-owned banks net slippage ratio expected Exhibit 50: Provisions to PPoP (%) to remain elevated in case
to decline QoQ but remain elevated (%, annualized) of state-owned banks
Net Slippage Ratio (%) 171
11.0
PSBs PBs
128
8.4
73 79 73
55 55 61 62
52 59
3.3
3.2
51
3.1
48
2.7
2.7
2.5
40 38
2.1
2.1
2.0
2.0
1.9
2.6
1.9
1.5
30 26
2.0
16 15 18 20 17 25
1.9
1.1
1.1
1.1
17 11 13
20 13
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
Source: MOSL, Company Source: MOSL, Company
Exhibit 51: Relative performance3 months (%) Exhibit 52: Relative performance1-year (%)
Sensex Index MOSL Financials Index Sensex Index MOSL Financials Index
115 130
110 115
100
105
85
100
70
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
95
Jun-16 Jul-16 Aug-16 Sep-16
Axis Bank
Bloomberg AXSB IN CMP: INR551 TP: INR630 (+14%) Buy
Equity Shares (m) 2382.8
We expect loan growth to be healthy at ~19% YoY. Deposit growth
M. Cap. (INR b)/(USD b) 1313 / 20
is likely to be lower at ~16% YoY AXSB is utilizing infra bonds and
52-Week Range (INR) 638 / 367
the refinancing window effectively. Sustainability of mid-high-teens
1,6,12 Rel Perf. (%) -7 / 11 / 3
CASA growth rate would be a key factor to monitor.
Financial Snapshot (INR b) NIM is likely to be stable QoQ at ~3.8%, despite (a) impact of high
Y/E March 2016 2017E 2018E 2019E share of high-quality incremental corporate growth (refinancing),
NII 168.3 187.7 216.2 250.7 and (b) expected higher stress addition during the quarter. NIM
OP 161.0 181.2 202.4 228.5 would be supported by expected sharp fall in cost of funds QoQ.
NP 82.2 75.9 89.0 103.1 Strong unsecured loan growth would provide yield cushion.
NIM (%) 3.8 3.6 3.5 3.4 AXSB had created a stressed asset watch list of INR252.5b (both
EPS (INR) 34.5 31.8 37.4 43.3 fund-based and non-fund based) in 4QFY16, of which 60% is
EPS Gr. (%) 11.2 -7.7 17.3 15.8 expected to slip into NPA category over FY17-18. As at the end of
BV/Sh. (INR) 217 243 274 310
1QFY17, the watch list stood at INR228.6b (~12% of corporate
ABV/Sh. (INR) 210 228 257 296
customer assets). We continue to expect relatively higher
RoE (%) 17.1 13.8 14.4 14.8
proportion of slippages in FY17, leading to higher credit costs. High
RoA (%) 1.7 1.3 1.3 1.3
provisions may be partially compensated by strong trading gains.
Payout (%) 15.0 17.6 17.6 17.6
AXSB trades at 1.9x FY18E BV and 13.2x FY18E EPS. Buy.
Valuations
P/E(X) 15.6 16.9 14.4 12.4
Key issues to watch for
P/BV (X) 2.5 2.2 2.0 1.7 Quantum of slippages from stressed asset watch list.
P/ABV (X) 2.6 2.4 2.1 1.8 Quantum of loans rescheduled under the 5:25, SDR and S4A
Div. Yield (%) 0.9 0.9 1.0 1.2 schemes.
Bank of Baroda
Bloomberg BOB IN CMP: INR169 TP: INR203 (+20%) Buy
Equity Shares (m) 2310.5
We expect balance sheet consolidation to continue, with a YoY
M. Cap. (INR b)/(USD b) 390 / 6
decline in loans/deposits in absolute terms. BOBs focus would
52-Week Range (INR) 191 / 109
remain on profitable growth, and incremental growth would be
1,6,12 Rel Perf. (%) 2 / -1 / -15
driven by granular Retail, Agri and SME credit.
Expect margins to expand sequentially to 2.3%, led by lower
Financial Snapshot (INR b)
Y/E March 2016 2017E 2018E 2019E
interest income reversals; net slippage ratio is likely to moderate
NII 127.4 146.0 167.8 191.4 (3.5% in 1QFY17), led by expected decline in sequential slippages
OP 88.2 112.4 125.8 140.6 and continued strong momentum in upgrades/recoveries.
NP -54.0 32.6 46.2 58.3 Fee income would remain muted. However, higher share of non-
NIM (%) 2.0 2.3 2.4 2.4 core income should support earnings.
EPS (INR) -23.4 14.1 20.0 25.2
PAT should more than double sequentially, but in absolute terms, it
EPS Gr. (%) NM NM 41.5 26.4
would still be at muted levels.
BV/Sh. (INR) 146.4 157.3 172.6 192.0
ABV/Sh. (INR) 91.8 102.3 119.0 142.5 Bulk of the asset quality stress has been taken in the last three
RoE (%) -15.3 9.3 12.1 13.9 quarters. We expect only a marginal increase in GNPAs in 2QFY17.
RoA (%) -0.8 0.5 0.6 0.7 The stock trades at 8.5x FY18E EPS and 0.9x FY18E BV. Buy.
Div. Payout (%) 0.0 23.2 23.2 23.2
Valuations
P/E(X) NM 11.8 8.4 6.6 Key issues to watch for
P/BV (X) 1.1 1.1 1.0 0.9 Stress addition, mainly from international book.
P/ABV (X) 1.8 1.6 1.4 1.2 Guidance on loan growth, margins and operating expenses.
Div. Yield (%) 0.0 1.7 2.4 3.0 Proceeds from stake sale in non-core assets.
Bank of India
Bloomberg BOI IN
CMP: INR116 TP: INR110 (-5%) Neutral
Equity Shares (m) 817.3
Continued asset quality strain and capital conservation efforts
M. Cap. (INR b)/(USD b) 95 / 1
would keep loan/deposit growth below the industry averageflat
52-Week Range (INR) 149 / 79
to marginally lower on a YoY basis. We expect NIM to expand
1,6,12 Rel Perf. (%) 0 / 4 / -21
marginally QoQ to ~2.1%, led by lower interest income reversals.
Financial Snapshot (INR b) Non-interest income is likely to grow ~50% YoY, led by higher non-
Y/E March 2016 2017E 2018E 2019E
core income. Fee income is expected to grow ~30% YoY, albeit on a
NII 117.2 118.7 141.0 162.6
lower base (-20% YoY in 2QFY16).
OP 60.4 64.8 83.7 98.6
NP -60.9 -10.1 20.2 25.6 We expect operating profit to decline 4.3% QoQ (but grow 8.5%
NIM (%) 2.1 2.1 2.3 2.3 YoY), driven by continued deterioration in asset quality, keeping
EPS (INR) -74.5 -10.8 21.6 27.3 provisioning elevated. We expect loss before taxes of INR2.9b v/s a
EPS Gr. (%) NM NM -300.6 26.8 loss of INR7.4b in 1QFY17 and INR11.3b in 2QFY16.
ROE (%) -25.2 -4.6 8.8 10.4
ROA (%) -1.0 -0.2 0.3 0.3
BOI trades at 0.3x FY18E BV and 4.7x FY18E EPS. Maintain Neutral.
BV/Sh. (INR) 266 236 253 274 Key issues to watch for
ABV/Sh. (INR) 44 69 100 159
Stress addition trends and outlook for FY17.
Div. Payout (%) 0.0 0.0 23.2 23.2
Valuations
Upgrade/recovery trends; management is targeting INR175b in
P/E(X) -1.5 -10.7 5.3 4.2 FY17 v/s INR85.5b in FY16.
P/BV (X) 0.43 0.49 0.46 0.42 Quantum of loans rescheduled under the 5:25 scheme.
P/ABV (X) 2.63 1.68 1.15 0.73 Outlook on balance sheet growth and further capital infusion.
Div. Yield (%) 0.0 0.0 3.8 4.8 Update on asset monetization plan to increase Tier I ratio.
Canara Bank
Bloomberg CBK IN CMP: INR319 TP: INR305 (-4%) Neutral
Equity Shares (m) 543.0
We expect slippages to moderate (3.1% of loans), given bulk of the
M. Cap. (INR b)/(USD b) 173 / 3
stress has been recognized in the last three quarters, driven by
52-Week Range (INR) 322 / 156
RBIs Asset Quality Review (AQR) and its second-level impact.
1,6,12 Rel Perf. (%) 14 / 49 / 7
Asset quality deterioration would keep credit costs elevated. We
Financial Snapshot (INR b) expect credit costs at ~175bp for the quarter.
Y/E March 2016 2017E 2018E 2019E Low balance sheet growth and subdued margins (+10bp QoQ, -10bp
NII 97.6 101.1 114.3 127.8
YoY) would mar core PPoP growth (-36% YoY).
OP 71.5 80.4 92.4 104.9
Loan/deposit growth is expected to be muted at 1%/-2% YoY.
NP -28.1 14.6 20.0 27.4
Like other state-owned banks, we expect CBKs fee income growth
NIM (%) 1.9 1.9 2.0 2.0
EPS (INR) -51.8 26.8 36.8 50.5 to be muted. However, non-core income could surprise positively.
EPS Gr. (%) NM NM 37.2 37.4 Overall non-interest income is likely to grow ~25%.
BV/Sh. (INR) 477 498 527 565 Despite just 4% PPoP de-growth, we expect PBT to decline 33% YoY.
ABV/Sh. (INR) 227 271 335 421 We upgrade earnings by ~6% over FY16-19 to factor in higher
RoE (%) -10.8 5.5 7.2 9.3
trading gains. NIMs and better than expected trading gains can
RoA (%) -0.5 0.3 0.3 0.4
Div. Payout (%) 0.0 20.9 23.2 23.2
provide upside to our estimates. The stock trades at 0.4x FY18E BV
Valuations and 5.4x FY18E EPS. Maintain Neutral.
P/E (x) -6.1 11.7 8.6 6.2 Key issues to watch for
P/BV (x) 0.66 0.63 0.60 0.56 Quantum of loans rescheduled under the 5:25, SDR and S4A
P/ABV (x) 1.39 1.16 0.94 0.75
schemes.
Div. Yield (%) 0.0 1.5 2.3 3.2
Outlook on balance sheet growth.
Update on asset monetization plan to increase Tier I ratio.
Quarterly Performance (INR Million)
FY16 FY17 FY16 FY17E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Interest Income 111,397 112,675 108,821 107,329 102,017 104,823 106,287 109,144 440,221 422,271
Interest Expense 86,232 86,210 86,555 83,592 78,943 80,377 80,754 81,085 342,588 321,158
Net Interest Income 25,165 26,465 22,266 23,738 23,074 24,446 25,533 28,060 97,634 101,113
% Change (Y-o-Y) 3.6 11.8 -6.5 -4.5 -8.3 -7.6 14.7 18.2 1.0 3.6
Other Income 11,130 12,105 11,686 13,832 15,847 15,126 15,105 17,061 48,752 63,138
Net Income 36,295 38,570 33,952 37,570 38,921 39,572 40,639 45,120 146,386 164,251
Operating Expenses 16,259 19,129 18,427 21,104 20,732 20,840 20,069 22,248 74,919 83,889
Operating Profit 20,036 19,441 15,524 16,466 18,189 18,732 20,569 22,872 71,467 80,362
% Change (Y-o-Y) 11.6 19.6 -13.6 -5.0 -9.2 -3.6 32.5 38.9 2.8 12.4
Other Provisions 13,597 12,123 14,289 63,315 14,929 13,650 15,150 15,827 103,324 59,556
Profit before Tax 6,438 7,318 1,236 -46,850 3,260 5,082 5,419 7,046 -31,858 20,806
Tax Provisions 1,650 2,029 386 -7,795 970 1,525 1,626 2,122 -3,730 6,242
Net Profit 4,788 5,289 850 -39,055 2,290 3,557 3,794 4,924 -28,128 14,565
% Change (Y-o-Y) -40.7 -15.6 -87.0 NM -52.2 -32.7 346.5 NM NM NM
Operating Parameters
NIM (Rep, %) 2.2 2.2 2.2 2.2 2.2 2.2
NIM (Cal, %) 2.0 2.1 1.7 1.9 1.9 2.0 2.0 2.1 1.9 2.0
Deposit Growth (%) 10.0 5.2 6.1 1.3 -1.4 -2.2 -0.4 9.0 1.3 9.0
Loan Growth (%) 7.0 3.9 6.3 -1.6 -0.9 1.4 1.7 10.0 -1.6 10.0
CD Ratio (%) 68.7 66.6 67.7 67.7 69.0 69.0 69.0 68.3 67.7 68.3
Tax Rate (%) 25.6 27.7 31.2 16.6 29.8 30.0 30.0 30.1 11.7 30.0
Asset Quality
Gross NPA (INR b) 130.8 140.2 198.1 316.4 323.3 323.8 324.3 323.9 316.4 323.9
Gross NPA (%) 4.0 4.3 5.8 9.4 9.7 9.5 9.3 8.7 9.4 8.7
E: MOSL Estimates
DCB Bank
Bloomberg DCBB IN CMP: INR127 Under Review
Equity Shares (m) 284.4
Loan growth (28% YoY) and deposit growth (20% YoY) would be
M. Cap. (INR b)/(USD b) 36 / 1
significantly above industry average.
52-Week Range (INR) 144 / 69
We expect NII to grow 23% YoY, led by strong loan growth and a
1,6,12 Rel Perf. (%) 10 / 47 / -17
robust margin performance (+10bp YoY). We expect margins to stay
broadly stable QoQ, led by higher pricing competition in mortgages.
Financial Snapshot (INR b)
Y/E MARCH 2016 2017E 2018E 2019E
Non-interest income is expected to grow by ~43% YoY, led by
NII 6.2 7.6 9.2 11.3 strong growth in trading gains. Overall, we expect revenue growth
OP 3.5 4.1 4.7 5.9 to remain strong at 28% YoY and PPP growth to be 29% YoY. We
NP 1.9 2.2 2.5 3.1 model opex growth of 27% YoY, led by the branch expansion
NIM (%) 3.9 3.9 3.8 3.8 strategy. We expect PBT/PAT to grow 40%/49% YoY.
EPS (INR) 6.8 7.7 8.7 11.0
Focus on granular SME and retail loans, along with working capital
EPS Gr. (%) 0.9 12.2 14.0 25.2
corporate loans, has led to stable asset quality; we expect this trend
BV/Sh. (INR) 61.6 69.3 78.0 89.0
RoE (%) 11.8 11.7 11.9 13.1 to continue.
RoA (%) 1.1 1.0 0.9 1.0 DCBB trades at 1.3x FY18E BV and 11.3x FY18E EPS. We roll forward
Valuations the target price by a quarter. At the revised target price of INR126,
P/E (x) 18.4 16.4 14.4 11.5 upside is limited. Rating for DCB has been put under review as we
P/BV (x) 2.0 1.8 1.6 1.4 await for more clarity over core operating trend.
Div. Yield (%) 0.0 0.0 0.0 0.0
Key issues to watch for
Update and commentary on balance sheet growth strategy.
CASA ratio and traction on NIMs.
Equitas Holdings
Bloomberg EQUITAS IN CMP: INR183 TP: 220 (+20%) Neutral
Equity Shares (m) 335.7
We expect NII growth of 38% YoY, led by strong loan growth of
M. Cap. (INR b)/(USD b) 61 / 1
40%+ YoY, aided by increased focus on SME and housing credit
52-Week Range (INR) 206 / 134
growth. Traction in MFI and vehicle loans would be maintained.
1,6,12 Rel Perf. (%) -/-/-
Margins would decline QoQ, led by (a) prepayment charges on
Financial Snapshot (INR b)
Y/E March 2016 2017E 2018E 2019E
borrowings (as replaced with bulk deposits), (b) a month impact of
NII 5.1 8.7 11.6 15.4 regulatory requirement of CRR and SLR, and (c) excess liquidity in
OP 3.2 4.0 4.6 6.3 the balance sheet due to transition.
NP 1.7 2.0 2.2 2.9
Non-interest income would be ~INR390m (+5% QoQ). Operating
NIM (%) 11.6 11.1 9.0 8.6
expenses are expected to grow 33% QoQ (v/s flat total income),
EPS (INR) 6.2 6.0 6.6 8.7
EPS Gr. (%) 56.1 -2.3 9.7 30.6 driven by costs associated with transition from an NBFC to an SFB,
BV/Sh. (INR) 50 67 74 82 leading to moderate PPP growth (-30% QoQ).
ABV/Sh. (INR) 49 66 72 79 We have upgraded estimates by ~5% to factor in better than
RoE (%) 13.3 11.3 9.4 11.1
expected margin. Maintain Neutral.
RoA (%) 3.0 2.2 1.5 1.4
Div. Payout (%) 0.0 0.0 0.0 0.0
Valuations
P/E(X) 29.1 29.8 27.1 20.8
P/BV (X) 3.6 2.7 2.4 2.2 Key issues to watch for
P/ABV (X) 3.7 2.7 2.5 2.3 Update on the transition progress.
Div. Yield (%) 0.0 0.0 0.0 0.0 Commentary on growth and asset quality in MFI.
Federal Bank
Bloomberg FB IN CMP: INR75 TP: INR90 (+20%) Buy
Equity Shares (m) 1,719.0
We expect 21% YoY (4% QoQ) loan growth, aided by greater focus
M. Cap. (INR b)/(USD b) 128 / 2
on corporate credit growth. Traction in SME, agri and retail loans
52-Week Range (INR) 77 / 41
would be maintained. Improvement in CD ratio YoY would aid
1,6,12 Rel Perf. (%) 7 / 48 / 6
margins. We expect NIM to improve 20bp YoY and remain stable
Financial Snapshot (INR b)
QoQ at 3.3%.
Y/E Mar 2016 2017E 2018E 2019E
NII 25.0 29.7 34.7 41.1 Non-interest income would grow by 50%+ YoY, led by strong
OP 14.2 17.4 20.3 24.5 trading gains, leading to strong PPoP growth of 38% YoY.
NP 4.8 7.4 8.9 10.6
We expect trading gains to be utilized for shoring up the coverage
NIM (%) 3.2 3.3 3.2 3.2
EPS (INR) 2.8 4.3 5.2 6.1
ratio. Accordingly, we factor in higher credit cost. PBT is expected to
EPS Gr. (%) -52.9 56.3 19.8 18.4 grow 14% YoY.
BV/Sh. (INR) 47 50 54 59 On the back of higher trading gains and expected traction in loan
ABV/Sh. (INR) 43 45 51 57
growth, we have upgraded estimates by ~10% over FY17-19. We
ROE (%) 6.0 8.9 9.9 10.8
roll forward our target price by a quarter. We maintain Buy with a
ROA (%) 0.5 0.7 0.7 0.7
Payout (%) 29.3 23.2 23.2 23.2 revised target price of INR90 (1.6x FY18E BV). FB trades at 1.1x
Valuations FY18E BV and 13.4x FY18E EPS.
P/E(X) 26.2 16.7 14.0 11.8
Key issues to watch for
P/BV (X) 1.5 1.4 1.3 1.2
Outlook on asset quality.
P/ABV (X) 1.7 1.6 1.4 1.3
Div. Yield (%) 1.0 1.2 1.4 1.7 Strategy on balance sheet growth and capital raising.
HDFC Bank
Bloomberg HDFCB IN CMP: INR1,287 TP: INR1,500 (+17%) Buy
Equity Shares (m) 2528.2
We expect healthy loan growth of ~21% YoY (~2x the system), aided
M. Cap. (INR b)/(USD b) 3253 / 49
by higher growth in retail products and continued momentum in
52-Week Range (INR) 1,318 / 929
corporate loans.
1,6,12 Rel Perf. (%) 1 / 9 / 13
Fee income growth would continue to lag loan growth in the near
term; however, it is expected to remain healthy at ~18% YoY, led by
Financial Snapshot (INR b)
Y/E MARCH 2016 2017E 2018E 2019E
continued traction in retail fees.
NII 275.9 335.5 399.2 484.4 Computed NIM is likely to be stable QoQ. Despite strong expansion,
OP 213.6 256.8 306.3 375.0 opex growth is expected to be 21% YoY, as the benefit of
NP 123.0 147.8 177.6 213.8 digitalization is reflected in lower sourcing cost.
NIM (%) 4.7 4.8 4.7 4.6 Strong operating performance (24%+ PPP growth) and healthy asset
EPS (INR) 48.6 58.4 70.2 84.6
quality (GNPA to remain stable QoQ at 1%) would lead to 20%+ YoY
EPS Gr. (%) 19.3 20.2 20.2 20.4
earnings growth in 2QFY17.
BV/Sh. (INR) 287.3 332.2 386.1 450.9
ABV/Sh. (INR) 283.7 326.5 379.0 438.7 HDFCB trades at 3.1x FY18E BV and 16.8x FY18E EPS. Comfort on
RoE (%) 18.3 18.9 19.6 20.2 earnings (~20% CAGR over FY16-19) remains high. Maintain Buy.
RoA (%) 1.9 1.9 1.9 1.9
Key issues to watch for
Payout (%) 22.9 23.4 23.4 23.4
Performance in retail loan portfolioespecially in segments like
Valuations
P/E(X) 26.5 22.1 18.4 15.3 CV/CE, where commentary from industry experts is positive.
P/BV (X) 4.5 3.9 3.3 2.9 Trends in digital banking/payment industry and various initiatives
P/ABV (X) 4.6 4.0 3.4 2.9 by the bank.
Div. Yield (%) 0.7 0.9 1.1 1.3 Overall B/S growth outlook with anticipated economic recovery.
ICICI Bank
Bloomberg ICICIBC IN CMP: INR256 TP: INR320 (+25%) Buy
Equity Shares (m) 5813.3 We expect moderate loan growth of 12-13% YoY (similar to the last
M. Cap. (INR b)/(USD b) 1,488 / 22 quarter) to continue. Retail loan growth has picked up over the last
52-Week Range (INR) 293 / 181 two years and is expected to remain a key driver of loan growth.
1,6,12 Rel Perf. (%) -1 / -4 / -12 Moderate growth, coupled with a YoY decline in NIMs (due to a
Financial Snapshot (INR b) higher share of non interest earning assets), should lead to broadly
Y/E March 2016 2017E 2018E 2019E flat NII on YoY basis. On a QoQ basis, we expect NIM to remain
NII 212.2 214.0 250.8 294.1 stable, led by a fall in cost of funds.
OP 238.6 263.9 242.1 273.4 We have factored in ~5% YoY growth in fees income, led by
NP 97.3 100.7 116.4 138.3 moderate corporate loan growth. We build in ~INR54b net capital
NIM (%) 3.6 3.2 3.3 3.4 gains from stake sale in ICICI Pru Life towards the end of quarter.
EPS (INR) 16.7 17.3 20.0 23.8 Gross slippages are expected to remain high in 2QFY17 as well.
EPS Gr (%) -13.2 3.5 15.6 18.9 Outstanding watch list (fund based and non-fund based) stood at
BV/Sh (INR)* 132.9 145.2 159.5 176.3 INR420b in 1QFY17.
ABV/Sh (INR)* 117.3 121.6 138.8 160.1 We expect PPoP (ex capital gains from stake sale) to grow by 4%
RoE (%) 11.3 10.5 11.2 12.3 YoY; however, led by higher credit cost, we factor in a 20% YoY
RoA (%) 1.4 1.3 1.4 1.4 decline in earnings. We expect one-off stake sale gains to be utilized
Div. Payout (%) 0.0 0.0 0.0 0.0 for provisions. ICICIBC trades at 0.9x FY18E core BV and 7.2x FY18E
Valuations EPS. Buy.
AP/E (x) 11.4 10.2 8.2 6.3
AP/BV (x) 1.4 1.2 1.0 0.9
AP/ABV (x) 1.6 1.4 1.2 0.9
Key issues to watch for
Div. Yield (%) 2.0 1.8 2.1 2.5 Movement of watch list accounts.
* BV adj for invt in subsidiaries Plans on monetization of stakes in various ventures.
Outlook on asset quality and trend on further relapse from RL.
Quantum of loans rescheduled under the 5/25 scheme.
IDFC Bank
Bloomberg IDFCB IN CMP: INR79 Under review
Equity Shares (m) 3,392.6 We expect 16% YoY (6% QoQ) loan growth, aided by greater focus
M. Cap. (INR b)/(USD b) 268 / 4
on retail banking. Though incremental deposits raised in 2Q would
52-Week Range (INR) 83 / 43
aid margins, we expect NIM (calculated) to decline to ~2.1% (v/s
1,6,12 Rel Perf. (%) -/-/-
2.5% in 1Q), led by lower asset yields.
Financial Snapshot (INR b) Non-interest income would be ~INR3b (+40% QoQ), led by strong
Y/E March 2H2016 2017E 2018E 2019E trading gains. Operating expenses are likely to grow 18% QoQ (v/s
NII 8.5 21.2 27.8 34.7 14% QoQ growth in total income), driven by costs associated with
OP 7.4 18.8 22.8 29.7 expansion of retail and rural banking franchise, leading to moderate
NP 4.7 11.6 14.2 18.3 PPP growth of 11% QoQ.
NIM (%) 2.5 2.4 2.5
EPS (INR) 3.4 4.2 5.4 We expect ~INR230m provisions (broadly stable QoQ). PAT is
EPS Gr. (%) 22.9 28.8 expected to grow ~13% QoQ to INR3b, largely helped by strong
BV/Sh. (INR) 40.2 42.8 46.0 50 profit on sale of investments.
ABV/Sh. (INR) 37.8 40.4 43.2 47
We have upgraded earnings by ~5% over FY16-19 to factor in higher
RoE (%) 8.2 9.4 11.2
RoA (%) 1.2 1.1 1.2 trading gains and marginally better margins. We also roll forward
Payout (%) 20.0 20.0 20.0 20.0 target price by a quarter to INR80. We wait to see trends in the
Valuations quarter related to margins and outlook on growth. We revise our
P/E(X) 16.1 13.1 10.2 rating from Buy to Under Review.
P/BV (X) 1.3 1.2 1.1
P/ABV (X) 1.4 1.3 1.2 Key issues to watch for
Div. Yield (%) 1.2 1.5 2.0 Outlook on balance sheet growth and costs.
Retail franchise building plans and update.
Indian Bank
Bloomberg INBK IN CMP: INR225 TP: INR260 (+16%) Buy
Equity Shares (m) 480.3
On a lower base, we expect an uptick in loan growth to 5.5% v/s
M. Cap. (INR b)/(USD b) 108 / 2
1.5% in 1QFY17 and 2.5% YoY in FY16. Deposits are also expected to
52-Week Range (INR) 242 / 76
grow ~7% YoY. Decline in cost of funds would keep margins stable
1,6,12 Rel Perf. (%) 3 / 103 / 60
to improving at 2.6%.
Financial Snapshot (INR b)
Y/E March 2016 2017E 2018E 2019E
Fee income would be subdued on lower corporate loan growth.
NII 44.5 51.9 58.7 66.8 Trading gains growth is expected to be muted, given unfavorable
OP 30.3 36.4 41.1 45.7 base. Overall, we expect 5% YoY growth in non-interest income.
NP 7.1 12.1 15.1 17.8 Asset quality stress is expected to be largely behind, as the bank has
NIM (%) 2.5 2.7 2.7 2.7 recognized entire SDR (INR11b) and ~80% of 5:25 refinanced
EPS (INR) 14.8 25.3 31.4 37.1
accounts as NPA. We expect slippage ratio to moderate to 2%
EPS Gr. (%) -29.2 70.6 24.1 18.2
(annualized) v/s 7.5% in 2HFY16 and 2.7% in 1QFY17. Expect credit
BV/Sh. (INR) 281 300 324 352
ABV/Sh (INR) 202 228 263 303 cost of 1.5%, as INBK looks to improve provision coverage (38% in
RoE (%) 5.5 8.7 10.0 11.0 1QFY17).
RoA (%) 0.4 0.6 0.6 0.7 INBK trades at 0.5x FY18E BV and 5.2x FY18E EPS. Maintain Buy.
Div. Payout (%) 23.2 23.2 23.2 23.2
Key issues to watch for
Valuations
P/E (x) 12.6 7.4 5.9 5.0 Outlook on business growth and asset quality remains the key
P/ BV (x) 0.66 0.6 0.6 0.5 factor to monitor.
P/ABV (x) 0.92 0.8 0.7 0.6 Quantum of loans rescheduled under the 5/25 scheme.
Div. Yield (%) 0.8 2.7 3.4 4.0 View on margins with an improvement in liquidity and lower
interest rates.
IndusInd Bank
Bloomberg IIB IN CMP: INR1,232 TP: INR1,385 (+12%) Buy
Equity Shares (m) 595.0 We expect strong loan/deposit growth of ~29%/~31% YoY in
M. Cap. (INR b)/(USD b) 733 / 11
2QFY17. Continuation of positive growth trend in the CV/CFD
52-Week Range (INR) 1,255 / 799
segment would remain a key factor to monitor. Overall, NIM is
1,6,12 Rel Perf. (%) 5 / 17 / 21
likely to remain largely stable QoQ at 3.8-3.9%, led by lower cost of
Financial Snapshot (INR Billion) funds and an increase in the share of high-yielding loans.
Y/E MARCH 2016 2017E 2018E 2019E We expect non-interest income growth to be strong at ~31%. Opex
NII 45.2 58.2 71.2 87.0 growth would remain high at ~30%+ YoY, led by continued
OP 41.4 53.5 64.2 78.1
investments in branches, people and technology.
NP 22.9 28.7 36.3 44.4
Strong PPP growth (+30% YoY) would keep earnings growth strong
NIM (%) 4.0 4.2 4.1 4.0
EPS (INR) 38.4 48.3 61.1 74.5 at 25%+ YoY, despite factoring in 50%+ YoY increase in provisions.
EPS Gr. (%) 13.4 25.6 26.6 22.0 IIB trades at 2.9x FY18E BV and 17.4x FY18E EPS, with best-in-class
BV/Sh. (INR) 291.0 332.5 385.1 449.2 RoA of ~2% and RoE of 17-18%. Delay in CV cycle revival and sharp
ABV/Sh. (INR) 287.5 329.4 382.4 446.9 moderation in fees remain the key risks to our estimates. Buy.
RoE (%) 16.6 15.5 17.0 17.9
RoA (%) 1.8 1.8 1.9 1.8
Payout (%) 18.5 14.0 14.0 14.0 Key issues to watch for
Valuations Uptick in CV/CE demand would be the key for CFD growth.
P/E (X) 32.2 25.6 20.2 16.6
Corporate asset quality a key monitorable.
P/BV (X) 4.2 3.7 3.2 2.8
P/ABV (X) 4.3 3.8 3.2 2.8
Traction in the non-vehicle consumer lending portfolio.
Div. Yield (%) 0.4 0.5 0.6 0.7
Quarterly Performance
Y/E March FY16 FY17 FY16 FY17E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Kotak Bank (standalone)
Net Interest Income 15,982 16,787 17,662 18,572 19,191 19,532 20,284 21,827 69,004 80,834
% Change (Y-o-Y) 59.5 61.6 66.7 65.4 20.1 16.4 14.8 17.5 63.4 17.1
Operating Profit 5,970 10,448 12,052 11,942 13,150 13,632 14,634 16,288 40,411 57,704
% Change (Y-o-Y) -10.3 42.4 63.4 38.7 120.3 30.5 21.4 36.4 34.8 42.8
Net Profit 1,898 5,695 6,347 6,958 7,420 7,799 8,390 9,488 20,898 33,097
% Change (Y-o-Y) -55.8 28.1 36.6 32.0 291.0 36.9 32.2 36.4 12.0 58.4
Other Businesses
Kotak Prime 1,190 1,270 1,260 1,300 1,200 1,300 1,425 1,499 5,025 5,424
Kotak Mah. Investments 300 360 390 500 400 450 500 601 1,540 1,951
Kotak Mah. Capital Co 30 70 60 170 230 200 210 222 320 862
Kotak Securities 670 780 550 510 600 650 700 856 2,515 2,806
International subs 250 320 260 220 130 180 230 248 1,050 788
Kotak Mah. AMC & Trustee
Co. 200 230 40 250 190 225 225 303 720 943
Kotak Investment Advisors 0 0 -10 50 110 110 115 115 50 450
Kotak OM Life Insurance 660 480 600 770 710 720 725 732 2,510 2,887
Con.adj and MI -30 230 -40 -180 -240 -10 -10 135 -19 -19,766
Conso. PAT 5,168 9,435 9,457 10,548 10,750 11,624 12,510 14,197 34,608 29,440
% Change (Y-o-Y) -25.9 31.5 32.0 15.5 108.0 23.2 32.3 34.6 13.7 -14.9
E: MOSL Estimates, Quarterly numbers vary from full year number due to difference in reporting
EPS Growth (%) 0.0 0.0 45.0 37.3 to de-grow 11% YoY.
BV/Sh. (INR) 418.0 409.5 428.1 453.6 Over the last two quarters, slippages (ex AQR) have risen sharply.
ABV/Sh. (INR) 202 185 223 290 However, the clean-up exercise taken up by the new management
RoE (%) 1.2 4.2 5.8 7.5 might throw more negative surprises in 2Q. Hence, we remain
RoA (%) 0.1 0.2 0.3 0.4
cautious on asset quality (expect 150bp of credit costs).
Div. Payout (%) 16.7 23.2 23.2 23.2
The stock trades at 0.2x FY18E BV and 4.3x FY18E EPS. Maintain
Valuations
P/E (x) 0.0 6.8 4.7 3.4 Neutral.
P/BV (x) 0.27 0.28 0.27 0.25 Key issues to watch for
P/ABV (x) 0.56 0.62 0.51 0.39 Outlook on asset quality, as net stressed loans remain one of the
Div. Yield (%) 0.0 2.9 4.3 5.8
highest in the industry.
Quantum of loans rescheduled under the 5:25 scheme.
Balance sheet growth and traction in focus loan segments.
Quarterly Performance (INR Million)
Y/E March FY16 FY17 FY16 FY17E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Interest Income 51,149 50,296 49,560 49,584 47,789 48,705 49,464 51,072 200,587 197,031
Interest Expense 37,863 36,465 36,466 36,047 35,743 36,262 36,736 37,526 146,841 146,267
Net Interest Income 13,285 13,831 13,093 13,537 12,046 12,444 12,729 13,546 53,746 50,764
% Change (YoY) 6.9 11.0 0.9 4.3 -9.3 -10.0 -2.8 0.1 5.7 -5.5
Other Income 4,539 4,246 3,945 4,933 6,138 5,515 4,907 5,303 17,663 21,863
Net Income 17,824 18,076 17,038 18,469 18,184 17,959 17,636 18,849 71,408 72,627
Operating Expenses 7,380 8,151 9,375 9,682 9,013 9,157 9,305 9,257 34,588 36,732
Operating Profit 10,445 9,925 7,664 8,787 9,171 8,801 8,331 9,592 36,821 35,895
% Change (YoY) -8.5 16.1 -24.5 -27.7 -12.2 -11.3 8.7 9.2 -12.9 -2.5
Other Provisions 5,777 5,694 11,831 10,261 7,504 6,807 6,169 6,653 33,562 27,133
Profit before Tax 4,668 4,231 -4,167 -1,474 1,667 1,995 2,162 2,938 3,258 8,762
Tax Provisions 2,090 1,218 80 -1,690 660 638 692 989 1,698 2,979
Net Profit 2,578 3,013 -4,247 216 1,007 1,356 1,470 1,949 1,561 5,783
% Change (YoY) -29.3 3.4 NM NM -60.9 -55.0 NM 801.7 -68.6 270.5
Operating Parameters
NIM (Rep, %) 2.7 2.8 2.6 2.7 2.4 2.7
NIM (Cal,%) 2.5 2.7 2.5 2.5 2.2 2.3 2.3 2.3 2.6 2.3
Deposit Growth (%) 5.0 6.9 4.4 2.4 4.4 5.7 5.1 11.0 2.4 11.0
Loan Growth (%) 8.3 7.0 7.9 3.7 4.0 6.3 7.1 10.0 3.7 10.0
CD Ratio (%) 74.8 73.7 71.7 71.3 73.5 73.1 72.8 70.6 71.3 0.0
Tax Rate (%) 44.8 28.8 -1.9 114.7 39.6 32.0 32.0 33.7 52.1 34.0
Asset Quality
Gross NPA (INR b) 85.8 85.6 118.2 147.0 172.1 176.1 172.6 162.9 147.0 162.9
Gross NPA (%) 5.9 5.7 7.8 9.6 11.5 11.0 10.6 9.6 9.6 9.6
E: MOSL Estimates
Yes Bank
Bloomberg YES IN CMP: INR1,271 TP: INR1,500 (+18%) Buy
Equity Shares (m) 421.1
Despite a high base, we expect loan growth to be significantly
M. Cap. (INR b)/(USD b) 535 / 8
above the industry average at 39%+ YoY on the back of refinancing
52-Week Range (INR) 1450 / 632
and strong growth in retail banking.
1,6,12 Rel Perf. (%) -7 / 37 / 67
NIMs are likely to improve marginally QoQ on the back of lower
Financial Snapshot (INR b)
Y/E March 2016 2017E 2018E 2019E
cost of funds (relatively high reliance on bulk deposits) and sticky
NII 45.7 57.5 73.5 92.8 lending rates. NII growth is expected to be healthy at ~26% YoY
OP 43.0 57.2 73.6 91.6 the best among the peers.
NP 25.4 33.3 42.6 51.3 Non-interest income growth is likely to be ~45% YoY, led by strong
NIM (%) 3.4 3.4 3.5 3.6 growth from third-party distribution, continued momentum in
EPS (INR) 60.4 79.0 101.2 121.9
financial advisory and higher trading gains.
EPS Gr. (%) 25.8 30.8 28.1 20.5
Led by aggressive franchise expansion, we expect opex growth to
BV/Sh. (INR) 328 390 471 568
ABV/Sh. (INR) 323 386 466 563 remain high (29%+ YoY). Productivity gains should push C/I lower.
RoE (%) 19.9 22.0 23.5 23.5 Asset quality performance so far has been significantly better than
RoA (%) 1.7 1.8 1.9 1.8 industry; we expect this trend to continue.
Div. Payout (%) 19.1 20.3 20.3 20.3 YES trades at 2.4x FY18E BV and 11.4x FY18E EPS. Return ratios also
Valuations remain strong (RoA of ~1.8% and RoE of 20%+). Our estimates do
P/E(X) 23.3 17.8 13.9 11.5
not factor in capital raising. Maintain Buy.
P/BV (X) 4.3 3.6 3.0 2.5
P/ABV (X) 4.3 3.6 3.0 2.5 Key issues to watch for
Div. Yield (%) 0.7 1.0 1.3 1.5 Implementation of retail strategy on assets and liabilities sides.
Performance on asset quality and quantum of loans rescheduled
under 5:25 scheme/sale to ARCs.
Financials - NBFCs
Company name
Divergent performance
Margin and asset quality performance to be keenly watched
Bajaj Finance
We expect NBFCs under our coverage universe to report PAT growth of 21% YoY in
Dewan Housing
2QFY17. We expect NBFCs to sequentially deliver stable trends on growth and profitability.
GRUH Finance However, good progress in monsoon this year and a sharper focus on recoveries are likely
HDFC to lead to above-trend-line performance in terms of asset quality in 2H. In addition, we
expect the improving macroeconomic environment, easing wholesale rates and sharp fall
Indiabulls Housing
in bond yields to offer some support. Within our NBFC coverage universe, BAF and BFI are
LIC Housing Fin likely to post strong earnings growth of 51% and 80%, respectively. Housing finance
M & M Financial companies (HFCs) should see a stable quarter in terms of loan growth. However, we would
Muthoot Finance
closely look at the margins performance, considering the sharp reduction in bond yields
and the significant proportion of incremental funding coming via bonds.
Repco Home Fin
Gold financing
Specialized gold financing company, MUTH, is likely to have a strong quarter with
53% YoY PAT growth, supported by strong gold prices. Sequential AUM growth is
likely to come in at 5% with margin improvement.
Exhibit 54: Relative performance3 months (%) Exhibit 55: Relative performance1-year (%)
Sensex Index MOSL Financials Index Sensex Index MOSL Financials Index
115 130
110 115
105 100
100 85
95 70
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Bajaj Finance
Bloomberg BAF IN CMP: INR1,087 TP: INR1,275 (+17%) Buy
Equity Shares (m) 535.5
We expect healthy AUM growth of 38% YoY in 2QFY17, driven by
M. Cap. (INR b)/(USD b) 582 / 9
strong growth in consumer and commercial lending. While
52-Week Range (INR) 1,180 / 492
seasonally 2Q is a weak quarter, independence day sale have been
1,6,12 Rel Perf. (%) -1/46/106
good.
NII should grow 48% YoY; margins are likely to expand on a YoY
Financial Snapshot (INR b)
basis, led by higher proportion of disbursements toward high-
2015 2016 2017E 2018E
yielding consumer loans.
NII 28.7 40.3 54.6 69.8
Asset quality is likely to remain stable. As of June 2016, GNPAs were
PPP 17.4 25.1 35.9 46.9
PAT 9.0 12.8 18.5 23.7
at 1.47% and NNPAs at 0.41%.
EPS (INR) 17.9 23.9 34.6 44.2 We expect provisions of INR2.0b, as against INR1.8b in 1QFY17 and
EPS Gr. (%) 23.9 33.4 44.9 27.8 INR1.4b in 2QFY16.
BV/Sh. (INR) 95.7 136.8 166.3 204.0 Net profit is likely to grow 52% YoY to INR4.2b.
RoAonAUM % 3.1 3.2 3.5 3.4 The stock trades at 6.5x FY17E and 5.3x FY18E BV. Maintain Buy.
RoE (%) 20.4 21.1 22.8 23.9
Payout (%) 10.1 2.9 14.0 14.0 Key issues to watch for
Valuations
Business growth momentum, as AUM is growing at 30%+ for the
P/E (x) 60.7 45.5 31.4 24.6
last 20+ quarters.
P/BV (x) 11.4 7.9 6.5 5.3
Guidance on margin due to changing product mix going forward.
Div. Yield (%) 0.2 0.2 0.2 0.3
Asset quality trends in consumer electronics and two-wheeler
businesses.
Performance of businesses such as rural SME lending, lifestyle
financing and e-commerce financing.
Gruh Finance
Bloomberg GRHF IN CMP: INR335 TP: INR384 (+15%) Buy
Equity Shares (m) 363.4
We expect loan growth to remain strong at ~25% YoY on the back
M. Cap. (INR b)/(USD b) 122 / 2
of strong demand for housing in the self-employed segment.
52-Week Range (INR) 350 / 226
Margins are likely to contract YoY due to increased competition.
1,6,12 Rel Perf. (%) 2/24/20
NII is likely to grow 14% YoY to INR1.3b.
Net income is likely to grow 14% YoY to INR1.2b, and cost-to-
Financial Snapshot (INR b)
income ratio is expected to be less than 15%.
2015 2016 2017E 2018E
Asset quality should witness seasonal improvement and remain
NII 3.4 4.2 5.4 6.8
PPP 3.2 3.8 4.9 6.2
largely stable YoY. In 1QFY17, GNPAs were at 0.56% and NNPAs at
PAT 2.0 2.4 3.0 3.8 0.27%. We expect provisions of INR80m for the quarter.
EPS (INR) 5.6 6.7 8.2 10.3 Net profit is likely to grow 27% YoY to INR656m.
EPS Gr. (%) 14.2 19.4 22.3 26.3 The stock trades at 11.8x FY17E and 9.6x FY18E BV. Maintain Buy.
BV/Sh. (INR) 19.6 23.0 28.3 35.0
ABV/Sh. (INR) 19.6 23.0 28.3 35.0
RoA (%) 2.5 2.4 2.3 2.3
RoE (%) 30.9 31.5 32.0 32.7
Key issues to watch for
Payout (%) 35.7 34.3 30.0 30.0 Business outlook, loan growth, asset quality trends and
Valuations management commentary on the same.
P/E (x) 59.7 50.0 40.9 32.4 Movement in borrowing costs and margins, as the impact of the
P/BV (x) 17.1 14.6 11.8 9.6 RBIs rate cut would be seen during the quarter.
Div. Yield (%) 0.6 0.7 0.7 0.9 Managements outlook on developments in the affordable
housing space.
HDFC
Bloomberg HDFC IN CMP: INR1,425 TP: INR1,639 (+15%) Buy
Equity Shares (m) 1,574.7
We expect moderate earnings growth of over 11% YoY, an
M. Cap. (INR b)/(USD b) 2,244 / 34
improvement from sluggish core earnings growth in past few
52-Week Range (INR) 1,463 / 1,012
quarters.
1,6,12 Rel Perf. (%) 0/16/11
We estimate AUM growth at 15%, which will be largely driven by the
individual segment.
Financial Snapshot (INR b)
Spreads are likely to remain largely stable at 2.3%. However, margins
2015 2016 2017E 2018E
would be the key monitorable. NII is likely to grow 13% YoY to
NII 80.0 87.0 96.5 110.1
INR23b.
PAT 59.9 70.9 76.1 87.1
Non-interest income would be strong at INR7b, up 7% YoY,
Adj. EPS (INR) 29.0 30.6 34.5 37.8
supported by dividend income from bank.
EPS Gr. (%) 3.9 5.6 12.8 9.6
Cost-to-income ratio should remain largely stable at 7.5%.
BV/Sh. (INR) 197.9 221.7 245.8 273.7
Asset quality has remained healthy over past several quarters, and
ABV/Sh. (INR) 145.6 169.5 193.6 217.1
the trend is likely to continue. However, asset quality in corporate
RoAA (%) 2.5 2.6 2.5 2.5
loan book would be a key monitorable.
Core RoE (%) 24.0 21.5 19.4 19.0
We estimate provisions of INR700m, as against INR520m in 1QFY16.
Payout (%) 45.7 43.9 43.5 43.5
The stock trades at 4.5x FY17E AP/ABV and 3.6x FY18E AP/ABV (price
Valuation
adjusted for value of other businesses and book value adjusted for
AP/E (x) 37.0 32.9 25.5 20.7
investments made in those businesses). Buy.
P/BV (x) 7.2 6.4 5.8 5.2
AP/ABV (x) 7.4 5.9 4.5 3.6 Key issues to watch for
Div. Yield (%) 1.1 1.2 1.3 1.5 Loan growth and uptick in corporate loans.
Movement in spreads and margins (on individual loans) and asset
quality trends.
Dividend income from subsidiaries.
Indiabulls Housing
Bloomberg IHFL IN CMP: INR855 TP: INR976 (+14%) Buy
Equity Shares (m) 421.3
We expect AUM to grow +26% YoY, driven by robust demand in the
M. Cap. (INR b)/(USD b) 360 / 5
mortgage business. Share of retail home loans is likely to increase.
52-Week Range (INR) 859 / 551
1,6,12 Rel Perf. (%) 4/21/0
Spreads are likely to contract (but remain over 300bp) due to
reduction in lending rates by the company and increased share of
Financial Snapshot (INR b) home loans.
2015 2016 2017E 2018E Cost-income ratio is likely to remain stable at ~16%.
Net Fin inc 21.8 28.7 36.0 45.7 Asset quality is expected to remain stable. In 1QFY17, GNPAs were
PPP 27.7 36.4 43.9 54.7 at 0.84% and NNPAs at 0.36%.
EPS (INR) 53.5 55.7 67.6 84.0
PAT is likely to grow 22% YoY to INR6.8b during the quarter.
EPS Gr. (%) 14.2 4.1 21.4 24.4
BV/Sh. (INR) 186.5 253.8 279.9 314.8 The stock trades at 3.1x FY17E and 2.7x FY18E BV. Maintain Buy.
RoA on AUM 3.6 3.3 3.3 3.3
(%)
RoE (%) 30.8 27.1 25.3 28.3
Key issues to watch for
Payout (%) 47.9 76.0 52.5 50.0
AUM growth trend and growth guidance, as competition from
Valuations
banks is increasing.
P/E (x) 16.0 15.4 12.7 10.2
Movement in incremental spreads and margins.
P/BV (x) 4.6 3.4 3.1 2.7
P/ABV (x) 4.6 3.4 3.1 2.7
Asset quality trends in corporate segment and loan against
Div. Yield (%) 4.1 5.3 4.1 4.9 property.
Updates on acquisition of retail bank, NorthOak Bank, in the UK.
Muthoot Finance
Bloomberg MUTH IN CMP: INR350 TP: INR405 (+16%) Buy
Equity Shares (m) 398.0
AUM is expected to grow ~14% YoY to INR284b, led by strong gold
M. Cap. (INR b)/(USD b) 139 / 2
prices.
52-Week Range (INR) 405 / 160
Calculated margins are likely to improve YoY led by better auction
1,6,12 Rel Perf. (%) -2/83/109
realization and increase in lending rates. Moreover, cost of funds is
also declining.
Financial Snapshot (INR b)
As a result, NII is expected to grow 31% YoY to INR7.5b.
2015 2016 2017E 2018E
Asset quality is likely to improve slightly, as increase in gold prices
NII 21.6 25.4 30.3 35.7
helps to improve recoveries.
PPP 10.7 14.8 18.0 21.7
PAT 8.1 11.2 13.4
We estimate provisions of INR200m, as against INR146m in 2QFY16
6.7
EPS (INR) 16.8 20.3 28.0 33.6
and INR176m in 1QFY17.
BV/Sh.(INR) 127.7 140.8 158.7 180.1 The stock trades at 2.2x FY17E and 1.9x FY18E BV. Maintain Buy.
RoA on AUM 3.0 3.4 4.2 4.2
(%)
RoE (%) 14.3 15.1 18.7 19.9
Div. Yld. (%) 1.7 2.4 2.9 Key issues to watch for
Valuations Management commentary on business growth and steps taken to
P/E (x) 20.8 17.3 12.5 10.4 sustain AUM growth.
P/BV (x) 2.7 2.5 2.2 1.9 Movement in yields and margins, with declining cost of funds.
Asset quality trends during the quarter.
Healthcare
Company name Domestic growth to pick up
Alembic Pharma Limited-competition gGleevec and gGlumetza sales would continue to drive
Alkem Labs growth for Sun Pharma and Lupin in 2QFY17. Additionally, the exclusive
authorized generic launch of gAsacol HD would drive growth for Cadila
Aurobindo Pharma
Healthcare in the quarter. Overall, we expect our pharma universe to report
Biocon sales growth of 8.7% YoY in 2QFY17.
Cadila Healthcare However, we expect our pharma universe to report muted 1.5% YoY growth in
EBITDA, largely due to higher R&D expenditure. Additionally, as US regulatory
Cipla
headwinds continue to plague the sector, higher remediation expenses and de-
Divi's Laboratories risking of key products are expected to continue weighing on operating margins.
Dr Reddy s Labs With respect to the US market, Sun Pharma, Lupin and Cadila Healthcare are
expected to report strong 2QFY17 results, aided by their limited-competition
Glenmark Pharma
launches. Aurobindo is also likely to continue its growth story in the US, with a
GSK Pharma strong number of product launches over last 18 months. Glenmark is also
Ipca Laboratories expected to exhibit strong growth in the US, led by gCrestor and a few niche
dermatology launches. However, Dr. Reddys may see another muted quarter
Lupin
due to delayed approvals for the US market and increased competition in key
Ranbaxy Labs products (e.g., gVidaza).
Sanofi India Domestic business for all pharma companies is expected to bounce back
strongly, after being impacted by external factors like FDC ban and NLEM 2013
Sun Pharma since March 2016. We expect Ipca Labs to report strong growth in its domestic
Torrent Pharmaceuticals business, largely led by strong traction in its anti-malarial portfolio.
Among MNCs, Sanofi is likely to report better numbers, whereas GSK is
expected to report subdued numbers due to ongoing supply issues.
Although the pace of approvals has picked up at the USFDA end, we believe the
lack of key approvals, coupled with increase in R&D spends and regulatory
concerns in domestic/US markets, will keep growth under check. Aurobindo and
Sun Pharma continue to remain our top picks.
Exhibit 60: Relative performance three-month (%) Exhibit 61: Relative performance one-year (%)
Sensex Index MOSL Health care Index Sensex Index MOSL Health care Index
107 120
105 110
103 100
101 90
99 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Alembic Pharma
Bloomberg ALPM IN CMP: INR669 TP: INR640 (-4%) Neutral
Equity Shares (m) 188.5
We expect Alembic Pharma (ALPM) to post 22.2% YoY decline in
M. Cap. (INR b)/(USD b) 126 / 2
2QFY17 reported sales to INR7.8b. International business is
52-Week Range (INR) 747/514
expected to decline 48% YoY owing to lower contribution from
1,6,12 Rel Perf. (%) 9/1/-12
gAbilify, while India business is expected to witness 14% YoY growth
aided by strong traction within the anti-infective portfolio.
Financial Snapshot (INR Billion)
INR million 2015 2016 2017E 2018E
Reported EBITDA is likely to decline 54% YoY to INR1.7b, with
EBITDA margin contracting 1570bp YoY, primarily on account of
Sales 20.5 31.5 31.4 38.1
EBITDA 4.0 10.0 6.6 8.8
lower gAbilify sales in 2QFY17 numbers.
NP 2.8 4.8 4.7 6.0
We expect reported PAT to decrease 60% YoY to INR1.2b, in line
EPS (INR) 15.0 38.2 25.0 31.9 with operational performance.
EPS Gro. (%) 20.0 154.6 -34.5 27.7 We believe increase in competition in gAbilify, coupled with high
BV/Sh. (INR) 46.9 84.9 102.9 127.8 R&D expense and rise in depreciation due to planned capex of
RoE (%) 36.3 38.8 26.6 27.7 INR15b over next 2-3 years, will keep profit growth under check.
RoCE (%) 29.6 50.6 24.9 26.5 The stock trades at 27x/21x FY17E/18E EPSin line with peers. We
Valuations 0.0 0.0 0.0 0.0 maintain our Neutral rating with a target price of INR640 (20x
P/E (x) 41.8 16.4 25.1 19.6 FY18E EPS).
P/BV (x) 13.4 7.4 6.1 4.9
EV/EBITDA 29.9 11.5 17.7 13.3 Key issues to watch out
(x)
Contribution of chronic portfolio and growth strategy.
Performance of US operations amid market pressure.
Outlook on future ANDA launches/filings.
Alkem Labs
Bloomberg ALKEM IN CMP: INR1,685 TP: INR1,800 (+7%) Neutral
Equity Shares (m) 119.6
Revenues are likely to exhibit muted 1% YoY growth, primarily
M. Cap. (INR b)/(USD b) 201 / 3
owing to presence of certain deferred revenues in 2QFY16.
52-Week Range (INR) 1,853/1,175
Additionally, we expect revenues to be weighed by NPPA-led
1,6,12 Rel Perf. (%) -
downward price erosions.
EBITDA is also likely to decline 9% YoY, driven by margin contraction
Financial Snapshot (INR Billion)
INR million FY15 FY16 FY17E FY18E
of 180bp during this quarter.
We expect PAT to remain flat due to higher taxes in 1QFY17, as
Sales 37.9 49.9 56.5 67.6
EBITDA 5.4 8.5 9.7 12.5
against +6% in 1QFY16.
NP 5.1 7.7 8.5 10.1 ALKEM's US business could potentially double from ~USD150m in
EPS (INR) 38.7 64.7 71.3 84.6 FY16 to ~USD300m over next 3-4 years, driven by a strong pipeline
EPS Gr. (%) 6.2 67.4 10.1 18.7 of ~50 pending ANDAs.
BV/Sh. (INR) 250.9 293.0 349.9 415.5 Lower base effect will continue to have a positive impact as the US
RoE (%) 18.4 23.8 22.2 22.1 will still contribute ~22% to sales, much lower than peers at ~40%
RoCE (%) 14.6 17.6 20.1 20.3 and above.
P/E (x) 46.6 27.9 25.3 21.3
P/BV (x) 7.2 6.2 5.2 4.3
Key issues to watch out
EV/EBITDA (x) 40.6 25.2 21.9 16.4 Updates on ramp-up in US sales.
EV/Sales (x) 5.8 4.3 3.8 3.0 Update on form 483 issued to Alkems Daman facility.
Pick-up in chronic business.
Aurobindo Pharma
Bloomberg ARBP IN CMP: INR869 TP:1,050 (+21%) Buy
Equity Shares (m) 585.2
We expect Aurobindo (ARBP) to post 15% YoY growth in sales for
M. Cap. (INR b)/(USD b) 509 / 8
2QFY17 to INR38.0b, aided by sustained traction in the US.
52-Week Range (INR) 892/582
We expect US business (~58% of formulation sales) to grow 23%
1,6,12 Rel Perf. (%) 13/7/5
YoY in 2Q on the back of 75+ ANDA approvals in the US over last 18
months. Europe and RoW sales are expected to exhibit modest 6%
YoY growth, while API sales are estimated to grow ~5% YoY in 2Q.
Financial Snapshot (INR Billion)
EBITDA margin would expand 70bp YoY to 24.0%. Overall EBITDA is
INR million 2015 2016 2017E 2018E
estimated to grow 17.6% YoY to INR9.1b. We expect reported PAT
Sales 121.2 139.0 157.8 181.0
at INR5.9b, compared to INR4.5b in the corresponding quarter last
EBITDA 25.6 32.1 38.3 45.8
year.
NP 15.8 19.8 25.1 30.8
EPS (INR) 27.0 33.9 42.9 52.6
The stock trades at 19.7x FY17E, 16x FY18E EPS, which is at ~15%
EPS Gr. (%) 18.9 25.5 26.6 22.7 discount to peers. Maintain Buy as we expect the valuation gap to
BV/Sh. (INR) 88.3 120.6 160.9 211.0 narrow on account of the companys increasing profitability, strong
RoE (%) 35.4 32.5 30.4 28.3 earnings growth trajectory (25% CAGR) and improving free cash
RoCE (%) 20.4 20.8 21.1 21.6 flow.
P/E (x) 29.2 23.3 18.4 15.0
P/BV (x) 8.9 6.5 4.9 3.7
EV/EBITDA (x) 19.3 15.4 12.9 10.5 Key issues to watch out
EV/Sales (x) 4.1 3.6 3.1 2.7 Clarity on fund raising plans.
Outlook on US business (175+ pending approvals).
Profitability of acquired Actavis business in Europe.
Biocon
Bloomberg BIOS IN CMP: INR964 TP: INR550 (-48%) Sell
Equity Shares (m) 200.0
Biocons revenue is likely to grow 12% YoY to INR9.3b, driven by
M. Cap. (INR b)/(USD b) 193 / 3
21% growth in CRO division, 11% growth in Biopharma sales and
52-Week Range (INR) 988/431
licensing income at INR134m.
1,6,12 Rel Perf. (%) 7/85/108
EBITDA is expected to increase 19% YoY to INR2.2b, with EBITDA
margins at 23.5%. The company has been facing issues on two
Financial Snapshot (INR Billion)
fronts, which will continue to affect its performance this quarter
Y/E March 2015 2016 2017E 2018E
(1) capacity constraints in insulin and (2) adverse business
Sales 30.6 34.5 39.4 46.5
EBITDA 6.7 7.9 9.6 11.4
environment in the Middle East.
Net Profit 4.0 4.6 5.5 6.1
We expect PAT to decline to INR1.4b, primarily owing to lower
Adj. EPS (INR) 20.1 23.2 27.7 30.6 other income.
EPS Gr. (%) -2.8 15.5 19.4 10.3 Key growth drivers for FY16E/17E will be: 1) commercialization and
BV/Sh. (INR) 163.5 195.2 214.8 236.4 ramp-up of the insulin plant in Malaysia, 2) ramp-up in CRO
RoE (%) 12.3 11.9 12.9 12.9 division, 3) contribution from API/immuno-suppressants supplies to
RoCE (%) 11.1 17.9 10.9 11.3 partners and 4) branded formulations in India. However, capex for
Payout (%) 23.5 29.3 29.3 29.3 long-term initiatives is likely to exert pressure on profitability and
Valuations return ratios in the near term.
P/E (x) 40.2 34.8 29.2 26.5 The stock trades at 36.6x FY17E and 31.5x FY18E earnings. Maintain
P/BV (x) 4.9 4.1 3.8 3.4 Sell.
EV/EBITDA (x) 24.1 19.6 16.0 13.4
Div. Yield (%) 0.6 1.4 0.9 0.9 Key issues to watch out
Update on Middle-East problems.
Progress on product registration for Rh-Insulin/Glargine in
Europe/US and other outlicensing opportunities.
Cadila Healthcare
Bloomberg CDH IN CMP: INR391 TP:INR400 (+2%) Buy
Equity Shares (m) 1,023.7
Cadila Healthcare's (CDH) 2QFY17 revenue is likely to grow 8.6%
M. Cap. (INR b)/(USD b) 400 / 6
YoY to INR 25.5b, driven by 3% YoY growth in the US formulations
52-Week Range (INR) 454/296
business. Growth in the US formulations business is expected to be
1,6,12 Rel Perf. (%) 3/10/-15
largely driven by launch of authorized generic of Asacol HD.
Overall export formulations are expected to grow 6% YoY to
Financial Snapshot (INR Billion)
INR13.1b, while domestic formulation is likely to grow 12% YoY to
Y/E March 2015 2016 2017E 2018E
INR8.4b.
Sales 86.4 97.5 102.4 120.9
We expect EBITDA to decline 4% YoY to INR5.8b and EBITDA margin
EBITDA 17.4 23.0 23.2 28.4
Net Profit 11.5 15.8 16.3 20.5
to decline 210bp due to adverse business mix. Adjusted PAT is also
Adj. EPS (INR) 11.2 15.4 15.9 20.0 likely to decline 8% YoY to INR4.0b.
EPS Gr. (%) 39.8 37.7 3.2 25.5 We believe CDH has made investments in the right areas and will
BV/Sh. (INR) 41.5 52.3 63.9 79.5 start accruing benefits over next 2-3 years. We expect sharp ramp-
RoE (%) 29.7 32.8 27.4 27.9 up in the US business post successful remediation of Moraiya
RoCE (%) 19.8 23.3 20.4 22.3 warning letter. We estimate 14% EPS CAGR for FY16-18E, with
Payout (%) 0.0 0.0 0.0 0.0 better return ratios over next two years.
Valuations Stock trades at 24.8x FY17E and 19.8x FY18E EPS. Maintain Buy.
P/E (x) 31.0 22.5 21.8 17.4
P/BV (x) 8.4 6.6 5.4 4.4
EV/EBITDA (x) 21.3 16.0 15.6 12.5
Div. Yield (%) 0.0 0.0 0.0 0.0
Cipla
Bloomberg CIPLA IN CMP: INR589 TP: INR540 (-8%) Neutral
Equity Shares (m) 802.9
We expect Ciplas revenues to grow 12.8% YoY to INR38.9b on a
M. Cap. (INR b)/(USD b) 473 / 7
lower base of 2QFY16 and consolidation of Invagen sales.
52-Week Range (INR) 705/458
Export formulation business is expected to grow 13.8% YoY to
1,6,12 Rel Perf. (%) 3/3/-15
INR21.3b. Domestic business is also expected to grow 13% YoY to
INR14.3b, driven by traction in Respiratory business. Export API
Financial Snapshot (INR Billion)
sales are expected to report muted 3.1% YoY growth to INR2.3b.
Y/E March 2015 2016 2017E 2018E
EBITDA is likely to decline 13% YoY to INR6.9b, with margin
Sales 113.5 136.8 161.8 187.1
EBITDA 21.6 25.0 28.5 36.5
contracting 520bp to 17.7%, owing to lower gNexium sales
Net Profit 11.3 15.1 16.9 22.8
compared to 2QFY16. We expect reported PAT to decline 6% YoY to
Adj. EPS (INR) 14.0 18.8 21.1 28.4 INR4.0b.
EPS Gr. (%) -18.6 34.0 12.1 34.7 We believe that earnings acceleration and potential upgrades on
BV/Sh. (INR) 134.3 147.5 165.6 191.1 successful EU inhaler portfolio monetization would help it sustain
RoE (%) 10.5 12.8 12.7 14.9 current multiples going forward (24x one-year forward P/E). The
RoCE (%) 11.0 10.6 10.1 12.2 stock trades at 27.3x FY17E and 20.4x FY18E earnings. Maintain
Payout (%) 15.9 14.0 13.9 10.3 Neutral.
Valuations
P/E (x) 37.2 27.8 24.8 18.4
P/BV (x) 3.9 3.5 3.2 2.7
EV/EBITDA (x) 20.0 18.5 16.1 12.2 Key issues to watch out
Div. Yield (%) 0.4 0.4 0.5 0.5 Launch of combination inhaler in the UK market (USD450m
market size).
Margin improvement in Medpro operations (acquired in July
2014).
Sustained strong growth in domestic formulations (38% of sales).
Divi's Laboratories
Bloomberg DIVI IN CMP: INR1,299 TP:INR1,215 (-6%) Neutral
Equity Shares (m) 265.5
Divi's Laboratories (DIVI) is likely to register 5% YoY growth in
M. Cap. (INR b)/(USD b) 345 / 5
1QFY17 revenue to INR10.1b.
52-Week Range (INR) 1,380/918
Adjusted EBITDA is also likely to exhibit muted 5% YoY growth to
1,6,12 Rel Perf. (%) 0/17/8
INR3.9b with margins at 39.0%, aided by lower raw material costs.
Reported EBITDA is expected to be weighed down by one-time ex-
Financial Snapshot (INR Billion)
gratia amount of INR790m to the companys employees.
Y/E March 2015 2016 2017E 2018E
We expect PAT to increase 2% YoY to INR3.0b, in line with EBITDA
Sales 31.0 37.7 44.5 52.6
EBITDA 11.5 14.1 16.6 20.2
growth during this quarter.
Net Profit 8.5 11.1 12.4 14.6
Management expects FY16 revenue to grow more than 15-16%,
Adj. EPS (INR) 32.1 41.9 46.8 55.2 with EBITDA margin sustaining at 37%.
EPS Gr. (%) 10.1 30.6 11.7 18.0 We estimate ~15-20% revenue, EBITDA, PAT CAGR over FY16-18E,
BV/Sh. (INR) 131.7 161.5 180.4 210.8 while maintaining EBITDA margin at ~37-38.5%. We expect balance
RoE (%) 26.3 28.6 27.4 28.2 sheet to continue to strengthen further, and expect dividend
RoCE (%) 26.1 28.4 27.2 28.1 payout to go up to 45% in FY18E, from 29% in FY16.
Payout (%) 36.5 45.0 45.0 45.0 The stock trades at 28.5x FY17E and 24.8x FY18E earnings. Maintain
Valuations Neutral.
P/E (x) 36.6 28.0 25.1 21.3
P/BV (x) 8.9 7.3 6.5 5.6
EV/EBITDA (x) 27.0 22.1 18.6 15.1
Div. Yield (%) 0.9 1.4 1.5 1.8
Key issues to watch out
Ramp-up at Vizag SEZ.
Outlook for growth beyond FY18.
Dr Reddys Labs
Bloomberg DRRD IN CMP: INR3,161 TP:INR3,000 (-5%) Neutral
Equity Shares (m) 170.5
Dr Reddys Lab is expected to report subdued numbers in 2QFY17,
M. Cap. (INR b)/(USD b) 539 / 8
with revenue declining 11.3% YoY to INR35.4b and PAT down 62.5%
52-Week Range (INR) 4,383/2,750
YoY at INR2.7m. This is primarily due to the lack of new launches in
1,6,12 Rel Perf. (%) 2/-6/-33
the US and increased generic competition in gVidaza.
US business is likely to decline 20% YoY to INR14.8b, while Russia
Financial Snapshot (INR Billion)
and CIS region sales are expected to decline in single-digits due to
Y/E March 2015 2016 2017E 2018E
currency devaluation. However, India business is expected to report
Sales 148.2 154.7 147.8 173.6
robust 12% YoY growth in 2QFY17.
EBITDA 33.5 39.1 28.1 39.9
Net Profit 22.2 22.6 15.3 23.7
EBITDA is expected to decline 45% YoY to INR6.2b and EBITDA
Adj. EPS (INR) 130.2 132.3 90.0 139.0 margin to decline 1100bp YoY to 17.5%, weighed down by higher
EPS Gr. (%) 4.5 1.7 -32.0 54.4 remediation costs and increased competition in key products.
BV/Sh. (INR) 653.2 752.3 822.5 945.7 PAT is expected decline 62.5% YoY with taxes at 25% in 2QFY17.
RoE (%) 21.9 18.8 11.4 15.7 Even though near-term earnings growth is muted due to recent
RoCE (%) 14.2 13.9 8.6 12.6 warnings letters, we believe the company is focusing on the right
Payout (%) 17.9 17.6 17.6 17.6 areas for growth in the US. The stock trades at 25.5x FY17E and
Valuation 19.1x FY18E earnings. Maintain Neutral.
P/E (x) 25.5 25.1 36.9 23.9
P/BV (x) 5.1 4.4 4.0 3.5 Key issues to watch out
EV/EBITDA (x) 16.9 14.2 20.0 13.9 Update on USFDA resolution of warning letters for Srikakulam,
Div. Yield (%) 0.6 0.5 0.4 0.6 Duvvada and Miryalaguda API plants.
Potential competition in key US products like Toprol XL and
Dacogen.
FY18 outlook for both generics and PSAI businesses.
Glenmark Pharma
Bloomberg GNP IN CMP: INR928 TP: INR900 (-3%) Neutral
Equity Shares (m) 271.3
We expect Glenmark Pharmaceuticals (GNP) to report robust 19.7%
M. Cap. (INR b)/(USD b) 252 / 4
YoY growth in overall revenues to INR22.1b, driven by its buoyant
52-Week Range (INR) 1,075/672
performance in the US and India market.
1,6,12 Rel Perf. (%) 12/5/-18
The India branded business is likely to grow 13% YoY, while the US
generic segment is expected to grow 29% YoY, primarily aided by
Financial Snapshot (INR Billion)
gCrestor launch. LatAm business is expected to witness 29% YoY
Y/E March 2015 2016 2017E 2018E
decline in 2Q sales owing to no sales in Venezuela. We also do not
Sales 66.0 75.9 92.4 108.7
EBITDA 11.8 13.7 24.3 26.8
factor in any out-licensing income in our 2QFY17 assumptions.
Net Profit 4.8 7.0 12.1 14.1 EBITDA is likely to increase 16% YoY to INR4.3b. Nevertheless, we
Adj. EPS (INR) 17.5 24.9 42.9 49.8 expect margins to contract 60bp YoY to 19.5%, weighed down by
EPS Gr. (%) -12.3 42.0 72.3 16.3 higher R&D expenses. Adjusted PAT is expected at INR 2.6b, up 27%
BV/Sh. (INR) 110.6 151.3 202.3 260.2 YoY, aided by lower tax expenses.
RoE (%) 15.8 16.4 21.2 19.1 We expect GNP to gradually reduce its net debt over FY16-18E,
RoCE (%) 12.5 12.7 20.4 19.4 resulting in an improvement in D/E from 1.0x in FY16 to 0.6x by
Payout (%) 13.8 10.0 6.6 5.9 FY18E. We also expect a gradual improvement in return ratios over
Valuations the same period.
P/E (x) 47.7 33.6 19.5 16.8 The stock trades at 22x FY17E and 19x FY18E EPS. Maintain Neutral.
P/BV (x) 7.6 5.5 4.1 3.2
EV/EBITDA (x) 22.0 18.8 10.5 9.3 Key issues to watch out
Div. Yield (%) 0.2 0.2 0.4 0.4 New ANDA filings in complex category.
Update on free cash generation and debt-repayment schedule.
Progress of NCE/NBE pipeline and potential out-licensing
prospects.
Granules India
Bloomberg GRAN IN CMP: INR120 TP:INR160 (+33%) Buy
Equity Shares (m) 216.7
We expect Granules India (GRAN) to post 3.9% YoY decline in
M. Cap. (INR b)/(USD b) 26 / 0
2QFY17 reported sales to INR3.5b. This is mainly due to exclusion of
52-Week Range (INR) 164/101
JV sales (Omnichem and Biocause) owing to Ind-AS accounting.
1,6,12 Rel Perf. (%) -4/-12/-23
However, reported EBITDA is likely to increase 4% YoY to INR715m,
with EBITDA margin expanding 150bp YoY, primarily owing to lower
Financial Snapshot (INR Billion)
raw material costs and better business mix.
INR million 2015 2016 2017E 2018E
Sales 12.9 14.3 15.6 19.0
We expect reported PAT to decrease 20% YoY to INR343m, in line
EBITDA 2.1 2.8 3.2 4.0
with operational performance.
NP 0.9 1.2 1.6 2.2
EPS (INR) 4.5 5.5 6.8 9.8
EPS Gr. (%) 19.9 22.8 25.1 42.6
We expect GRAN to report 34% PAT CAGR over FY16-18E, driven by
BV/Sh. (INR) 21.1 30.7 39.6 47.5 improving traction in finished dosages formulations. However, the
RoE (%) 23.1 21.6 19.9 22.4 story beyond FY18 is much rosier, as we see more approvals in the
RoCE (%) 13.3 14.0 14.1 16.4 US for the OTC and Rx business and ramp-up is expected in
P/E (x) 30.2 24.6 19.7 13.8 Omnichem JV, which will drive both revenue and profitability. At
P/BV (x) 6.4 4.4 3.4 2.8 CMP, the stock trades at 18x FY17E and 12x FY18E EPS. We
EV/EBITDA (x) 15.0 11.0 9.3 7.2 maintain Buy with target price of INR160 (@16x FY18E EPS)
EV/Sales (x) 2.4 2.1 1.9 1.6
D. Payout (%) 14.4 11.0 13.6 13.9
Key issues to watch out
Contribution of Auctus portfolio and outlook on ANDA filings.
Performance of Omnichem JV operations.
Outlook for growth beyond FY18E.
GSK Pharma
Bloomberg GLXO IN CMP: INR2,813 TP: INR3,150 (+12%) Neutral
Equity Shares (m) 84.7
In 2QFY17, we expect GlaxoSmithKline Pharmaceuticals (GLXO) to
M. Cap. (INR b)/(USD b) 238 / 4
report 7.5% YoY increase in revenues to INR7.4b.
52-Week Range (INR) 3,850/2,752
1,6,12 Rel Perf. (%) -4/-38/-23
EBITDA is also likely to decline 12% YoY to INR1.1b, with EBITDA
margin contracting 320bp YoY to 14.2%.
Financial Snapshot (INR Billion)
Y/E December 2015 2016E 2017E 2018E
We expect adjusted PAT to decline 16.6% YoY at INR866m. Growth
Sales 32.7 27.4 30.4 34.1
EBITDA 6.0 4.5 4.9 6.2
and profitability are expected to gradually improve, with volume
Net Profit 5.3 3.7 4.2 5.2
ramp-up in key NLEM products.
Adj. EPS (INR) 62.4 44.2 50.1 61.2
EPS Gr. (%) 11.1 -29.2 13.3 22.2 We believe GLXO has strong parent support, superior brand
BV/Sh. (INR) 215.9 200.2 169.8 150.5 portfolio (competitive advantage), high payout ratio (~100%) and
RoE (%) 23.1 22.1 29.5 40.7 industry-leading return ratios (RoCE of 50%+).
RoCE (%) 21.9 21.2 27.0 38.2
Payout (%) 114.3 167.8 159.4 130.4 However, current valuation of 53x FY17E and 40x FY18E EPS
Valuations adequately reflects recovery in the business over this period, in our
P/E (x) 53.7 75.8 66.9 54.7 view. Maintain Neutral.
P/BV (x) 15.5 16.7 19.7 22.2
EV/EBITDA (x) 55.0 59.8 56.6 45.1
Div. Yield (%) 1.9 1.9 2.1 2.1
Key issues to watch out
New product introductions in FY17-18E.
Market performance of products impacted by DPCO 2013.
Ipca Laboratories
Bloomberg IPCA IN
Equity Shares (m) 126.2
CMP: INR608 TP: INR525 (-23%) Neutral
M. Cap. (INR b)/(USD b) 77 / 1 We expect Ipca Laboratories (IPCA) to witness 10.3% YoY growth in
52-Week Range (INR) 807/402 overall revenues, aided by strong domestic anti-malarial sales.
1,6,12 Rel Perf. (%) 13/-6/-25 Domestic formulation is expected to exhibit robust 17% YoY
growth, while total API sales would witness 7% YoY decline.
Financial Snapshot (INR Billion) EBITDA is likely to grow 53% YoY, with margin improving 460bp YoY
Y/E March 2015 2016 2017E 2018E to 16.5% in 2QFY17. However, profitability is still lower due to
Sales 31.4 28.9 32.6 38.3 negative operating leverage (US import alerts and weak traction in
EBITDA 5.3 3.4 5.2 6.9 institutional business).
Net Profit 2.5 1.3 2.5 4.1 We expect reported PAT to improve to INR713m, with taxes at 20%
Adj. EPS (INR) 19.8 10.5 19.7 32.4 in 2QFY17.
EPS Gr. (%) -47.7 -46.9 87.2 64.3 While we believe that regulatory overhang would weigh on
BV/Sh. (INR) 175.0 181.0 197.7 225.2 valuation multiples, growth in domestic business remains healthy.
RoE (%) 12.0 5.9 10.4 15.3
We expect IPCA to clock FY16-18E EPS CAGR of 75% on the back of
RoCE (%) 10.1 5.5 9.0 13.0
15% revenue CAGR and recovery in EBITDA margin to 18%.
Payout (%) 5.9 0.0 15.0 15.0
Stock trades at 30x FY17E EPS and 19x FY18E EPS. Maintain Neutral.
Valuation
P/E (x) 26.8 50.6 27.0 16.4
P/BV (x) 3.0 2.9 2.7 2.4
Key issues to watch out
EV/EBITDA (x) 17.5 15.1 11.9 11.9
Div. Yield (%) 0.2 0.0 0.6 0.9
Update on resolution of USFDA regulatory issues.
Outlook for institutional tender business.
Impact of emerging market currency weakness.
Lupin
Bloomberg LPC IN CMP: INR1,494 TP:INR1,850 (+24%) Buy
Equity Shares (m) 447.5
We expect Lupin's (LPC) 2QFY17 revenue to grow 30% YoY to
M. Cap. (INR b)/(USD b) 669 / 10
INR43.3b, aided by buoyant performance in US generic segment
52-Week Range (INR) 2,127/1,294
(gGlumetza and gFortamet sales, consolidation of Gavis financials).
1,6,12 Rel Perf. (%) 0/-10/-37
Sanofi India
Bloomberg SANL IN CMP: INR4,229 TP:INR5,250 (+24%) BUY
Equity Shares (m) 23.0
We expect Sanofi India's (SANL) revenue to grow 14% YoY in
M. Cap. (INR b)/(USD b) 97 / 1
3QCY16 to INR6.7b. High growth of brands like Lantus, Allegra,
52-Week Range (INR) 4,770/3,850
Amaryl M, Enterogermina, Avila, Vaxlgrip and Cardace, and new
1,6,12 Rel Perf. (%) -4/-10/-4
product launches should drive SANLs revenue growth.
EBITDA is also likely to grow 13% YoY to INR1.6b during this quarter.
Financial Snapshot (INR Billion)
We expect PAT to increase by 30% YoY to INR942m, higher than
Y/E December 2014 2015 2016E 2017E
EBITDA growth owing to lower tax expense.
Sales 19.8 21.9 24.5 27.9
EBITDA 3.4 4.6 5.5 6.4
We expect earnings growth momentum to sustain over next few
Net Profit 2.0 2.4 3.4 4.0
years, led by strong revenue CAGR of 13% over CY15-17E and
Adj. EPS (INR) 85.5 103.2 148.4 175.4 ~210bp margin expansion from current levels.
EPS Gr. (%) -17.8 20.6 43.8 18.2 The stock trades at 29x CY16E and 25x CY17E EPS. Maintain Buy.
BV/Sh. (INR) 643.7 725.2 804.0 898.2
RoE (%) 13.3 14.2 18.5 19.5
RoCE (%) 14.8 16.1 18.5 19.7
Payout (%) 46.9 41.6 46.9 46.3 Key issues to watch out
Valuations
Amortization of goodwill and brands acquired from Universal
P/E (x) 53.4 44.3 30.8 26.1
Medicare.
P/BV (x) 7.1 6.3 5.7 5.1
Clarity on nature of reversal of recently withdrawn NPPA
EV/EBITDA (x) 29.7 21.7 17.6 14.8
guidelines.
Div. Yield (%) 1.0 1.1 1.3 1.5
Sun Pharma
Bloomberg SUNP IN CMP: INR758 TP:INR925 (+22%) Buy
Equity Shares (m) 2,406.1
Sun Pharmaceuticals (SUNP) is likely to register 14% YoY growth in
M. Cap. (INR b)/(USD b) 1,823 / 27
revenues, primarily driven by limited-competition gGleevec sales,
52-Week Range (INR) 934/706
coupled with the launch of gGlumetza in 2QFY17.
1,6,12 Rel Perf. (%) -2/-19/-23
India business is expected to grow 13.5% YoY to INR20.7b, while the
Financial Snapshot (INR Billion)
US business is likely to report 12% YoY jump in revenues with
Y/E March 2015 2016 2017E 2018E
USD55m of gGleevec sales during this quarter.
Sales 272.9 277.4 309.3 332.5
We expect margins to improve to 31.5% in 2QFY17 from 28.3% in
EBITDA 77.2 79.6 94.3 114.6
2QFY16. Overall EBITDA is expected to grow 27% YoY to INR24.6b
Rep. PAT 47.4 47.1 71.0 92.7
over a low base.
Rep.EPS (INR) 19.7 19.6 29.5 38.5
Adj. PAT 47.4 47.1 63.3 92.7
We expect total reported PAT at INR17.0b, compared to INR11.1b
Core EPS (INR) 19.7 19.6 26.3 38.5
in 2QFY16 and INR15.9b in 1QFY17.
EPS Gr. (%) 50.8 -0.7 50.9 30.6 We believe SUNP is an attractive Indian play on specialty business in
BV/Sh. (INR) 106.5 130.5 142.4 174.0 the US. We maintain our Buy rating, in light of its multiple earnings
RoE (%) 21.5 16.5 19.3 24.4 triggers (MK-3222, RBXY integration benefits and specialty product
RoCE (%) 22.7 18.7 21.5 24.8 pipeline), superior execution track record, high RoIC (30%) and
Payout (%) 21.8 0.0 21.1 16.3 cash-rich balance sheet (net cash of USD850m). The stock trades at
Valuations 28x FY17E and 20x FY18E EPS.
P/E (x) 39.1 39.4 29.3 20.0
P/BV (x) 7.2 5.9 5.4 4.4
EV/EBITDA (x) 23.3 22.4 17.9 14.0 Key issues to watch out
Div. Yield (%) 0.6 0.0 0.8 0.8 Update on resolution of USFDA warning letter on Halol.
Turnaround of Ranbaxys business.
Outlook on competitive landscape for Taros products.
Torrent Pharmaceuticals
Bloomberg TRP IN CMP: INR1,662 TP:INR1,700 (+2%) Buy
Equity Shares (m) 169.2
We expect Torrent Pharmaceuticals (TRP) to post 21.6% YoY decline
M. Cap. (INR b)/(USD b) 281 / 4
in 2QFY17 reported sales to INR15.3b. US business is expected to
52-Week Range (INR) 1,768/1,190
decline 46% YoY owing to lower contribution from gAbilify, while
1,6,12 Rel Perf. (%) 4/10/4
India business is expected to witness 15% YoY growth with
successful integration of Elders portfolio.
Financial Snapshot (INR Billion)
Y/E March 2015 2016 2017E 2018E
Reported EBITDA is likely to decline 43% YoY to INR4.1b, with
Sales 46.5 66.8 63.3 72.8
EBITDA 10.2 27.2 17.4 20.4
EBITDA margin contracting 1540bp YoY, primarily on account of
Net Profit 5.7 10.0 11.3 13.9
lower gAbilify sales in 2QFY17 numbers.
Adj. EPS (INR) 33.4 59.3 67.1 85.0
EPS Gr. (%) 4.9 77.5 13.2 26.8 We expect reported PAT to decrease 45% YoY to INR2.5b, in line
BV/Sh. (INR) 147.2 200.3 243.8 299.0 with operational performance.
RoE (%) 25.7 34.1 30.2 30.3
RoCE (%) 22.2 39.0 23.5 25.9 We expect core earnings (excluding one-offs) trajectory to remain
Payout (%) 29.7 28.7 36.2 36.3 strong (forecast 20% CAGR over FY16-18E) as we think margin
Valuation upside in domestic portfolio is still not fully reflected. The stock
P/E (x) 42.2 23.8 21.0 16.6 trades at 24.5x FY17E and 19x FY18E EPS, which is at 20% premium
P/BV (x) 9.6 7.0 5.8 4.7 over its last five-year average valuations. Maintain Buy.
EV/EBITDA (x) 25.3 9.2 14.6 12.0
Div. Yield (%) 0.8 1.8 1.4 1.8 Key issues to watch out
Contribution of Elder Pharma portfolio and growth strategy.
Performance of Brazilian operations amid market pressure.
Outlook on future ANDA launches
Media
16
16
8
7
5
-2
15
13
8
7
4
8.4 8.3
7.4 7.5 7.0
6.7
5.8 5.9 5.6 5.3 5.8
4.9 5.0 4.9
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
36,000 650
29,000 500
22,000 350
15,000 200
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Sep-08
Dec-08
Mar-09
Sep-09
Dec-09
Mar-10
Sep-10
Dec-10
Mar-11
Sep-11
Dec-11
Mar-12
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
Exhibit 68: Relative Performance-3m (%) Exhibit 69: Relative Performance-1 Yr (%)
Sensex Index MOSL Media Index Sensex Index MOSL Media Index
120 120
115 110
110
100
105
90
100
95 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
D B Corp
Bloomberg DBCL IN CMP: INR396 TP: INR465 (+17%) Buy
Equity Shares (m) 183.4 We expect ad growth to remain strong, courtesy the low base of
M. Cap. (INR b)/(USD b) 73 / 1 2QFY16 and as the impact on business due to pricing renegotiations
52-Week Range (INR) 439/287 last year is now behind. Any incremental pick-up in ad volumes
1,6,12 Rel Perf. (%) -2/16/15 would come at higher ad yields.
We expect print ad revenue to grow 16% YoY to INR3.57b.
Financial Snapshot (INR Billion)
Circulation revenue would grow 15% YoY to INR1.21b.
Y/E MARCH 2015 2016 2017E 2018E
Net Sales 20.1 20.5 23.8 26.7 Aggregate revenue is likely to grow 16% YoY to INR5.5b, as all major
EBITDA 5.7 5.4 7.1 8.1 revenue lines (print ad, circulation and radio) gain steam.
Adj. Net Profit 3.2 3.0 4.0 4.7 Raw material costs are expected to increase on rising newsprint
Adj. EPS (INR) 17.5 16.2 21.8 25.8 costs and higher newsprint consumption, led by recent district and
Adj. EPS Gr. (%) 10.0 -7.4 34.3 18.6 main edition launches in Bihar. However, EBITDA margin is likely to
BV/Sh (INR) 70.2 73.3 83.1 94.7 improve, as revenue growth outpaces opex escalation. We expect
RoE (%) 26.4 22.6 27.8 29.0 EBITDA margin to expand ~130bp YoY to ~25%.
RoCE (%) 22.7 20.0 24.8 26.2 Startup losses related to the Bihar footprint expansion are expected
Div. Payout (%) 53.9 81.5 55.0 55.0 to continue and remain at 1Q levels.
Valuations
Net profit is likely to grow 23% YoY to INR0.74b.
P/E (x) 22.6 24.4 18.2 15.3
P/BV (x) 5.6 5.4 4.8 4.2
The stock trades at 18.2x FY17E and 15.3x FY18E EPS. Buy.
EV/EBITDA (x) 12.7 13.6 10.0 8.5
Div. Yield (%) 2.0 2.8 2.5 3.0 Key things to watch for
YoY ad growth (we expect 16%).
EBITDA margin (we expect 25%).
Dish TV India
Bloomberg DITV IN CMP: INR97 TP: INR120 (+24%) Buy
Equity Shares (m) 1,064.8
We expect DITVs revenue to increase 7% YoY and 4% QoQ on a
M. Cap. (INR b)/(USD b) 103 / 2
reported basis to INR8.05b. (Since 1Q, DITV has started netting off
52-Week Range (INR) 112/65
entertainment tax with subscription revenue; hence, YoY numbers
1,6,12 Rel Perf. (%) 3/2/-16
are not comparable).
Financial Snapshot (INR Billion)
Subscription revenue is likely to grow 3% QoQ to INR7.51b.
Y/E March 2015 2016 2017E 2018E
Net Sales 27.8 30.6 33.1 37.6
We expect gross additions of 0. 67m and net additions of 0.36m.
EBITDA 7.4 10.2 11.6 13.8
Adj. NP 0.0 6.9 2.8 4.2
Adj. EPS (INR) 0.0 6.5 2.6 3.9
EBITDA margin is expected to expand 200bp QoQ to 36.2%.
Adj. EPS Gr.(%) NA NA -59.7 50.4
BV/Sh (INR) -2.9 3.6 6.2 10.1 We expect net profit of INR0.71m in 2QFY17.
RoE (%) NA NA NA NA
RoCE (%) 9.9 60.2 22.1 26.2 The stock trades at an EV of 9.2x FY17E and 7.2x FY18E EBITDA. Buy.
Div. Payout(%) NA NA NA NA
Valuations
P/E (x) NM 15 37 25
P/BV (x) NA NA 15.7 9.6 Key things to watch for
EV/EBITDA (x) 15.4 10.8 9.2 7.2 Quarterly gross additions (we expect 0.67m).
EV/Sub (INR) 8,730 7,646 6,562 5,632 ARPU (we expect INR166).
EBIDTA margin (we expect 36.2%)
Quarterly Performance
Y/E March FY16 FY17 FY16 FY17E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Sales 7,367 7,524 7,715 7,994 7,786 8,051 8,425 8,837 30,599 33,098
YoY Change (%) 15.0 11.9 8.1 5.9 5.7 7.0 9.2 10.5 10.0 8.2
Operating expenses 4,998 4,974 5,060 5,385 5,140 5,140 5,471 5,712 20,350 21,461
EBITDA 2,368 2,550 2,655 2,609 2,646 2,911 2,954 3,125 10,249 11,636
YoY Change (%) 50.8 57.1 38.8 17.6 11.7 14.1 11.3 19.8 39.4 13.5
EBITDA margin (%) 32.1 33.9 34.4 32.6 34.0 36.2 35.1 35.4 33.5 35.2
Depreciation 1,598 1,330 1,463 1,516 1,613 1,629 1,661 1,679 5,907 6,581
Interest 480 548 549 512 521 482 434 389 2,087 1,826
Other Income 252 197 42 218 119 150 150 151 640 570
PBT 542 870 686 799 631 950 1,009 1,208 2,895 3,799
Tax -4,029 223 235 250 299 -4,029 1,007
Effective Tax Rate (%) (504.2) 35.3 24.8 24.8 24.8 26.5
Net profit 542 870 686 4,828 409 715 759 909 6,924 2,793
Net Subs (m) 13.3 13.7 14.0 14.5 14.9 15.3 15.8 16.2 14.5 16.2
ARPU (INR/month) 173 171 172 174 165 166 168 170 172 167
Hathway Cable
Bloomberg HATH IN CMP: INR31 TP: INR50 (+61%) Buy
Equity Shares (m) 830.5
We expect standalone revenue to grow 6% QoQ to INR3.2b.
M. Cap. (INR b)/(USD b) 26 / 0
52-Week Range (INR) 49/24
Cable subscription revenue is expected to grow 5% QoQ to
1,6,12 Rel Perf. (%) 15/-30/-22
INR1.13b.
Financial Snapshot (INR Billion)
EBITDA would grow 12% QoQ to INR496m on overall basis and 15%
Y/E March 2015 2016 2017E 2018E
QoQ on an ex-activation basis to INR296m. EBITDA margin would
Net Sales 18.3 20.8 25.0 31.5
expand 80bp QoQ to ~15.5%. On an ex-activation basis, EBITDA
EBITDA 2.6 3.9 5.7 9.3
EBITDA #
margin would be largely flat QoQ at 9%.
1.7 1.6 3.9 8.7
Adj. NP -2.3 -1.6 -0.7 2.1
Adj. EPS (INR) -2.9 -1.9 -0.9 2.5 Net loss is expected to reduce from INR0.53b in 1QFY17 to
Adj. EPS Gr. (%) NA NA NA NA INR0.47b in 2QFY17.
BV/Sh (INR) 18.3 16.3 15.2 18.3
RoE (%) -17.4 -11.2 -5.5 14.9 The stock trades at attributable EV/EBITDA (ex-activation) of 13.4x
RoCE (%) -3.4 -2.6 1.3 16.1 FY17E and 5.6x FY18E. Maintain Buy.
Valuations
P/E (x) -11.6 -17.6 -38.6 13.4
EV/EBITDA (x)* 18.9 14.5 9.2 5.3 Key things to watch for
EV/EBITDA (x)*# 28.9 34.9 13.4 5.6 Cable subscription revenue growth (we expect 5% QoQ).
EV/Sub (INR)* 4,139 4,569 4,245 3,956 EBITDA margin (we expect 15.5%).
* Based on attributable EBITDA and subs post EBITDA margin ex-activation (we expect 9%).
minority stake; # (ex-activation)
HT Media
Bloomberg HTML IN CMP: INR84 TP: INR90 (+7%) Neutral
Equity Shares (m) 232.8 We expect revenue to grow 2% YoY to INR6.13b.
M. Cap. (INR b)/(USD b) 19 / 0
Print ad revenue would decline 2% YoY to INR4.38b, as English ad
52-Week Range (INR) 96/73
revenues continue to languish. Hindi revenue growth too is
1,6,12 Rel Perf. (%) 0/-4/-8
expected to moderate, as print industry ad growth overall has
remained weak in 2Q. We have factored in a de-growth of 6% YoY in
Financial Snapshot (INR Billion) English ad revenue (INR2.62b) and 5% growth in Hindi ad revenue
Y/E MARCH 2015 2016 2017E 2018E (INR1.76b).
Net Sales 22.9 25.0 26.8 29.5
Radio ad revenue is expected to grow 30% YoY to INR381m.
EBITDA 2.8 3.1 3.0 3.5
Adj. NP 1.8 1.7 1.3 1.7
We expect circulation revenue to increase 4% YoY to INR0.79b.
Adj. EPS (INR) 8.7 7.3 5.7 7.2 EBITDA margin is likely to decline by ~100bp YoY to 9.4%.
Adj. EPS Gr. (%) 17.4 -16.2 -22.2 27.1 Adjusted net profit would decline YoY to INR0.22b, primarily led by
BV/Sh (INR) 90.0 99.2 106.7 115.9 higher interest outgo related to new radio licenses.
RoE (%) 10.1 7.7 5.5 6.5
The stock trades at 14.8x FY17E and 11.6x FY18E EPS. Neutral.
RoCE (%) 10.7 8.7 7.1 7.9
Div. Payout (%) 4.9 4.3 4.3 4.3 Key things to watch for
Valuations YoY English ad growth (we expect 6% YoY de-growth).
P/E (x) 9.6 11.5 14.8 11.6 Hindi ad growth (we expect 5% YoY growth).
P/BV (x) 0.9 0.8 0.8 0.7 EBITDA margin (we expect 9.4%).
EV/EBITDA (x)* 4.0 5.5 5.2 3.8
Div. Yield (%) 0.5 0.4 0.3 0.4
* Proportionate
Quarterly Performance
(Consolidated)
Y/E March FY16 FY17 FY16 FY17E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Revenue 5,872 6,016 6,811 6,310 6,147 6,129 7,549 7,002 25,008 26,826
YoY (%) 7.5 7.2 12.5 9.4 4.7 1.9 10.8 11.0 9.2 7.3
Operating expenses 5,303 5,389 5,625 5,612 5,504 5,553 6,647 6,123 21,929 23,827
EBITDA 568 627 1,186 697 643 576 902 878 3,079 2,999
YoY (%) -8.3 -13.0 37.7 44.4 13.1 -8.0 -24.0 26.0 14.7 -2.6
EBITDA margin (%) 9.7 10.4 17.4 11.1 10.5 9.4 12.0 12.5 12.3 11.2
Depreciation 228 272 247 271 295 319 347 379 1,018 1,340
Interest 94 125 209 202 247 245 242 242 630 975
Other Income 281 456 271 535 478 447 440 440 1,543 1,804
Extra-ordinary exps 0 0 0 0 0 0 0 0 0 0
PBT 527 686 1,001 759 579 459 753 698 2,973 2,489
Tax 171 206 193 263 186 122 201 187 832 697
Effective Tax Rate (%) 32.4 30.0 19.2 34.6 32.2 26.7 26.7 26.8 28.0 28.0
PAT 356 480 809 497 392 337 552 511 2,142 1,792
Minority Interest 107 116 121 121 168 110 110 100 464 488
Reported PAT 249 364 688 376 224 227 442 411 1,678 1,304
Adj PAT 249 364 688 376 224 227 442 411 1,678 1,304
YoY (%) -23.8 -17.0 -11.7 -4.2 -10.1 -37.7 -35.8 9.3 -6.7 -22.3
Jagran Prakashan
Bloomberg JAGP IN CMP: INR191 TP: INR225 (+18%) Buy
Equity Shares (m) 326.9 We expect advertising revenue to grow 8% YoY to INR4.04b.
M. Cap. (INR b)/(USD b) 62 / 1
52-Week Range (INR) 213/138 Advertising revenue (ex-Radio) is expected to grow 8% to INR3.46b.
1,6,12 Rel Perf. (%) -1/9/27 We expect circulation revenue to grow 7% YoY to INR1.07b.
Financial Snapshot (INR Billion) Radio revenue and EBITDA would be INR0.59b and INR0.19b,
Y/E March 2015 2016 2017E 2018E respectively. Aggregate revenue would grow ~9% to INR5.54b.
Net Sales 17.7 21.1 23.5 26.0
EBITDA 4.5 6.0 6.6 7.4 We estimate EBITDA at INR1.49b and EBITDA margin at 26.9%.
Adj. NP 2.3 3.4 3.7 4.2
Adj. EPS (INR) 7.2 10.5 11.3 13.1 Adjusted earnings would grow 10% YoY to INR0.78b.
Adj.EPS Gr (%) 12.8 44.6 7.5 15.9
BV/Sh (INR) 36.1 49.3 55.9 64.9
The stock trades at 17.3x FY17E and 14.9x FY18E EPS. Buy.
RoE (%) 21.7 24.7 21.5 21.6
RoCE (%) 20.3 24.8 17.2 17.4
Div. Payout 57.0 40.5 36.4 31.4
(%)
Valuations
P/E (x) 26.8 18.6 17.3 14.9
Key things to watch for
P/BV (x) 5.4 3.9 3.5 3.0
YoY ad growth (we expect 8%).
EV/EBITDA (x) 13.7 10.9 9.5 8.3
Div. Yield (%) 1.8 1.8 1.8 1.8
YoY ad growth ex-Radio City (we expect ~8%).
EBITDA margin (we expect 26.9%).
(INR Million)
Y/E March FY16 FY17 FY16 FY17E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Sales 4,750 5,064 5,764 5,295 5,580 5,542 6,336 6,070 21,065 23,528
YoY (%) 7.9 16.1 22.5 25.3 17.5 9.4 9.9 14.6
Operating expenses 3,408 3,649 4,043 3,937 4,034 4,052 4,497 4,321 15,092 16,904
EBITDA 1,341 1,416 1,721 1,358 1,546 1,490 1,839 1,749 5,896 6,624
YoY (%) 25.3 33.2 29.9 29.5 15.3 5.3 6.9 28.8 30.9 12.4
EBITDA margin (%) 28.2 28.0 29.9 25.6 27.7 26.9 29.0 28.8 28.0 28.2
Depreciation 231 287 284 242 244 318 315 268 1,044 1,146
Interest 186 81 172 143 139 111 89 70 523 408
Other Income 195 -6 64 148 89 80 72 65 345 305
Exceptional item 51 -145 0 0 0 0 0 0 -95 0
PBT 1,068 1,186 1,329 1,120 1,252 1,141 1,507 1,476 4,769 5,375
Tax 348 327 396 319 407 363 480 470 1,390 1,720
Effective Tax Rate (%) 32.5 27.6 29.8 28.4 32.5 31.9 31.9 31.9 29.2 32.0
Reported net profit 721 859 933 802 840 777 1,027 1,006 3,378 3,655
YoY (%) 30.8 51.8 40.8 -38.2 8.9 8.9 10.1 25.5 44.5 11.3
PVR
Bloomberg PVRL IN CMP: INR1,236 TP: INR1,329 (+8%) Buy
Equity Shares (m) 46.7
We expect revenues to grow ~12% YoY (-6.8% QoQ) to INR5.3b.
M. Cap. (INR b)/(USD b) 58 / 1
52-Week Range (INR) 1,334/646 EBITDA margin is likely to decline 160bp YoY to 17.5%, translating
1,6,12 Rel Perf. (%) -2/57/43 into EBITDA growth of 2.7% YoY to INR930m.
We expect PAT to de-grow 34% YoY (on a very high base) to
Financial Snapshot (INR Billion)
INR270m. Buy.
Y/E March 2015 2016 2017E 2018E
Sales 14.8 18.7 22.5 26.6
EBITDA 2.0 3.3 4.0 5.2
NP 0.1 1.2 1.3 2.0
Adj EPS (INR) 3.3 25.5 27.1 43.5
EPS Gr. (%) -77.7 664.3 6.2 60.3
BV/Sh. (INR) 98.5 186.2 210.8 251.4
RoE (%) 3.4 18.7 13.7 18.8
RoCE (%) 8.0 14.5 11.3 14.9
Valuations
Key issues to watch for
P/E (x) 369.8 48.4 45.6 28.4
P/BV (x)
Footfalls, like-to-like growth.
12.5 6.6 5.9 4.9
EV/EBITDA (x) Advertisement income, spend per head, average ticket price.
30.5 18.3 15.3 11.4
Div yield(%) 0.1 0.2 0.3 0.4
SITI Networks
SITINET IN
Bloomberg
CMP: INR35 TP: INR45 (+29%) Buy
Equity Shares (m) 678.3
M. Cap. (INR b)/(USD b) 23 / 0 We expect reported revenue to decline 3.5% QoQ to INR2.72b,
52-Week Range (INR) 42/30 primarily led by (a) lower activation and other operating revenue,
1,6,12 Rel Perf. (%) 3/-16/-1
and (b) SITINETs move from gross to net billing in Mumbai and
Delhi.
Financial Snapshot (INR Billion) Cable subscription revenue is likely to optically decline 6% QoQ to
Y/E March 2015E 2016 2017E 2018E ~INR1.3b, with SITINET moving from gross to net billing in Mumbai
and Delhi. Apart from the accounting change, digitization-led
Net Sales 9.0 11.9 12.9 18.3
triggers for subscription were elusive in 2Q.
EBITDA 1.4 3.0 3.6 7.2
EBITDA# 0.7 0.9 1.0 6.1 Activation revenue is likely to grow 3% to INR0.37b in 2QFY17, as
Adj. NP -1.1 0.0 0.4 3.6 seeding remains subdued due to pending stay orders in selective
Adj. EPS (INR) -1.6 0.0 0.5 4.0 high courts. We have factored in set-top box seeding of ~0.4m for
Adj. EPS Gr. (%) NM NM NM NM
the quarter.
BV/Sh (INR) 3.7 9.1 10.9 16.9 Carriage revenue would remain flat QoQ at INR0.65b.
RoE (%) -57.5 0.1 4.8 29.4 EBITDA is expected to remain flat QoQ at INR0.42b, primarily led by
RoCE (%) -2.1 6.4 6.6 23.5 lower activation and other operating revenue. On an ex-activation
Valuation basis, EBITDA is likely to decline marginally to INR49m in 2QFY17.
P/E (x) -21.1 8,243 74.9 8.7
Net loss would decline to INR341m (1QFY17 net loss: INR536m).
EV/EBITDA (x)* 26.1 11.3 8.3 3.5
EV/ EBITDA (x)* 47.0 39.6 30.2 4.2 The stock trades at attributable EV/EBITDA (ex-activation) of 4.2x
EV/Sub (INR)* 3,368 2,762 2,419 2,000 FY18E. Maintain Buy.
* Based on attributable EBITDA and subs post Key things to watch for
minority stake; # (ex-activation) Subscription revenue growth (we expect 6% QoQ decline).
Activation revenue (we expect INR0.37b).
EBITDA margin (we expect 15.6%).
Sun TV
Bloomberg SUNTV IN
CMP: INR530 Not Rated
Equity Shares (m) 394.1
We expect Sun TVs revenue to increase 12% YoY to INR6.36b.
M. Cap. (INR b)/(USD b) 209 / 3
52-Week Range (INR) 533/312
1,6,12 Rel Perf. (%) 14/29/37
Advertising and broadcasting revenue is likely to grow 7% YoY to
INR3.5b, as ad volumes improve post a dismal 1QFY17.
Financial Snapshot (INR Billion)
Y/E March 2015 2016 2017E 2018E We expect domestic subscription revenue to grow 2% QoQ to
Net Sales 22.4 24.0 27.4 31.0 INR2.35b.
EBITDA 16.1 17.1 19.5 22.3
Adj. Net Profit 7.4 8.3 10.3 12.1 Sun TVs EBITDA/EBIT is estimated to grow ~12%/16% YoY to
Adj. EPS (INR) 18.7 21.1 26.1 30.6 INR4.36b/INR3.88b. PAT should grow 16% YoY to INR2.54b.
Adj. EPS Gr. (%) 4.7 12.8 23.8 17.2
BV/Sh (INR) 85.8 92.2 99.8 109.6 The stock trades at 20.3x FY17E and 17.3x FY17E EPS. Not Rated.
RoE (%) 21.8 23.4 26.2 27.9
RoCE (%) 22.4 24.1 27.1 29.1
Div. Payout (%) 60.2 59.1 61.3 58.8
Valuations
P/E (x) 28.3 25.1 20.3 17.3 Key things to watch for
P/BV (x) 6.2 5.8 5.3 4.8 YoY ad growth (we expect 7%).
EV/EBITDA (x) 12.4 11.5 9.9 8.4 QoQ domestic subscription growth (we expect 2%).
Div. Yield (%) 2.1 2.5 3.0 3.4
Zee Entertainment
Bloomberg Z IN CMP: INR579 TP: INR610 Buy
Equity Shares (m) 960.4 We expect advertising revenue to grow 16% YoY to INR9.78b. Any
M. Cap. (INR b)/(USD b) 556 / 8 dip in the operational performance of flagship, Zee TV is likely to be
52-Week Range (INR) 589/350 more than offset by strong performance by Zee Anmol, &TV and
1,6,12 Rel Perf. (%) 10/38/37 regional offerings.
We estimate 13% YoY growth in subscription revenue to INR5.43b.
Financial Snapshot (INR Billion) (Domestic subscription to grow 15% YoY to INR4.3b).
Y/E MARCH 2015 2016 2017E 2018E Total revenue is likely to grow 19% YoY to INR16.52b, aided by a
Net Sales 48.8 58.3 68.1 76.8 spike in other sales and services. The spike is courtesy the box office
EBITDA 12.5 15.0 19.4 25.5 performance of Zee-produced Hindi movie, Rustom in 2Q.
Adj. NP 9.8 10.2 14.0 18.9
We are building in ~17% YoY increase in content cost to bake in
Adj. EPS (INR) 10.2 10.6 14.6 19.7
some escalation due to the aforementioned movie release.
Adj. EPS Gr. (%) 9.7 3.9 37.8 34.9
We expect EBITDA margin to dip by ~80bp QoQ (but improve by
EPS ex-&TV (INR) 10.8 11.8 15.3 19.4
240bp YoY) to 28%.
RoE (%) 31.2 27.3 30.4 32.8
RoCE (%) 19.0 17.8 21.4 25.1 Sports losses are expected to be INR199m.
Div. Payout (%) 22.1 21.3 15.4 12.7 Adjusted PAT is likely to grow ~18% YoY to INR3.32b.
Valuations The stock trades at 38.8x FY17E and 28.8x FY18E EPS. Buy.
P/E (x) 55.6 53.5 38.8 28.8
P/E ex-&TV (x) 52.4 47.9 37.0 29.1
Key things to watch for
EV/EBITDA (x) 43.3 36.5 23.6 17.5
YoY ad growth (we expect 19%).
Div. Yield (%) 0.4 0.4 0.4 0.4
Sports loss (we expect INR199m).
Metals
Company name Metals 2QFY17 preview
Hindalco Base metals perform well; Steel seasonally weak
Hindustan Zinc
Base metal prices were higher in 2QFY17. Zinc outperformed with ~17% QoQ increase,
Jindal Steel & Power
while aluminum was up ~3% QoQ. Steel was seasonally weak.
JSW Steel EBITDA for our metals coverage universe is estimated to increase 10% QoQ/50% YoY
Nalco to INR165b, led by Vedanta (due to higher prices and volumes in zinc and aluminum)
NMDC and Tata Steel (due to higher margins in Europe).
SAIL We move to FY18E valuation for SAIL, JSW Steel, Hindalco and Hindustan Zinc to
ensure consistency in our metals coverage universe.
Tata Steel
We have upgraded Vedantas target price to INR202/share (from INR160), considering
Vedanta
higher zinc prices and incorporating Ind-AS adjustments.
We estimate EBITDA for our metals coverage universe to increase 10% QoQ/50%
YoY to INR165b, led by Vedanta and Tata Steel. Vedantas EBITDA is estimated to
increase 23% QoQ/10% YoY to INR42b due to higher prices and volumes of zinc and
aluminum. Tata Steels EBITDA is estimated to increase 24% QoQ (+2x YoY) to
INR40b due to strong volumes in India and higher spreads in Europe. We estimate
EBITDA/t of ~USD70 in Tata Steels EU operations. Among other ferrous names, JSW
Steels EBITDA is estimated to be down 10% QoQ (+70% YoY) to INR29b on account
of lower steel prices and an increase in raw material costs. SAIL is estimated to be
back in red, with EBITDA/t loss of ~INR130/t due to lower steel prices.
Revising base metal estimates; Hindalco and JSW our top picks
We revise our FY17/18 zinc price estimates to USD2,200/t from USD2,000/t earlier.
We move to FY18E valuation for SAIL, JSW Steel, Hindalco and Hindustan Zinc to
ensure consistency across our coverage universe. Our revised TPs are presented in
(Exhibit 14, 15 and 16). Vedantas TP is upgraded to INR202/share (from INR160),
considering higher zinc price estimate and incorporating Ind-AS changes.
27,000
24,000
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
Source: MOSL, Company
Exhibit 75: Domestic steel demand growth trailing 12-month (YoY %)
Domestic steel demand
growth in July was tepid at Cons. (mt) Trailing 12m Growth (%)
~1% YoY. It improved in
8.1
10.0
7.4
7.3
7.2
7.2
7.1
7.1
7.1
7.0
6.9
6.9
6.9
6.9
6.8
6.8
6.7
6.7
August to 4.4% YoY. On
6.7
6.7
6.6
6.6
6.6
6.6
6.5
6.5
6.3
6.3
6.2
6.1
8.0
5.9
5.9
5.9
5.9
5.8
5.8
5.7
5.6
5.5
5.4
5.1
5.1
Jun-14
Jun-15
Apr-13
Jun-16
Aug-13
Apr-14
Dec-13
Apr-15
Feb-14
Aug-14
Dec-14
Apr-16
Feb-15
Aug-15
Dec-15
Feb-16
Aug-16
Oct-13
Oct-14
Oct-15
Source: MOSL, Company
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
20,000
15,000
10,000
5,000
0
-5,000
-10,000
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
Source: MOSL, Company
Exhibit 80: Global aluminum production trend Exhibit 81: China aluminum production trend
Production YoY Production YoY
3.0 50
5,400 22.0 2.8
YoY growth (%)
17.0 40
YoY growth (%)
2.6
'000 tons
4,800
m tons
12.0
2.4 30
4,200 7.0
2.0 2.2
2.0 20
3,600 -3.0
-8.0 1.8
10
3,000 -13.0 1.6
1.4 -
Jul-14
Jul-15
Jul-16
Apr-15
Apr-16
Jan-15
Jan-16
Oct-14
Oct-15
Jul-14
Jul-15
Jul-16
Apr-14
Apr-15
Apr-16
Jan-15
Jan-16
Oct-14
Oct-15
USD/t
2.9
m tons
1,600
1,500 2.5
1,400 2.1
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Source: MOSL, Bloomberg
Top Picks
Hindalco (Buy, TP: INR245): Hindalcos (HNDL) strong cost positioning in aluminum,
support from domestic coal cost, limited room for LME to decline from current
levels, improving mix at Novelis and exit from capex phase are key positives.
HNDLs average primary aluminum cost of production has declined by more than
~USD600/ton over the past year due to benefits from operating leverage, falling
cost of coal, operating efficiencies and lower cost of crude derivatives, thereby
significantly improving its positioning on global cost curve. These cost savings,
except for crude derivatives, are sustainable, in our view.
Copper smelting continues to benefit from higher TC/RCS amid oversupply of copper
concentrates. Meanwhile, Novelis is likely to see margins improve as the share of
high-margin auto products in total mix increases.
HNDLs capex phase is now behind us, as newly added capacities enter the final
stage of commissioning. We estimate HNDL to generate FCF (pre-interest) of
INR85b/INR94b in FY17E/18E. Net debt is estimated to decline from INR553b in
FY16 to INR468b in FY18, driving equity value. Maintain Buy.
JSW Steel (Buy, INR2,205): JSW Steel (JSTL) is likely to benefit from counter-cyclical
low-cost capacity expansion, which would drive strong volume growth. The
company is set to accelerate volumes at a CAGR of 17% (to 15.8mtpa) over FY16-18E
after a hiatus of two years. It grew volumes at a CAGR of 23% during FY05-14.
EBITDA is estimated to increase more than 2x YoY to INR140b in FY17E. Net debt is
estimated to decline from INR505b in FY16 to INR408b in FY18E. JSTL is of the few
major domestic steel companies to generate positive FCF.
JSTL is well positioned to benefit from the upcoming auction of iron ore mines in
Karnataka. The stock trades at EV/EBITDA of 6.5xFY17E and 5.7xFY18E. JSTL has
strongest volumes among peers and less exposure to steel price volatility. Maintain
Buy.
Exhibit 87: Relative performance three-month (%) Exhibit 88: Relative performance one-year (%)
Sensex Index MOSL Metals Index Sensex Index MOSL Metals Index
131 180
122 160
140
113
120
104 100
95 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Hindalco
Bloomberg HNDL IN CMP:INR154 TP: INR245 (+59%) Buy
Equity Shares (m) 2,065.2
Standalone: We estimate standalone EBITDA to increase 3% QoQ
M. Cap. (INR b)/(USD b) 318 / 5
(+93% YoY) to INR11.7b on higher copper volumes as production
52-Week Range (INR) 165/59
stabilizes. Aluminum segment EBITDA is estimated to decline
1,6,12 Rel Perf. (%) -1/66/110
marginally by 5% QoQ to INR8b on higher raw material prices.
Financial Snapshot (INR Billion)
Aluminum sales volumes are estimated to increase 9% QoQ (+15%
Y/E March 2015 2016 2017E 2018E YoY) to 318kt. LME aluminum averaged USD1,619/t (+3% QoQ).
Sales 1,042.8 1,001 1,007 1,090
Copper volumes are estimated to increase 53% QoQ to 95kt as
EBITDA 89.4 106.1 131.1 143.3
production normalizes post shutdown in 1Q.
NP 27.9 24.7 35.9 47.7
Novelis: We estimate Novelis to report adjusted EBITDA of
Adj. EPS (INR) 13.5 12.0 17.4 23.1
USD281m (+5% QoQ) on higher volumes. Adj. EBITDA/t is estimated
EPS Gr(%) 8.7 -11.5 45.1 33.0
at USD350 (v/s. USD355 in 1QFY17). Volumes are estimated to
BV/Sh. (INR) 105.4 101.8 116.1 137.6
RoE (%) 12.3 11.6 15.9 18.2
increase by 2% YoY to 804kt. Buy.
RoCE (%) 4.9 5.9 8.1 9.1
Payout (%) 12.1 13.7 9.4 7.1
Valuations
P/E (x) 11.6 13.1 9.0 6.8
P/BV 1.5 1.5 1.4 1.1 Key issues to watch for
EV/EBITDA (x) 9.9 8.3 6.4 5.5 Lower margins in aluminum.
Div. Yield (%) 0.9 0.9 0.9 0.9 Foreign exchange rate impact at Novelis.
Hindustan Zinc
Bloomberg HZ IN CMP:INR255 TP: INR240 (-6%) Neutral
Equity Shares (m) 4,225.3
We expect HZLs EBITDA to increase 49% QoQ (-17% YoY) to
M. Cap. (INR b)/(USD b) 1,076 / 16
INR16.8b due to higher production and prices. Zinc LME is up 17%
52-Week Range (INR) 263/136
QoQ to USD2,249/t. Zinc production is estimated to increase 37%
1,6,12 Rel Perf. (%) 13/26/75
QoQ to 140kt. Lead production is estimated to increase 20% QoQ,
Financial Snapshot (INR Billion) while silver production is estimated to rise 13% QoQ to 107 tons.
Y/E March 2015 2016 2017E 2018E We estimate PAT to increase 37% QoQ to INR14.2b on lower other
Sales 147.9 142.3 167.3 183.8 income due to huge dividend payment in the quarter. Neutral.
EBITDA 74.3 67.8 91.6 104.7
NP 81.9 83.6 83.5 93.3
Adj. EPS (INR) 19.4 19.8 19.8 22.1
EPS Gr(%) 18.9 2.1 -0.1 11.7
BV/Sh. (INR) 102.6 88.5 102.1 117.4
RoE (%) 20.3 20.7 20.8 20.1
RoCE (%) 22.6 20.6 24.2 23.7
Payout (%) 26.6 164.9 24.7 25.2
Valuations
P/E (x) 13.1 12.8 12.8 11.5
P/BV (x) 2.5 2.9 2.5 2.2 Key issues to watch for
EV/EBITDA (x) 10.2 10.6 8.6 7.0 Delay in recovery of volumes at Rampura Agucha.
Div. Yield (%) 1.7 11.0 1.5 1.7
JSW Steel
Bloomberg JSTL IN CMP: INR1,768 TP: INR2,205 (+24%) Buy
Equity Shares (m) 241.7
Consolidated EBITDA is estimated to decline 10% QoQ to INR29.4b
M. Cap. (INR b)/(USD b) 427 / 6
on seasonally lower steel prices and an increase in cost of coking
52-Week Range (INR) 1,887/856
coal. PAT is estimated at INR7.6b, down from INR11b in 1Q, on
1,6,12 Rel Perf. (%) 1/28/94
lower EBITDA and an increase in depreciation cost from
capitalization of newly commissioned plants.
Financial Snapshot (INR Billion)
Standalone EBITDA is estimated to decline 9% QoQ to INR28.3b.
Y/E March 2015 2016 2017E 2018E
Sales 529.7 418.8 578.1 638.0
Volumes are estimated to be up 5% QoQ (11% YoY) to 3.5mt.
EBITDA 94.0 60.7 139.7 146.0
Realization is estimated to decline ~INR530/t QoQ to ~INR32,160/t
Adj. PAT 18.0 -0.1 46.1 47.9 as impact of lower domestic steel prices is partly offset by higher
Adj. EPS (INR) 74.5 -0.3 190.9 198.1 realization on exports. EBITDA margin is estimated at INR8,080/t,
EPS Gr(%) 93.2 -100.5 - 3.8 down from INR9,276/t in 1Q. Buy.
54,722.4
BV/Sh. (INR) 922 775 945 1,126
RoE (%) 8.3 0.0 22.2 19.1
RoCE (%) 5.7 2.7 9.4 9.1
Payout (%) 18.1 -36.6 7.5 7.2
Valuation
P/E (x) 24.0 n.a. 9.4 9.0 Key issues to watch for
P/BV 1.9 2.3 1.9 1.6 MIP/anti-dumping measures against steel imports.
EV/EBITDA (x) 9.7 15.4 6.5 5.8 Domestic steel demand growth.
Div. Yield (%) 0.6 0.6 0.7 0.7
Nalco
Bloomberg NACL IN CMP: INR46 TP: INR64 (+39%) Buy
Equity Shares (m) 2,577.2
We estimate Nalco to report a 32% QoQ increase in EBITDA to
M. Cap. (INR b)/(USD b) 119 / 2
INR2.6b. PAT is estimated to decline 2% QoQ to INR1.3b on lower
52-Week Range (INR) 51/30
other income due to share buyback.
1,6,12 Rel Perf. (%) 0/7/24
Aluminum sales volume is estimated to increase 14% QoQ to 94kt.
Aluminum LME is up 3% QoQ to USD1,619/t. Realized premium is
Financial Snapshot (INR Billion)
estimated at USD210/t, down from USD290/t in last quarter.
Y/E March 2015 2016 2017E 2018E
Alumina realization is estimated at USD270/t, up 5% QoQ. Buy.
Sales 73.8 68.2 71.2 81.2
EBITDA 17.1 9.4 11.9 18.3
NP 12.3 6.8 6.9 10.7
Adj. EPS (INR) 4.8 2.6 3.6 5.5
EPS Gr(%) 81.6 -44.8 36.2 54.1
BV/Sh. (INR) 49.7 50.2 53.9 57.3
RoE (%) 9.9 5.3 6.9 9.9
RoCE (%) 14.6 7.5 8.1 13.4
Payout (%) 34.2 77.7 57.1 37.0
Valuations
P/E (x) 10.1 18.3 13.4 8.7
Key issues to watch for
P/BV 1.0 1.0 0.9 0.8
Availability of coal for captive power plant.
EV/EBITDA (x) 4.0 7.0 4.8 2.6
Div. Yield (%) 3.1 3.6 3.6 3.6
LME price trend, utilization of smelter.
NMDC
Bloomberg NMDC IN CMP: INR108 TP: INR136 (+26%) Buy
Equity Shares (m) 3,163.9
NMDCs EBITDA is estimated to increase 2% QoQ to INR8.3b as
M. Cap. (INR b)/(USD b) 343 / 5
lower realization is offset by marginally higher volumes and lower
52-Week Range (INR) 117/75
cost.
1,6,12 Rel Perf. (%) 2/-1/8
Iron ore sales volumes are estimated to increase 2% QoQ (32% YoY)
Financial Snapshot (INR Billion)
to 7.9mt, aided by an increase in domestic demand.
Realization is down 8% QoQ to INR1,856/t.
Y/E March 2015 2016 2017E 2018E
Sales 123.6 64.6 71.2 76.7
Other income is estimated to decline 16% QoQ to INR2.9b on
EBITDA 77.8 32.3 35.6 39.7 dividend outflow.
Adj. PAT 65.9 33.2 28.4 26.3 PAT is estimated to increase 2% QoQ to INR7.2b. Buy.
Adj. EPS (INR) 16.6 8.4 9.0 8.3
EPS Gr(%) 3.1 -49.7 7.5 -7.6
BV/Sh. (INR) 81.5 75.9 72.9 74.0
RoE (%) 20.8 15.9 11.7 11.8
RoCE (%) 20.8 15.6 10.9 11.0
Payout (%) 44.5 177.0 80.1 86.7
Valuations
Key issues to watch for
P/E (x) 6.7 13.3 12.4 13.4
Increase in global iron ore prices.
P/BV 1.4 1.5 1.5 1.5
Quicker-than-expected production ramp-up.
EV/EBITDA (x) 3.3 9.5 8.7 8.6
Div. Yield (%) 7.7 9.9 5.4 5.4
SAIL
Bloomberg SAIL IN CMP: INR48 TP:INR31 (-35%) Sell
Equity Shares (m) 4,130.4
We estimate SAIL to report operating EBITDA loss of INR0.4b, as
M. Cap. (INR b)/(USD b) 198 / 3
against profit of INR2.3b in 1Q on lower steel prices.
52-Week Range (INR) 58/34
1,6,12 Rel Perf. (%) 1/-2/-13
Realization is estimated to decline by INR800/t QoQ to INR32,193/t.
Financial Snapshot (INR Billion)
EBITDA/t loss is estimated at ~INR130, as against profit of
Y/E March 2015 2016 2017E 2018E
~INR830/t in 1Q on lower steel prices.
Sales 459.5 395.0 460.5 559.9
EBITDA 49.0 -28.6 17.8 22.7
NP 21.6 -37.0 -30.8 -41.2
PAT loss is estimated at INR12.2b, an increase from INR5b in 1Q.
Adj. EPS (INR) 5.2 -9.0 -7.5 -10.0 Sell.
EPS Gr(%) 13.9 -271.5 -16.8 33.6
BV/Sh. (INR) 107.0 95.5 88.0 78.0
RoE (%) 4.9 -8.8 -8.1 -12.0
RoCE (%) 5.4 -6.0 -1.1 -1.4
Payout (%) 45.2 0.0 0.0 0.0
Valuations
P/E (x) 9.3 -5.4 -6.5 -4.9 Key issues to watch for
P/BV (x) 0.5 0.5 0.6 0.6 Commissioning of ISP and Bhilai capacity expansion.
EV/EBITDA (x) 9.8 -19.4 35.7 29.2
Div. Yield (%) 4.2 0.0 0.0 0.0
Tata Steel
Bloomberg TATA IN CMP: INR383 TP: 278 (-27%) Sell
Equity Shares (m) 971.4
India: We estimate Tata Steels standalone EBITDA to increase 17%
M. Cap. (INR b)/(USD b) 372 / 6
QoQ to INR25.9b on higher volumes. Volumes are estimated at
52-Week Range (INR) 409/210
2.7mt, up from 2.1mt in last quarter, aided by contribution from
1,6,12 Rel Perf. (%) 3/9/73
Kalinganagar. Blended sales realization is estimated to decline
Financial Snapshot (INR Billion)
INR1,420/t QoQ to INR41,000/t. Steel EBITDA is estimated at
INR9,438/t, down from INR10,332/t in 1Q.
Y/E March 2015 2016 2017E 2018E
Sales 1,395 1,172 1,102 1,241
Europe: EU steel margin is estimated to increase ~USD23/t QoQ to
EBITDA 128 76 144 170
USD73/t on higher steel spreads. Volumes are estimated to be
Adj. PAT 3 7 32 53 marginally higher QoQ to 2.6mt. EBITDA is estimated at INR12.6b, a
Adj. EPS (INR) 2.9 7.7 32.4 54.8 sharp increase from INR8.6b in 1Q.
EPS Gr(%) -91.9 168.6 322.5 68.8 Consolidated EBITDA is estimated at INR40b, an increase of 24%
BV/Sh. (INR) 185 152 136 181 QoQ. PAT is expected to come in at INR12.8b, up from adj. PAT of
RoE (%) 1.3 4.6 22.5 34.5 INR3.4b in 1Q. Sell.
RoCE (%) 6.1 5.4 7.9 9.5
Payout (%) -23.0 -28.6 -363.8 16.7
Valuations
P/E (x) 136.5 50.8 12.0 7.1 Key issues to watch out
P/BV 2.1 2.6 2.9 2.2
Imports from China and global iron ore prices.
EV/EBITDA (x) 8.7 15.1 8.4 7.0
Div. Yield (%) 2.1 2.1 2.1 2.1
Vedanta
Bloomberg VEDL IN CMP:INR179 TP: INR202 (+12%) Neutral
Equity Shares (m) 3,717.0
We estimate VEDLs EBITDA to increase 23% QoQ to INR42.4b on
M. Cap. (INR b)/(USD b) 665 / 10
higher prices and volumes in zinc and aluminum.
52-Week Range (INR) 181/58
Standalone business EBITDA is estimated to decline 24% QoQ to
1,6,12 Rel Perf. (%) 5/86/106
INR7.9b on lower copper margins due to a fall in acid prices and
seasonally weak iron ore volumes. Aluminum EBITDA is estimated
Financial Snapshot (INR Billion)
to increase 43% QoQ to INR2.9b.
Y/E March 2015 2016 2017E 2018E
Cairn EBITDA is estimated to increase 25% QoQ to INR9.9b.
Sales 749.2 644.3 719.0 805.3
EBITDA * 159.4 110.4 168.2 190.3
Ex-HZL and Cairn India, EBITDA is estimated to increase 3% QoQ to
NP 59.5 31.9 64.3 81.1 INR15.6b. Neutral.
Adj. EPS (INR) 20.1 10.8 17.3 21.8
EPS Gr(%) -21.3 -37.3 -13.8 102.7
BV/Sh. (INR) 121.7 151.8 172.1 183.5
RoE (%) 17.0 7.9 10.7 12.3
RoCE (%) 9.9 7.4 10.9 12.1
Payout (%) 20.4 48.9 30.4 24.1
Valuation
P/E (x) 9.5 17.8 11.1 8.8 Key issues to watch for
P/BV 1.1 1.1 1.0 1.0 Commissioning of 1.25mtpa smelter.
EV/EBITDA (x)* 6.7 8.6 6.4 5.4
Recovery in base metal prices.
Div. Yield (%) 1.8 2.3 2.3 2.3
GRM at USD5.1/bbl (down 19% YoY); petchem spreads up QoQ and YoY
The regional benchmark Reuters Singapore GRM was down 19% YoY, led by
decline in gasoline cracks to USD5.1/bbl.
In petchem, polymer and polyster, spreads increased sequentially. Meaningful
increase in PP spreads should benefit RIL, as it has higher PP capacity.
Exhibit 90: Relative performance - 3m (%) Exhibit 91: Relative performance - 1Yr (%)
Sensex Index MOSL Oil & Gas Index Sensex Index MOSL Oil & Gas Index
140
119
111 120
103 100
95 80
Jul-16
Jun-16
Aug-16
Sep-16
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
On QoQ basis, GRM up 2%, Brent flat, light/heavy spreads rise marginally
Exhibit 93: Brent crude price was flat QoQ but down 8% YoY Exhibit 94: Premium of Brent over WTI increased QoQ to
to an average of USD45.8/bbl in 2QFY17 USD0.9/bbl in 2QFY17
Brent Crude Price (USD/bbl) Brent less WTI (USD/bbl)
140 25
120 20
100 15
80
10
60
5
40
20 0
0 (5)
2QFY05 2QFY07 2QFY09 2QFY11 2QFY13 2QFY15 2QFY17 2QFY05 2QFY07 2QFY09 2QFY11 2QFY13 2QFY15 2QFY17
8 10
6 0
4 (10)
2
(20)
Gasoline
LPG
Naphtha
Jet/Kero
Diesel
Fuel Oil
0
2QFY05 2QFY07 2QFY09 2QFY11 2QFY13 2QFY15 2QFY17
Exhibit 97: Crude differentials declined in 2QFY17 (USD/bbl) Our key assumptions
In USD/bbl Brent - Dubai Arab L-H Our crude price assumptions are USD49.5/bbl for
10 FY17 and USD55/bbl over long term.
8 We expect the regional benchmark Singapore
6 Reuters GRM to remain in the USD6-7/bbl range
4 for the near term, with downward bias.
2
0
(2)
2QFY05 2QFY07 2QFY09 2QFY11 2QFY13 2QFY15 2QFY17
Exhibit 99: Polymer spreads increase (INR/kg): PE , PP, PVC Exhibit 100: POY spread down 3.8% QoQ; PSF spreads up
spreads change -1.4%/2.6%/19.8% QoQ 2.8% QoQ (INR/kg)
PE PP PVC POY PSF
80 80
60 60
40 40
20 20
0
0
2QFY11 2QFY13 2QFY15 2QFY17
2QFY11 2QFY13 2QFY15 2QFY17
Source: Bloomberg, Company, MOSL Source: Bloomberg, Company
Exhibit 101: We model nil subsidy for OMCs in FY17 and FY18
(INR b) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Fx Rate (INR/USD) 40.3 46.0 47.5 45.6 47.9 54.5 60.6 61.1 65.5 67.5 70.0
Brent (USD/bbl) 82 85 70 86 114 111 108 86 48 49.5 55
Product-wise Gross Under recoveries (INR b)
Petrol 73 52 52 27 0 0 0 0 0 0 0
Diesel 353 523 93 348 819 915 628 109 0 0 0
Kerosene 191 282 174 200 278 296 306 248 116 114 126
LPG* 156 176 143 205 284 399 465 366 161 174 242
Total 773 1,033 461 780 1,385 1,610 1,399 723 276 287 368
Sharing of Gross Under recoveries (INR b)
Government 353 713 260 410 829 1,000 707 273 263 270 332
Upstream 257 329 145 303 552 600 671 428 13 17 36
OMC's 163 (9) 56 67 0 10 21 22 0 0 0
Total 773 1033 461 780 1,385 1,610 1,399 723 276 287 368
Sharing of Gross Under recoveries (%)
Government 46 69 56 53 60 62 51 38 95 94 90
Upstream 33 32 31 39 40 37 48 59 5 6 10
OMC's 21 (1) 12 9 0 1 2 3 0 0 0
Total 100 100 100 100 100 100 100 100 100 100 100
*LPG includes DBTL component Source: Company, MOSL
Exhibit 102: Petrol-diesel price difference (INR/liter) Exhibit 103: Diesel in over-recovery zone post deregulation
40 Diesel (under)/over recovery (INR/ltr)
3
Petrol - Diesel price
difference (INR/ltr)
30
2
20
1
10
0
0
(1)
Jul-14
Jun-12
Nov-12
Apr-13
May-15
Aug-11
Dec-14
Aug-16
Mar-11
Jan-12
Sep-13
Feb-14
Mar-16
Oct-10
Oct-15
Jun-15
Jun-16
Nov-15
May-15
May-16
Dec-14
Aug-15
Feb-15
Mar-15
Sep-15
Dec-15
Aug-16
Jan-16
Mar-16
Sep-16
Source: PPAC, MoPNG, MOSL Source: PPAC, MoPNG, MOSL
Exhibit 104: With almost nil subsidy, model ONGCs net Exhibit 105: Expect higher LNG volumes in 2QFY17
realization for 2QFY17 at USD47/bbl (mmscmd) and lower production in RILs KG-D6
RIL KG-D6 PLNG GSPL GAIL India
120
95 96 95 97 97 96
76 94 95 97 100
56 64 51 43 91 48 52
63 63 62 74 62 86 87
63 63 62 64 61 40 0 5 44 46 47 38 38 36 51
35 46
90
46 44
40 90 43
2 0 0 0
24 25 24 25 27
0
47 47
48 51 40 45 46 33 47 41 36 56 59 49 44 35 46 47 21 20 21 22 24 23 29
80
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 23 24 70
11.5
3.1 10.8
10.6
2.4 10.4
191
1.4 10.1
1.5 10.1
10.0
186
183
180
175
174
173
172
172
170
170
169
168
168
167
167
167
3.1 9.6
163
0.4 9.5
3.1 9.3
2.9 8.7
1.8 8.4
3.5 8.3
138
5.4 2.3 7.7
6.7 0.9 7.6
125
125
125
125
6.3 1.0 7.3
118
116
4.3
6.5
4.9
45
9.1
8.7
8.6
8.0
8.0
7.7
18
15
6.6
6.5
6.3
6.2
5.8
5.1
5.0
4.8
6
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
FY13 FY14 FY15 FY16 FY17
Source: MOSL, Company Source: MOSL, Company
BPCL
Bloomberg BPCL IN CMP: INR628 TP: INR703 (+12%) Buy
Equity Shares (m) 1,446.0
We expect OMCs (IOCL, BPCL, HPCL) core earnings to improve, led
M. Cap. (INR b)/(USD b) 908 / 14
by higher marketing margins. However, on a reported basis, earnings
52-Week Range (INR) 630/366
would decline QoQ, as 1QFY17 had significant inventory gains.
1,6,12 Rel Perf. (%) 8/30/39
We model nil subsidy sharing for OMCs; the subsidy in 2QFY17
Financial snapshot (INR b) would entirely be borne by the government.
Y/E March 2015 2016 2017E 2018E 2QFY17 gross under-recoveries (including LPG DBTL component)
Sales 2,424 1,884 2,104 2,476 have declined 41% YoY, led by lower crude oil/petroleum product
EBITDA 96.0 142.1 147.1 162.4 prices and diesel deregulation.
Adj. PAT 48.1 79.8 84.5 93.4 We peg BPCLs refinery throughput at 6.3mmt for 2QFY17 v/s 6mmt
Adj. EPS (INR) 33.2 55.2 58.4 64.6 in 2QFY16 and 6.2mmt in 1QFY17.
EPS Gr.% 22.9 66.1 5.8 10.6 We expect BPCL to report PAT of INR14.7b in 2QFY17 (-44% QoQ,
BV/Sh.INR 155.9 191.2 228.6 270.9 +45% YoY).
RoE (%) 22.9 31.8 27.8 25.9 BPCL trades at 9.7x FY18E EPS and 2.1x FY18E BV (adjusted for
RoCE (%) 11.6 18.1 16.0 15.7 investments), with 3% dividend yield. Buy.
Payout*(%) 41.2 38.7 38.1 37.8
Valuation
P/E (x) 18.9 11.4 10.7 9.7
P/BV (x) 4.0 3.3 2.7 2.3 Key issues to watch for
EV/EBITDA (x) 11.4 7.7 7.4 6.6
(a) Inventory and forex change impact, (b) GRM, (c) Kochi refinery
Div. Yld (%) 1.8 2.7 2.9 3.0
*Based on standalone
expansion, and (d) update on Mozambique/Brazil E&P blocks.
Cairn India
Bloomberg CAIR IN
CMP: INR208 Neutral
Equity Shares (m) 1,874.9
We expect CAIR to report consolidated net sales of INR19b in
M. Cap. (INR b)/(USD b) 390 / 6
2QFY17 (v/s INR22b in 2QFY16 and INR18.8b in 1QFY17). Net sales
52-Week Range (INR) 213/107
are likely to increase QoQ, led by crude priceBrent average price
1,6,12 Rel Perf. (%) 4/24/28
was flat QoQ (down 8% YoY).
Financial snapshot (INR b) We estimate consolidated EBITDA at INR8.1b in 2QFY17 v/s INR9.8b
Y/E March 2015 2016 2017E 2018E in 2QFY16 and INR7.9b in 1QFY17.
Sales 146.5 86.3 88.2 104.0 We expect CAIRs 2QFY17 Rajasthan production (Cairn share) at
EBITDA 96.2 36.2 40.0 48.3 116.9kboepd v/s 117.7kboepd in 2QFY16 and 120.5kbpd in 1QFY17.
Adj. PAT 69.5 21.4 18.9 20.0 We model Brent crude price of USD49.5/bbl for FY17, USD55/bbl
Adj. EPS (INR) 37.1 11.4 10.1 10.7
for FY18 and USD55/bbl for the long term, and take a quality
EPS Gr. (%) -43.1 -69.2 -11.8 5.9
discount of 15% for CAIR.
BV/Sh.(INR) 314.0 259.0 264.1 271.5
The stock trades at 19.5x FY18E EPS of INR10.7. Neutral.
RoE (%) 12.0 4.0 3.9 4.0
RoCE (%) 9.8 2.8 4.1 3.9
Payout (%) 28.4 30.7 30.7 30.7
Valuations
Key issues to watch for
P/E (x) 5.6 18.2 20.6 19.5
In the medium term: (a) update on PSC extension, (b) production
P/BV (x) 0.7 0.9 0.8 0.8 ramp-up, (c) reserve updates, and (d) clarity on cash utilization.
EV/EBITDA (x) 2.5 6.2 5.1 3.6 During the quarter: (a) net realization, (b) forex fluctuations, and
Div. Yield (%) 4.3 1.4 1.3 1.3 (c) guidance on production ramp-up and reserve upgrade.
GAIL
Bloomberg GAIL IN
CMP: INR385 TP: INR414 (+8%) Neutral
Equity Shares (m) 1,268.5
We expect GAIL to report a PAT of INR7.9b (up 79% YoY and down 7%
M. Cap. (INR b)/(USD b) 488 / 7
QoQ). We model nil subsidy sharing for GAIL in 2QFY17 (v/s nil in
52-Week Range (INR) 408/276
2QFY16 and 1QFY17).
1,6,12 Rel Perf. (%) -1/-1/23
We estimate EBITDA at INR13.8b in 2QFY17 v/s INR7.6b in 2QFY16
Financial snapshot (INR b)
Y/E March 2015 2016 2017E 2018E and INR15.7b in 1QFY17.
Sales 567.4 516.1 455.9 543.3 Segmental EBIT (pre-subsidy) is expected to be INR13.4b, up 74%
EBITDA 47.0 39.7 62.4 73.7 YoY, led by turnaround in petchem division profitability and likely
Adj. PAT 29.9 23.0 34.8 44.2
higher gas trading profitability.
Adj. EPS (INR) 23.6 18.1 27.4 34.9
EPS Gr. (%) -27.5 -23.2 51.3 27.1
GAIL trades at 11x FY18E EPS of INR34.9. Maintain Neutral.
BV/Sh.(INR) 229.6 241.1 262.4 284.5
RoE (%) 10.8 7.7 12.4 12.7
RoCE (%) 7.9 6.5 9.3 10.4 Key issues to watch for
Payout (%) 30.1 36.5 32.0 36.5 (a) Petchem profitability, (b) profitability in gas trading business, (c)
Valuations progress of pipeline projects worth USD4b, (d) pending tariff
P/E (x) 16.3 21.2 14.0 11.0
revisions for key pipelines, and (e) transmission volumes post
P/BV (x) 1.7 1.6 1.5 1.4
EV/EBITDA (x) 11.0 11.5 7.8 6.2 RasGas contract renegotiation.
Div. Yield (%) 1.6 1.4 2.1 2.9
Quarterly Performance
Y/E March FY16 FY17 FY16 FY17E IndAS
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 2QFY17*
Net Sales 125,191 140,880 133,801 116,272 106,866 103,755 116,501 129,083 516,143 456,205 105,104
Change (%) -6.4 -0.3 -10.6 -18.5 -14.6 -26.4 -12.9 11.0 -9.0 -11.6
EBITDA 9,976 7,675 10,847 11,186 15,732 13,832 15,524 17,271 39,684 62,358 13,832
% of Net Sales 8.0 5.4 8.1 9.6 14.7 13.3 13.3 13.4 7.7 13.7 13.3
Depreciation 3,077 3,227 3,330 3,497 3,354 3,519 3,545 3,777 13,131 14,196 3,519
Interest 1,636 1,635 1,583 1,546 1,774 1,650 1,550 1,431 6,400 6,406 1,650
Other Income 1,248 3,787 3,284 3,256 1,362 3,107 2,694 2,333 11,576 9,496 3,107
Extraordinary item* 0 0 0 0 4,893 0 0 0 0 4,893 0
PBT 6,511 6,599 9,218 9,399 16,858 11,770 13,123 14,395 31,728 56,146 11,770
Tax 2,270 2,194 2,576 1,699 3,506 3,884 4,330 4,750 8,739 16,471 3,884
Rate (%) 34.9 33.2 27.9 18.1 20.8 33.0 33.0 33.0 27.5 29.3 33.0
PAT 4,241 4,405 6,643 7,700 13,352 7,886 8,792 9,645 22,989 39,675 7,886
Adj PAT 4,241 4,405 6,643 7,700 8,459 7,886 8,792 9,645 22,989 34,782 7,886
Change (%) -31.7 -66.2 18.7 50.8 99.4 79.0 32.4 25.3 -23.2 51.3 79.0
EPS (INR) 3.3 3.5 5.2 6.1 6.7 6.2 6.9 7.6 18.1 27.4 6.2
Key Assumptions
Gas Trans. volume (mmsmd) 87 90 97 95 96 97 98 101 92 98
Petchem sales ('000MT) 50 84 84 116 110 150 155 161 334 576
Segmental EBIT Breakup (INR m)
Gas Transmission 3,937 5,755 4,277 4,510 5,554 4,946 4,840 4,786 18,479 20,127
LPG Transmission 822 580 543 693 526 599 598 592 2,639 2,316
Natural Gas Trading 3,424 1,925 4,834 3,766 4,219 3,375 2,890 2,923 13,950 13,408
Petrochemicals -3,002 -2,369 -1,606 -1,089 930 1,686 3,725 4,481 -8,066 10,822
LPG & Liq.HC (pre-subsidy) 2,768 721 2,328 1,642 2,144 1,920 1,726 2,151 7,459 7,942
Unallocated; GAILTEL 681 1,101 -121 979 606 893 893 893 2,640 3,285
Total 8,630 7,714 10,255 10,501 13,979 13,420 14,673 15,827 37,100 57,898
Less: Subsidy 0 0 0 0 0 0 0 0 0 0
Total 8,630 7,714 10,255 10,501 13,979 13,420 14,673 15,827 37,100 57,898
E: MOSL Estimates; *Under IndAS, revenues are shown on gross basis including excise duties
Quarterly Performance
Y/E March FY16 FY17 FY16 FY17E IndAS
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 2QFY17*
Net Sales 2,557 2,526 2,475 2,313 2,579 2,744 3,079 3,013 9,870 11,414 2,744
Change (%) 11.0 -28.0 1.9 -2.1 0.9 8.6 24.4 30.3 -6.9 15.6 8.6
Employee Costs 74 113 89 71 79 119 96 81 347 375 119
Operating expenses 193 121 243 130 117 170 191 187 687 665 170
Other Expenditure 53 52 57 69 52 63 71 69 231 255 63
EBITDA 2,237 2,240 2,086 2,042 2,330 2,392 2,721 2,675 8,605 10,118 2,392
% of Net Sales 87.5 88.7 84.3 88.3 90.4 87.2 88.4 88.8 87.2 88.7 87.2
% Change 11.9 -30.7 2.7 3.5 4.2 6.8 30.4 31.0 -6.8 17.6 6.8
Depreciation 434 464 472 473 430 480 485 523 1,843 1,918 480
Interest 207 213 184 168 167 175 178 186 773 706 175
Other Income 143 122 288 137 147 165 195 146 690 653 165
PBT 1,738 1,685 1,718 1,538 1,881 1,902 2,253 2,112 6,679 8,147 1,902
Tax 610 600 483 541 668 653 773 725 2,234 2,819 653
Rate (%) 35.1 35.6 28.1 35.2 35.5 34.3 34.3 34.3 33.4 34.6 34.3
PAT 1,128 1,085 1,235 997 1,213 1,249 1,480 1,387 4,445 5,328 1,249
Adj. PAT 1,128 1,085 1,235 997 1,213 1,249 1,480 1,387 4,445 5,328 1,249
Change (%) 33 -2 39 35 8 15 20 39 24 20 15
EPS (INR) 2.0 1.9 2.2 1.8 2.2 2.2 2.6 2.5 7.9 9.5 2.2
Transmission Vol. (mmscmd) 24.2 24.3 25.1 24.4 25.1 26.5 28.0 28.0 24.5 26.9 26.5
Implied adj. tariff (INR/mscm) 1,126 1,068 1,054 1,028 1,073 1,075 1,180 1,180 1,069 1,127 1,075
E: MOSL Estimates; *Under IndAS, revenues are shown on gross basis including excise duties
HPCL
Bloomberg HPCL IN
CMP: INR432 TP: INR507 (+17%) Buy
Equity Shares (m) 1,017.0
We expect OMCs (IOCL, BPCL, HPCL) core earnings to improve, led
M. Cap. (INR b)/(USD b) 440 / 7
by higher marketing margins. However, on a reported basis,
52-Week Range (INR) 443/212
earnings would decline QoQ, as 1QFY17 had significant inventory
1,6,12 Rel Perf. (%) 6/52/60
gains.
We model nil subsidy sharing for OMCs; the subsidy would entirely
Financial snapshot (INR b)
Y/E MARCH
be borne by the government.
2015 2016 2017E 2018E
2QFY17 gross under-recoveries (including LPG DBTL component)
Sales 2,064 1,793 1,939 2,099
EBITDA
have declined 41% YoY, led by lower crude oil/petroleum product
54.2 76.2 91.5 94.5
Adj. PAT 27.3 38.6 47.5 49.3
prices and diesel deregulation.
Adj. EPS (INR) 26.9 38.0 46.7 48.4 We peg refinery throughput at 4mmt for 2QFY17 (v/s 4.5mmt in
EPS Gr. (%) 57.6 41.3 23.0 3.7 1QFY17 and 4.2mmt in 2QFY16).
BV/Sh.(INR) 158 182.1 212.4 243.9 We expect HPCL to report PAT of INR9b in 2QFY17 (-57% QoQ).
RoE (%) 17.6 22.4 23.7 21.2 HPCL trades at 8.9x FY18E standalone EPS and 7.2x FY18E
RoCE (%) 7.3 11.4 12.6 11.6 consolidated EPS of INR60. The stock trades at 1.8x FY18E BV. Buy.
Payout (%) 35.7 35.4 35.1 35.0
Valuations
P/E (x) 16.1 11.4 9.3 8.9 Key issues to watch for
P/BV (x) 2.7 2.4 2.0 1.8 (a) GRM, (b) impact of forex and inventory change, and (c)
EV/EBITDA (x) 9.9 6.8 5.7 5.7 Bhatinda refinery profits.
Div. Yield (%) 1.9 2.7 3.2 3.4
Indraprastha Gas
Bloomberg IGL IN CMP: INR790 TP: INR838 (+6%) Neutral
Equity Shares (m) 140.0
We expect IGL to report volumes of 4.4mmscmd and PAT of
M. Cap. (INR b)/(USD b) 111 / 2
INR1.6b (up 56% YoY and 7% QoQ) for 2QFY17.
52-Week Range (INR) 809/454
IGL's CNG volumes have seen an uptick in the last quarter, driven by
1,6,12 Rel Perf. (%) 1/28/61
anti-pollution drive in Delhi and we expect some uptick in the
current quarter as well.
Financial Snapshot (INR b)
Y/E MARCH
We expect 2QFY17 CNG volumes at 3.4mmscmd (+10% YoY, +3%
2015 2016 2017E 2018E
QoQ). We model total volumes of 4.4/4.6mmscmd in FY17/FY18.
Sales 36.7 36.7 36.1 42.0
EBITDA
We expect profitability to improve QoQ and YoY, driven by lower
7.8 7.6 10.3 11.2
Adj. PAT 4.4 4.2 6.1 6.7
cut in CNG prices versus gas cost decline.
Adj. EPS (INR) 31.3 29.7 43.8 47.8 The recent anti-pollution drive in Delhi, along with the Supreme
EPS Gr. (%) 21.6 -4.9 47.4 9.0 Court directive to set up ~100 CNG stations in Delhi, should increase
BV/Sh.(INR) 149.9 172.6 205.9 241.9 earnings. Also, the recent cut in domestic gas price juxtaposed with
RoE (%) 22.7 18.4 23.2 21.3 rise in crude oil prices will increase the competitiveness of CNG v/s
RoCE (%) 20.1 17.1 21.8 20.3 diesel/petrol; we expect this to translate into higher volumes.
Payout (%) 19.2 20.2 20.5 20.9 The stock trades at 16.6x FY18E EPS of INR47.8. Neutral.
Valuation
P/E (x) 25.3 26.6 18.0 16.6 Key issues to watch for
P/BV (x) 5.3 4.6 3.8 3.3 (a) Likely increase in volumes following lower gas prices, and (b)
EV/EBITDA (x) 14.0 14.0 10.0 8.8 EBITDA margin.
Div. Yield (%) 0.8 0.8 1.1 1.3
IOC
Bloomberg IOCL IN
CMP: INR604 TP: INR753 (+25%) Buy
Equity Shares (m) 2,428.0
We expect OMCs (IOCL, BPCL, HPCL) core earnings to improve, led by
M. Cap. (INR b)/(USD b) 1,465 / 22
higher marketing margins. However, on a reported basis, earnings
52-Week Range (INR) 606/345
would decline QoQ, as 1QFY17 had significant inventory gains.
1,6,12 Rel Perf. (%) 6/42/43
We model nil subsidies for OMCs subsidies would entirely be borne
by the government.
Financial snapshot (INR b)
Y/E MARCH
1QFY17 gross under-recoveries (including LPG DBTL component) have
2015 2016 2017E 2018E
declined 41% YoY, led by lower crude oil/petroleum product prices
Sales 4,483 3,544 3,333 4,047
and diesel deregulation.
EBITDA 93.4 217.0 346.8 371.7
Adj. PAT
We peg refinery throughput at 15.8mmt for 2QFY17 (+18.7% YoY)
32.4 98.5 176.8 191.2
Adj. EPS (INR) 13.4 40.6 72.8 78.7
higher due to the recently commissioned Paradip refinery being
EPS Gr. (%) -39.2 203.8 79.5 8.1 operational for the full quarter.
BV/Sh.(INR) 283.5 313.3 360.4 411.1 We expect IOCL to report net profit of INR30b in 2QFY17 (-64% QoQ, -
RoE (%) 4.7 13.6 21.6 20.4 flat YoY).
RoCE (%) 4.4 9.6 14.2 14.0 IOCL trades at 7.7x FY18E EPS and at 1.5x FY18E BV. Dividend yield is
Payout (%) 52.0 44.0 35.4 35.8 ~4%. Buy.
Valuations
P/E (x) 45.2 14.9 8.3 7.7
P/BV (x) 2.1 1.9 1.7 1.5
EV/EBITDA (x) 21.2 8.0 5.1 4.4 Key issues to watch for
Div. Yield (%) 1.1 2.3 3.6 4.0 (a) Update on Paradip refinery, (b) GRM, (c) capex plans, and (d)
forex/inventory changes.
Quarterly Performance
Y/E March FY16 FY17 FY16 FY17E IndAS
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 2QFY17*
Net Sales 1,010,089 851,148 831,788 800,189 856,553 809,183 939,550 1,067,732 3,493,214 3,673,018 882,010
Change (%) -19.0 -23.5 -22.2 -14.4 -15.2 -4.9 13.0 33.4 -20.0 5.1
EBITDA 98,026 4,249 49,590 36,136 132,581 58,551 68,047 73,936 188,001 333,114 58,551
% of Net Sales 9.7 0.5 6.0 4.5 15.5 7.2 7.2 6.9 5.4 9.1 7.2
Depreciation 11,435 11,286 11,693 14,114 14,350 16,450 22,000 24,464 48,528 77,264 16,450
Interest 5,922 7,293 6,104 10,682 6,800 6,023 6,221 6,122 30,001 25,167 6,023
Other Income 11,329 12,726 14,062 10,805 8,957 7,791 7,309 6,402 48,923 30,459 7,791
PBT 91,999 -1,604 45,854 22,146 120,388 43,869 47,135 49,751 158,395 261,142 43,869
Tax 27,642 1,688 15,286 9,789 37,698 13,819 16,026 16,915 54,405 84,458 13,819
Rate (%) 30.0 nm 33.3 44.2 31.3 31.5 34.0 34.0 34.3 32.3 31.5
PAT 64,357 -3,292 30,569 12,356 82,690 30,050 31,109 32,836 103,991 176,684 30,050
Change (%) 155.1 nm nm -80.3 28.5 nm 1.8 165.7 97.2 69.9 nm
Adj. EPS (INR) 26.5 -1.4 12.6 5.1 34.1 12.4 12.8 13.5 42.8 72.8 12.4
E: MOSL Estimates; *Under IndAS revenues are shown on gross basis including excise duties
MRPL
Bloomberg MRPL IN
CMP: INR89 TP: INR98 (+10%) Buy
Equity Shares (m) 1,752.6
M. Cap. (INR b)/(USD b) 156 / 2 We expect MRPL to report EBITDA of INR8b (v/s INR15.8b in
52-Week Range (INR) 93/51 1QFY17). We estimate adjusted PAT of INR3.9b (v/s INR7.2b in
1,6,12 Rel Perf. (%) 13/17/60 1QFY17).
Regional benchmark Reuters Singapore GRM is down 23% YoY/4%
Financial snapshot (INR b)
QoQ to USD4.8/bbl. We model MRPLs GRM at USD5/bbl v/s
Y/E MARCH 2015 2016 2017E 2018E
USD10/bbl in 1QFY17 and USD0.3/bbl in 2QFY16.
Sales 574.6 396.3 441.6 516.3
EBITDA -14.1 29.6 38.0 48.6 We expect refinery throughput at 4.6mmt (+24% QoQ and +32%
Adj. PAT -17.4 12.9 23.3 24.0 YoY).
Adj. EPS (INR) -9.9 7.4 13.3 13.7
For MRPL, we model GRM of ~USD7bbl for FY17/FY18. The stock
EPS Gr. (%) -430.5 -174.5 80.3 3.1
trades at 6.5x FY18E EPS, and at an EV of 4.7x FY18E EBITDA. Buy.
BV/Sh.(INR) 30.3 36.6 46.8 57.3
RoE (%) -27.7 19.6 31.9 26.3
RoCE (%) -5.9 23.1 19.8 15.5
Payout (%) 0.0 0.0 23.8 23.0
Valuation
P/E (x) -9.0 12.1 6.7 6.5 Key issues to watch for
P/BV (x) 2.9 2.4 1.9 1.6 (a) GRM, (b) forex fluctuations, and (c) inventory changes.
EV/EBITDA (x) -9.4 2.9 5.3 4.7 Updates on foray into petrol and diesel marketing.
Div. Yield (%) 0.0 0.0 3.0 3.0 Payment of outstanding dues to Iran.
Oil India
Bloomberg OINL IN
CMP: INR415 TP: INR461 (+11%) Buy
Equity Shares (m) 601.1
We expect OINL to report adjusted PAT of INR5.6b (v/s INR6.7b in
M. Cap. (INR b)/(USD b) 249 / 4
2QFY16 and INR4.9b in 1QFY17).
52-Week Range (INR) 467/301
We estimate EBITDA at INR7.9b (up 2.4% YoY and up 1.8% QoQ). We
1,6,12 Rel Perf. (%) 9/19/-11
estimate gross and net realization at USD44.9/bbl, with no subsidy
sharing burden.
Financial snapshot (INR b)
Y/E MARCH
We model upstream subsidy if under-recovery is above government
2015 2016 2017E 2018E
support of INR12/liter in kerosene and ~INR200/kg in LPG.
Sales 92.3 92.7 94.5 105.8
EBITDA
Our Brent price assumption is USD49.5/55/bbl for FY17/18.
30.1 31.2 33.8 38.0
Adj. PAT 25.1 23.3 22.9 28.2
The stock trades at 8.8x FY18E EPS of INR47. We remain positive on
Adj. EPS (INR) 41.8 38.8 38.8 47.0 OINL due to attractive valuations and high dividend yield of ~4%. Buy.
EPS Gr. (%) -15.8 -7.2 -1.8 23.4
BV/Sh.(INR) 357.9 377.9 399.1 424.6
RoE (%) 11.9 10.5 10.0 11.4
RoCE (%) 8.7 8.3 7.5 8.5
Payout (%) 45.6 48.3 45.6 45.6
Valuations
Key issues to watch for
P/E (x) 9.9 10.7 10.7 8.8
(a) Subsidy sharing, (b) DD&A charges, and (c) oil & gas production
P/BV (x) 1.2 1.1 1.0 1.0
EV/EBITDA (x) 8.1 8.1 7.4 6.7
volumes.
Div. Yield (%) 3.9 3.9 3.6 4.3
ONGC
Bloomberg ONGC IN
CMP: INR260 TP:INR290 (+11%) Buy
Equity Shares (m) 8,555.5
We expect ONGC to report adjusted PAT of INR40.7b in 2QFY17 (v/s
M. Cap. (INR b)/(USD b) 2,226 / 33
INR42.3b in 1QFY17 and INR48.4b in 2QFY16).
52-Week Range (INR) 268/188
We estimate EBITDA at INR89.3b (v/s INR92.8b in 1QFY17 and
1,6,12 Rel Perf. (%) 10/13/4
INR103.9b in 2QFY16). We estimate gross and net realization at
USD46.9/bbl, as we expect the entire subsidy to be borne by the
Financial snapshot (INR b)
Y/E March
government.
2015 2016 2017E 2018E
We model upstream subsidy if under-recovery is above government
Sales 1,609 1,293 1,286 1,447
EBITDA
support of INR12/liter in kerosene and ~INR200/cylinder in LPG.
547 452 480 552
Adj. PAT 177 176 176 215
The stock trades at 10.7x FY18E consolidated EPS of INR24.2.
Adj. EPS (INR) 21.1 20.4 20.2 24.4 Valuations are attractive, with implied dividend yield of 3-4%. Buy.
EPS Gr. (%) -33.0 -0.7 0.3 22.2
BV/Sh.(INR) 211 216 227 240
RoE (%) 10.4 9.5 9.1 10.5
RoCE (%) 9.2 8.7 7.6 8.6
Payout (%) 51.8 48.8 46.2 47.9
Valuation Key issues to watch for
P/E (x) 12.3 12.8 12.9 10.7 (a) Subsidy sharing, (b) DD&A charges, (c) oil & gas production
P/BV (x) 1.2 1.2 1.1 1.1 volumes, and (d) new investments in KG Basin following new deep
EV/EBITDA (x) 4.7 5.5 5.6 4.8
water gas pricing policy.
Div. Yield (%) 2.7 3.3 3.1 3.8
Petronet LNG
Bloomberg PLNG IN
CMP: INR353 TP: INR364 (+3%) Neutral
Equity Shares (m) 750.0
M. Cap. (INR b)/(USD b) 265 / 4
We expect PLNG to report PAT of INR3.5b (+40.3% YoY, -7.6% QoQ)
52-Week Range (INR) 366/175 and EBITDA of INR5.9b (+27.6% YoY, -7.3% QoQ) for 2QFY17.
1,6,12 Rel Perf. (%) 1/31/94 We model Dahej LNG volumes at 3.3mmt (up 8.1% YoY, flat QoQ) in
2QFY17.
Financial snapshot (INR b)
Dahej terminal utilization is above ~110% and long-term growth
Y/E March 2015 2016 2017E 2018E
would depend on Dahejs ramp-up and Kochi terminals pipeline
Sales 395.0 271.3 239.1 237.3
connectivity.
EBITDA 14.4 15.9 24.2 28.5
Adj. PAT 8.8 9.1 13.9 17.1 As against 15mmt capacity, PLNG has ~16mmt (RasGas: 8.5, new
Adj. EPS (INR) 10.0 11.2 18.6 22.8 contracts: ~7.5) long-term take-or-pay contracts.
EPS Gr. (%) 5.4 10.4 60.3 22.8 The stock trades at 15.5x FY18E consolidated EPS of INR22.8.
BV/Sh.(INR) 75.8 85.0 99.2 116.5 Maintain Neutral.
RoE (%) 16.5 14.0 20.2 21.2
RoCE (%) 10.6 9.9 14.0 15.4
Payout (%) 23.4 26.7 24.0 24.0
Key issues to watch for
Valuation (a) Ramp-up at Dahej terminal, (b) progress on Kochi-Mangalore
P/E (x) 35.3 31.5 19.0 15.5 pipeline, (c) spot volumes and marketing margin on spot volumes.
P/BV (x) 4.7 4.2 3.6 3.0 Petronet LNGs earnings are largely protected due to take-or-pay
EV/EBITDA (x) 20.9 18.0 11.8 9.8 contracts with off-takers.
Div. Yield (%) 0.6 0.7 1.1 1.3
Quarterly Performance
Y/E March FY16 FY17 FY16 FY17E IndAS
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 2QFY17*
Net Sales 83,772 75,450 51,460
60,653 53,373 59,850 59,506 66,388 271,334 239,117 59,850
Change (%) -17.6 -31.3 -54.0
-15.3 -36.3 -20.7 15.6 9.5 -31.3 -11.9 -20.7
EBITDA 3,611 4,668 3,158
4,466 6,425 5,955 5,779 6,068 15,903 24,227 5,955
% of Net Sales 4.3 6.2 6.17.4 12.0 9.9 9.7 9.1 5.9 10.1 9.9
Change (%) 0.9 -10.1 -7.3
101.7 77.9 27.6 83.0 35.9 10.5 52.3 27.6
Depreciation 801 808 807800 806 806 873 1,027 3,216 3,512 806
Interest 612 612 588576 556 520 515 491 2,387 2,083 520
Other Income 333 360 584427 494 505 434 414 1,704 1,847 505
PBT 2,531 3,608 2,348
3,517 5,556 5,134 4,826 4,964 12,004 20,479 5,134
Tax 780 1,120 564
1,124 1,777 1,643 1,544 1,589 3,588 6,553 1,643
Rate (%) 30.8 31.0 24.032.0 32.0 32.0 32.0 32.0 29.9 32.0 32.0
Adj. PAT 1,751 2,488 1,784
2,393 3,779 3,491 3,281 3,376 8,416 13,926 3,491
Change (%) 11.8 -5.3 9.9
42.1 115.8 40.3 83.9 41.1 12.2 65.5 40.3
Tax write-back 724 0 724 0 0
PAT 2,475 2,488 1,784 2,393 3,779 3,491 3,281 3,376 9,140 13,926 3,491
Adj. EPS (INR) 2.3 3.3 2.4 3.2 5.0 4.7 4.4 4.5 11.2 18.6 4.7
Dahej Gas Volume (TBTU) 125.4 153.9 138.2 148.5 165.2 166.8 166.0 168.5 566.0 666.5
Dahej Gas Volumes (mmt) 2.6 3.1 2.7 3.0 3.3 3.3 3.3 3.4 11.3 13.3
Kochi Gas Volumes (mmt) 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.3 0.3
Avg. Dahej Regas (INR/mmbtu) 40.0 40.2 24.7 37.9 49.0 44.0 38.6 39.8 35.7 42.9
E: MOSL Estimates; *Under IndAS, revenues are shown on gross basis including excise duties
Reliance Industries
Bloomberg RIL IN
CMP: INR1,090 TP: INR1,139 (+4%) Neutral
Equity Shares (m) 3,240.4
M. Cap. (INR b)/(USD b) 3,533 / 53
We expect RIL to report GRM of USD10/bbl (v/s USD11.5/bbl in
52-Week Range (INR) 1,129/859 1QFY17 and USD10.6/bbl in 2QFY16.
1,6,12 Rel Perf. (%) 9/-6/19 RILs refining segment profit is likely to decline QoQ due to decline
in GRMs. Petchem profitability is expected to increase YoY, led by
Financial snapshot (INR b) improved petchem margins, particularly PP.
Y/E March 2015 2016 2017E 2018E
We expect RIL to report standalone PAT of INR73.5b (flat QoQ,
Net Sales 3,290.8 2,331.6 2,704.7 3,102.0
+12% YoY). Reported consolidated numbers would include shale gas
EBITDA 316.0 401.4 474.0 554.0
business, but with a one-quarter lag.
Net Profit 227.2 274.2 308.8 341.5
Adj. EPS (INR) 77.6 93.6 104.1 115.1 RIL trades at 9.5x FY18E adjusted EPS of INR115. RIL's new
EPS Gr. (%) 3.2 20.6 11.2 10.6 refining/petchem projects are likely to add to earnings from
BV/Sh. (INR) 738.5 818.4 897.0 994.8 2HFY18/FY19, but Telecom business would be a drag on
RoE (%) 11.0 12.0 12.2 12.2 profitability. Maintain Neutral.
RoCE (%) 10.2 11.1 11.8 12.2
Key issues to watch for
Payout (%) 16.7 16.7 16.6 16.6
GRM.
Valuations
Petchem margins.
Adj. P/E (x) 14.0 11.7 10.5 9.5
KG-D6 production.
P/BV (x) 1.5 1.3 1.2 1.1
Update on Telecom venture.
EV/EBITDA (x) 11.9 8.9 7.3 6.5
EV/Sales (x) 1.1 1.5 1.3 1.2
Real Estate
Company name Torpidity continues amid signs of gradual recovery
DLF Presales momentum and new launches key for revival
Godrej Properties
Sluggishness likely to continue in 2Q
Indiabulls Real Estate
The grim situation in the Indian Real Estate sector continued in 2Q, as developers
Mahindra Lifespaces increased focus on project completion led to muted presales momentum. Also, high
Oberoi Realty inventory levels, lower demand and limited liquidity affected new launches.
Phoenix Mills However, reputed names continued to show some vigor in 2Q, with Godrej
launching its project Emerald in Thane and Prestige coming up with Boulevard and
Prestige Estate Projects
Lake Ridge in Bengaluru. While there was some respite in Mumbai and Bengaluru,
Sobha Developers
the NCR market remained a drag.
Exhibit 113: Commercial supply (msf)Commercial sector is Exhibit 114: Commercial absorption (msf)e-commerce and
on the cusp of revival; gradual economic push to further start-ups account for a huge chunk of commercial space
improve growth take-up
NCR Mumbai Bangalore NCR Mumbai Bangalore
6.3 5.0
5.0
3.8
3.8
2.5 2.5
1.3 1.3
0.0
0.0
1QCY11
2QCY11
3QCY11
4QCY11
1QCY12
2QCY12
3QCY12
4QCY12
1QCY13
2QCY13
3QCY13
4QCY13
1QCY14
2QCY14
3QCY14
4QCY14
1QCY15
2QCY15
1QCY11
2QCY11
3QCY11
4QCY11
1QCY12
2QCY12
3QCY12
4QCY12
1QCY13
2QCY13
3QCY13
4QCY13
1QCY14
2QCY14
3QCY14
4QCY14
1QCY15
2QCY15
Source: DTZ Source: DTZ
Exhibit 115: Recent private equity deals in Indian real estate sector
Deal
Entry/ Micro Size
Exit Date Investor Investee Asset City Market (INR M)
Entry May-16 KKR Mantri Developers Residential project Bangalore 145
Entry May-16 Edelweiss Aakruti Residential project Mumbai 300
Entry Mar-16 Blackstone Salarpuria Sattva Commercial project Bangalore 470
Entry Feb-16 KKR Sunteck Realty Signia Isle and Signia Pearls Mumbai BKC 150
Entry Jan-16 IIFL Ariisto Realtors Kandivali Mumbai Kandivali 500
exit Jan-16 Apollo Global Ahuja Construction Ahuja towers Mumbai worli 460
Exit ICICI Kolte
Entry Dec-15 KKR SARE Homes Gurgaon Gurgaon 200
Entry Mar-16 Blackstone Salarpuria Sattva Commercial project Bangalore 470
Entry Dec-15 Ask group Rajesh life spaces Vikhroli Mumbai 11 3,650
Entry Sep-15 GIC DLF Two upcoming projects in Moti NCR Delhi 19,900
Entry Aug-15 ICICI Prudential Asset Management ATS Residential project near sector 150, NCR Noida 1,300
Entry Aug-15 Standard Chartered Private Equity Tata Realty & Commercial Asset Investment - - 20,000
Entry Aug-15 Goldman Sachs Piramal Realty - - - 9,000
Entry Aug-15 Blackstone Group and Panchshil NA IT SEZ Pune Kharadi 7,500
Entry Jul-15 Standard Chartered Private Equity Shapoorji Pan India Affordable Housing - - 12,800
Entry Jul-15 Edelweiss Group Saya Group Saya Gold Avenue NCR Ghaziabad 2,000
Exhibit 117: Relative performancethree months (%) Exhibit 118: Relative performanceone year (%)
Sensex Index MOSL Real Estate Index Sensex Index MOSL Real Estate Index
107 120
105 105
90
103
75
101
60
99
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Mar-16
Sep-15
Jan-16
Feb-16
Sep-16
Oct-15
Jun-16 Jul-16 Aug-16 Sep-16
DLF
Bloomberg DLFU IN CMP: INR153 TP: INR171 (+19%) Buy
Equity Shares (m) 1,783.7
M. Cap. (INR b)/(USD b) 272 / 4
For 2QFY17, we expect revenue of INR16.8b (-9.7% YoY), EBITDA of
INR7.9b (margin of 7%) and PAT of INR1.2b.
52-Week Range (INR) 170 / 73
1,6,12 Rel Perf. (%) 3 / 15 / 6 DLF Phase-V super premium product is expected to remain the
main contributor to presales in 2QFY17.
Financial Snapshot (INR Billion)
The stock trades at 31.7x FY18E EPS and 0.9x FY18E BV, and at a
Y/E March 2015 2016 2017E 2018E
27% discount to our NAV estimate of INR201. Maintain Buy.
Net Sales 76.5 92.6 84.3 90.7
EBITDA 30.2 38.7 34.9 38.5
Adj PAT 5.4 5.5 7.0 8.2
EPS (INR) 3.0 3.1 3.9 4.6
EPS Gr. (%) -16.5 1.5 27.2 17.9
BV/Sh. (INR) 157.0 156.3 157.9 160.2
Key issues to watch out for
RoE (%) 1.9 1.9 2.4 2.8
Approach toward a REIT listing.
RoCE (%) 4.3 3.7 4.6 4.5
RentCo restructuring.
Payout (%) 77.2 76.0 58.2 49.4
Valuations
Movement in gearing levels.
P/E (x) 48.2 47.5 37.3 31.7
Outcome of legal and regulatory proceedings.
P/BV (x) 0.93 0.9 0.9 0.9 Strategy to improve core DevCo operations.
EV/EBITDA (x) 15.4 12.5 14.1 12.7
Div. Yield (%) 1.4 1.4 1.4 1.4
Godrej Properties
Bloomberg GPL IN CMP: INR352 TP: INR377 (+9%) Neutral
Equity Shares (m) 198.2
We estimate 2QFY17 revenue at ~INR4.9b, EBITDA at INR995m
M. Cap. (INR b)/(USD b) 70 / 1
(margin at 17%) and PAT at INR531m.
52-Week Range (INR) 386 / 266
1,6,12 Rel Perf. (%) 0/4/2 We expect presales of INR4b due to the launch of the Emerald
project in Thane, followed by phase-II of project Trees (Mumbai),
Financial Snapshot (INR Billion) phase-II of Anandam, Garden City and Palm Grove.
Y/E March 2015 2016 2017E 2018E The stock trades at 19.8x FY18E EPS and 2.8x FY18E BV, and close to
Net Sales 18.4 26.3 26.2 30.4
its SOTP value of INR377. Maintain Neutral.
EBITDA 2.6 3.5 4.1 5.9
NP 1.9 2.3 2.2 3.8
EPS (INR) 9.6 10.7 10.3 17.5
EPS Gr. (%) 19.1 11.6 -3.9 70.5
BV/Sh (INR) 92.6 100.3 108.2 122.2
RoE (%) 10.5 11.5 9.9 15.2
RoCE (%) 4.7 5.5 6.2 8.0
Payout (%) 24.4 21.9 22.8 20.2 Key issues to watch out for
Valuations Debt movement.
P/E (x) 36.2 32.5 33.8 19.8 Execution timeline of ongoing projects.
P/BV (x) 3.7 3.5 3.2 2.8 Launch of recently acquired projects.
EV/EBITDA (x) 24.2 18.0 15.0 9.4
Div. Yield (%) 0.6 0.6 0.6 0.9
Mahindra Lifespaces
Bloomberg MLIFE IN CMP: INR439 TP: INR477 (+9%) Neutral
Equity Shares (m) 40.8 For 2QFY17, we estimate standalone revenue at INR1.05b, margins
M. Cap. (INR b)/(USD b) 18 / 0 at ~11.4%, EBITDA at INR120m (-41% YoY) and PAT at INR223m.
52-Week Range (INR) 518 / 415
1,6,12 Rel Perf. (%) 3 / -10 / -13 Presales are expected to be driven by its projects LArtista in Pune,
Vivante in Andheri-Mumbai, Windchimes in Bengaluru, Luminaire in
Financial Snapshot (INR Billion) NCR and Bloomdale in Nagpur.
Y/E March 2015 2016 2017E 2018E The stock trades at 12.2x FY18E EPS and 1.1x FY18E BV. Maintain
Net Sales 10.9 8.3 11.4 13.1 Buy.
EBITDA 4.2 1.7 2.5 3.1
Adj PAT 2.7 0.9 1.3 1.5
Adj EPS (INR) 64.9 22.7 30.6 37.5
EPS Gr (%) 163.6 -65.1 35.0 22.3
BV/Sh (INR) 359.7 381.0 413.9 459.3
RoE (%) 19.5 6.1 7.7 8.6
RoCE (%) 11.4 3.6 5.7 7.1
Key issues to watch out for
Payout (%) 10.2 29.8 17.0 11.0
Regulatory issues and overall market scenario critical for Mumbai
Valuations
launches.
P/E (x) 6.8 19.4 14.9 12.2
Affordable housing key to future success.
P/BV (x) 1.2 1.2 1.1 1.0
EV/EBITDA (x) 7.0 20.6 12.3 9.5
Div. Yield (%) 1.1 1.1 1.1 1.1
E: MOSL Estimates
Oberoi Realty
Bloomberg OBER IN CMP: INR293 TP: INR348 (+20%) Buy
Equity Shares (m) 339.3
We expect a stable quarter, with revenue at INR2.5b (32% YoY),
M. Cap. (INR b)/(USD b) 99 / 1
EBITDA at 1.3b (margins of 53%) and PAT at INR832m (14.8% YoY).
52-Week Range (INR) 322 / 210
1,6,12 Rel Perf. (%) -3 / 9 / 3 We expect 2QFY17 presales to be INR1.2b, given no new launches.
Exquisite and Eternia are expected to see flattish to lower
Financial Snapshot (INR Billion) momentum.
Y/E March 2015 2016 2017E 2018E The stock trades at7.3x FY18E EPS and 1.4x FY18E BV, and at a 20%
Net Sales 9.2 14.1 19.5 33.9
discount to our NAV estimate of INR348. Maintain Buy.
EBITDA 5.1 6.7 9.1 20.1
Adj PAT 3.2 4.3 5.8 13.1
Adj EPS (INR) 9.7 13.0 17.8 39.9
EPS Growth (%) 1.9 34.3 36.8 124.7
BV/Share (INR) 141.2 156.3 170.0 203.9
RoE (%) 7.0 8.6 10.5 20.6 Key issues to watch out for
RoCE (%) 6.3 7.4 9.4 18.4 Launch of Borivali project (Tata Steel Land), the luxury Worli
Payout (%) 24.2 18.6 20.4 12.1 project, and the response they generate.
Valuations Leasing activity in Commerz II.
P/E (x) 30.3 22.6 16.5 7.3 Incremental presales in launched projects during the current
P/BV (x) 2.1 1.9 1.7 1.4
market slowdown and regulatory overhang in Mumbai.
EV/EBITDA (x) 19.9 14.8 9.2 4.1
Div. Yield (%) 0.7 0.7 1.0 1.4
Phoenix Mills
Bloomberg PHNX IN
CMP: INR395 TP: INR450 (+12%) Buy
Equity Shares (m) 153.0
We estimate consolidated revenue at INR4.9 (+18% YoY), EBITDA at
M. Cap. (INR b)/(USD b) 60 / 1
52-Week Range (INR) 445 / 238
INR2.3b (margin of 46%) and PAT at INR567m (2.3x YoY).
1,6,12 Rel Perf. (%) -3 / 19 / 16 We expect consumption growth of 15-25% across malls. No major
adverse impact due to online sales is yet visible.
Financial Snapshot (INR Billion)
One Bangalore and Kessaku are seeing good sales momentum.
Y/E March 2015 2016 2017E 2018E
However, the Pune project has been slow due to unfavorable market
Net Sales 16.5 17.8 23.0 27.8
conditions.
EBITDA 7.6 8.5 9.8 13.6
Adj PAT 1.3 1.8 2.5 4.1 The stock trades at 12.8x FY18E EPS and 2.2x FY18E BV, and at a 16%
EPS (INR) 2.4 9.3 16.3 26.5 discount to our NAV estimate of INR390. Maintain Buy.
EPS Growth (%) -72.4 278.5 76.0 62.6
BV/Share (INR) 115.5 122.1 134.9 156.7
RoE (%) 2.1 7.6 12.1 16.9
RoCE (%) 9.0 9.2 9.7 13.9 Key issues to watch out for
Payout (%) 95.7 25.3 21.6 17.7 Pick-up in monetization velocity.
Valuations Debt movement.
P/E (x) 138.1 36.5 20.7 12.8 Acquisition of turnkey projects.
P/BV (x) 2.9 2.8 2.5 2.2 Rental growth.
EV/EBITDA (x) 10.7 10.1 9.0 6.4
Div. Yield (%) 0.6 0.6 0.9 1.2
Sobha Developers
Bloomberg SOBHA IN
CMP: INR298 TP: INR360 (+23%) Buy
Equity Shares (m) 98.1
We estimate revenue at INR4.8b (+6% YoY), EBITDA at INR997m
M. Cap. (INR b)/(USD b) 29 / 0
(margin of 23%) and PAT at INR345m (-14% YoY).
52-Week Range (INR) 349 / 230
1,6,12 Rel Perf. (%) 4 / -3 / 0 Presales are estimated at INR3.8b (0.7msf). Dependency on
Bengaluru volume mix is likely to remain high in 2Q. The formal
Financial Snapshot (INR Billion) launch of group housing project in NCR-Gurgaon (3.23msf) in
Y/E March 2015 2016 2017E 2018E 1QFY17 would contribute to presales.
Net Sales 24.4 19.4 21.8 27.7
The stock trades at 8.8x FY18E EPS and 1.1x FY18E BV, and at a 55%
EBITDA 6.2 4.4 5.2 8.2
discount to our NAV estimate of INR505. Maintain Buy.
Adj PAT 2.5 1.4 1.8 3.4
EPS (INR) 25.5 14.1 17.9 34.7
EPS Gr. (%) 6.2 -44.7 27.3 93.8
BV/Sh (INR) 248.0 261.2 270.9 270.9
RoE (%) 10.6 5.5 6.7 12.8
RoCE (%) 8.7 4.6 6.2 9.5
Payout (%) 27.5 14.2 39.0 20.1
Valuations Key issues to watch out for
P/E (x) 12.0 21.7 17.1 8.8 FY17 guidance fulfillment contingent on approvals and launch of
P/BV (x) 1.2 1.2 1.1 1.1 projects in NCR and Kochi.
EV/EBITDA (x) 7.9 11.5 9.7 6.4 Timeline and ticket pricing are expected to remain the key.
Div. Yield (%) 2.3 0.7 2.3 2.3
Retail
Company name Muted footfalls; no revival yet, slow pace of expansion
Jubilant Foodworks
Consumption fatigue a major worry
Exhibit 120: SHOP to post LTL sales growth of 13% in 2QFY17 Exhibit 121: Jubilant Foodworks SSS to grow at 2% in
on a base of 0.1% LTL sales growth in 2QFY16 2QFY17
22.3
19.8
16.1
10.0 5.5 5.5
7.7
6.3
6.6
1.9
6.6
4.6
3.2
2.0
2.9
5.0
4.0 5.9
1.0
3.7
-2.6
-3.4
-2.4
-5.3
-3.2
0.8 0.1
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
Source: Company, MOSL Source: Company, MOSL
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
Source: Company, MOSL
Exhibit 123: Shoppers Stop has 82 stores and 20 HyperCITY Exhibit 124: Dominos stores crossed 1,062 as on September
stores as of date 3, 2016
Shoppers Stop Hypercity Dominos stores Cities
81 82
77
73 72 73 74 76
1062
1049
1026
69 72
990
950
67
911
65
876
838
60 61
797
761
54 55 55 19 20
726
679
632
602
576
16 17 17 17 17
552
515
14 15 15 15 15 15
12 12 12 13
112
118
123
128
132
142
152
154
167
185
196
208
216
225
235
243
248
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17*
Jun-13
Jun-14
Jun-15
Jun-16
Sep-12
Dec-12
Mar-13
Sep-13
Dec-13
Mar-14
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
Exhibit 125: Relative performance three months (%) Exhibit 126: Relative performance one-year (%)
Sensex Index MOSL Retail Index Sensex Index MOSL Retail Index
110 120
105 110
100 100
95 90
90 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Source: Bloomberg, MOSL Source: Bloomberg, MOSL
Jubilant Foodworks
Bloomberg JUBI IN CMP: INR974 TP: INR1,090 (+12%) Neutral
Equity Shares (m) 65.8
We expect JUBIs revenue to grow 11% YoY. 2QFY17 SSSG is likely to
M. Cap. (INR b)/(USD b) 64 / 1
be positive at around 2% due to the launch of Burger Pizza (which is
52-Week Range (INR) 1,689/897
receiving good response), Ramadan impact in the base quarter and
1,6,12 Rel Perf. (%) -16/-37/-48
sales of Pizza Mania Extreme for the entire quarter. Discretionary
spending is expected to improve in 2HFY17, led by good progress in
Financial Snapshot (INR b)
monsoon and 7th Pay Commission. Commodity inflation continues,
Y/E March 2015 2016 2017E 2018E
but remains benign (around low-single-digit).
Sales 20.9 24.4 26.8 32.8
EBITDA 2.6 2.6 2.8 4.0 We expect EBITDA margin to contract 100bp YoY to 9.3%, and
Adj. PAT 1.1 1.0 0.9 1.6 EBITDA to remain flattish YoY at INR605m.
Adj. EPS (INR) 16.9 15.0 14.0 24.5
EPS Gr. (%) -6.2 -11.7 -6.2 74.7 We estimate PAT to decline by 18.9% to INR178m.
BV/Sh.(INR) 98.6 111.3 124.2 130.6
The stock trades at 39.7x FY18E EPS of INR24.5. Maintain Neutral.
RoE (%) 17.2 13.4 11.3 18.8
RoCE (%) 18.1 14.1 11.9 19.2
Payout (%) 0.0 16.7 17.8 10.2 Key issues to watch for
Valuations Clarity on the appointment of new CEO.
P/E (x) 57.5 65.1 69.4 39.7 Demand outlook for QSR and Pizza space, as well as competition.
P/BV (x) 9.9 8.7 7.8 7.5 Performance of Dunkin Donuts and margin guidance.
EV/EBITDA (x) 24.5 23.8 22.6 15.6 Changes in expansion and capex strategy (if any).
Div. Yield (%) 0.0 0.3 0.3 0.3
Shoppers Stop
Bloomberg SHOP IN CMP: INR372 TP: INR365 (-2%) Neutral
Equity Shares (m) 82.2
We expect SHOPs revenue to grow 18% YoY to INR10.6b.
M. Cap. (INR b)/(USD b) 31 / 0
52-Week Range (INR) 422/335 Growth in same-store sales (SSS) is estimated at 13% on a base of
1,6,12 Rel Perf. (%) -3/-9/-10 0.1% LTL sales growth.
Titan Company
Bloomberg TTAN IN CMP: INR408 TP: INR390 (-4%) Neutral
Equity Shares (m) 887.8
We expect TTANs revenue to increase 25% to INR33.2b.
M. Cap. (INR b)/(USD b) 362 / 5
52-Week Range (INR) 445/303 Jewelry division sales were impacted by decline in industry demand
1,6,12 Rel Perf. (%) -1/8/17 by around 15-20%. As per the management, 2QFY17 started with
good expectation, given bountiful monsoon, but as the quarter
Financial Snapshot (INR b) progressed, consumer sentiment was patchy and became
Y/E March 2015 2016 2017E 2018E unpredictable. Base demand remained weak even as consumer
Sales 119.0 111.8 126.3 147.8 walk-ins improved due to good deals and new product launches.
EBITDA 11.5 8.6 10.4 12.6
During the quarter, TTAN added only one Tanishq store (5.5ksf).
Adj. PAT 8.2 7.1 7.9 9.6
Adj. EPS (INR) 9.3 8.0 9.0 10.8 We factor in EBITDA growth of 34% in 2QFY17, with underlying
EPS Gr. (%) 11.1 -13.4 11.4 21.0 margin expansion of 50bp to 7.4%, and 22.7% PAT growth.
BV/Sh.(INR) 34.8 40.4 47.1 54.9
The stock trades at 37.6x FY18E EPS of INR10.8; maintain Neutral.
RoE (%) 29.3 21.3 20.4 21.2
RoCE (%) 27.3 21.8 20.7 21.2
Payout (%) 29.9 30.0 30.0 30.0
Valuation
P/E (x) 44.0 50.7 45.5 37.6 Key issues to watch for
P/BV (x) 11.7 10.1 8.6 7.4 Comments on consumer demand for Jewelry and Watches.
EV/EBITDA (x) 31.2 42.0 34.5 28.3 Expansion initiatives.
Div. Yield (%) 0.7 0.6 0.7 0.8
Update on the new Golden Harvest Scheme.
Technology
Company Name No fireworks this season
Cyient Brexit and impending US elections keep expectations muted
HCL Technologies
Expectations laid low by macro and company-specific warnings
Hexaware Technologies
The seasonal strength that leads to strongest sequential growth in the September
Infosys quarter is hardly expected to play out this time, as slowness in spending by the BFSI
KPIT Technologies vertical weighs on the industry. In dollar terms, growth will be pegged back further
MindTree Consulting by sharp depreciation of the GBP v/s the USD (-8.5% QoQ). Hopes of a positive
Mphasis
surprise are laid low by commentaries from some companies:
TCS cited that weakness in discretionary spending in US BFSI is likely to cause
NIIT Tech
sequential loss of momentum.
Persistent Systems INFO suffered termination of a contract with RBS standalone UK bank, Williams
TCS & Glyn (W&G), leading to gradual ramp down of as many as 3,000 employees.
Tech Mahindra MTCL cited expectation of sequential revenue decline in USD terms and lower
Estimate cuts not behind us, yet; watch for INFOs guidance, TCS BFSI outlook
We believe there is room for estimates to moderate further, given the ask rates
implied in the current FY17 revenue estimates. This is especially given that the
seasonal weakness of 2H will be further exacerbated by current sluggish macro
and the US elections in November. To that extent, watch out for commentaries
suggesting any offsets from ramp-ups in large deals that have been delayed,
causing some growth impediment in recent quarters.
Watch out for the extent of cut in INFOs guidance, along with commentary
from TCS on the expected impact from current BFSI spending in 2HFY17.
PAT decline seen in 2Q PAT decline led by margin contraction and forex losses
Aggregate PAT for tier-I is expected to decline by 2% YoY, and for tier-II, the
10.5
2.0
1.5
in 2QFY17 for all companies under our coverage (barring Mphasis). For tier-
I, we model decline of 120-270bp YoY, and for tier-II, we model decline of
(1.5)
(2.4)
160-510bp YoY.
(32.5)
(9.9)
(15.3)
2. Forex losses On a closing basis, INR appreciated 1.4% QoQ against the USD
(19.0)
ZENT (20.6)
TECHM (21.3)
KPIT (35.4)
NITEC (23.3)
in 2QFY17, due to which we expect some translation losses v/s forex gains in
2QFY16
CYL
TCS
MPHL
MTCL
PSYS
INFO
WPRO
HEXW
HCLT
Valuation and view: Triggers missing despite valuation comfort; prefer INFO, HCLT
Lest the macro turns for the better, we see further moderation in estimates,
limiting any upside triggers for the sector over the near term. Risks are lesser at
led by margin pressure across the HCLT, given visibility from its unchanged guidance for the year, and TECHM, with
board
expectations within deliverable limits. From a medium-to-long-term
150
-290
premium multiple.
-120
-130
-160
-210
-280
-280
better growth compared to TECHM and WPRO, along with 25%+ RoE leaves
-430
-510
ample room for upside, despite embedding conservatism on the margin outlook.
Moreover, its exposure to IMS and Engineering Services makes it less vulnerable
TCS
INFO
KPIT
NITEC
MPHL
CYL
TECHM
PSYS
MTCL
WPRO
HCLT
HEXW
ZENT
Exhibit 129: Double-digit USD revenue growth (YoY) seen only in HCLT amongst tier-I
Revenue (USD m) Revenue (INR b)
Company 2QFY17E 2QFY16 YoY (%) 1QFY17 QoQ (%) 2QFY17E 2QFY16 YoY (%) 1QFY17 QoQ (%)
TCS 4,446 4,156 7.0 4,362 1.9 298 272 9.7 293 1.7
Infosys 2,544 2,392 6.4 2,501 1.7 170 156 9.0 168 1.6
Wipro 1,922 1,832 4.9 1,931 (0.5) 136 125 8.5 136 (0.2)
HCLT 1,722 1,545 11.5 1,691 1.9 115 101 14.3 113 1.8
TECHM 1,057 1,011 4.6 1,032 2.5 71 66 7.1 69 2.3
Aggregate 11,692 10,935 6.9 11,516 1.5 790 720 9.7 779 1.4
EBITDA Margin (%) PAT (INR b)
Company 2QFY17E 2QFY16 YoY (%) 1QFY17 QoQ (%) 2QFY17E 2QFY16 YoY (%) 1QFY17 QoQ (%)
TCS 27.1 28.8 (170) 26.7 30 62 61 2.0 63 (2.2)
Infosys 26.5 27.8 (130) 26.5 - 33 34 (1.5) 34 (2.6)
Wipro 19.1 21.8 (270) 19.5 (40) 20 22 (9.9) 21 (1.8)
HCLT 20.7 21.9 (120) 22.2 (160) 19 18 1.5 20 (9.4)
TECHM 14.4 16.6 (220) 14.9 (43) 6 8 (21.3) 7 (5.7)
Aggregate 23.5 25.3 (178) 23.7 (21) 140 143 (2.0) 145 (3.4)
Source: Company, MOSL
Exhibit 130: Margin decline expected to be steep across tier-II (except MPHL), YoY
Revenue (USD m) Revenue (INR b)
Company 2QFY17E 2QFY16 YoY (%) 1QFY17 QoQ (%) 2QFY17E 2QFY16 YoY (%) 1QFY17 QoQ (%)
Persistent Systems 108 83 29.9 105 2.9 7.2 5.4 33.1 7.0 2.9
Hexaware 136 125 8.9 129 5.4 9.1 8.2 11.6 8.7 5.0
KPIT Tech. 120 125 (3.7) 120 0.2 8.0 8.1 (1.0) 8.0 0.1
Mindtree 197 180 9.5 199 (0.8) 13.2 11.7 13.1 13.3 (0.4)
Mphasis 229 237 (3.3) 224 2.1 15.0 15.6 (3.4) 15.2 (0.8)
Cyient 129 118 8.7 124 3.8 8.6 7.7 11.8 8.3 3.9
NIIT Tech 100 104 (4.2) 99 0.7 6.7 6.8 (1.3) 6.7 (0.1)
Zensar 117 116 0.7 114 2.8 7.9 7.6 3.8 7.6 3.0
Aggregate 1,019 973 4.8 1,000 1.9 68.0 63.5 7.0 67.2 1.2
EBITDA margin (%) PAT (INR b)
Company 2QFY17E 2QFY16 YoY (%) 1QFY17 QoQ (%) 2QFY17E 2QFY16 YoY (%) 1QFY17 QoQ (%)
Persistent Systems 14.5 18.7 (430) 15.1 (60) 0.6 0.7 (15.3) 0.7 (16.9)
Hexaware 16.2 17.8 (160) 15.6 70 1.1 1.1 (2.4) 1.0 8.9
KPIT Tech. 11.1 13.9 (290) 10.7 40 0.2 0.3 (35.4) 0.2 (6.6)
Mindtree 13.4 18.5 (510) 14.7 (130) 1.1 1.6 (32.5) 1.2 (13.5)
Mphasis 16.5 15.1 150 16.1 40 2.1 1.9 10.5 2.0 2.8
Cyient 12.3 15.1 (280) 13.1 (80) 0.8 1.0 (19.0) 0.7 7.8
NIIT Tech 14.8 17.6 (280) 15.3 (50) 0.5 0.7 (23.3) 0.3 67.4
Zensar 13.3 15.5 (210) 13.8 (50) 0.7 0.9 (20.6) 0.8 (4.9)
Aggregate 14.5 15.0 (60) 15.4 (90) 6.4 7.2 (12.3) 6.2 1.8
Source: Company, MOSL
6.0
4.4
3.5
3.1 2.9 3.1
2.5 2.7 2.4
2.1 1.91.72.0 2.0 1.7
1.3
0.2 0.1 0.3 0.4
Exhibit 132: YoY traction seen picking up only at HCLT, led by Volvo IT acquisition (YoY, CC
%)
10.3
10.8
14.0
12.4
15.0
12.0
15.8
13.6
11.4
12.7
22.6
18.9
14.7
9.8
9.9
8.5
6.9
8.3
8.4
6.0
7.6
9.5
6.4
9.2
8.1
5.9
6.0
6.1
TCS INFO WPRO HCLT TECHM
Exhibit 133: TCS and HCLT to outperform peers organically (revenue growth, QoQ, USD, %)
2.5
1.9
1.9
1.7
3
-0.5
1
-1
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
Exhibit 134: Incremental revenue to revive at TECHM, aided by acquisitions; cross-currency movements unsupportive again
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 Cross currency impact on USD revenues (bp)
TCS
INFO
TECHM
WPRO
HCLT
150
75 (30)
0
(50)
TCS
Wipro
Mahindra
HCL Tech
Infosys
-75
Tech
(60) (60) (60)
26
22
18
14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
Exhibit 136: Sequential improvement seen in some mid-caps due to company-specific
dynamics (revenue growth, QoQ, USD, %)
8.1
6.25.4 6.1
4.3 3.8
2.9 3.12.8
2.3 1.7 2.1 2.12.6
0.7 0.2 0.0 0.7
Exhibit 140: Relative performance3m (%) Exhibit 141: Relative performance1Yr (%)
Sensex Index MOSL Technology Index Sensex Index MOSL Technology Index
110 110
105 104
100 98
95 92
90 86
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Mar-16
Sep-15
Jan-16
Feb-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Source: Bloomberg, MOSL Source: Bloomberg, MOSL
Cyient
Bloomberg CYL IN CMP: INR485 TP: INR550 (+13%) Buy
Equity Shares (m) 112.2
We expect CYLs USD revenue to grow 3.8% QoQ in 2QFY17.
M. Cap. (INR b)/(USD b) 54.4 /0.8
The guidance for Rangsons for FY17 is of 50% growth (~USD58m).
52-Week Range (INR) 638/369
However, 1Q was soft at USD9m. Although growth is expected to
1,6,12 Rel Perf. (%) 1/-8/20
pick up, we are conservative in our assumptions given sustained
disappointment since its acquisition. We estimate revenue of
Financial Snapshot (INR b)
USD11m (+16% QoQ) for 2Q, and USD52m (34% YoY) for FY17.
Y/E June 2015 2016 2017E 2018E
Sales
In the core services business, CYLs revenue is expected to grow
27.4 31.0 35.6 41.8
EBITDA 2.8% QoQ, led by strong traction in top accounts and momentum in
4.0 4.2 4.8 6.0
PAT 3.5 3.3 3.7 4.7
the verticals of Aerospace, Railway and Communication.
EPS (INR) 31.3 30.7 33.2 42.0 CYL has distributed its wage hike over 1Q and 2Q in FY17, and
EPS Gr. (%) 32.0 (1.9) 8.2 26.3 hence, would see a negative impact sequentially. We expect EBITDA
BV/Sh. (INR) 164.3 186.6 209.9 239.3 margin to decline by 70bp QoQ, also factoring in the increased
RoE (%) 19.0 16.5 15.8 17.5 revenue from lower margin Rangsons business.
RoCE (%) 17.4 15.1 14.9 16.6 PAT estimate for the quarter is INR798m, up 7.8% QoQ.
Payout (%) 25.6 22.8 30.0 30.0 The stock trades at 14.6x FY17E and 11.6x FY18E EPS. Maintain Buy.
Valuation
P/E (x) 15.5 15.8 14.6 11.6 Key issues to watch for
P/BV (x) 3.0 2.6 2.3 2.0 Update on problem verticals like Semiconductor, Energy and GIS.
EV/EBITDA (x) 12.4 11.2 9.6 7.3 Outlook for Rangsons for FY17 and progress on synergy through
Div yld (%) 1.6 1.4 2.1 2.6
DLM.
Margin trajectory going ahead.
HCL Technologies
Bloomberg HCLT IN CMP: INR809 TP: INR940 (+16%) Buy
Equity Shares (m) 1412.9
We expect HCLTs USD revenue to grow 1.9% QoQ in 2QFY17 (and
M. Cap. (INR b)/(USD b) 1143 / 17
2.4% QoQ on a constant currency basis). Impact from cross
52-Week Range (INR) 915 / 707
currency movement should shave off ~50bp from revenue growth.
1,6,12 Rel Perf. (%) 4 / -13 / -13
We expect momentum to continue in the IMS business, and
stability in BPO (after the sharp decline seen in 1Q). Deal signings
Financial Snapshot (INR b)
over the last many quarters provide visibility and confidence in
Y/E JUNE 2015 2016 2017E 2018E
Sales
execution of its 12-14% revenue growth guidance.
370.6 311.4 471.7 541.4
EBITDA
EBIT margin is likely to decline by 150bp to 19.1% because of wage
87.0 68.2 99.2 113.6
PAT 72.6 56.7 78.7 88.3
hikes and continued investments in the business. EBIT margin of 19-
EPS (INR) 50.4 40.1 55.3 61.7 19.3% over the remainder of the year is likely to lead to 19.5% EBIT
EPS Gr. (%) 11.7 -20.3 37.9 11.5 margin for FY17 the lower end of the 19.5-20.5% guidance range.
BV/Sh. (INR) 177.0 200.2 234.3 274.1 PAT estimate for the quarter is INR18.5b, -9.4% QoQ, on lower
RoE (%) 31.7 21.5 25.9 24.8 margins and lower other income (losses on hedges and translation).
RoCE (%) 29.2 19.9 23.7 23.1 The stock trades at 14.6x FY17E and 13.1x FY18E EPS. Maintain Buy.
Payout (%) 31.8 42.4 32.5 30.8
Valuation
P/E (x) 16.1 20.2 14.6 13.1
Key issues to watch for
P/BV (x) 4.6 4.0 3.5 3.0 Commentary on performance expectations for FY17.
EV/EBITDA 11.7 11.2 9.9 8.2 Deal signings and order book.
(x) Organic growth in IMS and traction in Engineering.
Div yld (%) 2.0 2.1 2.2 2.3
Hexaware Technologies
Bloomberg HEXW IN CMP: INR191 TP: INR230 (+20%) Neutral
Equity Shares (m) 301.8
We expect USD revenue to grow 5.1% QoQ to USD136.3m. In
M. Cap. (INR b)/(USD b) 58 / 1
1QCY16, HEXW was impacted by client-specific issues. It expects
52-Week Range (INR) 274 / 184
growth for the year to be dominated by 2Q and 3Q. In line with this,
1,6,12 Rel Perf. (%) -2 / -41 / -32
2Q saw a sharp revival: 6.6% QoQ growth. We expect the strength
to continue, and lead to 5.8% QoQ CC growth in 3Q.
Financial Snapshot (INR b)
EBITDA margin declined by 240bp YoY in 1HCY16. However, this
Y/E DEC 2014 2015 2016E 2017E
Sales
trend is expected to reverse with resurrection of revenue growth
25.8 31.2 35.5 41.6
EBITDA
momentum. We expect EBITDA margin improvement of 60bp QoQ
4.8 5.4 5.7 7.1
PAT 3.3 3.9 4.1 4.9
to 16.2% in 3QCY16.
EPS (INR) 10.6 12.9 13.6 16.1 The expansion, however, wont be sufficient to reach the
EPS Gr. -15.9 22.1 5.1 18.1 managements desired level of 17% in CY16, especially given the
(%)
BV/Sh. upcoming wage hike in 2H.
42.9 47.4 55.0 65.0
(INR) Our PAT estimate for the quarter is INR1,088m, up 8.9% from the
RoE (%) 25.7 28.9 26.6 26.7
RoCE (%) 27.6 27.7 24.1 26.1 previous quarter, on the back of strong revenue growth and margin
Payout (%) 77.4 64.5 40.9 29.0 expansion.
Valuation The stock trades at 14x CY16E and 11.9x CY17E earnings. Neutral.
P/E (x) 18.0 14.8 14.0 11.9
P/BV (x) 4.5 4.0 3.5 2.9
EV/EBITDA
Key issues to watch for
10.7 9.7 9.3 7.3
(x) Large deal pipeline and traction post the increased S&M spend.
Div yld (%) 4.4 4.5 3.0 2.5
Commentary on sustenance of revenue growth.
Margin outlook for the remainder of the year.
Infosys
Bloomberg INFO IN CMP: INR1,038 TP: INR1,300 (+25%) Buy
Equity Shares (m) 2,285.6
INFO cut its revenue growth guidance for FY17 after 1Q to 10.5-12%
M. Cap. (INR b)/(USD b) 2,372 / 36
(3-4% CQGR), from 11.5-13.5% (3-3.7% CQGR) earlier. However,
52-Week Range (INR) 1,278 / 1,009
following the termination of RBS contract and further worsening of
1,6,12 Rel Perf. (%) 2 / -26 / -19
the macro, it cited further likelihood of a guidance cut.
In USD terms, our revenue growth estimate is 1.7% QoQ on the
Financial Snapshot (INR b)
back of 30bp impact of cross-currency movement.
Y/E MAR 2015 2016 2017E 2018E
Sales 533.2
Although we expect higher sequential growth in 2Q (2% v/s 1.7% in
624.4 695.4 798.3
EBITDA 149.0 1Q), the annual guidance is likely to be revised downward.
170.8 185.4 216.8
PAT 123.3 134.9 140.5 162.4
We expect EBITDA margin to remain flat QoQ at 26.5%, as revenue
EPS (INR) 53.9 59.0 61.5 71.1 growth momentum has been affected over the last two quarters.
EPS Gr. (%) 15.8 9.4 4.1 15.6 Our PAT estimate is INR33.47b, -2.6% QoQ, led by lower other
BV/Sh. (INR) 240 270.3 301.3 336.2 income (loss on translation).
RoE (%) 26.0 24.7 22.7 23.5 The stock trades at 16.9x FY17E and 14.6x FY18E earnings. Buy.
RoCE (%) 24.1 23.2 21.5 22.3
Payout (%) 34.3 41.9 48.8 42.2
Valuations Key issues to watch for
P/E (x) 21.7 17.6 16.9 14.6 FY17 revenue guidance.
P/BV (x) 4.9 3.8 3.4 3.1 TCV of deal wins during the quarter.
EV/EBITDA (x) 15.8 11.9 10.6 8.8 Commentary around contribution of newly launched services.
Div Yield (%) 1.6 2.4 2.9 2.9 Commentary around macro, verticals, margins and pricing.
KPIT Technologies
Bloomberg KPIT IN CMP: INR127 TP: INR150 (+18%) Neutral
Equity Shares (m) 200.2
1QFY17 for KPIT was marked by 3.5% QoQ revenue decline and
M.Cap. (INR b) /(USD b) 25.4/0.4
550bp margin decline.
52-Week Range (INR) 197/107
1, 6, 12 Rel. Per (%) -1/-29/12
Internal changes in structure, changing business environment and
pressure in traditional ERP implementation resulted in the pressure.
The situation is not expected to reverse in 2Q.
Financial Snapshot (INR b)
Y/E MAR 2015 2016 2017E 2018E
Post the sharp decline seen in 1Q, we expect revenue of US120m
Sales
(0.2% QoQ), led by stability in the top client, post a 12% QoQ
29.9 32.2 33.2 37.3
EBITDA 3.3 4.4 4.3 5.2
decline in 1Q.
PAT 2.4 3.0 2.6 3.2
With cessation of the revenue decline, we expect EBITDA margin to
EPS (INR) 11.8 14.1 13.2 16.1 expand by 40bp QoQ, reversing a wee bit of 550bp decline in the
EPS Gr. (%) -7.9 19.0 -6.4 22.5 previous quarter.
BV/Sh. (INR) 65.7 69.0 82.8 99.0 Our PAT estimate is INR471m, -14.4% QoQ, because of the
RoE (%) 18.4 21.0 17.4 17.8 compounding of flat revenue and lower other income.
RoCE (%) 16.8 24.3 20.6 21.8 KPIT trades at 9.6x FY17E and 7.9x FY18E earnings. Maintain
Payout (%) 10.1 10.6 15.2 12.4 Neutral.
Valuations
Key issues to watch for
P/E (x) 10.7 9.0 9.6 7.9 Growth in IES, Engineering Services and top client.
P/BV (x) 1.9 1.8 1.5 1.3
Margin performance and guidance.
EV/EBITDA (x) 6.5 5.0 4.3 3.0
Commentary on deal wins across segments.
Div yld (%) 0.9 1.2 1.6 1.6
Plan to recoup revenue growth and profitability.
MindTree
Bloomberg MTCL IN CMP: INR489 TP: INR550 (+13%) Neutral
Equity Shares (m) 167.7
Earlier during the quarter, MTCL guided for a decline in 2Q revenue
M. Cap. (INR b)/(USD b) 82 / 1
due to [1] cross-currency movements, [2] project cancellations, [3]
52-Week Range (INR) 804 / 464
slower ramp-up at a few large clients from different verticals, and
1,6,12 Rel Perf. (%) -10 / -39 / -42
[4] continued weakness in Bluefin.
Consequently, EBITDA margin too is expected to decline QoQ,
Financial Snapshot (INR b)
Y/E MARCH 2015 2016 2017E 2018E
accentuated by expected EBITDA loss in Bluefin.
Sales
In line with this, we expect revenue decline of 0.8% QoQ and
35.6 46.9 54.3 62.8
EBITDA 7.1 8.3 8.0 10.8
EBITDA margin decline of 130bp QoQ.
PAT 5.4 6.0 5.0 6.8
We expect the trend of robust deal wins to continue. The company
EPS (INR) 31.9 35.9 29.6 40.3 won deals with TCV of USD898m LTM (average of USD225m per
EPS Gr. (%) 18.6 15.3 -17.4 35.9 quarter), of which 40% is Digital.
BV/Sh. (INR) 119.8 142.4 158.4 184.1 Our PAT estimate for the quarter is INR1.1b, which implies 13.5%
RoE (%) 29.4 27.4 19.7 23.5 QoQ decline.
RoCE (%) 32.8 30.6 22.6 29.3 The stock trades at 16.5x FY17E and 12.1x FY18E earnings. Neutral.
Payout (%) 26.6 29.3 40.5 29.8
Valuation Key issues to watch for
P/E (x) 15.3 13.6 16.5 12.1
Guidance for growth in 2H, especially in the verticals of BFSI and
P/BV (x) 4.1 3.4 3.1 2.7 Retail.
EV/EBITDA (x) 10.3 9.4 9.6 7.0 Margin trajectory, going forward, given the increased investments
Div Yld (%) 1.7 2.1 2.5 2.5 and revenue growth issues.
Deal wins during the quarter and growth in Digital.
Mphasis
Bloomberg MPHL IN CMP: INR538 TP: INR570 (+6%) Neutral
Equity Shares (m) 210.1
In 1QFY17, HP channel revenue declined by 4.2% QoQ to USD52m,
M. Cap. (INR b)/(USD b) 113 / 2
implying a run-rate of USD204m. This is expected to stabilize in 2Q,
52-Week Range (INR) 622 / 398
post the renewed MSA coming into effect, after the completion of
1,6,12 Rel Perf. (%) -3 / 3 / 23
the transaction between HPE and Blackstone.
We expect revenue growth of 2.1% QoQ driven by stability in HP
Financial Snapshot (INR b)
Y/E MAR 2015 2016 2017E 2018E
channel and Digital Risk and continued traction in the Direct
Sales 57.9 60.9 61.6 71.3 International business in 2Q.
EBITDA 8.7 9.0 10.0 11.9 EBITDA margin is likely to expand 40bp QoQ to 16.5% because of
PAT 6.8 7.2 8.3 9.3 the continued improvement in revenue mix and higher incremental
EPS (INR) 32.3 34.5 39.8 44.2 growth from the Direct International business.
EPS Gr. (%)* -8.6 6.8 15.5 11.1
BV/Sh. (INR)
MPHL had raised its EBIT margin guidance by 100bp at the end of
260.8 299.4 296.0 313.8
RoE (%)* 12.8 12.3 13.3 14.5 4QFY16 to 14-16% for FY17, and expressed confidence in achieving
RoCE (%)* 11.5 11.2 12.5 13.9 the higher end of the range.
Payout (%) 49.6 0.0 93.0 49.7 Our PAT estimate is INR2.1b (+2.8% QoQ).
Valuations
The stock trades at 13.5x FY17E and 12.2x FY18E EPS. Neutral.
P/E (x)* 16.7 15.6 13.5 12.2
P/BV (x) 2.1 1.8 1.8 1.7 Key issues to watch for
EV/EBITDA(x)* 10.5 9.9 9.0 7.4 Outlook for Digital Risk.
Div yld (%) 3.0 0.0 6.9 4.1 Deal TCV during the quarter in Direct Channel (organic business),
*Annualized values for 5m FY14
and focus areas.
Performance in Direct International business, and outlook for the
year.
Quarterly Performance (INR m)
Y/E March FY16 FY17E FY16 FY17E
Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
Revenue (USD m) 234 237 229 225 224 229.1 233 237 926 924
QoQ (%) 1.9 1.1 -3.4 -1.6 -0.3 2.1 1.5 2.1 -2.2 -0.2
Revenue (INR m) 14,964 15,575 15,167 15,173 15,167 15,039 15,551 15,858 60,879 61,615
YoY (%) 0.4 6.3 7.5 6.2 1.5 -3.4 2.5 4.6 5.1 1.2
GPM (%) 26.1 26.9 25.6 27.6 28.1 28.4 27.9 28.1 26.6 28.1
SGA (%) 11.8 11.9 11.3 12.1 12.0 11.9 11.7 11.7 11.8 11.8
EBITDA Margin (%) 14.1 15.1 14.3 15.4 16.1 16.5 16.1 16.4 14.7 16.3
EBIT Margin (%) 12.7 13.9 13.2 14.3 15.2 15.5 15.1 15.4 13.5 15.3
Other income 564 492 456 442 572 594 548 518 1,954 2,231
ETR (%) 27.3 26.4 27.7 27.1 27.7 27.7 27.7 27.7 27.1 27.7
PAT 1,742 1,900 1,736 1,864 2,043 2,100 2,080 2,127 7,242 8,349
QoQ (%) -2.0 9.1 -8.6 7.4 6.4 2.8 -1.0 2.3
YoY (%) -0.3 18.6 5.1 4.9 -17.9 -26.3 -20.1 -26.2 6.9 15.3
EPS (INR) 8.3 9.0 8.3 8.9 9.7 10.0 9.9 10.1 34.5 39.8
Headcount 34,159 24,169 23,563 22,324 22,374 21,091 21,411 21,856 22,324 21,856
Net Additions 100 -9990 -606 -1239 50 -1283 320 445 -11735 -468
HP Channel rev. (%) 28.8 26.5 24.2 24.3 23.4
Fixed Price (%) 12.3 14.0 19.2 21.1 19.8
E: MOSL Estimates
Persistent Systems
Bloomberg PSYS IN CMP: INR640 TP: INR710 (+11%) Neutral
Equity Shares (m) 80.0
Revenue growth is expected to be strong at PSYS, led by the
M. Cap. (INR b)/(USD b) 51 / 1
Enterprise segment and pick-up in the recently announced IBM
52-Week Range (INR) 797 / 501
Watson deal. Aided by these factors, we expect 2QFY17 revenue to
1,6,12 Rel Perf. (%) 5 / -25 / -9
grow 2.9% QoQ to USD108m.
We expect gradual pick up in IBM Watson IoT deal revenue, with
Financial Snapshot (INR b)
Y/E MARCH 2015 2016 2017E 2018E highest absolute revenue and consequently, margins in the
Sales 18.9 23.1 29.7 34.5 December quarter.
EBITDA 3.9 4.2 4.7 5.9 However, EBITDA margin is expected to be under pressure because
Adj. PAT 2.9 3.0 3.1 3.8 of wage hikes effective this quarter (230-240bp impact), offset by
Adj. EPS (INR) 36.3 37.2 38.2 48.0 missing visa costs of 1Q and operational efficiencies. As a result of
EPS Gr. (%) 16.6 2.3 2.7 25.8
this, we expect 60bp QoQ decline in EBITDA margin to 14.5%.
RoE (%) 22.1 19.5 17.5 20.2
RoCE (%) 18.6 18.9 16.9 15.9 Our PAT estimate for the quarter is INR609m, down 16.9% QoQ,
Payout (%) 27.5 29.6 31.4 25.0 owing to lower margins and lower other income.
Valuations The stock trades at 16.8x FY17E and 13.3x FY18E earnings. Neutral.
P/E (x) 17.6 17.2 16.8 13.3
P/BV (x) 3.5 3.0 2.7 2.6
EV/EBITDA (x) 10.6 10.1 8.4 6.5 Key issues to watch for
Div. Yield (%) 1.6 1.7 1.9 1.9 Performance and outlook for top clients in ISV (ex-IBM).
Commentary on traction with Enterprise customers and potential
of winning large deals.
Outlook on sustainable profit margins in the near to medium
term.
NIIT Technologies
Bloomberg NITEC IN CMP: INR 426 TP: INR530 (+24%) Neutral
Equity Shares (m) 61.2
We expect revenue growth for NITEC to remain subdued in 2Q.
M. Cap. (INR b)/(USD b) 26.1/0.4
Although deal wins have been strong for NITEC in recent quarters,
52-Week Range (INR) 632/335
the company witnessed couple of sizeable project completions in
1,6,12 Rel Perf. (%) 8/-27/18
the last quarter, and some delays in the commencement of new
deals. This is expected to contain any revenue growth in 2Q.
Financial Snapshot (INR b)
Y/E MARCH FY15 FY16 FY17E FY18E
We expect USD revenue decline of 0.8% in 2Q, also aggravated by
Sales 23.7 26.8 27.8 30.3 cross-currency movement, given the higher exposure of NITEC to
EBITDA 3.5 4.7 4.6 4.7 GBP, which declined by 8.5% QoQ against the USD.
PAT 1.9 2.8 2.8 2.9 Deal wins in international geographies are expected to continue
EPS (INR) 18.8 45.7 39.5 47.0
EPS Gr. (%)
showing strength.
-51.7 143.7 -13.6 18.9
BV/Sh. (INR) 223.7 259.8 284.3 318.1 Consequent to the subdued revenue growth, we expect EBITDA
RoE (%) 8.5 19.0 14.5 15.6 margin to decline by 50bp QoQ to 14.8%.
RoCE (%) 14.6 18.6 15.9 14.4 Our PAT estimate is INR524m, down 27.2% QoQ, driven by (a)
Payout (%) 50.6 21.9 27.8 23.4
decline in revenue and margins, and (b) lower other income.
Valuations
P/E (x) 22.7 9.3 10.8 9.1 The stock trades at 10.8x FY17E and 9.1x FY18E earnings. Neutral.
P/BV (x) 1.9 1.6 1.5 1.3
Key issues to watch for
EV/EBITDA (x) 6.6 4.8 4.9 4.4
Div Yld (%) 2.2 2.3 2.6 2.6 Traction in the international business.
Demand environment and update on ramp-up delays.
Deal wins.
Commentary on margin targets, going ahead.
Quarterly Performance (IFRS) (INR m)
Y/E March FY16 FY17 FY16 FY17E
1Q 2Q 3Q 3Q 1Q 2QE 3QE 4QE
Revenue (USD m) Ex. forex 98 104 103 102 99 98 101 103 406 401
QoQ (%) 5.9 6.2 -0.9 -1.2 -2.5 -0.8 2.3 2.3 8.6 -1.2
Revenue (INR m) 6,411 6,779 6,787 6,847 6,692 6,688 7,154 7,262 26,824 27,796
YoY (%) 11.0 15.2 14.0 12.0 4.4 -1.3 5.4 6.1 338.9 333.6
GPM (%) 36.4 37.2 37.3 37.1 35.3 34.8 37.4 37.0 37.0 36.2
SGA (%) 20.1 19.6 19.1 18.7 20.0 20.0 19.5 19.0 19.5 19.6
EBITDA Margin (%) 16.3 17.6 18.2 18.4 15.3 14.8 17.9 18.0 17.6 16.5
EBIT Margin (%) 12.0 13.7 14.2 14.2 10.9 10.5 13.8 14.0 13.5 12.4
Other income 79 13 52 39 71 27 95 53 183 246
ETR (%) 25.9 22.9 20.9 18.2 10.3 22.0 22.0 22.0 21.8 19.5
Minority Interest 40.0 43.0 48.0 39.0 46.0 46.0 46.0 46.0 170.0 184.0
PAT 587 683 741 790 720 524 801 787 2,801 2,425
QoQ (%) -433.5 16.4 8.5 6.6 -8.9 -27.2 52.8 -1.7 145.9 -13.4
YoY (%) 35.6 70.8 53.7 -548.9 22.7 -23.3 8.0 -0.3
EPS (INR) 9.6 11.2 12.1 12.9 5.1 8.5 13.0 12.8 45.8 39.5
Headcount 9,228 9,592 9,517 9,476 9,022 9,072 9,372 9,522 9,476 9,522
Util excl. trainees (%) 79.5 79.7 78.7 79.0 79.8 78.0 77.5 78.0 79.2 78.3
Attrition (%) 14.3 13.7 13.6 13.6 13.6
Offshore rev. (%) 39.0 41.0 41.0 39.0 39.0 40.0 38.6
Fixed Price (%) 42.0 41.0 43.0 46.0 46.0
TCS
Bloomberg TCS IN CMP: INR 2,412 TP: INR2,500 (+4%) Neutral
Equity Shares (m) 1,970.4
During the quarter, TCS cited growth concerns because of a
M. Cap. (INR b)/(USD b) 4,752 / 71
sequential loss in momentum, led by weakness in BFSI discretionary
52-Week Range (INR) 2,769 / 2,119
spend in the US.
1,6,12 Rel Perf. (%) -3 / -14 / -16
We expect little impact from seasonal strength in 2Q for TCS, and
estimate 2.5% QoQ CC growth.
Financial Snapshot (INR b)
We believe the pullback in discretionary spending will weigh on
Y/E MAR 2015 2016 2017E 2018E
margins too, derailing the company at least for FY17, from its
Sales 946.5 1,086.5 1,216.2 1,396.5
EBITDA
targeted margin band of 26-28%. Our EBIT margin estimate for 2Q is
272.9 306.8 329.3 373.8
PAT 25.4% QoQ (+40bp QoQ), below the lower end of the guided range.
217.0 242.7 263.5 298.1
EPS (INR) 110.8 123.5 134.1 148.5
Before the update by TCS, we were estimating 80bp margin
EPS Gr. (%) 13.5 11.5 8.5 13.1
expansion, given the assumption of accelerating revenue growth in
BV/Sh. (INR) 293.4 371.4 422.9 503.7 2Q.
RoE (%) 39.0 38.2 33.5 31.5 Our PAT estimate stands at INR61.8b (-2.2% QoQ). The decline is led
RoCE (%) 37.8 36.8 32.4 30.7 by lower other income, which is impacted by forex losses.
Payout (%) 71.3 35.2 34.8 37.0 The stock trades at 18x FY17E and 15.9x FY18E earnings. Neutral.
Valuation
P/E (x) 21.8 19.5 18.0 15.9
P/BV (x) 8.4 6.7 5.5 4.6 Key issues to watch for
EV/EBITDA (x) 16.7 14.6 13.4 11.5 Growth in troubled segmentsEnergy, Telecom, Insurance.
Div. yield (%) 3.3 1.8 1.9 2.3 Outlook on revenue from TCS Japan.
Traction in new Digital initiatives (automation/solutions).
Outlook for BFSI vertical going ahead.
Tech Mahindra
Bloomberg TECHM IN
CMP: INR 421 TP: INR500 (+19%) Neutral
Equity Shares (m) 984.7
We expect 3.1% QoQ CC growth in TECHMs revenue. In USD terms,
M. Cap. (INR b)/(USD b) 414 / 6
52-Week Range (INR) 579 / 408
we expect TECHMs revenue to grow by 2.5% QoQ 60bp negative
1,6,12 Rel Perf. (%) -10 / -21 / -33 impact of cross-currency movement.
In Telecom, 2Q is expected to be under pressure because of
consolidation of revenue in LCC. In Enterprise, growth is expected
Financial Snapshot (INR b)
to continue showing strong momentum.
Y/E MARCH 2015 2016 2017E 2018E
Revenue is also likely to include one month integration of Target,
Sales 224.8 264.9 290.0 329.1
EBITDA two months of Pininfarina and three months of BIO. Together, the
41.5 43.4 44.1 52.3
Adj. PAT 26.3 31.2 28.5 33.5
acquisitions are expected to add to 1.6pp; 1.5pp is expected from
Adj. EPS (INR) 29.6 35.1 32.1 37.7 organic growth.
EPS Gr. (%) 3.0 18.4 -8.5 17.6 We expect EBITDA margin to decline by 50bp to 14.4%. Margins are
BV/Sh.(INR) 142.2 165.6 191.0 213.5 expected to be weighed upon by restructuring in LCC, and also by
RoE (%) 24.5 23.4 18.4 16.2 depreciation of the GBP.
RoCE (%) 20.5 20.1 16.1 16.8 Consequently, we expect PAT to decline 5.7% QoQ, to INR6.2b in
Payout (%) 20.5 34.2 28.2 23.2 2QFY17, also led by lower other income.
Valuation The stock trades at 13.1x FY17E and 11.2x FY18E earnings. Neutral.
P/E (x) 14.2 12.0 13.1 11.2 Key issues to watch for
P/BV (x) 3.0 2.5 2.2 2.0 Performance of the Telecom segment.
EV/EBITDA (x) 8.1 7.5 8.1 6.5 Comments on profitability including LCC.
Div. Yield (%) 1.4 2.9 2.1 2.1
TCV of deal wins in the Enterprise segment.
Wipro
Bloomberg WPRO IN
CMP: INR 479 TP: INR570 (+19%) Neutral
Equity Shares (m) 2466.0
M. Cap. (INR b)/(USD b) 1180 / 18
We expect revenue to decline by 0.5% in USD terms, and growth of
52-Week Range (INR) 613 / 470
0.1% QoQ in constant currency terms; a negative impact of 60bp on
1,6,12 Rel Perf. (%) 0 / -27 / -28 account of depreciation of currencies against the USD.
In 1Q, WPRO had guided for 0-1% QoQ growth in 2Q. However,
Financial Snapshot (INR b) given the macroeconomic environment, uncertainties surrounding
Y/E MAR 2015 2016 2017E 2018E the BFSI vertical, and continued weakness in Energy, we expect
Sales 469.5 512.4 555.3 614.7 revenue growth to land up near the lower end of the range.
EBITDA 104.6 108.1 110.7 129.8 We expect EBIT margin in IT Services to decline by 120bp because
PAT 86.6 88.9 84.2 97.1 of the full impact of wage hikes, and increased investments.
EPS (INR) 35.1 36.1 34.2 40.1
EPS Gr. (%)
We expect overall EBIT margin to decline by 40bp because of
10.9 2.9 -5.4 17.3
BV/Sh. (INR) 166.1 189.7 199.3 227.1
improved profitability in the Products business.
RoE (%) 23.0 20.3 17.6 18.7 Our PAT estimate is INR20.1b, -1.8% QoQ, on account of lower
RoCE (%) 20.2 16.7 14.7 16.7 margins compared to the previous quarter.
Payout (%) 34.2 16.6 37.4 32.5
The stock trades at 14x FY17E and 12x FY18E earnings. Neutral.
Valuations
P/E (x) 13.6 13.3 14.0 12.0
P/BV (x) 2.9 2.5 2.4 2.1 Key issues to watch for
EV/EBITDA (x) 9.9 9.8 9.4 7.6 Revenue growth guidance for 3QFY17.
Div Yld (%) 2.5 1.3 2.7 2.7 Stabilization of the Energy vertical.
Commentary on large deal wins and ramp-up schedule.
Zensar Technologies
Bloomberg ZENT IN
CMP: INR 1,010 TP: INR1,300 (+29%) Buy
Equity Shares (m) 45.4
M. Cap. (INR b)/(USD b) 46 / 1
We expect revenue of USD117m, representing growth of 2.8%. We
52-Week Range (INR) 1,136 / 801
expect revenue growth to be a function of momentum in top
1,6,12 Rel Perf. (%) -2 / -6 / 14 accounts, contribution of new deals and traction in Digital on the
positive side; and continued pruning of non-core accounts and
products/MVS business in Infrastructure Management on the
Financial Snapshot (INR b)
Y/E MAR
negative.
2015 2016 2017E 2018E
Sales 469.5 29.6 31.9 37.0 Despite the pruning of non-core/low-yield business, we expect
EBITDA 104.6 4.3 4.7 6.1 EBITDA margin to decline by 50bp QoQ because of wage hikes, and
PAT 86.6 3.1 3.4 4.4 the requirement of investments to boost capabilities and to
EPS (INR) 35.1 68.2 75.7 98.2 augment sales and marketing.
EPS Gr. (%) 10.9 17.0 10.5 29.6
Post this, we expect margin expansion in the remainder of the year.
BV/Sh. (INR) 166.1 314.4 371.7 445.6
RoE (%) 23.0 24.0 22.0 24.0
Our PAT estimate is INR726m, -4.9% QoQ, on account of lower
RoCE (%) 20.2 28.5 26.6 29.4 margins and lower forex gain compared to the previous quarter.
Payout (%) 34.2 17.6 22.6 21.1 The stock trades at 13.3x FY17E and 10.3x FY18E earnings. Buy.
Valuations
P/E (x) 15.9 14.8 13.3 10.3
P/BV (x) 3.4 3.2 2.7 2.3 Key issues to watch for
EV/EBITDA (x) 11.8 10.2 8.5 6.1 Traction in Digital, large deals and other new initiatives.
Div Yld (%) 2.1 1.2 1.7 2.0 Margin outlook given the need for reinvestment.
Progress on restructuring.
Telecom
Company name
Revenue de-growth steeper than seasonality impact
Bharti Airtel Data growth moderation to 1.5% QoQ on 8-10% price drop
Voice revenue to decline: In 2QFY17, Bharti and Ideas traffic growth should be
subdued, largely on account of seasonality. With the interconnect issue
remaining unresolved in 2QFY17, there was limited impact of Rjios unlimited
voice offering on Bharti and Idea. We expect Bhartis voice revenue to decline
4.4% QoQ (but grow 18.6% YoY) to INR100.9b. Idea should see its voice revenue
declining 4.8% QoQ (but growing 4% YoY) to INR63.8b. We expect 1% voice RPM
contraction QoQ for both Bharti and Idea, and voice traffic contraction of 3.4%
QoQ for Bharti and 3.9% QoQ for Idea.
Data to see flattish growth: RJio has had a larger impact on the data revenues of
Bharti and Idea, given the shift of users towards RJios free data offer in the
metros and tier-1 towns. We expect data revenue growth to decelerate in
2QFY17. For Bharti, we expect marginal growth of 1.4% QoQ and 23% YoY in
data revenue to INR35.8b. For Idea, we expect data revenue of INR20b, a
subdued growth of 1.4% QoQ and 18% YoY. Data revenues are also impacted by
price declines of 10% for Bharti and 8% for Idea.
Bhartis consolidated EBITDA margin should see only 10bp impact QoQ to 37.3% due
to revenue mix change the lower margin Africa business is likely to see revenue
declining 15% QoQ. The sale of operations in two regions, Burkina Faso and Sierre
Leone, contributing about 7.5% of Africa revenue should impact Bhartis overall
revenue. Naira currency (accounts for ~33% of Africa revenue) depreciation of over
20% should further impact Africa revenue and costs by 7-8%. Tower sale should not
have a meaningful impact just a quarterly revenue loss of INR5m-6m.
Our view: We expect Bharti and Idea to remain under pressure, given seasonality-
led sluggishness and an uncertain outlook. Bharti Infratels renewal concerns
should be resolved in the next 2-3 quarters.
10 9 9
6 7 7 8 8 8
5 7 6 7 7
3 3 2 2
5 6 5 5 4 6 6 5 5
3 2 2
3
1 3 2 1 1 1
-2 -1 -1
-3
-6
Jul-13
Jul-14
Jul-15
Jun-16
Jun-13
Jun-14
Jun-15
Nov-13
Nov-14
Nov-15
Apr-16
May-16
May-14
Apr-15
May-15
Apr-13
May-13
Apr-14
Aug-13
Dec-13
Aug-14
Dec-14
Aug-15
Dec-15
Sep-14
Jan-15
Feb-15
Mar-15
Sep-15
Jan-16
Feb-16
Mar-16
Jan-13
Feb-13
Mar-13
Sep-13
Jan-14
Feb-14
Mar-14
Oct-13
Oct-14
Oct-15
-5
-10
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17E
Source: Company, MOSL
Exhibit 147: Aggregate traffic growth and RPM trend for wireless majors
QoQ traffic growth (%) Avg. RPM QoQ (%)
5 5
4 4 4
3 2 3 3
2 3 2 2 1
0 0 0 3 1 1 0
2 2
1 1
-1 -1
-1
-2 -2 -3
-3 -4 -3
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17E
Source: Company, MOSL
-1.2 -1.1
-1.9
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
Exhibit 149: Relative Performance-3m (%) Exhibit 150: Relative Performance-1 Yr (%)
Sensex Index MOSL Telecom Index Sensex Index MOSL Telecom Index
110 120
105 110
100
100
95
90 90
85 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Sep-15
Jan-16
Feb-16
Mar-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Bharti Airtel
Bloomberg BHARTI IN CMP: INR319 TP: INR410 (+29%) Buy
Equity Shares (m) 3,997.4 We expect consolidated revenue to grow 2.1% YoY but decline
M. Cap. (INR b)/(USD b) 1,274 / 19 4.8% QoQ to INR243b, largely led by seasonality. India wireless
52-Week Range (INR) 385/282 revenue would grow 7% YoY on a like-to-like basis to INR146.2b.
1,6,12 Rel Perf. (%) 1/-17/-14 Africa business revenue would decline 15% QoQ to ~USD793b,
led by (a) Naira currency devaluation, sale of operations in
Financial Snapshot (INR Billion) Burkina Faso and Sierra Leone, and (c) sale of tower.
Y/E March 2015 2016 2017E 2018E
Net Sales 920.4 965.3 971.4 1,013.2 Consolidated EBITDA margin is expected to decline 10bp QoQ to
EBITDA 312.3 339.8 354.6 364.0 ~37.3%, given the revenue mix change.
Adj. NP 55.8 49.1 52.7 45.6
AdjEPS(INR) 14.0 12.3 13.2 11.4
We expect Africa revenue and EBITDA to decline 15% and 14%
AdjEPS Gr(%) 189.7 78.4 -5.6 -7.1
QoQ to INR53b and INR12b, respectively.
BV/Sh (INR) 155.0 164.2 174.2 183.0
RoE (%) 9.2 7.7 7.8 6.4
Consolidated net profit would decline 5% YoY (but grow 0.3%
RoCE (%) 5.8 6.2 6.2 5.7
QoQ) to INR14.7b.
Payout (%) 19.9 17.0 20.5 22.6
Valuations
Bharti trades at proportionate EV/EBITDA of 6.1x FY17E and 5.7x
P/E (x) 22.6 25.7 24.0 27.7
FY18E. Maintain Buy.
P/BV (x) 2.0 1.9 1.8 1.7 Key things to watch for
EV/EBITDA x 6.6 6.4 6.1 5.7 Consolidated revenue growth (we expect 4.8% decline QoQ).
Div. Yld (%) 0.7 0.7 0.7 0.7 India wireless revenue growth (we expect 7% YoY).
Africa revenue growth (we expect 15% decline QoQ).
Consolidated EBITDA margin (we expect 37.3%).
Bharti Infratel
Bloomberg BHIN IN CMP: INR363 TP: INR435 (+20%) Buy
Equity Shares (m) 1,896.7
We expect revenue to grow 7.5% YoY and 1.8% QoQ to INR32.7b.
M. Cap. (INR b)/(USD b) 688 / 10
52-Week Range (INR) 437/302 Revenue from rent is expected to grow 1.3% QoQ. Energy and other
1,6,12 Rel Perf. (%) 7/-18/-16 reimbursements are expected to grow 2% QoQ.
We expect EBITDA to improve 2.6% QoQ to INR14.3b. EBITDA
Financial Snapshot (INR Billion) margin should expand ~40bp QoQ to 43.8%.
Y/E March 2015 2016 2017E 2018E
We expect ~19% drop in PAT QoQ to INR6.1b, primarily led high
Net Sales 116.7 123.3 132.4 144.2
investment income in previous quarter.
EBITDA 50.0 54.1 58.1 63.9
Adj. NP 19.9 22.5 26.7 23.7 Bharti Infratel trades at an EV/EBITDA of 11.4x FY17E and 10x
AdjEPS INR 10.5 11.8 14.1 12.5 FY18E. Maintain Buy.
Gr. (%) 99.0 48.1 33.9 5.4
BV/Sh (INR) 89.7 96.7 95.8 103.7
RoE (%) 11.4 12.7 14.6 12.5
RoCE (%) 11.1 11.2 13.0 14.5
Payout (%) 44.0 39.0 32.0 36.1
Key things to watch for
Valuations
Consolidated co-location additions (we expect ~2,440 in 2Q).
P/E (x) 34.5 30.6 25.8 29.1
Trend in consolidated sharing revenue per sharing operator (we
P/BV (x) 4.0 3.7 3.8 3.5
expect 0.3% QoQ increase).
EV/EBITDAx 13.9 12.3 11.4 10.0
Div. Yld (%) 1.1 1.1 1.1 1.1
PBT 7,444 9,770 8,292 10,260 9,932 9,238 9,679 10,059 35,767 38,907
Tax 3,020 3,854 3,342 3,076 2,369 3,141 3,291 3,420 13,292 12,221
Rate (%) 40.6 39.4 40.3 30.0 23.9 34.0 34.0 34.0 37.2 31.4
Minority Interest & P/L of Asso. Cos. 0 0 0 0 0 0 0 0 0 0
Reported PAT 4,424 5,916 4,950 7,184 7,563 6,097 6,388 6,639 22,475 26,687
Adj PAT 4,424 5,916 4,950 7,184 7,563 6,097 6,388 6,639 22,475 26,687
YoY Change (%) -4.4 27.2 -2.3 28.9 71.0 3.1 29.0 -7.6 12.8 18.7
Margins (%) 14.7 19.5 15.9 22.6 23.6 18.7 19.1 19.4 18.2 20.2
Idea Cellular
Bloomberg IDEA IN CMP: INR81 TP: INR75 (-7%) Sell
Equity Shares (m) 3,597.8
We expect consolidated revenue to grow 5.6% YoY (3.2% QoQ) to
M. Cap. (INR b)/(USD b) 632/10
INR91.8b.
52-Week Range (INR) 204/130
1,6,12 Rel Perf. (%) 2 / 13 / 23 We expect Idea to report mobile traffic growth of 3.7% QoQ. We
estimate voice RPM to decline 1%; our estimate factors 5% QoQ
Financial Snapshot (INR Million) drop in MoU per subscriber per month.
Y/E March 2015 2016 2017E 2018E EBITDA margin is expected to decline ~160bp QoQ/440bp YoY to
Net Sales 315.7 359.8 360.9 371.2
30.8% due to increased network cost.
EBITDA 108.1 127.8 107.9 108.2
Net profit is expected to remain marginally positive at INR209m,
Adj. NP 31.9 29.1 -3.4 -6.5
AdjEPS (INR) 8.9 8.1 -1.0 -1.8
down 90% QoQ in 2QFY17, as the sequential EBITDA decline trickles
Adj.EPSGr(%) 216 48 -111 -122 down to the bottom-line.
BV/Sh(INR) 64.0 71.6 70.6 68.8 Idea trades at an EV/EBITDA of 6.5x FY17E and 6.4x FY18E.
RoE (%) 16.1 11.9 -1.3 -2.6
RoCE (%) 8.2 6.8 2.6 2.0
Payout (%) 8.1 8.9 6.4 6.8 Key things to watch for
Valuations Voice RPM trajectory (we expect RPM to decline 1.5% QoQ).
P/E (x) 9.0 9.9 -83.9 -44.6 Mobile traffic (we expect 3.7% QoQ growth).
P/BV (x) 1.3 1.1 1.1 1.2 EBITDA margin (we expect ~160bp decline QoQ).
EV/EBITDA(x) 5.0 5.4 6.5 6.4
Div. Yield (%) 0.8 0.7 -0.1 -0.1
Utilities
NTPCs PAT is estimated to increase ~5% YoY to INR23.3b, led by lower PLF
Power Grid Corporation
incentives and other income. The companys commercial capacity is estimated to be
flat QoQ at 45.9GW. JSW Energy is expected to be impacted by under-utilization of
its Vijaynagar plant (estimated to have operated at just ~28% PLF in 2Q v/s. 81% in
the year-ago period). The companys EBITDA is estimated to decline 19% YoY to
INR8.1b and PAT to be down 70% YoY to INR1.1b.
Coal India is estimated to disappoint with EBITDA (ex-OBR) fall of ~46% YoY to
~INR12.7b, mainly due to a decline in coal dispatches (-5% YoY), lower e-auction
realization (-8% QoQ/-9% YoY) and impact of wage provisions. We estimate PAT to
decline 43% YoY to INR12.8b.
ST prices down 11% QoQ: Short-term (ST) prices were down 11% QoQ to
INR2.25/kWh in 2QFY17. ST volumes were up 26% YoY.
100
88
99
98
97
96
95
95
94
94
94
92
92
90
90
90
89
89
89
89
87
87
86
86
86
86
85
85
85
84
84
83
82
81
79
79
79
78
77
77
76
16 15
13 14
12 12 1213 12 12
10 9 10 8
6 5
7 6 8 6 5 7
5 3 6 6 6 7
5
4 4 4 3
1 2 1 1 2 0
0 -1
Jun-13
Jun-14
Jun-15
Apr-13
Jun-16
Aug-13
Apr-14
Dec-13
Feb-14
Aug-14
Apr-15
Dec-14
Feb-15
Aug-15
Apr-16
Dec-15
Feb-16
Aug-16
Oct-13
Oct-14
Oct-15
Source: MOSL, CEA
PLF was down 250bp YoY to Exhibit 156: NTPC coal-based power plants monthly PLF (%)
73% in July. It was down
NTPC's coal-based plants PLF - %
410bp YoY to 72% in
89.6
88.9
87.4
87.2
85.3
83.9
83.1
82.5
82.2
81.7
81.7
81.6
81.5
81.5
81.3
80.9
80.4
79.4
79.4
78.5
78.2
77.8
August.
77.1
76.7
76.5
76.2
75.7
74.0
73.7
73.6
72.3
69.8
Jul-14
Jul-15
Jul-16
Nov-14
Nov-15
May-14
May-15
May-16
Jan-14
Mar-14
Sep-14
Jan-15
Mar-15
Sep-15
Jan-16
Mar-16
Source: MOSL, CEA
Commercialized Commissioned
1565
1160 1255
1105
800
565 675 650 660
500 500 450525
99 110 20 20 15 0 0
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
Capitalized Capex
172
71 68 64 66
49 58 47 49 50 51 45 51 51 45 50 56 50 56
25
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17E
Source: MOSL, Company Data
Regulated equity base is Exhibit 159: Power Grid regulated equity base (INR b)
up 21% YoY.
Regulated equity
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17E
Source: MOSL, Company Data
Jul-14
Jul-15
Jul-16
Nov-12
Nov-13
Nov-14
Nov-15
May-13
May-14
May-15
May-16
Jan-13
Mar-13
Sep-13
Jan-14
Mar-14
Sep-14
Jan-15
Mar-15
Sep-15
Jan-16
Mar-16
Source: MOSL, Company
Exhibit 161: Dispatches declined by 9.6% YoY in August
1514
11 9 10 10 10 9 9.6
5 67 6 6 7 7677 79 6.6
2 0 2 2 2 30 2 3.5 4.1 1.5
-1 -1 1 1 -2 1 -2 -1 5.5
-9 -2.5 -9.6
39
42
44
40
46
40
38
37
38
35
36
36
39
43
44
40
45
41
41
38
38
37
35
39
42
44
44
43
48
44
44
42
41
41
40
44
45
48
48
46
49
42
46
45
41
37
Jul-13
Jul-14
Jul-15
Jul-16
Nov-12
Nov-13
Nov-14
Nov-15
May-13
May-14
May-15
May-16
Jan-13
Mar-13
Sep-13
Jan-14
Mar-14
Sep-14
Jan-15
Mar-15
Sep-15
Jan-16
Mar-16
Source: MOSL, Company
Exhibit 162: Inventory at mines declined MoM in August (14mt destocked ytd FY17)
COAL inventory - mt
58 55
54 52 52 49
46 49 45 48 47 44
40 37 44 42
39 39
32 32 29 31 33 37 35 32 32 34 38
Jun-14
Jun-15
Jun-16
Apr-14
Aug-14
Apr-15
Dec-14
Feb-15
Aug-15
Apr-16
Dec-15
Feb-16
Aug-16
Oct-14
Oct-15
12.6 86%
11.411.9
9.1 9.6 10.610.5 10.2 83%
8.2 8.7 7.4 81%
4.8 5.3 79% 78%
4.1 76% 76% 76% 75% 77%
74% 74% 75% 73%
-1.4 -1.9
205 218 217 215 206 198 196 195 198 211 224 225 226 227 233 211 73%
Jul-15
Jun-15
Nov-15
Apr-15
May-15
Apr-16
Aug-15
Dec-15
Jan-15
Feb-15
Mar-15
Sep-15
Jan-16
Feb-16
Mar-16
Oct-15
Jun-14
Jun-15
Apr-14
Dec-13
Feb-14
Aug-14
Apr-15
Dec-14
Apr-16
Feb-15
Aug-15
Dec-15
Feb-16
Oct-13
Oct-14
Oct-15
Source: MOSL, Coal India, ICMW Source: MOSL, Coal India, ICMW
4
36 3,340 2,164
Mar-14 32 Mar-14 3,364 Mar-14 2,183 Jul-13
October 2016
32 3,302 2,256
5545
May-14 31 May-14 3,301 May-14 2,317 Oct-13
31 3,645 2,555
Jul-14 48 Jul-14 3,772 Jul-14 3,045
59 4,075 3,347 Jan-14
66
Sep-14 61 Sep-14 4,400 Sep-14 3,566
56 4,444 3,616 Apr-14
666 565
Nov-14 46 Nov-14 4,241 Nov-14 3,114
4
32 3,547 2,061
2
Jan-15 30 Jan-15 3,823 Jan-15 2,218 Jul-14
28 4,146 2,305
111
Mar-15 30 Mar-15 3,866 Mar-15 2,220 Oct-14
3
2,023
1,715
31 3,068 1,769
5
18 3,044
9
13 2,505 1,227
4 4
Source: ICMW
Source: ICMW
Source: ICMW
Source: ICMW
4
1,200
1,600
2,000
2,400
2,800
3,200
3,600
6
528 1,574
Mar-14 448 Mar-14 1,695 Jul-13
547 1,829 1Q14
May-14 618 May-14 1,939 Oct-13
855 2,192
Jul-14 1,123 Jul-14 2,327 2Q14
2,414 Jan-14
8
1,266
Sep-14 2,487 3Q14
67.9
Sep-14 1,385
1,648 2,707 Apr-14
Nov-14 1,224 Nov-14 2,345 4Q14
473 1,422 Jul-14
1
394 1,455
May-15 332 May-15 1,501 3Q15 Jan-15
311 1,508
Jul-15 154
Offered (mt)
Jan-16 139
Exhibit 166: Monthly E-auction offered quantity
14
Jan-16 1,215
101
Exhibit 168: Realization trend CIL v/s. exchanges
1,284 3Q16
10
52.3
Mar-16 148 Mar-16 1,085 Jan-16
90
18
1,078 4Q16
May-16 64
14
1Q17
60.7
Jul-16 52
at reserve price - INR/t
270
Source: ICMW
Source: ICMW
Source: ICMW
Source: ICMW
Exhibit 173: Relative performance3m (%) Exhibit 174: Relative performance1Yr (%)
Sensex Index MOSL Utilities Index Sensex Index MOSL Utilities Index
107 120
105 110
103 100
101 90
99 80
Jul-16
Jun-16
Nov-15
Apr-16
May-16
Dec-15
Aug-16
Mar-16
Sep-15
Jan-16
Feb-16
Sep-16
Oct-15
Jul-16
Jun-16
Aug-16
Sep-16
Source: Bloomberg, MOSL Source: Bloomberg, MOSL
Coal India
Bloomberg COAL IN CMP: INR328 TP: INR350 (+6%) Neutral
Equity Shares (m) 6,316.4
We estimate Coal Indias EBITDA (ex-OBR) to decline 50% YoY to
M. Cap. (INR b)/(USD b) 2,071 / 31
INR12.7b due to lower volumes, e-auction realization and impact of
52-Week Range (INR) 350/272
wage hike provision.
1,6,12 Rel Perf. (%) 0/2/-8
Dispatches are down 5% YoY to 116mt. FSA volumes are estimated
Financial Snapshot (INR Billion) to decline 8% YoY to 95mt given weak demand from the power
Y/E March 2015 2016 2017E 2018E sector. E-auction volumes are up 17% YoY to ~17mt.
Sales 720.1 756.4 764.3 853.6 FSA realizations are estimated to increase 5% YoY to INR1,354/t. E-
EBITDA 152.3 159.4 114.2 150.9 auction realization is estimated to decline 8% QoQ to INR1,450/t.
NP 137.3 142.7 107.6 133.5 We estimate 17% YoY increase in wage cost due to the wage hike
EPS (INR) 21.7 22.6 17.0 21.1 provision.
EPS Gr. (%) -14.1 4.0 -24.6 24.1
BV/Sh. (INR) 63.9 53.6 55.3 57.4
RoE (%) 34.0 42.2 30.8 36.8
RoCE (%) 34.5 40.0 32.7 39.2
Payout (%) 112.9 145.5 90.0 90.0
Valuations
P/E (x) 14.8 14.2 18.8 15.2
P/BV (x) 5.0 6.0 5.8 5.6
EV/EBITDA (x) 7.1 7.6 9.3 7.3
Key issues to watch for
Div. Yield (%) 6.4 8.5 4.0 4.9
E-auction volumes and realization.
Global coal prices.
JSW Energy
Bloomberg JSW IN CMP: INR74 TP: INR95 (+27%) Buy
Equity Shares (m) 1,640.1
We estimate JSW Energys EBITDA to decline 19% YoY to INR8.1b
M. Cap. (INR b)/(USD b) 122 / 2
due to under-utilization of the Vijaynagar plant and an increase in
52-Week Range (INR) 96/59
cost of imported coal.
1,6,12 Rel Perf. (%) -2/-2/-24
Vijaynagar is estimated to have operated at just 28% PLF v/s. 81%
Financial Snapshot (INR Billion) last year.
Y/E MARCH 2015 2016 2017E 2018E Imported coal price average was ~USD8/t higher QoQ to USD58/t.
Sales 938.0 996.9 915.5 1,018.2
PAT is estimated at INR1.1b, down ~70% YoY on low utilization.
EBITDA 36.2 41.4 37.5 41.8
NP 13.8 12.5 8.3 13.2
EPS (INR) 8.4 7.6 5.1 8.1
EPS Gr. (%) 22.2 -10.0 -33.4 59.3
BV/Sh. (INR ) 45.8 52.0 54.8 60.6
RoE (%) 19.6 15.5 9.5 14.0
RoCE (%) 13.9 12.5 9.9 11.5
Payout (%) 23.7 26.3 39.5 24.8
Valuation
P/E (x) 14.1 9.2 14.7 9.2
P/BV (x) 2.6 1.3 1.4 1.2
EV/EBITDA (x) 7.8 6.8 7.0 5.9 Key issues to watch for
Div. Yield (%) 1.7 2.9 2.7 2.7 Capitalization/capex guidance for FY17.
Details on competitively bid projects.
Development on green energy projects, state JVs, etc.
NTPC
Bloomberg NTPC IN CMP: INR151 TP: INR199 (+32%) Buy
Equity Shares (m) 8,245.5
We estimate modest 5% YoY growth in adjusted PAT to INR23.3b in
M. Cap. (INR b)/(USD b) 1,241 / 19
2QFY17. Generation business PAT is estimated to increase 7% YoY
52-Week Range (INR) 170/117
to INR20.7b, while other income is estimated to be down 9% YoY to
1,6,12 Rel Perf. (%) -5/4/14
INR2.6b.
Financial Snapshot (INR Billion) PLF incentives are estimated to decline from INR1.5b in 1QFY17 to
Y/E MARCH 2015 2016 2017E 2018E INR0.5b.
Sales 806.2 787.1 820.4 965.0 Commercial capacity is estimated to remain unchanged at 45.9GW.
EBITDA 171.9 191.6 228.2 301.9
NP 99.9 101.6 96.5 119.0
EPS (INR) 12.1 12.3 11.7 14.4
EPS Gr. (%) -12.4 1.7 -5.1 23.3
BV/Sh. (INR ) 99.6 108.2 115.1 124.1
RoE (%) 11.8 11.9 10.5 12.1
RoCE (%) 7.4 7.3 6.8 8.2
Payout (%) 47.4 27.2 34.2 31.2
Valuations
P/E (x) 12.0 10.5 13.0 10.5
P/BV (x) 1.5 1.2 1.3 1.2
Key issues to watch for
EV/EBITDA (x) 12.0 11.1 10.9 8.7
PLF for coal-based projects and generation loss.
Div. Yield (%) 2.6 2.6 3.0 3.3 Core RoE and incentives.
Financial Snapshot (INR Billion) We estimate regulated equity base to increase to INR399b by
Y/E MARCH 2015 2016 2017E 2018E 2QFY17 from INR328b in 2QFY16.
Sales 176.6 213.5 263.5 311.6
EBITDA 151.3 186.0 233.9 278.8 Other income is estimated to increase 11% YoY to INR1.4b.
NP 50.9 60.1 74.1 87.8
EPS (INR) 9.7 11.5 14.2 16.8 We estimate core-RoE of 17.2% (v/s 17.4% in 1Q).
EPS Gr. (%) 10.9 18.2 23.1 18.6
BV/Sh. (INR ) 73.5 82.6 94.4 108.2
RoE (%) 13.9 14.7 16.0 16.6
RoCE (%) 6.2 6.6 7.4 8.0
Payout (%) 24.7 20.8 17.1 18.1
Valuations
P/E (x) 14.9 11.9 12.7 10.7 Key issues to watch for
P/BV (x) 2.0 1.7 1.9 1.7 Capitalization/capex guidance for FY17.
EV/EBITDA (x) 11.2 9.5 9.1 7.8 Details on competitively bid projects.
Div. Yield (%) 1.4 1.5 1.1 1.4 Development on green energy projects, state JVs, etc.
Allcargo
Bloomberg AGLL IN CMP: INR188 TP: INR217 (+15%) Buy
Equity Shares (m) 252.1
We expect AGLL to report EBITDA of INR1.3b (-2% YoY, +3% QoQ)
M. Cap. (INR b)/(USD b) 47 / 1
and PAT of INR630m (-15% YoY, flat QoQ) due lower volumes and
52-Week Range (INR) 222/135
flat margins.
1,6,12 Rel Perf. (%) 3/12/17
We estimate MTO volumes at 122K TEU (+2% QoQ, +4.5% YoY) and
Financial Snapshot (INR b) CFS volumes at 70K TEU (-7% QoQ, +1% YoY); the rise in volumes
Y/E March 2015 2016 2017E 2018E would be led by the recovery in macro trade.
Sales 56.2 56.8 58.6 63.0
We estimate EBITDA/PAT CAGR of 9%/11% over FY16-18, and
EBITDA 4.6 5.2 5.5 6.2 expect return ratios to improve from ~14% to 17%, driven by
NP 2.3 2.9 2.7 3.4 margin expansion and reduction in capex intensity in the business.
EPS (INR) 9.2 11.4 10.7 13.6
The stock trades at 13.8x FY18E EPS of INR13.6. Maintain Buy.
EPS Growth (%) 55.5 23.9 (5.9) 26.2
BV/Share (INR) 75.7 87.5 71.3 82.2
RoE (%) 12.6 14.0 13.5 17.7
RoCE (%) 9.4 11.6 11.2 14.5
Valuations Key issues to watch for
P/E (x) 20.4 16.4 17.5 13.8 (a) Volume data and (b) setup of logistics park in Jhajjar.
P/BV (x) 2.5 2.1 2.6 2.3
EV/EBITDA (x) 11.1 9.8 8.6 6.9
Arvind
Bloomberg ARVND IN CMP: INR354 TP: INR372 (+5%) Buy
Equity Shares (m) 258.2
We expect ARVNDs revenue to grow 9.5% YoY (+9.1% QoQ) to
M. Cap. (INR b)/(USD b) 91 / 1
INR22.9b in 2QFY17, driven by the brand and retail segments.
52-Week Range (INR) 366/236
1,6,12 Rel Perf. (%) 13/18/22 We expect EBITDA margin to expand 20bp YoY (+120bp QoQ) to
12.7%, and estimate EBITDA of INR2.9b.
Financial Snapshot (INR Billion)
Consequently, we expect adjusted PAT to grow 14.6% YoY to
Y/E March 2015 2016 2017E 2018E
INR1.1b. Buy.
Sales 78.5 84.5 93.5 106.7
EBITDA 10.1 10.7 11.6 13.3
NP 3.4 3.6 4.5 5.9
EPS (INR) 13.2 14.0 17.6 23.0
EPS Gr. (%) -3.6 6.3 25.1 30.8
BV/Sh. (INR) 105.5 112.8 135.1 153.5
RoE (%) 12.9 12.9 14.2 15.9
RoCE (%) 11.6 10.5 10.7 11.9
Div Payout (%) 23.4 20.5 23.8 21.2
Key things to watch for
Valuations
Growth and margin expansion in brand and retail segments.
P/E (x) 26.8 25.2 20.1 15.4
P/BV (x)
Performance of newly acquired brands and newer formats.
3.4 3.1 2.6 2.3
EV/EBITDA (x) 12.3 11.5 10.2 8.8
Realizations in textiles.
Div Yield (%) 0.7 0.7 1.0 1.1
Bata India
Bloomberg BATA IN CMP: INR496 TP: INR459 (-7%) Sell
Equity Shares (m) 128.5
We expect revenue to grow 7% YoY (-9% QoQ) to INR6.2b in
M. Cap. (INR b)/(USD b) 64 / 1
2QFY17.
52-Week Range (INR) 614/438
1,6,12 Rel Perf. (%) -7/-13/-14 EBITDA is likely to increase 10% YoY to INR540m (on a very low
base), with margin expansion of 30bp to 8.8%.
Financial Snapshot (INR Billion)
Adjusted PAT is expected to grow 32% YoY to INR296m (on a very
Y/E March 2015* 2016 2017E 2018E
low base). Sell
Sales 26.9 24.3 25.8 27.8
EBITDA 3.4 2.7 2.9 3.4
NP 1.9 1.4 1.7 2.0
EPS (INR) 14.6 11.2 12.9 15.3
EPS Gr. (%) -4.8 -23.6 15.4 18.4
BV/Sh.(INR) 79.5 89.5 93.7 100.3
RoE (%) 20.2 13.2 14.1 15.8
Key things to watch for
RoCE (%) 20.3 13.4 14.2 15.8
SSS growth during the quarter.
Payout (%) 28.8 40.9 67.3 56.9
Share of accessories in total revenue.
Valuations
Impact on margins due to promotional campaigns.
P/E (x) 33.9 44.3 38.4 32.4
P/BV (x)
New store additions.
6.2 5.5 5.3 4.9
EV/EBITDA (x) 18.4 22.4 20.8 17.7
Dividend yield 0.7 1.2 1.5 1.5
*15 months
Quarterly Performance
Y/E March FY16 FY17 FY16 FY17E
Consolidated 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Net Sales 6,849 5,754 6,176 5,447 6,746 6,156 6,793 6,101 24,226 25,805
YoY Change (%) 10.1 5.0 15.0 10.9 -1.5 7.0 10.0 12.0 NM 6.5
Total Expenditure 6,015 5,263 5,378 4,894 5,926 5,616 5,880 5,465 21,550 22,889
EBITDA 834 491 798 553 820 540 914 636 2,676 2,916
Margins (%) 12.2 8.5 12.9 10.2 12.2 8.8 13.4 10.4 11.0 11.3
Depreciation 194 192 195 206 162 180 200 207 788 769
Interest 5 4 4 3 7 2 4 3 17 11
Other Income 78 82 71 104 110 90 100 100 335 380
PBT before EO expense 713 376 669 447 761 448 810 526 2,206 2,516
Extra-Ord expense 430 318 0 0 0 0 0 0 747 0
PBT 1,143 694 669 447 761 448 810 526 1,459 2,516
Tax 240 153 224 169 257 152 275 179 786 855
Rate (%) 33.7 40.6 33.5 37.7 34.0 34.0 34.0 34.0 35.7 34.0
Reported PAT 902 541 445 279 504 296 534 347 2,185 1,661
Adj PAT 473 224 445 279 503 296 534 347 1,438 1,661
YoY Change (%) -22.3 -42.7 27.4 10.5 6.3 32.2 20.0 24.5 386.6 15
Margins (%) 6.9 3.9 7.2 5.1 7.4 4.8 7.9 5.7 5.9 6.4
E: MOSL Estimates
Castrol (India)
Bloomberg CSTRL IN
CMP: INR487 TP: INR552 (+13%) Buy
Equity Shares (m) 494.6
We expect revenue to grow 4% YoY to INR8.2b due to the
M. Cap. (INR b)/(USD b) 241 / 4
combined effect of YoY flat realization at INR172/liter and volume
52-Week Range (INR) 490/360
at 47.6m liters (+5% YoY, -16% QoQ).
1,6,12 Rel Perf. (%) 7/17/1
We expect CSTRL to report EBITDA of INR2.6b (+21% YoY, -18%
Financial Snapshot (INR b) QoQ). EBITDA margin is estimated to come in 31.6%, higher than
Y/E Dec 2014 2015 2016E 2017E 27.2% in 3QCY15, but lower than 32.5% in 2QCY16.
Sales 33.9 33.0 34.6 37.8
Net profit is expected at INR1.7b (+19% YoY, -18% QoQ)
EBITDA 7.2 9.3 10.6 11.5
The stock trades at 30.7x/27.9 CY16E/CY17E EPS. Buy.
Adj. PAT 4.7 6.4 7.1 7.8
Adj. EPS (INR) 9.6 12.8 14.3 15.8
EPS Gr. (%) 6.1 33.8 11.6 10.0
BV/Sh.(INR) 10.0 11.6 13.0 14.6
RoE (%) 76.0 118.4 116.2 114.2
Key issues to watch for
RoCE (%) 76.2 118.5 116.4 114.3
(a) Volume growth.
Payout (%) 92.7 87.1 94.6 87.6
Valuations (b) Operating margin expansion.
P/E (x) 45.9 34.3 30.7 27.9 (c) Launch of new products.
P/BV (x) 43.8 37.8 33.8 30.2 (d) Competitive pressure from other players.
EV/EBITDA (x) 29.8 22.8 19.5 17.9
Div. Yield (%) 1.9 2.2 2.7 2.7
Concor
Bloomberg CCRI IN CMP: INR1,382 TP: INR1,556 (+13%) Neutral
Equity Shares (m) 195.0
We expect CCRI to report net sales of INR14.3b (-4.6% YoY, +7%
M. Cap. (INR b)/(USD b) 269 / 4
QoQ), led by (a) realization decline of -9% YoY and flat QoQ, and (b)
52-Week Range (INR) 1,575/1,051
volume growth of 7.1% YoY and 4.6% QoQ.
1,6,12 Rel Perf. (%) 2/-2/-16
We model EXIM volumes to improve 5% YoY, and expect domestic
volumes to grow 2% YoY.
Financial Snapshot (consolidated, INR b)
Y/E March 2015 2016 2017E 2018E We estimate EBITDA at INR2.9b (-5.2% YoY, +14% QoQ) and PAT at
Sales 61.5 63.1 62.1 71.6
INR2.1b (-10% YoY, +17% QoQ).
14.0 11.6 11.9 14.6
The stock trades at 21.9x/17.8x FY17E/FY18E EV/EBITDA. CCRI
EBITDA
remains a direct play on the upcoming dedicated freight corridor
NP 10.5 7.9 8.2 9.9
(DFC) project, which will multiply its asset turnover and significantly
EPS (INR) 54.1 40.6 42.0 50.7
improve profitability. Neutral.
EPS Gr. (%) 11.7 -24.9 3.3 20.8
BV/Sh (INR) 385.5 409.4 434.4 464.6
RoE (%) 14.7 10.2 10.0 11.3
RoCE (%) 13.9 9.8 9.6 10.9
Payout (%) 30.2 40.0 40.5 40.5 Key issues to watch for
Valuations
EXIM and domestic volumes, and realizations.
P/E (x) 27.2 36.2 35.0 29.0
Progress on MMLPs and DFC projects.
P/BV (x) 3.8 3.6 3.4 3.2
EV/EBITDA (x) 18.5 22.5 21.9 17.8
Div. Yield (%) 0.9 0.9 1.0 1.2
Coromandel International
Bloomberg CRIN IN CMP: INR247 TP: INR298 (+21%) Buy
Equity Shares (m) 291.3
We expect revenue to decline 1% YoY (+71% QoQ) to INR35.3b in
M. Cap. (INR b)/(USD b) 72 / 1
2QFY17.
52-Week Range (INR) 280/146
1,6,12 Rel Perf. (%) -6/17/47 Margins are likely to decline 130bp YoY (+320bp QoQ) to 7.5%.
EBITDA should de-grow 16% YoY to INR2.6b.
Financial Snapshot (INR Billion)
We expect adjusted PAT to decline 24% YoY to INR1,321m. Buy.
Y/E March 2015 2016 2017E 2018E
Sales 113.1 115.2 118.7 132.0
EBITDA 8.5 7.7 8.7 11.2
NP 4.0 3.4 4.1 6.2
EPS (INR) 13.9 11.8 14.1 21.3
EPS Gr. (%) 7.6 -14.9 19.7 50.6
BV/Sh. (INR) 75.6 83.2 90.2 103.1
RoE (%) 18.0 14.9 16.3 22.0
RoCE (%) 12.7 10.8 12.3 16.6
Valuations
P/E (x) 17.8 20.9 17.5 11.6
P/BV (x) 3.3 3.0 2.7 2.4 Key issues to watch for
EV/EBITDA (x) 10.7 11.9 9.8 7.2 Performance of exports in non-subsidy business.
EV/Sales (x) 0.8 0.8 0.7 0.6
Dynamatic Tech
Bloomberg DYTC IN CMP: INR3,138 TP: INR3,260 (+4%) Buy
Equity Shares (m) 6.3
We expect revenue to grow 5% YoY (-1.5% QoQ) to INR3.9b in
M. Cap. (INR b)/(USD b) 20 / 0
2QFY17, led by weak performance in the Hydraulics and
52-Week Range (INR) 3,240/1,482
Automotive divisions, which are expected to post flat growth YoY.
1,6,12 Rel Perf. (%) 7/72/16
Margins are likely to expand 240bp YoY to 11.5%. EBITDA is
Financial Snapshot (INR Billion) expected to grow 32.2% YoY to INR447m.
Y/E March 2015 2016 2017E 2018E
We estimate adjusted PAT at INR101m, as against profit of INR3m
Sales 16.3 14.9 16.3 17.9
in 2QFY16. Buy.
EBITDA 1.5 1.4 1.9 2.3
NP 0.2 0.1 0.5 0.8
EPS (INR) 27.9 19.4 83.5 125.4
EPS Gr. (%) 12.3 -30.6 330.9 50.2
BV/Sh(INR) 412.6 406.2 505.5 630.9
RoE (%) 8.5 4.7 18.3 22.1
RoCE (%) 8.3 6.8 10.9 12.9
Valuations
P/E (x) 112.5 162.0 37.6 25.0 Key issues to watch for
P/BV (x) 7.6 7.7 6.2 5.0 Execution outlook and ramp-up for the Aerospace division.
EV/EBITDA (x) 13.3 14.9 11.0 9.0
EV/Sales (x) 1.2 1.4 1.3 1.2
Gateway Distriparks
Bloomberg GDPL IN CMP: INR255 TP: INR354 (+39%) Buy
Equity Shares (m) 108.6
We expect GDPL to report net sales of INR2.7b (+7% YoY, flat QoQ),
M. Cap. (INR b)/(USD b) 28 / 0
led by increased volumes in Rail and CFS businesses.
52-Week Range (INR) 361/206
1,6,12 Rel Perf. (%) -5/-20/-36 We estimate EBITDA at INR594m (-7% YoY, +7% QoQ) and EBITDA
margin at 21.4%. We estimate adjusted PAT at INR274m (-8% YoY,
Financial Snapshot (INR b) +22% QoQ).
Y/E March 2015 2016 2017E 2018E
Sales 11.1 10.5 11.3 12.4 The stock trades at 11.8x/9x FY17E/FY18E adjusted EV/EBITDA.
EBITDA 3.3 2.5 2.5 3.2 GDPL remains a direct play on the upcoming dedicated freight
NP 1.9 1.2 1.3 1.9 corridor project, which will multiply its asset turnover and
EPS (INR) 17.3 11.4 11.5 17.9 significantly improve profitability. Buy.
Adj. EPS (INR) 12.6 8.7 8.8 12.9
Adj. EPS Gr.h (%) 25.0 -31.3 1.5 46.5
RoE (%) 16.0 10.1 9.9 14.4
RoCE (%) 12.9 7.6 8.5 12.2
Payout (%) 47.9 81.7 55.9 44.6
Valuations Key issues to watch for
P/E (x) 14.8 22.4 22.2 14.2 Volume growth, realization and per TEU profitability.
Adj. P/E (x) 20.2 29.4 29.0 19.8
EV/EBITDA (x) 8.8 11.8 11.8 9.0
Adj. EV/EBITDA (x) 11.8 16.6 16.6 12.8
Div. Yield (%) 2.7 2.7 2.1 2.6
Info Edge
Bloomberg INFOE IN CMP: INR862 TP: INR1,000 (+16%) Buy
Equity Shares (m) 121.7 We expect standalone revenue to grow 18.1% YoY to INR2.1b in
M. Cap. (INR b)/(USD b) 105 / 2 2QFY17.
52-Week Range (INR) 906/690
Recruitment segment (~75% of business) is estimated to grow 16%
1,6,12 Rel Perf. (%) 5/1/0
YoY to INR1.5b. We estimate revenue of real estate portal
99acres.com at INR295m (up 6.5% YoY) and that of matrimonial
Financial Snapshot (INR b)
portal Jeevansathi.com at INR155m (up 42% YoY).
Y/E March 2015 2016 2017E 2018E
Sales 6.1 7.1 8.3 9.8 Our EBITDA margin estimate for the quarter stands at 25.9%, as
EBITDA 1.8 1.4 2.3 2.9 against 24.2% in the previous quarter and 19.2% in 2QFY16. We
PAT 1.9 1.3 2.1 2.7 expect this sequential improvement to be led by rebound in
EPS (INR) 13.7 12.0 17.4 21.9 revenue growth, as costs largely remain unchanged.
EPS Gr. (%) 16.4 -12.1 44.4 26.2
Consequently, we expect adjusted PAT of INR528m (up 19% QoQ,
BV/Sh. (INR) 138.3 143.0 153.7 169.0
RoE (%) 13.6 8.6 11.7 13.6 and 56% YoY). Buy.
RoCE (%) 13.6 7.2 11.3 13.6
Payout (%) 26.4 39.9 38.0 30.1
Valuation
P/E (x) 56.7 64.5 44.7 35.4
EV/EBITDA (x) 46.5 53.6 32.9 24.9 Key issues to watch for
EV/Sales (x) 13.9 10.9 9.1 7.4 Impact of consolidation in real estate segment, and outlook on ad
spends given the current competitive dynamics.
Traction in recruitment business from segments other than IT.
Commentary around monetization of Zomato.com.
Inox Leisure
Bloomberg INOL IN CMP: INR270 TP: INR256 (-5%) Neutral
Equity Shares (m) 96.2
We expect revenue to grow 8% YoY (-1.3% QoQ) to INR3.3b in
M. Cap. (INR b)/(USD b) 26 / 0
2QFY17 on the back of decent box office collections.
52-Week Range (INR) 293/170
1,6,12 Rel Perf. (%) -4/24/7 Margins are likely to remain flattish at 18.3%. We expect EBITDA to
increase 7.8% YoY to INR608m.
Financial Snapshot (INR Billion)
We expect profit of INR262m, as against INR205m in 2QFY16.
Y/E March 2015 2016 2017E 2018E
Neutral.
Sales 10.2 11.6 13.3 15.7
EBITDA 1.2 1.9 2.1 2.7
NP 0.2 0.8 0.7 1.0
EPS (INR) 2.2 8.4 8.1 11.2
EPS Gr. (%) -42.8 284.0 -4.1 39.1
BV/Sh. (INR) 53.2 61.4 69.2 79.9
RoE (%) 4.6 14.9 11.8 14.4
RoCE (%) 10.0 13.2 10.6 12.5
Valuations
Key things to watch for
P/E (x) 122.9 32.0 33.4 24.0
Footfall growth during the quarter due to a high base and stronger
P/BV (x) 5.1 4.4 3.9 3.4
content.
EV/EBITDA (x) 23.0 14.8 13.3 10.7
Number of screen additions.
InterGlobe Aviation
Bloomberg INDIGO IN
CMP: INR945 TP: INR1,014 (+7%) Neutral
Equity Shares (m) 360.4
We expect INDIGO to report revenue of INR43.6b in 2QFY17
M. Cap. (INR b)/(USD b) 340 / 5
52-Week Range (INR) 1,396/702
(+23.2% YoY, -4.8% QoQ) and EBITDAR of INR9.9b (+14.8% YoY, -
1,6,12 Rel Perf. (%) 9/-8/NA
34.7% QoQ).
We model yield at INR3.90 (-8.7% YoY) and RPK at 11.2b (+35%
Financial Snapshot (INR Billion) YoY). Any deviation in yield would have a meaningful impact on our
Y/E March 2015 2016 2017E 2018E estimates.
Sales 139.3 161.4 209.6 273.1
We expect net profit of INR1.1b (-1.3% YoY, -81.2% QoQ).
EBITDA 18.7 30.1 31.4 39.0
NP 13.1 19.9 21.3 26.1 We model ASK at 57.1b/70.3b in FY17/FY18 v/s 42.8b in FY16, and
EPS (INR) 36.3 55.2 59.1 72.4 RPK at 47.8b/58.9b in FY17/FY18 v/s 35.9b in FY16, driven by an
EPS Gr. (%) 175.6 52.1 7.0 22.6 increase in fleet size.
BV/Sh (INR) 11.7 50.9 60.2 71.6 We assume IndiGos fleet at 116 aircraft as of end-2QFY17 (v/s 107
RoE (%) 310.5 176.5 106.4 109.9 at FY16-end). We model Indigo fleet at 136/154 by end-FY17/FY18.
RoCE (%) 33.7 42.9 47.2 55.1
The stock trades at 16x/13x FY17E/FY18E reported EPS of
Payout (%) 99.0 93.0 84.3 84.3
INR59.1/INR72.4 and at EV of 8.8x/7.6x FY17E/FY18E adjusted
Valuations
EBITDAR. Maintain Buy.
P/E (x) 26.0 17.1 16.0 13.0
80.9 18.6 15.7 13.2
Key issues to watch for
P/BV (x)
Induction of new aircraft in the fleet.
Adj.EV/EBITDAR(x) 12.9 9.2 8.8 7.6
Fuel costs and their impact on yields.
Div. Yield (%) 3.0 4.2 4.7 5.6
Jain Irrigation
Bloomberg JI IN CMP: INR95 TP: INR98 (+3%) Buy
Equity Shares (m) 457.2
We expect revenue to grow 9% YoY to INR14.3b in 2QFY17.
M. Cap. (INR b)/(USD b) 44 / 1
52-Week Range (INR) 101/47 EBITDA is likely to increase 17.4% YoY to INR1.86b. We expect
1,6,12 Rel Perf. (%) 9/46/43 margins to expand 90bp YoY to 13%.
We expect adjusted PAT at INR135m, as against loss of INR70m in
Financial Snapshot (INR Billion)
2QFY16. Buy.
Y/E March 2015 2016 2017E 2018E
Sales 61.5 62.9 72.3 83.2
EBITDA 7.8 8.2 9.9 11.7
NP 0.9 1.0 2.6 4.1
EPS (INR) 1.9 2.2 5.5 8.2
EPS Gr. (%) 28.8 17.7 151.4 48.9
BV/Sh (INR) 46.3 60.5 65.1 67.7
RoE (%) 4.0 4.0 8.5 12.5
RoCE (%) 16.1 8.2 9.2 11.2
Valuations
P/E (x) 51.1 43.5 17.3 11.6 Key things to watch for
P/BV (x) 2.1 1.6 1.5 1.4 Receivable days in MIS business.
EV/EBITDA (x) 10.8 9.5 7.8 6.2 Execution of solar pump orders and new tenders.
EV/Sales (x) 1.4 1.2 1.1 0.9
Debt reduction.
Just Dial
Bloomberg JUST IN CMP: INR436 TP: INR550 (+26%) Buy
Equity Shares (m) 70.2
We expect revenue to grow 8% YoY (4.9% QoQ) to INR1.9b in
M. Cap. (INR b)/(USD b) 31 / 0
2QFY17.
52-Week Range (INR) 1,077/378
1,6,12 Rel Perf. (%) -8/-55/-63 We expect EBITDA margin to contract 750bp YoY to 15.7% (-90bp
QoQ). Consequently, we estimate EBITDA to de-grow 27% YoY to
Financial Snapshot (INR Billion) INR290m.
Y/E March 2015 2016 2017E 2018E
PAT should decline 45.7% to INR252m from INR464m in 2QFY16.
Sales 5.9 6.9 7.6 8.8
Buy.
EBITDA 1.7 1.7 1.3 1.6
NP 1.4 1.4 1.1 1.4
EPS (INR) 19.7 20.4 16.4 19.7
EPS Growth (%) 14.6 3.7 -19.9 20.2
BV/Sh (INR) 95.5 96.7 110.7 127.5
RoE (%) 23.0 21.1 15.8 16.5
RoCE (%) 23.0 21.1 15.8 16.5
Payout (%) 12.2 0.0 14.2 14.8
Key things to watch for
Valuations
Performance of Search Plus and traction from JD Omni.
P/E (x) 22.1 21.4 26.7 22.2
Addition of paid campaigns.
P/BV (x) 4.6 4.5 3.9 3.4
Promotional campaigns.
EV/EBITDA (x) 18.2 17.7 23.1 17.4
Div Yield (%)
Employee addition.
0.6 0.0 0.6 0.8
Kaveri Seeds
Bloomberg KSCL IN CMP: INR380 TP: INR367 (-3%) Neutral
Equity Shares (m) 69.1
We expect revenue to grow 35% YoY to INR1.3b.
M. Cap. (INR b)/(USD b) 26 / 0
52-Week Range (INR) 543/300 We expect EBITDA at INR14m (loss of INR453m 2QFY16), with
1,6,12 Rel Perf. (%) 17/-12/-19 margins at 1.1%
We expect adjusted PAT to post loss of INR31m, as against loss of
Financial Snapshot (INR Billion)
INR475m in 2QFY16. Neutral.
Y/E March 2015 2016 2017E 2018E
Sales 11.6 8.9 8.1 9.6
EBITDA 3.1 1.9 1.6 2.0
NP 3.0 1.7 1.4 1.8
EPS (INR) 43.7 24.9 20.3 26.2
EPS Gr. (%) 42.5 -42.9 -18.8 29.4
BV/Sh (INR) 109.6 131.3 136.5 145.3
RoE (%) 47.4 20.7 15.1 18.6
RoCE (%) 50.2 22.2 16.4 20.2
Payout (%) 20.6 46.5 74.4 66.3
Key things to watch for
Valuations
Impact on cotton acreages due to reduced sowing.
P/E (x) 8.7 15.2 18.8 14.5
Cotton yields.
P/BV (x) 3.5 2.9 2.8 2.6
Any write-offs.
EV/EBITDA (x) 8.5 13.9 16.3 12.7
Div Yield (%) 2.0 2.7 3.4 4.0
MCX
Bloomberg MCX IN CMP: INR1,368 TP: INR1,400 (+2%) Buy
Equity Shares (m) 51.0
Total volumes at MCX traded during the quarter stood at INR15.2t,
M. Cap. (INR b)/(USD b) 70 / 1
down 5.1% QoQ and up 2.4% YoY.
52-Week Range (INR) 1,420/726
This drives our revenue estimate for the quarter to INR562m,
1,6,12 Rel Perf. (%) 38/52/41
down 3.6% QoQ and flat YoY.
Our EBIT margin estimate for the quarter is 17.8%, down 370bp
Financial Snapshot (INR b)
Y/E MARCH 2015 2016 2017E 2018E
from 21.5% in 1QFY17, mainly because of the sequential revenue
Sales
decline.
2.0 2.1 3.2 4.7
EBITDA 0.7 0.6 1.5 2.8
We do not expect much change in costs, including in
PAT 1.3 0.4 1.9 3.0
advertisement expenses, which has pared down after FY16.
EPS (INR) 24.6 20.5 35.2 56.1 Our PAT estimate is INR311m, down 5.1% QoQ and up 0.4% YoY.
EPS Gr. (%) -18.1 -16.6 71.6 59.4 We are modeling ETR of 25% for 2QFY17. Buy.
BV/Sh. (INR) 235.8 235.6 253.5 282.0
RoE (%) 10.7 3.7 14.4 20.9
RoCE (%) 10.4 8.9 14.0 20.5
Payout (%) 6.9 191.7 68.7 64.7
Valuation
P/E (x) 33.4 40.0 23.3 14.6 Key issues to watch for
P/BV (x) 3.5 3.5 3.2 2.9 Any move to enter commodities space by potential competitors
EV/EBITDA (x) 38.6 46.1 18.7 9.2 like NSE.
Div yld (%) 0.2 2.1 2.9 4.4 Cost base and impact on margins.
Pace of reforms under SEBI.
Monsanto India
Bloomberg MCHM IN CMP: INR2,392 TP: INR2,706 (13%) Buy
Equity Shares (m) 17.3
We expect revenue to grow 50% YoY to INR567m (on a very low
M. Cap. (INR b)/(USD b) 41 / 1
base) in 2QFY17.
52-Week Range (INR) 2,745/1,520
1,6,12 Rel Perf. (%) 5/33/-17 EBITDA is estimated at negative INR57m, as against negative
INR256m in 2QFY16.
Financial Snapshot (INR Billion)
We expect PAT loss at INR39m, as against loss of INR264m in
Y/E March 2015 2016 2017E 2018E
2QFY16.
Sales 5.6 5.4 6.1 7.5
EBITDA 1.2 1.1 1.3 1.7
NP 1.1 1.0 1.2 1.6
EPS (INR) 61.6 60.4 67.2 90.2
EPS Gr. (%) -17.6 -1.8 11.1 34.3
BV/Sh (INR) 216.9 239.4 234.5 252.6
RoE (%) 29.6 26.5 28.3 37.0
Key things to watch for
RoCE (%) 29.7 26.7 28.3 37.0
Trends in shift of crop to corn due to increasing corn prices.
Payout (%) 70.3 96.9 107.4 79.9
Age profile of corn seeds sold.
Valuations
Realizations in glyphosate.
P/E (x) 38.8 39.6 35.6 26.5
P/BV (x) 11.0 10.0 10.2 9.5
EV/EBITDA (x) 35.5 38.2 31.3 23.3
Div Yield (%) 1.5 2.1 2.5 2.5
PI Industries
Bloomberg PI IN CMP: INR839 TP: INR865 (+3%) Buy
Equity Shares (m) 136.6
We expect revenue to grow 20% YoY (-22% QoQ) to INR5.4b in
M. Cap. (INR b)/(USD b) 115 / 2
2QFY17.
52-Week Range (INR) 878/495
1,6,12 Rel Perf. (%) 3/36/25 We estimate 190bp margin expansion to 20.9%, and expect EBITDA
to grow 32% YoY to INR1.1b.
Financial Snapshot (INR Billion)
We estimate adjusted PAT at INR742m, as against INR550m in
Y/E March 2015 2016 2017E 2018E
2QFY16. Buy.
Sales 19.4 21.0 25.2 30.2
EBITDA 3.7 4.3 5.6 6.9
NP 2.5 3.0 3.9 4.9
EPS (INR) 18.0 22.1 28.4 36.1
EPS Gr. (%) 30.3 22.8 28.5 27.1
BV/Sh. (INR) 65.6 85.8 108.7 138.1
RoE (%) 30.9 29.2 29.2 29.3
RoCE (%) 27.6 26.8 27.6 28.8
Valuations
Key things to watch for
P/E (x) 46.6 37.9 29.5 23.2
CSM growth and order book.
P/BV (x) 12.8 9.8 7.7 6.1
Agrochemical business updates for FY17.
EV/EBITDA (x) 30.0 25.7 19.8 15.6
EV/Sales (x) 5.8 5.3 4.4 3.6
SRF
Bloomberg SRF IN
CMP: INR1,907 TP: INR2,061 (+8%) Buy
Equity Shares (m) 57.4
We expect SRFs revenue to grow 2% YoY (-2% QoQ) to INR11.9b.
M. Cap. (INR b)/(USD b) 110 / 2
Its technical textile and packaging segments are crude-driven and
52-Week Range (INR) 1,925/1,022
are expected to see a decline in realizations.
1,6,12 Rel Perf. (%) 13/37/61
We expect EBITDA margin at 22.8% (+150bp YoY, -50bp QoQ) and
Financial Snapshot (INR Billion) EBITDA at INR2.7b. We believe margins will be largely driven by the
Y/E March 2015 2016 2017E 2018E packaging segment.
Sales 45.4 46.0 48.7 56.7
We expect adjusted PAT to grow 18% YoY (-8% QoQ) to INR1.27b.
EBITDA 7.2 9.6 11.3 13.2
Buy.
NP 3.0 4.2 5.3 6.6
EPS (INR) 52.7 73.7 92.6 114.5
EPS Gr. (%) 86.4 39.7 25.8 23.6
BV/Sh. (INR) 392.9 456.8 533.5 628.6
RoE (%) 13.9 17.0 18.4 19.4
RoCE (%) 15.6 19.4 21.5 23.9
Valuations
Key things to watch for
P/E (x) 36.2 25.9 20.6 16.7
Growth in chemicals segment (particularly specialty chemicals).
P/BV (x) 4.9 4.2 3.6 3.0
Client additions and capex plans in specialty chemicals.
EV/EBITDA (x) 16.9 12.4 10.5 8.9
EV/Sales (x)
Margins in technical textile and packaging segment.
2.7 2.6 2.4 2.1
Tata Elxsi
Bloomberg TELX IN CMP: INR1,403 TP: INR1,965 (+40%) Buy
Equity Shares (m) 31.1
We expect revenue to grow 22.5% YoY (9.7% QoQ) to INR3.2b in
M. Cap. (INR b)/(USD b) 44 / 1
2QFY17, driven by the automotive and broadcast divisions.
52-Week Range (INR) 2,396/1,372
1,6,12 Rel Perf. (%) -10/-38/-33 Margins are likely to expand 50bp to 23.7%. EBITDA is expected to
grow 25% YoY to INR765m.
Financial Snapshot (INR Billion)
We estimate PAT at INR490m, as against INR381m in 2QFY16. Buy.
Y/E March 2015 2016 2017E 2018E
Sales 8.5 10.8 13.2 16.4
EBITDA 1.8 2.5 3.2 4.0
PAT 1.0 1.5 2.0 2.6
EPS (INR) 33.0 49.7 64.8 81.9
EPS Gr. (%) 42.3 50.5 30.4 26.3
BV/Sh. (INR) 91.0 123.9 162.3 208.2
RoE (%) 39.6 46.3 45.3 44.2
Key things to watch for
RoCE (%) 39.6 46.3 45.3 44.2
Impact of Euro depreciation.
Payout (%) 39.9 33.8 40.7 43.9
Brexit impact on the companys operations and clients.
Valuations
P/E (x) 42.5 28.2 21.6 17.1
P/BV (x) 15.4 11.3 8.6 6.7
EV/EBITDA (x) 24.0 16.9 12.8 9.8
Div. Yield (%) 0.8 1.0 1.6 2.1
TTK Prestige
Bloomberg TTKPT IN CMP: INR5,318 TP: INR4,781 (-10%) Neutral
Equity Shares (m) 11.7
We expect revenue to grow 16% YoY to INR4.9b in 2QFY17.
M. Cap. (INR b)/(USD b) 62 / 1
52-Week Range (INR) 5,540/3,584 We expect EBITDA margin to expand 150bp YoY to 14%.
1,6,12 Rel Perf. (%) 11/10/34 Consequently, we expect EBITDA to grow 30% YoY to INR684m.
We expect adjusted PAT to grow 27% YoY to INR433m. Neutral.
Financial Snapshot (INR Billion)
Y/E March 2015 2016 2017E 2018E
Sales 13.9 15.3 17.9 20.2
EBITDA 1.5 1.8 2.4 3.0
NP 0.9 1.2 1.5 1.9
EPS (Rs) 77.8 100.7 129.3 159.4
EPS Gr. (%) -15.0 29.6 28.3 23.3
Sales 554.2 620.3 697.9 798.8
RoE (%) 14.7 17.2 19.6 21.3
Key things to watch for
RoCE (%) 14.9 17.3 19.0 20.3
Performance of appliances division.
Valuations
Outlook on exports, and recent acquisition of Horwood
P/E (x) 68.4 52.8 41.1 33.4
Homeware.
P/BV (x) 9.6 8.6 7.6 6.7
EV/EBITDA (x) 41.3 33.8 25.9 21.0
EV/Sales (x) 4.4 4.0 3.5 3.1
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a
registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the
absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This
document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be
engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by
the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal
Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore,
may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the
Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Kadambari Balachandran
Email : [email protected]
Contact : (+65) 68189233 / 65249115
Office Address : 21 (Suite 31),16 Collyer Quay,Singapore 04931