January 2014
India Strategy
India Inc PerforMeter
CAGR %
FY03-FY14
FY03-FY08
FY08-FY14
FY14-FY16E
PAT
17
26
10
15
Sensex
20
39
05
??
Happy New Year
Research Team (Rajat@MotilalOswal.com)

Contents
Section A: India Strategy - Happy New Year
.............................................................................
A1-72
Section B: 3QFY14 Highlights & Ready Reckoner
.....................................................................
B1-12
Section C: Sectors & Companies
..............................................................................................
C1-209
1.
Automobiles
Ashok Leyland
Bajaj Auto
Eicher Motors
Exide Industries
Hero MotoCorp
Mahindra & Mahindra
Maruti Suzuki India
Tata Motors
TVS Motor
Capital Goods
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Cement
ACC
Ambuja Cement
Birla Corporation
Grasim Industries
India Cements
Jaiprakash Associates
Shree Cement
UltraTech Cement
Consumer
Asian Paints
Britannia Industries
Colgate Palmolive
Dabur India
GSK Consumer
Godrej Consumer Products
Hindustan Unilever
ITC
Marico
Nestle India
Pidilite Industries
Radico Khaitan
United Spirits
2-14
6
7
8
9
10
11
12
13
14
15-26
19
20
21
22
23
24
25
26
27-38
31
32
33
34
35
36
37
38
39-54
42
43
44
45
46
47
48
49
50
51
52
53
54
55-75
60
61
62
63
64
65
66
67
68
69
70
71
Punjab National Bank
State Bank of India
Union Bank
Yes Bank
5b. Financials - NBFC
Bajaj Finance
HDFC
IDFC
LIC Housing Finance
M & M Financial Services
Power Finance Corporation
Rural Electricfication
Shriram Transport
6.
Healthcare
Biocon
Cadila Healthcare
Cipla
Divi’s Laboratories
Dr Reddy’s Labs.
GSK Pharma
Glenmark Pharma
IPCA Laboratories
Lupin
Ranbaxy Labs.
Sanofi India
Sun Pharmaceuticals
Torrent Pharma
Media
D B Corp
Dish TV
HT Media
Jagran Prakashan
PVR
Sun TV Network
Zee Entertainment
Metals
Hindalco
Hindustan Zinc
Jindal Steel & Power
JSW Steel
Nalco
NMDC
Sesa Goa
SAIL
Tata Steel
Oil & Gas
BPCL
Cairn India
GAIL
Gujarat State Petronet
HPCL
IOC
Indraprastha Gas
MRPL
72
73
74
75
76-85
78
79
80
81
82
83
84
85
86-104
92
93
94
95
96
97
98
99
100
101
102
103
104
105-115
109
110
111
112
113
114
115
116-128
120
121
122
123
124
125
126
127
128
129-144
133
134
135
136
137
138
139
140
Oil India
ONGC
Petronet LNG
Reliance Industries
10. Real Estate
DLF
Godrej Properties
Indiabulls Real Estate
Jaypee Infratech
Mahindra Lifespaces
Oberoi Realty
Phoenix Mills
Prestige Estate Projects
Sobha Developers
11. Retail
Future Retail
Jubilant Food
Shoppers Stop
Titan Company
12. Technology
Cognizant Technology
HCL Technologies
Hexaware Technologies
Infosys
KPIT Technologies
Mindtree
MphasiS
Persistent Systems
TCS
Tech Mahindra
Wipro
13. Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Communication
141
142
143
144
145-158
150
151
152
153
154
155
156
157
158
159-165
162
163
164
165
166-180
170
171
172
173
174
175
176
177
178
179
180
181-189
186
187
188
189
2.
3.
7.
4.
8.
5a. Financials - Banks
Axis Bank
Bank of Baroda
Bank of India
Canara Bank
Federal Bank
HDFC Bank
ICICI Bank
Indian Bank
IndusInd Bank
ING Vysya Bank
Kotak Mahindra Bank
Oriental Bank
9.
14. Utilities
190-203
CESC
194
Coal India
195
Jaiprakash Power Ventures
196
JSW Energy
197
NHPC
198
NTPC
199
Power Grid Corp.
200
PTC India
201
Reliance Infrastructure
202
Tata Power
203
204-209
204
205
206
207
208
209
15. Others
Bata India
Castrol India
Just Dial
Sintex Industries
UPL
V-Guard Industries
Note:
All stock prices and indices for Section C as on 27 December 2013, unless otherwise stated
Investors are advised to refer through disclosures made at the end of the Research Report.

Sensex
Close
(MoM %)
2013 – India At A Glance
January
February
RBI releases Guidelines for Licensing of New Banks
S
E
N
S
E
X
March
3QFY13 CAD/GDP spikes to record high of 6.7%
RBI expectedly cut repo rates by 25bp, announces
Govt to raise prices of diesel by INR0.5/ltr/
month, deregulate bulk diesel sales and caps
subsidized LPG cylinders at 9/household
Government sets up Cabinet Committee on
Investment (CCI) for fast-tracking approvals
RBI cuts repo rate by 25bp to 7.75%
Dec-12 inflation at 36 month low at 7.2%
GAAR norms deferred to April 2016
Mobile call prices rise for the first time in
3 years
Import tax on gold raised by 2pp to 6%
19,895
+ 2.4%
in the Private Sector
First draft guidelines of US Immigration Bill
Strides Arcolab enters into agreement to sell its
specialties business to Mylan for USD1.6b
No applications received for bidding in Mar'13
spectrum auctions
Coal Price Pooling approval implying that Coal
India is now liable to supply 68% of total coal
requirement for the identified projects
Afzal Guru executed for 2001 parliament attack
S
E
N
S
E
X
18,862
–5.2%
OMO of INR100b
DMK pulled out of the ruling UPA coalition
COBRAPOST came out with a revealing sting opera-
tion on ICICI, Axis and HDFC Bank exposing money
laundering modus operandi
BRICS agree to USD100b reserve fund to combat
currency crisis
Second phase of digitisation deadline ends for 38
cities
S
E
N
S
E
X
18,836
– 0.1%
April
SC gave the clearance for resumption of
May
GDP at 4.8% for Q4FY13
RBI trimmed the repo rate to 7.25 %, lowest since May
S
E
N
S
E
X
June
JD(U) splits away from NDA ahead of election
S
E
N
S
E
X
mining operations for A and B category
mines in Karnataka
Billionaire Ambani brothers announce
sharing a fibre optic network for their
rival telecoms companies
Ranbaxy pleads guilty in US court, agrees
to pay USD500m in penalty
IMD predicts normal monsoon for 2013
19,504
+ 3.5%
2011; announces OMO of INR100b
Apr-13 WPI at 41-month low of 4.9%
Congress returns to power in Karnataka
Wockhardt swallows the bitter pill of FDA import alert
RBI bans jewellery import through the consignment
route accounting for 70% of imports
Scandal-hit Railway Minister Pawan Kumar Bansal and
Law Minister Ashwani Kumar quit
19,760
+1.3%
(17-year old alliance)
Just Dial listed, most successful IPO of the year,
with post-issue market cap of ~INR38b
Narayana Murthy returns to Infosys as Executive
Chairman
CCEA approved increase in gas prices from April 1, 2014 as
per Rangarajan committee formula
Current account deficit at record 4.8% of GDP for FY13
L.K. Advani quits all party posts, reverses decision next day
Approval of pass through of increased cost of imported coal
S
E
N
S
E
X
19,396
–1.8%
July
Ordinance passed for Food Security Programme approved by
August
India hikes bullion import duty to a record 10%
Rupee reaches its all-time low of 69, forex reserves drops to
S
E
N
S
E
X
September
New RBI chief Raghuram Rajan assumes office, opens swap
the Union Cabinet
AP being split into Telangana; 29th Indian
State to be given a go-ahead.
RBI hikes MSF/Bank Rate by 2% to 10.25%,
limits LAF support to 1% of NDTL and
announces OMO sale of INR120b
India relaxes FDI rules in 13 sectors
including telecom, single brand retail and oil and gas
Unilever hikes stake in HUL by 14.8% to 67.3% for INR192b
19,346
–0.3%
USD275b
RBI introduced forex swap window for OMCs, lowers limit
for Overseas Direct Investment and outward remittances
RBI announced auction INR220b of cash management bill
every Monday, conducts OMO auction of INR160b
Rainfall 14% above average
Lok Sabha passes Land Acquisition Bill
US jobless claims at a near 6 year low
S
E
N
S
E
X
18,620
–3.8%
window for FCNR(B) and overseas bank borrowing
9th Annual India General Conference
covering close to 100
Corporates and over 3000+ investor meetings
Modi crowned as BJP's prime ministerial candidate
RBI cuts MSF by 75bp, raises repo by 25bp
1QFY14 BoP reported at 4.9% of GDP
Tata Group and Singapore Airlines enters into JV
JPA concludes its cement deal to Ultratech
US FDA imposes import alert on Ranbaxy
Relaxations in Branch Authorization Policy
S
E
N
S
E
X
19,380
+4.1%
October
RBI ups repo rate, cuts MSF rate by 25bp
November
2QFY14 GDP growth recovers to 4.8%
CAD corrects to 1.2% of GDP
RBI issues statement to stabilize forex volatility,
December
BJP sweeps in 3 out of 5 state elections (Chattisgarh,
each, restores corridor back to 100bp
Sept 13 sees lowest trade deficit of 30-month
at USD7b
Onion prices hit INR100/kg
Ms. Arundhati Bhattacharya joins as CMD of
State Bank of India
Appointment of Janet Yellen as next Fed Chairman
Rahul Gandhi forces government to drop convicted
politicians decree
S
E
N
S
E
X
21,165
+ 9.2%
estimates FY14 CAD at USD56b
Government/RBI indicates return of majority of
OMCs dollar demand back to the market
Sachin Tendulkar bids farewell from all forms of
cricket with tears and cheers
Highest ever voter turnout for the four state elections
Cairn India announces buy back of shares
S
E
N
S
E
X
20,792
–1.8%
Madhya Pradesh and Rajasthan); AAP forms govt in Delhi.
Sensex touches life-time high
Forex reserves back to USD290+b levels
RBI keeps rates unchanged vs estimates of a hike
WPI hits 14 month high of 7.5%
Mr V Balakrishnan resigns from Infosys
Britain's Tesco will be the first foreign supermarket
to venture into India's USD500b retail sector
Reliance JIO makes infrastructure sharing arrangement
with Bharti
S
E
N
S
E
X
21,171
+1.8%

2014 – Events Calendar
January
February
March
3QFY14 Monetary Policy review
(RBI expected to keep rates
stable)
Advance estimate of FY14 GDP
(expected at 4.5%)
MOBIZ - Insights from domain
experts across businesses
3QFY14 GDP
3QFY14 BoP (expected to remain moderate at less than 2%
of GDP)
Interim Budget session of Parliament
Motilal Oswal
EUREKA INDIA
Conference, 2014
4QFY14 Monetary Policy review (expected to cut rates by
25bp)
April
May
June
Jan-Mar 14
Preview
&
India
Strategy
FY14 Monetary Policy (expected to cut rates
by 25bp)
General elections
FY14 GDP (expected at 4.5%)
FY14 BoP (expected at 2.3% of GDP)
General elections
State elections for Andhra Pradesh and Sikkim
1QFY15 Monetary Policy review (expected to
hold rates)
State elections for Odisha
2014 FIFA World Cup
July
Apr-Jun 14
Preview
&
India
Strategy
August
September
2QFY15 Monetary Policy (RBI expected
to continue with its dovish stance)
2014 FIFA World Cup
1QFY15 GDP
1QFY15 BoP
Motilal Oswal
10th Annual Global
Investor Conference
2QFY15 Monetary Policy review
Parliament Monsoon session
October
Jul-Sep 14
Preview
&
India
Strategy
November
December
3QFY15 Monetary Policy
State elections for Maharashtra, Jammu &
Kashmir and Arunachal Pradesh
2QFY15 GDP
2QFY15 BOP
Parliament Winter session

India Strategy | Happy New Year
India Strategy
BSE Sensex:
21,194
S&P CNX:
6,314
2014: Happy New Year!!
Earnings recovery | Elections outcome | Monetary easing
2013 MARKETS: Indian equities deliver 9% return | Top performers are
beneficiaries of INR weakness; Expect 2014 to be a year of economic
recovery and positive returns
Indian markets ended 2013 with returns of 9%, with the entire gains clocked in
4QCY13. However, sharp currency depreciation led to a negative 3% Sensex returns
in USD terms. BSE Midcap Index delivered negative 6% returns (INR).
The top performing sectors in 2013 were
Technology (+60%),
followed by
Telecom
(26%)
and
Healthcare (+23%). Real Estate (-32%), PSU Banks (-26%)
and
Cement (-
14%)
were the worst performing sectors.
Average market volumes in 2013 were higher than in 2012. However, the share of
F&O continued to move up to an all-time high of 92% (+200bps).
FIIs invested another USD20b in 2013, making it the third biggest year of inflows.
On the other hand, DIIs withdrew a record USD13b during the year.
Valuations of Indian equities remain attractive with Market Cap to GDP at 62%,
below long term averages. The Sensex PE at 14x is also below long term averages,
while the RoEs at 16% are at their bottom.
We expect 2014 to see improvement in growth rates and moderation in inflation.
This should lead to another year of positive returns for Indian equities. Our top
picks are: HDFC Bank / ICICI Bank, Infosys / Tech Mahindra, Bharti, Tata Motors /
Hero Motocorp, Lupin, ACC, BPCL, Hindalco. Our other bets are LIC Housing, Bank
of Baroda, Divi’s Lab, Eicher Motors, Bata, Shree Cement, SUN TV.
Profit Pool: Oil share halves, Technology doubles; Public sector dwarfed |
Profit Pool analysis FY03-14: Identifying themes for next growth cycle
Over FY03-14, India Inc PAT expanded by 5.6x at a CAGR of 17%. In Phase 1 (FY03-
08) PAT CAGR was 26% and in Phase 2 (FY08-14) only 10%. Our analysis of the FY03-
14 profit pool leads us to the following key trends -
#1 PUBLIC v/s PRIVATE SECTOR:
The ultimate case study of value migration
#2 CYCLICALS:
Change in PAT orbit
#3 OIL & GAS:
PAT share halves to 20% in best era of crude prices
#4 TECHNOLOGY:
PAT share doubles to 13%
#5 FINANCIALS:
Private sector cashes in on public banks’ slip
#6 HEALTHCARE:
Perfect prescription for high-immunity profits!
#7 CONSUMER:
Only a foul-weather friend? Not quite
#8 TELECOM:
How a non-cyclical sector can behave like a cyclical
Based on the above, expect some of the following potential themes to play out
going forward -
#1 FY14-16 PAT GROWTH:
Expect reversion to mean of 15%
#2 PRIVATE BANKS, TECHNOLOGY:
Two large profit pools which can only get bigger
and better; creating several growth opportunities
#3 OIL & GAS:
Will reforms pump profits back to the sector?
January 2014
A–1

India Strategy | Happy New Year
#4 CEMENT, PUBLIC SECTOR BANKS:
Early-bird cyclical turnarounds?
#5 TELECOM:
Data should help the sector regain its lost voice
Economy: RBI’s focus to shift to growth as Inflation, Currency stabilizes
Crisis causes its own conquest. India faced a crisis of the eerie combination of low
growth, high inflation and external instability. Since Dr Rajan assumed the role of
RBI Governor, the approach on various policy measures have seen a significant
shift. This has brought in the much needed stability in aspects of policy rates and
INR. During 1HCY14, as the focus shifts to Elections, this positive approach by RBI
will be critical to address a volatile domestic and global macro environment.
We see a fall in inflation in the coming months to drive a shift in debate to that of
a rate cut sometime in Mar-14. While this may seem to be an out of consensus
view, several components of Inflation can surprise positively led by food inflation,
the way they did negatively. We see RBI easing rates the moment a change in the
direction of inflation is established.
Recent months of trade data show that the big concern of CAD is now surely behind
us. Growth prospects in West will aid exports in 2014, while imports will remain
muted due to domestic slowdown and commodity prices. RBI has used this phase
to build Forex Reserves closer to USD300b. We see some of the restrictions on
gold imports to ease in 1QCY14.
Refer to the Election update
released on December 2013
Elections: Alternate climax or anti-climax in the making | AAP forming
government in Delhi spices up the national politics landscape
The recent assembly elections results clearly indicated a strong anti-Congress
wave bringing out decisive voting against corruption, inflation, lack of policy
reforms, etc.
The decisive mandate saw BJP, riding on the NaMo wave, forming government in
3 out of 5 states with record number of votes. AAP was the BIGGEST SURPRISE,
which formed government in Delhi, with outside support from Congress. AAP’s
40% seat share and 30% vote share indicates that a fresh alternative can no longer
be ruled out.
Till recently, all the political pundits were betting for BJP as the majority party in
the upcoming 2014 Lok Sabha elections riding on the dual wave of anti-Congress
and NaMo. Indian markets were also riding high, driven by the Modi bandwagon,
who stands as a symbol of pro-development driven by his success in Gujarat.
However, AAP’s win in Delhi has queered the national pitch. The focus of AAP’s
early policy action is socialistic, rather than an anti-corruption drive that was
expected from AAP. Many high profile personalities including industrialists have
voluntarily joined the party. Whether AAP, aided by the new joinees, can showcase
their policy action prowess on growth and development front remains to be seen!
Market view:
With four months remaining for Lok Sabha elections, a lot of action
is expected on the political front which is likely to keep markets volatile and the
environment uncertain. A churn is taking place in India and the 2014 mandate will
reflect this ‘manthan’!
FED (TAP)ER: FII debt investors pre-empt but equity investors stay put |
Private Financials, Technology, Automobiles witness highest FII flows
The US Fed recently announced the first round of tapering of its stimulus package
from January 2014, after a period of over 5 years of easing. During this period,
A–2
January 2014

India Strategy | Happy New Year
India received USD109b, in aggregate, USD91b from equity and USD18b from debt.
The impact of tapering is clearly visible on the debt front with ~USD12b outflows
in the last seven months, since the talks of Fed taper first started. Accordingly, out
of the total debt flows of USD20b received since Nov-08, 40% of the cumulative
debt flows (USD8b) have been withdrawn by investors in CY13 alone.
Equity flows, on the other hand, continue unabated with CY13 receiving USD20b
(3rd highest equity flow ever). With the Fed taper, India could see see moderation
in the flows. This will particularly impact the sectors / stocks where the FII holding
is high.
In this section, we present our analysis on: (i) the beneficiary sectors/stocks which
saw maximum FII inflows during the QE phase, (ii) sectors/stocks where FIIs are
overweight or underweight relative to MSCI ETF. As and when the markets gets
worried on the impact of FII flows, these stocks are likely to be impacted.
3QFY14 Preview: Theme similar to 2Q - Globals do, locals undo | 2Q earnings
rebound sustained; Aggregate PAT up 10%; Sensex PAT up 13%
We expect MOSL Universe of 143 companies (ex RMs) to report aggregate 3QFY14
PAT growth of 10% YoY, sustaining the earnings rebound in 2QFY14 (+8% YoY v/s
estimated 3% YoY). 4QFY14 PAT growth is expected to be an even higher 13% YoY.
As in 2Q, expect global-facing sectors like Technology, Healthcare and Metals to
outperform their domestic-facing counterparts thanks to 15% YoY depreciation of
the INR vis-à-vis the USD.
Expect Sensex 3QFY14 PAT to grow 13% YoY.
Within Sensex, top 5 PAT growth companies are: Tata Steel (loss to profit), Bharti
(+299% YoY), Tata Motors (+89%), TCS (+48%) and Sun Pharma (+44%). Top 5 PAT de-
growth companies: BHEL (-56% YoY), State Bank (-33%), Sesa Sterlite (-21%), Tata
Power (-10%) and Coal India (-8%).
3QFY14 performance of MOSL Universe by sector: Globals do, locals undo
SECTOR
(no. of companies)
High growth sectors
Telecom (4)
Auto (9)
Technology (10)
Metals (9)
Health Care (13)
Media (7)
NBFC (8)
Med/Low growth sectors
Private Banks (8)
Consumer (13)
PAT de-growth sectors
Retail (4)
Oil Excl. RMs (9)
Utilities (10)
Capital Goods (8)
Real Estate (9)
PSU Banks (8)
Cement (8)
Others (6)
MOSL Excl. RMs (143)
Sensex (30)
January 2014
Sales
Dec-13
YoY %
3,382
368
1,005
517
1,127
233
41
90
491
153
338
3,332
67
1,780
601
364
49
293
176
62
7,266
5,003
17
12
16
30
13
22
18
19
14
19
12
8
-6
10
8
1
18
12
-2
14
12
13
EBITDA
Dec-13
YoY %
774
122
139
143
219
53
13
85
205
132
73
703
6
273
161
34
17
185
26
11
1,692
1,071
29
23
39
37
28
27
15
20
16
18
14
-1
-1
1
4
-15
42
-3
-24
17
13
14
PAT
Dec-13
YoY %
372
23
65
106
82
35
6
55
129
78
51
355
3
166
91
21
6
58
10
6
861
563
37
163
42
39
36
30
22
16
14
14
13
-10
0
0
-2
-23
-27
-29
-38
22
10
13
PAT
Share %
43
3
8
12
10
4
1
6
15
9
6
41
0
19
11
2
1
7
1
1
100
Delta
Share %
131
19
25
39
28
10
1
10
20
12
8
-53
0
0
-2
-8
-3
-31
-8
1
100
EBITDA Margins
Dec-13
YoY bp
22.9
33.1
13.8
27.7
19.4
22.7
30.6
94.1
41.7
86.4
21.5
21.1
9.4
15.4
26.8
9.3
35.1
63.2
14.5
17.5
23.3
21.4
217
306
230
144
217
99
-85
96
97
-68
46
-188
51
-142
-112
-178
587
-959
-421
53
19
27
A–3

India Strategy | Happy New Year
FY14/FY15 ESTIMATES: Downgrades take a breather as exports fuel growth |
Sensex FY14 EPS upgraded to 11% growth; Expect FY15 growth of 15%
MOSL Aggregate PAT to grow 7% in FY14; expect rebound in FY15 to 16%. Sales
growth of 12% in FY14 will see some moderation to 10% in FY15.
Sensex EPS to grow by 11% in FY14 to 1,317 and further accelerate to 15% in FY15 to
1,518. Downgrades to Sensex EPS have taken a breather. In fact, strong earnings
from export driven businesses (benefitting from weak INR) have led to upgrades
of 2% in FY14 and 3% in FY15 EPS.
For 2HFY14, the prominent upgrades have been in Tata Motors, Tata Steel, ICICI
Bank, Maruti, TCS. The stocks to see top downgrades are Sesa Sterlite, BHEL, SBI,
Cipla, Coal India.
Our early estimates suggest the growth of 15% may continue into FY16 as well.
MOSL Universe FY14/FY15 estimates: Expect 16% PAT growth in FY15
Sales
Sector
(INR b)
(No of Companies)
FY13
High PAT CAGR (>20%)
2,752
Telecom (4)
1,306
Cement (13)
1,108
Real Estate (9)
195
Media (8)
143
Medium PAT CAGR (15-20%) 10,028
Retail (3)
137
Consumer (13)
1,190
Health Care (13)
791
Financials (31)
2,197
PSU Banks (12)
1,359
Private Banks (10)
541
NBFC (9)
296
Auto (9)
3,773
Technology (10)
1,940
Low PAT CAGR (<15%)
15,212
Metals (9)
4,205
Oil Ex. RMs (10)
7,416
Utilities (10)
2,015
Capital Goods (8)
1,576
Others (6)
210
MOSL Excl. RMs (156)
28,202
Sensex (30)
9,633
Nifty (50)
10,889
Sales Gr./
EBIDTA
Margin
EBIDTA
PAT
PAT Gr. /
PAT
CAGR
EBIDTA Margin
Delta
CAGR (INR
CAGR
delta
(%)
(INR b)
(%)
(bp)
(%)
b)
(%)
FY13-15
FY14E FY15E FY13-15 FY13 FY13 FY14E FY15E (FY13-15) FY13 FY14E FY15E FY13-15 shr (%)
8
12
10
744 27.0
-7 151
13 204
3
46
22
12
11
10
11
397 30.4
274 144
18
45
82
65
73
11
0
14
7
235 21.2
-474 200
0 111
-33
38
-4
-1
18
13
16
71 36.5
17 147
18
30
1
29
14
1
17
14
16
41 28.7
85
61
19
19
25
25
25
1
16
14
15 3,159 31.5
5
13
16 1,788
11
16
14
62
15
21
18
14 10.1
-42
31
17
9
6
19
12
0
11
15
13
242 20.4
56
23
15 166
15
19
17
7
19
14
16
194 24.5
-99 192
19 110
28
18
23
7
14
15
15 1,735 79.0
-323
11
12 904
-2
16
6
14
11
14
12
997 73.4
-657
2
7 432
-23
18
-5
-5
19
17
18
452 83.5
238
-3
20 278
17
16
16
12
22
15
18
286 96.4
-149
4
17 193
16
13
15
7
13
15
14
484 12.8
165
2
21 228
25
16
20
12
27
12
19
489 25.2
102
-31
21 372
30
15
22
22
9
6
8 2,717 17.9
-47 102
9 1,461
3
11
7
25
7
9
8
792 18.8
61
57
11 308
6
12
9
7
14
4
9 1,132 15.3
-100 141
10 642
7
12
9
15
6
12
9
603 29.9
80
11
11 377
4
11
8
7
-1
3
1
189 12.0
-201
-20
-9 134
-26
1
-13
-4
12
11
12
35 16.8
66
70
16
20
11
18
14
1
12
10
11 6,654 23.6
-6
96
13 3,473
7
16
11
100
6
9
8 1,875 19.5
130 100
14 1,011
9
15
12
NA
13
9
11 2,170 19.9
97 103
17 1,182
12
15
14
NA
STRATEGY:
STRATEGY:
Navin Agarwal
(Navin@MotilalOswal.com) |
Rajat Rajgarhia
(Rajat@MotilalOswal.com)
Ashish Gupta
|
ECONOMIST: Dipankar Mitra
Sources of exhibits in this section include RBI, CMIE, Bloomberg, IMF, UN, Rogers International, Industry, Companies, and MOSL database
January 2014
A–4

India Strategy | Happ y Ne w Year
2013 MARKETS: Indian equities deliver 9% return, driven
by a 4QCY13 rally
Top performers are beneficiaries of INR weakness; FII flows strong at USD20b
Indian markets ended 2013 with returns of 9%, where the entire gains were made
in 4QCY13. However, a sharp currency depreciation led to a -3% Sensex returns in
USD terms. BSE Midcap Index delivered -6% return (INR).
The top performing sector in 2013 was Technology (+60%), followed by Telecom
(26%) and Healthcare (+23%). Real Estate (-32%), PSU Banks (-26%) and Cement (-
14%) were top negative performing sectors.
Best 6 Index stocks that performed were beneficiaries of rupee weakness. TCS
was the best performing Sensex stock, with 72% return. Both Sun Pharma and
Infosys delivered returns of +50%. SBI and BHEL were the top underperformers,
with negative returns of 26% and 23%. Another PSU, Coal India gave negative
returns of 18%.
Average market volumes in 2013 were higher than in 2012; moreover, the
composition of F&O moved up by 200bps to an all-time high of 92%.
FIIs invested another USD20b in 2013, making it the third highest year of inflows.
On the other hand, DIIs withdrew a record USD13b during the year.
Valuations of Indian equities remain attractive with Market Cap to GDP at 62%.
The Sensex PE at 14x is below long term averages, while the RoEs at 16% are at
their bottom.
2013: Sensex positive return led by last quarter
2013
Positive return years: 25 (74%)
Negative return years: 9 (26%)
2012
2010
2004
2002
2011
2001
2000
1998
1996
1995
1987
2008
Year
-52
%
1986
Year
-25
-18
-21
-16
-1
-21
-16
-1
%
1997
1994
1993
1989
1984
1983
1982
1980
Year
9
26
17
13
4
19
17
29
17
7
7
4
25
%
2007
2006
2005
1992
1990
1988
1981
Year
30 to 60
47
47
42
37
35
51
54
%
2009
2003
1999
1991
1985
Year
>60
81
73
64
82
94
%
-30 to 0
0 to 30
Percentage Total Return Range
Note: Return is CY Ending.
-30 to -60
January 2014
A–5

India Strategy | Happ y Ne w Year
After a positive return of 26% in CY12,
Markets delivered 9% return in CY13.
Indian markets delivered 9% return in 4QCY13
after it remained fla t in 3QCY13 (QoQ,%)
CY13 world equity returns - Local Currency (%)
CY13 world equity returns - In USD (%)
Sectoral performance for CY13 (%)
Sectoral performance for CY07-13 CAGR (%)
January 2014
A–6

India Strategy | Happ y Ne w Year
Best & worst performers in Sensex for CY13 (%)
Best & worst performers in Sensex for CY07-13 CAGR (%)
Monthly sectoral performance relative to Nifty
Sector
Auto
Banks - PSU
Banks - Pvt
Capital Goods
Cement
Consumer
Health Care
Media
Metal
Mid-Cap (BSE)
NBFC
Oil
Real Estate
Retail
Technology
Telec o m
Utilities
Nifty Abs Chg (%)
Sensex Abs Chg (%)
January 2014
Relative to Nifty MoM Performance (%)
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13
-6
-1
-1
-6
-6
-2
-4
4
-6
-4
-5
8
4
-4
10
6
-4
2
2
1
-9
0
-7
3
1
3
-2
-9
-4
-1
-2
-5
-5
11
1
-5
-6
-5
-4
-1
0
-2
-5
5
3
-3
-3
-2
2
-4
-11
-3
2
-8
-5
0
0
5
4
6
3
0
6
4
4
-6
-1
1
0
2
0
-21
11
3
4
4
1
-9
1
-4
-3
2
1
-3
-3
0
2
-2
-12
6
5
-1
-1
1
1
-2
-6
-4
-1
2
-2
2
1
-6
-4
-3
5
-8
-22
6
4
-5
-2
-2
0
-11
-11
-8
-3
7
4
8
-10
-5
-11
-2
-11
17
21
20
-6
-2
0
1
-11
-2
-9
-9
-2
4
-1
18
0
-4
0
-6
-10
12
-7
-3
-5
-4
Sep-13 Oct-13 Nov-13
3
2
1
4
12
3
1
-5
3
1
4
-4
-5
-1
-7
3
5
5
4
0
6
9
9
-4
-10
-8
1
0
-1
1
-1
5
4
-2
0
-4
10
9
4
3
-1
9
-1
-2
1
-4
5
6
2
-1
3
-11
1
-5
4
-2
-2
CY13
Dec-13 Chg (%)
-3
0
0
2
-5
-2
3
3
4
4
-2
0
4
-1
6
-4
2
2
2
1
-33
-5
-12
-21
4
16
-1
-17
-12
-15
-3
-39
-36
53
19
-21
7
9
A–7

India Strategy | Happ y Ne w Year
Global Ranking: India v/s others
Country
Mkt Cap
(USD t) Dec-03
22.3
4.6
4.0
3.5
3.4
2.1
2.1
2.0
1.5
1.3
1.2
1.1
1.0
0.9
0.8
0.8
1
2
3
7
11
4
6
5
8
10
15
17
18
13
12
19
Mkt Cap Rank
Dec-07 Dec-08
1
2
4
6
3
5
9
7
12
10
14
8
11
18
15
16
1
2
3
6
4
5
8
7
9
11
16
12
14
17
13
20
Chg in Rank
CY14/FY15E
Dec-13 2003-13 P/E (x) P/B (x) RoE (%)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
0
0
0
3
6
-2
-1
-3
-1
0
4
5
5
-1
-3
3
15.2
18.4
12.8
10.3
8.2
13.0
14.6
12.9
14.6
14.7
9.5
13.9
10.4
14.8
14.9
4.5
2.4
1.6
1.7
1.3
1.1
1.3
1.7
1.6
2.4
1.9
1.0
2.3
1.0
1.6
1.3
0.6
15.5
8.9
13.5
12.4
13.8
10.2
11.9
12.3
16.6
13.1
10.9
16.4
9.1
11.0
9.0
12.8
United States
Japan
United Kingdom
Hong Kong
China
France
Canada
Germany
Switzerland
Australia
South Korea
India
Brazil
Taiw a n
Spain
Russia
Mkt Cap / Total Volumes (Cash Holding Period Days)
Indian Market Volumes
Trend in net FII Investment (USD b)
Annual Trend
Quarterly Trend
January 2014
A–8

India Strategy | Happ y Ne w Year
Trend in net DII investment (USD b)
Annual Trend
Quarterly Trend
12-month forward Sensex P/E (x)
12-month for ward Sensex P/B (x)
Sensex RoE (%)
Indian market cap to GDP (%)
January 2014
A–9

India Strategy | Happy New Year
PROFIT POOL
Oil share halves, Technology doubles; Public sector dwarfed
Profit Pool analysis FY03-14: Identifying themes for next growth cycle
Over FY03-14, India Inc PAT expanded by 5.6x at a CAGR of 17%. In Phase 1 (FY03-08) PAT
CAGR was 26% and in Phase 2 (FY08-14) only 10%. Our analysis of the FY03-14 profit pool
leads us to the following key trends -
#1 PUBLIC v/s PRIVATE SECTOR: The ultimate case study of value migration
#2 CYCLICALS: Change in PAT orbit
#3 OIL & GAS: PAT share halves to 20% in best era of crude prices
#4 TECHNOLOGY: PAT share doubles to 13%
#5 FINANCIALS: Private sector cashes in on public banks' slip
#6 HEALTHCARE: Perfect prescription for high-immunity profits!
#7 CONSUMER: Only a foul-weather friend? Not quite
#8 TELECOM: How a non-cyclical sector can behave like a cyclical
Based on the above, expect some of the following potential themes to play out going
forward -
#1 FY14-16 PAT GROWTH: Expect reversion to mean of 15%
#2 PRIVATE BANKS, TECHNOLOGY: Two large profit pools which can only get bigger and
better; creating several growth opportunities
#3 OIL & GAS: Will reforms pump profits back to the sector?
#4 CEMENT, PUBLIC SECTOR BANKS: Early-bird cyclical turnarounds?
#5 TELECOM: Data should help the sector regain its lost voice
Backdrop & Summary findings
In FY14, India's GDP growth is expected to be 4.5%. This virtually takes us back 11 years
to FY03 when India's GDP growth was 4%. We believe GDP growth has bottomed out
with early estimates for FY15 placed at over 5%. So, it is appropriate that we analyze
India Inc's profit pool trends over the past 11 years, and also derive some potential
themes going forward.
Our key findings and conclusions may be summarized as under -
PAT expands to 5.6x in 11 years:
Over FY03-14, India Inc PAT expanded by 5.6x at a
CAGR of 17%. There are two distinct growth phases: Phase 1 (FY03-08) which saw
PAT CAGR of 26% on the back of average real GDP growth of 8.7%; and Phase 2
(FY08-14) when GDP growth slipped to 6.7%, and PAT CAGR to only 10%. Stock
market return CAGR was 39% in Phase 1 and 5% in Phase 2. This translates to full-
cycle (FY03-14) return CAGR of 20%, broadly in line with PAT CAGR of 17%.
Public sector dwarfed:
The Indian public sector companies have been dwarfed by
their private sector counterparts. The PAT share between the two has virtually
reversed over the 11 years - from 63:37 in favor of public sector in FY03 to 64:36 in
favor of the private sector in FY14.
Cyclicals change their PAT orbit:
Most cyclical sectors made hay during the global
sunshine of FY03-08 e.g. PAT CAGR of 143% for Real Estate, 106% for Cement, 62%
for Metals and 42% for Capital Goods. Despite some pull-back in growth rates in
the FY08-14 phase, full-cycle earnings growth of most cyclicals is higher than
corporate sector average of 17%.
January 2014
A–10

India Strategy | Happy New Year
Oil & Gas PAT share halves to 20% in best era of crude prices:
FY03-14 saw crude
prices more than quadruple to USD110 levels. And yet, over this 11-year period,
share of Oil & Gas in corporate sector PAT halved from 40% in FY03 to 20% in FY14.
Technology PAT share doubles to 13%:
Riding India's global competitive advantage,
Technology sector PAT share has more than doubled from 6% in FY03 to 13% in
FY14, the third largest profit share after Financials and Oil & Gas.
Expect mean reversion in earnings growth; bounce-back in beaten-down sectors:
Our initial estimates suggest FY14-16 PAT CAGR of 15%. Some beaten-down sectors
are likely to bounce back e.g. Oil & Gas on the back of near-mandatory reforms,
Capital Goods on likely revival in investment cycle in 2HFY15, and Telecom on the
back of lower competitive intensity.
We discuss below the above points in detail in the subsequent pages.
FY03-14 India Inc PAT performance: Sector-wise highlights
SECTOR
(No. of companies)
Auto (9)
Capital Goods (8)
Cement (13)
Consumer (13)
Financials (31)
PSU Banks (12)
Private Banks (10)
NBFC (9)
Healthcare (13)
Media (8)
Metals (9)
Oil & Gas (13)
Real Estate (9)
Retail (3)
Technology (10)
Telecom (4)
Utilities (10)
Others (6)
MOSL (159)
PAT (INR B)
FY03
FY08 FY14E
20
12
2
48
157
102
26
29
21
3
27
268
1
0
39
-4
72
2
669
80
69
70
73
366
217
91
58
48
6
303
540
90
2
152
133
175
7
2,115
283
99
50
191
882
332
325
224
141
24
325
756
30
10
482
81
394
22
3,770
PAT CAGR (%)
FY03
FY03
FY08
-14
-08
-14
27
21
35
13
17
11
26
20
19
21
25
10
35
45
26
L to P
17
22
17
32
42
106
9
18
16
29
15
18
17
62
15
143
61
31
L to P
19
23
26
23
6
-5
17
16
7
24
25
20
25
1
6
-17
32
21
-8
14
21
10
Avg RoE (%)
FY03
FY03
FY08
-14
-08
-14
26
21
16
35
18
18
16
20
21
15
23
18
14
25
31
10
14
20
19
27
21
18
35
19
19
18
20
23
13
30
22
20
21
34
11
13
19
21
25
21
17
35
17
17
15
19
18
15
17
15
11
28
28
11
15
21
17
MOSL Univ. PAT Share (%)
FY03
FY08 FY14E
3
2
0
7
23
15
4
4
3
0
4
40
0
0
6
-1
11
0
100
4
3
3
3
17
10
4
3
2
0
14
26
4
0
7
6
8
0
100
8
3
1
5
23
9
9
6
4
1
9
20
1
0
13
2
10
1
100
FY14 Profit Pool share (%)
FY03-14: Technology share up 7pp, Oil & Gas down 20pp
January 2014
A–11

India Strategy | Happy New Year
PAT expands to 5.6x in 11 years: A tale of two phases
India's GDP growth for FY14 may have retraced to FY03 levels. However, over these
11 years, India Inc's profits (significantly represented by MOSL Universe) expanded
to 5.6x at a CAGR of 17%. As the chart below suggests, the 11-year period can be
broken down into two distinct phases -
Phase 1 (FY03-08):
Over these 5 years, average GDP growth was a robust 8.7% (v/
s 5.6% in preceding 5 years). As a result, corporate earnings more than trebled i.e.
CAGR of 26%.
Phase 2 (FY08-14):
Over these 6 years, average GDP growth slipped 2pp over the
preceding 5-year period to 6.7%. Corporate earnings too rose only to 1.8x i.e.
CAGR of 10%.
India Inc PAT growth vis-à-vis India's GDP growth: 2 distinct phases FY03-08 & FY08-14
Other key metrics: Phase 2 worse off on all counts
Sales growth:
FY03-14 Sales CAGR is 19%, broken down into 23% during FY03-08
and 16% during FY08-14.
EBITDA growth & margin:
FY03-14 EBITDA CAGR at 17.5% is lower than Sales CAGR
as average EBITDA margin slipped from 21.5% in FY03 to 18.6% in exit year FY14.
Here too, there is a sharp performance difference in the two phases. Over FY03-
08, EBITDA CAGR was the same as Sales CAGR at 23%, indicating no hit to margins.
However, over FY08-14, EBITDA CAGR at 13% is lower than Sales CAGR of 16% as
EBITDA Margin dipped from 21.0% in FY08 to 18.6% in FY14
RoE and Dividend payout:
Phase 1 average RoE was 21% which slipped to 16% in
Phase 2. However, Dividend payout remained stable throughout FY03-14 around
the average of 26%.
January 2014
A–12

India Strategy | Happy New Year
FY08-14 Sales growth slips to 16% v/s 23% in FY03-08
FY08-14 sees hit on margins …
FY09-14 average RoE at 16% is 5pp lower than the preceding
5-year average of 21%
Payout remains stable across cycles
Full-cycle stock market return in line with PAT CAGR
Stock market return CAGR was 39% in Phase 1 and 5% in Phase 2. This translates to full-
cycle (FY03-14) return CAGR of 20%, broadly in line with PAT CAGR of 17%.
Full-cycle (FY03-14) stock market return at 20% in line with PAT CAGR of 17%
January 2014
A–13

India Strategy | Happy New Year
Profit Pool analysis: Key past trends; potential future themes
Our analysis of the FY03-14 profit pool leads us to the following key trends which we
also discuss in detail -
#1 PUBLIC v/s PRIVATE SECTOR:
The ultimate case study of value migration
#2 CYCLICALS:
Change in PAT orbit
#3 OIL & GAS:
PAT share halves to 20% in best era of crude prices
#4 TECHNOLOGY:
PAT share doubles to 13%
#5 FINANCIALS:
Private sector cashes in on public banks' slip
#6 HEALTHCARE:
Perfect prescription for high-immunity profits!
#7 CONSUMER:
Only a foul-weather friend? Not quite
#8 TELECOM:
How a non-cyclical sector can behave like a cyclical
Based on the above, expect some of the following potential themes to play out going
forward -
#1 FY14-16 PAT GROWTH:
Expect reversion to mean of 15-16%
#2 PRIVATE BANKS, TECHNOLOGY:
Two large profit pools which can only get bigger
and better
#3 OIL & GAS:
Will reforms pump profits back to the sector?
#4 CEMENT, PUBLIC SECTOR BANKS:
Early-bird cyclical turnarounds?
#5 TELECOM:
Data should help the sector regain its lost voice
Past Trend #1
PUBLIC v/s PRIVATE SECTOR: The ultimate case study of value migration
Yet another key finding of our Profit Pool analysis is the significant value migration in
India from the public sector to the private sector. Over FY03-14, the private sector has
emerged larger and superior to the public sector on every key metrics -
Absolute PAT levels:
Private sector PAT is now 80% higher than public sector PAT v/
s 40% lower in FY03
Profit share:
FY14 PAT mix is 64:36 in favor of the private sector, fully reversing the
63:37 in favor of public sector in FY03.
Dividend payout:
In FY10, the private sector convincingly overtook the public sector
in absolute dividends paid out. The gap has only widened since then.
Return on Equity:
Public sector aggregate RoE is down 7pp over the last 11 years v/
s only 2pp for the private sector.
Private sector profits - from 40% lower than public sector in FY03 to 80% higher in FY14
January 2014
A–14

India Strategy | Happy New Year
Profit mix between private and public sector has exactly reversed in just 11 years
Dividend trend follows PAT trend
Public sector RoE damage also much higher than that for private sector
January 2014
A–15

India Strategy | Happy New Year
Public Sector Oil Refining & Marketing companies: Classic example of value
destruction
The public sector oil refining & marketing companies (RMs) present a classic example
of value destruction in the public sector.
In a large profit-pool, highly consolidated, steady volume-growth business, the
aggregate PAT of IOC, HPCL and BPCL is down from INR98b in FY03 to INR70b in
FY14.
PAT share is down from a high 14% of total in FY03 to a miniscule 2% in FY14
Even as aggregate net worth has steadily increased, RoE has plunged from a superior
31% in FY03 to a significantly below-cost-of-equity 7% in FY14.
Needless to add, the RMs have significantly underperformed the markets over
the last 11 years.
The only positive takeaway from this case study is that since much of the downturn is
led by policy (rather, the lack of it), there is a high probability of mean reversion,
especially once a new government is in place post 2014 elections.
IOC, HPCL, BPCL - Share of PAT down from 14% in FY03 to 2% in FY14
IOC, HPCL, BPCL - RoE has plunged from 31% in FY03 to 7% in FY14
January 2014
A–16

India Strategy | Happy New Year
RM stocks have significantly underperformed the markets for a very long time
Past Trend #2
CYCLICALS: Change in PAT orbit
Many sectors made hay during the FY03-08 global liquidity led sunshine, especially
cylicals like Real Estate, Cement, Metals and Capital Goods. At the peak of the cycle in
FY08, these sector profits were several multiples over the base profit of FY03 as shown
below.
Most cyclical sectors made hay during FY03-08 global sunshine …
During the FY09-14 phase of global meltdown coupled with domestic slowdown, PAT
growth of all cyclical sectors was below that of their more secular counterparts. In
fact, Real Estate PAT actually crashed 70% while Cement PAT was down 30%. And yet,
the hyper growth of Phase 1 could not be wiped out, and full-cycle FY03-14 PAT growth
of all the cyclical sectors still remained well above aggregate PAT growth.
January 2014
A–17

India Strategy | Happy New Year
Despite cyclical sectors' PAT pull-back during FY08-14 …
… full-cycle PAT growth of many cyclical sectors higher than MOSL Universe average
Past Trend #3
OIL & GAS: PAT share halves to 20% in best era of crude prices
FY03-14 saw crude prices more than quadruple to USD110 levels. And yet, over this 11-
year period, share of Oil & Gas in corporate sector PAT halved from 40% in FY03 to 20%
in FY14.
OIL & GAS: PAT share halves to 20% in best era of crude prices
January 2014
A–18

India Strategy | Happy New Year
Oil & Gas is the only sector to lose share in both the boom and slowdown phases
Past Trend #4
TECHNOLOGY: PAT share doubles to 13%
Technology is one of India's biggest success stories over the last decade. Over FY03-14
Sector PAT CAGR was a robust 26%; equally important, it was fairly consistent in
both the phases: 31% CAGR over FY03-08 and 21% CAGR over FY09-14.
Sector PAT share almost doubled from 6% in FY03 to 13% in FY13.
Technology has emerged has the third largest contributor to the profit pool of
FY14.
TECHNOLOGY: PAT share doubles to 13%
Trend in PAT growth divergent from currency movements, contrary to
expectations…
Technology sector saw a PAT CAGR of 31% during FY03-08, while CAGR during FY08-
FY14 is much lower at 21%. However, the pattern in currency was quite the opposite.
During the high growth years for PAT, the INR actually appreciated at a CAGR of 4%
(from INR48.3/USD to INR40/USD). Over FY08-FY14, the INR has depreciated at a
CAGR of 9% (to INR60.9/USD from INR40/USD).
This is contrary to the usual expectation of PAT growth being fuelled by a
depreciating currency, and being challenged in an appreciating currency regime.
The best PAT growth for Indian IT has come in the years when the currency steadily
appreciated.
January 2014
A–19

India Strategy | Happy New Year
Growth in PAT has been divergent to movement in currency
…explained partly by the declining growth rate in industry exports
Growth rates for Indian IT exports have seen a steady decline, explained by
multiple factors:
1. Slowdown in the developed economy,
2. Increased competition from MNCs like Accenture, IBM and Cap Gemini, which
set up offshore delivery centers at a healthy rate, and
3. Higher penetration in traditional IT services such as ADM and Testing.
The period post the economic downturn led by financial meltdown saw the
divergence in growth rates across companies, with TCS, CTSH and HCLT gaining
greater share, while INFO and WPRO lagged. This was due to readiness to
aggressively pursue even the traditional services work by the former group, at
competitive rates.
Growth rates have cooled off to low-to-mid teens for the industry
January 2014
A–20

India Strategy | Happy New Year
Past Trend #5
FINANCIALS: Private sector cashes in on public banks' slip
The Financials sector has been a steady performer over both the phases of FY03-14 -
PAT CAGR of 18% over FY03-08 and 16% over FY08-14. The sector's PAT share has also
been stable around the average of 21% over the period. However, the aggregates
conceal the internal churn within the sector.
In both the phases, private sector PAT CAGR is much higher than that of public
sector banks - 29% v/s 16% during FY03-08, and even more so in the slowdown
phase of FY08-14 at 24% v/s 7%.
The growth differential has caused the sector PAT mix to dramatically shift in favor
of the private sector at 50:50 for FY14, which was at 20:80 in FY03.
FINANCIALS: Steady aggregate PAT growth, but significant differential between public and private
Financials Sector PAT Trend (INR b)
FINANCIALS: FY14 PAT mix a virtual reversal of FY03 mix in favor of private sector
Financials Sector PAT Mix (%)
Past Trend #6
HEALTHCARE: Perfect prescription for high-immunity profits!
The Healthcare sector comes across as the perfect prescription for profits which are
immune to any kind of turmoil, whether global or local.
Across cycles, Sector PAT CAGR has been consistent - 18% over FY03-08 and 20%
over FY08-14, translating to full cycle PAT CAGR of 19% v/s 17% for MOSL Universe.
Equally important, only 3 of 13 Healthcare companies in our Universe reported
PAT CAGR below aggregate average of 17%.
Ex Ranbaxy and Dr Reddy's, the Healthcare sector's FY03-08 PAT CAGR matched the
aggregate average of 26%.
January 2014
A–21

India Strategy | Happy New Year
Only 3 of 13 Healthcare companies had FY03-14 PAT CAGR < MOSL aggregate of 17%
Past Trend #7
CONSUMER: Only a foul-weather friend? Not quite
At first glance, Consumer sector has underperformed, with FY03-14 PAT CAGR of only
13% v/s 17% for MOSL Universe. Further, FY03-08 PAT CAGR was only 9% v/s 26% for
MOSL Universe. It is only during FY08-14 Consumer PAT CAGR at 17% was higher than
10% for MOSL Universe. Also, every single Consumer company's PAT CAGR during this
phase was higher than 10%. Prima facie, this seems to suggest that Consumer is
primarily a foul weather friend i.e. outperforms only during periods of slowdown.
ITC and HUL have underperformed Universe earnings over the past 11 years
FY03-14 PAT CAGR 18% (ex HUL, ITC):
Company-level analysis suggests that the sector's
performance is not as bad as the aggregates suggest. Two companies - ITC and HUL -
have consistently accounted for 60-75% of sector aggregate PAT. And both these
companies have sharply underperformed during FY03-08 with PAT CAGR of only 6%
(HUL's FY08 PAT was actually flat over FY03). Excluding ITC and HUL, FY03-14 sector PAT
CAGR is a healthy 18%.
January 2014
A–22

India Strategy | Happy New Year
Past Trend #8
TELECOM: Why a non-cyclical sector behaved liked a cyclical one
Arguably, no cyclical sector can match the perfect symmetry of Telecom sector's profit
share trend over FY03-14. Whereas, the sector is indeed a highly consumer-facing,
secular business, the Indian telecom sector is a classic case of competition cycle,
rather than business cycle.
TELECOM: Profit share trend more typical than any classical cyclical sector
Over FY03 to FY09, the telecom sector gained rapid scale advantages in a limited
competition scenario. Post the turnaround in FY04, the next 5-year PAT CAGR through
FY09 was a scorching 111%. This coincided with two game-changing events -
1. 2G spectrum auction adding several new players to the sector, in turn, driving
down RPMs, margins and PAT;
2. The leader Bharti Airtel's leveraged mega acquisition of Zain in Africa, causing
further erosion in profits.
TELECOM: Rising competition lowers RPM; Bharti's Africa acquisition too drags PAT
January 2014
A–23

India Strategy | Happy New Year
Based on the above past trends, we discuss some potential themes to play out
going forward.
Potential Theme #1
FY14-16 PAT GROWTH: Expect mean reversion to 15% levels
The growth trend emerging from quarterly results suggests that the worst may be
over for India Inc earnings. After 3% YoY PAT de-growth in Jun-2013 quarter, MOSL
Aggregate PAT grew 8% YoY. For the Dec-2013 quarter, our estimates suggest a higher
10% YoY growth, followed by an even higher 13% YoY growth in Mar-2014 quarter.
Further, our FY15 estimates indicate 16% PAT growth and early estimates indicate this
trend to sustain into FY16 as well. Telecom, Cement, Media, Real Estate and Retail are
likely to be among the highest growth sectors.
Quarterly trends suggest PAT growth bottoming out
The quarterly growth trend is expected to further improve in FY15 and FY16
January 2014
A–24

India Strategy | Happy New Year
Potential Theme #2
PRIVATE BANKS, TECH: 2 big Profit Pools will only get bigger
PRIVATE BANKS: The juggernaut rolls on
The Indian Financials Profit Pool is large (23% of total) and steadily growing at
over 15%
Within this, Private Banks are consistently increasing their Profit Pool share, up
from 20% in FY03 to 49% in FY14, driving a high PAT CAGR of 26%. Interesting to
note is that the share of private banks in deposits is still quite low at 19%, providing
room for continued market share gains.
The above trend will sustain for the foreseeable future e.g. FY14-16, Financials
PAT CAGR is estimated at 16% with Private Banks growing a shade faster at 17%.
The issue of new banking licenses is more likely to expand the banking market
rather than significantly disrupt the competitive landscape.
Within Private Banks, HDFC Bank has seen significant corrections in valuations
without any major change in earnings prospects. It offers one of the best investment
opportunities for sustained performance. We have upgraded our rating to Buy.
The Private Banks juggernaut rolls on
Financials
Profit Pool (INR b)
HDFC Bank - long-period EPS & P/E band
January 2014
A–25

India Strategy | Happy New Year
TECHNOLOGY: Nowhere near the end of the road for Indian IT
Global IT-BPM spend is expected to grow over 5% in CY13, as rate of introduction
of disruptive technologies will continue to be faster (SMAC technologies are
forecasted to grow to USD1t+ by 2020.
Trend of increasing adoption of offshoring continues in Continental Europe, driving
growth in the geography. The region is the source of largest deals in the current
pipeline.
With still a lot of penetration yet to happen, new verticals, customers and
geographic markets will continue to gain importance, and offer ample opportunity
for continued double digit industry growth.
Emerging technologies like Cloud, Mobility, Big data and Analytics continue to
gain prominence, and scale in these technologies will determine success of IT
companies over the next few years. While Indian IT continues to evolve its
approach around the same, those with successful bets in this space will be the
likely outperformers going forward.
Prefer Infosys and Tech Mahindra:
INFO's stated focus on Products | Platforms |
Solutions, therefore, is a step in the right direction and it has been ahead of the
curve in formulating its strategy of expanding the share of revenues from this
segment. TECHM too, appears to be well placed in order to address the demand
trends shaping the future, with unique advantages compared to peers in areas
like Network, communication and Analytics. Its traction in Run-the-business (RTB)
segments in both Telecom and Enterprise is additionally benefiting from the
synergies of Satyam acquisition. INFO and TECHM are our top picks in the
technology sector.
Opportunity for Indian IT sector big with new verticals, customers and geographic markets continuing to gain importance
Worldwide IT
Industry:
USD3,600b
IT Services:
USD906b
IT Outsourcing
Market:
USD130b
Indian IT
Exports:
USD76b
Segment-wise
oppurtunity by 2020
IT Services
BPM
ER&D
GICs
Software Products
Domestic market
Internet and Mobile
Total
USD b
80
45
40
28
10
75
100
378
Valuation over the years
Market Cap in USD b
Company
Mar 03 Mar 08 Dec 13 FY15 PE
TCS
INFO
CTSH
WPRO
HCLT
TECHM
-
5.6
1.4
6.0
0.9
-
19.8
20.4
8.3
15.5
4.2
2.1
68.8
32.4
30.5
22.3
14.3
6.9
20.1
16.3
20.6
15.9
13.4
12.6
January 2014
A–26

India Strategy | Happy New Year
Potential Theme #3
OIL & GAS: Reforms can normalise earnings; resulting in significant growth
Need for investment in the sector has already propelled the government to take
some bold policy actions in the last 12 months. We do not foresee different policy
actions for private and PSU companies and hence believe that the reversion to the
normalized profitability happen and benefit all.
Government has already initiate some of the policy actions on the petroleum
pricing as well as at policy levels.
On the petroleum pricing front it has a) decontrolled Petrol price in June 2010,
b) allowed monthly price hikes in diesel from January 2013, c) capped LPG
cylinders per household and d) is in process to shift LPG and kerosene subsidy
to direct cash transfer to eventually eliminate dual pricing in the same and
stop leakages.
While, OMC”s earnings in the initial period of reforms are expected to increase
through interest cost reduction, but the significant increase would come in
after diesel de-regulation when they would be able to charge normalized
(higher than current)marketing margins on retail diesel sales.
On the policy front, it is in process to increase domestic gas prices from current
USD4.2/mmbtu to ~USD8/mmbtu, in-line with the proposed formula by the
Rangarajan Committee to boost E&P investments. Other E&P policy decisions
include a) allowing exploration in the developed/producing fields, b)
Integrated block development policy to cut development timelines and c)
initiated process to extend PSC tenure among others.
Oil sector profitability bottomed out, expect recovery led by policy actions
Energy sector is a critical lifeline for economic growth and India with ~80% import
dependence, while continuing to promote domestic E&P will have to strengthen
its overall infrastructural capabilities.
With a)inevitable increase of oil import bill (@USD110/bbl) by 1.6x to USD160b in the
next 6 years and b) likely increase in under-recoveries by 1.5x to USD2.2t, if diesel
reforms are halted; oil sector reform become necessity than an option, in our view.
Hence, we believe that the profitability of the oil companies has bottomed out
and will start normalizing from FY15. Our top picks in the sector are ONGC/OINL in
upstream and BPCL in OMC’s for its E&P upside potential. Also, Cairn is at attractive
valuations and could benefit from the production increase as well as likely reserve
upgrade from its ongoing exploration program.
PSU oil have suffered the most due to under recoveries
ONGC/OINL's EPS has significant sensitivity to gas price
January 2014
A–27

India Strategy | Happy New Year
Potential Theme #4
CEMENT, PSU BANKS: Early-bird cyclical turnarounds?
CEMENT: Utilisation levels at decade low; expect improvement
Imminent demand recovery (from lows of 4.7% CAGR over FY10-14E) and slowing
capacity addition (5.3% CAGR over FY14-17E) augurs well for improvement in
utilization, pricing and profitability.
This coupled with focus on cost cutting and falling debt levels bodes well for
strong earnings growth during recovery.
In large caps we prefer
ACC
and
Shree Cement,
and in mid-caps we prefer
Dalmia
Bharat, JK Lakshmi
and
Birla Corp.
Capacity utilization (%) is at two decade's low
PSU BANKS: Highly levered to economic growth
Stressed asset creation hit banks in three ways viz. (1) loan growth slows down,
(2) NIMs fall led by interest income reversals and (3) provisions rise significantly.
In this cycle of FY11/14, stress assets of the PSU banks are expected to rise to 11.9%
as compared to 6.1% in FY11 and earnings to decline by 8% over FY11/14E. RoA's
would be at its low at 0.6%.
As we expect the economic cycle to improve in CY14, we also see peak of stress
asset addition and disablers of earnings in the FY11/14 cycle can become enablers.
Hence overall earnings growth could improve and return ratios rebound.
Credit cost rise significantly impacting profitability
Cyclical downturn impacts asset quality and
dents earnings- can this reverse?
January 2014
A–28

India Strategy | Happy New Year
Potential Theme #5
TELECOM: Data should help it regain lost voice
With an active subscriber base of ~700m (~60% active SIM penetration), the Indian
wireless market is already showing signs of maturing with active user base and
wireless traffic growing at 6-7% YoY.
The industry focus is therefore shifting from acquiring subscribers to mining the
existing base by affecting voice tariff improvements and stimulating data demand.
With mobile data user penetration at ~15% and mobile data traffic for GSM
incumbents growing at ~100% YoY, we believe that data will be a key growth driver
for the sector.
Over FY14-19, we expect Indian wireless revenue base to grow at ~10% CAGR from
~USD27b to ~USD43b. Half of the incremental revenue is expected to come from
data which will increase from ~10% industry revenue contribution in FY14 to ~25%
in FY19.
EBITDA and PAT CAGR for incumbents would be higher than revenue CAGR given
significant operating and financial leverage.
Data user penetration in India set to leap-frog (%)
January 2014
A–29

India Strategy | Happy New Year
ECONOMY RBI’s focus to shift to growth as Inflation, Currency stabilizes
Crisis causes its own conquest. India faced a crisis of the eerie combination of low growth,
high inflation and external instability. A change of guard at RBI has brought in the much
needed stability in aspects of policy rates and INR. Since Dr Rajan assumed the role of RBI
Governor, the approach on various policy measures have seen a significant shift. During
1HCY14, as the focus shifts on Elections, this positive approach by RBI will be critical to adress
a volatile domestic and global macro environment.
We see a fall in inflation in the coming months to shift the debate to that of a rate cut
sometime in Mar-14. While this may seem to be an out of consensus view, several components
of inflation can surprise positively, the way they did negatively. December - January trend of
food inflation should be important. RBI will consider easing rates, the moment they see the
change in direction of inflation.
Recent months of trade data are clearly showing that the big concern of CAD is now surely
behind us. Growth prospects in West will aid exports in 2014, while imports will remain low
due to domestic slowdown and commodity prices. RBI has used this phase to build Forex
Reserves closer to USD300b. We see some of the restrictions on gold imports to ease in the
coming months.
The new leadership brings fresh thinking at RBI
2HCY13 has been one of the worst period of crisis in India. Growth plummeted to
decadal low, inflation remained at high levels particularly consumer inflation while
INR at one point of time became one of the worst performing currencies among
the EMEs. Amidst all these came a change of guard at RBI with a markedly different
approach to address the problem of the day.
1HCY14 would be an interesting and still challenging period for Indian economy.
While everyone goes into the election mode till May-14, RBI would continue to
play an anchor role during this trying times navigating between slow
implementation of US FED’s taper, moderation in inflation but continued low
growth.
Under the leadership of Dr. Subbarao, RBI chased the headline inflation print with
successive hikes in interest rates and very tight liquidity conditions for three years
in a row, that resulted in deposit growth consistently lagging the credit growth
during this period. Inflation still however, did not fall below the tolerance limit of
RBI. In many ways Dr. Rajan is approaching the problem in a vastly different way.
At the outset he wants to steer himself clear of the noise element in the data and
is willing to await for more clarity to emerge in this regard. More formally, he is
moving away from a ‘single target single instrument’ framework to a ‘multiple
target multiple instruments’ approach.
This balanced approach also informed his multidirectional approach to the
solutions through a combination of easing of MSF rates, hike in Repo rates, easing
of liquidity and finally a series of communication aimed at managing inflationary
expectations and expectations regarding RBI policy. In holding his nerve vis-à-vis
a spike in Nov-13 inflation print, he has also vetted for stability in policy.
January 2014
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India Strategy | Happy New Year
The iron hand vs. gentle persuasion - the eight months of two regimes at RBI
Crisis
Dr. Subbarao during
May-13 to Aug-13
Situation:
Faced with an average inflation of 5.6% and
growth of around 4.8-4.4%.
Response:
Kept the repo rates high at 7.25%. Also raised
MSF rates as part of forex crisis reponse. Kept liquidity
tight throughout to keep call money high.
Dr. Rajan during
Sep-13 to Dec-13
Situation:
Faced an average inflation of 7.2% and growth
of around the same of 4.8%
Response:
Lowered the effective MSF rate while hiking
Repo to rationalize the corridor. Also waited for data
to stabilize in the last policy, citing concerns of
overtightening. Eased liquidity and money market
rates.
Scorecard:
Inflation is expected to drop sharply from
Dec-13 onwards.
High
inflation
Scorecard:
Inflation did not subside and indeed
vegetable inflation kept rising.
External crisis
Situation:
INR moved from 54-69 in four months as CAD
ruled high at 4.9% in 1QFY13 and USD5b flown out during
2QFY14.
Response:
Hiked short term rates, inverted yield curve
to attract capital flows, clamped down on gold imports.
Scorecard:
Forex volatility at its peak, continued FIIs
outflow, trade deficit corrects to USD12b from USD18/
20b earlier.
Situation:
Forex market volatility at its peak, market
jittery despite improvement in trade data to USD12b
from USD18/20b earlier.
Response:
Rationalized policy rates, normalized yield
curve, opened forex swap windows, liberalized certain
aspects of forex market, calmed the market through
timely communication.
Scorecard:
INR stabilized at 62/USD, trade data continued
to improve, capital inflow resumed allowed forex built
up.
January 2014
A–31

India Strategy | Happy New Year
The iron hand vs. gentle persuasion - the eight months of two regimes at RBI
Quotes
On inflation and policy:
Admittedly, some growth
slowdown is attributable to monetary tightening. Note
that the objective of monetary tightening is to compress
aggregate demand, and so some sacrifice of growth is
programmed into monetary tightening.
On INR:
It is the avowed policy of the Reserve Bank not
to target a level of exchange rate and we have stayed
true to that policy.
On tapering:
There has been dismay about the ferocity
of depreciation; there has also been a growing
tendency to attribute all of this to the 'tapering' of its
ultra easy monetary policy by the US Fed.
Such a diagnosis, I believe, is misleading. Admittedly,
the speed and timing of the rupee depreciation have
been due to the markets factoring in 'tapering' by the
US Fed, but we will go astray both in the diagnosis
and remedy, if we do not acknowledge that the root
cause of the problem is domestic structural factors.
On inflation and policy:
We may be in danger of over
tightening and that has its consequences also,
especially in a weak economy.
On INR:
There is no fundamental reason for volatility
in the value of the rupee. We are left with fear about
what others will fear and do to explain what is going
on. At such times, it makes sense to take a deep
breath and examine the fundamentals. I hope you all
will do that..
On tapering:
What we need to do is put our house in
order before it (tapering) comes back. The
postponement of tapering is only that, a
postponement. We must use this time to create a
bullet-proof national balance sheet and growth
agenda, which creates confidence in citizens and
investors alike.
A–32
January 2014

India Strategy | Happy New Year
Similarly the response to the external crisis too has been vastly different under the
two regimes. Dr. Subbarao caused a spike in short term rates, inverted the yield curve,
clamped down on gold imports and spent forex reserves to stabilize INR. On the other
hand, Dr. Rajan has eased the short term rates, brought the yield curve back to shape,
relaxed some of the forex restrictions for exporter/importers even while in crisis and
shored up forex reserves through debt capital flows. At the end, the INR stabilized at
around 62/USD while volatility came back to normal levels. Again proactive
communication, especially in between scheduled policy events were used to soothe
the tempered nerves of the financial markets.
In recent times, a friendlier approach from RBI has helped stabilize the market
expectations and improve the outcome than a straight forward iron hand approach
adopted by the earlier regime. This has important implications for events that would
unfold in 1HCY14 and especially with regard to the two prime concerns of 2HCY13, the
debate may now shift to i) when can we see the first rate cut and ii) have we left the
external crisis behind?
Come Mar-14 and we could all be singing rate cuts
An analysis of the inflation data reveals that vegetable prices account for much of
the acceleration of inflation since Jun-13.
Indeed vegetable prices with just 1.7% weight in WPI accounted for around 2% of
the 7.5% overall WPI inflation in Nov-13.
Similarly while vegetables accounted for around 5.4% of the weight in CPI it
contributed 3.5% of the 11.2% overall CPI inflation in Nov-13.
Our channel check and high frequency data suggests that various vegetables prices
have nearly halved during Dec-13. This would lead to 1% drop in WPI and 1.5%
drop in CPI inflation during Dec-13.
Moreover, the sharp drop in vegetable prices would be combined with the expected
drop in the cereals and pulses on arrival of new crop. The expectations of a bumper
Ravi crop also expected to accelerate this trend.
A sharp drop in domestic food prices would keep the overall inflation stable,
further reinforced by an expected drop in imported inflation on low international
commodity prices and stable INR.
The same is the case for CPI inflation too
The recent spike in WPI inflation clearly caused by vegetables alone
January 2014
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India Strategy | Happy New Year
A sharp drop in vegetables inflation would lead WPI inflation to drop by 1% Similarly CPI inflation would subside to single digit level in Dec-13
In the light of the above development we expect WPI to stabilize to 6-6.5% level in
1HCY14. Similarly, CPI would moderate to around 9% level from the current 11% level.
This would decisively shift the debate on policy to easing of rates around Mar-14.
We hold that the space for rate cut exists even now as policy rates are around the high
levels that prevailed during the two previous cycles during Mar-07 and Jun-11 despite
inflation hovering near the same levels or lower and growth faltering to decadal low.
Thus we expect once the inflation rate stabilizes, talk of a rate cut would pick up.
However, external stability is a precondition for any rate cut.
We observe that a forex level below USD280 had drawn the panic reaction from RBI in
raising the MSF rate by 200bp. Thus for any talk of rate cut to gain currency forex
reserves needs to be at least in the range of USD280-290b and INR needs to be stable
in the 60-64/USD range.
Similarly CPI may hover around 9% in the coming six months
Falling food prices may see WPI ~6-6.5% in 1HCY14
Space for rate cut already exists as rates are as high as previous However, external stability (forex level of USD280-290b)
peaks despite growth faltering and inflation similar or lower
is a pre-condition for RBI not to press the panic button
January 2014
A–34

India Strategy | Happy New Year
Have we left the CAD problem behind?
Since Jun-13 the trade deficit has come down sharply to USD10-12b from USD18-
20b earlier. This has resulted in a dramatic correction in the CAD to 1.2% of GDP
during 2QFY13 from 4.9% during 1QFY14.
Thus we expect the CAD/GDP to correct sharply to 2.3% in FY14 and 1.9% in FY15,
far lower than the peak of 4.7% during FY13.
We base our conclusion on the sharply falling imports and the pick up in exports
seen in the recent months. We feel these trends would be durable for the following
reasons.
The decline in imports is broadbased and is due to slowdown in the economy,
particularly the non-oil-non-gold imports. As the economy slowly recovers
the imports, particularly the import intensive sectors, e.g, capital goods would
show generalized growth only with a lag.
The restrictions on gold imports have been effective in suppressing the supply
of gold as seen in the sudden spike in premium paid in the domestic market
vis-à-vis international market on gold since Sep-13.
On the other hand gold demand has been low as investment demand has
evaporated on the back of low return expectations after a decade long bull
run.
Indeed the sharp decline in gold imports has opened up space for removal of
some of the restrictions on gold imports, particularly the high import duties.
Meanwhile exports have started picking up and is expected to do so as growth
in the advanced countries pick up steam.
The commodity-wise breakdown of exports reflect that apart from the primary
products, value added goods too have started gaining traction, including
petroleum products, chemicals and iron & steel. This augurs well for the future
prospect of exports.
Thus as the situation on CAD improves it would provide confidence on the strength
to the external investors regarding the value of INR. A slow return of growth too
would be a critical factor in reviving capital flows.
Thus the fear of tapering has receded and RBI’s pronouncement of much better
preparedness has helped calm the market expectations. Here too Dr. Rajan has
pulled out an winning formula, as the maxim go ‘fortune favours the brave’.
Raising the hope to correct CAD to sustainable levels
Trade deficit is coming down to FY11 or FY08 levels
January 2014
A–35

India Strategy | Happy New Year
CAD is expected to come back to the pre-crisis levels in FY15 (in USDb)
Annual
Exports
Imports
Trade Deficit
Invisible Surplus
Current A/c deficit
Net capital flows
Forex Reserves
(As % of GDP)
Exports
Imports
Trade Deficit
Invisible Surplus
Current A/c deficit
External debt
FY08
166
258
-91
76
-16
107
310
13.4
20.8
-7.4
6.1
-1.3
18.1
FY09
189
309
-120
92
-28
7
252
15.5
25.4
-9.8
7.5
-2.3
20.5
FY10
182
301
-118
80
-38
53
279
13.2
21.8
-8.6
5.8
-2.8
18.9
FY11
251
381
-130
86
-44
57
305
14.5
22.1
-7.6
5.0
-2.6
17.3
FY12
310
500
-190
112
-78
68
294
16.8
27.0
-10.3
6.0
-4.2
18.7
FY13
307
502
-196
107
-88
89
293
16.3
26.7
-10.4
5.7
-4.7
21.4
FY14E
316
467
-151
110
-41
40
290
17.4
25.7
-8.3
6.0
-2.3
23.2
FY15E
348
506
-158
120
-38
50
301
17.4
25.3
-7.9
6.0
-1.9
24.2
The decline in imports is widespread across major items of
exports barring oil
Restriction on gold has suppressed gold supply as reflected in
spike in premium between Indian and international prices
This has prepared the ground for lifting some of the restrictions on gold imports
Date
Jan-12
Mar-12
Jan-13
May-13
Jun-13
Jul-13
Aug-13
Measure
The import duty of 1% raised to 2%
Import duty raised to 4%
Import duty raised to 6%
Restriction on bank imports via consignment;
Import duty hiked to 8%; consignment restriction further extended to all agencies
on Jun-13; requirement of outright cash payment
Consignment restrictions withdrawn; stringent requirement of 20%
exports for all imports
Import duty hiked to 10%Excise duty hiked to 9% from 7%
January 2014
A–36

India Strategy | Happy New Year
Meanwhile exports have started picking up once again
12 export items (ranked as per their weight) that has seen the
maximum growth in YTDFY14 (YoY%)
January 2014
A–37

India Strategy | Happy New Year
ELECTIONS Alternate climax or anti-climax in the making
AAP forming government in Delhi spices up the national political landscape
Refer to the Election update
released on December 2013
The recent assembly elections results clearly indicated a strong anti-Congress wave bringing
out a decisive voting against corruption, inflation, lack of policy reforms, etc.
The decisive mandate saw BJP, riding on the NaMo wave, forming government in 3 out of
5 states with record number of votes. AAP was the BIGGEST SURPRISE, which formed
government in Delhi, with outside support from Congress. AAP’s 40% seat share and 30%
vote share indicates that a fresh alternative can no longer be ruled out.
Till recently, all the political pundits were betting for BJP as the majority party in the
upcoming 2014 Lok Sabha elections riding on the dual wave of anti-Congress and NaMo.
Indian markets were also riding high, driven by the Modi bandwagon, who stands as a
symbol of pro-development driven by his success in Gujarat.
However, AAP’s win in Delhi has queered the national pitch. The focus of AAP’s early policy
action is socialistic, rather than an anti-corruption drive that was expected from AAP
(Refer Annexure I). Many high profile personalities including industrialists have voluntarily
joined the party (Refer Annexure II). Whether AAP, aided by the new joinees, can showcase
their policy action prowess on growth and development front remains to be seen! (Refer
Annexure III)
Market view: With four months remaining for Lok Sabha elections, a lot of action is
expected on the political front which is likely to keep markets volatile and the environment
uncertain. A churn is taking place in India and the 2014 mandate will reflect this ‘manthan’!
Strong anti-Congress wave across country; lowest tally for Congress
Congress bagged merely 126 of the total 589 seats in 4 major state elections. This is
the lowest ever number of combined seats by Congress. Seat share at 21% and
lowest vote share clearly indicates a strong anti-Congress wave in recent elections.
Growth and governance over entitlement has been the clear preference of voters.
However, while governance is found to be a necessary condition, governance
deficit has nearly unambiguously thrown the incumbent out of its office.
Congress won its lowest ever seats in the recently concluded assembly elections
Parties
Chahattisgarh
BJP
Congress
Others
Delhi
BJP
Congress
AAP
Others
Madhya Pradesh
BJP
Congress
Others
Rajasthan
BJP
Congress
Others
Total seats
BJP
Congress
Assembly
(2003)
90
50
37
3
70
20
47
0
3
230
173
38
19
200
120
56
24
590
363
178
General
(2004)
11
10
1
0
7
1
6
0
0
29
25
4
0
25
21
4
0
72
57
15
Assembly
(2008)
90
50
38
2
70
23
43
0
4
230
143
71
16
200
78
96
26
590
294
248
General
(2009)
11
10
1
0
7
0
7
0
0
29
16
12
1
25
4
20
1
72
30
40
Assembly
(2013)
90
49
39
2
70
32
8
28
2
230
165
58
7
199
162
21
16
589
408
126
A–38
Congress won merely 126
of the total 589 seats
(1/5 of the total seats) in
4 major state elections
January 2014

India Strategy | Happy New Year
Congress vote share also remained very low
Party
Chattisgarh
BJP
Congress
Others
Delhi
BJP
Congress
AAP
Others
Madhya Pradesh
BJP
Congress
Others
Rajasthan
BJP
Congress
Others
Vote share
(1998)
NA
NA
NA
36
48
0
16
39
41
20
34
45
21
Vote share
(2003)
39
37
24
35
48
0
17
43
32
26
40
36
25
Vote share
(2008) (A)
40
40
20
37
40
0
23
38
33
29
36
37
28
Vote share
(2013) (B)
41
40
19
33
25
30
13
45
36
19
45
33
22
Swing
(B-A)
1
0
-1
-4
-16
30
-10
7
4
-10
10
-4
-6
Rajasthan and Delhi vote
share - lowest for
Congress
BJP emerges as the alternative in 3 out of 4 major states; betters all
expectations
BJP, driven by the strong NaMo wave, emerged as the preferred choice in states
where there was a direct battle between BJP and Congress.
Infact, BJP bettered its own tally and all expectations winning 408 seats out of a
maximum possible 589 seats. This is more than 2/3
rd
of the total number of seats.
Even BJP’s vote share saw a marked improvement, except Delhi, which saw AAP
eating away some of the vote share.
BJP surpassed the consensus exit polls seat estimate by a significant margin.
The win was supported by the strong Modi wave, riding on his pro-development
philosophy and his heroics in the state of Gujarat.
BJP exceeded all expectations and won higher seats than that predicted by exit polls
States/Parties
Chhattisgarh
BJP
Congress
Others
Delhi
BJP
Congress
AAP
Others
Madhya Pradesh
BJP
Congress
Others
Rajasthan
BJP
Congress
Others
January 2014
ABP News -
Nielsen
90
43
42
5
70
37
16
15
2
230
138
80
12
200
110
73
17
CNN-IBN
Week
90
50
36
4
70
37
13
17
3
230
141
72
17
200
131
53
16
Times Now
- C Voter
90
44
41
5
70
31
24
11
4
230
128
92
10
200
130
48
22
India Today
-ORG
90
53
33
4
70
41
20
6
3
230
138
80
12
200
110
62
28
Today’s
Chanakya
90
51
39
0
70
29
10
31
0
230
161
62
7
200
147
39
14
Average of
all polls (A)
90
48
38
4
70
35
17
16
2
230
141
77
12
200
126
55
19
Assembly
(2013) (B)
90
49
39
2
70
32
8
28
2
230
165
58
7
199
162
21
16
Swing
(B-A)
0
1
1
-2
0
-3
-9
12
0
0
24
-19
-5
-1
36
-34
-3
A–39

India Strategy | Happy New Year
Combined seats won by Congress lowest in 4 major state elections; BJP highest
The “AAP-rising” – a fresh alternative?
I have already wished
him well.
Anna Hazare
,,
The biggest surprise of 2013 assembly elections was Delhi which saw the
emergence of AAP as the second largest party winning 28 seats out of 70. It was
also the runner-up party in 20 seats apart from the 28 seats won. More importantly,
in its first year of existence, AAP won a vote share of 30%.
AAP has formed the government in Delhi with outside support from the Congress.
A party with mere one year of existence forming a government is unconceivable.
The differentiating factor for AAP was its underlying PHILOSOPHY: No high profile
politician, drive against corruption, unorthodox election campaign, and a personal
connect with the voters.
The UNIQUE STRATEGY adopted by AAP to garner peoples mindshare include: i)
symbol of broom to suggest a clean-up, ii) online donation and stopping to accept
donations once the mobilization reached the target of INR200m, iii) 70 manifestos
dedicated to each constituency along with a general manifesto, iv) a transparent
and participative candidate selection process.
Post the AAP win, there is a renewed belief amongst voters that a fresh alternative
is now available in Indian politics.
,,
AAP's performance exceeded most expectations
States/
Parties
Exit Polls
Avg of Assembly
ABP News - CNN-IBN Times Now - India
Today's Exit polls (2013)
Nielsen
Week
C Voter Today-ORG Chanakya
(A)
(B)
Total seats
70
70
70
70
70
70
70
BJP
37
37
31
41
29
35
32
Congress
16
13
24
20
10
17
8
AAP
15
17
11
6
31
16
28
Others
2
3
4
3
0
2
2
Swing
(B-A)
0
-3
-9
12
0
AAP ate vote share largely from Congress and BSP and also in part from BJP
Party
1998
BJP
Congress
AAP
Others
36
48
0
16
Vote share (%)
2003
2008 (A)
35
48
0
17
37
40
0
23
2013 (B)
33
25
30
13
Swing
(B-A)
-4
-16
30
-10
January 2014
A–40

India Strategy | Happy New Year
AAP got runners up position in 20 seats
Party (Seats won)
BJP
BJP (31)
AAP (28)
INC (8)
SAD (1)
JD (U) (1)
Ind (1)
Total (2nd position)
22
6
Runner up seats
AAP
18
2
1
1
1
29
20
21
INC
14
5
Why AAP assumes significance for 2014 General elections?
Any change is always driven by a revolution (against corruption this time). The
biggest question today is, Will AAP drive that CHANGE?
Till recently, all the political pundits were betting for BJP as the majority party in
the upcoming 2014 Lok Sabha elections riding on the dual wave of anti-Congress
and NaMo. Indian markets were also riding high, driven by the Modi bandwagon,
who stands as a symbol of pro-development driven by his success in Gujarat.
However, AAP’s win in Delhi has queered the national pitch. The focus of AAP’s
early policy action is socialistic, rather than an anti-corruption drive that was
expected from AAP
(refer Annexure-I for AAP's promises and achievements).
Thus, the national fight has now narrowed to two alternatives: (i) BJP, led by
Narendra Modi, with a righteous and pro-development model and (ii) AAP, led by
Arvind Kejriwal, with a pro-leftist and anti-corruption model.
However, with many high profile personalities including industrialists joining the
party, whether AAP can showcase their policy action prowess on growth and
development front remains to be seen!
(refer Annexure-II for high profile joinees).
Arguments for AAP is not a force to reckon with at the national level are : (i) Arvind
Kejriwal carried his socialistic work in Delhi for the last 10 years though it floated
AAP a year ago; (ii) unlike Delhi, where there are no regional parties, other states
have many regional parties and penetrating them will be difficult, and (iii) four
months is too short a time for AAP to set its base pan India.
However, there is equal bullishness that AAP can spoil the party for BJP, like it did
in Delhi
(refer Annexure-III for industrialists and journalists reactions).
Market view: One thing is for sure! There is a wind of change in India … who is
likely to be a beneficiary of this change remains to be seen.
With four months
remaining for the Lok Sabha elections, a lot of action is expected on the political
front which is likely to keep markets volatile and the environment uncertain.
January 2014
A–41

India Strategy | Happy New Year
Annexure-I
Manifesto: Tall promises and high benchmark; have already started striking
chords
AAP’s manifesto promised a lot of steps for the AAM AADMI. We have presented
below the issues AAP wishes to resolve and the policy actions they have made during
the limited period they have been in power:
1) Electricity bill:
To be reduced by 50% through audit of discoms, checking bills and
meters, promotion of solar power.
Key announcements post assuming office
Ordered a 50% cut in electricity prices up to a consumption of 400 units of
power. This will benefit 2.8m people or 82% of electricity consumers. The
subsidy will result in cash outgo of INR610m for Jan-Mar’14.
It has also ordered audit of discoms that provide power to Delhi.
2) Water availability:
Households using up to 700 litres of water (per day) would be
given free water. Transparency to be introduced and privatization to be stopped in
Delhi Jal Board.
Key announcements post assuming office
Free 20kl of water a month or 667litres a day. No levy of any existing charges
such as water cess and sewerage charges will be made.
3) Education:
Commitment to high quality education to all, regulate high fees and
donations in private schools, expansion of higher education and regularization of
temporary posts.
Key announcements post assuming office
Mr. Manish Sisodia, State Education Minister, expressed disappointment at
the low-functioning state of the department.
Delhi government provides scholarships for children from the weaker sections
of society by which half their tuition fees are covered. But only 7 children have
been able to benefit from it in the past year.
4) Transport:
Unified Transport Authority, expansion of DTC bus service and Delhi
Metro, making pavements and cycle tracks on all possible roads, preventing police
harassment and revising auto fares in an ongoing manner etc.
Key announcements post assuming office
Minister of Transport for Delhi, Mr. Saurabh Bharadwaj, has approved the
distribution of 15000 autos, free of cost, to members of the SC/ST.
5) Delhi Jan Lokpal Bill:
Commitment to pass Delhi Jan Lokpal Bill within 15 days of
coming to power.
6) Women’s security:
Citizens’ security forces would be formed with a branch in
each ward. Special fast track courts for crimes against women.
7) Slums:
Flats/plots would be provided on site or as near as possible to existing
location of slums through a consultative process. Till rehabilitation no demolition
and improvement in living conditions.
8) Inflation and unemployment:
Basic provisioning to protect people from inflation.
For unemployment, government posts to be filled up, better facilities to be
provided at industrial areas and low interest loans for young entrepreneurs.
January 2014
A–42

India Strategy | Happy New Year
9) Other economic issues:
Simplified VAT structure, licensing procedure and
opposition to FDI in retail for traders. Other target groups’ measures include
stopping of contract labors for 365 days jobs, enforcement of minimum wages,
social security for unorganized sector, regulation of wage and working hours of
domestic workers, improvement in conditions of rag pickers and licences and
fixed locations for street vendors.
Key announcements post assuming office
Ordered shelters for all people who are sleeping in the open in Delhi.
Porta Cabin Tents to be transformed into nightshelters and also announced 45
new nightshelters to be made to prevent people from the chilling cold in
Delhi.
Annexure-II
7 days of power – 7 high profile joinees in AAP army; ~0.4m members added
post Dec 8
AAP could not have called for a better response to showcase them at the national
level. AAP currently has its units and committees in atleast 309 districts across
India and is well on its target of having presence in all 672 districts of the country.
The party had less than 0.5m registered members before the Delhi elections.
However, since its stellar debut in Delhi Assembly elections on December 8, AAP
members have almost doubled.
Top three places which have seen recent additions are Uttar Pradesh with 72,416
members, Delhi with 48,001 and Maharashtra with 37,028 members.
With just over a week gone since Arvind Kejriwal took oath as the Chief Minister
of Delhi, AAP has already within its folds many high profile joinees from different
sectors.
January 2014
A–43

India Strategy | Happy New Year
Distinguished personalities in various disciplines now dawn as AAP soldiers
Name of
new joinees
Mr. V
Balakrishnan
or Bala as he
is commonly
known
Brief profile/
Quote shoot
Credentials
BSc from the University of Madras,
AAP is the most successful startup by
started his career at Amco Batteries
an IIT-ian ever. I would like to be a
before joining IT major Infosys.
part of the revolution happening in
,,
Held a variety of positions for Infosys
the country
including CFO from May'06 to Oct'12.
Member of the Board of Directors of
Infosys till 31st December, 2013.
Former CEO, Royal
MBA from INSEAD France, worked
There is a perception that AAP's
Bank of Scotland
with RBS for 6 years and before that
economic policies are along the lines
was associated with ABN Amro for
of the Left. I am not in favour of
15 years.
subsidies but we have parties like
President of Indian Liberal Group, a
Congress and BJP, who passed the
non proft think tank for improving
Food Security Bill and are quibbling
quality of governance in India.
over a subsidy bill (that of power in
,,
Delhi) that is way smaller
Former Head of
Grandson of former PM, Lal Bahadur
Victory of AAP is reaffirmation by
Sales (West
Shastri and son of current Congress
people in the values of transparency
India), Apple
leader Anil Shastri.
and probity as espoused by my
,,
40 year old MBA, who has spent over
grandfather Shastriji
15 years in telecom sector.
I had a cushy life with a great
company but somehow it did not feel
right. I was inspired by Arvind Kejriwal
and felt compelled to do more
,,
Popular singer
Rose to fame in 1970s and 1980s by
I've had enough of voting for different
from Goa
lending his music/songs to several
parties and different leaders and
popular movements which dealt
expecting change, but being short-
with social issues like making
changed each time. Like the saying
Konkani Goa's official language.
goes, if I want change, I have to BE
,,
Ambassador of Election Commission
the change
of India in 2012 to encourage voting
among youth.
Leading social
Led the historic peoples movement
In the national context, AAP is an IDEA
activist from Goa
in 2006-07 to get anti-Goa Regional
here to completely stay. Post 2014, if
and a practicing
Plan scrapped and save Goa from
Congress and the khichdi Third Front
doctor
total destruction of ecology and
comes to power it will be the same
natural beauty.
old power brokers, wheeler dealers,
Worked indefatigably for welfare of
and corrupt crony capitalists back in
Goa in various causes.
action
,,
Ex BJP MLA
Three term BJP MLA led farmers’
Now, with the help of this broom, I
,,
movement against Nirma Group
will clean up the filth from Gujarat
which wanted to set up a major
I am not against industries but
cement manufacturing plant in
against the industrial development
,,
Bhavnagar district..
at the cost of the poor and farmers
Mrs. Meera
Sanyal
Mr. Adarsh
Shastri
Mr. Remo
Fernandes
Dr. Oscar
Rebello
Mr. Kanu
Kalsaria
Founder of Air
Captain
G.R. Gopinath Deccan
Spent eight years in the Indian army,
earning the rank of Captain.
Founded Air Deccan, a low cost
airline.
In 2009 Lok Sabha elections, stood
unsuccessfully as an independent
candidate.
January 2014
,,
,,
,,
,,
,,
,,
,,
,,
,,
Past
association
Former CFO and
Director, Infosys
The biggest problem with political
parties today is that MPs treat their
constituencies like dirt and the high
command treats its MPs like dirt.
,,
Morals and values don't trickle down
A–44

India Strategy | Happy New Year
Annexure-III
Quotes from leading Industrialists and Journalists indicate mixed response for AAP
We have collated the reactions of the major industrialist and journalists on AAP's
victory in Delhi. While majority have appreciated the feat performed by AAP, there
are some who believe that AAP's socialist model will not last for long.
Mixed response for AAP
THOSE POSITIVE …
You do not need much money and other resources to
win elections. That’s the lesson at least I got from the
Aam Aadmi Party victory
N R Narayana Murthy,
Co- Founder and Executive Chairman, Infosys
Honesty isn’t just the best policy but the best politics
Anand Mahindra,
CMD, Mahindra & Mahindra
AAP is the 5th revolution in India's domestic politics
after the freedom struggle, socialist movement,
emergency and mandir/mandal politics
Shekhar Gupta, Editor-in-Chief, Indian Express
Political parties deal in creating distances. Kejriwal
has reduced distances between the politician and
the people
Santosh Desai, columnist for The Times of India,
MD & CEO of Futurebrands India Ltd
It is not necessary that he has to achieve all the goals
on the first day itself. This is how business leaders
function too. They set targets and goals and I’m glad
that he has set goals for his government to achieve. Whether,
he’ll be able to achieve and deliver only a part of the goals is
not a worry as opposed to not having any goals at all
Rajat Jain, Managing Director, Xerox India
Kejriwal's the Amol Palekar of Indian politics, the
man next door
Suhel Seth, Founder Equus Advertising
AAP can play a sport spoiler for few states but can't
be a riding force …. Better Kejriwal does, the better
it is for Modi because it signals a need for change
Rajdeep Sardesai, Editor-in-chief, IBN18 Network
... THOSE DITHERING
We should wait and watch …. Some goals seem
unrealistic because state government cannot print
money, unlike the Centre
Rahul Bajaj,
Chairman, Bajaj Auto
He is not tried and tested, so I am eager to see what
he does. But I am not wishing him away though there
are others who want to wish him away
Anand Burman,
Chairman, Dabur India
AAP forming govt is a good step. My only concern is
that they have been elected on big economic
promises for the poor and ideal principles for the
rich. An Utopian model which is difficult to live up to, but if
delivered will be laudable
Sunil Alagh, Former MD, Britannia
January 2014
A–45

India Strategy | Happy New Year
FED (TAP)ER
FII debt investors pre-empt but equity investors stay put
Private Financials, Technology, Automobiles witness highest FII flows
The US Fed recently announced the first round of tapering on its stimulus package from
January 2014, after a period of over 5 years in continuance. During this period, India
received USD109b, in aggregate, USD91b from equity and USD18b from debt.
The impact of tapering is clearly visible on the debt front with ~USD12b outflows in the
last seven months, since the talks of Fed taper first started. Accordingly, out of the total
debt flows of USD20b received since Nov-08, 40% of the cumulative debt flows (USD8b)
have been withdrawn by investors in CY13 alone.
Equity flows, on the other hand, continue unabated with CY13 receiving USD20b (3rd
highest equity flow ever). With the Fed taper imminent, India could see see moderation
in the flows. This will particularly impact the sectors / stocks where the FII holding is high.
In this section, we present our analysis on: (i) the beneficiary sectors/stocks which saw
maximum FII inflows during the QE phase, (ii) sectors/stocks where FIIs are overweight or
underweight relative to MSCI ETF. As and when the markets gets worried on the impact
of FII flows, these stocks are likely to be impacted.
US Federal Reserve stimulus package saw USD3.4t being infused over five
years
US Federal Reserve has announced three Quantitative Easing (QE), infusing USD3.4t
on aggregate basis. During this period, India received USD109b, USD91.0b from
equity and USD18.4b in debt.
The US Fed recently announced a minor taper of USD10b/month to its third stimulus
package of USD85b per month from January 2014, backed by strong household
spending in US and higher GDP growth.
This was the first round of tapering after a period of more than five years in
continuance.
Fed QE timelines
2008 Financial
Crisis
September/
October 2008
End of QE1
March 31, 2010
End of QE2
June 30, 2011
QE saw aggregate infusion of USD3.4t over 5 years
Particulars
QE1
QE2
QE3
Total
Start date
Dec-08
Nov-10
Sep-12
End date
Mar-10
Jun-11
Present
Amt (USD b)
1,650
600
1,140
3,390
QE1
Nov. 25, 2008
March 31, 2010
QE2
Nov. 3, 2010
June 30, 2011
QE3
Sept 13, 2012
to present
January 2014
A–46

India Strategy | Happy New Year
FII flows galore: Debt sees outflows during the recent months; equity flows
still healthy
For Indian markets, FII ownership is at all-time high at 20.9% at September 30,
2013. Even as a proportion of free float, FII ownership was at its peak of ~44%.
FIIs pumped in net flows of USD109b during the Quantitative Easing (QE) phase; of
which more than 4/5th was in equity (USD91.0b) while the remaining was in debt
(USD18.4b).
Debt has already seen FII outflows of ~USD12b over the past seven months since
the talks of tapering first started off. Thus, CY13 saw net debt outflows of USD8b
(highest ever).
However, net equity flows still remain healthy with USD90.9b in past 5 years. CY13
is the third best year with net equity inflows of USD20b. The past 5 months alone
have seen ~USD8b of net inflows.
FII ownership at its peak in 2QFY14
FII ownership as a proportion of free float at historic high
Stupendous equity inflows in the QE phase; huge debt outflows flows during CY13 (USD b)
January 2014
A–47

India Strategy | Happy New Year
Debt sees massive outflows of USD12b over the past 7 months (USD b)
However, equities continue to see healthy flows unabated; USD7b in last 5 months
Private financials, Technology and Automobiles are the major beneficiaries
With tapering of US stimulus package, we present sectors which have been the major
beneficiaries of FII flows:
Private financials, Utilities, Technology and Automobiles were the top sectors
seeing maximum FII inflows during CY09-CY13. Higher flows in Utilities was mainly
driven by Coal India's IPO bringing in USD2.5b.
Top 5 sectors received USD44.4b, more than 50% of the total FII flows giving healthy
market returns.
Surprisingly, the sectoral FII flows do not coincide with the sector performance
indicating that mere FII flows are not a determinant of stock performance.
3 out of the top 4 stocks comprised of Private Financials led by HDFC, Axis Bank
and HDFC Bank on account of consistently higher NII growth and stable asset
quality.
Bharti Airtel saw net FII outflow of USD1.4b over this period due to significant
growth concerns led by increased competitive scenario.
January 2014
A–48

India Strategy | Happy New Year
Analysis methodology
For the companies that constitute the BSE-200, we have calculated the quarterly
change in the number of shares owned by FIIs and multiplied it by the average price
for the quarter to derive the FII flows for the quarter. Our calculations may differ
from the actual FII flows due to the assumptions on purchase price and exchange
rate. For sectoral FII flow analysis, we have rebased our computed sector FII flows
for the BSE-200 companies to the total market FII flows for each of the years.
Private financials, Consumer, Technology are the biggest beneficiaries
Top 5 sectors received more than 50% of the total FII flows (USD b)
January 2014
A–49

India Strategy | Happy New Year
Sectoral FII flows (USD b)
Sectors
NBFC
Banks - Pvt
Utilities
Technology
Automobiles
Health Care
Consumer
Oil & Gas
Real Estate
Metals
Banks - PSU
Cement
Capital Goods
Media
Telecom
Misc
Total
Cumulative
10.7
10.6
9.2
7.2
6.7
5.5
5.3
5.3
5.2
4.5
3.0
2.9
1.6
1.2
-0.4
6.0
84.4
Jan-Sep
2013
0.8
2.3
2.2
2.1
0.2
2.2
-0.9
1.4
0.5
-0.1
0.0
0.4
0.1
0.4
0.3
1.4
13.4
CY12
4.9
3.2
0.8
2.9
1.9
1.6
2.5
2.0
0.0
1.0
0.9
0.7
1.0
0.1
0.7
0.6
24.5
CY11
0.0
-0.2
0.1
0.1
0.0
0.0
0.5
-0.1
-0.1
-0.2
-0.6
0.0
-0.2
0.1
0.1
0.1
-0.5
CY10
3.9
3.6
6.3
0.2
2.9
0.8
2.0
0.8
0.5
0.9
1.8
1.5
-0.1
0.6
0.3
3.3
29.3
CY09
1.0
1.7
-0.1
1.9
1.7
0.9
1.3
1.2
4.3
2.9
0.9
0.2
0.8
0.0
-1.7
0.6
17.6
Price Relative
CAGR (%) perf (pp)
20.5
4.4
25.7
9.6
-2.0
-18.1
40.0
23.8
40.9
24.8
31.0
14.9
33.0
16.9
7.9
-8.3
-13.5
-29.7
10.3
-5.9
4.9
-11.2
29.8
13.7
2.6
-13.5
24.2
8.1
0.5
-15.6
NA
NA
16.1
Top 20 companies receiving FII flows
Top companies witnessing FII outflows
January 2014
A–50

India Strategy | Happy New Year
FIIs overweight on Private Banks, Autos; underweight on Oil & Gas, Capital
Goods
In this section, we present the sectors/stocks in which FIIs are underweight or
overweight relative to MSCI ETF and BSE-200.
Relative to MSCI weights:
Our analysis suggests that FIIs are overweight on Private
Banks (459bp) and Auto (275bp) and underweight on Technology (414bp) and Oil &
Gas (298bp). Among stocks, FIIs are overweight on ICICI Bank (486bp), Tata Motors
(279bp) but underweight Reliance Ind (239bp), Infosys (177bp) and Wipro (109bp).
MSCI: Top 25 stocks comprising more than 75% of the total portfolio
Company name
Infosys
HDFC
Reliance Industries
HDFC Bank
Tata Consultancy Services
ITC
Hindustan Unilever
Sun Pharmaceutical Industries
Wipro
Larsen & Toubro
Mahindra & Mahindra
Tata Motors
HCL Technologies
Dr Reddy's Laboratories
State Bank of India
ICICI Bank
Kotak Mahindra Bank
Oil & Natural Gas Corp
United Spirits
Sesa Sterlite
Bharti Airtel
Tech Mahindra
Hero MotoCorp
Bajaj Auto
Cairn India
Total
MSCI weight (%)
10.8
7.9
7.7
7.0
6.8
4.8
2.5
2.4
2.3
2.3
2.0
1.9
1.8
1.7
1.6
1.6
1.6
1.5
1.5
1.4
1.3
1.3
1.1
1.1
1.0
77.0
FII weight (%)
9.1
8.3
5.3
6.8
5.8
5.0
2.0
2.7
1.2
1.3
2.0
4.7
1.9
1.9
1.2
6.5
1.5
1.4
1.5
1.3
1.9
1.0
1.2
1.0
0.9
77.2
FII weight relative
to MSCI ETF (bp)
-177
38
-239
-17
-105
21
-53
27
-109
-99
1
279
12
17
-40
486
-1
-8
0
-10
60
-34
5
-10
-17
Sectoral difference between MSCI weights and FII weights
(bp): FIIs were overweight Pvt Banks, Autos;
underweight Technology and Oil & Gas
Difference between MSCI weights and FII weights (bp): ICICI
Bank, Tata Motors saw higher FII interest, while RIL and
Infosys saw less favor
Note: FII weight is as on September 30, 2013. MSCI weights is based on the ETF weight of MSCI as on December 30, 2013
January 2014
A–51

India Strategy | Happy New Year
MOSL model
portfolio
Sector / Portfolio Picks
Nifty-50
26.1
16.2
6.0
6.1
6.7
6.0
0.7
0.0
3.2
2.2
0.6
16.9
8.1
5.4
0.0
8.9
3.3
1.2
1.1
6.0
2.1
1.0
0.0
0.0
11.7
7.1
2.5
0.4
11.6
8.6
0.0
1.9
1.9
0.0
4.4
0.5
0.8
8.4
4.2
0.5
4.0
0.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
100.0
MOSL Wt
25.0
14
7
7
7
3
2
2
4
2
2
17.0
8
5
4
9.0
4
3
2
8.0
3
2
2
1
8.0
3
3
2
7.0
6
1
5.0
3
2
4.0
2
2
4.0
2
2
2.0
2
11.0
1
1
1
1
1
1
1
1
1
1
1
0.0
100.0
Wt relative to Nifty-50
-1.1
-2.2
1.0
0.9
0.3
-3.0
1.3
2.0
0.8
-0.2
1.4
0.1
-0.1
-0.4
4.0
0.1
0.7
1.8
0.9
2.0
0.9
1.0
2.0
1.0
-3.7
-4.1
0.5
1.6
-4.6
-2.6
1.0
3.1
1.1
2.0
-0.4
1.5
1.2
-4.4
-2.2
1.5
-2.0
1.1
11.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
0.00
Sector Stance
Neutral
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Overweight
Buy
Neutral
Buy
Overweight
Buy
Buy
Buy
Overweight
Buy
Buy
Buy
Buy
Underweight
Neutral
Buy
Buy
Underweight
Buy
Buy
Overweight
Buy
Buy
Neutral
Buy
Buy
Underweight
Buy
Buy
Underweight
Neutral
Overweight
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Financials
Private
HDFC Bank
ICICI Bank
NBFCs
HDFC
IDFC
LIC Housing
PSU
SBI
BOB
Technology
Infosys
TCS
Tech Mahindra
Auto
Tata Motors
Hero Motocorp
Maruti
Healthcare
Sun Pharma
Lupin
Divi's Lab
IPCA
Energy
Reliance Inds.
ONGC
BPCL
Consumer / Retail
ITC
Marico
Telecom
Bharti Airtel
Idea Cellular
Metals
NMDC
Hindalco
Infrastructure & Related sectors
Larsen & Toubro
ACC
Utilities
Coal India
Others
Sobha Developers
PVR
TVS Motor
Eicher Motors
Bata
Shree Cement
Crompton Greaves
SUN TV
Petronet
DB Corp
UPL
Cash
Total
January 2014
A–52

India Strategy | Happy New Year
3QFY14 PREVIEW Theme similar to 2Q: Globals do, locals undo
2Q earnings rebound sustained; Aggregate PAT up 10%; Sensex PAT up 13%
We expect MOSL Universe of 143 companies (ex RMs) to report aggregate 3QFY14 PAT
growth of 10% YoY, sustaining the earnings rebound in 2QFY14 (+8% YoY v/s estimated
3% YoY). 4QFY14 PAT growth is expected to be an even higher 13% YoY.
As in 2Q, expect global-facing sectors like Technology, Healthcare and Metals to outperform
their domestic-facing counterparts thanks to 15% YoY depreciation of the INR vis-à-vis
the USD.
Expect Sensex 3QFY14 PAT to grow 13% YoY.
Within Sensex, top 5 PAT growth companies are: Tata Steel (loss to profit), Bharti (+299%
YoY), Tata Motors (+89%), TCS (+48%) and Sun Pharma (+44%). Top 5 PAT de-growth
companies: BHEL (-56% YoY), State Bank (-33%), Sesa Sterlite (-21%), Tata Power (-10%)
and Coal India (-8%).
Macroeconomic backdrop: Adverse for locals, favorable for globals
The macroeconomic backdrop for 3QFY14 has remained adverse for most domestic
businesses; however, economic recovery in the developed world and the strong dollar
favored specific global-facing sectors and companies.
IIP remained at almost zero, with no improvement in the investment climate
Festival demand was unexciting; no boost for sectors like Autos, Cement and Real
Estate
INR though sequentially stable was still down 15% YoY
Western economies are in strong recovery mode.
YTDFY14 IIP growth is 0%
INR is stable sequentially but still down about 15% YoY
USD/INR - Qtr average
Expect 3QFY14 Aggregate PAT to grow 10% YoY; Sales growth is strong at
12%
We expect MOSL Universe of 143 companies (excluding RMs i.e. 3 major oil refining &
marketing companies IOC, BPCL, HPCL) to report aggregate 3QFY14 PAT growth of 10%
YoY. This sustains the earnings rebound witnessed in 2QFY14 (+8% YoY v/s estimated
3% YoY), following 6 successive quarters of lower earnings growth culminating in 2%
YoY de-growth in 1QFY14. Sales growth is at 12%, while EBIDTA growth is 13%. 4QFY14
PAT growth is expected to be an even higher 13% YoY, driving 2HFY14 PAT growth to
January 2014
A–53

India Strategy | Happy New Year
12% YoY (v/s 2% YoY for 2HFY13 and 4% YoY for 1HFY14). Full year FY14 PAT growth is
estimated at 7% YoY v/s 3% in FY13. FY15 PAT growth is estimated at 16% and early
estimates for FY16 suggest this growth momentum will be sustained.
Analyzing the Dec-13 quarter results by sector clearly suggests the significant role of
the “global hand” i.e. gradually economic recovery in the developed world and the
strong US dollar.
Technology, Metals and Healthcare – all USD-led revenue sectors – are expected
to report PAT growth of over 30%, predictably benefiting from the weaker INR YoY.
Interestingly, even the high 42% YoY PAT growth of the Auto sector has multiple
aspects of global hand/currency at play: (1) Tata Motors’ PAT (50% of Auto sector
PAT) is expected to grow 89% YoY led by US-subsidiary JLR, (2) Bajaj, despite 4%
sales de-growth, is expected to report 6% PAT growth due to high margins on
exports led by weak INR, and (3) Both Maruti Suzuki and Hero MotoCorp are
beneficiaries of the strong USD vis-à-vis the yen, ensuring that EBITDA and PAT
growth is much higher than revenue growth.
Within domestic businesses, the underlying trend for the 3-4 quarters is the gross
underperformance of cyclicals vis-à-vis the seculars:
Cement, PSU Banks, Real Estate and Capitals Goods are the top PAT de-growth
sectors by far.
The Financials sector overall is expected to report PAT de-growth (-4% YoY) for the
second quarter in succession. However, within Financials, NBFCs (PAT +16% YoY)
and Private Banks (PAT +14% YoY) are likely to deliver much superior performance
than the cyclically more vulnerable PSU Banks (PAT -29% YoY).
3QFY14 performance of MOSL Universe by sector: Globals do, locals undo
SECTOR
(no. of companies)
High growth sectors
Telecom (4)
Auto (9)
Technology (10)
Metals (9)
Health Care (13)
Media (7)
NBFC (8)
Med/Low growth sectors
Private Banks (8)
Consumer (13)
PAT de-growth sectors
Retail (4)
Oil Excl. RMs (9)
Utilities (10)
Capital Goods (8)
Real Estate (9)
PSU Banks (8)
Cement (8)
Others (6)
MOSL Excl. RMs (143)
Sensex (30)
January 2014
Sales
Dec-13
YoY %
3,382
368
1,005
517
1,127
233
41
90
491
153
338
3,332
67
1,780
601
364
49
293
176
62
7,266
5,003
17
12
16
30
13
22
18
19
14
19
12
8
-6
10
8
1
18
12
-2
14
12
13
EBITDA
Dec-13
YoY %
774
122
139
143
219
53
13
85
205
132
73
703
6
273
161
34
17
185
26
11
1,692
1,071
29
23
39
37
28
27
15
20
16
18
14
-1
-1
1
4
-15
42
-3
-24
17
13
14
PAT
Dec-13
YoY %
372
23
65
106
82
35
6
55
129
78
51
355
3
166
91
21
6
58
10
6
861
563
37
163
42
39
36
30
22
16
14
14
13
-10
0
0
-2
-23
-27
-29
-38
22
10
13
PAT
Share %
43
3
8
12
10
4
1
6
15
9
6
41
0
19
11
2
1
7
1
1
100
Delta
Share %
131
19
25
39
28
10
1
10
20
12
8
-53
0
0
-2
-8
-3
-31
-8
1
100
EBITDA Margins
Dec-13
YoY bp
22.9
33.1
13.8
27.7
19.4
22.7
30.6
94.1
41.7
86.4
21.5
21.1
9.4
15.4
26.8
9.3
35.1
63.2
14.5
17.5
23.3
21.4
217
306
230
144
217
99
-85
96
97
-68
46
-188
51
-142
-112
-178
587
-959
-421
53
19
27
A–54

India Strategy | Happy New Year
Dec-13 quarter pat growth should improve to 10% YoY; still, well below LPA of 14%
Earnings growth seems to have bottomed out; expect mean reversion to 15-17% levels
Dec-13 quarter sales growth, well below LPA of 21%
Dec-13 quarter EBITDA growth at 13% YoY; 12th consecutive quarter growth below LPA of 17%
January 2014
A–55

India Strategy | Happy New Year
Dec-13 EBITDA margin (ex RMs and Financials) at 19.2%; below LPA for several quarters now
Dec-13 PAT margin (ex RMs and Financials) at 10.1%; below LPA for several quarters now
% Revison in 2HFY14E sector PAT in last 3mth % Revison in 2HFY14E companies PAT in last 3mth
Companies reporting PAT de-growth lowest in the last 10 quarters
The distribution of PAT growth also suggests a major improvement over recent quarters –
Firstly, 29% of 146 companies in MOSL Universe are expected to report PAT de-
growth. This is the lowest level in the last 11 quarters.
Likewise, 42% of companies are likely to see PAT growth higher than 15% which is
marginally higher than the preceding 3 quarters.
An interesting observation is that 47-48% of the companies lie in the PAT growth
band of 0-30%. This is among the highest ever, indicating that increasingly, PAT
growth will veer around the long-period mean of 15%.
A–56
January 2014

India Strategy | Happy New Year
PAT distribution improving; fewer companies reporting PAT de-growth
Expect Sensex PAT growth of 13% YoY; further acceleration to 16% in 4Q
Based on bottom-up estimates of its 30 constituent companies, Sensex 3QFY14
PAT is expected to grow 13% YoY. This is the highest growth in the last 6 quarters.
For 4QFY14, PAT growth is expected to be even higher at 16% YoY, lends further
credence to mean reversion of earnings growth to 15-17% levels.
Sales growth for Sensex-30 is also strong at 13%, while EBIDTA growth is 14%.
While EBIDTA margins are up 27bps YoY to 21.4%, PAT margins are stable at 11.2%.
Several companies will report big growth numbers due to a very low base. The top
5 PAT growth companies are expected to be: Tata Steel (loss to profit), Bharti
(+299% YoY), Tata Motors (+89%), TCS (+48%) and Sun Pharma (+44%). Few other
strong growing names are: Maruti (31%), HDFC Bank (25%), Hero Moto (22%) and
Dr Reddy’s (24%).
The top 5 PAT de-growth companies are expected to be largely cyclicals: BHEL (-
56% YoY), State Bank (-33%), Sesa Sterlite (-21%), Tata Power (-10%) and Coal India
(-8%).
Expect 3QFY14 Sensex PAT growth of 13% YoY, the highest in the last 6 quarters
January 2014
A–57

India Strategy | Happy New Year
Sensex Companies 3QFY14E Performance (INR b)
Company
Sales
Dec-13 Var % YoY
EBITDA
Dec-13 Var % YoY
PAT
Dec-13 Var % YoY
PAT Contb.
(%)
Gr. (%)
124
25
14
25
28
6
3
2
8
1
2
6
3
24
5
3
4
4
2
1
1
0
3
1
-48
-1
-5
-7
0
-6
-18
-11
100
EBITDA margin
Dec-13 Var (bp)
21
12
32
15
32
40
12
10
80
22
11
27
104
33
39
95
97
23
15
17
21
22
53
10
16
14
7
25
17
34
56
11
21
261
458
228
223
276
-210
358
131
114
170
232
-144
86
32
144
-3
-198
-220
197
14
263
-177
-80
-29
-218
-153
-173
1
-332
10
-1373
-566
18
High PAT Growth (8)
2,063
20
424
37
Tata Steel
362
13
42
87
Bharti Airtel
220
14
71
22
Tata Motors
604
31
88
55
TCS
214
33
68
46
Sun Pharma
39
44
16
37
Maruti Suzuki
109
-3
13
41
Hindalco
217
11
22
27
HDFC Bank
47
18
37
19
Dr Reddy’ s Labs
36
25
8
36
Hero Motocorp
68
10
7
40
Infosys
130
25
35
19
HDFC
17
13
18
14
Med/Low PAT Growth (10)
970
7
320
8
ITC
85
10
33
14
Axis Bank
30
20
28
20
ICICI Bank
43
22
41
20
NTPC
170
8
39
-2
Mahindra & Mahindra
102
-1
16
14
Hind. Unilever
73
10
12
10
Bajaj Auto
52
-4
11
10
Cipla
27
28
6
19
ONGC
221
5
117
4
Larsen & Toubro
168
9
17
6
Negative PAT Growth (12)
1,857
9
305
-4
GAIL
150
21
21
9
Reliance Inds.
1,019
9
73
-13
Coal India
184
6
45
6
Tata Power
98
8
17
-10
Sesa Sterlite
196
15
67
15
State Bank
127
14
71
-8
BHEL
84
-16
9
-45
Sensex (29)
4,890
13
1,048
14
Note:
For Financials, Sales represents Net Interest Income, and EBITDA
203
59
37
8
LP
1
11
299
2
33
89
6
53
48
10
12
44
2
7
32
1
6
30
1
23
25
4
5
24
1
6
22
1
28
17
5
13
15
2
188
8
35
23
14
4
15
13
3
25
12
5
25
11
5
10
11
2
9
8
2
9
6
2
4
6
1
58
4
11
11
3
2
151
-16
28
12
-4
2
52
-5
10
43
-8
8
2
-10
0
13
-21
2
23
-33
4
5
-56
1
543
13
100
represents Operating Profit
Nifty and the dollar divide: Trend of 2QFY14 continues in 3QFY14 too
In 2QFY14, the sharp currency depreciation had played a very important role in
driving the Nifty earnings. Even though in 3QFY14, the INR has remained stable
QoQ, it remains significantly depreciated on a YoY basis, which is still fuelling the
aggregate growth.
We classified the 50 Nifty companies into (1) USD-denominated and (2) Others.
The USD-denominated Nifty includes Technology, Healthcare, Metals, Oil & Gas
(Reliance, Cairn) and Tata Motors’ JLR operations and this now constitutes 42-44%
of the total Nifty earnings. The key findings are as under -
USD-denominated Nifty is expected to clock aggregate PAT growth of 29% YoY,
whereas others are likely to see flat PAT growth. Sales growth for USD will be 19%,
while for others growth is 8%.
Such a steep depreciation of the rupee will lead to a 120bps YoY margin expansion
for USD- denominated companies, while the domestic businesses will see a drop
of 30bps.
January 2014
A–58

India Strategy | Happy New Year
We expect the YoY currency impact to benefit the USD-denominated Universe for
another two quarters. This is built in our 25% growth in earnings for them in 4Q
also. However, the domestic businesses will see a marginal rebound in growth
rates to 10% in 4Q, still underperforming the aggregate Universe.
Nifty - USD sales growth poised to sky-rocket …
… but no major impact on margins
EBITDA growth in line with sales growth for USD & non-USD
Expect USD PAT growth to be much higher than non-USD
OVERALL
Expect Technology, Consumer, Private Financials (Banks, NBFCs) and Media to
clock their highest ever sector PAT in a quarter.
Autos and Healthcare should see the highest ever December quarter PAT. In
contrast, for Cement , this is the lowest ever December quarter PAT since 2006,
and for Capital Goods since 2008.
Consumer, Technology and Telecom are the only sectors where all companies are
expected to clock positive PAT growth.
Only one company is expected to de-grow PAT in each of Healthcare (GSK Pharma)
and Private Banks (Federal Bank). In contrast, in PSU banks, only one company is
expected not to de-grow (Union Bank, that too a marginal 2% YoY PAT growth).
January 2014
A–59

India Strategy | Happy New Year
3QFY14 Sales growth by sector (%)
3QFY14 EBITDA Margin YoY delta by sector (bp)
3QFY14 EBITDA growth by sector (%)
3QFY14 PAT growth by sector (%)
Contribution to 3QFY14 PAT growth by sector (%)
Sector mix of 3QFY14 PAT (%)
January 2014
A–60

India Strategy | Happy New Year
Other sector
highlights
AUTOS
PAT growth of 42% YoY is primarily led by 89% YoY growth in Tata Motors PAT on the
back of JLR. Ex Tata Motors, sector PAT growth is 13%, driven by Maruti Suzuki (32%
YoY) and Hero Moto (22% YoY) benefitting from favorable JPY movement.
Ashok Leyland and Tata Motors (standalone) are expected to report QoQ increase
in losses on the back of low volumes and higher discounting pressure.
Two-wheelers:
After negative growth in FY13 and expected muted growth of 9%
in FY14, two-wheeler PAT should see a bounce back in FY15 on the back of:
(1) Expected revival in volumes with improvement in macro-economic and
consumer sentiments,
(2) Significant reduction in royalty payments for Hero MotoCorp, and
(3) Continued benefit of weak INR reflecting in Bajaj Auto’s profits from exports.
AUTOS: Highest ever December quarter PAT
CAPITAL GOODS
Facilitation of Project Monitoring Group (PMG) in getting mandatory approvals for
INR 340b for infrastructural projects was the key positive to be highlighted for
3QFY14. However, we await more clarity on the incremental pace of project
execution post the same.
Given strong sectoral headwinds, we expect marginal revenue growth for 3QFY14
leading to 15% YoY EBITDA de-growth and 23% YoY PAT de-growth. Amidst turmoil,
expect L&T to stand firm and maintain PAT YoY.
Key triggers to watch:
(1) Order inflow guidance by ABB and Siemens, especially
for short-term gestation orders, and (2) Volume guidance by Cummins because of
implementation of CPCB 2 norm.
CAPITAL GOODS: Lowest Dec quarter PAT since 2008
January 2014
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India Strategy | Happy New Year
CEMENT
Expect all companies (except Birla Corp) to clock YoY PAT de-growth; many mid-
caps will even post QoQ de-growth.
Non-recovery of cement demand post monsoon, leading to price roll back was a
negative surprise. As a result, hope of sector recovery in 4QFY14 remains uncertain.
CEMENT: Lowest Dec quarter PAT since 2006
CONSUMER
Expect 12% sales growth and 15% PAT growth for the sector led by ITC (+14%),
Godrej Consumer (+37%) and Britannia (+62%).
Volume growth should mirror 2QFY14, and rural-urban gap in growth rates should
narrow.
Expect soft commentary/guidance for topline growth from FMCG managements.
CONSUMER: Highest ever PAT in a quarter
FINANCIALS
State-owned banks:
Earnings pressure should continue (PAT down 30% YoY) on
the back of lower NIM YoY, higher NPA provisions and MTM losses on their securities
portfolio. But the key here is expected stabilization in core operations and asset
quality trend – which would be viewed positively despite lower earnings growth.
Private banks:
Despite NII growth of 19% and PPP growth of 18%, PAT growth is
expected to moderate to 14% YoY given higher credit cost. HDFCB PAT growth is
expected to be highest among peers at 25% YoY.
NBFC:
Expect health PAT growth of 16%+ YoY led by state-owned power financiers
(PFC, REC) and strong growth in LICHF and MMFS.
January 2014
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India Strategy | Happy New Year
PRIVATE FINANCIALS (BANKS, NBFCs): Highest ever PAT in a quarter
HEALTHCARE
Expect a strong quarter as slowing revenue growth in India (due to new pricing
policy) will be more than offset by high growth in US and emerging markets.
EBITDA margins should expand 100bp YoY, primarily driven by (1) 14.5% YoY
depreciation in USD/INR, and (2) improving sales mix. Ranbaxy and Divi’s Labs are
also expected to benefit from low-base effect.
Further, INR has remained flat QoQ; hence, major MTM loss on forex liabilities is
unlikely. Expect sector PAT to grow 30% YoY, higher than EBITDA growth of 27%.
Key outperformers are expected to be Ranbaxy, Dr Reddy’s, Glenmark and Divi’s.
GSK Pharma’s operations may continue to be impacted by supply-chain and trade-
channel related issues
HEALTHCARE: Highest ever December quarter PAT
METALS
Expect health growth in Sales (+13% YoY) and PAT (36% YoY) on the back of profit
rebound in JSW Steel, Nalco, SAIL, Hindalco and NMDC. However, QoQ Sales will
likely remain flat and PAT up 6%.
Ferrous:
Most steel producers are expected to report flat QoQ volumes while
margins are expected be higher due to higher realizations.
Non-ferrous:
Realizations will be better QoQ for zinc and lead but flat for
Aluminum. Overall, expect PAT to remain almost flat QoQ (+2%).
January 2014
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India Strategy | Happy New Year
TELECOM
PAT is expected to grow 164% YoY and 54% QoQ given significant operating and
financial leverage.
Finance costs are expected to decline YoY led by lower leverage and relief on
forex losses given stable USD/INR during 3QFY14.
TELECOM: Highest ever quarter PAT since December 2010
MEDIA: Highest ever PAT in a quarter
January 2014
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India Strategy | Happy New Year
Intra-sector 3QFY14 earnings divergence (%)
Sectors
Sector
Growth (%)
+30% Growth
15-30% growth
0-15% growth
-ve earnings
growth (%)
Earnings
momentum
0
0
2
1
High growth sectors
Telecom
163
Autos
Metals
Technology
Healthcare
42
36
35
30
Media
NBFC
22
16
BHARTI: 299, RCOM: 188,
IDEA: 121, BHIN: 39
Tata Motors: 89,
EIM: 29, TVSL: 24,
Maruti: 32
HMCL: 22
JSW Steel: 121,
Hindalco: 30,
SAIL: 31, Tata Steel: LP
NMDC: 22
TECHM: 132, HCLT: 49,
Infosys: 17
TCS: 48
CDH: 46, SUNP: 44.
Dr. Reddy's: 24,
IPCA: 35, Lupin: 35,
DIVI: 23,
Ranbaxy Labs: LP
Biocon: 20
PVR: 146,
D B Corp: 17
Jagran Prakashan: 48
LIC Housing: 43
MMFS: 25, BAF: 22,
PFC: 20, REC: 19
HDFC Bank: 25,
IndusInd Bank: 19
United Spirits: 19,
Dabur: 17,
Pidilite Inds: 17
Grasim: 25
4
0
M&M: 11,
Bajaj Auto: 6
Hind. Zinc: 9
KPIT: 11, PSYS: 6,
MPHL: 4
Glenmark: 12,
Cipla: 6
Zee Ent.: 12,
HT Media: 9
HDFC: 15
Ashok
2
4
Leyland: Loss
Sesa Sterlite: -21,
2
4
JSPL: -22
1
2
0
1
4
4
1
GSK Pharma: -36
5
Sun TV: -1,
Dish TV: Loss
SHTF: -3,
IDFC: -5
4
3
2
1
1
4
2
2
1
2
Medium/Low growth sectors
Banks-Private
14
Consumer
13
Britannia: 63,
GCPL: 37
AXSB: 13, ICICIBC: 12, Federal Bank: -21
YES: 11, KMB: 0
ITC: 14, APNT: 9,
NEST/HUVR: 8,
MRCO:7
Birla Corp: 11
0
2
5
1
0
7
3
3
PAT degrowth sectors
Cement
-38
ACEM: -29, ACC: -33,
SRCM: -35,
UTCEM: -48
Banks - PSU
-29
Union Bank: 2
BOB: -4,
OBC:-23, BOI:-24,
SBI: -33, PNB: -42
Real Estate
-27
MLIFE: 28,
GPL: 10, PHNX: 5,
PEPL: -16,
IBREL: 19
Sobha Dev.: 2
OBER: -35, DLF: -60
Capital Goods
-23
Crompton: 315,
Havells India: 23
L&T: 3
TMX: -2, KKC: -24,
ABB: 238
BHEL: -56
Utilities
-2
CESC: 26,
PTCIN: 15, NTPC: 11, COAL: -8, TPWR: -10,
PWGR: 8, NHPC: 5
JSW: -18,
RELI: -20
Retail
-0.1
Shopper's Stop: 32
Jubi. Foodworks: 9, Future Retail: PL
Titan: 1
Oil & Gas
-0.1
MRPL: LP
IGL: 10, ONGC: 4,
GSPL: -3, GAIL: -4,
(Ex RMs)
Oil India: 0
RIL: -5%, CAIR: -7
PLNG: -53
Earnings momentum:
Represents number of companies in each of the growth brackets; PL: Profit to Loss; LP: Loss to
0
1
1
6
0
0
0
1
7
2
3
4
1
4
4
5
2
1
2
1
0
1
1
0
1
0
3
5
Profit
January 2014
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India Strategy | Happy New Year
FY14/15 ESTIMATES
Downgrades take a breather as exports fuel growth
Sensex FY14 EPS upgraded to 11% growth; Expect FY15 growth of 15%
MOSL Aggregate PAT to grow 7% in FY14; expect rebound in FY15 to 16%. Sales growth of
12% in FY14 will see some moderation to 10% in FY15.
Sensex EPS to grow by 11% in FY14 to 1,317 and further accelerate to 15% in FY15 to
1,518. Downgrades to Sensex EPS have taken a breather. In fact, strong earnings from
export driven businesses (benefitting from weak INR) have led to upgrades of 2% in FY14
and 3% in FY15 EPS.
For 2HFY14, the prominent upgrades have been in Tata Motors, Tata Steel, ICICI Bank,
Maruti, TCS. The stocks to see top downgrades are Sesa Sterlite, BHEL, SBI, Cipla, Coal
India.
Our early estimates suggest the growth of 15% may continue into FY16 as well.
Aggregate PAT to grow 7% in FY14; expect rebound in FY15 to 16%
Based on bottom-up estimates, we expect MOSL Universe of 156 companies (ex RMs)
to report aggregate FY14 PAT growth of 7% YoY. Growth is dragged down by two major
factors –
First ever de-growth in Financials (-2%), a heavyweight sector accounting for 25%
of FY13 Aggregate PAT; and
Low 7% growth in Oil & Gas (ex RMs), which has the second highest share of FY13
Aggregate PAT (18%).
In FY15, aggregate PAT growth is expected to rebound to 16%, largely led by a bounce
back in these very two sectors, coupled with Telecom re-entering the high profit
growth zone following easing up of competitive intensity. Few domestic cyclicals
(Capital Goods, Cement) will also contribute to growth, post a sharp decline in FY14.
The export facing sectors growth rates will moderate as we build stable currency in
FY15 over FY14 (growth in FY14 was significantly aided by a big currency depreciation).
Expected FY14 PAT growth muted at 7%....
….sales growth also at 12%
January 2014
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India Strategy | Happy New Year
MOSL Universe FY14/FY15 estimates: Expect 16% PAT growth in FY15
Sales
Sector
(INR b)
(No of Companies)
FY13
High PAT CAGR (>20%)
2,752
Telecom (4)
1,306
Cement (13)
1,108
Real Estate (9)
195
Media (8)
143
Medium PAT CAGR (15-20%) 10,028
Retail (3)
137
Consumer (13)
1,190
Health Care (13)
791
Financials (31)
2,197
PSU Banks (12)
1,359
Private Banks (10)
541
NBFC (9)
296
Auto (9)
3,773
Technology (10)
1,940
Low PAT CAGR (<15%)
15,212
Metals (9)
4,205
Oil Ex. RMs (10)
7,416
Utilities (10)
2,015
Capital Goods (8)
1,576
Others (6)
210
MOSL Excl. RMs (156)
28,202
Sensex (30)
9,633
Nifty (50)
10,889
Sales Gr./
EBIDTA
Margin
EBIDTA
PAT
PAT Gr. /
PAT
CAGR
EBIDTA Margin
Delta
CAGR (INR
CAGR
delta
(%)
(INR b)
(%)
(bp)
(%)
b)
(%)
FY13-15
FY14E FY15E FY13-15 FY13 FY13 FY14E FY15E (FY13-15) FY13 FY14E FY15E FY13-15 shr (%)
8
12
10
744 27.0
-7 151
13 204
3
46
22
12
11
10
11
397 30.4
274 144
18
45
82
65
73
11
0
14
7
235 21.2
-474 200
0 111
-33
38
-4
-1
18
13
16
71 36.5
17 147
18
30
1
29
14
1
17
14
16
41 28.7
85
61
19
19
25
25
25
1
16
14
15 3,159 31.5
5
13
16 1,788
11
16
14
62
15
21
18
14 10.1
-42
31
17
9
6
19
12
0
11
15
13
242 20.4
56
23
15 166
15
19
17
7
19
14
16
194 24.5
-99 192
19 110
28
18
23
7
14
15
15 1,735 79.0
-323
11
12 904
-2
16
6
14
11
14
12
997 73.4
-657
2
7 432
-23
18
-5
-5
19
17
18
452 83.5
238
-3
20 278
17
16
16
12
22
15
18
286 96.4
-149
4
17 193
16
13
15
7
13
15
14
484 12.8
165
2
21 228
25
16
20
12
27
12
19
489 25.2
102
-31
21 372
30
15
22
22
9
6
8 2,717 17.9
-47 102
9 1,461
3
11
7
25
7
9
8
792 18.8
61
57
11 308
6
12
9
7
14
4
9 1,132 15.3
-100 141
10 642
7
12
9
15
6
12
9
603 29.9
80
11
11 377
4
11
8
7
-1
3
1
189 12.0
-201
-20
-9 134
-26
1
-13
-4
12
11
12
35 16.8
66
70
16
20
11
18
14
1
12
10
11 6,654 23.6
-6
96
13 3,473
7
16
11
100
6
9
8 1,875 19.5
130 100
14 1,011
9
15
12
NA
13
9
11 2,170 19.9
97 103
17 1,182
12
15
14
NA
50% of FY13-15 PAT delta comes from just 3 sectors
Technology, Oil & Gas, Financials
Sectorwise PAT CAGR (%)
FY14/15 Sector earnings: Interesting observations
TELECOM:
After four consecutive years of PAT decline, easing competitive pressure
should cause Telecom sector profits to rebound sharply in FY14 and FY15 with
growth rates of 65-81% per annum. Bharti will lead this growth as earnings grow
by 51% in FY14, 73% in FY15.
AUTO:
After negative growth in FY13, the sector earnings rebounding with 25%
growth in FY14 and extending by 16% further in FY15. While Tata Motors and M&M
are the growth drivers in FY14, Hero and Maruti will lead the earnings in FY15 on
the back of: (1) Healthy monsoon reviving volume growth, especially in rural India,
January 2014
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India Strategy | Happy New Year
(2) No royalty burden for Hero MotoCorp, and (3) Full benefit of INR benefits in
Maruti's earnings.
CEMENT:
Like Autos, even Cement would benefit from expected higher rural
demand in FY15 on the back of good monsoon led higher rural GDP growth. This
should help the sector reverse the muted PAT performance of the preceding years
i.e. 4% growth in FY13 and 33% de-growth in FY14. We expect growth to revive by
38% in FY15.
FINANCIALS:
The sector will report its first decline of 2% in FY14, but should see
growth rebounding to 16% in FY15 as credit cost pressure eases on PSU Banks.
Private Banks will grow at 15-17% in both the years. Economic recovery could lead
to upgrade in their estimates in 2HFY15.
HEALTHCARE v/s TECHNOLOGY:
In FY14, both Healthcare and Technology sectors
are expected to clock similar healthy growth rates of 28-29%, on the back of weak
INR. Going forward, our numbers do not factor in further weakening of the INR.
This will lead to moderation in growth rates in FY15 to 14-18% for these two sectors.
FY13-15 Sensex EPS CAGR at 14%
We now expect Sensex EPS CAGR of 14% over FY13-15, up from the estimate of 11%, a
quarter back. As the growth rates revert back to the long-period mean of 15%, the
composition has significantly shifted in favor of the export facing sectors.
We believe that clarity on domestic investment climate will be important, post the
Elections 2014 for the domestic businesses to see any recovery, that can further aid
the growth rates in 2HFY15.
FY08-13 EPS CAGR at 7%; expect rebound in FY13-15
January 2014
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India Strategy | Happy New Year
Sensex Perfomance: Expect FY13-15 PAT CAGR of 14%
Sales
EBIDTA EBITDA
Sales (INR b)
CAGR Margin (%)
CAGR
FY13
FY14 FY15
% FY14 FY15
%
5,171
769
236
722
158
612
442
1,624
609
9,860
404
647
299
200
112
1,347
116
802
630
62
3,603
97
374
687
83
139
258
3,624
1,888
683
96
473
484
18,655
5,616
6,247
10
11
11
7
20
12
6
10
10
9
18
8
13
8
30
4
15
11
22
15
5
18
14
9
18
17
11
13
20
5
10
19
-18
10
32.3
33.5
11
17
32
7
25
5
22
10
9
15
16
5
15
15
27
21
18
18
25
14
8
19
18
10
9
18
12
10
26
8
13
6
-40
13
862
951
253
289
721
829
186
226
684
764
442
498
1,810 1,950
658
738
11,063 11,812
505
565
660
759
331
380
203
234
160
190
1,425 1,467
136
153
868
991
824
944
71
82
4,043 3,982
118
135
435
490
735
815
102
115
166
191
281
319
4,114 4,588
2,331 2,720
711
755
105
115
570
671
396
326
20,793 22,647
32.3 33.7
11.0 13.5
36.3 35.3
76.1 79.4
57.9 59.9
12.0 12.8
32.4 34.1
10.3 10.3
18.0 19.3
26.7 27.6
25.0 24.8
37.0 36.9
20.7 20.7
43.2 41.8
11.5 12.4
21.8 22.5
10.0 11.3
30.9 29.7
106.4 106.4
7.5
9.0
97.6 96.7
22.2 22.1
13.2 13.6
23.1 22.8
97.7 96.6
15.8 15.8
17.4 16.6
16.2 15.5
27.6 27.7
23.4 22.4
12.5 10.6
11.9 10.3
21.7 22.7
PAT (INR b)
FY13 FY14 FY15
668
658
825
PAT
PAT Contbn %
YoY (%)
CAGR to FY15
FY14 FY15
%
delta
-2
25
75
36
27
25
22
22
20
20
14
19
18
17
17
17
16
16
14
14
14
14
13
12
11
11
10
10
2
8
7
-4
-13
-33
15
11
66
21
8
26
-5
21
12
-1
17
15
14
16
13
32
447
22
-7
24
13
8
15
19
18
21
13
9
3
23
4
-4
-4
-40
14
47
8
2
4
6
8
2
15
2
51
6
5
4
2
2
2
1
1
8
2
8
2
3
1
0
3
1
2
3
4
0
-2
-3
100
Company
High PAT Growth (20%+)
Bharti Airtel
Hero MotoCorp
Sesa Sterlite
HDFC Bank
State Bank
Maruti Suzuki
ONGC
Larsen & Toubro
Medium PAT Gr. (10-20%)
Infosys
NTPC
ITC
Bajaj Auto
Sun Pharma
Tata Steel
Dr Reddy’s Labs
Hindalco
TCS
HDFC
Reliance Inds.
Axis Bank
Wipro
M&M
Cipla
ICICI Bank
Hind. Unilever
Low PAT Growth (<10%)
Tata Motors
Coal India
Tata Power
GAIL
BHEL
Sensex (PAT free float)
23
36
63
58
21
23
31
7
62
56
72
-9
67
85
106
27
179
134
163
-25
24
29
35
20
242
255
306
5
49
40
48
-18
1,040 1,238 1,417
19
94
105
125
12
86
95
112
10
74
85
99
14
30
33
39
9
31
46
53
50
2
39
46 2,476
15
19
22
27
32
25
28
-24
139
189
216
36
48
54
62
12
210
217
246
3
52
60
68
16
61
77
86
25
36
46
51
26
11
15
17
32
83
97
107
17
33
35
39
8
395
412
418
4
103
146
157
41
177
180
193
2
9
9
8
-4
40
42
37
5
66
35
24
-46
977 1,097 1,265
12
FY14 Sensex EPS up by 2%, ending the downgrade phase
Over the last 3 months, Sensex EPS for FY14 has seen an upgrade of 2% from 1,289 to
1,317. This upgrade has happened after a full 12 months of downgrades in the earnings
cycle. This upgrade could be attributed to companies benefiting from global businesses
or weak INR trends. Even, few domestic businesses such as Private Banks and four
wheelers have weathered this downturn well and have now seen an upgrade in their
earnings.
January 2014
A–69

India Strategy | Happy New Year
2% upgrade in FY14 Sensex EPS since September 2013
Sensex companies FY14E EPS Upgrade/Downgrade in last 3 months (%)
Stock-wise contribution to growth in FY14E Sensex EPS (INR)
FY15 Sensex EPS upgraded by 3%, led by Autos, Private Banks
Sensex EPS for FY15 has seen an upgrade of 3%, and we now expect growth of 15% to
1,518. The top upgrade drivers have been from Autos, Private Bank and INR
beneficiaries. Several of the cyclical continue to see downgrades in their estimates,
both global and domestic. The contributors to the growth in FY15 are from HDFC Bank,
Infosys and Reliance, unlike FY14 where the top 2 contributors were the cyclicals.
The top 3 Sensex companies to grow in FY15 are Bharti, Hero Motocorp, HDFC Bank.
Companies that will underperform are BHEL, GAIL and Tata Power.
January 2014
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India Strategy | Happy New Year
3% upgrade in FY15 Sensex EPS since September 2013
Sensex companies FY15E EPS Upgrade/Downgrade in last 3 months (%)
Stock-wise contribution to growth in FY15E Sensex EPS (INR)
January 2014
A–71

India Strategy | Happy New Year
T H I S S PA C E I S I N T E N T I O N A L LY L E F T B L A N K
January 2014
A–72

December 2013 Results Preview
MOSL Universe:
3QFY14 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 company’s 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 27 December 2013, unless otherwise stated.
January 2014

MOSL Universe
MOSL Universe: 3QFY14 aggregate performance highlights (Ex RMs)
Quarter-wise sales growth (% YoY)
13.2%
9.0%
12.4%
8.2%
Quarter-wise net profit growth (% YoY)
9.9%
3.8%
1.6%
-3.0%
Ma r-13
June-13
Sep-13
Dec-13E
Mar-13
June-13
Sep-13
Dec-13E
Sectoral sales growth - quarter ended December 2013 (%)
30.3
21.8
18.4
17.9
16.3
14.7
13.3
12.4
12.1
11.6
10.2
8.0
0.6
-2.0
-6.4
Sectoral EBITDA growth - quarter ended December 2013 (%)
42.2
39.5
37.4
27.6
27.3
23.5
14.7
14.0
13.3
7.5
3.6
0.8
-1.1
-15.5
-24.1
Sectoral net profit growth - quarter ended December 2013 (%)
163.5
41.8
39.2
35.6
29.5
21.7
13.4
9.9
-0.1
-0.1
-1.8
-3.5
-23.0
-26.8
-37.7
January 2014
B–2

MOSL Universe
Corporate Scoreboard (quarter ended December 2013)
Top 10 by sales growth (%)
52
51
44
43
41
34
33
32
32
32
-23
-32
-20
-11
-16
-10
-7
-6
-6
-5
Worst 10 by sales growth (%)
Top 10 by EBITDA growth (%)
687
Worst 10 by EBITDA growth (%)
467
132
126
88
87
73
73
58
57
-60
-45
-42
-42
-38
-34
-33
-32
-28
-24
Top 10 by net profit growth (%)
315
299
238
188
132
121
121
113
Worst 10 by net profit growth (%)
-60
89
63
-83
-56
-53
-52
-48
-42
-36
-35
-35
Source: MOSL
January 2014
B–3

MOSL Universe
Annual performance - MOSL universe
Sales
EBITDA
FY13 FY14E FY15E Chg.# Chg.@ FY13 FY14E FY15E Chg.# Chg.@ FY13
(%)
(%)
(%)
(%)
Auto (9)
3,773 4,268
4,922 13.1 15.3
484
618
714
27.7 15.5
228
Capital Goods (8) 1,576 1,555
1,602 -1.3
3.0
189
156
157 -17.8
1.0
134
Cement (13)
1,108 1,107
1,260 -0.1 13.8
235
182
233 -22.4 27.6
111
Consumer (13)
1,190 1,321
1,523 11.0 15.3
242
277
322
14.1 16.6
166
Financials (31)
2,197 2,510
2,881 14.3 14.8 1,735 1,901 2,186
9.6 15.0
904
Pvt Banks (10)
541
644
754 19.0 17.1
452
553
647
22.4 17.0
278
PSU Banks (12) 1,359 1,505
1,712 10.7 13.8
997 1,005 1,144
0.8 13.8
432
NBFC (9)
296
361
415 21.9 15.0
286
343
394
20.0 15.0
193
Health Care (13)
791
940
1,072 18.9 14.0
194
221
273
14.1 23.3
110
Media (8)
143
167
191 17.0 14.4
41
49
58
20.5 16.8
19
Metals (9)
4,205 4,488
4,899
6.7
9.2
792
873
981
10.2 12.4
308
Oil & Gas (13)
16,511 17,965 18,286
8.8
1.8 1,365 1,422 1,666
4.2 17.2
715
Excl. RMs (10)
7,416 8,432
8,768 13.7
4.0 1,132 1,202 1,374
6.2 14.3
642
Real Estate (9)
195
230
261 18.3 13.4
71
84
100
18.8 17.9
30
Retail (3)
137
158
191 15.0 20.7
14
15
19
10.1 24.6
9
Technology (10)
1,940 2,465
2,758 27.0 11.9
489
646
715
32.2 10.6
372
Telecom (4)
1,306 1,455
1,605 11.4 10.3
397
482
555
21.4 15.1
45
Utilities (10)
2,015 2,139
2,398
6.1 12.1
603
658
740
9.0 12.5
377
Others (6)
210
235
262 12.2 11.3
35
41
48
16.6 15.7
20
MOSL (159)
37,297 41,004 44,113
9.9
7.6 6,888 7,627 8,766
10.7 14.9 3,546
Excl. RMs (156)
28,202 31,470 34,595 11.6
9.9 6,654 7,407 8,473
11.3 14.4 3,473
Sensex (30)
9,633 10,259 11,213
6.5
9.3 1,875 2,130 2,441
13.6 14.6 1,011
Nifty (50)
10,889 12,302 13,434 13.0
9.2 2,170 2,571 2,945
18.5 14.6 1,182
# Growth FY14 over FY13; @ Growth FY15 over FY14;
For Banks : Sales = Net Interest Income, EBITDA = Operating Profits; Note: Sensex & Nifty Numbers
(INR Billion)
Net Profit
FY14E FY15E Chg.# Chg.@
(%)
(%)
283
328 24.6 15.6
99
101 -25.9
1.2
74
102 -32.8 37.6
191
226 15.2 18.5
882 1,022
-2.4 16.0
325
376 17.1 15.5
332
392 -23.1 18.1
224
254 15.8 13.5
141
166 27.8 18.1
24
30 24.5 24.9
325
366
5.7 12.4
756
872
5.7 15.3
685
769
6.7 12.2
30
38
0.9 28.8
10
11
6.0 18.8
482
552 29.5 14.6
81
135 81.6 65.3
394
437
4.4 11.1
22
26 10.6 17.6
3,794 4,413
7.0 16.3
3,724 4,310
7.2 15.7
1,097 1,265
8.6 15.3
1,327 1,524 12.2 14.8
are Free Float.
Valuations - MOSL universe
Sector
(No. of companies)
FY13
Auto (9)
15.9
Capital Goods (8)
16.4
Cement (13)
14.8
Consumer (13)
39.2
Financials (31)
10.4
Private Banks (10)
16.7
PSU Banks (12)
5.5
NBFC (9)
12.2
Health Care (13)
32.6
Media (8)
31.5
Metals (9)
10.6
Oil & Gas (13)
10.9
Excl. RMs (10)
10.8
Real Estate (9)
20.8
Retail (3)
35.5
Technology (10)
24.8
Telecom (4)
54.9
Utilities (10)
11.2
Others (6)
21.9
MOSL (159)
15.7
MOSL Excl. RMs (156)
15.8
Sensex (30)
17.9
Nifty (50)
17.2
N.M. - Not Meaningful.
January 2014
P/E
(x)
FY14E FY15E
12.8
11.0
22.1
21.8
22.0
16.0
34.1
28.7
10.6
9.1
14.2
12.3
7.1
6.0
10.5
9.3
25.5
21.6
25.3
20.2
10.0
8.9
10.3
8.9
10.1
9.0
20.6
16.0
33.5
28.2
19.1
16.7
30.2
18.3
10.8
9.7
19.8
16.8
14.7
12.7
14.8
12.8
16.1
14.0
15.6
13.6
EV/EBITDA
(x)
FY13 FY14E FY15E
6.1
5.7
4.9
9.3
13.2
12.6
9.2
10.3
8.1
23.5
23.0
19.5
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
13.9
16.2
12.9
13.4
12.2
10.2
5.4
6.0
5.3
6.5
6.3
5.3
5.7
5.6
4.9
16.0
11.7
9.8
23.8
21.3
17.2
12.7
13.2
11.6
7.7
7.4
6.1
8.5
7.9
7.2
9.2
11.5
9.8
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
N.M
P/BV
(x)
FY14E FY15E
3.1
2.5
2.7
2.5
1.8
1.7
11.4
10.1
1.5
1.3
2.4
2.1
0.7
0.7
2.1
1.8
5.4
4.4
4.8
4.2
1.0
1.0
1.3
1.2
1.4
1.3
1.0
1.0
8.5
6.9
5.4
4.4
2.0
1.8
1.6
1.5
4.0
3.5
2.2
1.9
2.2
2.0
2.6
2.3
2.5
2.2
RoE
Div.
PAT
(%)
yld (%) CAGR
FY14E FY15E FY14E FY13-15
24.3
23.0
1.4
20.0
12.1
11.3
1.4 -13.4
8.4
10.7
1.3
-3.8
33.6
35.1
1.6
16.9
14.0
14.5
2.3
6.4
17.0
17.2
1.6
16.3
10.2
11.1
3.1
-4.7
19.8
19.6
2.7
14.6
21.3
20.6
0.7
22.9
18.9
20.7
1.4
24.7
10.4
10.7
2.4
9.0
12.8
13.4
2.4
10.4
14.0
14.1
2.4
9.4
5.0
6.2
1.5
14.0
25.2
24.4
0.7
12.2
28.4
26.3
1.4
21.8
6.6
9.9
0.6
73.3
15.0
15.4
3.7
7.7
20.0
20.8
1.5
14.0
14.7
15.3
1.8
11.6
15.0
15.5
1.8
11.4
16.1
16.4
1.6
11.9
15.8
16.1
1.6
13.5
Source: MOSL
B–4
FY13
3.8
2.9
2.0
13.6
1.7
2.9
0.8
2.5
6.2
5.4
1.1
1.5
1.6
1.1
10.4
6.6
2.2
1.8
4.5
2.4
2.5
3.0
2.8
FY13
24.1
17.7
13.4
34.8
16.5
17.2
14.9
20.3
19.1
17.1
10.6
13.4
14.6
5.4
29.3
26.7
4.0
15.8
20.6
15.4
15.8
16.5
16.5

MOSL Universe
Ready reckoner: quarterly performance
(INR Million)
CMP
(INR)
27.12.13
17
1,935
4,976
121
2,087
965
1,775
371
69
Rating
Dec.13
Sales
Var.
% YoY
-19.9
-3.6
2.1
-0.1
10.1
-0.8
-3.0
31.1
10.4
16.3
Var.
% QoQ
Dec.13
EBITDA
Var.
% YoY
PL
9.9
24.9
24.5
39.5
13.7
40.7
54.8
9.0
39.5
Var.
% QoQ
PL
-1.7
-6.3
1.9
25.7
25.0
-5.1
1.4
-0.7
3.2
Net Profit
Dec.13
Var.
% YoY
-1,684
8,696
939
1,248
5,956
10,128
6,611
32,691
651
65,235
Loss
6.2
29.1
19.9
22.1
10.7
31.9
88.5
23.7
41.8
Var.
% QoQ
Loss
3.9
9.5
5.3
23.7
-1.4
-1.4
-12.8
-1.6
-6.8
Automobiles
Ashok Leyland
Bajaj Auto
Eicher Motors
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
Capital Goods
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Sector Aggregate
Cement
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
Jaiprakash Associates
Shree Cement
Ultratech Cement
Sector Aggregate
Consumer
Asian Paints
Britannia
Colgate
Dabur
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Marico
Nestle
Pidilite Inds.
Radico Khaitan
United Spirits
Sector Aggregate
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
19,079
52,168
16,887
14,602
67,712
101,563
108,670
604,100
19,856
1,004,637
-25.2
-65
0.8 11,124
0.3
1,473
2.3
2,050
18.9
7,428
17.3 15,678
3.8 12,542
6.2 87,594
-0.1
1,163
6.3 138,988
689
173
130
469
802
1,078
663
696
UR
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
21,835
83,979
33,472
9,775
11,850
168,315
24,075
11,059
364,359
4.9
-16.4
12.6
-10.3
12.0
9.1
-3.6
5.6
0.6
22.3
-4.8
4.4
4.8
0.9
16.0
-26.1
6.0
4.9
1,502
8,914
1,598
1,681
1,619
16,831
739
1,061
33,945
125.5
-45.4
88.0
-19.4
15.8
6.1
-59.9
-5.2
-15.5
42.5
47.8
-0.9
10.1
-4.2
12.1
-61.2
13.3
14.0
567
5,240
617
1,374
1,197
10,708
110
751
20,564
238.3
-55.7
314.8
-24.4
22.7
3.0
-82.7
-1.6
-23.0
59.2
-11.2
5.6
-5.1
-4.4
2.2
-89.8
27.0
-5.1
1,120
185
259
2,716
61
54
4,386
1,771
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Neutral
27,731
22,120
7,218
13,194
10,169
34,832
13,499
47,701
176,465
-10.5
-4.4
17.8
8.5
-6.0
2.5
-5.5
-1.8
-2.0
10.5
10.3
1.6
-6.1
-6.4
9.7
8.2
6.0
6.0
2,490
2,474
516
2,253
1,198
7,152
2,437
7,004
25,525
-21.5
-42.2
0.5
4.6
-37.8
-6.2
-34.4
-31.6
-24.1
10.5
-3.1
-11.8
-13.8
-6.1
-9.5
-2.3
6.2
-2.8
1,601
1,633
357
2,472
-285
-33
1,471
3,143
10,360
-33.1
-29.0
10.7
24.9
PL
PL
-35.4
-47.7
-37.7
32.6
21.3
-14.2
-37.6
Loss
PL
-15.1
19.0
-13.2
485
915
1,305
172
847
4,444
569
322
221
5,338
290
144
2,537
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Neutral
Buy
Neutral
35,553
16,277
8,763
18,803
20,634
8,311
72,870
84,833
11,110
23,980
9,758
3,782
23,479
338,154
17.1
12.0
14.9
15.3
22.0
17.2
9.5
10.0
-4.6
11.4
16.5
16.0
8.0
11.6
15.3
2.1
-2.2
7.5
5.4
-14.5
5.7
7.9
-0.4
2.1
-1.6
7.4
15.2
6.2
5,724
1,351
1,650
3,196
3,570
604
12,024
32,661
1,611
5,467
1,756
613
2,465
72,692
15.7
72.9
10.0
18.7
27.2
18.6
10.4
14.3
-0.6
10.3
16.0
22.4
0.2
14.0
19.2
-1.9
12.7
-1.3
20.8
-59.7
10.8
8.2
-2.6
11.1
-4.9
8.6
20.1
7.8
3,638
927
1,218
2,472
2,353
775
9,388
23,323
1,138
3,181
1,211
259
957
50,840
8.5
62.7
9.7
17.1
36.6
11.2
7.5
13.7
6.5
8.2
16.8
40.9
18.8
13.4
11.3
-3.2
11.2
-1.1
20.7
-47.3
6.3
11.2
7.5
8.9
-3.6
-7.6
1.5
7.0
PULL OUT
January 2014
B–5

MOSL Universe
Ready reckoner: quarterly performance
(INR Million)
CMP
(INR)
27.12.13
466
786
405
1,222
2,519
538
2,958
718
906
464
2,749
576
475
Rating
Dec.13
Sales
Var.
% YoY
20.1
13.6
28.4
17.8
25.5
20.2
-6.8
14.8
11.6
15.7
16.5
43.9
21.9
21.8
Var.
% QoQ
3.8
4.3
5.8
11.0
7.1
7.7
-1.4
-4.9
5.3
2.8
-1.2
0.3
1.3
3.7
Dec.13
EBITDA
Var.
% YoY
20.9
9.5
18.8
31.5
36.2
28.5
-42.2
12.7
11.9
467.1
34.9
36.8
13.3
27.3
Var.
% QoQ
1.4
7.1
3.8
-3.7
-8.6
6.1
2.4
-23.9
4.2
20.5
-31.4
-1.0
5.6
-0.9
Net Profit
Dec.13
Var.
% YoY
1,096
1,504
3,590
1,780
4,503
1,757
1,013
1,189
3,797
1,121
566
11,515
1,261
34,691
19.5
46.1
5.9
23.4
23.9
11.6
-35.9
35.3
35.1
LP
26.4
43.9
12.3
29.5
Var.
% QoQ
7.1
-18.0
-2.3
-13.1
-34.8
22.3
-0.4
-8.2
12.3
83.5
-26.4
-2.9
17.9
-6.1
Healthcare
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’ s Labs
Glenmark Pharma
GSK Pharma
IPCA Labs.
Lupin
Ranbaxy Labs
Sanofi India
Sun Pharma
Torrent Pharma
Sector Aggregate
Media
D B Corp
Dish TV
HT Media
Jagran Prakashan
PVR
Sun TV
Zee Entertainment
Sector Aggregate
Metals
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Sesa Sterlite
Tata Steel
Sector Aggregate
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Sell
Neutral
Buy
Buy
7,614
18,222
26,575
6,280
35,947
15,628
6,118
8,049
26,513
28,791
4,668
39,084
9,718
233,208
1,713
2,791
5,857
2,384
7,729
3,221
1,106
1,785
5,668
2,335
684
15,767
1,827
52,867
285
60
75
90
628
376
279
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
5,042
6,163
5,739
4,516
3,632
5,212
11,181
41,486
14.9
10.5
4.9
29.4
79.4
7.3
19.1
17.9
15.1
4.0
7.3
9.2
-0.7
11.8
1.5
6.0
1,421
1,648
993
1,083
636
3,983
2,936
12,700
19.2
19.7
13.5
18.9
85.2
5.8
12.4
14.7
32.0
11.5
54.3
18.0
-15.0
17.9
-5.4
11.9
824
-53
576
680
213
1,888
2,165
6,293
16.7
Loss
9.1
47.5
146.3
-0.6
11.6
21.7
37.0
Loss
177.5
49.2
-28.4
21.0
-8.4
18.2
122
133
262
1,007
38
142
72
201
424
Buy
Buy
Neutral
Sell
Buy
Buy
Sell
Neutral
Sell
217,351
34,349
50,836
109,072
16,579
28,966
112,375
195,686
361,732
1,126,945
10.7
8.1
5.9
31.5
-2.1
41.5
5.3
14.6
12.7
13.3
-0.3 22,120
-3.5 17,682
2.0 15,335
-5.0 20,808
-4.6
2,865
16.8 18,391
-2.6 12,417
8.6 67,183
-1.3 41,778
0.4 218,579
27.1
18.4
-14.3
58.4
56.9
32.2
9.1
14.9
86.6
27.6
5.0
-6.1
-1.5
-6.9
7.0
23.1
43.2
-3.4
12.8
3.7
6,265
17,582
6,728
6,507
1,843
15,827
6,405
13,060
8,001
82,219
30.2
9.0
-22.4
121.5
55.0
22.4
30.6
-20.9
LP
35.6
9.8
3.8
21.9
-17.8
2.9
20.1
86.9
-6.8
-12.7
5.9
Others
Bata India
1,054
Buy
Castrol India
315
Neutral
Just Dial
1,386
Buy
Sintex Inds.
34
Buy
UPL
193
Buy
V-Guard Inds
472
Buy
Sector Aggregate
PL: Profit to Loss; LP: Loss to Profit; UR: Under
5,777
8,190
1,223
14,795
27,917
4,003
61,907
Review
13.5
8.0
28.5
3.7
21.6
14.7
13.9
19.3
13.8
8.6
8.4
19.7
19.9
15.8
907
1,626
336
2,309
5,256
381
10,815
12.7
-2.4
41.3
5.0
30.0
48.3
17.5
43.4
11.3
-4.5
8.9
23.4
40.9
18.9
595
1,210
276
991
2,419
217
5,708
16.8
2.7
112.5
0.4
39.4
41.5
21.6
58.2
19.2
-3.8
21.8
38.6
50.0
30.3
PULL OUT
January 2014
B–6

MOSL Universe
Ready reckoner: quarterly performance
(INR Million)
CMP
(INR)
27.12.13
352
324
341
60
239
213
267
42
484
292
122
879
Rating
Dec.13
Sales
Var.
% YoY
-2.4
14.7
20.5
6.2
9.1
12.8
22.8
7.1
8.7
5.3
28.8
8.5
8.8
10.2
Var.
% QoQ
Dec.13
EBITDA
Var.
% YoY
-96.3
14.2
8.9
6.4
-53.3
-75.4
9.0
131.9
8.5
3.7
-28.1
-12.6
-17.3
0.8
Var.
% QoQ
Net Profit
Dec.13
Var.
% YoY
PL
-6.9
-3.7
-3.2
PL
PL
10.1
LP
0.3
3.7
-53.4
-5.4
-28.4
-0.1
Var.
% QoQ
PL
-13.2
35.1
1.0
PL
PL
2.5
-40.1
4.4
-4.9
-18.4
-5.2
-23.4
-4.6
Oil & Gas
BPCL
Cairn India
GAIL
Gujarat State Petronet
HPCL
IOC
Indraprastha Gas
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Sector Aggregate
Excl. RMs
Real Estate
DLF
Godrej Properties
Indiabulls Real Estate
Jaypee Infratech
Mahindra Lifespace
Oberoi Realty
Phoenix Mills
Prestige Estates
Sobha Developers
Sector Aggregate
Retail
Future Retail
Jubilant Foodworks
Shopper's Stop
Titan Company
Sector Aggregate
Buy
608,136
Buy
49,049
Neutral
150,337
Neutral
2,766
Buy
575,297
Buy
1,300,404
Neutral
10,674
Neutral
192,772
Buy
26,242
Buy
221,055
Buy
108,490
Neutral 1,018,710
4,263,931
1,780,094
-1.5
847
5.5 37,526
7.8 21,469
-0.1
2,487
10.9
1,812
18.4 12,610
5.8
2,040
2.7
4,112
-3.3 12,205
-0.9 116,566
14.3
3,804
-1.8 73,215
6.5 288,694
0.6 273,425
-95.0
-3,873
6.2 29,369
52.8 12,367
-0.8
1,152
-82.1
-5,076
-59.6
-1,310
1.9
951
-43.7
1,413
-8.1
9,431
-2.9 57,675
4.5
1,484
-6.7 52,029
-13.8 155,612
-1.2 165,871
171
168
69
24
401
230
229
166
311
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
19,857
2,968
4,358
8,987
930
1,942
735
4,744
4,965
49,486
51.6
11.4
31.6
-3.7
51.4
-32.1
6.1
-3.6
15.5
18.4
1.5
-3.2
-3.3
12.8
-3.5
2.8
4.0
-0.2
-8.2
1.4
6,851
772
1,314
4,059
128
1,146
493
1,233
1,390
17,385
687.2
2.7
0.0
-3.9
41.8
-32.9
4.0
-13.4
1.2
42.2
15.2
-4.5
-22.1
14.6
4.4
33.1
3.0
3.9
-3.0
8.2
1,130
390
623
1,397
174
867
359
777
535
6,253
-60.3
9.9
19.2
-9.9
28.5
-35.5
5.2
-15.5
1.8
-26.8
12.9
13.8
-23.3
34.6
-33.4
35.2
-1.6
0.2
-5.4
7.7
74
1,257
416
229
UR
Sell
Neutral
Neutral
24,560
5,007
7,141
30,127
66,835
-22.5
30.0
18.2
1.0
-6.4
6.0
14.7
-1.5
29.4
15.1
2,112
801
536
2,862
6,311
-24.0
19.2
18.3
15.5
-1.1
3.0
22.7
34.7
9.4
10.4
-77
412
226
2,066
2,628
PL
9.3
32.5
1.3
-0.1
Loss
24.0
128.4
10.7
18.5
Technology
HCL Technologies
1,249
Hexaware Tech.
132
Infosys
3,562
KPIT Tech.
174
Mindtree
1,556
MphasiS
425
Persistent Systems
988
TCS
2,159
Tech Mahindra
1,861
Wipro
555
Sector Aggregate (ex Wipro)
Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Comm
Sector Aggregate
January 2014
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Buy
82,070
6,393
130,291
7,206
7,922
15,931
4,381
214,328
48,472
112,855
516,994
30.8
27.3
25.0
27.9
34.3
26.7
31.6
33.4
32.1
NA
30.3
3.1 20,719
2.9
1,466
0.5 35,245
2.5
1,157
2.9
1,539
-0.1
2,797
1.3
1,072
2.2 67,984
1.6 11,233
NA 23,267
1.8 143,212
48.6
73.1
18.7
31.1
27.8
20.1
30.1
46.1
41.2
NA
37.4
-1.0 14,105
-0.8
1,013
4.0 27,609
6.3
664
-3.7
986
0.2
1,916
-4.5
523
2.4 52,584
1.1
6,671
NA 19,993
2.0 106,072
49.4
34.7
16.5
11.0
-0.2
3.9
5.7
48.1
131.6
NA
39.2
-0.4
2.5
5.1
-0.4
-23.4
0.8
-13.9
11.8
-2.6
NA
6.4
329
168
167
131
Buy
Neutral
Buy
Neutral
219,792
27,493
65,731
55,457
368,472
13.5
4.7
17.8
4.6
12.1
3.1 70,565
2.4 10,994
3.9 20,748
2.8 19,746
3.1 122,053
22.2
12.0
40.8
19.4
23.5
3.3
2.5
5.2
4.7
3.8
11,315
3,534
5,058
3,293
23,200
298.9
39.1
121.3
188.3
163.5
121.0
27.4
13.0
21.0
53.7
B–7

MOSL Universe
Ready reckoner: quarterly performance
(INR Million)
CMP
(INR)
27.12.13
449
283
19
56
20
137
100
66
431
90
Rating
Dec.13
Sales
Var.
% YoY
19.9
6.0
43.2
10.8
-5.6
7.5
16.6
18.3
-0.3
7.9
8.0
Var.
% QoQ
Dec.13
EBITDA
Var.
% YoY
14.4
6.1
40.9
11.9
-21.2
-1.8
17.1
-9.2
-12.2
-9.5
3.6
Var.
% QoQ
-19.1
62.8
-50.4
11.8
-52.5
-4.5
1.5
-59.9
-9.8
-17.4
1.8
Net Profit
Dec.13
Var.
% YoY
1,275
42,828
-875
3,062
2,544
24,571
11,963
250
3,018
2,489
91,124
26.2
-8.5
Loss
-17.6
5.3
11.3
8.0
14.7
-19.5
-9.8
-1.8
Var.
% QoQ
-25.5
39.9
PL
32.5
-67.2
11.7
16.2
-59.6
-12.7
-1.4
8.8
Utilities
CESC
Coal India
Jaiprakash Power
JSW Energy
NHPC
NTPC
Power Grid Corp.
PTC India
Reliance Infrastructure
Tata Power
Sector Aggregate
PL: Profit to Loss; LP: Loss
12,470
183,710
6,114
26,215
9,534
169,638
39,198
22,222
34,453
97,578
601,132
to Profit; UR = Under Review
Rating
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
-23.6
3,043
19.2 45,493
-36.9
3,775
29.5
9,370
-42.2
4,834
4.2 39,223
-1.6 34,229
-29.2
272
21.7
4,300
11.3 16,783
6.1 161,322
CMP
(INR)
27.12.13
Financials
Private Banks
Axis Bank
1,293
Federal Bank
84
HDFC Bank
669
ICICI Bank
1,108
IndusInd Bank
422
ING Vysya Bank
603
Kotak Mahindra Bank
737
Yes Bank
374
Pvt Bkg. Sector Aggregate
PSU Banks
Bank of Baroda
652
Bank of India
236
Canara Bank
282
Indian Bank
114
Oriental Bank
228
Punjab National Bank
635
State Bank
1,770
Union Bank
130
PSU Bkg. Sector Aggregate
NBFC
Bajaj Finance
1,530
HDFC
789
IDFC
106
LIC Housing Fin
217
M & M Financial
320
Power Finance Corp
163
Rural Electric. Corp.
217
Shriram Transport Fin.
673
NBFC Bkg. Sector Aggregate
Financials Sector Aggregate
Net Interest Income
Dec.13
Var.
Var.
% YoY % QoQ
Operating Profit
Dec.13
Var.
Var.
% YoY % QoQ
Net Profit
Dec.13
Var.
% YoY
Var.
% QoQ
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
29,830
5,484
46,892
42,810
7,018
4,509
9,413
6,733
152,688
30,136
27,209
22,916
11,204
12,956
41,022
127,399
20,309
293,151
6,517
17,347
6,726
4,691
7,208
21,122
17,533
9,322
90,466
536,305
19.6
10.3
17.8
22.3
21.5
11.9
14.4
15.2
18.7
6.1
17.9
15.3
-2.0
7.6
9.9
14.2
7.4
11.6
29.3
12.7
2.5
26.9
28.4
25.9
22.6
4.2
18.5
14.7
1.6 28,226
0.0
3,637
4.7 37,295
5.9 41,393
0.3
5,997
2.4
3,011
1.9
6,266
0.2
6,116
3.6 131,941
4.1 21,795
7.7 19,864
4.6 15,439
2.4
7,440
1.1
9,042
2.2 26,735
4.0 71,484
3.9 13,511
3.9 185,310
12.4
3,823
9.9 18,017
-2.0
7,641
3.5
4,394
6.3
4,906
0.1 20,932
0.6 17,790
3.0
7,652
3.6 85,155
3.8 402,407
19.5
-7.7
19.5
19.9
27.0
14.4
9.4
8.5
17.8
-2.9
7.0
1.8
-0.5
-2.4
-0.3
-8.2
-0.5
-3.1
32.6
13.7
8.7
24.7
29.4
27.0
24.4
5.6
19.7
7.5
2.6
2.8
10.1
6.5
2.0
9.0
3.3
-14.2
5.0
3.3
-5.5
8.3
5.4
9.6
5.5
13.3
10.3
7.5
15,284
1,658
23,235
25,123
3,183
1,776
3,624
3,813
77,696
9,762
6,083
3,403
2,545
2,498
7,596
22,819
3,099
57,804
13.4
-21.3
25.0
11.6
19.1
9.4
0.2
11.4
14.2
-3.5
-24.3
-52.1
-23.0
-23.5
-41.8
-32.8
2.5
-29.4
22.2
14.6
-4.6
43.1
25.1
19.6
18.9
-3.1
15.7
-3.5
12.2
-26.6
17.2
6.8
-3.6
0.7
2.8
2.7
8.6
-16.4
-2.2
-45.6
-16.8
-0.6
50.3
-3.9
48.9
-4.6
17.6
3.2
-10.8
9.0
13.2
0.6
5.4
2.5
2.9
2.6
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
25.3
1,965
3.8 13,069
1.7
4,340
-4.0
3,381
6.1
2,505
1.6 13,777
1.7 12,398
3.8
3,351
3.1 54,787
5.7 190,287
PULL OUT
January 2014
B–8

MOSL Universe
Ready reckoner: valuations
CMP (INR)
27.12.13
Automobiles
Ashok Leyland
Bajaj Auto
Eicher Motors
Exide Inds.
Hero Motocorp
Mah. & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
Capital Goods
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Sector Aggregate
Cement
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
J P Associates
Shree Cement
Ultratech Cement
Dalmia Bharat
J K Cements
JK Lakshmi Cem.
Ramco Cements
Prism Cement
Sector Aggregate
Consumer
Asian Paints
Britannia
Colgate
Dabur
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Marico
Nestle
Pidilite Inds.
Radico Khaitan
United Spirits
Sector Aggregate
17
1,935
4,976
121
2,087
965
1,775
371
69
Rating
EPS (INR)
FY13 FY14E FY15E
0.6
105.2
120.1
6.2
106.1
60.9
80.2
32.1
3.8
-1.8
114.4
132.5
6.5
113.3
76.5
96.4
45.3
5.3
-0.1
133.6
195.7
7.7
154.1
84.7
117.3
48.7
7.5
P/E (x)
FY13 FY14E FY15E
26.4
18.4
41.4
19.7
19.7
15.8
22.1
11.6
18.0
15.9
106.2
6.5
42.3
19.7
23.3
20.2
139.0
25.8
16.4
16.3
18.4
7.4
9.3
10.5
23.9
13.9
18.3
7.0
5.9
5.0
11.1
-22.4
14.8
41.8
46.7
35.7
39.1
43.2
45.2
37.4
33.9
36.8
46.8
34.2
21.8
182.9
39.2
-9.3 -242.6
16.9
14.5
37.6
25.4
18.5
15.7
18.4
13.5
12.6
11.4
18.4
15.1
8.2
7.6
12.9
9.2
12.8
11.0
83.6
12.1
25.6
21.1
19.7
24.6
50.8
27.6
22.1
24.6
28.9
8.7
10.4
-77.3
60.3
16.1
25.3
28.3
60.6
10.4
35.9
-7.9
22.0
37.4
29.3
34.9
32.1
35.6
37.3
34.8
29.7
30.2
42.8
29.6
18.0
87.1
34.1
59.9
18.0
14.5
18.6
19.1
20.6
48.1
23.6
21.8
17.4
22.9
6.0
8.8
15.9
22.7
14.5
18.9
20.9
10.9
8.7
13.5
-51.6
16.0
30.3
24.8
29.3
26.7
28.8
31.8
31.6
25.4
25.9
35.5
24.4
13.7
47.6
28.7
EV/EBITDA (x)
FY13 FY14E FY15E
8.9
12.4
11.3
11.8
12.2
5.8
7.2
4.3
5.3
6.1
31.4
3.9
19.0
15.3
12.8
11.8
44.9
12.9
9.3
9.5
9.3
4.4
4.3
6.6
17.6
8.3
11.4
5.6
4.9
4.9
8.8
15.7
9.2
27.9
18.8
24.9
24.0
27.9
35.3
23.9
21.9
22.8
24.5
20.9
11.8
25.0
23.5
48.1
11.0
19.2
9.4
13.6
6.0
8.7
3.6
8.0
5.7
32.1
7.6
13.4
17.2
13.2
13.6
23.5
16.1
13.2
13.5
16.4
5.1
4.6
8.3
10.0
10.8
14.1
10.8
11.1
8.8
13.1
25.0
10.3
23.6
19.8
25.3
24.7
24.7
34.7
26.2
19.8
20.4
25.0
19.2
11.2
36.9
23.0
8.7
9.1
13.7
8.0
9.5
5.1
6.8
3.2
5.8
4.9
26.5
9.2
10.0
15.2
11.7
11.9
22.5
13.6
12.6
9.8
13.5
3.4
3.6
6.3
9.1
8.8
11.1
8.5
6.3
7.1
7.8
9.0
8.1
19.6
16.3
20.3
20.9
20.5
27.1
22.9
17.2
16.2
21.3
15.9
9.0
27.2
19.5
RoE (%)
FY13 FY14E FY15E
3.9
43.7
20.8
15.3
45.6
22.4
12.9
29.4
15.1
24.1
5.4
23.5
-1.0
29.7
29.8
16.2
4.2
18.4
17.7
17.7
18.3
11.0
13.6
4.3
3.9
30.6
18.9
6.6
14.4
15.4
18.3
-5.4
13.4
33.3
37.5
108.4
35.1
20.9
30.5
70.8
36.1
19.6
71.6
24.9
12.1
3.4
34.8
-10.6
38.0
20.2
14.6
42.1
20.9
13.6
32.9
19.2
24.3
6.6
11.1
8.7
24.5
28.1
14.5
11.1
15.3
12.1
11.4
11.0
8.8
11.0
-0.5
1.5
18.4
12.0
1.6
1.4
6.9
5.3
-17.5
8.4
31.7
47.8
90.0
35.1
22.5
31.1
61.2
37.5
28.5
58.5
24.3
13.3
5.1
33.6
-0.4
37.0
25.1
15.4
47.6
18.7
14.7
26.7
23.1
23.0
8.8
7.1
15.1
25.6
24.0
14.4
11.1
16.1
11.3
15.4
13.2
11.6
11.7
2.7
3.8
16.5
14.3
2.1
7.2
7.9
13.2
-3.1
10.7
32.9
45.7
90.7
34.9
23.8
30.8
57.6
40.1
25.6
56.4
24.7
15.6
8.7
35.1
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
689
173
130
469
802
1,078
663
696
UR
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
6.5
26.8
3.1
23.8
34.4
53.4
4.8
27.0
8.2
14.4
5.1
22.3
40.7
43.8
13.1
25.2
11.5
9.6
8.9
25.2
42.1
52.4
13.8
29.5
1,120
185
259
2,716
61
54
4,386
1,771
169
194
80
189
27
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
68.7
10.0
35.0
291.3
5.8
2.3
314.9
96.8
24.3
33.0
16.0
17.0
-1.2
45.5
6.4
29.6
260.0
-0.8
0.9
272.2
70.1
6.0
3.2
7.6
5.3
-3.4
64.3
8.1
42.8
309.2
3.8
2.4
302.0
93.6
8.1
17.8
9.1
14.0
-0.5
485
915
1,305
172
847
4,444
569
322
221
5,338
290
144
2,537
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Neutral
Buy
Neutral
11.6
19.6
36.5
4.4
19.6
98.3
15.2
9.5
6.0
114.1
8.5
6.6
13.9
13.0
31.2
37.4
5.4
23.8
119.1
16.4
10.9
7.3
124.9
9.8
8.0
29.1
16.0
37.0
44.5
6.5
29.4
139.8
18.0
12.7
8.5
150.3
11.9
10.6
53.3
PULL OUT
January 2014
B–9

MOSL Universe
Ready reckoner: valuations
CMP (INR)
27.12.13
Healthcare
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’ s Labs
Glenmark Pharma
GSK Pharma
IPCA Labs.
Lupin
Ranbaxy Labs
Sanofi India
Sun Pharma
Torrent Pharma
Sector Aggregate
Media
D B Corp
Dish TV
Hindustan Media
HT Media
Jagran Prakashan
PVR
Sun TV
Zee Entertainment
Sector Aggregate
Metals
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Sesa Sterlite
Tata Steel
Sector Aggregate
Others
Bata India
Castrol India
Just Dial
Sintex Inds.
UPL
V-Guard Inds
Sector Aggregate
466
786
405
1,222
2,519
538
2,958
718
906
464
2,749
576
475
Rating
EPS (INR)
FY13 FY14E FY15E
16.4
31.9
14.2
45.4
90.2
18.4
80.0
25.7
23.1
13.0
76.7
14.7
27.8
20.4
33.5
18.9
58.7
115.0
23.1
55.6
34.1
32.4
11.5
99.4
22.1
29.3
22.3
40.1
20.9
67.0
133.5
29.1
68.5
48.0
42.1
13.8
116.2
25.8
30.7
P/E (x)
FY13 FY14E FY15E
28.5
24.6
28.4
26.9
27.9
29.2
37.0
27.9
39.2
35.7
35.8
39.0
17.1
32.6
22.8
23.4
21.4
20.8
21.9
23.3
53.2
21.1
28.0
40.4
27.6
26.0
16.2
25.5
20.9
19.6
19.4
18.2
18.9
18.5
43.2
14.9
21.5
33.5
23.7
22.3
15.5
21.6
EV/EBITDA (x)
FY13 FY14E FY15E
8.3
15.4
13.1
15.6
12.7
13.9
20.8
11.4
14.4
9.7
23.6
16.0
8.6
13.9
13.0
16.6
13.2
15.6
14.8
13.1
46.7
12.6
16.2
22.2
21.3
16.3
11.1
16.2
11.7
13.6
11.6
12.5
12.5
11.5
34.4
10.4
13.5
8.5
18.3
13.8
10.4
12.9
RoE (%)
FY13 FY14E FY15E
12.1
23.7
12.7
26.0
20.7
18.1
33.7
23.1
22.5
31.4
14.8
22.5
35.8
19.1
13.8
21.5
14.7
28.5
21.4
19.0
22.9
24.9
24.4
-18.5
17.4
28.6
30.3
21.3
13.7
21.9
14.2
27.7
20.4
19.9
27.7
28.3
25.1
35.0
18.3
27.2
25.8
20.6
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Sell
Neutral
Buy
Buy
285
60
113
75
90
628
376
279
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
11.9
-1.2
11.5
7.1
4.7
11.2
17.3
7.5
15.7
-0.3
15.4
7.1
6.5
16.9
18.2
9.5
18.8
0.0
18.9
8.0
8.4
26.4
22.6
11.3
24.0
18.2
15.2
-50.8 -175.2 2202.2
9.8
7.3
6.0
10.5
10.5
9.4
19.2
13.9
10.7
55.9
37.1
23.8
21.7
20.7
16.7
37.1
29.3
24.7
31.5
25.3
20.2
11.1
14.0
7.2
7.2
11.3
15.2
10.9
20.5
13.4
10.4
11.2
2.6
4.1
8.0
13.6
9.4
21.3
12.2
8.8
9.5
1.7
3.4
6.5
10.1
7.8
17.9
10.2
22.3
NA
17.9
10.1
17.5
9.6
23.6
19.6
17.1
26.3
NA
20.1
9.2
20.5
10.2
23.1
21.5
18.9
28.0
NA
20.1
9.4
23.3
14.3
25.5
21.9
20.7
122
133
262
1,007
38
142
72
201
424
Buy
Buy
Neutral
Sell
Buy
Buy
Sell
Neutral
Sell
17.0
16.4
37.2
49.7
2.3
16.7
6.0
20.8
1.6
12.0
16.7
27.3
43.7
3.1
15.9
6.7
19.0
40.4
13.7
17.3
29.8
58.8
3.2
17.4
6.8
24.2
47.0
7.2
8.1
7.0
20.3
16.5
8.5
11.9
9.7
270.2
10.6
10.2
8.0
9.6
23.1
12.4
8.9
10.8
10.6
10.5
10.0
8.9
7.7
8.8
17.1
11.9
8.2
10.6
8.3
9.0
8.9
8.1
4.6
8.7
6.8
3.9
4.3
8.6
2.2
7.3
5.4
8.5
4.2
9.1
7.1
4.0
4.7
9.6
3.9
6.8
6.0
6.7
3.5
7.5
7.1
3.2
4.2
8.4
3.3
6.2
5.3
18.0
23.4
17.7
6.6
5.0
26.8
6.1
9.5
0.7
10.6
11.4
20.1
12.0
6.1
6.5
22.3
6.4
7.8
17.7
10.4
11.8
18.0
12.3
8.4
6.5
20.4
6.2
9.0
18.0
10.7
1,054
315
1,386
34
193
472
Buy
Neutral
Buy
Buy
Buy
Buy
26.8
9.0
10.1
13.3
18.1
21.1
30.7
9.7
16.6
10.1
22.0
27.1
38.5
10.9
23.0
10.9
26.0
36.0
39.4
34.8
137.2
2.5
10.7
22.4
21.9
34.3
32.4
83.3
3.3
8.8
17.4
19.8
27.4
28.9
60.3
3.1
7.4
13.1
16.8
16.0
25.4
5.3
4.2
13.2
9.2
20.8
23.3
62.9
5.0
5.2
10.8
11.5
16.9
20.1
44.7
4.7
4.3
8.3
9.8
27.1
83.8
26.3
14.3
18.2
26.7
20.6
25.6
71.4
25.2
9.9
19.3
27.6
20.0
26.5
71.4
29.5
9.7
19.4
29.3
20.8
PULL OUT
January 2014
B–10

MOSL Universe
Ready reckoner: valuations
CMP (INR)
27.12.13
Oil & Gas
BPCL
Cairn India
Chennai Petroleum
GAIL
Guj. State Petronet
HPCL
Indraprastha Gas
IOC
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Sector Aggregate
Ex RMS
Real Estate
DLF
Godrej Properties
Indiabulls Real Est.
Jaypee Infratech
Mahindra Lifespace
Oberoi Realty
Phoenix Mills
Prestige Estates
Sobha Developers
Sector Aggregate
Retail
Jubi. Foodworks
Shopper's Stop
Titan Company
Sector Aggregate
Technology
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
Mindtree
MphasiS
Persistent Systems
TCS
Tech Mahindra
Wipro
Sector Aggregate
Telecommunication
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Comm
Sector Aggregate
January 2014
352
324
68
341
60
239
267
213
42
484
292
122
879
Rating
EPS (INR)
FY13 FY14E FY15E
26.0
63.1
-118.6
31.7
9.6
26.7
25.3
18.3
-4.3
59.7
28.3
15.3
71.9
35.3
64.9
-17.5
33.2
8.4
12.4
25.8
16.8
1.1
54.7
29.8
9.8
74.1
38.5
55.2
29.7
28.9
8.9
23.5
29.0
27.6
6.4
67.3
35.8
11.5
84.1
P/E (x)
FY13 FY14E FY15E
13.5
5.1
-0.6
10.7
6.3
9.0
10.6
11.6
-9.8
8.1
10.3
8.0
12.2
10.9
10.8
10.0
5.0
-3.9
10.3
7.1
19.3
10.3
12.7
38.9
8.9
9.8
12.4
11.9
10.3
10.1
9.1
5.9
2.3
11.8
6.7
10.2
9.2
7.7
6.7
7.2
8.2
10.6
10.5
8.9
9.0
EV/EBITDA (x)
FY13 FY14E FY15E
8.8
2.7
-7.9
7.9
4.4
10.7
5.5
11.7
17.6
4.6
4.6
6.3
7.8
6.5
5.7
8.4
2.8
16.2
7.9
3.6
10.3
4.8
11.0
7.4
4.0
4.0
6.8
9.3
6.3
5.6
7.7
2.5
5.5
7.9
3.5
8.1
4.1
6.7
3.9
3.0
3.6
6.1
7.9
5.3
4.9
RoE (%)
FY13 FY14E FY15E
11.5
24.8
-60.7
17.5
19.9
6.7
26.0
7.2
-11.1
19.4
16.8
28.8
12.3
13.4
14.6
14.5
23.6
-13.4
16.4
15.0
3.0
22.1
6.3
2.9
16.3
15.9
15.5
11.5
12.8
14.0
14.3
17.2
22.1
13.0
14.1
5.6
21.1
9.8
15.9
17.9
17.3
16.1
11.8
13.4
14.1
Buy
Buy
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
171
168
69
24
401
230
229
166
311
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
4.2
8.9
4.1
5.0
34.6
15.4
5.8
8.2
22.2
3.2
8.2
7.8
5.3
26.9
13.0
5.8
9.6
23.3
5.0
9.9
12.6
4.8
28.5
18.1
10.8
12.4
28.8
40.9
18.9
16.9
4.8
11.6
15.0
39.4
20.4
14.1
20.8
53.4
20.5
8.9
4.5
14.9
17.7
39.2
17.3
13.4
20.6
34.5
16.8
5.5
5.0
14.1
12.7
21.2
13.4
10.8
16.0
23.9
19.7
7.6
9.0
9.8
12.0
22.8
13.4
8.6
16.0
17.0
16.4
7.1
5.7
13.3
11.4
11.5
11.7
7.5
11.7
14.0
11.9
5.4
5.9
11.4
8.1
8.5
8.9
6.5
9.8
2.6
9.6
2.5
11.6
10.9
12.8
4.8
10.4
10.5
5.4
2.0
8.8
4.7
11.3
7.9
9.8
4.6
11.1
10.3
5.0
3.0
8.4
7.0
9.4
7.8
12.5
8.1
12.7
11.9
6.2
1,257
416
229
Sell
Neutral
Neutral
20.9
4.9
8.2
23.2
7.0
8.4
31.1
9.7
9.6
60.1
85.7
28.0
35.5
54.1
59.7
27.2
33.5
40.4
42.9
23.8
28.2
32.3
27.1
21.4
23.8
27.4
21.7
19.5
21.3
19.9
17.4
16.3
17.2
31.2
5.9
42.5
29.3
25.7
7.9
30.2
25.2
25.6
10.1
27.8
24.4
1,249
132
3,562
174
1,556
425
988
2,159
1,861
555
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Buy
57.0
10.9
164.9
10.6
81.7
37.5
46.9
71.2
93.0
25.0
81.6
12.5
184.5
13.9
113.3
51.3
59.9
96.7
126.5
31.4
93.8
14.0
218.8
17.0
129.7
42.0
73.7
110.3
149.0
35.1
21.9
12.1
21.6
16.5
19.0
11.3
21.1
30.3
20.0
22.2
24.8
15.3
10.5
19.3
12.5
13.7
11.7
16.5
22.3
14.7
17.7
19.1
13.3
9.4
16.3
10.2
12.0
10.1
13.4
19.6
12.5
15.8
16.7
8.9
5.1
12.3
4.4
7.5
8.2
5.3
16.6
3.4
12.6
12.7
9.7
6.4
12.9
6.9
10.5
6.3
8.2
16.1
9.4
13.0
13.2
8.8
5.5
10.6
5.2
8.2
7.6
7.0
14.3
8.0
11.3
11.6
32.2
29.3
25.7
22.7
25.8
19.1
20.2
37.8
32.6
21.6
26.7
39.2
28.8
24.3
23.6
32.3
16.0
21.9
40.8
35.1
25.2
28.4
34.5
26.8
26.3
23.3
29.4
16.7
23.0
36.7
32.5
24.1
26.3
329
168
167
131
Buy
Neutral
Buy
Neutral
6.0
5.6
3.1
0.9
9.1
7.3
6.0
5.7
15.7
8.8
9.2
12.0
54.8
30.2
54.8
139.1
54.9
36.2
23.2
27.7
22.9
30.2
20.9
19.2
18.3
10.9
18.3
7.3
9.5
8.4
7.6
7.7
6.8
7.9
7.8
8.9
7.4
5.7
7.3
6.3
6.9
6.1
4.2
6.3
7.4
0.6
4.0
6.0
7.8
12.9
4.0
6.6
9.2
9.1
17.0
8.0
9.9
B–11

MOSL Universe
Ready reckoner: valuations
CMP (INR)
27.12.13
Utilities
CESC
Coal India
Jaiprakash Power
JSW Energy
NHPC
NTPC
Power Grid Corp.
PTC India
Reliance Infra.
Tata Power
Sector Aggregate
UR = Under Review
449
283
19
56
20
137
100
66
431
90
Rating
EPS (INR)
FY13 FY14E FY15E
49.2
28.0
1.3
6.5
1.7
10.5
8.9
6.7
65.2
3.9
55.0
28.5
1.3
7.6
2.1
11.5
8.5
8.1
50.6
3.7
56.9
30.5
2.2
6.7
2.4
13.5
10.3
8.1
54.8
3.6
P/E (x)
FY13 FY14E FY15E
9.1
10.1
14.6
8.6
11.7
13.1
11.2
9.9
6.6
23.1
11.2
8.2
9.9
14.5
7.3
9.3
12.0
11.7
8.1
8.5
24.1
10.8
7.9
9.3
8.7
8.3
8.4
10.2
9.7
8.2
7.9
25.2
9.7
EV/EBITDA (x)
FY13 FY14E FY15E
4.1
7.4
15.4
6.2
8.4
8.8
10.3
8.3
-2.3
15.9
8.5
5.1
5.8
13.1
5.0
9.0
9.1
9.3
7.0
0.3
11.5
7.9
4.8
5.5
7.1
5.2
7.7
8.2
8.8
6.4
0.6
10.7
7.2
RoE (%)
FY13 FY14E FY15E
12.3
28.4
6.3
17.8
7.0
11.2
16.6
5.6
10.7
8.1
15.8
12.5
24.8
5.8
19.0
7.8
11.4
14.7
5.1
6.7
9.6
15.0
11.6
23.6
9.6
15.1
8.6
12.5
14.7
5.6
6.9
8.1
15.4
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
CMP (INR)
27.12.13
Private Banks
Axis Bank
1,293
Federal Bank
84
HDFC Bank
669
ICICI Bank
1,108
IndusInd Bank
422
ING Vysya Bank
603
J&K Bank
1,411
Kotak Mahindra
737
South Indian Bank
21
Yes Bank
374
Pvt. Bank Aggregate
PSU Banks
Andhra Bank
63
Bank of Baroda
652
Bank of India
236
Canara Bank
282
Corporation Bank
263
Dena Bank
63
IDBI Bank
66
Indian Bank
114
Oriental Bank
228
Punjab Nat.l Bank
635
State Bank
1,770
Union Bank
130
PSU Bank Aggregate
NBFC
Bajaj Finance
1,530
Dewan Housing
212
HDFC
789
IDFC
106
LIC Housing Fin
217
M & M Financial
320
Power Finance Corp 163
Rural Electric. Corp. 217
Shriram Transport
673
NBFC Aggregate
Financial Sector Aggregate
Rating
EPS (INR)
FY13 FY14E FY15E
110.7
9.8
28.3
72.2
20.3
39.6
217.5
29.3
3.8
36.3
128.6
7.8
35.8
84.1
25.5
38.4
234.5
33.0
3.4
43.3
145.7
9.7
44.8
92.7
29.9
41.4
246.4
37.8
3.6
49.7
P/E (x)
FY13 FY14E FY15E
11.7
8.6
23.7
15.4
20.8
15.2
6.5
25.2
5.5
10.3
16.7
2.7
6.1
5.1
4.4
2.8
2.7
4.7
3.1
5.0
4.7
6.4
3.6
5.5
12.9
6.0
25.2
8.7
10.7
20.4
4.7
5.6
10.4
12.2
10.4
10.1
10.8
18.7
13.2
16.6
15.7
6.0
22.3
6.1
8.6
14.2
5.6
6.3
5.3
5.8
4.9
4.4
5.9
4.3
6.2
6.7
8.5
5.4
7.1
10.1
4.8
22.4
8.3
8.8
18.0
4.0
4.6
10.4
10.5
10.6
8.9
8.7
15.0
11.9
14.1
14.6
5.7
19.5
5.7
7.5
12.3
4.2
6.2
4.8
5.0
3.8
3.8
5.3
3.6
5.3
5.2
7.1
4.5
6.0
8.5
3.9
19.7
7.2
7.5
15.1
3.6
4.1
9.1
9.3
9.1
P/BV (x)
FY13 FY14E FY15E
1.8
1.1
4.4
2.0
3.0
2.1
1.4
3.6
1.0
2.3
2.9
0.4
0.9
0.7
0.5
0.4
0.5
0.5
0.5
0.6
0.7
0.9
0.5
0.8
2.3
0.8
4.9
1.2
1.7
4.0
0.9
1.2
2.1
2.5
1.7
1.6
1.0
3.7
1.8
2.6
1.6
1.2
3.1
0.9
1.9
2.4
0.4
0.8
0.6
0.5
0.4
0.4
0.4
0.4
0.5
0.7
0.9
0.5
0.7
1.9
0.7
4.4
1.1
1.4
3.5
0.8
1.0
1.8
2.1
1.5
1.4
1.0
3.1
1.6
2.3
1.5
1.0
2.7
0.8
1.6
2.1
0.4
0.7
0.6
0.5
0.4
0.4
0.4
0.4
0.5
0.6
0.8
0.4
0.7
1.6
0.6
4.0
1.0
1.3
3.0
0.7
0.9
1.5
1.8
1.3
RoE (%)
FY13 FY14E FY15E
18.5
13.9
20.3
14.8
17.8
14.6
23.6
15.5
20.5
24.8
17.2
16.2
16.1
13.6
13.3
16.1
17.6
10.2
15.6
11.5
16.5
15.9
15.0
14.9
21.9
17.1
23.8
14.1
16.8
23.4
20.1
23.6
20.6
20.3
16.5
16.9
10.1
21.6
15.2
16.7
12.4
21.5
15.0
14.9
24.1
17.0
7.3
13.9
12.3
9.1
8.2
9.9
7.4
10.1
8.8
10.3
10.6
8.9
10.2
20.4
16.3
25.6
13.4
17.8
20.8
20.7
24.1
17.5
19.8
14.0
16.6
11.5
22.7
14.7
17.1
10.5
19.4
14.8
14.3
22.9
17.2
9.2
12.7
12.2
9.8
9.9
10.5
7.8
11.0
9.5
12.1
11.8
10.0
11.1
20.6
17.2
25.2
13.9
17.9
21.2
19.6
22.6
17.1
19.6
14.5
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
23.0
106.0
46.1
64.8
93.8
23.1
14.1
36.8
45.5
134.3
261.9
36.0
11.4
104.1
44.3
48.3
53.3
14.4
11.2
26.7
37.1
94.5
195.3
24.2
15.2
105.4
49.3
56.3
68.6
16.6
12.5
31.3
42.9
121.9
238.1
29.2
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
118.8
35.2
31.4
12.1
20.3
15.7
34.3
38.7
64.7
150.9
44.2
35.2
12.8
24.7
17.8
41.0
47.2
65.0
180.6
54.1
40.1
14.6
28.9
21.2
45.2
52.9
73.7
January 2014
B–12

December 2013 Results Preview
Sectors & Companies
BSE Sensex:
21,194
S&P CNX:
6,314
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 company’s 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 27 December 2013, unless otherwise stated.
C–1
January 2014

December 2013 Results Preview | Sector: Automobiles
Automobiles
Companies Covered
Ashok Leyland
Bajaj Auto
Eicher Motors
Exide Industries
Hero MotoCorp
Mahindra & Mahindra
Maruti Suzuki India
Tata Motors
TVS Motor
Underlying demand remains weak; however festive season led buying and good
monsoon helped tractors and two-wheeler sales:
Considering the slowdown in
economic activity and consequent weakness in consumer and business sentiments,
demand continues to remain weak across auto segments. MHCVs and cars have
been the worst impacted. However, tractor volumes continue to remain strong on
favorable monsoon and high farm income. Two-wheeler sales also picked up during
the festive season driven by rural markets.
3QFY14E margins to improve 20bp QoQ on higher volumes:
EBITDA margins for our
auto coverage universe (excluding JLR) are expected to improve 20bp QoQ (+200bp
YoY) on higher volumes. YoY margin improvement is driven by two-wheeler majors
Hero Moto, Bajaj Auto, M&M (driven by strong tractor sales) and MSIL (helped by
SPIL merger). Excluding MSIL, margins for our coverage universe would improve by
60bp QoQ (160bp YoY). Continued demand weakness and consequent high
discounting pressure is expected to further exert pressure on margins of CV players.
Easing of macro headwinds to be key catalyst for demand recovery:
With expected
increase in rural incomes due to favorable monsoon, coupled with election spending
led improvement in macro-economic environment, we expect better 4Q for the
auto sector. Over the long term, easing macro headwinds in terms of lower interest
rates and higher economic growth would be the key driver for volume growth,
profitability and in turn re-rating.
Valuation and view:
Considering the near term weakness in demand environment,
we downgrade the volume growth/earnings estimates for most companies.
Our estimates for Bajaj Auto have been lowered by 4.1%/4% for FY14E/15E, largely
reflecting continued weakness in domestic business. Similarly, we lower the
estimates for HMCL by 3%/4.7% for FY14E/15E EPS.
For Maruti, our FY15E EPS estimates are raised by 8.6% to factor the recent favorable
movement in JPY/INR. Due to continued weakness in UV demand, partially offset by
the strength in tractor volumes, we downgrade M&M's consolidated FY14E/15E EPS
by 2.7%/2%.
Expected quarterly performance summary
CMP
(INR)
27.12.13
Ashok Leyland
17
Bajaj Auto
1,935
Eicher Motors
4,976
Exide Inds.
121
Hero Motocorp
2,087
Mahindra & Mahindra
965
Maruti Suzuki
1,775
Tata Motors
371
TVS Motor
69
Sector Aggregate
Rating
Dec.13
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
19,079
52,168
16,887
14,602
67,712
101,563
108,670
604,100
19,856
1,004,637
Sales
Var.
% YoY
-19.9
-3.6
2.1
-0.1
10.1
-0.8
-3.0
31.1
10.4
16.3
Var. Dec.13
% QoQ
-25.2
-65
0.8 11,124
0.3
1,473
2.3
2,050
18.9
7,428
17.3 15,678
3.8 12,542
6.2 87,594
-0.1
1,163
6.3 138,988
EBITDA
Var.
% YoY
PL
9.9
24.9
24.5
39.5
13.7
40.7
54.8
9.0
39.5
Var.
% QoQ
PL
-1.7
-6.3
1.9
25.7
25.0
-5.1
1.4
-0.7
3.2
(INR Million)
Net Profit
Dec.13
Var.
% YoY
-1,684
Loss
8,696
6.2
939
29.1
1,248
19.9
5,956
22.1
10,128
10.7
6,611
31.9
32,691
88.5
651
23.7
65,235
41.8
Var.
% QoQ
Loss
3.9
9.5
5.3
23.7
-1.4
-1.4
-12.8
-1.6
-6.8
Jinesh Gandhi
(Jinesh@MotilalOswal.com) /
Chirag Jain
(Chirag.Jain@MotilalOswal.com)
January 2014
C–2

December 2013 Results Preview | Sector: Automobiles
We raise TTMT FY14E/15E EPS by 3.3%/4.5% respectively driven by continued strength
in JLR volumes and consequent margins, partially offset by weak standalone
performance.
Demand environment and changing competitive landscape in the auto sector would
be the key determinants of stock performance. Prefer
Hero MotoCorp
and
Maruti
Suzuki
in large caps and
TVS Motor
and
Eicher Motors
in mid-caps.
Volume snapshot for 3QFY14 ('000 units)
3QFY14
Two wheelers
4,383
Three wheelers
207
Passenger cars
563
UVs & MPVs
200
Total PVs
762
M&HCV
53
LCV
138
Total CVs
191
Total
5,544
3QFY13
4,089
241
606
211
816
62
147
209
5,355
YoY (%)
7.2
-14.1
-7.1
-5.2
-6.6
-13.9
-6.2
-8.5
3.5
2QFY14 QoQ (%)
4,064
7.9
214
-3.3
627
-10.3
182
9.9
809
-5.8
56
-4.4
137
0.9
192
-0.6
5,279
5.0
9MFY14
12,394
623
1,703
559
2,262
169
399
567
15,846
9MFY13 YoY (%)
11,870
4.4
628
-0.7
1,748
-2.6
543
2.9
2,291
-1.3
213
-20.7
425
-6.3
638
-11.1
15,427
2.7
Source: SIAM, MOSL
Revised EPS estimates (INR)
EPS
Bajaj Auto
Hero MotoCorp
Maruti *
M&M *
Tata Motors *
Ashok Leyland
Eicher Motors *
Exide Industries
* Consolidated
Rev
114.4
113.3
96.4
76.5
45.3
-1.8
132.5
6.5
FY14E
Old
119.3
116.8
96.3
78.7
43.9
-1.4
142.4
6.7
Chg (%)
-4.1
-3.0
0.0
-2.7
3.3
NA
-7.0
-2.8
Rev
133.6
154.1
117.3
84.7
48.7
-0.1
195.7
7.7
FY15E
Old
139.2
161.7
108.0
86.4
46.6
0.5
201.6
8.1
Chg (%)
-4.0
-4.7
8.6
-2.0
4.5
-114.2
-2.9
-4.6
January 2014
C–3

December 2013 Results Preview | Sector: Automobiles
Trend in segment-wise EBITDA margins (%)
Commodity cost (index)
Source: Bloomberg, MOSL
Trend in key currencies v/s INR
Trend in EBITDA margins (%)
Source: Company, MOSL
HDFC Bank's Base rate trend
Trend in petrol and diesel prices
Source: HDFC Bank PLR
Source: Bloomberg, MOSL
January 2014
C–4

December 2013 Results Preview | Sector: Automobiles
Trend in key financials
Volumes (‘000 units)
3Q
YoY
QoQ
FY14E
(%)
(%)
976
-13.5
1.5
1,671
6.2
18.0
506
-2.4
-0.1
286
-5.2
3.7
204
-2.6
16.0
137
-33.0
-9.9
(23.3)
EBITDA Margins (%)
Adj PAT (INR M)
3Q
YoY
QoQ
3Q
YoY
QoQ
FY14E
(bp)
(bp) FY14E
(%)
(%)
21.3 260.0
-60.0 8,696
6.2
3.9
11.0 230.0
60.0 5,956
22.1
23.7
5.9
-10.0
0.0
651
23.7
-1.6
11.5 360.0 -110.0 6,611
31.9
-1.4
15.4 200.0 100.0 10,128
10.7
-1.4
1.5
-70.0
-50.0 -6,247
38.1
NA
14.5 220.0
-70.0 32,691
88.5
-12.8
-0.3 -460.0 -250.0 -1,684
NA
NA
8.7 160.0
-60.0
939
29.1
9.5
14.0 280.0
0.0 1,248
19.9
5.3
BJAUT
HMCL*
TVS Motor
MSIL
MM
TTMT (S/A)
TTMT (Cons)
Ashok Leyland
18
-21.8
Eicher Motors
Exide Industries
*Normalized for royalty adjusted
Relative Performance-3m (%)
Sens ex Index
MOSL Automobi l es Index
Relative Performance-1Yr (%)
Sens ex Index
MOSL Automobi l es Index
115
110
105
100
95
120
110
100
90
80
Comparative valuation
CMP (INR)
27.12.13
Automobiles
Ashok Leyland
Bajaj Auto
Eicher Motors
Exide Inds.
Hero Motocorp
Mah. & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
17
1,935
4,976
121
2,087
965
1,775
371
69
Rating
EPS (INR)
FY13 FY14E FY15E
0.6
105.2
120.1
6.2
106.1
60.9
80.2
32.1
3.8
-1.8
114.4
132.5
6.5
113.3
76.5
96.4
45.3
5.3
-0.1
133.6
195.7
7.7
154.1
84.7
117.3
48.7
7.5
P/E (x)
FY13 FY14E FY15E
26.4
18.4
41.4
19.7
19.7
15.8
22.1
11.6
18.0
15.9
NA
16.9
37.6
18.5
18.4
12.6
18.4
8.2
12.9
12.8
NA
14.5
25.4
15.7
13.5
11.4
15.1
7.6
9.2
11.0
EV/EBITDA (x)
FY13 FY14E FY15E
8.9
12.4
11.3
11.8
12.2
5.8
7.2
4.3
5.3
6.1
48.1
11.0
19.2
9.4
13.6
6.0
8.7
3.6
8.0
5.7
8.7
9.1
13.7
8.0
9.5
5.1
6.8
3.2
5.8
4.9
RoE (%)
FY13 FY14E FY15E
3.9
43.7
20.8
15.3
45.6
22.4
12.9
29.4
15.1
24.1
-10.6
38.0
20.2
14.6
42.1
20.9
13.6
32.9
19.2
24.3
-0.4
37.0
25.1
15.4
47.6
18.7
14.7
26.7
23.1
23.0
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
January 2014
C–5

December 2013 Results Preview | Sector: Automobiles
Ashok Leyland
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
AL IN
2,660.7
44 / 1
28 / 12
1 / -29 / -48
CMP: INR17
Neutral
Financials & Valuation (INR b)
Y/E March
Sales
EBITDA
NP
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2013 2014E 2015E
125
9
1.7
0.6
(73.3)
16.7
6.5
97.2 121.6
1.3
(4.7)
(1.8)
NA
16.7
(1.9)
7.0
(0.2)
(0.1)
NA
17.1
(0.4)
3.8
2016E
144.1
9.4
1.6
0.6
NA
17.6
3.5
6.1
163.8
27.1
0.9
8.8
6.0
3.9 (10.6)
95.6 (11.3) (586.4)
26.4
1.0
9.2
3.6
(9.3) (242.6)
1.0
1.0
63.6 11.8
1.2
2.4
Expect volumes to decline 21.8% YoY (-23.3% QoQ) on continued
weakness in economic activity and pressure on CV demand.
MHCV volumes expected to decline 32% YoY (on the back of 29%
decline last year). Sequentially, MHCV volumes are expected to decline
37% to 10,008 units (worst quarterly volumes since 3QFY09). LCV (Dost,
Stile) volumes are also expected to decline 3% YoY to 7,710 units.
EBITDA margin expected at negative 30bp (v/s 2.2% in 2QFY14 and
4.3% in 3QFY13) on weak volumes and continued pressure on
discounts.
Expect to report a PBT loss of INR2.1b (v/s PBT loss of INR1.35b in
2QFY14). In Dec-13, ALL sold shares in Indusind Bank worth INR750m
to raise funds.
We cut FY14E/15E EPS on continued weakness in CV industry and
consequent margin pressure.
Key issues to watch out
Current demand environment and discounting trend, plant and
channel inventory for MHCVs.
Industry growth, market share guidance for 4QFY14/FY15.
Pantnagar volume guidance, RM cost outlook and margin guidance
for 4QFY14/FY15.
Capex, investment guidance and divestment plans for 4QFY14/FY15.
(INR Million)
FY13
FY14
4Q
34,627
-4.9
1,077
-9.1
37,285
-13.5
75.8
7.6
11.4
1,983
5.3
115
828
1,000
271
-1,344
1,614
114
7.1
1,500
-42.0
251
-90.2
1Q
21,721
-21.0
1,088
-0.5
23,638
-21.4
75.5
10.9
12.6
233
1.0
123
1,007
952
-1,603
65
-1,669
-251
15.0
-1,418
-311.6
-1,362
-303.3
2Q
23,110
-22.6
1,103
-0.1
25,496
-22.6
76.3
10.0
11.5
563
2.2
231
1,244
901
-1,351
-438
-914
-663
72.6
-251
-117.6
-371
-126.0
3QE
17,718
-21.8
1,077
2.5
19,079
-19.9
76.5
12.8
11.0
-65
-0.3
150
1,250
940
-2,105
0
-2,105
-421
20.0
-1,684
-327.1
-1,684
96.4
4QE
25,974
-25.0
1,116
3.7
28,998
-22.2
76.6
9.3
12.3
531
1.8
166
1,093
960
-1,355
0
-1,355
-270
19.9
-1,086
-172.4
-1,086
-531.7
FY13
114,620
11.6
1,089
-13.4
124,812
-3.4
73.1
8.6
11.3
8,765
7.0
624
3,769
3,808
1,812
-2,896
4,707
370
7.9
4,337
-33.0
1,669
-74.2
FY14E
88,023
-23.2
1,104
1.4
97,212
-22.1
76.2
10.6
11.9
1,261
1.3
670
4,594
3,752
-6,415
-372
-6,042
-1,605
26.6
-4,438
-202.3
-4,711
-382.3
C–6
Quarterly Performance
Y/E March
Total Volumes (nos)
Growth (%)
Realizations ('000)
Change (%)
Net Sales
Change (%)
RM/Sales %
Staff / sales %
Oth. Exp./ Sales %
EBITDA
EBITDA Margins (%)
Other Income
Interest
Depreciation
PBT before EO Exp
EO Exp/(Inc)
PBT
Tax
Effective Tax Rate (%)
Rep. PAT
Change (%)
Adj. PAT
Change (%)
E: MOSL Estimates
January 2014
1Q
27,487
42.6
1,094
-16.1
30,074
19.7
72.8
8.9
10.3
2,407
8.0
129
834
893
810
0
810
140
17.3
670
-22.3
670
-22.3
2Q
29,840
25.0
1,105
-15.4
32,960
5.8
72.8
8.0
9.1
3,341
10.1
239
1,036
984
1,559
0
1,559
133
8.5
1,426
-7.5
1,426
-7.5
3Q
22,666
-2.2
1,050
-16.2
23,805
-18.0
71.9
11.0
12.8
1,023
4.3
141
1,071
931
-838
-1,563
725
-17
-2.3
741
10.8
-858
-228.2

December 2013 Results Preview | Sector: Automobiles
Bajaj Auto
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
BJAUT IN
289.4
560 / 9
2,229 / 1,658
-4 / -7 / -19
CMP: INR1,935
Buy
Financials & Valuation (INR b)
Y/E March
Sales
EBITDA
NP
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2013 2014E 2015E
200.0 203.2 233.7
36.4
30.4
(2.0)
43.7
59.8
49.7
18.4
7.1
13.5
2.3
42.0
33.1
8.8
38.0
52.9
51.1
16.9
5.9
11.0
2.6
48.4
38.7
16.7
37.0
51.2
52.2
14.5
4.9
9.1
3.1
2016E
273.4
57.7
45.9
158.5
18.7
475.8
36.5
50.3
47.7
12.2
4.1
7.2
3.4
105.2 114.4 133.6
273.1 329.0 392.8
Expect 3QFY14E volumes to decline 13.5% YoY (+1.5% QoQ) to 0.98m
units. Sequential growth is driven by seasonal pick-up in domestic
demand during the festive season.
EBITDA margin to decline 60bp QoQ (+260bp YoY) to 21.3%, driven by
unfavorable mix on higher share of
Discover M
(100cc motorcycle) and
lower share of high margin 3W volumes (from 11.6% to 10.6%), partially
offset by favorable export realizations (2Q realizations stood at 60.9/
USD).
Expect PAT to rise 6.2% YoY (+3.9% QoQ) to INR8.7b.
We downgrade FY14E/FY15E EPS by 4.1%/4% as we cut our volume
assumptions on continued weakness in demand, particularly in the
standalone business.
Key issues to watch out
Update on retail demand post festive season and channel inventory.
Guidance for 4QFY14 volumes and margins.
Details on new launches, update on forex hedges on exports for FY14/
FY15.
Update on RE60 launch timeline (for export and domestic market),
volume and margin guidance.
Quarterly Performance
Y/E March
Volumes ('000 units)
Growth YoY (%)
Realization (INR/unit)
Growth YoY (%)
Net Sales
Change (%)
RM (%)
Staff cost (%)
Oth. Exp. (%)
EBITDA
Growth YoY (%)
EBITDA Margins (%)
Other Income
Interest
Depreciation
PBT
Effective Tax Rate (%)
Rep. PAT
Change (%)
Adj. PAT
Growth YoY (%)
E: MOSL Estimates
January 2014
1Q
1,079.0
-1.3
45,095
4.7
48,657
3.4
72.1
3.3
6.9
8,717
3.8
17.9
1,820
0
352
10,184
29.5
7,184
1.0
7,184
1.0
2Q
1,049.2
-9.9
47,392
6.4
49,724
-4.1
71.8
3.1
7.0
9,152
-6.2
18.4
1,667
2
410
10,407
28.8
7,407
2.0
7,407
(6.2)
FY13
3Q
1,127.7
4.9
47,996
3.5
54,127
8.6
72.4
2.9
6.2
10,118
2.8
18.7
2,032
1
411
11,738
30.2
8,187
3.0
8,187
(1.8)
4Q
981.2
-3.5
48,372
2.1
47,465
-4.5
71.8
3.5
7.6
8,366
-4.2
17.6
2,436
2
466
10,334
25.9
7,658
3.4
7,658
0.9
1Q
979.3
-9.2
50,150
11.2
49,111
0.9
69.4
3.7
8.8
9,067
4.0
18.5
1,756
1
444
10,378
28.9
7,377
2.7
7,377
2.7
2Q
961.3
-8.4
53,831
13.6
51,749
4.1
67.0
3.5
7.8
11,320
23.7
21.9
1,242
0
443
12,118
30.9
8,372
13.0
8,372
13.0
FY14
3QE
975.9
-13.5
53,455
11.4
52,168
-3.6
67.8
3.7
7.5
11,124
9.9
21.3
1,750
2
450
12,422
30.0
8,696
6.2
8,696
6.2
4QE
941.5
-4.1
53,268
10.1
50,152
-3.1
67.5
4.1
7.7
10,527
19.1
21.0
2,327
10
456
12,387
30.0
8,670
3.6
8,670
13.2
(INR Million)
FY13
FY14E
4,237.2
3,858
(2.6)
(8.9)
47,195 52,664
5.1
11.6
199,973 203,179
2.4
1.6
72.0
68.2
3.2
3.8
6.9
7.9
36,353 41,416
-2.3
13.9
18.2
20.4
7,955
7,074
5
13
1,640
1,793
42,662 46,684
28.7
30.4
30,436 32,492
1.3
6.8
30,436 33,114
-2.0
8.8
C–7

December 2013 Results Preview | Sector: Automobiles
Eicher Motors
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
EIM IN
27.0
134 / 2
5,295 / 2,512
7 / 38 / 71
CMP: INR4,976
Buy
Financials & Valuation (INR b)
Y/E December
Net Income
EBITDA
Net Profit
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2012 2013E 2014E
63.9
5.5
3.2
5.0
20.8
23.0
0.4
41.4
8.2
35.1
0.4
67.7
6.4
3.9
10.3
20.2
20.8
0.5
37.6
7.0
24.8
0.5
83.4
8.6
5.3
47.8
25.1
23.6
0.6
25.4
5.8
16.3
0.6
2015E
105.6
11.7
7.0
259.7
32.7
27.2
28.1
0.7
19.2
4.7
11.9
0.7
120.1 132.5 195.7
603.6 706.9 854.2 1,055.3
With higher production and continued demand momentum, Royal
Enfield’s volumes to increase 75% YoY (+16% QoQ). Expect flat QoQ
standalone margin at 19.3% (+780bp YoY), as we expect Café Racer
launch expenses to offset operating leverage benefits.
Expect VECV’s volumes to decline 29% YoY (-12% QoQ). VECV’s margins
are expected to decline 210bp YoY (-150bp QoQ) to 4.1% due to ramp-
up in MDEP (engine export project), lower volumes and continued
pressure on discounts.
Expect 2.1% YoY (flat QoQ) growth in consolidated sales. Consolidated
margins to improve 160bp YoY (-60bp QoQ) to 8.7%. Consolidated PAT
(after minority) to grow by 29% YoY (+9.5% QoQ) to INR939m.
Company plans to sell 250,000 units in CY14 (v/s 180,000 units expected
in CY13) in the Royal Enfield division. While the CV business remains
weak with no signs of stability yet, Eicher would launch an all-new
range of CVs (based on Volvo’s technical inputs) from Jan-14 onwards.
Key issues to watch out
Ramp-up of Medium Duty engine project, update on commissioning/
launch of bus body plant and new HCV range.
Update on CV demand trends, discount levels and channel inventory.
New launches and timelines under Royal Enfield business.
(INR Million)
CY12
CY13
4Q
16,536
4.7
1,180
7.1
245
271
10
1,196
0
1,196
12.1
1,052
324
727
-14.9
31,968
68.2
92,345
1.0
11,735
-8.1
1,138
2.7
1Q
17,243
1.7
1,705
9.9
275
444
6
1,868
0
1,868
28.9
1,328
348
979
-10.6
34,737
45.3
95,299
3.2
12,529
-12.7
1,099
-3.4
2Q
16,699
5.4
1,662
10.0
296
211
12
1,565
0
1,565
19.6
1,258
335
923
21.7
40,040
45.5
93,911
-1.5
11,027
-8.2
1,152
4.8
3Q
16,834
13.5
1,572
9.3
336
153
23
1,366
-527
1,893
23.1
1,456
382
857
29.9
48,240
60.6
94,857
1.0
9,428
-12.6
1,277
10.9
4QE
16,887
2.1
1,473
8.7
356
270
21
1,367
0
1,367
23.1
1,051
112
939
29.1
56,043
75.3
95,514
0.7
8,309
-29.2
1,364
6.8
CY12
63,899
11.6
5,490
8.6
822
1,366
38
5,997
0
5,997
20.8
4,749
1,506
3,243
5.0
CY13E
67,663
5.9
6,412
9.5
1,262
1,078
62
6,166
0
6,166
25.9
4,566
1,177
3,389
4.5
2Q
15,850
22.1
1,395
8.8
187
306
9
1,506
0
1,506
25.3
1,125
366
759
-0.6
27,519
48.1
92,162
0.1
12,016
9.0
1,098
7.7
3Q
14,831
2.2
1,114
7.5
213
246
12
1,135
0
1,135
17.4
937
277
660
-10.5
30,046
49.7
91,476
-0.7
10,791
-14.1
1,108
0.9
Quarterly Performance
Y/E December
Net Op Income
Growth (%)
EBITDA
EBITDA Margins (%)
Depreciation
Other income
Interest cost
PBT before EO item
Exceptional Exp/(Inc)
PBT after EO item
Effective tax rate (%)
PAT
Minority interest
Recurring PAT
Growth (%)
Standalone (Royal Enfield)
Royal Enfield (units)
Growth (%)
Net Realizations (INR/unit)
Change - QoQ (%)
VECV (derived)
Total CV Volumes
Growth (%)
Net Realizations (INR '000/unit)
Change - QoQ (%)
E: MOSL Estimates
January 2014
1Q
16,950
21.7
1,802
10.6
177
543
9
2,160
0
2,160
24.3
1,634
539
1,096
49.5
23,899
40.8
92,083
2.5
14,346
13.0
1,019
-6.9
113,432 179,058
52.0
57.9
92,015 94,938
3.2
48,888
-0.3
1,081
5.8
41,293
-15.5
1,207
11.6
C–8

December 2013 Results Preview | Sector: Automobiles
Exide Industries
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
EXID IN
850.0
103 / 2
150 / 111
6 / -12 / -23
CMP: INR121
Neutral
Expect flat YoY revenue at INR14.6b (+2% QoQ).
EBITDA margin expected to improve 280bp YoY (flat QoQ) to 14%.
Average lead cost has remained largely stable QoQ. Exide undertook
a price cut effective Nov-13 on the back of reversal in USD/INR rates
and pressure on replacement market share.
PAT expected to grow by 20% YoY (+5% QoQ) to INR1.25b on a low
base.
We downgrade FY14E/FY15E EPS by 2.8%/4.6% on continued weakness
in OEM demand outlook and consequent impact on margins on lower
capacity utilization (considering its 40-45% volume exposure to OEM
segment).
Financials & Valuation (INR b)
Y/E March
Net Sales
EBITDA
Adj. PAT
Adj. EPS (INR)
EPS Growth (%)
BV/Share (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2013 2014E 2015E
60.7 60.8 68.2
7.8
9.0 10.0
5.2
5.6
6.6
6.2
6.5
7.7
13.4
6.2 18.4
40.3 44.8 50.1
15.3 14.6 15.4
21.2 20.9 21.5
26.0 26.8 25.9
19.7
3.0
10.9
1.3
18.5
2.7
9.4
1.4
15.7
2.4
8.0
1.7
2016E
77.8
11.4
7.4
8.7
13.2
56.6
15.5
21.6
22.9
13.8
2.1
6.7
1.7
Key issues to watch out
Update on demand environment for OEMs, auto replacement and
industrial battery segment.
Outlook on RM cost trend, recent pricing action and currency hedges
if any.
Update on capacity expansion plans across product segments.
Quarterly Performance
Y/E March
Net Sales
Growth YoY (%)
RM (%)
Employee Cost (%)
Other Exp. (%)
EBITDA
EBITDA Margin (%)
Change (%)
Non-Operating Income
Interest
Depreciation
PBT after EO Exp
Tax
Effective Tax Rate (%)
Rep. PAT
Change (%)
Adj. PAT
Change (%)
E: MOSL Estimates
1Q
15,511
24.8
65.1
5.4
14.5
2,328
15.0
4.6
147
14
276
2,185
665
30.4
1,520
-6.8
1,520
-6.8
2Q
15,168
29.1
66.2
5.9
15.5
1,882
12.4
108.5
125
10
282
1,716
514
30.0
1,202
135.0
1,202
135.0
FY13
3Q
14,622
17.0
67.2
5.8
15.7
1,647
11.3
-0.5
121
11
289
1,469
428
29.1
1,041
-0.2
1,041
-0.2
4Q
15,382
6.4
67.1
5.8
13.8
2,044
13.3
-4.0
304
8
288
2,053
588
28.7
1,465
2.8
1,465
2.8
1Q
16,263
4.9
64.3
5.8
13.8
2,624
16.1
12.7
62
4
300
2,383
795
33.3
1,588
4.5
1,588
4.5
2Q
14,280
-5.9
65.5
6.0
14.5
2,012
14.0
6.9
37
5
313
1,731
546
31.6
1,185
-1.5
1,185
-1.5
FY14
3QE
14,602
-0.1
65.8
6.2
14.0
2,050
14.0
24.5
100
5
323
1,821
574
31.5
1,248
19.9
1,248
19.9
4QE
15,690
2.0
65.1
6.0
14.3
2,275
14.5
11.3
322
7
336
2,254
724
32.1
1,531
4.5
1,531
4.5
(INR Million)
FY13
60,718
18.9
66.5
5.7
14.8
7,899
13.0
14.8
704
42
1,135
7,427
2,195
29.6
5,232
13.4
5,232
13.4
FY14E
60,835
0.2
65.2
6.0
14.2
8,960
14.7
13.4
521
20
1,272
8,189
2,638
32.2
5,551
6.1
5,551
6.1
January 2014
C–9

December 2013 Results Preview | Sector: Automobiles
Hero MotoCorp
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
HMCL IN
199.7
417 / 7
2,215 / 1,434
-2 / 14 / 2
CMP: INR2,087
Buy
Expect Hero Moto’s (HMCL) 3QFY14E volumes to rise 6.2% YoY (+18%
QoQ) to 1.67m units. Strong sequential growth is driven by robust
retails during the festive season. HMCL’s festive retails increased by
10% to 1.2m units.
Margins (adjusted for royalty amortization) to improve 60bp QoQ
(+230bp QoQ) to 11%, driven by higher volumes, marginal benefits
from cost reduction measures, partially offset by adverse JPY/INR
movement in 2Q (impact on vendors import with a quarter lag).
Demand environment for the two-wheeler industry has weakened
post the festive season, though rural continues to perform better than
urban markets.
We downgrade FY14E/FY15E EPS by 3%/4.7% as we moderate our
volume growth assumption and consequent compression in margins.
Financials & Valuation (INR b)
Y/E March
Sales
EBITDA
NP
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2013
235.8
31.0
21.2
106.1
(10.9)
250.7
45.6
43.6
65.1
19.7
8.3
12.3
2.9
2014E
252.8
36.0
22.6
113.3
6.8
287.7
42.1
53.8
66.0
18.4
7.3
10.5
3.1
2015E
289.2
40.9
30.8
154.1
36.1
360.5
47.6
62.8
52.2
13.5
5.8
9.0
3.4
2016E
332.8
47.9
37.3
186.9
21.3
460.2
45.5
61.8
46.1
11.2
4.5
7.4
3.6
Key issues to watch out
Update on retail demand, post festive season, and channel inventory.
Guidance for 4QFY14 volumes and margins.
Guidance on FY14 volume growth and margins, update on export
plans and new launches together with timelines.
(INR Million)
FY13
FY14
4Q
1,525
-3.0
39,810
5.0
60,725
1.8
73.1
3.7
10.4
7,765
12.8
9.6
1,778
31
2,655
6,857
1,115
16.3
5,742
5,742
-4.9
1Q
1,559
-5.1
39,300
4.0
61,268
-1.3
72.7
3.6
9.3
8,825
14.4
11.1
1,449
30
2,744
7,502
2,016
26.9
5,486
5,486
-10.9
2Q
1,416
6.3
40,223
4.1
56,965
10.6
71.9
4.0
10.0
8,029
14.1
10.4
1,452
30
2,869
6,583
1,769
26.9
4,814
4,814
9.3
3QE
1,671
6.2
40,523
3.6
67,712
10.1
72.8
3.6
9.7
9,421
13.9
11.0
1,500
31
2,743
8,147
2,192
26.9
5,956
5,956
22.1
4QE
1,638
7.4
40,800
2.5
66,824
10.0
72.1
3.5
9.8
9,723
14.5
11.6
1,673
35
2,785
8,576
2,212
25.8
6,364
6,364
10.8
FY13
FY14E
Quarterly Performance
Y/E March
Total Volumes ('000 nos)
Growth YoY (%)
Net Realization
Growth YoY (%)
Net Sales
Change (%)
RM Cost (% sales)
Staff Cost (% sales)
Other Exp (% sales)
EBITDA
EBITDA Margins (%)
Adj. EBITDA Margins (%)
Other Income
Interest
Depreciation
PBT
Tax
Effective Tax Rate (%)
PAT
Adj. PAT
Growth (%)
E: MOSL Estimates
1Q
1,642
7.4
37,799
2.6
62,078
10.1
74.1
3.3
8.1
8,974
14.5
10.7
1,439
29
3,035
7,349
1,194
16.3
6,155
6,155
10.3
2Q
1,333
-13.7
38,649
3.2
51,512
-10.9
73.2
3.7
9.8
6,829
13.3
9.0
1,356
30
2,895
5,261
855
16.3
4,406
4,406
-27.0
3Q
1,573
-1.0
39,102
3.9
61,513
2.8
74.5
3.2
10.2
7,423
12.1
8.7
1,264
30
2,832
5,826
947
16.3
4,879
4,879
-20.4
6,074
6,284
-2.6
3.5
38,828 40,224
3.6
3.6
235,827 252,769
0.9
7.2
73.8
72.4
3.5
3.7
9.6
9.7
30,991 35,999
13.1
14.2
9.5
11.0
5,838
6,075
119
125
11,418 11,141
25,292 30,808
4,110
8,188
16.3
26.6
21,182 22,620
21,182 22,620
-9.5
6.8
January 2014
C–10

December 2013 Results Preview | Sector: Automobiles
Mahindra & Mahindra
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
MM IN
615.9
594 / 10
1,026 / 742
-1 / -9 / -6
CMP: INR965
Buy
Financials & Valuation (INR b)
Y/E March
2013 2014E 2015E
Sales
404.4 385.6 428.2
EBITDA
47.1 50.4 55.3
NP (incl. MVML) 36.3 37.6 39.1
Adj. EPS (INR)
60.7 62.8 65.2
EPS Gr. (%)
24.8
3.4
3.9
Cons. EPS (INR) 60.9 76.5 84.7
BV/Share (INR) 248
296
346
RoE (%)
22.4 20.9 18.7
RoCE (%)
23.2 22.0 21.1
Payout (%)
26.6 26.4 26.9
Valuations
P/E (x)
15.9 15.4 14.8
Cons. P/E (x)
15.8 12.6 11.4
P/BV (x)
3.9
3.3
2.8
EV/EBITDA (x)
7.4 11.0
9.8
Div. Yield (%)
1.3
1.5
1.6
* Incl. MVML
2016E
483.9
61.5
43.5
72.8
11.5
94.3
403
17.8
20.5
24.3
13.3
10.2
2.4
8.5
1.6
While M&M continues to face pressure on UV business led by weak
industry demand and higher competitive pressures, growth in tractors
continues to remain strong.
We expect auto volumes to decline 13% YoY (+8% QoQ), while tractor
volumes are expected to grow by 20% YoY (+31% QoQ). Overall
volumes are expected to decline by 3% YoY (+16% QoQ). Sequential
volume growth is driven by seasonal pick-up in festive demand.
Expect M&M (incl. MVML) to report revenue decline of 1% YoY (+17%
QoQ) to INR101.5b.
EBITDA margin (incl. MVML) to improve 90bp QoQ on higher volumes,
better mix (higher tractor share) to 15.4%.
Adjusted PAT estimated at INR10.1b (+11% YoY, flat YoY).
Key issues to watch out
Update on post festive retail demand environment for auto and
tractor division; plant and channel inventory.
Considering competitive launches in FY15/FY16 guidance on auto
volumes and margins.
Guidance for 4QFY14/FY15 tractor volumes (current guidance of 16-
18% for FY14 industry growth).
Update on Ssangyong business and financial performance.
(INR Million)
FY13
FY14
4Q
195,528
0.1
510,569
9.4
12.6
99,831
9.5
71.1
4.8
9.7
14,352
14.4
1,017
784
2,279
13,211
27.1
9,630
8,970
11.7
1Q
194,962
7.0
497,564
2.1
10.3
97,006
9.3
70.2
5.5
9.9
14,008
14.4
972
759
2,080
12,141
25.1
9,097
9,097
16.9
2Q
175,799
-6.7
492,631
0.3
10.0
86,604
-6.4
68.5
6.2
10.8
12,544
14.5
3,628
892
2,244
13,036
21.2
10,276
10,276
5.1
3QE
203,887
-2.6
498,133
1.8
10.3
101,563
-0.8
69.0
5.6
10.0
15,678
15.4
810
880
2,325
13,283
23.8
10,128
10,128
10.7
4QE
177,715
-9.1
493,887
-3.3
10.7
87,771
-12.1
69.0
5.9
10.1
12,780
14.6
916
881
2,448
10,368
22.2
8,071
8,071
-10.0
FY13
FY14E
Quarterly Performance (incl. MVML)
Y/E March
Total Volumes (nos)
Growth YoY (%)
Net Realization
Growth YoY (%)
Excise (%)
Net Op. Income
Growth YoY (%)
RM Cost (% of sales)
Staff (% of sales)
Oth. Exp. (% of Sales)
EBITDA
EBITDA Margins (%)
Other income
Interest
Depreciation
PBT
Effective Tax Rate (%)
Reported PAT
Adj PAT
Change (%)
E: MOSL Estimates
1Q
182,149
14.4
487,431
14.9
11.9
88,785
31.5
71.5
5.4
9.2
12,350
13.9
662
714
1,800
10,498
25.8
7,785
7,785
25.9
2Q
188,412
10.4
491,082
14.9
13.1
92,526
26.8
71.0
5.5
9.7
12,797
13.8
3,260
741
2,045
13,272
26.3
9,781
9,781
28.4
3Q
209,266
14.2
489,452
9.2
11.8
102,426
24.7
72.0
5.2
9.3
13,795
13.5
758
725
2,054
11,774
22.3
9,149
9,149
35.1
775,358 752,363
10.0
-3.0
494,696 495,697
11.1
0.2
12.3
10.3
383,566 372,944
22.2
-2.8
71.4
69.2
5.2
5.8
9.5
10.3
53,293 55,010
13.9
14.8
5,697
6,327
2,964
3,411
8,178
9,097
48,754 48,828
25.5
23.1
36,344 37,572
36,344 37,572
24.8
3.4
January 2014
C–11

December 2013 Results Preview | Sector: Automobiles
Maruti Suzuki India
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
MSIL IN
302.1
536 / 9
1,830 / 1,217
3 / 4 / 10
CMP: INR1,775
Buy
Financials & Valuation (INR b)
Y/E March
2013 2014E 2015E
Sales
435.9 434.3 498.5
EBITDA
42.3 52.7 63.7
Adj. PAT
23.9 28.7 35.4
Con.adj.EPS(INR) 80.2 96.4 117.3
EPS Growth (%) 37.8 20.2 21.7
BV/Share (INR) 615.0 697.2 800.5
RoE (%)
12.9 13.6 14.7
RoCE (%)
15.5 17.4 18.6
Payout (%)
10.1 11.6 10.2
Valuations
P/E (x)
22.1 18.4 15.1
P/CE (x)
12.5 10.8
9.0
EV/EBITDA (x)
11.2
8.7
6.8
Div. Yield (%)
0.5
0.6
0.7
2016E
577.3
77.9
44.4
146.9
25.2
933.5
15.7
20.0
8.2
12.1
7.4
5.0
0.7
Our quarterly estimates for 3QFY14E are including SPIL merger. Hence,
YoY performance is strictly not comparable.
Expect volumes to decline 5.2% YoY (+3.7% QoQ) led by continued
weakness in consumer sentiments and consequent pressure on PV
industry demand. Sequential growth is driven by seasonal pick-up in
festive demand.
Realizations to improve 2.1% YoY (+0.2% QoQ). Increase in realizations
is driven by price hike effective Oct-13 of ~0.7-0.8%, partially offset by
higher discounts.
Expect margins to decline 110bp QoQ (+360bp YoY) driven by adverse
JPY/INR movement in 2Q (impact on vendors import with a quarter
lag).
While our FY14E EPS remains unchanged, we upgrade FY15E EPS by
8.6%, largely driven by margin increase on favorable JPY/INR rates.
Key issues to watch out
Update on demand scenario, post festive season, channel inventory,
discounting trends and new launches.
Guidance on FY14 volume growth, margins, forex hedges, localization
efforts.
Quarterly Performance
Y/E March
1Q
2Q
Total Volumes (nos)
295,899 230,376
Change (%)
5.1
-8.7
Realizations (INR/car)
355,839 350,302
Change (%)
21.3
19.5
Net Op. Revenues
107,782
83,054
Change (%)
27.5
8.2
RM Cost (% of Sales)
77.8
79.6
Staff Cost (% of Sales)
2.1
2.7
Other exp. (% of Sales)
12.8
11.6
EBITDA
7,864
5,086
EBITDA Margins (%)
7.3
6.1
Non-Operating Income
1,123
1,563
Interest
332
380
Depreciation
3,399
3,470
PBT
5,256
2,798
Tax
1,018
524
Effective Tax Rate (%)
19.4
18.7
PAT
4,239
2,275
Adjusted PAT
4,239
2,275
Change (%)
-22.8
-5.4
E:MOSL Estimates; * Including SPIL Merger
FY13
3Q
301,453
25.9
363,471
15.7
112,003
44.9
78.4
2.2
11.5
8,913
8.0
1,886
459
3,583
6,756
1,743
25.8
5,013
5,013
143.8
4Q*
343,756
-4.6
379,812
19.1
133,040
13.4
65.6
2.9
16.4
19,996
15.0
3,990
726
8,159
15,101
2,705
17.9
12,396
12,396
93.7
1Q
266,434
-10.0
375,144
5.4
102,373
-5.0
71.9
2.9
13.8
11,662
11.4
2,043
442
4,802
8,461
2,145
25.3
6,316
6,316
49.0
2Q
275,586
19.6
370,550
5.8
104,681
26.0
69.4
3.6
14.4
13,214
12.6
1,010
434
4,992
8,799
2,097
23.8
6,702
6,702
194.7
FY14
3QE
285,727
-5.2
371,228
2.1
108,670
-3.0
70.9
3.3
14.3
12,542
11.5
2,000
475
5,300
8,767
2,157
24.6
6,611
6,611
31.9
(INR Million)
FY13
FY14E
4QE
314,489 1,171,484 1,142,236
-8.5
3.3
-2.5
369,153 363,749 371,407
-2.8
18.8
2.1
118,614 435,879 434,338
-10.8
22.5
266.2
70.6
74.7
70.7
3.1
2.5
3.2
13.5
13.1
14.0
15,279
42,296
52,697
12.9
9.7
12.1
2,847
8,124
7,900
477
1,898
1,829
5,600
18,612
20,693
12,048
29,910
38,075
2,969
5,989
9,367
24.6
20.0
24.6
9,080
23,921
28,709
9,080
23,921
28,709
-26.8
46.3
216.2
January 2014
C–12

December 2013 Results Preview | Sector: Automobiles
Tata Motors
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
TTMT IN
3,218.9
1,195 / 19
405 / 252
-11 / 25 / 10
CMP: INR371
Buy
Financials & Valuation (INR b)
Y/E March
Net Sales
EBITDA
NP
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2013 2014E 2015E
1,888 2,331 2,720
266
377
421
103
146
157
32.1 45.3 48.7
(17.7) 41.2
7.6
118.0 158.9 205.8
29.4 32.9 26.7
23.4 27.2 24.8
7.2
5.2
7.2
11.6
3.1
5.4
0.5
8.2
2.3
3.6
0.5
7.6
1.8
3.2
0.8
2016E
3,252
500
192
59.7
22.4
263.7
25.4
25.3
5.8
6.2
1.4
2.5
0.8
JLR volumes expected to grow 18.5% YoY (+10.2% QoQ) driven by strong
growth in both Jaguar and Land Rover (LR) brand. Jaguar volumes to
rise 33% YoY, while LR volumes to increase 15.8% YoY.
EBITDA margin to improve 220bp YoY (decline 70bp QoQ) on higher
volumes and stronger mix (higher Range Rover/Sport).
Standalone volumes to decline 33% YoY (-10% QoQ) led by 32%/36%
YoY decline in CVs/PVs respectively. Within CVs, MHCVs expected to
report a decline of 26% (despite a lower base), while LCVs to decline
by 34%. Standalone margins to remain weak at 1.5% (-50bp QoQ, -
70bp YoY) on lower volumes and higher discounting pressures.
Expect 31% YoY (+6% QoQ) rise in consolidated sales. Consolidated
margins to decline 70bp QoQ (+220bp YoY). Expect consolidated PAT
to rise 89% YoY (-13% QoQ) to INR32.7b led by strong JLR performance,
translation gains, partially offset by higher standalone loss.
We upgrade FY14E/15E consolidated EPS by 3.3%/4.5% led by upgrades
in JLR, partially offset by higher losses in S/A.
Key issues to watch out
Current JLR demand trends and outlook for 4QFY14/FY15, particularly
China and the US.
Order book for new Range Rover and Range Rover Sport and their
ramp-up schedule.
Update on forex hedges (JLR operations).
Volume guidance for MHCVs and PVs, inventory levels, discounts.
(INR Million)
FY13
FY14
4Q
116,345
18.6
16.9
196,370
-31.3
3.6
560,016
10.0
78,015
13.9
23,391
1,775
9,670
46,729
-215
46,943
18.8
38,116
-178
1,517
39,280
-11.5
1Q
90,620
8.6
16.5
153,172
-19.7
2.3
467,847
8.0
62,192
13.3
23,477
1,823
9,482
31,056
1,786
29,270
39.8
17,628
-198
-169
18,337
-28.5
2Q
101,931
31.6
17.8
151,466
-32.3
2.0
568,823
31.1
86,351
15.2
27,293
2,321
11,117
50,262
2,738
47,524
25.1
35,590
-106
-65
37,469
80.0
3QE
112,360
18.5
17.3
136,501
-33.0
1.5
604,100
31.1
87,594
14.5
31,000
1,500
11,000
47,094
0
47,094
30.0
32,966
-175
-100
32,691
88.5
FY13
FY14E
Quarterly Performance (Consolidated)
Y/E March
JLR volumes
Growth YoY (%)
JLR EBITDA Margins (%)
S/A volumes
Growth YoY (%)
S/A EBITDA Margins (%)
Total Op. Income
Growth (%)
EBITDA
EBITDA Margins (%)
Depreciation
Other Income
Interest Expenses
PBT before EO Exp
EO Exp/(Inc)
PBT after EO Exp
Tax rate (%)
PAT
Minority Interest
Share in profit of Associate
Adj PAT
Growth (%)
E: MOSL Estimates
January 2014
1Q
83,452
34.5
14.5
190,783
-3.5
7.3
433,236
30.1
57,548
13.3
15,659
2,386
8,044
36,232
4,405
31,826
27.3
23,138
-276
-414
25,651
25.2
2Q
77,442
13.9
14.8
223,665
5.8
5.9
434,029
19.9
53,336
12.3
15,944
2,068
8,474
30,987
101
30,886
32.0
21,010
-230
-32
20,816
(7.3)
3Q
94,828
9.9
14.0
203,852
-11.9
2.2
460,895
1.8
56,573
12.3
20,700
1,886
9,344
28,416
1,735
26,681
38.7
16,362
-152
67
17,341
(50.9)
4QE
129,979 372,067 434,890
11.7
18.3
16.9
18.1
15.2
17.5
143,267 809,503 584,406
-27.0
-12.3
-27.8
1.6
4.8
1.9
690,674 1,888,176 2,331,443
23.3
14.0
23.5
118,307 245,473 354,445
17.1
13.0
15.2
36,793
75,693 118,562
2,590
8,115
8,234
11,328
35,533
42,928
72,777 142,362 201,190
0
6,027
4,525
72,777 136,335 196,665
21.2
27.7
27.0
57,354
98,625 143,538
-256
-837
-735
100
1,138
-234
57,198 103,286 145,871
45.6
-17.7
41.2
C–13

December 2013 Results Preview | Sector: Automobiles
TVS Motor
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
TVSL IN
475.1
33 / 1
70 / 28
25 / 103 / 52
CMP: INR69
Buy
Expect TVS Motor's (TVSL) 3QFY14E volumes to decline 2.4% YoY (flat
QoQ) to 505,913 units. Decline in volumes have been largely driven by
Mopeds due to weak demand in southern region, while scooters have
grown by 5% YoY and motorcycles have declined marginally by 1% YoY.
Margins are expected to remain flat YoY at 5.9% (flat QoQ as well).
Recently launched Jupiter scooter have received strong response from
customers and currently is under wait list. Production ramp-up of
scooters, recovery in southern region coupled with upcoming re-launch
of Victor motorcycle (executive motorcycle segment) would drive
volume growth.
Financials & Valuation (INR b)
Y/E March
Sales
EBITDA
Adj. PAT
EPS (INR)
EPS Gr. (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2013 2014E 2015E
70.7 78.5 93.3
4.1
4.6
5.9
1.8
2.5
3.6
3.8
5.3
7.5
-27.3 39.9 40.4
25.8 29.8 35.0
15.1 19.2 23.1
15.7 19.3 24.3
56.5 30.2 31.3
18.0
2.7
9.5
1.7
12.9
2.3
8.0
2.2
9.2
2.0
5.8
2.9
2016E
106.9
7.1
4.5
9.4
25.9
41.5
24.6
26.9
31.0
7.3
1.7
4.4
3.6
Key issues to watch out
Update on retail demand, post festive season, and channel inventory.
Update on new launches together with timelines.
Quarterly Performance (Consolidated)
Y/E March
Volumes (units)
Growth (%)
Realization (INR/unit)
Growth (%)
Net Sales
Growth (%)
RM (%)
Emp cost (%)
Other exp (%)
EBITDA
EBITDA margin (%)
Interest
Depreciation
Other Income
PBT before EO Exp
EO Exp
PBT after EO Exp
Tax rate (%)
Reported PAT
Adjusted PAT
E: MOSL Estimates
1Q
519,160
(3.2)
35,623
9.4
18,494
5.9
73.6
5.5
15.1
1,075
5.8
155
310
51
661
0
661
22.7
511
511
2Q
485,999
(19.6)
35,234
6.9
17,124
(14.0)
72.8
6.3
15.0
1,011
5.9
152
320
43
582
0
582
22.3
452
452
FY13
3Q
518,496
(2.1)
34,701
3.5
17,992
1.3
72.0
5.8
16.3
1,067
5.9
118
328
49
670
-8
678
21.5
532
526
4Q
509,210
(4.1)
34,334
11.4
17,483
6.8
71.0
5.3
18.3
938
5.4
56
347
96
631
916
-285
-17.6
-335
743
1Q
494,494
(4.8)
35,596
(0.1)
17,602
(4.8)
71.1
6.4
16.8
989
5.6
65
314
81
691
0
691
24.9
519
519
2Q
506,617
4.2
39,248
11.4
19,884
16.1
71.2
5.9
17.0
1,171
5.9
52
314
77
882
-303
1185
25.0
888
661
FY14
3QE
505,913
(2.4)
39,248
13.1
19,856
10.4
70.6
6.0
17.5
1,163
5.9
40
325
70
868
0
868
25.0
651
651
(INR Million)
FY13
FY14E
4QE
607,356 2,032,865 2,114,380
19.3
(7.6)
4.0
39,248
34,972
37,138
14.3
7.7
6.2
21,182
71,093
78,524
21.2
(0.6)
10.5
71.7
72.4
71.2
5.7
5.7
6.0
16.7
16.1
17.0
1,271
4,090
4,594
6.0
6.0
5.8
40
480
198
338
1,304
1,291
43
238
271
935
2,544
3,375
908
-303
935
1,636
3,678
25.1
29.1
25.0
701
1,160
2,759
701
1,804
2,532
January 2014
C–14

December 2013 Results Preview | Sector: Capital Goods
Capital Goods
Companies Covered
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
PMG facilitates mandatory clearances…await execution:
1QFY14 saw the intervention
of India's Prime Minister to facilitate speedier execution of projects, which resulted
in the creation of a special cell, Project Monitoring Group (PMG), to address the
bottlenecks in stalled projects on a fast track basis. In 2QFY14, PMG facilitated to get
environmental clearances for projects worth INR202.8b. Other notable achievements
would include facilitating the fuel supply agreement (FSA) for 15.4gw of power plants,
which involved an investment of INR944b. However, we await more clarity on the
execution status of these projects as several industry experts maintain that a
meaningful improvement in large infrastructural capex is expected only post the
outcome of 2014 general elections.
UMPPs get encouraging response despite constrained environment:
Power Finance
Corporation (PFC) has shortlisted nine applicants for the Orissa UMPP and eight for
Cheyyur UMPP, who have cleared technical bids by the apex evaluation committee.
Among the pre-qualified applicants who were asked to submit financial bids are NTPC,
Tata Power, NHPC, Adani Power, JSW Energy, Jindal Power, Sterlite Infraventures, CLP
India and L&T. Response from the bidders seems encouraging considering the current
scenario in power sector. Cumulative investment across both projects is expected to
be ~INR500b. Financial bids by the pre-qualified players are expected to be submitted
by the approved applicants as PFC intends to award these projects in 1QFY15.
BTG ordering to emerge from "eclipse":
We expect capex for power generation to
commence in the next 12-15 months. Currently, 90gw of power capacity is under
execution, which is expected to be commissioned, of which 60% capacity is from
private sector players facing funding constraints. PLF improvement from central sector
plants to 80% and 70% in case of private sector plants. Resulting in 11.9% CAGR of coal-
based generation till FY19 when juxtaposed with aggregate demand of 997 Bus, the
supply CGAR stands at 8.8%. We believe L&T and TMX would be the major beneficiaries
of the power generation capex once it begins, while BHEL is best-positioned as cyclical
factors support recovery.
Expected quarterly performance summary
CMP
(INR)
27.12.13
689
173
130
469
802
1,078
663
696
Rating
Dec.13
UR
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
21,835
83,979
33,472
9,775
11,850
168,315
24,075
11,059
364,359
Sales
Var.
% YoY
4.9
-16.4
12.6
-10.3
12.0
9.1
-3.6
5.6
0.6
Var.
% QoQ
22.3
-4.8
4.4
4.8
0.9
16.0
-26.1
6.0
4.9
Dec.13
1,502
8,914
1,598
1,681
1,619
16,831
739
1,061
33,945
EBITDA
Var.
% YoY
125.5
-45.4
88.0
-19.4
15.8
6.1
-59.9
-5.2
-15.5
Var.
% QoQ
42.5
47.8
-0.9
10.1
-4.2
12.1
-61.2
13.3
14.0
(INR Million)
Net Profit
Dec.13
Var.
% YoY
567
238.3
5,240
-55.7
617
314.8
1,374
-24.4
1,197
22.7
10,708
3.0
110
-82.7
751
-1.6
20,564
-23.0
Var.
% QoQ
59.2
-11.2
5.6
-5.1
-4.4
2.2
-89.8
27.0
-5.1
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Sector Aggregate
Satyam Agarwal
(AgarwalS@MotilalOswal.com) /
Nirav Vasa
(Nirav.Vasa@MotilalOswal.com)
January 2014
C–15

December 2013 Results Preview | Sector: Capital Goods
Maintain Neutral rating on the sector:
For 3QFY14E, we expect revenue growth of just
0.6% on a YoY basis. We expect order inflows for 3QFY14E to be muted considering the
constrained environment, with maximum order inflows from short cycle orders. Projects
which received mandatory clearances can be expected to be invited on EoI/bids from
vendors. However, more clarity on the same is awaited due to strong headwinds. L&T's
focus continues to be on order inflows from GCC to meet its targeted order inflow of
INR1t, representing a growth of 20% on a YoY basis. Increasing debtors continue to be
the major concern for BHEL (2QFY14 debtors of ~INR400b, which includes retention
money of INR220b). Thus, await more clarity on the legal notices sent by BHEL to its
customers. Thermax is expected to report muted order inflow from its domestic
customers and has guided for an increase in margins only if order inflows pick up. After
revising its revenue guidance for FY14 in 2QFY14, Havells' management also guided for
higher margins for FY15 based on robust demand for its consumer products. Cummins is
expected to gain as the Government has finally decided to implement CPCB-2 norms
with effect from April 2014. Await more clarity on the quantum of pent-up demand
expected in 4QFY14 and its capability to revise prices to comply with CPCB-2 norms. We
remain Neutral on the sector. Our top picks are
Larsen & Toubro, Thermax, Cummins
and
BHEL.
Expect muted domestic order inflows in 2QFY14, as well
Source: Company, MOSL
Domestic project execution impacted in constrained environment
Source: Company, MOSL
January 2014
C–16

December 2013 Results Preview | Sector: Capital Goods
List of projects issues were resolved through facilitation by Project Monitoring Group (PMG)
Approx.
Investment
(in INR b)
A. Project where Fuel Supply Agreement (FSA) signed for power generation:
1 Maruti Clean Coal and Power Ltd
Chhattisgarh
15
2 Kobra West Power Ltd
Chhattisgarh
39
3 DB Power Ltd
Chhattisgarh
34
4 Jhabua Power Ltd
Chhattisgarh
36
5 Adani Power Maharashtra Ltd
Maharashtra
40
6 GMR Kamalanga Energy Ltd
Odisha
60
7
8
9
10
11
12
13
14
15
16
17
Haldia Energy Ltd
Prayagraj Power Generation Co. Ltd
Raghunathpur TPP (unit - I)
DBC Power Project
Lanco Amarkantak
Corporate Power Ltd
Ideal Energy Projects Ltd
2x300 MW Thermal Power Plant-
Bharat Aluminium Ltd
SKS Power Generation Chhattisgarh Ltd
8 FSA signed for 300 MWs only
2x600 MW Power Plant
*FSA signed for 600 MWs
Jindal India Thermal Power
*FSA singed for 600 MWs
Talwadi Power Ltd
Total
West Bengal
Uttar Pradesh
West Bengal
Chhattisgarh
Jharkhand
Maharashtra
Chhattisgarh
Chhattisgarh
Chhattisgarh
Odisha
Punjab
34
95
30
77
47
18
25
68
136
91
100
944
No. Name of Project
(PMG SI. No)
Location
(State)
Approx.
Generating
Capacity (in MWs)
300
600
1,200
600
800
1,050
600
1,980
600
1,320
540
270
600
600
1,200
1,200
1,980
15,440
Dateof
Commissioning
of Project
Quarter-2, 2014-15
Quarter-3, 2013-14
Quarter-4, 2013-14
Quarter-1, 2014-15
Commissioned
2 units commissioned,
3rd unit Quarter-3, 2013-14
Quarter-2, 2014-15
Quarter-2, 2014-15
1st unit - Quarter-3, 2013-14,
2nd unit - Quarter-2, 2014-15
Quarter-4, 2014-15
Quarter-3, 2014-15
Commissioned
Quarter-3, 2013-14
Quarter-3, 2014-15
Quarter-4, 2013-14
Quarter-3, 2013-14
Quarter-1, 2014-15
Other Projects facilitated for clearance
No. Name of Project
Location
Approx. Investment
(PMG SI. No)
(State)
(INR b)
1 BPCL Project - Integrated Distilition units
Maharashtra
14
2 Ashok Cuttack Angul Tollway Ltd
Odisha
11
3 Salka Road - Anupur Railway Track Doubling
Chhattisgarh
6
4 Lumding - Silchar Gauge Conversion
Assam
43
5 Bhairabi - Sarang New Railway Line
Mizoram
23
6 Supreme Panvel Indapur Tollway
Maharashtra
9
7 BSCPL Aurang Tollway Ltd
Chhattisgarh
12
8 IOCL Project New Marketing Terminal
Odisha
2
9 Nagai Power Pvt Ltd
Tamil Nadu
15
10 Moonidih XV Seam
Jharkhand
1
11 IOCL Project - POL Tap Off Point
Odisha
12
12 Lumding - Silchar (482km) Gauge Conversion
Assam
43
13 Mumbai & Delhi Airports New Terminal
Maharashtra & Delhi
120
14 OCI Iron & Steel Ltd - Integrated Steel
Odisha
12
manufacturing expansion plant
15 Development of Haldia Dock - II (North)
West Bengal
8
16 Development of Haldia Dock - II (South)
West Bengal
9
Total
340
Issues
Resolved
Environmental Clearance
Environmental Clearance
Environmental Clearance
Environmental Clearance
Environmental Clearance
Environmental Clearance
Environmental Clearance
Approval of DPR for Railway siding
Consortium funding apporval
Environmental Clearance
Environmental Clearance
Environmental Clearance
Security Clearance
Environmental Clearance
Environmental Clearance
Environmental Clearance
Source: Media
January 2014
C–17

December 2013 Results Preview | Sector: Capital Goods
Relative Performance - 3m (%)
Sens ex Index
MOSL Capi tal Goods Index
Relative Performance-1Yr (%)
120
105
90
75
60
Sens ex Index
MOSL Ca pita l Goods Index
145
130
115
100
85
Comparative valuation
CMP (INR)
27.12.13
Capital Goods
ABB
689
BHEL
173
Crompton Greaves 130
Cummins India
469
Havells India
802
Larsen & Toubro
1,078
Siemens
663
Thermax
696
Sector Aggregate
Rating
EPS (INR)
FY13 FY14E FY15E
6.5
26.8
3.1
23.8
34.4
53.4
4.8
27.0
8.2
14.4
5.1
22.3
40.7
43.8
13.1
25.2
11.5
9.6
8.9
25.2
42.1
52.4
13.8
29.5
P/E (x)
FY13 FY14E FY15E
106.2
6.5
42.3
19.7
23.3
20.2
139.0
25.8
16.4
83.6
12.1
25.6
21.1
19.7
24.6
50.8
27.6
22.1
59.9
18.0
14.5
18.6
19.1
20.6
48.1
23.6
21.8
EV/EBITDA (x)
FY13 FY14E FY15E
31.4
3.9
19.0
15.3
12.8
11.8
44.9
12.9
9.3
32.1
7.6
13.4
17.2
13.2
13.6
23.5
16.1
13.2
26.5
9.2
10.0
15.2
11.7
11.9
22.5
13.6
12.6
RoE (%)
FY13 FY14E FY15E
5.4
23.5
-1.0
29.7
29.8
16.2
4.2
18.4
17.7
6.6
11.1
8.7
24.5
28.1
14.5
11.1
15.3
12.1
8.8
7.1
15.1
25.6
24.0
14.4
11.1
16.1
11.3
UR
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
January 2014
C–18

December 2013 Results Preview | Sector: Capital Goods
ABB
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
ABB IN
211.9
146 / 2
737 / 448
5 / 6 / -10
CMP: INR689
Under review
Financials & Valuation (INR b)
Y/E December
Net Sales
EBITDA
Adj PAT
Adj EPS (INR)
EPS Gr (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2012 2013E 2014E
75.7 76.9 82.3
3.4
4.7
5.7
1.4
1.7
2.4
6.5
8.2 11.5
-25.5 27.0 39.5
122.6 127.2 133.3
5.4
6.6
8.8
5.7
7.1
8.8
53.8 40.0 40.0
106.2
5.6
44.0
0.5
83.6
5.4
32.1
0.6
59.9
5.2
26.5
0.8
2015E
92.4
6.8
3.4
16.0
39.0
141.9
11.6
10.3
40.0
43.1
4.9
21.8
1.1
ABB inaugurated its new factory set up in Gujarat at a cost of INR2.5b
for manufacturing high voltage switchgear and distribution
transformers. Setting up the factory was in line with company's policy
of "in country for country" approach which lays strong focus on
localization.
The new factory would also be manufacturing GIS systems, post which
ABB could be the first company in India for the same.
For 4QCY13E, we model 5% revenue growth on a YoY basis, EBITDA of
5.9% and PAT of 3%.
Key issues to watch out
Inflow of short cycle orders which supported 5% YoY increase in order
inflows in 3QCY13. Order inflows for 3QCY13 stood at INR17.6b,
supported mainly by order inflows from sectors like renewable, solar,
data centers and exports.
Any major improvement in the performance of projects business,
where margins are being impacted partly by legacy projects and poor
operating leverage, which has suppressed margins.
Quantum of interest cost, which remained at a high level in 3QCY13
at INR270m (v/s INR256m in 1QCY13), mainly due to deterioration of
NWC to 89 days from 71 days.
Quarterly Performance
Y/E December
1Q
Sales
17,903
Change (%)
(0.3)
EBITDA
975
Change (%)
-4.0
As % of Sales
5.4
Adjusted EBITDA (%) *
6.2
Depreciation
223
Interest
54
Other Income
19
PBT
716
Tax
240
Effective Tax Rate (%)
33.5
Repoted PAT
476
Adj. PAT
476
Change (%)
-20.0
Order Intake
16,320
Order Book
90,280
BTB (x)
1.2
E: MOSL Estimates; * As reported by ABB
2Q
18,838
10.0
1,060
24.0
5.6
4.6
231
77
14
766
250
32.6
516
516
33.2
20,450
91,892
1.2
CY12
3Q
18,086
3.7
664
-0.4
3.7
4.3
240
117
10
316
102
32.4
214
214
-3.6
16,790
90,596
1.2
4Q
20,823
(5.3)
666
-38.4
3.2
5.2
246
185
28
263
96
36.4
168
168
-73.8
15,790
86,720
1.1
1Q
19,700
10.0
1,065
9.2
5.4
6.5
246
198
14
636
210
33.0
426
426
-10.7
15,310
82,290
1.1
2Q
17,512
(7.0)
1,079
1.8
6.2
6.3
260
256
38
601
205
34.2
396
396
-23.3
17,310
82,350
1.1
CY13
3Q
17,859
(1.3)
1,054
58.8
5.9
6.2
257
270
9
537
180
33.6
356
356
66.9
17,620
82,520
1.5
4QE
21,835
4.9
1,502
125.5
6.9
334
327
13
854
287
33.6
567
567
238.3
27,444
82,265
1.1
(INR Million)
CY12
75,650
1.2
3,365
-7.0
4.4
5.1
941
432
71
2,062
688
33.4
1,374
1,374
-25.5
69,660
86,720
1.1
CY13E
76,906
1.7
4,700
39.7
6.1
1097
1,050
74
2,627
882
33.6
1,745
1,745
27.0
77,684
82,265
January 2014
C–19

December 2013 Results Preview | Sector: Capital Goods
BHEL
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
BHEL IN
2,447.6
424 / 7
245 / 100
15 / -6 / -33
CMP: INR173
Buy
Financials & Valuation (INR b)
Y/E March
2013 2014E 2015E
Net Sales
484.2 395.6 325.8
EBITDA
93.9 47.2 33.7
Adj PAT
65.5 35.1 23.6
EPS (INR)
26.8 14.4
9.6
EPS Gr. (%)
(4.9) (46.4) (32.9)
BV/Sh. (INR)
124.4 133.3 139.6
RoE (%)
23.5 11.1
7.1
RoCE (%)
24.5 11.4
7.3
Payout (%)
20.0 30.0 30.0
Valuations
P/E (x)
6.5 12.1 18.0
P/BV (x)
1.4
1.3
1.2
EV/EBITDA (x)
3.8
7.6
9.2
Div Yield (%)
3.1
2.4
1.7
Consolidated
2016E
358.8
47.6
36.7
15.0
55.6
149.3
10.4
10.7
30.0
11.6
1.2
5.2
2.6
BHEL continues to face maximum revenue de-growth compared to
peers in the industry. For 3QFY14E, we model revenue de-growth of
16% YoY, EBITDA margin of 10.6% v/s 6.4% in 1HFY14 and PAT de-growth
of 56%. Pressure on margins is expected mainly on lower operating
leverage due to slower pace of project execution.
Overall, the pace of order finalization in utility power segment is
expected to be constrained from near to medium term. However, we
expect the cycle of utility power capex to start over the next 12-15
months (discussed in detail in our report titled - BTG ordering: Emerging
from the eclipse).
Order inflow for 1HFY14 was INR44.7b, down 49% YoY, as ordering
activity continues to be dormant. BHEL recently received an order
worth INR10.2b in 3QFY14 from Neyveli Lignite for supply of steam
turbine generator, associated auxiliaries and civil works.
Key issues to watch out
Increase in retention money which stood at INR220b at end-2QFY14.
Media reports also state that BHEL has sent legal notices to recover
INR170b of its dues; management comment on the same.
Guidance given related to implementation of seventh pay
commission and its impact on BHEL's staff cost.
Any new provisions which are to be made post the merger of BHPV.
Management stated that all provisions are already made in 2QFY14.
Insights shared on growth prospects related to industrial businesses
like metro, power transmission, railways and defence.
(INR Million)
FY13
FY14
2Q
3QE
88,190
83,979
-15.2
-16.4
4,119
8,914
4.7
10.6
6,033
8,914
-68.2
-45.4
6.7
10.6
247
302
2,387
2,400
4,979
1,550
6,465
7,763
1,905
2,523
29.5
32.5
4,560
5,240
-64.2
-55.7
5,899
5,240
-53.7
-55.7
30,010
75,000
1,023
1,014
2.3
2.4
FY13
4QE
152,031
-19.3
30,297
19.9
30,297
-34.9
19.9
380
2,421
1,651
29,146
9,810
33.7
19,336
-40.3
19,336
-40.3
144,289
1,012
2.6
476,177
0.8
93,894
19.7
93,894
-3.3
19.7
1,253
9,534
11,217
94,324
28,177
29.9
66,148
-6.0
65,537
-4.9
316,500
1,152
2.4
FY14E
387,725
-18.6
47,216
12.2
47,216
-49.7
12.2
1,206
9,516
13,565
50,058
16,269
32.5
33,789
-48.9
35,129
-46.4
263,989
1,012
2.6
C–20
Quarterly Performance
Y/E March
Sales (Net)
Change (%)
EBITDA
As a % Sales
Adjusted EBITDA
Change (%)
As a % Sales
Interest
Depreciation
Other Income
PBT
Tax
Effective Tax Rate (%)
Reported PAT
Change (%)
Adj. PAT
Change (%)
Order Intake
Order Book (INR b)
BTB (x)
E: MOSL Estimates
January 2014
1Q
83,262
16.9
12,022
14.4
12,022
41.0
14.2
55
2,284
3,663
13,346
4,137
31.0
9,209
12.9
9,209
12.9
55,900
1,330
2.7
2Q
103,996
1.0
18,995
18.3
18,995
12.0
18.0
259
2,163
1,307
17,880
5,135
28.7
12,745
-9.7
12,745
-0.9
31,530
1,223
2.5
3Q
100,417
-4.8
16,341
16.3
16,341
-12.6
16.0
509
2,200
3,324
16,955
5,139
30.3
11,816
-17.5
11,816
-17.5
19,500
1,137
2.4
4Q
188,502
-2.2
46,512
24.7
46,512
-3.2
24.2
405
2,889
2,924
46,142
13,766
29.8
32,375
-4.2
32,375
-3.6
209,570
1,152
2.4
1Q
63,526
-23.7
3,886
6.1
3,886
-67.7
6.0
278
2,308
5,385
6,685
2,031
30.4
4,654
-49.5
4,654
-49.5
14,690
1,086
2.4

December 2013 Results Preview | Sector: Capital Goods
Crompton Greaves
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
CRG IN
629.7
82 / 1
137 / 72
4 / 49 / 5
CMP: INR130
Buy
Post the restructuring program for its European operations, CG
continues to face growth pangs (discussed in detail in our report titled
- Murphy's Law = Growth Pangs 2.0).
For 3QFY14E, we model standalone revenue growth of 5% on YoY basis,
EBITDA margin of 9% and PAT margin of 6.5%. For subsidiaries, we
expect revenue of euro 184m and EBITDA of 0.9% for 3QFY14E, against
0.2% EBITDA margin in 2QFY14.
Execution of orders in the industrial segment is expected to remain
under pressure due to slower pace of project execution.
Financials & Valuation (INR b)
Y/E March
2013 2014E 2015E
Net Sales
120.9 134.7 144.3
EBITDA
3.8
7.2
9.7
Adj PAT
1.9
3.2
5.6
EPS(INR)
3.1
5.1
8.9
EPS Gr. (%)
(48.4) 65.6 76.1
BV/Sh. (INR)
55.5 58.7 58.3
RoE (%)
(1.0)
8.7 15.1
RoCE (%)
2.8
6.8 11.4
Payout (%)
20.1 20.0 20.0
Valuations
P/E (x)
42.3 25.6 14.5
P/BV (x)
2.0
2.2
2.2
EV/EBITDA (x)
20.7 12.6
9.2
Div Yield (%)
0.9
1.1
1.2
Consolidated
2016E
161.4
12.1
7.3
11.7
30.8
67.8
18.3
14.0
20.0
11.1
1.9
7.2
1.4
Key issues to watch out
Status of Canadian operations and systems business in the US (1H
revenue of USD10-12m), which are being re-organized.
Incremental staff cost savings across the Hungarian plant as customers
start accepting products from the new plant, which operates at 1/6th
the staff cost of Belgium.
Funding pattern for the new factory planned at Baroda for
manufacturing transformers and reactors up to 1,200kv.
Quarterly performance (Consolidated)
Y/E March
Sales (Net)
Change (%)
EBITDA
Change (%)
Adjusted EBITDA
As of % Sales (Adj)
Depreciation
Interest
Other Income
EO Income/(Exp)
PBT
Tax
Effective Tax Rate (%)
Minority interest
Reported PAT
Adjusted PAT
Change (%)
Order Book
Order Intake
BTB (x)
E: MOSL Estimates
1Q
28,111
15.3
1,668
-8.3
1,793
6.4
466
99
192
0
1,294
445
34.4
-9.6
859
984
23.8
91,720
27,170
0.8
2Q
29,242
8.1
1,365
-39.6
1,490
5.1
544
190
208
0
838
414
49.4
4.2
420
545
(53.3)
94,000
25,750
1.0
FY13
3Q
29,718
-1.9
20
-98.9
850
2.9
566
213
304
1,207
-1,662
228
-13.7
-1.4
-1,888
149
(80.7)
92,320
22,570
0.8
4Q
33,873
10.1
779
-63.4
779
2.3
453
208
51
0
169
-78
-45.9
-5.7
253
253
(74.8)
91,250
29,830
1.0
1Q
31,572
12.3
1,448
-13.2
1,448
4.6
527
201
353
0
1,072
464
43.3
7.5
601
601
(38.9)
97,700
24,410
0.8
FY14
2Q
3QE
32,049
33,472
9.6
12.6
1,613
1,598
18.2
1,613
1,598
5.0
4.8
662
655
193
225
326
335
0
0
1,083
1,053
506
446
46.7
42.4
-6.4
-10.0
584
617
584
617
7.1
314.8
97,430
99,958
22,500
29,000
1.0
0.8
4QE
37,633
11.1
2,582
231.4
2,582
6.9
659
238
196
0
1,882
523
27.8
-31.1
1,390
1,390
450.0
102,325
33,000
0.8
(INR Million)
FY13
120,944
77.0
3,832
-48.6
4,912
4.1
2,029
709
754
1,207
640
1,009
157.5
-7.3
-361
1,926
(51.5)
91,250
105,450
0.8
FY14E
134,726
11.4
7,241
89.0
7,241
5.4
2,503
858
1,210
0
5,090
1,939
38.1
-40.0
3,191
3,191
65.7
102,325
33,000
0.8
January 2014
C–21

December 2013 Results Preview | Sector: Capital Goods
Cummins India
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
KKC IN
277.2
130 / 2
550 / 365
8 / -7 / -18
CMP: INR469
Buy
Financials & Valuation (INR b)
Y/E March
Net Sales
EBITDA
Adj PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div Yield (%)
2013 2014E 2015E
45.9 41.2 45.1
8.3
7.0
7.9
6.6
6.2
7.0
23.8 22.3 25.2
20.1 (6.6) 13.0
87.3 94.3 102.5
29.7 24.5 25.6
29.8 24.7 25.7
58.9 68.3 67.4
19.7
5.4
14.8
2.5
21.1
5.0
17.3
2.8
18.6
4.6
15.2
3.1
2016E
52.4
9.5
8.3
29.9
18.7
113.7
27.6
27.8
62.7
15.7
4.1
12.4
3.4
Government has mandated implementation of CPCB-2 for diesel
gensets till 800kw with effect from April 2014. We expect Cummins to
be a key beneficiary as its products are already certified by certification
agencies, according to our channel checks.
Company's focus on domestic manufacturing will also help to compete
with peers, which are still in the process of setting up their own
manufacturing units in India.
Due to the constrained environment, we model 15% de-growth in
domestic revenue and 2% YoY growth in export revenue.
Pig iron prices increased by 3% QoQ in 3QFY14, which are expected to
be passed on to the final consumer via price hikes.
Key issues to watch out
Guidance given by the management on volume growth expected from
pent up demand before the revised norms are expected to be
implemented in 4QFY14. We model 31% QoQ growth in powergen
business in 4QFY14E.
Quantum of increase in business volume from reconditioning and
refurbishment business once the CPCB-2 norms are implemented
due to pricing differential.
Any change in the royalty paid to Cummins Inc for getting access to
CPCB-2 compliant technology.
Any major change in guidance for FY14, which was revised to 15%
decline for domestic business (revenue declined 14% in 1HFY14) and
10% decline for exports (revenue declined 17% in 1HFY14).
(INR Million)
FY13
2Q
10,869
-0.3
1,999
13.6
18.4
117
13
338
0
2,207
598
27.1
1,609
25.2
1,609
25.2
7,650
(0.5)
3,030
0.7
3Q
10,895
13.2
2,086
29.4
19.1
118
9
661
475
3,096
755
24.4
2,341
66.1
1,817
28.9
8,223
21.3
2,490
(5.9)
4Q
11,543
10.9
1,939
-0.5
16.8
124
11
824
0
2,628
742
28.2
1,886
30.4
1,494
3.3
8,320
20.2
2,960
(10.0)
1Q
10,493
-16.6
1,756
-24.5
16.7
117
12
668
0
2,294
632
27.6
1,662
-8.0
1,662
(8.0)
7,550
(8.0)
2,737
(35.0)
FY14
2Q
3QE
9,327
9,775
-14.2
-10.3
1,526
1,681
-23.6
-19.4
16.4
17.2
131
140
9
15
558
300
0
0
1,944
1,826
496
452
25.5
24.8
1,448
1,374
-10.0
-41.3
1,448
1,374
(10.0)
(24.4)
6,118
(20.0)
3,020
(0.3)
7,025
(14.6)
2,550
2.4
FY13
4QE
11,624
0.7
1,995
2.9
17.2
176
24
424
0
2,219
532
24.0
1,687
-10.5
1,687
13.0
7,610
(8.5)
3,726
25.9
45,894
11.5
8,349
19.7
18.2
473
46
2,067
616
10,513
2,872
27.3
7,641
29.2
6,606
20.1
32,400
12.5
12,690
8.3
FY14E
41,219
-10.2
6,958
-16.7
16.9
565
60
1,950
0
8,283
2,112
25.5
6,171
(19.2)
6,171
(6.6)
-1,769
(12.7)
12,056
(5.0)
C–22
Quarterly Performance (Standalone)
Y/E March
Sales
Change (%)
EBITDA
Change (%)
As of % Sales
Depreciation
Interest
Other Income
Extra-ordinary Items
PBT
Tax
Effective Tax Rate (%)
Reported PAT
Change (%)
Adjusted PAT
Change (%)
Operational Details
Domestic Sales
Change (%)
Exports
Change (%)
E: MOSL Estimates
January 2014
1Q
12,588
21.8
2,325
33.7
18.5
114
14
385
0
2,583
777
30.1
1,806
1.9
1,806
32.7
8,210
10.1
4,210
52.4

December 2013 Results Preview | Sector: Capital Goods
Havells India
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
HAVL IN
124.8
100 / 2
817 / 557
3 / 0 / 18
CMP: INR802
Buy
Financials & Valuation (INR b)
Y/E March
Net Sales
EBITDA
Adj PAT
Adj EPS (INR)
EPS Gr. (%)
BV/Share (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div Yield (%)
Consolidated
2013 2014E 2015E
72.5 82.0 87.6
6.7
7.9
8.7
4.3
5.1
5.2
34.4 40.7 42.1
1.0 18.3
3.3
115.6 144.8 175.2
29.8 28.1 24.0
21.4 21.4 19.5
28.3 26.4 27.8
23.3
6.9
11.9
0.9
19.7
5.5
13.2
1.1
19.1
4.6
11.7
1.2
2016E
95.3
9.9
6.1
48.9
16.3
210.0
23.3
20.0
28.7
16.4
3.8
9.8
1.5
Management continues to revise its guidance on the positive side.
After revising its revenue guidance for FY14 in 2QFY14, Mr Anil Rai
Gupta, Joint MD, recently stated in the media that, "our company-
level net profit margins had slowed down to 10 odd per cent. We
expect them to increase to 13-13.5% by next year." Increase in margins
was supported mainly on management's expectation of revival in
consumer business, which accounts for 75% of its total revenue.
For Sylvania, Mr Gupta guided for an EBITDA of 5-6%, despite a
challenging environment in Europe. Sylvania's EBITDA margin for
2QFY14 was at 2.9% due to muted operational performance in Europe,
leading to EBITDA of just 1.7%, while EBITDA for Latam region was at
6.2%.
Our interactions with Havells' dealers/distributors support
management's revised guidance of 12% growth for its standalone
business. Major dealers were confident of achieving 10% volume
growth, while remaining 2-3% growth is expected to come from price
hikes undertaken by Havells in September 2013.
We model 13% YoY revenue growth for FY14E, EBITDA margin of 9.6%
and PAT margin of 6.2%.
Key issues to watch out
Growth rates reported in Cables & Wire segment in 3QFY14, which
reported a growth of 52% YoY in 2QFY14, supported mainly by the
base effect.
Improvement in Sylvania's margins across its European business under
the constrained environment and its capability to maintain margins
in Latam business.
Quantum of increase in revenue from Reo switches targeted mainly
for Tier II and III cities.
Quarterly Performance (Standalone)
Y/E March
Sales
Change (%)
Adj EBITDA
Change (%)
Adj EBITDA margin (%)
Depreciation
Interest
Other Income
PBT
Tax
Effective Tax Rate (%)
Reported PAT
Change (%)
Adj PAT
Change (%)
E: MOSL Estimates
January 2014
1Q
10,328
25.4
1,281
44.1
12.4
118
102
28
1,004
204
20.3
800
23.5
880
55.5
2Q
9,642
13.4
1,192
9.5
12.4
159
99
20
1,054
185
17.5
870
23.8
789
6.5
FY13
3Q
10,584
17.8
1,399
15.2
13.2
146
58
15
1,173
227
19.3
947
20.0
976
17.6
4Q
11,696
11.7
1,460
2.1
12.5
156
26
34
1,342
243
18.1
1,099
20.0
1,075
5.3
1Q
10,513
1.8
1,411
10.1
13.4
156
56
32
1,154
207
18.0
947
18.3
1,029
16.9
FY14
2Q
3QE
11,740
11,850
21.8
12.0
1,690
1,619
41.8
15.8
14.4
13.7
159
163
61
25
78
75
1,554
1,506
296
309
19.1
20.5
1,257
1,197
44.6
26.5
1,253
1,197
58.9
22.7
4QE
12,675
8.4
1,618
10.8
12.8
169
33
65
1,481
270
18.2
1,211
10.3
1,211
12.6
(INR Million)
FY13
42,250
16.9
5,331
17.0
12.6
579
286
96
4,571
858
18.8
3,713
21.3
3,720
21.8
FY14E
46,778
10.7
6,338
18.9
13.5
647
175
250
5,694
1,082
19.0
4,612
24.2
4,691
26.1
C–23

December 2013 Results Preview | Sector: Capital Goods
Larsen & Toubro
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
LT IN
923.1
995 / 16
1,152 / 678
3 / 7 / -10
CMP: INR1,078
Buy
Financials & Valuation (INR b)
Y/E March
2013 2014E 2015E
Sales
614.7 664.8 745.5
EBITDA
63.9 67.6 76.3
Adj PAT *
49.3 40.4 48.3
EPS (INR)*
53.4 43.8 52.4
EPS Gr. (%)
2.8 -18.1 19.6
BV/Sh (INR)
315.7 351.4 392.8
RoE (%)
16.2 14.5 14.4
RoCE (%)
14.4 12.4 12.5
Payout (%)
24.9 27.7 26.9
Valuations
P/E (x)*
18.3 24.6 20.6
P/BV (x)
3.1
3.1
2.7
EV/EBITDA (x)
14.4 15.5 13.8
Div Yield (%)
1.3
1.2
1.3
* Consolidated
2016E
833.7
88.2
59.4
64.3
22.9
440.4
14.8
12.9
26.9
16.7
2.4
11.6
1.5
Order inflows disclosed by L&T through press releases are of INR117.1b
(we model an order inflow of INR200b for 3QFY14E), which includes
major export orders worth INR54.4b (order for offshore services from
Qatar for six specialized vehicles worth INR9.6b and an order from
Oman Electricity Transmission Company worth INR29b for EPC work
related to grid stations).
For 3QFY14E, we expect revenue to grow by 9% YoY, with EBITDA margin
of 10% and PAT of 6.4%.
Key issues to watch out
Impact of hiving off its hydrocarbon business into a separate
subsidiary on its balance sheet for which court approval was recently
received.
Execution challanges particularly in domestic market given tight
liquidity conditions & poor demand envioronment.
Commentary/updates given by the management related to possible
listing of its subsidiary IDPL on global stock exchanges.
Any major increase in provisions due to constrained pace of project
execution across multiple segments.
Any major impact seen/expected on order inflows, as several projects
have received mandatory clearances from government authorities.
Quarterly Performance (Standalone)
Y/E March
Net Sales
Change (%)
EBITDA
Change (%)
Margin (%)
Adjusted EBIDTA
Change (%)
Adjusted Margin (%)
Depreciation
Interest
Other Income
Extraordinary Inc/(Exp)
Reported PBT
Tax
Effective Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Adj PAT (excl Subs Dividend)
Change (%)
Order Intake (INR b)
Order Book (INR b)
BTB (x)
E: MOSL Estimates
January 2014
1Q
119,554
26.1
10,847
-3.7
9.1
12,447
10.5
10.4
1,919
2,284
6,081
-383
12,341
3,705
30.0
8,636
10,025
34.4
7,105
2.9
196
1,531
2.8
2Q
131,952
17.4
14,054
15.5
10.7
14,054
15.5
10.7
2,040
2,350
3,294
2,672
15,630
4,257
27.2
11,373
9,151
14.6
8,521
20.1
210
1,585
2.8
FY13
3Q
154,294
10.3
14,620
6.9
9.5
15,870
1.2
10.3
2,004
2,380
5,431
0
15,668
4,450
28.4
11,218
10,393
-7.8
9,463
4.1
195
1,623
2.7
4Q
202,938
9.9
24,509
-1.5
12.1
25,759
-4.2
12.1
2,222
2,810
3,744
187
23,408
5,528
23.6
17,880
17,758
-1.5
16,398
-6.4
279
1,536
2.5
1Q
125,551
5.0
10,715
-1.2
8.5
11,795
-5.2
9.4
2,103
2,453
4,726
0
10,885
3,325
30.5
7,560
8,316
-17.0
6,116
-13.9
252
1,654
2.7
FY14
2Q
3QE
145,095 168,315
10.0
9.1
14,017
16,831
-0.3
15.1
9.7
10.0
15,017
16,831
6.9
6.1
10.3
10.0
2,164
2,250
2,428
3,000
4,494
3,500
0
0
13,920
15,081
4,145
4,374
29.8
29.0
9,775
10,708
10,475
10,708
14.5
3.0
8,185
9,958
-3.9
5.2
265
200
1,760
1,790
2.8
2.8
4QE
219,368
8.1
26,017
6.2
11.9
26,017
1.0
11.9
2,273
3,620
3,723
0
23,847
6,337
26.6
17,510
17,510
-1.4
17,250
5.2
174
1,744
2.6
(INR Million)
FY13
608,733
14.5
64,071
2.0
10.5
66,071
1.9
11.0
8,185
9,824
18,509
2,475
67,046
17,940
26.8
49,106
47,327
5.6
41,477
1.8
880
1,536
2.5
FY14E
658,329
8.1
67,580
5.5
10.3
69,660
5.4
10.6
8,789
11,500
16,443
0
63,734
18,164
28.5
45,570
47,026
-0.6
41,526
0.1
891
1,744
2.6
C–24

December 2013 Results Preview | Sector: Capital Goods
Siemens
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
SIEM IN
352.0
234 / 4
695 / 414
8 / 13 / -10
CMP: INR663
Neutral
Financials & Valuation (INR b)
Y/E September
Net Sales
EBITDA
Adj PAT
Adj EPS (INR)
EPS Gr (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2013
113.5
4.2
1.7
4.8
-67.7
114.5
4.2
5.1
124.0
136.2
5.8
51.9
0.8
2014E 2015E
112.8 120.5
9.2
9.7
4.6
4.9
13.1 13.8
173.6
5.6
121.1 128.0
11.1 11.1
12.8 12.7
49.7 49.7
50.8
5.5
23.0
0.8
48.1
5.2
22.1
0.9
2016E
138.5
15.2
7.9
22.5
63.4
139.3
16.8
18.9
49.7
29.5
4.8
14.0
1.4
4QFY13 numbers included several extraordinary items like a) transfer
of postal & logistics technologies, b) CENVAT credit of INR166m, c)
employee separation costs of INR433m and d) impairment loss of
INR355m. For 1QFY14E, we model 4% revenue de-growth, with EBITDA
margin of 3.1% and 83% YoY decline in PAT at INR110m.
Media reports state that Siemens intends to sell 12 residential
properties in Mumbai, with an intention to optimize its asset portfolio.
Impact of the same is expected to result in extraordinary items in the
forthcoming quarters.
Siemens India reported negative earnings for the first time in FY13
due to lower demand and volatile currency.
Consortium of Siemens and Alstom is among the four qualified bidders
for electrical and signaling work for the 343km Bhaupur- Khurha section
of the Eastern Dedicated Freight Corridor. Civil work contract for the
same has been awarded to Tata-Aldisa JV for a consideration of INR33b.
Key issues to watch out
Any major increase in revenue from services, which accounted for
7% of FY13 revenue and increased 43% YoY.
Capability to maintain order inflows in a constrained environment.
4QFY13 order inflows of INR35.4b, up 22% YoY and 35% QoQ.
NWC which stood at 49 days at end-4QFY14 v/s 67 days at end-March
2013 on management's cautious approach.
Quarterly Performance (Standalone)
Y/E September
FY13
FY14E
4Q
1Q
2Q
32,589
24,075
30,057
-3.4
-3.6
1.7
1,753
739
2,266
5.4
3.1
7.5
1,905
739
2,266
5.8
3.1
7.5
678
680
685
21
-60
-60
134
165
200
-523
0
0
1,752
164
1,721
260
54
568
14.9
33.0
33.0
1,492
110
1,153
1,073
110
1,153
162.2
-82.7
284.3
35
27
34
133
136
140
1.2
1.2
1.3
revenues and cost estimates
3Q
25,756
-2.5
1,541
6.0
1,541
6.0
690
-60
230
0
1,021
337
33.0
684
684
-413.7
20
134
1.2
4Q
32,919
1.0
4,655
14.1
4,655
14.1
786
-70
155
0
3,954
1,305
33.0
2,649
2,649
146.8
45
146
1.3
1Q
2Q
3Q
Total Revenues
24,962
29,556
26,420
Change (%)
-0.2
-26.4
-12.5
EBITDA
1,556
754
276
As % of Revenues
6.2
2.6
1.0
Operational EBIDTA
1,841
1,654
1,630
As % of Revenues
7.4
5.6
6.2
Depreciation
588
610
626
Interest Income
-87
-84
-39
Other Income
69
125
26
Extra-ordinary Items
0
0
338
PBT
951
185
-701
Tax
314
-115
-213
Effective Tax Rate (%)
33.0
-62.3
30.4
Reported PAT
636
300
-488
Adjusted PAT
636
300
-218
Change (%)
5.8
-91.1
-141.1
Order Intake (INR b)
20
28
26
Order Book (INR b)
132
130
130
BTB (x)
1.0
1.1
1.2
E: MOSL Estimates; Adj EBITDA: Adjusted for change in project
(INR Million)
FY13
113,527
-5.6
4,207
3.7
6,905
6.1
2,502
-189
345
-325
1,537
246
16.0
1,290
1,680
-80.1
102
137
1.2
FY14E
112,808
-0.6
9,200
8.2
9,200
8.2
2,841
-250
750
0
6,859
2,263
33.0
4,595
4,595
173.6
110
133
1.2
January 2014
C–25

December 2013 Results Preview | Sector: Capital Goods
Thermax
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
TMX IN
119.2
83 / 1
716 / 526
5/4/4
CMP: INR696
Buy
Financials & Valuation (INR b)
Y/E March
2013 2014E 2015E
Net Sales
54.3 53.7 58.2
EBITDA
5.0
4.8
5.6
Adj PAT
3.2
3.0
3.5
EPS (INR)
27.0 25.2 29.5
EPS Gr. (%)
(20.2) (6.6) 17.0
BV/Sh. (INR)
160.0 177.1 197.3
RoE (%)
18.4 15.3 16.1
RoCE (%)
14.8 12.8 14.2
Payout (%)
30.3 32.4 31.7
Valuations
P/E (X)
20.2 27.6 23.6
P/BV (X)
3.4
3.9
3.5
EV/EBITDA (X)
12.3 16.1 13.6
Div Yield (%)
1.3
1.0
1.1
2016E
70.0
7.0
4.7
39.4
33.3
223.8
19.0
17.2
32.7
17.7
3.1
10.6
1.6
Pace of project execution is likely to remain challenging under the
constrained environment. We expect energy segment revenue to grow
6% YoY (1HFY14 de-growth of 17% YoY) and 5% growth in environment
segment (1HFY14 de-growth of 2% YoY).
Order inflow from domestic customers is likely to remain muted
(2QFY14 domestic order inflow was INR5.5b v/s average domestic
inflows of INR9.3b in FY13). TMX received an order worth INR2.7b for
supply of heat recovery steam generators from Reliance Ind in 3QFY14
(1QFY14 order inflow from Reliance was INR17b).
In a recent media report management stated that "company is hopeful
of stable third quarter and is likely to see an improvement in
performance in the fourth quarter (4Q)" and also stated that margins
are unlikely to improve unless order inflow picks up.
Key issues to watch out
Quantum of order inflows would be the key variable to focus in a
constrained environment. Order inflow for 1HFY14 was INR35.8b, up
29% YoY on consolidated basis (we model consolidated order inflow
of INR58.6b for FY14E).
Updates shared by management on the pace of project execution,
mainly Reliance Ind (order value INR19.7b and accounts for 32% of
the consolidated unexecuted order book of INR61.3b).
Revenue from its subsidiaries had stagnated at INR1.9b in 1QFY14
and 2QFY14 but subsidiary profits had increased 91% QoQ in 2QFY14.
Maintaining the revenue momentum across subsidiaries would be a
crucial factor to watch for.
(INR Million)
FY13
2Q
11,924
-8.5
1,218
-13.3
10.2
139
34
274
1,318
407
30.9
911
911
-10.4
44,120
11,620
0.9
3Q
10,468
-17.5
1,119
-18.0
10.7
133
20
124
1,090
326
29.9
764
764
-20.1
46,490
12,840
0.9
4Q
14,682
-13.0
1,672
-9.7
11.4
145
5
244
1,767
614
34.7
1,153
1,153
-11.2
43,358
11,550
1.2
1Q
8,628
-12.3
814
-15.5
9.4
142
8
81
745
243
32.6
503
503
-25.2
55,300
21,230
1.2
FY14
2Q
3QE
10,433
11,059
-12.5
5.6
937
1,061
-23.1
-5.2
9.0
9.6
140
152
19
25
75
200
853
1,084
551
333
64.6
30.7
302
751
592
751
-66.9
-1.6
53,080
51,771
7,680
9,750
1.2
1.2
FY13
4QE
15,083
2.7
1,764
5.5
11.7
173
48
316
1,859
571
30.7
1,288
1,288
11.7
50,753
12,997
1.1
46,909
-11.6
5,071
-13.1
10.8
549
96
730
5,156
1,657
32.1
3,500
3,500
-14.0
43,358
48,590
0.9
FY14E
45,203
-3.6
4,575
-9.8
10.1
607
100
673
4,542
1,394
30.7
3,147
3,147
-10.1
50,753
51,657
1.1
Quarterly Performance (Standalone)
Y/E March
Sales
Change (%)
EBITDA
Change (%)
As of % Sales
Depreciation
Interest
Other Income
PBT
Tax
Effective Tax Rate (%)
Reported PAT
Adj PAT
Change (%)
Order Book
Order Intake
BTB (x)
E: MOSL Estimates
January 2014
1Q
9,835
-5.8
964
-15.1
9.8
132
37
187
981
309
31.5
672
672
-15.9
44,740
12,580
0.9
C–26

December 2013 Results Preview | Sector: Cement
Cement
Companies Covered
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
Jaiprakash Associates
Shree Cement
UltraTech Cement
Demand fails to recoup in seasonally stronger quarter
Cement demand continued to remain sluggish in 3QFY14E, with a weak October,
followed by a relatively better November and again a subdued December. Adverse
impact continues in housing and infrastructure vertical, coupled with sand mining
issues, delayed crop selling and politico-economic uncertainties. We estimate growth
of 1% YoY (+3% QoQ) in 3QFY14E and ~2.5% for FY14E for MOSL universe. Capacity
utilization is expected to remain at 69% (unchanged QoQ), which is the lowest 3Q
level in last decade. Our interactions with dealers across regions highlight a possible
better rural demand in 4QFY14E, also propelled by recent easing of sand mining issue,
post SC verdicts.
Price volatility persists despite futile attempts by players; net increase
estimated at INR1/bag QoQ
Weak demand and aggressive stance by tier II players resulted in rollback of couple of
price increase attempts (September-end and mid-November) taken by industries.
Overall, we estimate weighted average national prices to increase by INR1/bag QoQ
(-INR8/bag YoY) in 3QFY14E. This includes specific trends of (a) INR2-3/bag QoQ increase
in south and central, (b) INR1/bag increase in east, (c) INR1/bag decline in west and
(d) flattish trend in south. There have been instances of sharp plunge in non-trade
prices in between select markets like Rajasthan. We factor for YoY (-INR2/bag) and
INR10/bag YoY increase in realizations in FY14E and FY15E respectively.
Weaker demand and price to maintain pressure on profitability
Profitability is expected to be under pressure in 3QFY14E as well, after a weak 2QFY14,
as there has been (1) weak pricing trend, (2) continued cost push in energy and freights
and (3) no major benefits of seasonal operating leverage due to a weak demand. We
estimate EBITDA at ~INR505/bag (+INR6/bag QoQ, -INR293/bag YoY for pure cement
players). We estimate EBITDA/ton at INR793/906 for FY14E/FY15E respectively based
on (-INR2)/INR10 per bag YoY price increases.
Valuation and view
We revise the realizations improvement assumption for FY14E/15E at INR-2/10 per
bag YoY (v/s earlier estimate of INR0/15 per bag) to factor the disappointment in
expectation of realization improvement in 3QFY14E. This has resulted in downgrade
Expected quarterly performance summary
CMP
(INR)
27.12.13
ACC
1,120
Ambuja Cements
185
Birla Corporation
259
Grasim Industries
2,716
India Cements
61
Jaiprakash Associates
54
Shree Cement
4,386
Ultratech Cement
1,771
Sector Aggregate
Rating
Dec.13
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Neutral
27,731
22,120
7,218
13,194
10,169
34,832
13,499
47,701
176,465
Sales
Var.
% YoY
-10.5
-4.4
17.8
8.5
-6.0
2.5
-5.5
-1.8
-2.0
Var.
% QoQ
10.5
10.3
1.6
-6.1
-6.4
9.7
8.2
6.0
6.0
Dec.13
2,490
2,474
516
2,253
1,198
7,152
2,437
7,004
25,525
EBITDA
Var.
% YoY
-21.5
-42.2
0.5
4.6
-37.8
-6.2
-34.4
-31.6
-24.1
Var.
% QoQ
10.5
-3.1
-11.8
-13.8
-6.1
-9.5
-2.3
6.2
-2.8
(INR Million)
Net Profit
Dec.13
Var.
% YoY
1,601
-33.1
1,633
-29.0
357
10.7
2,472
24.9
-285
PL
-33
PL
1,471
-35.4
3,143
-47.7
10,360
-37.7
Var.
% QoQ
32.6
21.3
-14.2
-37.6
Loss
PL
-15.1
19.0
-13.2
Jinesh K Gandhi
(Jinesh@MotilalOswal.com) /
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com)
January 2014
C–27

December 2013 Results Preview | Sector: Cement
of our FY15E EPS estimates by 1-13% for ACC/ACEM/UTCEM/SRCM/Grasim. While
demand recovery is expected to be gradual, slowing capacity addition coupled with
higher capex and opex cost would support cement prices and profitability, going
forward. Recovery in demand would be critical for operating and stock performance.
In large caps, we prefer ACC and Shree Cement, while in mid-caps we prefer Birla
Corp, Madras Cement and Dalmia Bharat.
Demand growth flattish YoY in a seasonally strong quarter
MOSL cement universe volumes to grow 1% YoY (+3% QoQ)
Source: CMA/MOSL
Utilizations fail to improve in a seasonally strong quarter
100%
90%
80%
70%
60%
Trend in average quarterly cement price remains weak (INR/bag)
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
North
Eas t
Wes t
South
Centra l Na ti onal
Avera ge
Source: CMA/MOSL
Realization to remain flat QoQ as suggested by price trend
Rea l i za ti on (INR/ton)
Weaker realizations, cost push and weak operating leverage to
keep profitability under pressure
EBITDA (INR/ton)
Source: Company/MOSL
January 2014
C–28

December 2013 Results Preview | Sector: Cement
Trend in key operating parameters
Net Sales (INR m)
3QFY14
YoY (%)
QoQ (%)
27,731
-10.5
10.5
22,120
-4.4
10.3
47,701
-1.8
6.0
7,218
17.8
1.6
10,169
-6.0
-6.4
13,499
-5.5
8.2
7,202
6.8
1.1
6,311
-8.1
1.1
4,513
-8.6
0.5
8,110
-7.0
-10.4
3,421
0.7
6.5
12,436
5.9
8.0
170,431
-3.4
5.1
EBITDA Margins (%)
3QFY14
YoY (Rs)
QoQ (Rs)
9.0
-130
0
11.2
-730
-150
14.7
-640
0
7.2
-120
-110
11.8
-600
0
18.1
-800
-190
10.7
-820
40
9.1
-1,040
300
11.6
-830
-90
14.7
50
-60
10.8
-580
0
2.2
170
450
11.6
-500
0
Net Profit (INR m)
3QFY14 YoY (INR) QoQ (INR)
1,601
-33.1
32.6
1,633
-29.0
21.3
3,143
-47.7
19.0
357
10.7
-14.2
-285
-209.0
26.4
1,471
-35.4
-15.1
-64
-135.1
-75.4
-49
-109.0
-77.3
47
-88.7
-54.8
43
-94.9
-76.4
159
-49.2
10.1
-447
-17.0
-61.2
7,609
-50.3
28.5
ACC
Ambuja Cement
UltraTech
Birla Corp
India Cement
Shree Cement
Dalmia Bharat
J K Cements
JK Lakshmi Cem.
Madras Cement
Orient Paper
Prism Cement
Sector Agg.
Trend in key financial parameters
Volume (m tons)
3QFY14
YoY (%)
QoQ (%)
6.0
0.5
7.8
5.4
-0.6
9.6
9.7
-2.1
5.4
1.9
20.0
0.6
2.4
-1.7
-2.5
3.1
4.3
-4.2
1.6
8.0
-2.3
1.4
-4.3
-5.3
1.3
2.5
-0.6
2.0
1.5
-9.6
1.0
2.5
5.1
1.4
3.0
15.0
37.0
1.0
3.1
Realization (INR/ton)
3QFY14
YoY (BP) QoQ (BP)
4,244
79
9
4,131
-163
27
4,826
10
23
3,876
-71
38
4,166
-198
50
3,334
-390
0
4,291
102
0
4,554
-188
286
3,522
-427
40
4,139
-382
60
3,462
-62
45
3,727
84
80
4,223
-105
44
EBITDA (INR/ton)
3QFY14
YoY (%)
QoQ (%)
408
-126
11
462
-333
-61
709
-307
5
376
-74
32
504
-293
-19
578
-440
-92
480
-379
34
413
-511
153
408
-377
-28
444
-560
60
375
-211
6
59
121
296
505
-293
6
Source: Company, MOSL
FY15E/CY14E
Old
64.7
8.6
102.9
42.6
5.0
315.7
ACC
Ambuja Cement
UltraTech
Birla Corp
India Cement
Shree Cement
Dalmia Bharat
J K Cements
JK Lakshmi Cem.
Madras Cement
Orient Paper
Prism Cement
Sector Agg.
Revised EPS estimates (INR)
Rev
ACC
Ambuja Cement
UltraTech
Birla Corp
India Cement
Shree Cement
45.5
6.4
70.1
29.6
-0.8
272.2
FY14E/CY13E
Old
Chg (%)
51.5
7.2
86.4
34.1
1.9
312.7
-11.6
-11.3
-18.9
-13.0
-141.7
-13.0
Rev
64.3
8.1
93.6
42.8
3.8
302.0
Chg (%)
-0.5
-6.4
-9.0
0.5
-23.6
-4.3
Recent correction makes valuations attractive (FY12)
200
150
100
50
0
0%
6%
12%
RoCE (%)
18%
24%
Gra s i m
Bi rl a Corp
Repl acement Cos t at
USD140/ton
Ul tra Tech
Indi a Cement
Ambuja
Shree
ACC
January 2014
C–29

December 2013 Results Preview | Sector: Cement
Relative Performance - 3m (%)
Sens ex Index
MOSL Cement Index
Relative Performance-1Yr (%)
120
105
Sens ex Index
MOSL Cement Index
110
106
102
98
90
75
60
Comparative valuation
CMP (INR)
27.12.13
Cement
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
J P Associates
Shree Cement
Ultratech Cement
Dalmia Bharat
J K Cements
JK Lakshmi Cem.
Ramco Cements
Prism Cement
Sector Aggregate
1,120
185
259
2,716
61
54
4,386
1,771
169
194
80
189
27
Rating
EPS (INR)
FY13 FY14E FY15E
68.7
10.0
35.0
291.3
5.8
2.3
314.9
96.8
24.3
33.0
16.0
17.0
-1.2
45.5
6.4
29.6
260.0
-0.8
0.9
272.2
70.1
6.0
3.2
7.6
5.3
-3.4
64.3
8.1
42.8
309.2
3.8
2.4
302.0
93.6
8.1
17.8
9.1
14.0
-0.5
P/E (x)
FY13 FY14E FY15E
16.3
18.4
7.4
9.3
10.5
23.9
13.9
18.3
7.0
5.9
5.0
11.1
-22.4
14.8
24.6
28.9
8.7
10.4
-77.3
60.3
16.1
25.3
28.3
60.6
10.4
35.9
-7.9
22.0
17.4
22.9
6.0
8.8
15.9
22.7
14.5
18.9
20.9
10.9
8.7
13.5
-51.6
16.0
EV/EBITDA (x)
FY13 FY14E FY15E
9.5
9.3
4.4
4.3
6.6
17.6
8.3
11.4
5.6
4.9
4.9
8.8
15.7
9.2
13.5
16.4
5.1
4.6
8.3
10.0
10.8
14.1
10.8
11.1
8.8
13.1
25.0
10.3
9.8
13.5
3.4
3.6
6.3
9.1
8.8
11.1
8.5
6.3
7.1
7.8
9.0
8.1
RoE (%)
FY13 FY14E FY15E
17.7
18.3
11.0
13.6
4.3
3.9
30.6
18.9
6.6
14.4
15.4
18.3
-5.4
13.4
11.4
11.0
8.8
11.0
-0.5
1.5
18.4
12.0
1.6
1.4
6.9
5.3
-17.5
8.4
15.4
13.2
11.6
11.7
2.7
3.8
16.5
14.3
2.1
7.2
7.9
13.2
-3.1
10.7
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
January 2014
C–30

December 2013 Results Preview | Sector: Cement
ACC
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
ACC IN
187.9
211 / 3
1,453 / 912
1 / -19 / -30
CMP: INR1,120
Buy
Financials & Valuation (INR b)
Y/E December
Sales
EBITDA
NP
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/Ton (USD)
2012 2013E 2014E
111.3 109.9 122.6
19.7 13.5 18.5
12.9
8.6 12.1
68.7 45.7 64.3
14.1 -33.5 40.8
392.9 406.9 430.5
17.7 11.4 15.4
23.5 15.2 20.6
61.8 73.1 63.3
16.3
2.9
8.9
93
24.6
2.8
12.8
91
17.4
2.6
8.7
85
2015E
140.4
23.6
15.7
83.6
30.0
467.6
18.6
24.8
55.6
13.4
2.4
7.4
82
Dispatches in 4QCY13E are estimated to grow 0.5% YoY (+8% QoQ) to
5.97mt. Average realizations are expected to remain flat QoQ (+1.3%
YoY) to INR4,244/ton.
Revenue is expected to de-grow by 11% YoY (+11% QoQ) to INR27.7b.
EBITDA margins are expected to remain unchanged QoQ (-1.2pp YoY)
due to (a) lower realizations growth and (c) push on energy and freight
cost. EBITDA/ton is estimated at INR408 (+INR11 QoQ, -INR122 YoY).
PAT would decline 33% YoY (+33% QoQ) to INR1.6b.
We cut the EPS estimates (ex-synergies) by 11.6%/0.5% for CY13E/
CY14E to INR45.5 and INR64.3 respectively to factor for weaker
realizations in volume and higher cost.
The stock trades at 17.4x CY14E EPS, 8.7x EV/EBITDA and USD85/ton.
Maintain
Buy
with a target price of INR1,297 (CY14E USD101/ton).
Key issues to watch out
Volume growth recovery and outlook.
Cement pricing outlook and sustainability, considering recent
downtrend in November and December.
Progress in ongoing capex for Jamul expansion of 5mt.
Update of synergies and other guided cost saving measures.
Quarterly Performance (Standalone)
Y/E December
CY12
4Q*
5.94
-0.2
4,166
-0.8
-7.5
30,989
24.0
3,172
10.2
1,575
273
1,468
2,792
2,792
400
14.3
2,392
2,392
7.7
-15.2
1Q
6.42
-4.5
4,269
0.9
2.5
29,111
2.4
4,468
15.3
1,383
108
1,205
4,182
5,861
1,484
25.3
4,377
3,124
10.7
-19.1
2Q
6.12
1.2
4,298
-5.7
0.7
27,952
1.4
4,335
15.5
1,387
179
908
3,677
3,677
1,086
29.5
2,591
2,591
9.3
-38.0
CY13
3Q
5.54
2.6
4,235
-5.9
-1.5
25,087
3.2
2,253
9.0
1,444
110
1,023
1,721
1,721
514
29.8
1,207
1,207
4.8
-51.4
4QE
5.97
0.5
4,244
1.9
0.2
27,731
-10.5
2,490
9.0
1,505
123
1,365
2,227
2,227
625
28.1
1,601
1,601
5.8
-33.1
1Q
2Q
3Q
Cement Sales (m ton)
6.72
6.05
5.40
YoY Change (%)
9.1
2.0
-5.1
Cement Realization
4,231
4,558
4,502
YoY Change (%)
8.7
12.5
19.1
QoQ Change (%)
0.7
7.7
-1.2
Net Sales
28,430
27,576
24,310
YoY Change (%)
18.5
14.8
13.1
EBITDA
5,988
6,306
4,215
Margins (%)
21.1
22.9
17.3
Depreciation
1,305
1,356
1,352
Interest
316
301
257
Other Income
1,121
1,360
975
PBT before EO Item
5,487
6,009
3,581
PBT after EO Item
2,134
6,009
3,581
Tax
580
1,829
1,094
Rate (%)
27.2
30.4
30.6
Reported PAT
1,554
4,179
2,487
Adjusted PAT
3,859
4,179
2,487
Margins (%)
13.6
15.2
10.2
YoY Change (%)
10.1
24.2
48.4
E: MOSL Estimates; * Merger of RMC business from 4QCY12
(INR Million)
CY12
24.1
1.6
4,358
9.7
111,305
18.0
19,681
17.7
5,589
1,147
4,923
17,869
14,515
3,903
26.9
10,612
12,918
11.6
11.9
CY13E
24.0
-0.2
4,263
-2.2
109,881
-1.3
13,546
12.3
5,719
520
4,500
11,807
13,485
3,708
27.5
9,777
8,560
7.8
-33.7
January 2014
C–31

December 2013 Results Preview | Sector: Cement
Ambuja Cements
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
ACEM IN
1,545.2
285 / 5
212 / 148
-1 / -10 / -17
CMP: INR185
Neutral
Dispatches in 4QCY13E are estimated to de-grow 0.6% YoY (+10% QoQ)
to 5.36mt. Average realizations are expected to decline by 0.7% QoQ
(-3.8% YoY) to INR4,131/ton.
EBITDA margins are expected to decline by 7.3pp YoY (-1.5pp QoQ) to
11.2%, impacted by lower realizations, cost push and no seasonal
benefits from operating leverage. EBITDA/ton is estimated at ~INR462/
ton (-INR61/ton QoQ and -INR333/ton YoY).
PAT is estimated to decline 29% YoY (+21% QoQ) to INR1.6b.
We cut the EPS estimates (ex-synergies) by 11.3%/6.4% for CY13E/
CY14E to INR6.4 and INR8.1 respectively to factor the weaker
realizations volume and higher cost.
The stock trades at 22.9x CY14E EPS, 13.2x EV/EBITDA and USD132/ton.
Maintain
Neutral
with a target price of INR185 (CY14E USD126/ton).
Financials & Valuation (INR b)
Y/E December
Sales
EBITDA
NP
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/Ton (USD)
2012 2013E 2014E
96.7 91.1 101.3
24.7 15.1 18.4
15.4
9.9 12.4
10.0
6.4
8.1
22.4 -36.1 26.2
56.9 59.7 62.5
18.3 11.0 13.2
27.6 16.3 19.2
49.8 62.9 64.9
18.4
3.2
9.8
139
28.9
3.1
16.2
137
22.9
3.0
13.2
132
2015E
115.6
22.5
15.7
10.2
26.2
66.9
15.7
22.7
57.2
18.1
2.8
10.3
127
Key issues to watch out
Volume growth recovery and outlook.
Cement pricing outlook and sustainability, considering recent
downtrend in November and December.
Progress in ongoing mining land acquisition and capex in Nagaur
(Rajasthan) plant of 4.5mt.
(INR Million)
CY12
CY13
4Q
5.39
-5.6
4,293
5.2
-5.0
23,133
-0.7
4,282
18.5
1,576
243
1,100
3,563
-279
3,284
1,164
35.5
2,120
2,300
-28.8
1Q
5.96
-3.6
4,271
0.3
-0.5
25,448
-3.3
5,118
20.1
1,204
132
1,339
5,121
1,741
6,862
1,983
28.9
4,879
3,641
-28.3
2Q
5.46
-3.1
4,297
-5.7
0.6
23,457
-8.6
4,920
21.0
1,223
171
1,051
4,578
0
4,578
1,336
29.2
3,242
3,242
-30.9
3Q
4.89
2.0
4,103
-9.2
-4.5
20,049
-7.4
2,554
12.7
1,246
178
940
2,070
481
2,551
891
34.9
1,660
1,346
-60.1
4QE
5.36
-0.6
4,131
-3.8
0.7
22,120
-4.4
2,474
11.2
1,261
168
1,270
2,315
0
2,315
682
29.5
1,633
1,633
-29.0
CY12
21.99
2.5
4,400
11.0
96,749
13.8
24,675
25.5
5,373
757
4,042
22,588
-3,570
19,018
6,048
31.8
12,971
15,435
23.0
CY13E
21.66
-1.5
4,205
-4.4
91,075
46.4
15,067
16.5
4,934
649
4,600
14,083
2,223
16,306
4,892
30.0
11,414
9,858
-36.1
Quarterly Performance
Y/E December
Sales Volume (m ton)*
YoY Change (%)
Realization (INR/ton)
YoY Change (%)
QoQ Change (%)
Net Sales
YoY Change (%)
EBITDA
Margins (%)
Depreciation
Interest
Other Income
PBT before EO Item
Extraordinary Inc/(Exp)
PBT after EO Exp/(Inc)
Tax
Rate (%)
Reported Profit
Adj PAT
YoY Change (%)
E: MOSL Estimates
1Q
6.18
9.6
4,257
8.5
4.4
26,315
18.9
7,470
28.4
1,209
168
1,122
7,215
-2,791
4,424
1,301
29.4
3,122
5,075
24.5
2Q
5.63
6.5
4,556
10.7
7.0
25,660
17.9
7,223
28.2
1,215
180
908
6,736
0
6,736
2,047
30.4
4,689
4,689
34.9
3Q
4.79
-0.4
4,521
20.3
-0.8
21,645
19.8
5,673
26.2
1,373
166
939
5,074
-499
4,575
1,535
33.6
3,040
3,371
96.6
January 2014
C–32

December 2013 Results Preview | Sector: Cement
Birla Corporation
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
BCORP IN
77.0
20 / 0
342 / 191
3 / 7 / -22
CMP: INR259
Buy
Financials & Valuation (INR b)
Y/E March
Sales
EBITDA
NP
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/Ton (USD)
2013 2014E 2015E
25.6 30.0 33.7
3.5
3.1
4.6
2.7
2.3
3.3
35.0 29.6 42.8
12.8 -15.4 44.5
318.2 338.4 370.8
11.0
8.8 11.6
10.7
8.0 11.8
24.9 31.6 24.4
7.4
0.8
4.1
25
8.7
0.8
4.8
26
6.0
0.7
3.0
25
2016E
37.7
6.0
4.1
53.6
25.2
412.8
13.0
13.5
21.7
4.8
0.6
2.3
21
3QFY14E volumes are estimated to grow 20% YoY (+0.6% QoQ) to 1.86mt
on a low base of last year when the mining ban was implied. Average
realizations are expected to decline by 5.1% YoY (+1.4% QoQ) to
INR3,591/ton.
EBITDA margins are expected to decline by 1.2pp YoY (1pp QoQ) to
7.2%, impacted by higher cost. EBITDA/ton (including non-cement
business) is estimated to decline by ~INR39/ton QoQ (-111/ton YoY)
to INR277/ton.
PAT estimated to grow 11% YoY (-14% QoQ) to INR357m.
We cut the FY14E/15E EPS estimates by 13%/unchanged to factor better
volume but lower realizations and cost push.
The stock trades at 4.8x FY16E EPS, 2.3x EV/EBITDA and USD21/ton.
Maintain
Buy
with a target price of INR317 (4x FY15E EV/EBITDA).
Key issues to watch out
Volume growth recovery and outlook.
Cement pricing outlook and sustainability, considering recent
downtrend in November and December.
Status of mining ban at Rajasthan plant.
Quarterly Performance
Y/E March
Cement Sales (m ton)
YoY Change (%)
Cement Realization
YoY Change (%)
QoQ Change (%)
Net Sales
YoY Change (%)
EBITDA
Margins (%)
Depreciation
Interest
Other Income
Profit before Tax
Tax
Rate (%)
PAT
Margins (%)
YoY Change (%)
E: MOSL Estimates
1Q
1.63
7.1
4,021
17.8
11.3
6,580
18.1
1,258
19.1
235
237
346
1,132
284
25.1
847
12.9
-24.3
2Q
1.58
11.7
3,934
25.2
-2.2
6,274
24.2
1,102
17.6
252
141
347
1,056
254
24.0
802
12.8
206.8
FY13
3Q
1.55
11.9
3,784
8.1
-3.8
6,126
14.7
514
8.4
285
171
270
328
6
1.7
322
5.3
-26.3
4Q
1.71
4.6
3,581
-0.9
-5.4
6,658
2.4
663
10.0
272
99
701
992
265
26.8
726
10.9
26.4
1Q
1.87
14.8
3,864
-3.9
7.9
7,720
17.3
668
8.7
302
207
367
525
66
12.5
460
6.0
-45.7
2Q
1.85
17.3
3,541
-10.0
-8.3
7,107
13.3
585
8.2
311
249
422
448
32
7.1
416
5.9
-48.2
FY14
3QE
1.86
20.0
3,591
-5.1
1.4
7,218
17.8
516
7.2
315
255
450
396
40
10.0
357
4.9
10.7
4QE
1.92
12.3
3,885
8.5
8.2
7,983
19.9
1,284
16.1
334
298
515
1,167
116
10.0
1,051
13.2
44.7
(INR Million)
FY13
6.47
8.5
3,827
12.0
25,638
14.1
3,536
13.8
1,044
649
1,663
3,507
809
23.1
2,698
10.5
12.8
FY14E
7.50
16.0
3,722
-2.7
30,028
17.1
3,054
10.2
1,263
1,009
1,755
2,537
254
10.0
2,283
7.6
-15.4
January 2014
C–33
 Motilal Oswal Financial Services