India Strategy | Get on track please !
India Strategy
October 2017
Macro
Pick-up
Demand
uptick
Demonetization
GST
RERA
IBC
Turbulence behind; clear skies ahead
Research Team (Gautam.Duggad@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Contents
India Strategy – Turbulence behind; Clear skies ahead
2QFY18 Highlights & Ready Reckoner
Sectors & Companies
Automobiles .......................................... 63-81
Amara Raja Batteries ...................................... 67
Ashok Leyland ................................................. 68
Bajaj Auto........................................................ 69
Bharat Forge ................................................... 70
BOSCH ............................................................. 71
CEAT ................................................................ 72
Eicher Motors ................................................. 73
Endurance technologies .................................. 74
Escort .............................................................. 75
Exide Industries ............................................... 76
Hero MotoCorp ............................................... 77
Mahindra & Mahindra .................................... 78
Maruti Suzuki .................................................. 79
Tata Motors .................................................... 80
TVS Motor Company ....................................... 81
Capital Goods.......................................... 82-97
ABB ................................................................. 85
Bharat Electronics ........................................... 86
BHEL ................................................................ 87
Blue Star.......................................................... 88
Crompton Greaves .......................................... 89
Crompton Greaves Consumer ......................... 90
Cummins India ................................................ 91
GE T&D............................................................ 92
Havells India .................................................... 93
Larsen & Toubro ............................................. 94
Siemens........................................................... 95
Thermax .......................................................... 96
Voltas .............................................................. 97
Cement ..................................................98-112
ACC ............................................................... 103
Ambuja Cements........................................... 104
Birla Corporation........................................... 105
Dalmia Cement ............................................. 106
Grasim Industries .......................................... 107
India Cements ............................................... 108
JK Cement ..................................................... 109
Ramco Cement.............................................. 110
Shree Cement ............................................... 111
UltraTech Cement ......................................... 112
Consumer ............................................ 113-133
Asian Paints................................................... 116
Britannia Industries ....................................... 117
Colgate .......................................................... 118
Dabur ............................................................ 119
Emami ........................................................... 120
Godrej Consumer .......................................... 121
GSK Consumer .............................................. 122
Hindustan Unilever ....................................... 123
ITC ................................................................. 124
Jyothy Labs .................................................... 125
Marico ........................................................... 126
Nestle India ................................................... 127
Page Industries.............................................. 128
Parag Milk Foods........................................... 129
Pidilite Industries .......................................... 130
P&GH Hygiene .............................................. 131
United Breweries .......................................... 132
United Spirits ................................................ 133
Financials ............................................. 134-156
Axis Bank ....................................................... 139
Bank of Baroda.............................................. 140
Bank of India ................................................. 141
Canara Bank .................................................. 142
DCB Bank....................................................... 143
Equitas Holdings............................................ 144
Federal Bank ................................................. 145
HDFC Bank .................................................... 146
ICICI Bank ...................................................... 147
IDFC Bank ...................................................... 148
Indian Bank .................................................... 149
IndusInd Bank ................................................ 150
Kotak Mahindra Bank .................................... 151
Punjab National Bank .................................... 152
RBL Bank ........................................................ 153
State Bank of India......................................... 154
Union Bank of India ....................................... 155
Yes Bank ........................................................ 156
NBFC ................................................... 157-174
Bajaj Finance.................................................. 159
Bharat Financial Inclusion .............................. 160
Capital First .................................................... 161
Cholamandalam Inv & Fin.............................. 162
Dewan Housing.............................................. 163
GRUH Finance ................................................ 164
HDFC .............................................................. 165
Indiabulls Housing ......................................... 166
L&T Finance Holdings .................................... 167
LIC Housing Fin .............................................. 168
M & M Financial ............................................ 169
Muthoot Finance ........................................... 170
PNB Housing Finance ..................................... 171
Repco Home Fin ............................................ 172
Shriram City Union Fin ................................... 173
Shriram Transport Fin. ................................... 174
Healthcare........................................... 175-196
Ajanta Pharma ............................................... 177
Alembic Pharmaceuticals ............................. 178
Alkem Labs .................................................... 179
Aurobindo Pharma ........................................ 180
Biocon............................................................ 181
Cadila Healthcare .......................................... 182
Cipla............................................................... 183
Divi's Laboratories ......................................... 184
Dr Reddy’ s Labs ............................................ 185
Fortis Healthcare ........................................... 186
Glenmark Pharma.......................................... 187
GSK Pharma ................................................... 188
Ipca Laboratories ........................................... 189
Jubilant Life Sciences ..................................... 190
Lupin .............................................................. 191
Sanofi India .................................................... 192
Shilpa Medicare ............................................. 193
Strides Shasun ............................................... 194
Sun Pharma ................................................... 195
Torrent Pharmaceuticals ............................... 196
Logistics .............................................. 197-188
Allcargo Logistics ........................................... 199
Concor ........................................................... 200
Gateway Distriparks ...................................... 201
Media.................................................. 202-215
D B Corp......................................................... 207
Dish TV India .................................................. 208
Entertainment Network................................. 209
HT Media ....................................................... 210
Jagran Prakashan ........................................... 211
Music Broadcast ........................................... 212
PVR ................................................................ 213
Sun TV............................................................ 214
Zee Entertainment......................................... 215
Metals ................................................. 216-230
Hindalco......................................................... 222
Hindustan Zinc ............................................... 223
Jindal Steel & Power ..................................... 224
JSW Steel ....................................................... 225
Nalco ............................................................. 226
NMDC ............................................................ 227
SAIL ................................................................ 228
Tata Steel ....................................................... 229
Vedanta ......................................................... 230
3-48
49-62
63-308
Oil & Gas ..............................................231-248
BPCL .............................................................. 237
GAIL............................................................... 238
Gujarat Gas ................................................... 239
Gujarat State Petronet .................................. 240
HPCL .............................................................. 241
Indraprastha Gas ........................................... 242
IOC ................................................................ 243
MRPL ............................................................. 244
Oil India ......................................................... 245
ONGC ............................................................ 246
Petronet LNG ................................................ 247
Reliance Industries ........................................ 248
Retail ...................................................249-253
Jubilant Foodworks ....................................... 252
Titan Company .............................................. 253
Technology ..........................................254-273
Cyient ............................................................ 259
HCL Technologies .......................................... 260
Hexaware Tech.............................................. 261
Infosys ........................................................ 262
KPIT Tech....................................................... 263
L&T Infotech.................................................. 264
Mindtree ....................................................... 265
MphasiS ........................................................ 266
NIIT Tech. ...................................................... 267
Persistent Systems ........................................ 268
Tata Elxsi ....................................................... 269
TCS ................................................................ 270
Tech Mahindra .............................................. 271
Wipro .......................................................... 272
Zensar Tech ................................................... 273
Telecom ...............................................274-282
Bharti Airtel ................................................... 279
Bharti Infratel ................................................ 280
Idea Cellular .................................................. 281
Tata Comm .................................................... 282
Utilities ................................................270-278
CESC .............................................................. 285
Coal India ...................................................... 286
JSW Energy.................................................... 287
NTPC ............................................................. 288
Power Grid Corp. ........................................... 289
Tata Power .................................................... 290
Others..................................................291-308
Arvind............................................................ 291
Avenue Super. ............................................... 292
Bata India ...................................................... 293
BSE ................................................................ 294
Castrol India .................................................. 295
Delta Corp ..................................................... 296
Indo Count Industries .................................... 297
Info Edge ....................................................... 298
InterGlobe Aviation ....................................... 299
Kaveri Seed.................................................... 300
Manpasand Beverages .................................. 301
MCX............................................................... 302
Navneet Educat. ............................................ 303
PI Industries .................................................. 304
Quess Corp .................................................... 305
S H Kelkar ...................................................... 306
SRF ................................................................ 307
Team Lease Serv............................................ 308
Note:
All stock prices and indices for companies as on 5 October 2017, unless otherwise stated
Investors are advised to refer through important disclosures made at the last page of the Research Report.

India Strategy | Turbulence behind; Clear skies ahead
India Strategy
BSE Sensex: 31,592
S&P CNX: 9,889
Turbulence behind; Clear skies ahead
Earnings rebound led by OMCs, Cyclicals and low base
OMCs and select Cyclicals drive earnings; maintain Nifty EPS estimates
As we prepare estimates for 2QFY18, we can’t help but notice the slight moderation
in the Indian macro story – weaker than expected GDP growth for 1QFY18, higher
crude prices and some teething troubles pertaining to GST implementation. That
said, our Economist, Nikhil Gupta believes that the worst is behind as far as GDP
growth is concerned. Post-GST restocking and an early festive season should help
2QFY18 performance of India Inc.
We expect MOSL Universe PAT to grow 23.4% YoY, but just 4% YoY excluding
OMCs, PSU Banks and Metals. Growth will be led by Cyclicals like Metals, PSU
Banks, OMCs, while Defensives are expected to post the fourth consecutive
quarter of profit decline, dragged by IT and Healthcare.
We maintain our FY18/FY19 Nifty EPS estimates at INR487/INR602 and
introduce our FY20 Nifty EPS estimate at INR693. We expect Nifty EPS to grow
15%/24% in FY18/FY19.
Key sectoral trends/highlights
PSU Banks
will report 2.9x YoY jump in profits owing to swing in SBI’s numbers
from loss of INR5.6b to profit of INR29b.
Oil & Gas
will report 60% YoY profit growth, led by OMCs, which will benefit
from inventory gains and higher GRMs, and report 3.2x higher profits.
Metals
will report another strong quarter, led by strong underlying commodity
prices and low base – profits are expected to grow 123% YoY.
Autos
will report positive growth in profits after three consecutive quarters of
YoY decline, while our
Consumer
universe will post 10% profit growth.
Technology
is expected to report the third consecutive quarter of muted PAT.
Healthcare, Telecom and Cement
will have a lackluster quarter, with YoY
earnings decline.
Utilities’
performance will be buoyed by low base of Coal
India.
Three key trends to watch out for:
1.
Macros: Worst is behind:
After the weak 1QFY18 GDP print, debate has revived
around the macro fundamentals. We believe that worst is behind and expect
GDP growth to recover, albeit gradually. Recent high frequency indicators like
PMI and our own proprietary EAI for July and August point towards the same.
We also don’t find any indications of stress on the central governments
budgeted tax receipts. While non-tax receipts are likely to be lower than
estimated, there is still a good chance that it could be made up by higher-than-
budgeted tax collection. Indirect tax receipts up to August 2017 were 39.5% of
full-year budget estimates (BE), marking the highest collection in the first five
months in any fiscal year (barring FY08) since FY01.
Sources of exhibits in this report include RBI, CMIE, Bloomberg, IMF, Industry, Companies, and MOSL database
October 2017
3

India Strategy | Turbulence behind; Clear skies ahead
2.
GST: Settling in; 2H to be much better vs. 1H for B2C sectors:
Implementation
of GST has expectedly resulted in some teething troubles pertaining to
compliance, tax return filing for SME’s, Wholesalers and Retailers. However, our
channel checks and conversations with corporates in our coverage universe
suggest 2QFY18 will benefit from re-stocking of trade supply chain. We also
expect 2HFY18 to be much better vs. 1HFY18 for B2C sectors like Consumer,
Auto, Durables etc. as trade settles down with the GST. Low base of
demonetization in 2HFY17 should also help in our view.
3.
Commodity costs hardening: threat to margins?
Operating margins of India Inc.
benefitted from the commodity cost tailwinds in FY15, FY16 and 1HFY17. We
saw eight consecutive quarters of operating margin expansion from Mar’15 till
Dec’16 for MOSL Universe excl. OMCs and Financials. Commodity prices have
hardened off-late – base metals, crude as well as agro commodities. This could
potentially put at risk our estimated 50bps margin expansion for our universe in
2HFY18. Operating margins of sectors like Consumers, Cement, Automobiles,
and Durables will be at risk especially since corporates have been reluctant to
exercise pricing power in an environment of moderate demand scenario.
Model portfolio changes
We have made a few changes to our portfolio to reflect our preference for earnings
visibility in an environment of disruption, and also our belief in an earnings pick-up
2HFY18 onward. Overall, we continue to like Financials, Autos, Energy and
Healthcare sectors. At the same time, we find valuations in the Consumer space rich,
even as we believe Discretionary will do well compared to Staples. We have also
made a few changes to our Mid-Cap basket.
BFSI:
We have increased the weight in HDFC Bank, and replaced Federal Bank
with RBL. We expect HDFC Bank to continue with its steady growth and report
strong RoAs, driven by an improvement in operating leverage and digital
initiatives. We believe that RBL is well positioned to report strong balance sheet
growth, backed by the recent capital raising. Also, we expect the margins and
fee income profile for RBL to improve, which should drive RoA expansion over
the next two years. Among PSU Banks, we stick with SBIN, maintaining our
positive stance. However, we have removed PNB from our portfolio, as its weak
growth profile, combined with elevated provisions and relatively weak capital
position, is expected to remain a drag on its earnings recovery. We introduce
HDFC in our portfolio as the company has demonstrated its ability to keep
spreads intact in a very competitive environment. We replace Repco with
Capital First, as the land registration issues for the former are not yet resolved in
TN. Besides this, we see continued intense pressure in terms of balance transfer
from Repco’s loan portfolio. We introduce Capital First as it has demonstrated
strong growth and improving return ratios over the past few years, and has
become a significant player in most of the businesses it operates in.
Consumer:
We maintain our positions in ITC and Britannia, but replace Colgate
with Titan, given our expectations of sharper market share gains for organized
jewelers. The recent government action to withdraw the notification pertaining
to PMLA is an added positive.
October 2017
4

India Strategy | Turbulence behind; Clear skies ahead
Energy:
We introduce HPCL in our portfolio while maintaining our weights in
IOC, ONGC and Petronet LNG. We continue to find the OMC story attractive, and
the recent improvements in GRMs are yet to reflect in valuations, in our view.
Healthcare:
We maintain our overweight stance on Healthcare (had upgraded
the stance in 4QFY17), with Sun Pharma and Aurobindo as our key picks. We are
replacing Fortis with Granules, as we believe the latter has the potential to
deliver >50% return over the next 12-18 months, led by multiple re-rating (to
>18x forward earnings) and strong EPS CAGR of ~35% until FY20.
Metals and Utilities:
We maintain our overweight on Hindalco as we expect the
de-leveraging story to play out. We are replacing Power Grid with Coal India, as
we believe the worst is behind for the latter and its valuations are attractive
with a 5.5% dividend yield.
October 2017
5

India Strategy | Turbulence behind; Clear skies ahead
2QFY18 PREVIEW
Growth led by cyclical sectors and low base
Earnings breadth remains a concern; retain Nifty EPS estimates for FY18/19
As we prepare estimates for 2QFY18, we can’t help but notice the slight
moderation in the Indian macro story. The narrative of India has so far been
defined by excellent macros (inflation under control, twin deficits under control,
stable currency, and highest-ever FDI and forex reserves) and muted micros
(lack of earnings recovery). However, of late, the macros have moderated a bit,
with a weaker than expected 5.7% GDP print of 1QFY18, followed by hardening
of crude prices. Meanwhile, private capex is not showing signs of pick-up.
Admittedly, the GDP impact could be owing to GST-related de-stocking in
1QFY18, and hence, transitory. We expect re-stocking to gather momentum in
2QFY18, aided by an early festive season in CY17. Our Economist also believes
that the worst is behind as far as GDP growth is concerned. However, if Crude
prices were to harden further, it could impact the fiscal deficit and inflation
equation.
As articulated in our earlier strategy reports, FY18 remains a year of earning
recovery, albeit led by few sectors, and hence, narrow. We refrain from drawing
any immediate conclusions on the soundness of this recovery as yet. While we
build in healthy 15% earnings growth for the Nifty in FY18, we highlight two key
potential risks to earnings:
1. Prolonged GST-led disruption – while changes in GST rates have been largely
passed through, the burden of compliance and challenges pertaining to GSTN
infrastructure is impacting the trade and supply chain. This could create further
volatility in earnings.
2. Higher-than-estimated credit costs for the BFSI sector (PSU Banks account for
23% of FY18E PAT delta for MOSL), as one awaits the resolution of flagged
stressed assets at NCLT.
Earnings pick-up led by OMCs’ exceptional gains and low base of Metals
As the implementation and impact of GST settles in, we expect 2QFY18 to be
marked by volatility in earnings. Last four quarters have clearly been disruptive
as far as the economy, and consequently, the earnings performance of
Corporate India is concerned. Series of disruptive initiatives like demonetization,
RERA, and now, GST have impacted earnings. If 1QFY18 was impacted by GST
related de-stocking, 2QFY18 will benefit from re-stocking and early festive
season, in our view. Inflation in commodity prices is also lending respectability
to topline growth, as companies pass on the impact of input price inflation to
consumers. We believe 2QFY18 will mark the end of material GST-related
disruptions in numbers. From 3QFY18, we expect a relatively cleaner trajectory
for India Inc. As we exit a disruptive 1HFY18, hopes of a strong 2HFY18 led by
low base as well as non-disruptive environment characterize our optimism.
For 2QFY18, we expect MOSL Universe revenue to grow 14.5% YoY (revenue
was up 3% YoY in the base quarter), the highest in 20 quarters.
EBITDA growth is estimated at 15% YoY, with flat underlying operating margin
for the MOSL Universe (ex-Financials and OMCs). PAT is likely to grow 23% YoY
(8% PAT growth in 2QFY17) – highest in 13 quarters. However, it is primarily
boosted by exceptional performance of OMCs and low base of Metals and SBI.
6
October 2017

India Strategy | Turbulence behind; Clear skies ahead
Excluding OMCs, we estimate 12% YoY PAT growth for the MOSL Universe.
Excluding OMCs, Metals and PSU Banks – PAT growth for MOSL Universe will be
4% YoY. PAT margin for the MOSL Universe (ex-OMC and Financials) is expected
to see another quarter of contraction (by 40bp YoY to 9.8%). Global Cyclicals will
drive 85% of incremental growth for MOSL Universe PAT, with a strong 73% YoY
PAT growth. Defensives are estimated to report the fourth consecutive quarter
of YoY decline in PAT, while Domestic Cyclicals should post strong 21% YoY PAT
growth. Nifty earnings are expected to grow 29.4% YoY, while Nifty ex-OMCs
profit is estimated to grow 15% YoY and Nifty ex-OMCs, Metals and PSU Banks is
expected to post 5% YoY profit growth.
THREE KEY TRENDS
Three key trends characterizing 2QFY18
1. Macros: Worst is behind? We think so…
Recent moderation in macros numbers has revived the debate about the prevailing
narrative of strong macros. However, we believe that worst of the GDP slowdown is
behind us and we expect the economy to revive from hereon, albeit at a gradual
pace. Recent high frequency indicators like PMI for Manufacturing and Services have
shown a rebound from the July lows. Our monthly economic activity index (EAI) also
confirms that India’s economic activity grew 3.5% YoY in July-August 2017, same as
in April-June 2017. With festive season beginning early this year, we believe that
economic activity will improve in September, helping the 2QFY18 growth to be
better than in 1QFY18. However, even if our EAI grows ~6% YoY in September, it
indicates a real GDP growth of ~6% YoY in 2QFY18, higher than 5.7% in 1QFY18.
Secondly, we don’t find any indications of stress on the central government’s
budgeted tax receipts. While non-tax receipts are likely to be lower than estimated,
there is still a good chance that it could be made up by higher-than-budgeted tax
collection. Including past dues etc., total indirect tax collection in August 2017 (for
July 2017) was INR1,046b – up 56% YoY, marking the highest growth in more than 7
years. Not surprisingly then, indirect tax receipts up to August 2017 was 39.5% of
full-year budget estimates (BE), marking the highest collection in the first five
months in any fiscal year (barring FY08) since FY01.
2.
GST: Settling in; 2H to be much better vs. 1H for B2C sectors
2QFY18 will be the first quarter where one would see the actual impact of GST
implementation in numbers. 1QFY18 saw de-stocking ahead of GST in several
sectors –
Consumer, Consumer Durables, Autos, Healthcare
– as businesses
corrected their supply chains before the onset of new regime of indirect tax. Impact
of this de-stocking was felt in the 1QFY18 reported numbers of the aforementioned
sectors with across the board revenue deceleration and consequent operating
deleverage.
Our channel checks, media reports and anecdotal evidences suggest that initial
teething troubles pertaining to compliance, return filing, adjusting to the new GSTN
architecture are still being experienced. The impact is higher for wholesalers,
retailers and SME players even as the large organized players and distributors have
made requisite changes. In order to ease the teething troubles, GST council has
recently announced some relief measures pertaining to composite scheme,
frequency of return filing and several other mechanisms of GST.
October 2017
7

India Strategy | Turbulence behind; Clear skies ahead
That said, our conversations with corporates across sectors indicate decent re-
stocking in the trade channels as inventory is replenished. Early festive season has
also helped in our view. Needless to say, we expect qoq revenue pick-up for these
sectors.
Going forward, as GST settles in and ecosystem gets well acquainted with the whole
GST regime, we expect further improvement in topline numbers. The low base of
2HFY17 on account of Demonetization will also aid the 2HFY18 growth. In-fact, we
are projecting healthy pick up in 2HFY18 vs. 1HFY18 performance for these sectors.
3. Commodity costs hardening: threat to margins?
The tailwind from commodity cost deflation boosted the margins of B2C oriented
sectors in FY15, FY16 and 1HFY17 even in the absence of major demand pick up –
for MOSL Universe excluding OMCs and Financials, operating margins had shown
YoY expansion for eight consecutive quarters from 4QFY15 to 3QFY17. Last two
quarters have seen margin contraction and for 2QFY18 we are forecasting flat
margins for MOSL ex OMCs and Financials universe.
We note that commodity costs have been hardening. Base metal prices as well as
several agro commodity prices have picked up. This introduces an element of risk to
our margin forecasts given that demand recovery has not yet taken shape and
corporates may refrain from passing on the entire impact of commodity price
inflation.
We are currently building in ~50bps of operating margin expansion for 2HFY18 for
our universe ex OMCs and Financials.
Earnings breadth yet to pick up
With OMCs, PSU Banks and Metals accounting for 85% of incremental PAT delta of
MOSL Universe, we see huge scope for earnings breadth to improve. Quality of
earnings remains less than impressive, with low-RoE sectors driving the
performance. High-RoE sectors like Healthcare, Technology and Cement are
expected to report YoY earnings decline for 2QFY18. PAT growth is likely to be 21%
YoY (2% YoY in 2QFY17) for Domestic Cyclicals, led by Financials. However,
Defensives are estimated to report another quarter of YoY PAT decline (9% YoY
decline), dragged by Technology and Healthcare. MOSL Universe (ex-Metals, OMCs
and PSU Banks) PAT is likely to grow by a muted 4% YoY in 2QFY18, the first positive
print after three consecutive quarters of decline. Earnings breadth is expected to
remain weak, with 35% of the MOSL Universe expected to post YoY decline in PAT.
Snapshot of sector performance
The Cement universe is expected to report its worst PAT performance in nine
quarters, on the back of high base and rising commodity costs.
Technology is expected to witness another sluggish quarter, with (i) EBITDA
decline of 1.8% YoY, and (ii) PAT decline of 0.1% YoY.
Healthcare (-22%), Media (-10%) and Telecom (Profit to Loss) are the other
sectors expected to report YoY PAT decline.
Oil & Gas (60%), PSU Banks (188%), Consumer (10%), Auto (9%), Capital Goods
(9%), NBFC (21%), Private Banks (18%), Metals (123%) and Utilities (35%) are
expected to post PAT growth.
October 2017
8

India Strategy | Turbulence behind; Clear skies ahead
Defensives’ share in MOSL Universe earnings would continue declining to 29%
(39% in 2QFY17, 33% in 1QFY18); the share of Domestic Cyclicals would be 33%
and Global Cyclicals at 38% will be the biggest beneficiary (27% in 2QFY17, 30%
in 1QFY18) in 2QFY18.
Nifty sales are estimated to grow 16% YoY, highest growth in 20 quarters. PAT is
estimated to grow 29%, highest in 13 quarters, aided by OMCs, SBI and Metals.
EBITDA is likely to post 18% growth – the highest in 13 quarters.
Nifty EPS unchanged for FY18/19:
We maintain our Nifty EPS estimates at
INR487/602 (INR484/602 earlier) for FY18/FY19. Major FY18E EPS downgrades
vis-à-vis our 1QFY18 review: Dr Reddy’s (15%), Hindalco (10%), Tata Motors
(11%), and Zee (18%). Major FY18E EPS upgrades were for BPCL (44%), HPCL
(35%), IOCL (39%), Coal India (8%), and ONGC (8%). We now expect Nifty EPS to
grow 15%/24% for FY18/FY19.
Exhibit 1:
Profit growth led by OMC’s and low base in Metals; Top-line growth at 20 quarter high
SECTOR
(No of Companies)
SALES
Sep-
17
1,597
306
249
474
5
182
29
115
237
542
102
189
45
3
202
253
17
40
84
112
2,392
1,364
1,652
1,813
EBITDA
Var %
YoY
26
12
41
38
22
24
18
25
15
6
9
14
14
4
-2
-14
-3
1
-10
-22
15.3
6.6
8.3
18.3
Sep- Var % Var %
17
YoY QoQ
High growth sectors
6,341
21
5
PSU Banks (7)
350
3
3
Metals (9)
1,246
21
7
Oil & Gas (12)
3,511
26
6
Logistics (3)
35
12
8
Utilities (6)
572
8
-1
Others (18)
193
22
-4
NBFC (16)
150
24
4
Private Banks (11)
285
16
4
Med/Low growth sectors
3,334
8
9
Consumer (18)
427
4
2
Auto (15)
1,438
12
18
Capital Goods (13)
512
9
9
Retail (2)
38
14
-19
Technology (15)
920
4
3
PAT de-growth sectors
1,081
0
3
Media (10)
59
2
-2
Cement (10)
230
15
-8
Healthcare (20)
418
4
16
Telecom (4)
373
-11
-2
MOSL (189)
10,755 14.5
5.9
MOSL Ex Metals, Oil & PSU Banks (161) 5,648 7.7
6.0
MOSL Ex OMCs, Metals, PSU Bk (170) 6,949 9.4
7.0
Nifty (50)
8,255 15.7
6.5
*Margins
EBITDA PAT
Margins Margins
Var %
Var % Var % PAT
Chg bp Chg bp
Sep-17
Sh. %
QoQ
YoY QoQ Delta
YoY
YoY
10
733
52
32
251
63
92
236
18
46
188
37
30
4
704
853
17
81
123
22
44
7
276
295
16
329
60
73
124
28
112
198
6
3
43
7
1
0
117
210
-1
76
35
1
20
7
410
271
-24
13
24
-38
2
1
-42
11
6
67
21
20
12
6
47
-103
0
117
18
8
18
10
-98
65
15
354
5
16
17
31
-26
-33
7
72
10
10
6
6
101
82
36
94
9
53
8
8
18
-15
29
26
9
27
2
2
38
-1
-24
2
3
-23
0
0
-90
-63
3
160
0
3
0
14
-125
-67
1
71
-40
-1
-48
6
-398
-450
-7
7
-10
-4
-1
1
-148
-168
-26
19
-15
-33
-3
2
-248
-293
37
50
-22
53
-14
4
-334
-405
-5
-6
PL
PL
-30
0
-440
-731
10.1 1,157 23.4 24.5
220
100
16
78
5.4
701
3.1
9.6
-25
-55
6.0
867
4.0
10.3
-22
-65
12.7 945
29.4 27.8
49
122
PAT
PAT
October 2017
9

India Strategy | Turbulence behind; Clear skies ahead
MOSL Universe: Earnings breadth unimpressive; few sectors and low base drive profit growth
Exhibit 2:
Sales growth for MOSL Universe highest since
Sep’12
Exhibit 3:
Sales growth of Defensives still lackluster
16.4
10.910.1
9.8
7.9
7.8 8.8
11.9
9.1
9.4
4.3
1.0
-1.0
4.9
1.7
6.5
Source: MOSL
Source: MOSL
Exhibit 5:
Multi-quarter high earnings growth led by
Cyclicals
Exhibit 4:
2QFY18 EBITDA margins flattish YoY
MOSL Universe EBITDA Margin LPA: 19.2%
Source: MOSL
Source: MOSL
Exhibit 6:
Fourth consecutive quarter of YoY PAT decline for
Defensives
Exhibit 7:
2QFY18 PAT margin (ex-OMCs, Financials) would
contract 40bp to 9.8%
MOSL Universe PAT Margin LPA: 10%
11.1
10.9
10.8
10.5
10.6
10.5
10.4
10.2
10.3 10.2
10.2
10.0
9.9
9.89.7
9.8
9.8
9.6 9.8
9.5
9.5
9.4
9.2
9.1
Source: MOSL
Source: MOSL
Low base of select sectors and OMCs to drive 13-quarter high PAT growth
for MOSL Universe
PAT growth for several sectors in MOSL Universe to benefit from low base:
Apart from OMCs, which will benefit significantly from inventory gains and
higher GRMs post Hurricane Harvey in USA, low base of Banks, Metals and
Utilities
will aid the 23% YoY PAT growth for MOSL Universe.
October 2017
10

India Strategy | Turbulence behind; Clear skies ahead
However, sectors like IT, Healthcare, Cement and Telecom are expected to post
YoY PAT decline, while Auto, FMCG, Capital Goods will post YoY profit growth in
the range of 8-10%.
Exhibit 8:
Sectoral quarterly PAT trend (INR b)
Sector
Auto
Capital Goods
Cement
Consumer
Financials
Private Banks
PSU Banks
NBFC
Healthcare
Logistics
Media
Metals
Oil & Gas
Oil & Gas Ex OMCs
Retail
Technology
Telecom
Utilities
Others
MOSL Universe
MOSL Ex Metals, Oil & PSU Bks
FY14
FY15
FY16
FY17
FY18
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep (E) Dec (E) Mar (E)
53 74 84
15 21 23
20 11 11
47 49 54
194 169 175
70 72 80
92 62 61
33 35 34
32 42 87
3 3 3
5 5 6
66 71 75
63 169 109
107 140 146
2 2 2
106 121 129
15 13 15
77 71 85
8 5 6
707 827 863
486 524 619
82
53
19
50
208
85
81
42
45
3
5
84
315
135
2
134
24
99
5
1,129
649
93 78 78
18 20 21
18 14 10
53 56 60
213 198 195
82 85 95
93 75 61
37 37 39
47 51 35
4 3 4
5 5 8
87 90 77
160 130 58
122 126 82
2 3 2
132 137 144
23 27 28
79 59 74
9 6 6
941 876 799
601 581 603
61
46
16
57
217
100
70
47
39
4
6
41
242
129
2
141
29
91
5
998
645
100 69 84 118
13 16 6 46
14 16 16 24
58 58 64 60
207 201 116
-11
91 98 106 83
76 59
-37 -146
39 44 45 51
56 56 54 54
3
3 3 4
7
8 9 11
46 55
-13
29
239 119 184 204
138 121 132 149
2
2 3 2
141 152 153 158
23 26 26 28
83 76 88 92
9
5 7 7
1000 861 797 825
638 627 663 737
89 85 55
16 24 23
28 22 17
65 65 65
153 166 184
94 94 97
11 16 32
48 55 54
59 61 56
3 2 3
8 8 9
33 36 53
275 205 229
145 153 150
2 2 3
153 157 164
28 24 8
79 56 78
11 7 7
999 921 952
681 664 638
105
54
23
67
122
102
-37
55
47
5
7
98
237
163
2
155
11
81
7
1,020
722
60
20
28
65
193
102
34
56
32
3
8
66
189
145
3
152
3
75
10
906
617
93
26
19
71
228
114
46
67
48
3
7
81
328
165
2
157
-6
76
8
1,140
685
89
32
26
75
232
117
43
70
54
3
10
103
279
187
3
161
-7
95
8
1,164
739
130
55
31
78
242
121
42
77
61
4
10
105
277
188
2
168
-3
112
9
1,278
855
Exhibit 9:
Sectoral quarterly PAT growth trend (%)
FY18
Mar Jun
Mar Jun
Mar Jun
Mar Jun Sep(E) Dec(E) Mar(E)
Auto
3 74
-25 7
92 -10
-11 -32
9
62
24
Capital Goods
-13 24
-13 -27
-1 19
17 27
9
39
3
Cement
-13 -9
-12 -21
44 96
-2 3
-15
52
35
Consumer
13 12
13 9
6 13
11 -1
10
16
17
Financials
4 10
4 -3
PL -26
LP 26
37
26
99
Private Banks
20 18
17 10
-16 3
22 9
20
21
19
PSU Banks
-9 2
-13 -18
PL -86
Loss 218 188
36
LP
NBFC
6 14
11 5
9 21
8 17
21
29
40
Health Care
48 45
-12 20
37 7
-12 -46 -22
-3
29
Logistics
22 13
20 -8
0 -20
26 23
43
28
-24
Media
12 -4
18 29
88 13
-35 0
-9
17
34
Metals
-6 31
-52 -47
-28 -30
235 103 123
94
7
Oil & Gas
-16 154
-23 49
-15 15
16 -31 60
22
17
Oil & Gas Ex OMCs
25 14
-4 13
16 5
9
0
8
24
15
Retail
12 -5
1 -13
-13 33
1 15
3
18
1
Technology
38 25
6 7
12 8
-2 0
0
-1
8
Telecom
105 48
17 2
-2 20
-59 -90 PL
PL
PL
Utilities
-1 2
-8 5
1 -5
-12 -4
35
22
38
Others
3 15
9 5
22 18
10 -10
6
16
22
MOSL Universe
0 33
-12 6
-17 0
24 -9
24
22
25
MOSL Ex Metals, Oil & PSU Bks
14 24
-1 6
14 7
-2 -9
3
16
18
Source: MOSL
Note:
Comparable Universe, excludes Alkem Labs, Interglobe Aviation, CG Consumer Electricals, Parag Milk Foods, Equitas Holding, IDFC Bank,
RBL Bank, L&T Infotech, Manpasand, SH Kelkar, Endurance Tech, Gujarat Gas, Music Broadcast, Avenue Supermarts, Quess Corp and
Teamlease Service.
October 2017
11
Sector
FY14
Jun Sep Dec
-10 42 69
-44 -24 -20
-28 -49 -36
14 15 13
9 -3 -7
29 26 20
-6 -30 -31
19 22 4
43 40 133
-6 -1 9
26 13 19
-34 6 28
LP -47 -42
-8 -6 9
15 3 -12
17 31 33
44 41 128
-9 8 -6
38 3 9
93 -10 5
6 19 26
FY15
Sep Dec
5 -7
-8 -11
31 -11
14 11
17 11
19 19
21 0
8 13
20 -60
-2 32
4 33
26 3
-23 -47
-10 -44
22 7
13 11
105 86
-16 -13
19 3
6 -7
11 -3
FY16
Sep Dec
-12 8
-21 -71
12 66
4 7
2 -40
14 12
-21 PL
17 17
11 53
4 -32
38 9
-38 PL
-8 219
-4 61
-37 13
11 7
-5 -9
28 18
-9 10
-2 0
8 10
FY17
Sep Dec
24 -35
51 287
41 6
12 2
-17 59
-3 -9
-73 LP
25 20
9 4
-26 -12
8 -2
-34 LP
72 25
27 14
22 7
4 7
-6 -68
-26 -11
37 9
7 19
6 -4

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 10:
Key assumptions
Macro
GDP Growth (%)
IIP Growth (%)
Inflation CPI-RU (%)
Currency: USD/INR
Oil: Brent (US$/bbl)
Repo Rate (%)
Interest Rate (%):
1Year CP Rate (Avg)
10Year G Sec (Avg)
Sectoral
Auto:
CV Volume growth (%)
Car Volume growth (%)
Banking: Loan Growth (%)
Cement: Volume growth (%)
Capital Goods: L&T order Intake (INRb)
Capital Goods: L&T order Intake (% YoY)
Metal:
Steel (USD/Tonne)
Aluminium (USD/Tonne)
Zinc (USD/Tonne)
Oil & Gas:
Under Recoveries (INRb)
Singapore GRM (USD/bbl)
Technology: USD Revenue growth (%)
FY17
1QFY18E
2QFY18E
3QFY18E
4QFY18E
FY18E
6.9
5.7
6.3
6.6
7.2
6.6
0.9
1.9
1.9
3.7
4.2
3.0
4.6
2.2
3.2
4.2
4.6
3.5
67.1
64.5
64.1
64.5
65.0
64.5
49.0
50.1
51.5
55.0
55.0
52.9
6.38
6.25
6.00
6.00
6.00
6.00
7.70
7.23
7.00
7.00
7.00
7.1
6.95
6.71
6.51
6.50
6.50
6.6
FY17
1QFY18E
2QFY18E
3QFY18E
4QFY18E
FY18E
1.7
-16.2
8.1
11.3
11.0
8.1
10.6
14.0
18.3
10.5
15.0
14.4
5.9
6.0
4.5
9.3
10.0
10.0
-1.2
-4.0
5.0
10.0
12.0
6.0
1,430
264
342
492
553
1,650
4.5
-11.1
10.0
18.3
16.9
15.4
503
550
566
566
566
562
1,687
1,909
1,825
1,825
1,825
1,846
2,366
2,589
2,800
3,200
3,200
2,947
227
58
66
66
68
258
5.7
6.4
8.3
6.5
6.0
6.8
7.2
2.8
2.4
1.5
1.8
7.7
* CV volume for Tata Motors and Ashok Leyland; PV Volume for Maruti Suzuki
Interesting sectoral trends
Key PAT growth sectors
Autos
will report positive PAT growth after three consecutive quarters of YoY
PAT decline. Growth will be led by Tata Motors (50%), Ashok Leyland (29%) and
Eicher Motors (33%).
PSU Banks
should report PAT of INR46b (v/s INR16b in the base quarter), up
2.9x, largely led by SBI (swing from loss of INR5.6b to profit of INR29b,
accounting for 2/3
rd
of MOSL PSU Bank Universe profits). Except, BOI, rest of the
PSU Banks are expected to report profits.
NBFCs
are expected to post another quarter of steady growth (up 21%). All
NBFCs, barring Bharat Financial and LIC HF, are expected to report healthy PAT
performance, with Bajaj Finance, Capital First, Dewan, Chola, L&T Finance,
MMFS and PNB HF particularly standing out.
Private Banks
are expected to accelerate profit growth from 11% in 1QFY18 to
18% in 2QFY18, aided to an extent by low base (1% growth in base). Federal
Bank (39%), RBL (80%), Yes Bank (27%), Kotak (26%), HDFC Bank (22%) and
IndusInd (27%) are expected to post strong performance. Among the corporate-
focused private sector banks, while Axis Bank (up 4x) will benefit from low base,
ICICI Bank is expected to post 18% YoY decline in profits.
Metals
will post 123% growth in PAT to INR81b – third consecutive quarter of
triple-digit profit growth. JSW Steel (60%), Vedanta (76%) and Tata Steel (Loss to
Profit) and Hindalco (126%) are expected to post strong results, while JSPL and
SAIL are expected to post losses.
Utilities
are expected to report 35% growth in PAT – 22-quarter high growth, led
by depressed base of Coal India. Ex-Coal India, MOSL Utilities universe is
expected to register 10% YoY PAT growth.
Technology
is expected to report third consecutive quarter of flattish PAT
(-0.1%), with Tech Mahindra (21%) likely to outperform among tier-I names.
October 2017
12

India Strategy | Turbulence behind; Clear skies ahead
MOSL Telecom
universe will report loss for the first time. Idea’s loss is expected
to double QoQ while Bharti is expected to post 85% YoY decline in profits.
Oil & Gas
would report 60% YoY PAT growth, entirely led by OMCs. OMCs are
expected to report 3.2x YoY jump in earnings this quarter, aided by inventory
gains, and contribute ~50% of YoY absolute profit delta for MOSL Universe.
Excluding OMCs, profit growth for Oil & Gas universe will stand at 8%.
Exhibit 12:
2QFY18 sectoral PAT growth QoQ (%)
73
53 53
37
Exhibit 11:
2QFY18 sectoral PAT growth YoY (%)
188
123
60
Three sectors account for
85% of PAT growth
43 35
23 21 18 12 10 9 9
3
0 -10 -15
-22
PL
27 25 22
20 13
10 8 7
3 1
-4
-23
-33
PL
Exhibit 13:
Sequential improvement in earnings breadth; still one-third of the universe to report YoY PAT decline
Earnings Gr.
15
24
26
20
-8
-15
-15
>30%
-11
23
42
26
22
24
9
>15-30%
13
11
4
18
11
9
>0-15%
0
6
-3
8
12
9
<0%
7
17
-9
-7
-3
Ex OMCs (%)
-3
-11
-13
-4
1
18
20
-1
12
27
21 24 23 26
30 27 25
42 41 32 35 31
14 19 24
26
9 9 10 20 18
14 14
13
21 11
17
18
22
18
22
18
21
22 10
18
10 14
51
44 45
41 43
38 32 39
35 30
26 27 32
24 31
34
18
24 19
42 40
26
31 38
35 38 46 36 40 37 34 33 36
35
39 42 40 37 38 45 36
43 46
22 27
21
18
16 18 20
23
19 24
13 27 17 16
25 25
16
22
17 22
16
23
21 21
20
20
19 13 12
18 14
25 13 20
24 25 18 22 17 17 19 16
19
20 22 20 23 16 12
18
16
35
29 23
21 21 24 25 25 28 26 24 19 26 24 19 20 26 18 21 21 21 25 26 29 28
17 24
42% of the companies would grow at >15% YoY, and almost a quarter of the Universe would report >30% PAT growth. 35% of the Universe
would report PAT de-growth.
October 2017
13

India Strategy | Turbulence behind; Clear skies ahead
THREE KEY TRENDS
Three key trends for 2QFY18
Trend 1] Macros: Is the worst behind? We think so…
With real GDP growth slowing from ~9% in 4QFY16 to 5.7% in 1QFY18, the fear of a
slowing economy has arisen again. While economists were quick to adjust their real
GDP growth forecasts, the general consensus is a sharp rebound in GDP growth
from 2QFY18. Even the Reserve Bank of India (RBI) lowered its growth forecast from
7.4% projected earlier to 6.7% for FY18. Real GDP is expected to grow ~6.5% in
2QFY18 before reclaiming 7% growth in 2HFY18.
Our forecasts for India’s economic growth have been spot-on. Not only had we
rightly identified the
inflection point in 4QFY17,
when real GDP grew ~6% against
the market consensus of 7%, we had stated as early as
April 2017
that real GDP
growth will be sub-7% in FY18. This time, while we concur that the worst is behind,
the market consensus seems aggressive on the pace of rebound.
After falling into contraction zone (reading <50) in July and August 2017, services
PMI for India moved back into expansion territory last month (at 50.7). The
manufacturing PMI in September – at 51.2 – was unchanged as in August, but better
than 47.9 in July 2017
(exhibit 14).
Our monthly economic activity index (EAI) also confirms that India’s economic
activity grew 3.5% YoY in July-August 2017, same as in April-June 2017. With festive
season beginning early this year, we believe that economic activity will improve in
September, helping the 2QFY18 growth to be better than in 1QFY18.
However, even
if our EAI grows ~6% YoY in September, it indicates a real GDP growth of ~6% YoY
in 2QFY18, higher than 5.7% in 1QFY18, but not as strong as ~6.5% expected by the
consensus.
Exhibit 14:
India’s PMI moved into expansion zone in
September after a brief hiccup…
55
53
51
49
47
45
Manufacturing PMI
Services PMI
Exhibit 15:
…and India’s economic activity appears to have
bottomed out in 1QFY18 (%)
9
8
7
6
5
Real GVA
MOSL Forecast
RBI Forecast
Source: Central Statistics office (CSO), MOSL
Source: Central Statistics office (CSO), MOSL
The pessimism about the central government’s fiscal situation could be short-lived.
We don’t believe there is any scope or requirement for an effective fiscal stimulus;
however, the growing concern about the possibility of a shortfall in the
government’s tax receipts could die down soon. August 2017, when taxes for the
October 2017
14

India Strategy | Turbulence behind; Clear skies ahead
activities undertaken in the month of July 2017 were received, was effectively the
first month of GST-led tax collection for the government.
Multiple communications from various quarters led to confusion regarding the
actual indirect tax receipts by the government for July 2017 in August 2017. With
CGA publishing actual data (which is cash-based accounting), it is now clear that the
government received a hefty INR939b as GST-led taxes in August 2017.
Including
past dues, etc, total indirect tax collection in August 2017 (for July 2017) was
INR1,046b – up 56% YoY, marking the highest growth in more than 7 years.
Not
surprisingly then, indirect tax receipts up to August 2017 were 39.5% of full-year
budget estimates (BE), marking the highest collection in the first five months in any
fiscal year (barring FY08) since FY01.
Exhibit 16:
GST-taxes led to 7-year highest growth in total
indirect taxes in August 2017 (% YoY)…
70
40
10
-20
-50
Indirect taxes
Exhibit 17:
…which led to highest indirect tax collection
(barring FY08) in the first five months since FY01 (% of BE)
Indirect taxes
Source: Ministry of Finance, CEIC, MOSL
Source: Ministry of Finance, CEIC, MOSL
The probability of such high collection faltering in the subsequent months is as high
as the probability of continuance of such high collection. Yet,
even if there is only
1% YoY growth in total indirect tax collection in the last seven months of FY18, the
government will slightly overshoot its FY18 BE.
Can indirect taxes make up for the expected shortfall of about INR400b in non-tax
receipts? Certainly, in our view.
With ~10% YoY growth in indirect taxes in the
remaining seven months (versus an average growth of ~20% in the past 7 years
and ~24% in the first five months of FY18), the government will garner an
additional INR522b,
sufficient to offset the expected shortfall in non-tax receipts
(INR400b on account of shortfall in RBI’s dividends and another INR130b due to cut
in fuel excise duty).
Overall, we don’t find any indications of stress on the central government’s
budgeted tax receipts. While non-tax receipts are likely to be lower than estimated,
there is still a good chance that it could be made up by higher-than-budgeted tax
collection.
October 2017
15

India Strategy | Turbulence behind; Clear skies ahead
Trend 2] GST: Settling in; 2H to be much better than 1H for B2C sectors
2QFY18 will be the first quarter, when one would see the impact of GST
implementation in numbers. 1QFY18 saw de-stocking ahead of GST in several
sectors – Consumer, Consumer Durables, Autos, Healthcare – as businesses
corrected their supply chains before the onset of a new indirect tax regime. Impact
of this de-stocking was felt in the 1QFY18 reported numbers of the aforementioned
sectors, with across-the-board revenue deceleration and consequent operating
deleverage.
Our channel checks, media reports and anecdotal evidence suggest that teething
troubles pertaining to compliance, return filing, and adjusting to the new GSTN
architecture are still being experienced. The impact is higher for wholesalers,
retailers and SME players, even as the large organized players and distributors have
made requisite changes. To ease the teething troubles, the GST Council has recently
announced some relief measures pertaining to composite scheme, frequency of
return filing, and several other mechanisms of GST.
That said, our conversations with corporates across sectors indicate decent re-
stocking in the trade channels, as inventory is replenished. An early festive season
has also helped, in our view. We expect QoQ revenue pick-up for these sectors.
Going forward, as GST settles in and the ecosystem gets well acquainted with the
whole GST regime; we expect further improvement in revenues. The low base of
2HFY17 on account of demonetization will also aid 2HFY18 growth. We project
healthy pick-up in 2HFY18 v/s 1HFY18 for these sectors.
a) Consumer
GST disruption impact reducing:
The wholesale trade has already returned to near-
normal in West and South India towards the second half of 2QFY18. Disruption on
this front will incrementally be even lower in the other parts of the country, going
forward. CSD impact will also reduce gradually. Traction has picked up in B2B
wholesale and modern retail.
Weak base on demonetization and overseas business:
From 3QFY17, most
companies have seen an impact on sales as a result of demonetization. From
3QFY18, this will be in the base and outlook is improving. Similarly, companies with
exposure to MENA – like Dabur, Emami, Britannia and Marico – had also seen
demand fall off a cliff starting from 3QFY17. From 3QFY18, this will be in the base,
and with rising crude, the outlook may actually even improve slightly for the MENA
region.
Combination of volume growth, realization increase and premiumization will be
witnessed for the first time in a few years in 2HFY18:
Volumes will be led by rural
(second consecutive year of normal monsoon) demand. End of commodity cost
inflation will result not only in realization growth but also in potential volume
growth and market share gain for organized players. Premiumization, which
continued even during the slowdown, will be in effect, going forward.
October 2017
16

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 18:
MOSL Consumer universe: Key headline numbers expected to pick up sharply in 2HFY18
Sales Growth YoY (%)
9.0
EBITDA Growth YoY (%)
PAT Growth YoY (%)
15.7
16.4
2.6
4.0
4.5
1HFY18
2HFY18
1HFY18
2HFY18
1HFY18
2HFY18
b) Automobiles
GST implementation impacted the Auto industry in 1QFY18 on both volumes
(inventory de-stocking led to lower volumes) and margins (by up to 150bp due to
dealer compensation for loss of input tax credit). However, with improving retails
and festive buildup, we have seen pre-festive inventory build-up in 2QFY18, driving
volume growth of ~11% for the Auto industry and ~160bp QoQ (-100bp YoY) margin
improvement. We expect 2HFY18 to show significant pick-up in volumes, revenues,
EBITDA and PAT.
Exhibit 19:
Autos is expected to show significant pick up in 2HFY18 vs. 1HFY18
Volumes ('000 units)
Growth % YoY
19.9
Aggregate revenues (ex-JLR) INR b
Growth % YoY
21.0
EBITDA (ex- JLR) INR b
Growth % YoY
13.3
13.4
7.5
9,616
1HFY18
9,661
2HFY18
1,356
1HFY18
1,502
2HFY18
12.7
172
1HFY18
200
2HFY18
Source:
c) Healthcare
The domestic business of India Pharma companies has been deeply impacted by two
major events – demonetization and GST. Since the announcement of
demonetization, growth of domestic business has slowed drastically. GST
implementation has led to further decline in sales growth. In 1QFY18, GST has been
the major factor for muted revenue growth and EBITDA erosion in domestic
business. Implementation of GST led to decline in inventory days with stockists from
45 days to 17 days. Companies are of the view that channel re-filling has started
taking place, but inventory days stand at 25-30, well below pre-GST levels. Though
companies might report sequential growth, full recovery could take at least six
months.
October 2017
17

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 20:
Healthcare: Even Healthcare topline is expected to improve post GST related de-stocking in 1QFY18
Domestic revenue growth (%)
14.5
8.9
13.9
4.8
-9.4
19.1 19.0
PAT growth (%)
4.2
-22.5
-54.4
-32.1
15.2 17.9
EBITDA growth (%)
8.1
-20.6
-42.4
-23.9
10.4
*India
sales of Alembic, Alkem, Cadila, Cipla, Glenmark, IPCA, Lupin, Sun Pharma & Torrent Pharma
Source: MOSL, Company
d) Consumer Durables
GST implementation impacted the operating performance of consumer durables
companies (Voltas, Blue Star, Crompton Consumer and Havells) in 1QFY18. Primary
sales were impacted, as dealers were destocking due to confusion on availing input
credit on implementation of GST.
Even 2QFY18 performance is likely to be impacted, as 2QFY18 is a seasonally weak
quarter for AC players. Though restocking of inventory has picked up since August,
secondary demand seems muted given advance purchases by consumers (old
inventory cleared at high discount by dealers).
We expect demand to revert to normal levels from 3QFY18 and expect strong
operating performance from these companies in 2HFY18, given (a) low base effect
(demonetization impacted performance in 3QFY17), and (b) overall revival in
demand.
Exhibit 21:
Consumer Durables: Headline numbers of Durable companies should see pick-up in 2HFY18
Sales (INR b)
Growth YoY (%)
14
16
21.2
EBIDTA (INR b)
Growth YoY (%)
30.3
1.5
PAT (INR b)
Growth YoY (%) 21.7
112
1HFY18
129
2HFY18
11
1HFY18
14
2HFY18
7
1HFY18
10
2HFY18
Source: MOSL, Company
*Summation of headline numbers of Voltas, Blue star, Crompton Consumer and Havells
October 2017
18

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 22:
Trajectory of profit growth of B2C sectors changing materially in 2H v/s 1H due
to GST disruption in 1HFY18 and low base of 2HFY17
1HFY18 PAT growth (%)
2HFY18 PAT growth (%)
42
37
16
5
9
10
-5
Cement
-12
Automobiles
Consumer
Retail
Trend 3: Commodity costs hardening – threat to margins?
The tailwind from commodity cost deflation boosted the margins of B2C-oriented
sectors in FY15, FY16 and 1HFY17 even in the absence of major demand pick-up. For
MOSL Universe excluding OMCs and Financials, operating margins had shown YoY
expansion for eight consecutive quarters from 4QFY15 to 3QFY17. The last two
quarters saw margin contraction, and for 2QFY18, we forecast flat margins for MOSL
Universe ex OMCs and Financials.
We note that commodity costs have been hardening and this poses a risk to our
margin assumptions. The reversal in commodity prices is driven by supply-side
measures and unexpected improvement in demand conditions in China. Steel
demand has grown ~15% YoY in July-August, aluminum production growth has
contracted, while Zinc concentrate supply is impacted due to environment checks in
China.
We build in ~50bp operating margin expansion in 2HFY18 for our Universe ex OMCs
and Financials.
Operating margin of MOSL universe excluding OMCs and Financials is expected to expand 50bps YoY in 2HF18
MOSL Universe exc. Fnancials and
OMCs EBITDA Margin LPA: 19.6%
21.1
19.9
19.5
19.1
18.5
18.9
20.1
21.5
20.4
20.3 20.2
20.0
19.7 20.0
20.8
20.7
22.3
21.7 21.5 21.7
20.8
18.6
21.6
19.8
20.8
18.1
18.1
18.4 18.8
18.1
18.9 19.0
18.9
18.6
18.7 18.8 18.3
18.3
18.2
18.1
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Source: MOSL, Company
October 2017
19

India Strategy | Turbulence behind; Clear skies ahead
..but commodity prices have strengthened
Steel YoY (%)
6
13
24
Aluminum YoY (%)
14
2
-2
-16
-20
-24
-17
-14
-11
-20
-24
-16
-11
22
24
18
21
Source: Company, MOSL
Source: Company, MOSL
33
20
Zinc YoY (%)
22
5
56
65
35
31
Copper YoY (%)
8
25
-18
-28
-24
-14
-11
-25
-26
-20
-9
-22
Source: Company, MOSL
Lead YoY (%)
9
0.5
-12
(7.8)
(4.9)
1.5
3.7
28
31
TiO2 price YoY change (%)
Source: Company, MOSL
26.6
13.1
14.0
26
24
-7
-21
-16
-3
Source: Company, MOSL
Palm Fatty Acid price YoY change (%)
70.5
33.8
6.5
(3.3)
28.3
3.2
3.3
(9.2)
(3.0)
Source: Company, MOSL
Mentha Oil prices YoY change (%)
17.9
2.1
24.0
11.1
9.9
32.8
(32.0)
Source: Company, MOSL
Source: Company, MOSL
October 2017
20

India Strategy | Turbulence behind; Clear skies ahead
Copra Calicut YoY change (%)
46.4
68.9
74.4
Liquid Paraffin YoY change (%)
7.6
28.2
21.1
13.6
(5.1)
(27.8)
(41.4) (41.2)
(25.8)
(35.2)
(25.5) (18.5)
(12.7)
Source: Company, MOSL
Source: Company, MOSL
....putting operating margins of few B2C sectors at risk
Auto EBITDA margin
15.5
13.1
13.7
14.7
12.9
12.2
14.2
13.1 13.3
11.4
Consumer EBITDA margin
24.3
24.6
13.9
23.3
22.6
22.9
23.3
22.9 22.9
23.2
22.8
23.9
Source: Company, MOSL
Source: Company, MOSL
Cement EBITDA margin
22.7
19.9
16.6 16.8
19.8
18.4 18.1
21.5
19.4
17.3
21.6
Capital Goods EBITDA margin
12.8
7.6
4.1
8.5
9.5
11.4
7.5
8.9
12.6
10.1
7.1
Source: Company, MOSL
Source: Company, MOSL
October 2017
21

India Strategy | Turbulence behind; Clear skies ahead
Global Cyclicals to account for 85% of 2QFY18 earnings growth
Global Cyclicals are expected to post strong earnings growth of 73% YoY, led by
Metals and OMCs, and account for 85% of YoY delta in MOSL Universe PAT.
Defensives are expected to post 9% YoY PAT decline – dragged by IT and
Healthcare, even as Consumer bounces off from the GST destocking impact of
the June 2017 quarter. This will be the fourth consecutive quarter of YoY PAT
decline for Defensives.
For 2QFY18, Domestic Cyclicals would report healthy 13% and 21% YoY growth
in EBITDA and PAT, respectively, driven by Financials and Autos, and account for
30% of incremental PAT delta YoY.
Exhibit 23:
Cyclicals expected to drive earnings growth in FY18
60
Contribution to 1HFY18 PAT growth (%)
41
29 22
15 12
5 5 3 1 0
0 -1 -2
-16
19 19
Contribution to 2HFY18 PAT growth (%)
12 12
10 9
8
5 4 3
2 2 1 1
0
0
-42
-6
-33
Source: MOSL
Source: MOSL
Exhibit 24:
Cyclical growth expected to significantly exceed MOSL Universe average growth in FY18, with likely recovery in
Automobiles and Cement in 2HFY18
200
115
33
1HFY18 PAT growth (%)
19 15 15 14 12
9 8 7 5
0 -5 -5
-12
LP
2HFY18 PAT growth (%)
42 38 37
35 30
25 24 24 20 20
16 14 13 10
3
-6
-34
PL
PL
Source: MOSL
Source: MOSL
Defensives remain a drag; fourth consecutive quarter of PAT decline
Defensives solely drove MOSL Universe PAT growth over FY14-16. Cyclicals
(both domestic and global), on the other hand, were under pressure, resulting in
the share of Defensives in aggregate PAT rising to 37% in FY16 from 23% of
FY12.
However, we expect Domestic Cyclicals to be the key drivers of PAT growth in
FY18, with their share rising to 35% of aggregate PAT by FY18, a 600bp jump v/s
FY17.
October 2017
22

India Strategy | Turbulence behind; Clear skies ahead
As a result, we expect the share of Cyclicals to increase to 71% by FY18 from
65% in FY17. Key drivers of growth within Cyclicals would be Financials (PSU
Banks, Private Banks, and NBFC), Metals, Cement and Capital Goods.
For 2QFY18, Defensives would report EBITDA decline of 3.3% YoY and PAT
decline of 9% YoY.
Exhibit 25:
OMCs, Metals and PSU Banks to support earnings performance in 2QFY18, excluding which the earnings growth
would be 4%
44
30
20
18
12
8
6
2
2
1
0
0
1
3
14
30
124
938
1,157
Source: MOSL
Share of Defensives to come off further; Cyclicals’ contribution to see sequential pick-up
Exhibit 26:
PAT share of Domestic Cyclicals to see pick-up
100%
75%
50%
25%
0%
33
27 24
28
Defensives
Global
cyclicals
33
Domestic
cyclicals
35
40
33 3232
40 41 39 35 35
26 34
27 28 32 32
25
33
40
42
37
33
26
24
27 23
42
33 36 3530
34
39
36
38 39 37 37
38
35
33
36
37
Defensives
includes Consumer, Healthcare, Technology, Telecom and Utilities
Global cyclicals
includes Metals, Oil & Gas and JLR
Domestic cyclicals
includes Automobiles, Banks, Capital Goods, Cement, Media, NBFCs, Real Estate and Retail
Nifty sales growth to be at 20-quarter high; PAT growth of ~30% aided by
low base and OMCs
Nifty PAT is likely to grow 29.4% YoY, the highest since September 2014 and the
first double-digit growth after six quarters. However, the profit growth is
boosted by low base in few sectors and strong inventory gains of OMCs.
October 2017
23

India Strategy | Turbulence behind; Clear skies ahead
Excluding OMCs, Nifty PAT is likely to post 15% YoY growth. Excluding OMCs,
PSU Banks and Metals, the Nifty PAT will post a muted 5% YoY growth.
Sales are expected to grow 15.7% YoY (2% YoY growth in base quarter), the
highest in 20 quarters, again aided by Cyclicals. Even excluding OMCs, Metals
and PSU Banks, sales growth would be 9.4% YoY, the highest in 13 quarters.
Pick-up in underlying commodity costs is driving pricing power at the margin
and aiding topline growth, we believe.
Nifty EBITDA is expected to grow 18%, the highest in 13 quarters. Excluding
OMCs, PSU Banks and Metals, Nifty EBITDA is expected to post 9% YoY growth.
Operating margin for Nifty (ex-OMCs, Financials) is expected to stay flat YoY at
21.2%.
Nifty performance would be driven by Cyclicals like SBI (big swing from loss to
profit), OMCs (inventory gains plus higher GRMs post capacity outage in USA
after Hurricane Harvey) and Metals (strong commodity prices coupled with low
base).
13 Nifty companies (largely from Autos, IT, Oil & Gas and Pharma) are expected
to post YoY PAT decline.
Exhibit 27:
Nifty sales to grow 16% in 2QFY18; 20 quarter high growth
30 32
30
23
15
8
37 35
33
28 26
26
21
26
16
25
22
18 22
26
21
16 14
8
14 14 14 15
4 4
4
-1
LPA: 14%
2
-6 -6
1Q
-4
3Q
FY16
0
3 4
13
16
9
12
9
-4
-12
1Q
3Q
FY07
1Q
3Q
FY08
1Q
3Q
FY09
1Q
-8
3Q
FY10
1Q
3Q
FY11
1Q
3Q
FY12
1Q
3Q
FY13
1Q
3Q
FY14
1Q
3Q
FY15
-8
1Q
3Q
FY17
1Q 3QE
FY18
Exhibit 28:
2QFY18 Nifty PAT to post 29% growth led by OMC’s, Metals and PSU Banks
65
38
22
16
36
19
13 12
21
11
19
34
16
24
4
-8 -5
1Q
3Q
FY07
1Q
3Q
FY08
1Q
3Q
FY09
10
0
12
27
29
6
24
5
LPA: 10%
11
-2
9
2 8
19
5
-6
-1
-12
1Q
0
-7
3Q
FY16
2
-2 -3
8 7
-9
3Q
FY17
29 22 24
-15
-20
1Q
3Q
FY10
1Q
3Q
FY11
1Q
3Q
FY12
1Q
3Q
FY13
1Q
3Q
FY14
1Q
3Q
FY15
1Q
1Q 3QE
FY18
October 2017
24

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 29:
2QFY18 Nifty EBITDA to grow at 18% YoY – 13 quarter high
47
35
17
25
16
20
26
15
18
13
37
29
21
31
20
18
10 13
6
10
3
LPA: 12%
12
4 5
13 11 14 13 17
14
6
2
-5
4 2 4
8 9 9 8
1
18
14
11
-5 -8 -10
1Q
3Q
FY07
1Q
3Q
FY08
1Q
3Q
FY09
1Q
-2
3Q
FY10
1Q
3Q
FY11
1Q
3Q
FY12
1Q
3Q
FY13
1Q
3Q
FY14
1Q
3Q
FY15
1Q
3Q
FY16
1Q
3Q
FY17
1Q 3QE
FY18
Exhibit 30:
Nifty sectoral 2QFY18 PAT change YoY (%)
LP
PSU Banks, Metals, and Oil
& Gas to outperform;
Telecom, IT and Healthcare
to underperform
210
188
64
37
29
22
20
11
10
8
7
0
-6
-32
-34
-54
October 2017
25

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 31:
Nifty companies’ 2QFY18 performance (INR b)
Company
Sales
Sep-17
High PAT Growth (23)
State Bank
Tata Steel
HPCL
Axis Bank
Coal India
BPCL
IOC
UPL
Hindalco
Vedanta
Tata Motors
Bajaj Finance
Eicher Motors
GAIL
Yes Bank
IndusInd Bank
Kotak Mahindra Bank
HDFC Bank
Indiabulls Housing
Tech Mahindra
Aurobindo Pharma
HDFC
Cipla
Reliance Inds.
Med/Low PAT Growth (14)
Power Grid Corp.
Larsen & Toubro
Asian Paints
Hind. Unilever
ITC
HCL Technologies
Mahindra & Mahindra
Dr Reddy’ s Labs
Zee Entertainment
Bharti Infratel
Ambuja Cements
NTPC
Bosch
Negative PAT Growth (13)
Hero MotoCorp
Bajaj Auto
Infosys
Maruti Suzuki
TCS
Wipro
Adani Ports
ONGC
ICICI Bank
Lupin
Ultratech Cement
Sun Pharma
Bharti Airtel
Nifty (50)
5,434
185
325
544
47
186
606
1,060
42
266
213
690
20
22
132
19
18
23
98
12
76
43
27
43
737
1,155
73
267
42
78
99
125
122
37
16
36
23
202
34
1,665
86
66
176
220
305
138
29
200
56
41
64
68
217
8,255
Var %
YoY
22
2
23
29
5
15
36
32
14
10
34
5
47
26
11
32
27
15
22
34
5
14
17
15
24
8
16
7
13
0
2
9
20
4
-7
10
14
4
31
4
10
9
1
23
4
0
34
9
7
-4
19
-13
-12
16
EBITDA
Var %
Sep-17
YoY
1,026
36
181
29
53
79
33
79
42
3
28
276
36
107
116
87
8
34
34
12
63
36
73
16
12
45
7
29
21
36
17
25
16
28
18
23
76
25
11
21
10
-3
11
19
25
17
8
13
126
20
292
11
65
17
25
8
8
14
16
11
39
7
27
6
18
19
7
15
5
-4
16
12
3
26
57
6
6
35
496
-4
15
2
13
-3
45
-4
33
9
79
-3
26
-1
19
29
104
9
54
8
9
-14
12
6
13
-53
75
-21
1,813
18
PAT
Sep-17
526
29
17
32
13
21
39
92
5
11
22
12
6
6
12
10
9
10
42
8
8
7
22
4
88
159
21
11
5
12
27
22
14
3
3
8
3
24
4
260
10
11
36
23
64
20
10
43
26
5
3
8
2
945
Var %
YoY
92
LP
LP
354
309
244
200
195
188
126
76
50
39
33
32
27
27
26
22
21
21
20
19
17
15
8
11
11
11
10
10
9
8
7
7
5
5
4
1
-16
0
0
-2
-3
-3
-5
-6
-13
-18
-31
-49
-63
-86
29
PAT Contbn
Grw.
(%)
(%)
56
117
3
16
2
9
3
12
1
5
2
7
4
12
10
28
1
1
1
3
2
4
1
2
1
1
1
1
1
1
1
1
1
1
1
1
4
4
1
1
1
1
1
1
2
2
0
0
9
5
17
6
2
1
1
1
1
0
1
1
3
1
2
1
1
0
0
0
0
0
1
0
0
0
3
0
0
0
28
-23
1
0
1
0
4
0
2
0
7
-1
2
-1
1
0
5
-3
3
-3
0
-1
0
-1
1
-7
0
-6
100
100
EBITDA margin
Var
Sep-17
(bp)
19
199
98
2057
16
510
6
171
89
-177
15
1040
6
203
11
320
18
274
13
26
30
31
11
102
57
-68
32
81
16
283
93
-518
89
78
77
450
77
200
95
-991
14
-123
26
89
94
11
18
-19
17
-57
25
64
90
28
9
16
19
20
20
200
39
150
21
-50
14
-8
19
170
30
107
45
62
15
145
28
59
19
53
30
-244
18
-138
19
-236
26
-147
15
-193
26
-187
19
-18
64
-249
52
-3
95
119
22
-246
18
-217
19
-1585
34
-381
22
49
October 2017
26

India Strategy | Turbulence behind; Clear skies ahead
Intra-sector 2QFY18 earnings divergence (%)
Sector
gr.
HIGH GROWTH SECTORS
Sectors
Banks - PSU
188
+30%
growth
15-30%
growth
0-15%
growth
-Ve earnings
growth
INBK: -1,BOB: -3,
PNB: -24,
UNBK: -34, BOI: PL
Earnings
momentum
CBK: 50,
SBIN: LP
HNDL: 126,
VEDL: 76,JSTL: 60,
NACL: 45,
NMDC: 34,TATA: LP
HPCL: 354,
BPCL: 200,IOCL: 195,
MRPL: 76,
GUJS: 38, GAIL: 32
CCRI: 66
COAL: 244,
TPWR: 62
MMFS: 53,
PNBHOUSI: 41,
BAF: 39,
LTFH: 30,CAFL: 30
AXSB: 309,
RBK: 80,FB: 39
DEWH: 27,
MUTH: 26,
CIFC: 25,SHTF: 22,
IHFL & GRHF: 21,
HDFC: 19,REPCO: 17
DCBB: 30,
YES & IIB: 27,
KMB: 26,HDFCB: 22
UNSP: 27, UBBL: 23,
PG: 22, PAG: 20,
BRIT: 19,
GCPL & MRCO: 18
AL: 29,TVSL: 25,
ENDU: 21
HZ: 13
Metals
123
JSP & SAIL: Loss
Oil & Gas
(Ex OMCs)
Logistics
Utilities
51
GUJGA: 26
RIL: 15,IGL: 12,
PLNG: 7
GDPL: 5
PWGR: 11,
NTPC: 4,CESC: 4
SCUF: 13,
LICHF: 8
OINL: -7,
ONGC: -13
43
35
AGLL: -4
JSW: -6
BHAFIN: -16
NBFC
21
Banks -
Private
18
ICICIBC: -18,
IDFCBK: -47,
EQUITAS: -87
CLGT & APNT: 11,
HUVR & ITC: 10,
DABUR: 7,
PIDI: 5,HMN: 4
EXID: 11,MM: 8.
BOS: 1,HMCL: 0,
BJAUT: 0
LT: 11,
CROMPTON: 7,
TMX: 4,ABB: 3,
VOLT: 2
TTAN: 3,
JUBI: 0
MEDIUM/LOW GROWTH SECTORS
Consumer
10
PARAG: 48,
JYL: 42
ESC: 91,BHFC: 51,
TTMT: 50,EIM: 33
BHEL: 146,
GETD: 80,
BLSTR: 54,
SIEM: 46
SKB: -5,
NEST: -7
MSIL: -3,CEAT: -14,
AMRJ: -19
KKC: -1,
HAVL: -2,
BHE: -35,
CRG: -59
Autos
9
Capital Goods
9
Retail
3
TECHM: 21,
LTI: 19,
TELX: 16,
MTCL: 15
Technology
0
HEXW: 13,
HCLT & NITEC: 9,
CYL: 8,PSYS: 4
PAT DE-GROWTH SECTORS
Media
-10
DBEL: 225,
ACC: 129,
JKCE: 37
IPCA: 61,
CDH: 42
INFO: -2,
TCS: -3,
MPHL & WPRO: -5,
KPIT: -10,ZENT: -23
ENIL: -17,
HTML: -22,
RADIOCIT: -25,
JAGP: -71,DITV: -97,
SITINET: Loss
SRCM: -4,GRASIM: -
16,TRCL: -32,UTCEM: -
49,BCORP: -63,ICEM: -71
BIOS: -6,ALKEM: -12,
GNP: -15,ALPM: -17,
AJP: -20,SLPA: -25,
DIVI: -29,LPC: -31,
STR: -41,
FORH: -56,SUNP: -63
TCOM: -57,
BHARTI: -86,IDEA: PL
Z: 7,SUNTV: 5,
DBCL: 1,
PVRL: 0
ACEM: 5
Cement
-15
Health Care
-22
GLXO: 29,
ARBP: 20,CIPLA: 17,
TRP & JUBILANT: 16
SANL: 10,
DRRD: 7
Telecom
PL
BHIN: 5
October 2017
27

India Strategy | Turbulence behind; Clear skies ahead
EARNINGS FY17-FY20
FY18 earnings largely dependent on three sectors
Introducing FY20 estimates; predict 18% earnings CAGR over FY17-20
FY18 earnings recovery narrow; dependent on three sectors:
We expect FY18
revenue growth for our MOSL Universe to come in at 12% (v/s 0% CAGR in FY14-
17). This will be the first year of double-digit revenue growth after three years of
flattish sales performance. It will be driven by BFSI, Auto, Metals and Oil & Gas.
On the other hand, we expect IT to see sharp deceleration in growth. Overall,
we expect EBITDA margin for the MOSL Universe (ex-OMCs, Financials) to stay
flat at 20.3% in FY18. For MOSL Universe, we expect profits to grow 15.4% YoY.
87% of the incremental profits are accounted for by BFSI (46% of delta), Metals
(21% of delta) and Oil & Gas (20% of delta), highlighting the narrowness of
FY18E earnings recovery. PSU Banks alone account for a quarter of earnings
delta for FY18E, introducing an element of unpredictability in the forecasts given
the uncertainty prevailing over provisions pertaining to IBC cases in NCLT.
Nifty to post 19.5% earnings CAGR over FY17-19:
Nifty PAT is expected to grow
16% in FY18 (v/s 6% in FY17) and record 19.5% CAGR over FY17-19. Even for
Nifty, three sectors – BFSI, Metals and O&G – contribute 86% of incremental
earnings delta in FY18E. For FY19E, we note that contribution of Auto sector to
incremental Nifty profits move up significantly owing to Tata Motors – from 7%
in FY18E to 27% in FY19E.
We introduce FY20 earnings estimates:
We are introducing our FY20 earnings
estimates with this preview. We estimate MOSL Universe to post EBITDA and
PAT growth of 12% and 16%, respectively. For Nifty, we expect EBITDA and PAT
to grow 12% and 15%, respectively.
EBIDTA
Margin
(%)
FY18E
28.8
80.6
76.2
84.7
83.1
20.7
13.5
19.3
16.2
30.4
9.2
21.8
10.2
14.1
32.8
23.9
20.4
16.8
14.0
21.8
22.3
30.8
22.3
25.5
26.3
23.2
EBIDTA EBITDA margin
CAGR (%) change (bp)
(FY17-20)
15
12
6
15
22
16
18
22
22
17
19
15
17
12
16
14
14
8
10
12
7
3
12.9
13.2
11.8
12.6
FY17-20
118
-611
-967
-721
290
416
140
253
109
490
55
258
174
-100
680
68
101
-56
-6
-13
-83
-5
100
111
30
103
FY18E
35
43
323
23
24
57
14
18
20
12
18
9
13
11
21
11
-11
2
12
12
1
PL
15
16
13
16
PAT Gr. / CAGR (%)
FY19E
42
40
96
28
24
35
60
36
31
37
22
20
24
18
14
17
35
8
6
13
9
LP
25
28
26
24
FY20E (FY17-20)
21
32
26
36
33
123
24
25
23
24
13
34
13
27
26
26
27
26
23
24
19
20
16
15
19
19
18
16
11
15
17
15
19
13
8
6
5
8
4
9
8
6
1073
-24
15
18
16
20
15
18
15
18
PAT delta
Share (%)
FY17-20
70
38
17
14
7
12
13
4
3
1
0
18
3
0
6
5
4
12
9
7
5
-2
100
NA
NA
NA
Exhibit 32:
Recovery in Cyclicals to drive robust 18% PAT CAGR (FY17-20E)
Sector
Sales Gr. /
CAGR (%)
(No of Companies)
(FY17-20)
High PAT CAGR (>20%)
13
Financials (36)
15
PSU Banks (7)
10
Private Banks (13)
18
NBFC (16)
20
Metals (9)
9
Auto (15)
14
Cement (13)
17
Others (24)
19
Media (12)
11
Retail (2)
17
Medium PAT CAGR (10-20%)
11
Capital Goods (16)
11
Logistics (3)
14
Utilities (6)
9
Consumer (18)
13
Healthcare (20)
12
Low PAT CAGR (up to 10%)
9
Oil & Gas (12)
11
Excl. OMCs (9)
12
Technology (15)
8
Telecom (4)
3
MOSL (205)
11
MOSL Excl. OMCs (202)
12
Sensex (30)
11
Nifty (50)
11
October 2017
28

India Strategy | Turbulence behind; Clear skies ahead
FY18 earnings recovery narrow; dependent on three sectors
For MOSL Universe, we estimate FY18 PAT growth at 15% (after 14% growth in
FY17), led by strong performance in Auto, Cement, Financials, Utilities and
Metals. PSU Banks, Metals and Oil & Gas contribute 2/3
rd
of the earnings delta
for our universe in FY18E. We note that earnings performance of PSU Banks is
vulnerable to provisioning requirements pertaining to IBC cases in NCLT, which
introduces volatility in our estimates.
IT, Pharma and Telecom are expected to post muted performance, led by
sector-specific headwinds.
Introducing FY20 estimates: Nifty EPS CAGR at 18% for FY17-20E
We introduce our FY20 estimates with this preview and forecast 18% FY17-20E
CAGR for MOSL PAT, significantly higher than 5% over FY12-17, largely driven by
BFSI, Autos, Cement and Metals, which are expected to post 36%, 27%, 26% and
34% profit CAGR, respectively.
For Nifty, we expect 18% PAT CAGR over FY17-20. 40% of Nifty universe is
expected to post 20%+ profit CAGR over FY17-20. Only Bharti Airtel is estimated
to register profit contraction (-24% CAGR over FY17-20E) while Sun Pharma’s
profits are expected to stay flat.
EBITDA margin for the Nifty (ex-OMC/s, Financials) is expected to expand 10bp
to 21.6% in FY18, and by 70bp to 22.3% in FY19. PAT margin is likely to decline
by 20bp in FY18 to 10.7% and expand by 70bp in FY19 to 11.4%.
We estimate Nifty EPS at INR487 (+15%) for FY18, INR602 for FY19 (+24%), and
INR693 (+15%) for FY20.
Exhibit 33:
Nifty EPS – expect 18% CAGR over FY17-20E (v/s 5% CAGR over FY12-17)
FY17-20E:
18% CAGR
FY08-17:
4.7% CAGR
FY01-08:
21% CAGR
131
169
184
236
315
349
369
406
414
396
24%
15%
7%
15%
693
602
424
487
281
251
247
73
78
92
Nifty EPS estimates unchanged for FY18/19
We maintain our EPS estimates for Nifty at INR487/602 (INR484/602 earlier) for
FY18/FY19.
We expect the lower base of FY17 (especially in 2HFY17 due to demonetization)
to aid a sharp rebound in FY18. For FY18, we build in 15% Nifty EPS growth.
We note that 2QFY18 will benefit from sharp inventory gains and higher GRMs
of OMCs – for the first time in its history, all three OMCs are now part of the
Nifty.
October 2017
29

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 34:
Top Nifty companies’ EPS upgrades/downgrades since 1QFY18 review (%)
Company
FY18
Company
FY19
BPCL
IOC
HPCL
Coal India
ONGC
Bajaj Auto
Larsen & Toubro
Bharti Infratel
Bajaj Finance
Reliance Inds.
Hindalco
Tata Motors
Dr Reddy’ s Labs
Zee Entertainment
43.5
39.3
34.7
8.3
8.2
5.2
3.8
-3.5
-4.8
-5.3
-9.7
-10.7
-14.7
-17.5
BPCL
HPCL
Coal India
IOC
Vedanta
Larsen & Toubro
Bajaj Auto
HCL Technologies
Bharti Infratel
GAIL
Dr Reddy’ s Labs
Infosys
Zee Entertainment
Hindalco
25.9
18.0
15.4
14.9
13.0
9.5
6.6
4.6
-3.5
-4.0
-4.2
-4.6
-5.9
-6.7
Contbn
to
Exhibit 35:
Nifty performance - Expect FY17-20 PAT CAGR of 18%
Sales (INR b)
FY18E FY19E FY20E
Company
High PAT Growth (20%+) 9,828 11,512 12,740
State Bank
766
890 1,014
Axis Bank
192
226 271
Tata Motors
2,970 3,726 4,135
Hindalco
1,075 1,148 1,144
Vedanta
855 1,026 1,112
Bajaj Finance
78
103 135
Eicher Motors
90
111 132
Cipla
168
190 215
Dr Reddy’ s Labs
145
172 203
Ambuja Cements
102
113 126
Tata Steel
1,255 1,254 1,263
Yes Bank
76
94
121
Indiabulls Housing
52
64
81
Kotak Mahindra Bank
94
112 135
IndusInd Bank
75
94
114
Ultratech Cement
298
374 430
UPL
186
211 237
Maruti Suzuki
820
978 1,127
HDFC Bank
401
479 576
Bosch
129
147 168
Medium PAT Growth
10,060 11,442 12,157
(10-20%)
Mahindra & Mahindra 938 1,045 934
Coal India
829
887 945
Hind. Unilever
333
392 453
Larsen & Toubro
1,207 1,333 1,460
Bajaj Auto
247
280 321
Asian Paints
166
202 242
Zee Entertainment
65
76
88
Power Grid Corp.
321
368 397
NTPC
850
966 1,069
HDFC
116
132 151
Bharti Infratel
146
159 171
GAIL
525
604 650
Sales
EBIDTA Margin
EBITDA
PAT (INR b)
(%)
CAGR
CAGR
% 17- FY18 FY19 FY20 % 17- FY18E FY19E FY20E
20
20
13
10
14
15
5
15
35
24
14
13
11
4
28
26
19
23
22
12
18
20
17
12
4
7
12
10
14
17
11
16
10
15
8
11
28
77
89
12
13
30
68
32
18
18
18
17
93
108
77
90
21
20
15
80
19
24
14
21
21
11
19
20
31
89
28
94
45
15
29
71
88
15
13
34
69
34
19
21
19
16
94
111
81
89
22
20
16
81
21
24
14
22
21
12
20
19
35
89
32
94
45
14
30
74
87
15
13
34
71
35
20
23
22
17
96
113
84
88
23
21
16
81
22
24
15
24
21
12
21
19
37
89
34
94
44
14
16
8
10
18
5
21
38
28
20
24
20
9
26
26
24
23
26
20
21
22
23
13
10
23
17
15
14
16
19
16
19
15
9
12
1,042
126
52
68
44
94
26
22
17
12
14
65
42
35
62
37
25
22
86
175
17
1,544
232
91
208
55
139
36
30
21
20
16
62
52
44
78
46
38
26
115
212
21
1,860
309
121
214
56
159
50
38
27
25
20
74
66
57
97
55
49
31
133
255
25
PAT YoY (%)
PAT
CAGR
FY18 FY19 FY20 % 17- Delta %
20
47
5,126
42
1
132
68
42
35
33
3
42
76
26
22
25
29
-4
27
15
20
14
13
28
32
17
10
9
6
-10
22
13
11
16
17
48
84
74
206
24
48
39
35
23
65
18
-5
24
25
26
24
51
21
34
21
29
15
18
12
19
22
21
19
39
18
16
14
14
13
20
33
32
3
2
14
38
25
28
23
23
20
26
29
24
19
27
19
15
21
17
13
12
14
17
21
16
21
21
5
13
15
9
7
38
404
49
47
43
41
39
32
28
28
28
26
25
25
25
24
23
22
21
21
20
14
19
19
18
17
15
15
15
15
14
13
13
12
61
16
4
8
2
5
2
1
1
1
1
2
2
1
3
1
1
1
3
6
1
30
1
3
1
2
1
1
0
2
3
2
1
1
1,335 1,538 1,733
42
123
50
65
42
21
13
91
111
83
32
45
49
137
59
79
50
25
18
108
129
95
36
51
55
155
69
96
59
31
22
112
147
109
40
54
October 2017
30

India Strategy | Turbulence behind; Clear skies ahead
Sales (INR b)
FY18E FY19E FY20E
Company
Reliance Inds.
ITC
Tech Mahindra
ICICI Bank
Aurobindo Pharma
Low PAT Growth (<10%)
Lupin
Hero MotoCorp
HCL Technologies
Adani Ports
Infosys
Wipro
IOC
BPCL
TCS
HPCL
ONGC
Sun Pharma
Bharti Airtel
Nifty (PAT free float)
3,198 3,723 3,828
416
479 548
309
347 391
228
262 304
167
186 205
14,717 16,149 17,253
169
199 230
326
351 385
511
570 612
102
113 127
706
773 846
564
617 663
4,055 4,479 4,897
2,284 2,459 2,537
1,239 1,382 1,488
2,093 2,266 2,333
1,509 1,674 1,728
280
322 366
879
945 1,040
34,604 39,103 42,151
EBIDTA Margin
EBITDA
PAT (INR b)
(%)
CAGR
CAGR
% 17- FY18 FY19 FY20 % 17- FY18E FY19E FY20E
20
20
Sales
17
11
10
12
11
8
9
11
9
15
7
6
11
8
8
8
7
7
3
11
16
38
14
101
25
17
21
16
22
64
26
20
10
7
26
6
41
20
35
22
15
37
15
91
24
17
23
15
22
65
26
20
9
7
26
6
41
24
35
23
15
37
14
90
24
17
25
15
21
64
26
21
9
7
26
6
41
26
36
23
10
11
10
1
12
8
9
8
8
13
6
8
7
8
6
8
14
3
2
12
356
113
31
93
26
1,349
19
37
91
36
142
82
242
97
258
70
229
36
10
1,876
407
125
33
106
29
1,435
25
39
99
42
152
88
220
102
286
65
246
56
13
2,320
443
142
37
132
31
1,526
33
43
105
47
170
97
234
109
299
70
233
65
20
2,669
PAT YoY (%)
PAT
Contbn
to
CAGR
FY18 FY19 FY20 % 17- Delta %
20
13
10
13
-5
14
0
-27
9
8
-7
-1
-1
19
2
-2
13
8
-42
-78
16
14
11
7
15
11
6
36
7
9
16
7
7
-9
6
11
-7
8
54
34
24
9
13
12
24
5
6
31
10
6
12
12
10
6
7
5
7
-5
17
52
15
12
12
11
10
10
4
9
9
7
7
6
5
5
5
4
4
3
1
-24
18
7
2
1
2
0
9
0
0
1
0
1
1
2
1
2
0
1
0
-1
100
Exhibit 36:
Nifty stock absolute FY18E PAT change (INR b)
3,727
Exhibit 37:
Nifty stock absolute FY19E PAT change (INR b)
October 2017
31

India Strategy | Turbulence behind; Clear skies ahead
Key Sectoral Highlights - 2QFY18
SECTOR
Auto
Key highlights
Sales
2QFY18E YoY (%)
EBITDA
PAT
Capital Goods
Regulatory actions had
materially influenced auto
volumes since 3QFY17. However,
given the waning regulatory
impact, the automobile sector
has witnessed gradual volume
growth August onward,
supported by pre-festive
inventory build-up and
improving rural sentiment.
EBITDA margin for our auto OEM
(ex-JLR) universe is likely to
contract (-100bp YoY; +160bp
QoQ) for the fourth consecutive
quarter to 13.4%. This is without
any impact of an increase in
commodity prices (which is
expected to be realized in
2HFY18).
Auto aggregate PAT is likely to
grow 9.4% YoY (ex JLR 8.1%), led
by AL, EIM and MM. MSIL is
likely to report a decline of 2.7%,
partially offset the increase in
overall PAT.
We expect order intake by most
companies to be weak on
account of a delay in ordering
activity due to GST
implementation. Also,
announced orders during the
quarter stand muted. Industrial
capex remains sluggish; roads,
rail and power T&D remain the
only bright spots on the infra
side.
Revenue growth is expected to
remain moderate as electrical
consumer durables companies
sales get impacted by delay in
dealer restocking post GST
implementation,
Margins to show 40bp
improvement YoY on account of
better operational performance
of core capital goods companies
like ABB, Siemens and BHEL.
12.0
13.5
9.4
Margin
Key stocks to watch
Chg YoY (pp)
Ashok Leyland’s volumes were
0.2
healthy, led by waning pre-buy
impact and a revival in buying
decisions post GST by fleet
operators; EBITDA margin is
expected to contract 104bp, while
PAT should increase 29% YoY.
Royal Enfield’s volumes grew
21.5% YoY, led by additional
capacity amid continued healthy
demand. Consolidated margin is
likely to be 31.7%. Consolidated
PAT is estimated to rise 33.3% YoY
(+19.9% QoQ).
MM’s volume growth of 16.3%
YoY was led by healthy tractor and
UV sales. PAT is projected to
increase 8.5% YoY, while margin is
expected to remain flat YoY.
MSIL: PAT expected to fall 2.7%
YoY, while EBITDA margin likely to
shrink 190bp YoY to 15.1% due to
the impact of Gujarat plant and
GST transition.
9.1
14.0
8.9
0.4
Execution from LT is likely to
register 7% growth in 2QFY18;
operating profit is likely to register
8% growth YoY. Operating margins
are expected to improve 70bp YoY
to 9.4%. 2QFY17 operating
performance was impacted by ECL
provisioning.
Bharat Electronics is likely to
report weak operating
performance despite strong
revenue growth of 16% YoY, on
account of adverse revenue mix.
Gross margins are expected to
shrink 490bp, and Apt is expected
to decline 35% YoY.
Havells to report revenue growth
of 26% YoY given contribution
from the newly acquired Lloyd. We
expect operating margin to decline
130bp YoY given adverse product
mix. Net profit is expected to
decline 5% YoY.
October 2017
32

India Strategy | Turbulence behind; Clear skies ahead
SECTOR
Cement
Key highlights
Sales
2QFY18E YoY (%)
EBITDA
PAT
We expect pan-India players like
ACC, Ambuja and Ultratech to
report combined volume growth
of ~8% YoY, with ACC reporting
stronger growth on account of
capacity addition. North-based
companies like Shree Cement, JK
Cement and JK Lakshmi Cement
are likely to report volume
growth of 9% YoY, while south-
based companies are expected
to report volume growth of 4%
YoY in 2QFY18. Volume growth
for central players should come
in muted due to the impact of
sand mining issues in UP and
Bihar.
We estimate volume growth at
7-8% YoY for FY18, given the
favorable base in 2HFY18 and
the demand improvement led by
the pick-up in infrastructure and
low-cost housing projects. We
expect (a) pan-India players to
report volume increase of 4-16%
YoY, (b) players with capacity
headroom (SRCM, JKLC) to
deliver 8-11% YoY increase in
volumes and (c) south-based
companies to post volume
growth of -3%-8%.
Cement prices should decrease
QoQ due to weak exit prices in
1QFY18 v/s average prices for
the quarter. Retail cement prices
were lower QoQ due to the pass-
through impact of GST. Cement
prices in north and south are
likely to be lower by 5%/6%
QoQ, as exit prices of 1QFY18 in
both north and south were ~3%
lower than average prices for the
quarter.
ASP should decrease 2% QoQ in
2QFY18 due to seasonal
weakness. We estimate a price
decline of (a) 5% QoQ in north
India, (b) 3% QoQ in central
India, (c) 5% QoQ in west India,
(d) 4% QoQ in east India and (e)
6% QoQ in south India. However,
the ASPs of companies under
coverage will not decline to the
extent of the fall in retail prices,
as cement prices were reduced
effective 1 July 2017 due to the
pass-through of tax benefit on
account of the 28% tax rate for
cement under GST.
14.9
0.5
-15.1
Margin
Key stocks to watch
Chg YoY (pp)
Shree Cement’s superior execution
-2.5
capabilities enable it to achieve
RoIC of over 50% (FY19E), while its
gross block to capacity has been
structurally trending downward.
Ramco Cement is likely to
generate strong operating cash
flow, which would be utilized to
raise grinding capacity by ~16%
over FY17-FY20E. We estimate
9%/14% EBITDA/PBT CAGR over
FY17-20.
JK Cement is a play on a revival in
the north region and a strong
improvement in white cement
performance (40-45% market
share in white cement). It thus
deserves premium valuation, in
our view.
Birla Corp is likely to be profitable
due to the strong performance of
the acquired subsidiary Reliance
Cement. With a 23% market share
in the Satna cluster and Reliance
Cement’s mineral concession, it
has the potential to expand to
multiple states.
We believe Dalmia Cement’s
deleveraging play and superior
volume growth make it attractive
for re-rating.
October 2017
33

India Strategy | Turbulence behind; Clear skies ahead
SECTOR
Consumer
Key highlights
Sales
2QFY18E YoY (%)
EBITDA
PAT
We expect our Consumer
Universe’s revenues to grow
4.3% YoY and aggregate PAT to
grow 9.7% YoY in 2QFY18. Sales
for the quarter are likely to be
impacted by (a) GST-related
disruptions, as well as by (b) GST
accounting on sales, which will
not affect the base.
PFAD/palm oil prices were stable
– up 3.3%/1.9% YoY in 2QFY18.
Ti02 prices increased by 14% YoY
and mentha prices by 24% YoY in
2QFY18. While copra and LLP
prices were up 82% YoY and 13%
YoY, respectively, HDPE prices
declined 7% YoY in the two
months ended August 2017.
Aggregate EBITDA is likely to
grow 9% YoY, mainly because of
a weak base, and margin should
expand 100bp YoY – GST
accounting impacts sales, but
not EBITDA.
4.3
9.0
9.7
Margin
Key stocks to watch
Chg YoY (pp)
We expect ITC’s sales to grow
1.0
2.5% YoY (with 2% decline in
cigarette volumes) and PAT to
grow 9.5% YoY (partly due to high
34.7% tax rate in the base
quarter).
HUVR’s sales would be flattish
(volume growth of 4%); its EBITDA
margin is expected to expand
200bp YoY, mainly owing to GST
accounting and a weak margin
base.
15 of the 18 companies under our
coverage are likely to report YoY
growth in EBITDA. Britannia,
Colgate, GCPL, Page Industries and
P&G Hygiene are likely to report
healthy EBITDA growth of over
15% YoY, mainly due to weak
base. United Breweries is likely to
report EBITDA decline (though
much lower than initially feared)
due to the absence of input tax
credit under GST.
Financials
10.9
Private Banks
14.8
14.6
35.0
17.8
2.8
-1.0
PSU Banks
Growth momentum is expected
to sustain for YES, IIB and RBL,
while earnings pressure should
stay elevated at corporate
lenders like ICICIBC and AXSB,
led by provisioning. The impact
of GST on MSME borrowers and
that of RERA on
home/construction finance
remain key monitorables. Yields
would be under pressure, led by
MCLR cuts. However, we expect
reduced cost of funds to negate
the pressure on margins.
Loan and deposit growth
trajectory would remain muted
but start picking up from the
lows of the last quarter. Margins
are expected to normalize with
reducing impact of interest
income reversals, but stay under
pressure with low yields.
Provisions are expected to
remain at elevated levels, led by
ageing of NPLs and continued
stress additions. Trading gains
are expected to remain flat QoQ.
Led by weak core revenue,
16.0
Prefer YES and ICICIBC among
corporate lenders; HDFCB and IIB
top picks among retail lenders.
2.6
11.5
188.4
7.0
Prefer SBIN, PNB and BOB among
PSU banks.
October 2017
34

India Strategy | Turbulence behind; Clear skies ahead
SECTOR
Key highlights
muted non-core income and
elevated credit costs, earnings
would remain under pressure.
We expect stable-to-improving
trends in growth across product
segments in NBFCs.
Farm loan waivers and normal
monsoon have lifted sentiment
in the rural economy. Focus on
collections has also helped
companies to effect strong
recoveries. Vehicle financiers are
expected to report healthy asset
quality.
Our channel checks suggest that
at-par delinquencies have come
off in the MFI segment and
disbursements have resumed.
This would benefit BHAFIN.
Margins in HFCs will continue to
be under pressure. We expect
continued diversification into
other products such as LAP and
corporate loans.
Sales
2QFY18E YoY (%)
EBITDA
PAT
Margin
Key stocks to watch
Chg YoY (pp)
NBFC
24.2
24.9
21.4
0.5
Repco could disappoint on the
growth front due to regulatory
issues
BHAFIN’s provisioning and at-par
delinquency trend would be a key
monitorable.
Growth in SHTF and MMFS would
be a key thing to watch out for.
SHTF is likely to report strong
decline in cost of funds.
SCUF may disappoint on growth
due to impact of GST.
Healthcare
Logistics
With respect to the US market,
Cadila is expected to exhibit
strong growth in the US, on the
back of recently launched
gLialda.
Sun Pharma is likely to continue
to report decline in revenues,
primarily on the back of a
decrease in the US business due
to continued pricing pressure.
Aurobindo Pharma’s US business
is expected to post robust
growth with the launch of
gRenvela.
Healthcare companies will
continue to witness pricing
pressure and channel
consolidation in the US, partially
offset by growth in the domestic
business on the back of channel-
refilling post GST
implementation.
EXIM originating volumes by rail
are likely to grow in mid-teens in
2QFY18. In July-August 2017,
EXIM container volumes were up
by 13% YoY and domestic
volumes by 12% YoY.
CCRI is likely to report EXIM
handling volume growth of 13%
YoY (+7 QoQ) for 2QFY18, led by
4.4
-10.4
-22.0
-3.3
Cadila (+ve; US business to witness
~40% YoY growth led by gLialda
sales).
AJP (+ve; should report 25% YoY
increase in revenues, largely due
low base of 2QFY17, increased
traction in both, pharma as well as
life science ingredient segments,
and additional sales of about one
month from the Triad acquisition
formulation and Africa sales).
Sun (-ve; should report decline in
revenues on back of decrease in
US business by ~35% YoY).
12.5
22.2
42.7
1.2
We expect CCRI to report better
margins YoY/QoQ due to strong
volume growth in the EXIM and
domestic businesses.
GDPL should see downward
pressure on margins, led by
margin pressure on the CFS
business and flat margins in the
rail business.
October 2017
35

India Strategy | Turbulence behind; Clear skies ahead
SECTOR
Key highlights
strong EXIM volumes and ramp-
up of the Kathuwas terminal.
GDPL is likely to report growth of
8% YoY (+17% QoQ) in rail
volumes due to strong EXIM
trade during the quarter. CFS
segment is expected to see
volume decline of 2% YoY (+3%
QoQ), impacted by DPD at the
JNPT terminal.
We expect ad revenue for our
Media universe to grow just
~1.3% YoY. Earnings are
expected to remain weak, with
GST-related hiccups keeping
primary sales in FMCG, and
consequently, ad spends in
check.
The sluggish performance of
media companies is a
consequence of a weak July and
August in terms of ad spends
across sectors, particularly FMCG
and auto. However, we
understand that September has
started showing a healthy
growth trend with the onset of
the festive season.
Zee’s ad growth is likely to come
in at ~4% YoY (3% ex-Sports),
with contribution from RBL’s
revenues. Sun TV’s ad revenue is
expected to grow at a meager
2%.
ARPU for Dish TV is expected to
remain stable to INR148 (1QFY18
ARPU: INR148) and net additions
are estimated at 0.17m.
Radio broadcasters are likely to
see weak like-to-like growth, the
impact of which should be partly
offset by new channel launches.
Supply-side measures and
demand surprise in China are
driving metal prices.
Chinese HRC export prices rose
sharply QoQ, aluminum prices
were up 5% QoQ, while zinc
prices were up 14% QoQ.
Domestic companies also
benefited from increase in
volumes. Steel sales for our
coverage universe rose 19%
QoQ. Aluminum volumes are
higher by 14% QoQ.
Sales
2QFY18E YoY (%)
EBITDA
PAT
Margin
Key stocks to watch
Chg YoY (pp)
AGLL is likely to see pressure on
margins, led by subdued
performance at CFS and P&E; the
MTO segment is expected to do
better.
Media
2.2
-2.8
-9.7
-1.5
Zee Ent: 12%/9% ad/domestic
subscription CAGR over FY17-19E.
13% EPS CAGR (adjusted for sports
sale gain) over FY17-19E.
Metals
21.1
40.6
122.7
2.8
Tata Steel’s EBITDA would increase
7% QoQ / 79% QoQ on strong
volume growth and higher steel
spreads.
JSW Steel’s EBITDA would increase
by 24% QoQ/10% YoY to INR32.4b
on higher steel spreads.
October 2017
36

India Strategy | Turbulence behind; Clear skies ahead
SECTOR
Oil & Gas
Key highlights
Sales
2QFY18E YoY (%)
EBITDA
PAT
Singapore complex GRM was
USD8.3/bbl in 2QFY18 v/s
USD6.4/bbl in 1QFY18 and
USD5.1/bbl in 2QFY17. Inventory
gains are likely to boost earnings
further.
Average Brent crude price was
up 13% YoY and 3% QoQ to
USD51.5/bbl. While the
YoY/QoQ increase would benefit
upstream companies, we expect
lower operating costs to further
help them. ONGC and Oil India
should see YoY EBITDA increase.
RIL is expected to clock a GRM of
USD12.6/bbl, led by strong
benchmark (premium of
USD4.3/bbl). Petchem segment
would do better despite decline
in HDPE and LDPE delta, with RIL
being an integrated player and
strong volume growth in the
segment.
Brent crude increased, primarily
due to Hurricane Harvey. The
average for the quarter was up
13% YoY (3% QoQ) at
USD51.5/bbl. OMCs are likely to
post inventory gains for the
quarter. Due to the increase in
oil prices, we expect inventory
gains to benefit all refiners –
they had reported inventory
losses in the previous quarter.
OMCs’ gross margins for auto
fuels have increased YoY/QoQ.
Gross margins were INR3.2/liter
in 2QFY18 v/s INR2.7/liter in
2QFY17 for petrol and
INR3.1/liter in 2QFY18 v/s
INR2.5/liter in 2QFY17 for diesel.
Domestic oil & gas production
has improved, which would be
beneficial for the upstream
companies. Rise in crude oil price
and revived production volume
growth for oil and gas would
benefit ONGC/OINL.
We expect volume growth to
continue for CGD players. We
might see margin compression
(YoY/QoQ) in the industrial
segment due to competition
from alternate fuels.
We expect our Retail Universe to
report healthy revenue growth
of 14.2% YoY in 2QFY18. EBITDA
is expected to increase by 3.7%
YoY and PAT by 2.6% YoY.
Retail companies under our
26.4
37.8
60.2
Margin
Key stocks to watch
Chg YoY (pp)
Bullish on OMCs: We continue to
1.1
like OMCs on account of (a)
improving core performance
which reflects strong GRMs, (b)
strong consumption growth of
auto fuels, (c) potential marketing
margin expansion, and (c) low
competitive intensity. We prefer
IOC among the three due to its
high free cash flow generation.
Excl. OMCs
17.2
17.4
7.7
0.0
ONGC looks attractive:
We prefer
ONGC, as (a) cost efficiency would
result in decline in opex, (b) gas
production is likely to grow 10-
15% annually for the next five
years, (c) oil production is set to
increase, (d) it has no subsidy
burden, and (e) valuations are
attractive.
PLNG – a long-term buy:
Visibility
on PLNG’s medium/long-term
earnings is high, given (a) the huge
gas demand-supply gap in India,
(b) volume growth, driven by
gradual capacity addition, and (c)
earnings growth boosted by
annual re-gas charge escalation.
Poor competition from existing
and upcoming terminals and lower
LNG prices add to the Buy case for
PLNG.
Retail
14.2
3.7
2.6
-0.9
Jewelry business revenue growth
may not be as impressive for TTAN
unlike the preceding few quarters
due to (a) advancement of sales of
INR 2.5-3b from July to June ahead
of GST implementation; (b)
October 2017
37

India Strategy | Turbulence behind; Clear skies ahead
SECTOR
Key highlights
coverage are moderating store
expansion. In 2QFY18, TTAN
added only two Tanishq stores
(adding 7.5ksf), while JUBI likely
added 12 stores.
Sales
2QFY18E YoY (%)
EBITDA
PAT
Technology
The seasonal strength of 1Q was
watered down by a delay in BFS
recovery, which most companies
were hoping for to drive an
improved performance for the
year. Continued softness in BFS,
combined with troubles in Retail,
drive our expectation of 1.0-2.2%
QoQ CC growth for 2QFY18.
With EUR and GBP appreciating
6.7% QoQ and 2.2% QoQ,
respectively, against the USD, we
see ~100bp tailwind in reported
QoQ dollar revenue growth.
HCLT, TECHM, CYL and NITEC
should be the larger
beneficiaries, given their
exposures to the EUR.
Although the absence of visa
expenses and wage hikes (for
some) should provide some
margin tailwinds, we expect the
benefits to be limited because of
a flat average INR/USD and lack
of a material pick-up in organic
revenue growth.
Expect 2QFY18 to see pressure
on both revenue and EBITDA
because of 1) GST @ 18%, 2)
ARPU downtrading to INR350-
400 and 3) seasonality. We
expect revenue de-growth of
1.2/6.9% QoQ for Bharti/Idea,
with 4/18% QoQ EBITDA decline
on consolidated basis.
Voice business is expected to
decline 3.5/7.1% QoQ for
Bharti/Idea, while Data revenue
is expected to fall 7/12% QoQ
respectively, hurt by the increase
in unlimited and bundled price
plans in the market.
Bharti Infratel is expected to
continue its steady tenancy
addition of ~4,290
(
2% QoQ
growth) in 2QFY18 on a
consolidated basis. Tower
growth is expected to be
moderate at 680 (+1.9% QoQ
)
.
We expect revenue to grow 3%
QoQ to INR36.2b and
consolidated EBITDA growth of
3% QoQ to INR16.2b.
3.8
-1.8
-0.1
Margin
Key stocks to watch
Chg YoY (pp)
subdued response to diamond-
studded activation and (c) some
disruption as a result of new PMLA
guidelines issued on 23 August.
For Jubilant Foodworks (JUBI), we
expect sales to increase 11% YoY,
with same-store sales (SSS)
increasing by 6% YoY.
At the end of 4QFY17, INFO guided
-1.2
for 6.5-8.5% YoY CC growth,
implying a CQGR of 2.2-3%. FY17
guidance would be tested by 2Q
revenue growth, and by
expectations of momentum going
forward as the company continues
to be faced with multiple internal
issues. Updates on stability of
board and management, and
strategy execution would also be
keenly watched to judge the
internal stability of the company.
For TECHM, we expect EBITDA
margin to expand by 100bp QoQ
to 13.7% post the margin shock in
4QFY17. The revival is expected to
be led by completion of
rationalization in LCC and better
operational efficiencies. Organic
revenue growth revival would also
be crucial, given the subdued
performance in 1Q led by multiple
project closures.
Telecom
-10.7
-22.1
PL
-4.4
Bharti’s consolidated EBITDA
expected to decline 4% QoQ.
Idea’s consolidated EBITDA likely
to decline 18% QoQ.
Bharti Infratel’s consolidated
EBITDA should grow 3% QoQ.
TCOM’s EBITDA growth is
estimated at 5% QoQ.
October 2017
38

India Strategy | Turbulence behind; Clear skies ahead
SECTOR
Key highlights
Sales
2QFY18E YoY (%)
EBITDA
PAT
Margin
Key stocks to watch
Chg YoY (pp)
Utilities
Revenues of Tata Comm. are
expected to grow 1.8% QoQ to
INR43.9b on the back of 3.2%
data revenue growth to
INR28.7b. EBITDA should grow at
5% QoQ to INR5.9b on the back
of 7% data EBITDA growth to
INR5b, partly offset by a 5%
voice EBITDA decline to
INR829m.
Regulated businesses: Power
Grid would continue to
outperform driven by strong
capitalization momentum. CESC
would grow at steady pace on
growth in regulated equity.
NTPC’s earnings growth will
remain impacted due to GCV
measurement change.
The increase in global thermal
coal prices is likely to benefit
Tata Power. JSW Energy on the
other hand would be impacted
on increase in fuel cost and
lower generation.
Coal India EBITDA (ex-OBR) is
estimated increase ~3x YoY on
higher volumes and e-auction
realization.
7.6
23.5
35.2
4.1
Coal India e-auction and ASQ
realization.
Power Grid – capitalization
momentum
NTPC - commercialization
guidance and impact of GCV
measurement change.
October 2017
39

India Strategy | Turbulence behind; Clear skies ahead
MARKETS & FLOWS
Indian equities remain buoyant
Domestic MFs record highest ever inflows
Nifty delivers positive returns in all
three quarters of CY17 so far
QoQ Return (%)
12
4
4
7
3
0
-5
-3
-5
The Nifty gained an impressive 21% in CY17 YTD, after two years of muted returns.
Notably, the benchmark delivered positive returns in all three quarters of CY17 so far,
despite negative return in the last two months due to global geopolitical tensions,
moderation in domestic macros (inflation, CAD, currency depreciation, noise around
fiscal stimulus) and continued selling by FIIs.
Midcaps (+28% in CY17 YTD) outperformed the Nifty for the fourth consecutive year,
expanding the premium v/s large caps to 42% (4% in May).
In CY17 YTD, MSCI EM (+28%), Brazil (+27%), India-Nifty (+21%), China (+21%), Korea
(+18%) and US (+14%) were the best performers among the key global markets in local
currency terms. On the other hand, Russia (-10%) delivered negative returns.
India’s share in world market cap is at its long-term average of 2.4%. Over the last 12
months, world market cap has increased 29.3% (USD19.4t), while India’s market cap is
up 22%.
Nine sectors outperformed the benchmark. Real Estate (+66%), Cement (+39%),
Private Banks (+37%), Metals (+36%) and NBFCs (+32%) were the top outperformers in
CY17 YTD. Healthcare (-6%) and Technology (-2%) were the only sectors to deliver
negative returns.
Market breadth has been positive so far in CY17 YTD, with 41 Nifty stocks trading
higher. Bajaj Finance (+122%), Indiabulls Housing (+94%), Tata Steel (+69%), Yes Bank
(+55%) and Hindalco (+55%) were the top performers. Lupin (-31%), Dr Reddy’s (-22%),
Sun Pharma (-18%), ONGC (-11%) and Infosys (-11%) were the worst performers.
India has recorded highest ever inflows from domestic MFs: USD14b, double the full-
year inflows of USD7.1b in CY16. FII inflows for YTD CY17 stand at USD5b. DIIs (ex-
MFs) saw outflows of USD3.8b in CY17 YTD – six successive years of outflows.
Valuations of Indian equities remain attractive. The Nifty trades at a P/E of 17.8x, at a
5% premium to long-period average of 17x. At 2.7x, Nifty P/B is near its historical
average. RoE stands at 15.2%, near its long-term average. Market cap-to-GDP ratio of
79% (FY18E GDP) is near its long-term average of 78%.
Exhibit 38:
CY17 YTD returns best in last three years
Nifty annual return YoY (%)
4 years of negative return in 1990s cycle
2 year of negative return in 2000s cycle
2 year of negative return in
2011 cycle
69
36 37
13
-1
-23
-18
67
20
3
-15 -16
72
36 40
11
CAGR of 13%
76
55
18
28
7
-4
-25
-52
31
3
21
October 17
40

India Strategy | Turbulence behind; Clear skies ahead
Global equities: India among the best-performing markets in CY17 YTD
MSCI EM (+28%), Brazil (+27%), India-Nifty (+21%), China (+21%), Korea (+18%)
and US (+14%) were the best performers among the key global markets in local
currency terms. On the other hand, Russia (-10%) delivered negative returns.
In USD terms, India-Nifty has delivered 26% returns in CY17 YTD.
Exhibit 40:
World equity indices (CY17YTD) – USD (%)
Brazil
MSCI EM
India - Nifty
South Korea
Taiwan
China (HSCEI)
S&P 500
UK
Japan
Russia MICEX
-4
14
12
12
21
20
28
32
Exhibit 39:
World equity indices (CY17YTD) – local currency
MSCI EM
Brazil
India - Nifty
China (HSCEI)
South Korea
S&P 500
Taiwan
Japan
UK
Russia MICEX
-10
5
8
14
14
28
27
21
21
18
26
25
MSCI EM outperforms MSCI India in last 12 months
Over the last 12 months, MSCI EM (+20%) has outperformed MSCI India (+10%).
Over the last five years, MSCI India has outperformed MSCI EM by 75%.
MSCI India P/E is at a premium of 41% to MSCI EM P/E, marginally below its
historical average premium.
Exhibit 42:
MSCI India outperforms EM by 75% over five
years
205
Exhibit 41:
MSCI EM outperforms MSCI India over 12
months
125
115
105
95
85
MSCI India Rebased
MSCI EM Rebased
MSCI India Rebased
MSCI EM Rebased
120
110
160
115
70
25
10 Year CAGR:
5 Year CAGR:
MSCI India: 5.1% MSCI India: 9.6%
MSCI EM: -1.1% MSCI EM: 1.5%
165
90
October 2017
41

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 43:
MSCI India v/s MSCI EM trailing P/E (x)
MSCI India PE (x)
33.0
26.0
19.0
12.0
5.0
MSCI EM Avg: 13.6x
MSCI EM PE (x)
Exhibit 44:
MSCI India v/s MSCI EM P/E premium (%)
100
MSCI India Vs EM PE Premium (%)
MSCI India Avg: 19.3x
22.3
15.8
75
50
25
0
Average of 43%
41
India’s share in world market cap at historical average
India’s share in the world market cap is at 2.4%, at its long-term average.
Over the last 12 months, world market cap has increased 29.3% (USD19.4t),
while India’s market cap is up 22%.
Exhibit 46:
Market cap change in last 12 months (%)
0.9
29
2.0
7.6
1.1
28.1 0.6
5.8
1.5
3.6 0.5
Mkt cap chg 12M (%)
19
16
15
15
13
Curr Mcap (USD Tr)
Exhibit 45:
Trend in India's contribution to world market cap
3.5
3.0
2.5
2.0
1.5
Average of 2.4%
India's Contribution to World Mcap (%)
3.3
22
13
12
2.4
1.6
8
Sector performance: Nine sectors outperform the benchmark in CY17 YTD
Real Estate, Cement, Private Banks, Metals and NBFCs top outperformers
Real Estate (+66%), Cement (+39%), Private Banks (+37%), Metals (+36%) and
NBFCs (+32%) were the top outperformers for CY17 YTD.
Except Healthcare and Technology, all sectors have delivered positive returns in
CY17 YTD.
Exhibit 47:
Sectoral performance in CY17 YTD (% return)
66
Midcaps
outperformed
the benchmark
by 7% in CY17
YTD
39
37
36
32
28
26
26
25
23
21
21
16 12 11
-2
-6
October 2017
42

India Strategy | Turbulence behind; Clear skies ahead
Breadth positive for CY17 YTD; 41 Nifty stocks trade higher
Healthcare stocks top underperformers
Among the Nifty components, Bajaj Finance (+122%), Indiabulls Housing (+94%),
Tata Steel (+69%), Yes Bank (+55%) and Hindalco (+55%) were the top
performers. Lupin (-31%), Dr Reddy’s (-22%), Sun Pharma (-18%), ONGC (-11%)
and Infosys (-11%) were the worst performers.
Exhibit 48:
Best and worst Nifty performers for CY17 YTD (%)—24 companies of Nifty outperformed the benchmark
122
94
69
55 55 53 53 49 48
47 47 44 44 43 41
39 33
31 29 26 25
24 23 21
21
20 20 19 18
1715 13 12 11 11 10 10
8 4 3 3 1
-1 -8
-9 -10 -11 -22
-11 -18
-31
Source: Company, MOSL
Among the Nifty Midcap 50 stocks, L&T Finance (+121%), JSPL (+114%), Dalmia
Bharat (+103%), PC Jeweller (+85%) and TVS Motor (+82%) were the top
performers. Reliance Comm (-50%), Ajanta Pharma (-35%), IDBI Bank (-25%),
Strides Shasun (-19%) and Amara Raja (-19%) were the worst performers.
Exhibit 49:
Best and worst Nifty Midcap 50 performers for CY17 YTD (%)—only 12 companies are trading lower
121
114
103
85 82
71 71 69 60
59 58 58 57 54 53
40 36 36 35 33 30
30
29 29
26 22 21
13 11 10 10 9 8 7 7 2
1 1 1
-1 -2 -6 -7 -8 -9
-16 -19
-19 -25
-35
-50
October 2017
43

India Strategy | Turbulence behind; Clear skies ahead
Institutional flows: Domestic MFs recorded highest ever inflows
FII flows moderate; FIIs big sellers in last two months
India has recorded highest ever inflows from domestic MFs: USD14b, double the
full-year inflows of USD7.1b in CY16.
FII flows moderate; YTD CY17 inflows stand at USD5b.
DIIs (ex-MFs) saw outflows of USD3.8b in CY17 YTD – sixth successive year of
outflows.
Exhibit 51:
Cumulative domestic MF flows in CY17 YTD
(USD b)
16.0
12.0
8.0
4.0
0.0
Exhibit 50:
Yearly domestic MF flows in equities (USD b)
14.0
11.2
7.1
1.7
3.3
3.9
1.3
-1.2
14.0
USD6.4b inflows in
last two months
0.3
-3.9 -3.7
-6.1
CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
YTD
Exhibit 52:
Yearly FII flows in equities (USD b)
29.3
24.5
17.8
17.6
20.0
16.2
3.3
-0.5
-12.2
CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
YTD
2.9
Exhibit 53:
Cumulative FII flows in CY17 YTD (USD b)
11.0
8.0
9.0
5.0
5.0
5.0
2.0
-1.0
-0.5
USD4b outflows in
last two months
Exhibit 54:
Yearly DII ex-MF flows in equity (USD b)
13.6
6.5
3.7
1.4
-1.0
-7.0
CY07
CY08
CY09
CY10
CY11
CY12
-1.9
Six successive
years of
outflows
4.7
-3.8
-9.3
CY13
-8.8
CY14
CY15
CY16
CY17
YTD
October 2017
44

India Strategy | Turbulence behind; Clear skies ahead
Valuations above long-period averages; midcaps continue to
outperform
Valuations of Indian equities remain attractive. Nifty trades at a P/E of 17.8x, at
a 5% premium to long-period average of 17x. At 2.7x, Nifty P/B is near its
historical average. RoE stands at 15.2%, near its long-term average.
Market cap-to-GDP ratio of 79% (FY18E GDP) is near its long-term average of
78%.
Exhibit 56:
12-month forward Nifty P/B (x)
4.5
Exhibit 55:
12-month forward Nifty P/E (x)
25
21
17
13
23.7
10 Year
Avg: 17.0x
4.1
10 Year
Avg: 2.6x
17.8
3.8
3.0
2.3
2.7
11.1
9
1.5
1.7
Exhibit 57:
12-month forward Nifty RoE (%)
18.5
17.0
15.5
14.0
12.5
10 Year
Avg: 15.3%
Exhibit 58:
India’s market cap to GDP (%)
103
83
95
Average of 78%
for the period
81
71
69
66
64
18.0
88
80
79
15.2
55
12.7
Midcaps continue to outperform; premium to Nifty P/E inches up
In CY17 YTD, midcaps delivered 28% return, as against 21% by the Nifty. Also,
over the last five years, midcaps have outperformed the Nifty by 57%.
Midcaps now trade at a 42% premium to the Nifty on a P/E basis
.
Exhibit 60:
Midcaps trading at 42% premium to Nifty
45
25
5
Average: -0%
Midcap Vs Nifty PE Prem/(Disc) (%)
Nifty PE (x)
Exhibit 59:
Midcaps v/s Nifty P/E (x) – 12-month forward
Midcap PE (x)
30.0
25.0
20.0
15.0
10.0
Nifty Avg: 17.9x
Midcap Avg: 17.8x
25.4
42
17.8
-15
-35
October 2017
45

India Strategy | Turbulence behind; Clear skies ahead
Exhibit 61:
Midcaps outperformed large caps by 57% in last five years
Nifty Rebased
275
5 Year CAGR:
Nifty: 12%
Midcap: 18.5%
Nifty Midcap 100 Rebased
Midcaps
outperformed
the benchmark
by 57% in the
last five years
225
175
125
75
233
176
Sector valuations: Moderation in domestic macros, GST implementation
blurring earnings visibility
Metals are among the top performing sectors for CY17 YTD, with 36% return.
The sector trades at its historical average P/B of 1.6x. EV/EBITDA is at 6.6x, 10%
discount to historical average. Steel prices weakened marginally, but spreads
are still at multi-year highs. Aluminium prices continue to benefit from supply-
side action in China.
Healthcare is among the underperforming sectors for CY17 YTD, with 6%
negative return. The sector trades at a P/E of 22x, near its historical average of
22.6x. Pricing pressure in the US and the new Draft Pharmaceutical Policy 2017
for push to generics are the key concerns in the medium term for Indian pharma
companies. Outlook for FY18 remains negative due to structural changes in the
US market and pricing pressure. Post implementation of GST, domestic
businesses will be the key to watch out for in the coming quarter, as companies
expect channel re-stocking in 2QFY18.
Automobiles sector is trading at a P/E of 18.5x, at 21% premium to its historical
average of 15.2x. In September 2017, auto volumes across OEMs grew at a
healthy pace, led by inventory build-up ahead of Diwali and an improvement in
rural sentiment, led by better crop realizations and spread of monsoon.
Relative to
Nifty P/E (%)
10 Yr
Current
Avg
PB (x)
Current
10 Yr
Avg
Prem/
Disc (%)
Relative to
Nifty P/B (%)
10 Yr
Current
Avg
Exhibit 62:
Sector valuations - Snapshot
Sector
PE (x)
Current
10 Yr
Avg
Prem/
Disc (%)
Auto
Banks - Private
Banks - PSU
NBFC
Capital Goods
Cement
Consumer
Healthcare
Media
Metals
Oil & Gas
Retail
Technology
Telecom
Utilities
18.5
21.1
11.1
24.0
27.5
27.6
38.1
22.0
26.1
12.1
11.3
54.1
15.3
Loss
11.4
15.2
16.7
3.5
17.7
26.6
18.4
30.1
22.6
23.4
12.3
11.7
34.2
15.8
-
15.2
21.3
26.5
214.2
35.9
3.6
49.5
26.6
-2.5
11.4
-1.6
-4.0
58.2
-3.3
-
-25.2
3
18
-38
35
54
54
113
23
46
-32
-37
203
-14
-
-36
-12
-3
-71
4
52
7
78
33
36
-28
-30
100
-6
-
-8
3.8
2.9
0.8
4.0
3.0
3.1
11.1
3.3
4.6
1.6
1.5
10.4
3.4
2.3
1.5
3.1
2.2
1.0
3.0
3.9
2.3
9.5
3.9
3.9
1.6
1.6
9.2
4.1
2.6
2.0
23.0
30.7
-24.1
34.7
-22.3
37.2
16.9
-16.3
18.1
2.1
-5.0
13.8
-17.1
-11.1
-23.5
43
9
-71
50
12
15
314
22
71
-41
-44
288
27
-15
-43
22
-13
-61
16
47
-12
278
54
51
-41
-38
260
61
0
-22
October 2017
46

India Strategy | Turbulence behind; Clear skies ahead
MOSL model
portfolio
SECTOR WEIGHT /
PORTFOLIO PICKS
Financials
Private
HDFC Bank
ICICI Bank
Yes Bank
Axis Bank
RBL
PSU
SBI
NBFCs
Mahindra Finance
HDFC
Capital First
Auto
Tata Motors
Maruti
M&M
Amara Raja
Technology / Telecom
Infosys
Bharti Airtel
Cyient
Consumption / Retail
ITC
Titan
Britannia
Cap Goods, Infra & Cement
Larsen & Toubro
JK Cement
Bharat Electronics
Health Care
Sun Pharma
Aurobindo
Jubilant Life
Energy
ONGC
IOC
HPCL
Petronet LNG
Utilities / Metals
Hindalco
Coal India
Midcaps
Manpasand Beverages
Team Lease
IGL
Birla Corp
Crompton Consumer
NALCO
Granules
MCX
AllCargo
Shriram Transport
Cash
TOTAL
BSE 100
33.3
20.2
8.2
3.9
1.5
1.9
0.0
2.7
2.1
10.3
0.3
6.2
0.0
11.2
1.8
2.3
1.4
0.0
11.1
4.0
0.9
0.0
12.0
5.1
0.6
0.6
7.7
3.1
0.0
0.3
5.0
1.2
0.5
0.0
10.7
1.1
0.9
0.7
0.4
7.2
0.8
0.8
1.9
0.0
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.3
0.0
100.0
MOST
WEIGHT
33.0
22.0
8.0
5.0
3.0
4.0
2.0
3.0
3.0
8.0
2.0
5.0
1.0
11.0
4.0
3.0
2.0
2.0
10.0
5.0
3.0
2.0
9.0
5.0
2.0
2.0
8.0
4.0
2.0
2.0
6.0
3.0
2.0
1.0
8.0
2.0
2.0
2.0
2.0
5.0
3.0
2.0
10.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
0.0
100.0
WEIGHT
RELATIVE TO
BSE100
-0.3
1.8
-0.2
1.1
1.5
2.1
2.0
0.3
0.9
-2.3
1.7
-1.2
1.0
-0.2
2.2
0.7
0.6
2.0
-1.1
1.0
2.1
2.0
-3.0
-0.1
1.4
1.4
0.3
0.9
2.0
1.7
1.0
1.8
1.5
1.0
-2.7
0.9
1.1
1.3
1.6
-2.2
2.2
1.2
8.1
1.0
1.0
1.0
1.0
0.8
1.0
1.0
1.0
1.0
0.7
0.00
EFFECTIVE SECTOR
STANCE
Neutral
Overweight
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Underweight
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Underweight
Buy
Buy
Buy
Underweight
Neutral
Neutral
Buy
Neutral
Buy
Buy
Buy
Overweight
Buy
Buy
Buy
Underweight
Buy
Buy
Buy
Buy
Underweight
Buy
Buy
Overweight
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
October 2017
47

India Strategy | Turbulence behind; Clear skies ahead
THIS PAGE INTENTIONALLY LEFT BLANK
October 2017
48

India Strategy | Turbulence behind; Clear skies ahead
Sectors & Companies
BSE Sensex: 31,592
S&P CNX: 9,889
October 2017
MOSL Universe:
2QFY18 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 5 October 2017, unless otherwise stated.
October 2017
49

India Strategy | Turbulence behind; Clear skies ahead
MOSL Universe: 2QFY18 aggregate performance highlights
Quarterly Performance - MOSL Universe (INR b)
Sector
(Nos of Companies)
Auto (15)
Capital Goods (13)
Cement (10)
Consumer (18)
Financials (34)
Private Banks (11)
PSU Banks (7)
NBFC (16)
Healthcare (20)
Logistics (3)
Media (10)
Metals (9)
Oil & Gas (12)
Excl. OMCs (9)
Retail (2)
Technology (15)
Telecom (4)
Utilities (6)
Others (18)
MOSL (189)
MOSL Excl. OMCs (186)
Sensex (30)
Nifty (50)
Sep-17
1,438
512
230
427
784
285
350
150
418
35
59
1,246
3,511
1,301
38
920
373
572
193
10,755
8,545
4,884
8,255
Sales
Var % YoY
12.0
9.1
14.9
4.3
10.9
16.0
2.6
24.2
4.4
12.5
2.2
21.1
26.4
17.2
14.2
3.8
-10.7
7.6
21.6
14.5
10.6
9.3
15.7
Var % QoQ
17.9
9.4
-7.5
1.8
3.7
3.8
3.5
4.1
15.5
7.8
-2.4
7.4
5.6
11.6
-19.2
2.7
-1.7
-1.2
-4.1
5.9
6.9
8.6
6.5
Sep-17
189
45
40
102
658
237
306
115
84
5
17
249
474
288
3
202
112
182
29
2,392
2,207
1,348
1,813
EBITDA
Var % YoY
13.5
14.0
0.5
9.0
14.8
14.6
11.5
24.9
-10.4
22.2
-2.8
40.6
37.8
17.4
3.7
-1.8
-22.1
23.5
18.3
15.3
11.7
12.0
18.3
Var % QoQ
35.9
29.2
-25.6
6.7
8.9
0.3
18.2
5.6
36.8
6.4
-7.1
17.0
16.4
9.3
-24.2
3.0
-4.7
-0.9
-24.0
10.1
8.7
11.9
12.7
Sep-17
94
26
19
72
231
117
46
67
50
3
7
81
329
166
2
160
-6
76
13
1,157
994
635
945
PAT
Var % YoY Var % QoQ
9.4
53.5
8.9
27.3
-15.1
-33.0
9.7
10.4
35.0
16.6
17.8
8.5
188.4
37.1
21.4
19.9
-22.0
53.2
42.7
7.3
-9.7
-4.3
122.7
22.0
60.2
73.3
7.7
13.3
2.6
-22.8
-0.1
2.9
PL
PL
35.2
0.7
23.7
-37.5
23.4
24.5
12.2
12.2
12.5
13.4
29.4
27.8
Quarter-wise sales growth (% YoY)
14.5%
10.1%
7.8%
Quarter-wise net profit growth (% YoY)
19.1%
23.0%
23.4%
14.0%
-8.8%
Dec-16
Mar-17
Jun-17
Sep-17E
Dec-16
Mar-17
Jun-17
Sep-17E
Sectoral sales growth - quarter ended Sep-17 (%)
26
21
Sectoral net profit growth - quarter ended Sep-17 (%)
123
15
15
14 12 12
11
9
8
60
4
4
4
2
43 35 35
23
10
9
9
3
PL
0 -10
-15 -22
-11
For Banks: Sales = Net Interest Income, EBITDA = Operating Profits
October 2017
50

India Strategy | Turbulence behind; Clear skies ahead
Annual performance - MOSL universe (INR Billion)
Sector
Sales (INR B)
Change YoY (%)
EBIDTA (INR B)
Change YoY (%)
PAT (INR B)
Change YoY (%)
FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E
5,569 6,327 7,571 3.8 13.6 19.7 792 854 1,175 -2.9 7.8 37.7 323 368 587 -9.9 13.7 59.6
Auto (15)
2,186 2,416 2,713 9.4 10.5 12.3 208 246 297 25.8 17.8 21.0 127 143 178 48.3 13.0 24.4
Capital Goods (16)
1,228 1,468 1,733 4.7 19.6 18.1 236 283 358 16.0 20.0 26.2 105 123 167 18.8 17.7 35.5
Cement (13)
1,655 1,750 2,052 5.6 5.8 17.3 381 418 486 6.5 9.9 16.2 261 289 337 7.1 10.7 16.7
Consumer (18)
2,934 3,239 3,782 10.2 10.4 16.8 2,501 2,611 2,959 19.6 4.4 13.3 666 956 1,339 19.8 43.4 40.1
Financials (36)
Private Banks (13) 1,051 1,209 1,437 15.2 15.0 18.9 950 1,025 1,193 19.1 7.9 16.5 406 498 635 -0.7 22.7 27.5
1,396 1,438 1,640 3.6 3.0 14.1 1,153 1,095 1,175 19.3 -5.0 7.3 45 189 371 LP 323.4 95.7
PSU Banks (7)
487
592
705 20.8 21.6 19.1 399 492 591 21.8 23.4 20.2 216 268 334 15.1 24.4 24.3
NBFC (16)
1,583 1,672 1,943 7.2 5.6 16.2 354 342 436 -0.7 -3.5 27.4 229 204 275 10.4 -10.7 34.5
Healthcare (20)
123
140
159 -2.1 13.3 13.9 19
20
23 -7.7 1.6 15.9 12 14
16 -6.3 11.2 18.3
Logistics (3)
252
272
309 7.4 7.8 13.5 73
83
101 11.7 12.7 22.7 35 39
53 5.1 12.1 36.6
Media (12)
4,405 5,008 5,444 7.4 13.7 8.7 835 1,035 1,221 64.3 23.8 18.0 225 354 478 65.0 57.2 35.0
Metals (9)
12,629 14,581 16,269 3.6 15.5 11.6 1,675 2,035 2,170 18.3 21.5 6.7 996 1,120 1,188 34.0 12.4 6.1
Oil & Gas (12)
5,193 6,150 7,064 2.4 18.4 14.9 1,094 1,342 1,484 12.5 22.7 10.6 635 710 800 20.6 11.9 12.6
Excl. OMCs (9)
156
178
211 13.5 14.4 18.4 14
16
20 16.5 17.9 21.3 9
10
13 12.2 18.3 21.9
Retail (2)
3,556 3,737 4,146 12.9 5.1 11.0 822 835 938 9.0 1.6 12.3 644 649 709 7.9 0.8
9.2
Technology (15)
1,621 1,511 1,625 -2.0 -6.8 7.5 539 465 515 -1.1 -13.7 10.7 76
-12
3 -20.3 -116.0 -123.5
Telecom (4)
2,354 2,546 2,793 5.3 8.2 9.7 687 835 974 -1.0 21.5 16.7 299 362 411 -10.4 21.0 13.6
Utilities (6)
886 1,068 1,279 12.6 20.5 19.7 146 173 214 6.8 18.6 23.7 72 86 113 13.5 19.7 31.4
Others (24)
41135 45914 52029 5.9 11.6 13.3 9284 10250 11888 14.0 10.4 16.0 4079 4705 5868 14.5 15.4 24.7
MOSL (205)
33700 37482 42824 6.2 11.2 14.3 8703 9558 11201 13.0 9.8 17.2 3718 4296 5480 11.1 15.6 27.6
Excl. OMCs (202)
10072 11226 12859 4.8 11.5 14.5 2749 2952 3435 9.5 7.4 16.4 1246 1411 1774 -0.1 13.2 25.7
Sensex (30)
14774 16514 18747 5.4 11.8 13.5 3494 3829 4457 12.9 9.6 16.4 1623 1876 2320 6.3 15.5 23.7
Nifty (50)
For Banks: Sales = Net Interest Income, EBIDTA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float
Valuations - MOSL universe
Sector
Auto (15)
Capital Goods (16)
Cement (13)
Consumer (18)
Financials (36)
Private Banks (13)
PSU Banks (7)
NBFC (16)
Healthcare (20)
Logistics (3)
Media (12)
Metals (9)
Oil & Gas (12)
Excl. OMCs (9)
Retail (2)
Technology (15)
Telecom (4)
Utilities (6)
Others (24)
MOSL (205)
MOSL Excl. OMCs (202)
Sensex (30)
Nifty (50)
N.M.: Not Meaningful.
FY17
28.8
34.9
36.9
46.2
33.3
29.7
73.9
31.9
23.7
31.5
34.8
23.0
13.2
15.1
72.2
16.5
36.2
15.5
37.5
24.2
25.6
23.5
23.3
PE (x)
FY18E
25.3
30.9
31.3
41.7
23.2
24.2
17.4
25.6
26.6
28.3
31.1
14.6
11.7
13.5
61.0
16.4
-226.1
12.8
31.4
20.9
22.1
21.3
20.3
EV / EBIDTA (x)
P/BV (x)
FY19E FY17 FY18E FY19E FY17 FY18E FY19E
15.9
9.5
10.3
7.2
5.0
4.4
3.6
24.8 22.6 19.6 16.0
3.6
3.3
3.0
23.1 15.3 14.0 10.9
3.5
3.2
2.9
35.7 28.3 28.2 24.1 12.8 11.9 10.5
16.6 N.M N.M N.M
2.6
2.3
2.1
19.0 N.M N.M N.M
3.4
3.0
2.7
8.9
N.M N.M N.M
0.9
0.8
0.8
20.6 N.M N.M N.M
5.1
4.4
3.7
19.8 18.2 16.0 12.3
4.0
3.6
3.2
23.9 15.1 18.7 16.0
3.4
3.2
3.0
22.8 16.9 13.8 10.9
5.0
4.7
4.1
10.8
8.3
7.5
6.0
1.8
1.7
1.5
11.0
7.0
6.0
5.3
1.7
1.6
1.4
12.0
7.2
6.1
5.1
1.6
1.5
1.4
50.1 33.9 37.6 30.8 12.4 11.4
9.8
15.0 11.5 11.4
9.9
3.8
3.7
3.3
960.8 7.3
8.9
7.9
2.5
2.6
2.7
11.3 10.6
9.0
7.8
2.3
2.1
1.9
23.9 15.3 14.8 11.7
7.0
5.8
5.1
16.8 N.M N.M N.M
3.0
2.8
2.5
17.3 N.M N.M N.M
3.1
2.8
2.6
16.9 N.M N.M N.M
3.0
2.9
2.6
16.4 N.M N.M N.M
3.1
2.9
2.6
FY17
17.3
10.3
9.4
27.7
7.7
11.5
1.2
15.9
16.8
10.6
14.5
7.6
13.2
10.5
17.2
22.9
6.9
14.6
18.6
12.6
12.0
12.9
13.3
ROE (%)
Div Yld (%) EARN. CAGR
FY18E FY19E
FY17
(FY17-FY19)
17.3 22.8
1.0
34.8
10.7 12.2
1.2
18.6
10.2 12.4
0.6
26.3
28.4 29.5
1.4
13.7
9.9
12.6
0.9
41.8
12.5 14.2
0.8
25.1
4.6
8.6
0.9
187.8
17.0 17.9
1.1
24.4
13.6 16.0
0.5
9.6
11.2 12.5
1.7
14.7
15.0 18.2
0.6
23.7
11.5 14.1
4.0
45.7
13.5 13.0
3.0
9.2
10.9 11.4
2.0
12.2
18.6 19.6
0.5
20.1
22.8 22.0
2.0
4.9
-1.2
0.3
1.4
-80.6
16.3 16.9
3.7
17.3
18.4 21.4
1.2
25.4
13.3 15.0
1.6
19.9
12.8 14.8
1.5
21.4
13.5 15.1
1.4
19.3
14.2 15.6
1.4
19.5
October 2017
51

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Quarterly performance
Sector
CMP
(INR)
Automobiles
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
CEAT
Eicher Motors
Endurance Tech.
Escorts
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
Capital Goods
ABB
Bharat Electronics
BHEL
Blue Star
CG Consumer Elect.
CG Power & Indl.
Cummins India
GE T&D India
Havells India
Larsen & Toubro
Siemens
Thermax
Voltas
Sector Aggregate
Cement
ACC
Ambuja Cements
Birla Corporation
Dalmia Bharat
Grasim Industries*
India Cements
J K Cements
Ramco Cements
Shree Cement
Ultratech Cement
Sector Aggregate
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Jyothy Labs
Marico
Nestle
705
123
3,131
632
20,781
1,718
30,788
1,055
665
204
3,757
1,301
7,838
423
655
Rating
Sales (INR m)
Var
Var
Sep-17
% YoY % QoQ
15.0
32.6
8.7
39.5
31.0
9.7
25.8
12.2
20.0
12.7
10.5
20.2
23.3
4.8
17.6
12.0
12.2
16.4
3.3
8.1
1.1
8.7
9.9
11.5
31.0
6.6
27.5
6.8
11.6
9.1
15.8
14.4
64.9
11.5
20.3
-3.4
9.7
-1.9
3.2
19.1
14.9
12.5
5.0
4.0
2.5
6.5
13.5
1.5
0.0
2.5
8.5
10.0
-0.2
3.3
44.6
20.9
3.5
29.2
7.5
10.4
4.8
2.7
3.1
8.1
10.2
25.3
18.0
18.6
17.9
3.7
14.9
25.1
-34.2
-14.7
2.4
4.8
-23.1
2.3
11.9
48.7
30.4
-44.5
9.4
-13.6
-18.8
-13.0
-9.3
9.2
-2.1
-4.1
-2.3
-18.3
-3.0
-7.5
11.0
11.4
12.5
13.1
15.1
23.1
11.3
-8.0
-0.5
26.4
-5.9
-2.8
EBITDA (INR m)
Var
Var
Sep-17
% YoY % QoQ
2,006
6,477
12,537
3,560
6,329
1,839
7,000
2,256
1,069
3,278
15,201
17,543
33,188
72,832
3,472
188,589
1,950
2,535
3,846
580
990
697
2,250
700
2,165
24,900
3,271
814
761
45,460
2,862
3,490
1,721
4,496
5,514
1,636
1,597
2,536
4,406
11,627
39,884
8,106
3,783
3,217
4,250
1,882
5,510
2,324
15,615
38,693
741
2,663
4,600
-12.7
20.7
-3.3
43.8
34.8
-0.8
29.1
12.4
71.1
12.0
2.5
19.5
9.3
15.9
25.5
13.5
28.6
-24.3
147.9
43.2
1.7
-19.8
13.1
106.2
6.5
8.4
35.5
5.3
10.7
14.0
27.3
26.4
124.5
15.2
4.0
-27.1
9.3
-27.4
-32.9
6.3
0.5
13.7
20.8
17.1
5.5
7.4
19.0
-5.2
11.2
6.6
16.3
6.8
-5.0
4.0
111.6
33.6
6.8
44.2
236.5
12.8
5.6
9.6
1.1
8.6
20.7
42.4
46.7
64.2
35.9
32.4
55.2
LP
-35.8
-23.5
6.8
15.2
-33.6
25.6
21.1
45.1
89.6
-64.2
29.2
-42.2
-43.1
-28.4
-19.2
-0.7
-11.9
-19.2
-8.8
-35.2
-25.5
-25.6
21.8
30.6
45.0
37.6
134.7
59.6
39.7
-16.3
3.3
69.7
-17.9
3.9
PAT (INR m)
Var
Var
Sep-17
% YoY % QoQ
1,108
3,787
11,189
1,913
4,384
921
5,509
1,082
657
2,016
10,017
13,591
23,323
12,322
2,209
94,029
897
2,211
2,681
307
595
362
1,940
370
1,386
11,450
2,693
623
714
26,229
1,926
2,918
216
1,012
4,976
183
560
1,414
2,793
3,067
19,067
5,271
2,788
2,008
3,810
1,390
3,798
1,753
11,935
27,378
454
1,954
2,795
-18.7
28.6
-0.3
50.8
0.9
-13.9
33.3
21.2
91.3
11.2
-0.3
8.5
-2.7
50.4
24.5
9.4
3.0
-35.5
145.9
53.5
7.4
-59.3
-1.5
79.8
-1.6
10.9
46.0
4.4
2.5
8.9
129.1
5.3
-63.1
225.5
-16.0
-70.6
36.9
-31.7
-4.2
-49.0
-15.1
10.7
19.1
10.7
6.7
4.0
18.3
-4.6
10.3
9.5
41.9
8.2
-7.5
10.9
215.7
18.2
9.2
44.9
8614.6
19.9
12.1
4.8
6.7
9.6
76.9
49.9
304.7
70.6
53.5
19.5
76.5
231.7
-47.5
-25.8
95.6
16.8
-39.9
14.2
28.3
65.3
92.0
-61.6
27.3
-40.1
-25.6
-54.0
-30.4
43.3
-30.6
-29.4
-9.2
-36.5
-65.6
-33.0
20.3
29.1
47.2
36.3
129.6
63.2
32.6
-7.6
6.9
120.2
-17.2
11.5
Buy
15,474
Buy
61,281
Buy
65,803
Buy
12,430
Neutral 34,211
Buy
17,515
Buy
22,080
Buy
16,250
Neutral 11,944
Buy
21,680
Neutral 86,146
Buy
122,241
Buy
219,928
Buy
690,313
Buy
40,304
1,437,601
Sell
23,050
Buy
19,820
Sell
68,859
Neutral 9,610
Buy
9,000
Neutral 12,915
Buy
14,050
Neutral 9,300
Neutral 19,030
Buy
266,500
Neutral 39,414
Neutral 9,303
Sell
10,798
511,648
Neutral
Buy
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
28,613
22,933
12,686
18,677
29,929
12,627
9,990
9,931
20,719
64,259
230,365
42,337
24,792
10,903
20,251
6,226
26,744
10,965
78,427
99,022
4,500
15,829
23,194
1,388
164
84
780
216
81
919
390
506
1,132
1,214
920
518
1,702
274
918
2,755
1,160
182
980
705
18,718
3,897
1,152
4,360
1,088
317
1,101
961
4,990
1,188
266
396
313
7,257
Neutral
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Neutral
October 2017
52

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Quarterly performance
Sector
CMP
(INR)
P&G Hygiene
Page Industries
Parag Milk Foods
Pidilite Inds.
United Breweries
United Spirits
Sector Aggregate
Healthcare
Alembic Pharma
Alkem Lab
Ajanta Pharma
Aurobindo Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’ s Labs
Fortis Health
Glenmark Pharma
GSK Pharma
IPCA Labs.
Jubilant Life
Lupin
Sanofi India
Shilpa Medicare
Strides Shasun
Sun Pharma
Torrent Pharma
Sector Aggregate
Logistics
Allcargo Logistics
Concor
Gateway Distriparks
Sector Aggregate
Media
D B Corp
Dish TV
Ent.Network
HT Media
Jagran Prakashan
Music Broadcast
PVR
Siti Networks
Sun TV
Zee Entertainment
Sector Aggregate
Metals
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Tata Steel
Vedanta
Sector Aggregate
8,527
18,501
262
794
839
2,399
Rating
Neutral
Buy
Neutral
Neutral
Buy
Neutral
Sales (INR m)
Var
Var
Sep-17
% YoY % QoQ
6,725
12.0
33.7
6,453
20.0
-7.3
5,201
10.0
26.0
14,531
2.5
-5.0
11,045
7.0
-34.0
20,278
-1.0
13.8
427,423
4.3
1.8
8,491
17,265
4,999
43,201
10,939
29,552
42,975
9,224
37,374
13,392
23,160
8,768
8,891
17,353
41,041
6,911
1,930
8,952
67,603
16,461
418,482
16,042
15,482
3,035
34,559
5,512
7,547
1,266
5,822
5,913
872
5,930
3,516
6,686
15,745
58,808
-2.6
5.4
-3.1
14.4
16.4
25.6
14.6
-7.0
4.2
12.0
6.6
12.0
2.0
25.2
-4.3
10.7
-8.6
-6.1
-12.9
17.1
4.4
13.9
12.3
6.2
12.5
2.3
-3.2
-2.3
-3.3
28.8
7.7
7.0
21.7
6.9
-7.1
2.2
9.9
44.8
19.0
12.7
13.7
40.5
23.4
23.3
34.3
21.1
31.0
33.3
5.7
17.4
17.2
34.5
21.9
12.3
12.7
15.8
-0.6
49.4
24.7
11.5
6.1
15.1
14.5
6.3
9.6
22.1
15.5
8.1
6.3
14.0
7.8
-7.2
2.1
21.3
-2.8
0.0
24.1
-6.8
-3.7
-15.0
2.2
-2.4
-0.7
11.5
-2.6
1.4
16.4
-14.0
19.7
10.0
16.5
7.4
EBITDA (INR m)
Var
Var
Sep-17
% YoY % QoQ
1,910
26.4
45.7
1,290
20.0
-5.5
415
10.0
41.3
3,568
10.6
11.1
1,138
-3.8
-64.2
2,638
11.9
67.6
102,342
9.0
6.7
1,494
3,108
1,425
11,016
2,625
7,240
7,717
2,998
6,914
1,286
3,474
1,534
1,423
3,696
8,824
1,513
405
1,298
12,507
4,001
84,498
1,091
3,445
513
5,049
1,508
2,080
265
585
904
241
1,008
772
4,770
4,712
16,844
34,241
28,986
12,390
32,441
3,216
12,314
8,552
53,179
63,363
248,682
-15.6
0.1
-17.8
18.5
16.7
40.3
13.4
-18.5
14.8
29.9
-12.7
23.3
11.1
8.6
-14.2
4.6
-17.2
-9.5
-53.1
21.2
-10.4
-13.4
50.6
-11.8
22.2
0.2
-21.3
14.5
15.9
-25.5
-13.7
8.4
63.1
2.3
-3.7
-2.8
12.1
39.6
46.0
9.6
86.6
49.1
667.5
79.1
35.8
40.6
47.3
229.3
9.0
30.9
36.7
161.1
19.4
22.4
126.1
49.3
-36.1
LP
561.1
9.5
14.8
31.1
18.9
48.7
18.7
34.7
36.8
6.0
5.4
14.0
6.4
-19.1
3.4
58.6
-26.8
-44.0
8.5
-10.0
-23.6
6.4
-2.7
-7.1
4.2
21.6
-8.4
24.0
41.4
-24.0
LP
6.9
30.0
17.0
PAT (INR m)
Var
Var
Sep-17
% YoY % QoQ
1,278
22.4
63.8
825
20.1
-3.3
189
32.2
79.9
2,414
4.6
6.8
297
22.6
-81.6
1,238
26.6
94.3
71,574
9.7
10.4
986
2,492
1,048
7,112
1,389
4,791
4,159
2,161
3,469
135
1,863
1,268
759
1,676
4,540
889
287
439
8,296
2,408
50,167
626
2,622
181
3,429
893
24
66
240
219
121
291
-265
2,825
3,078
7,493
11,073
21,478
-6,373
11,625
1,758
8,406
-6,629
17,333
22,085
80,754
-16.9
-11.9
-19.8
20.3
-5.5
41.9
17.4
-28.7
6.9
-56.5
-15.1
28.5
61.0
15.8
-31.4
10.3
-24.9
-40.7
-62.9
16.3
-22.0
-3.9
66.1
4.9
42.7
0.9
-96.6
-17.0
-22.2
-71.0
-25.2
-0.2
Loss
4.5
6.9
-9.7
126.2
12.9
Loss
60.0
45.0
33.6
Loss
LP
76.4
122.7
47.9
290.8
6.9
36.1
126.5
246.1
1.7
22.4
486.9
-40.9
-44.1
820.8
LP
16.6
26.8
20.6
30.0
125.9
57.8
28.1
53.2
-0.7
7.7
36.4
7.3
-18.9
LP
295.0
-42.1
-74.7
11.9
-34.6
Loss
12.3
10.3
-4.3
13.7
14.5
Loss
86.3
36.3
-26.1
Loss
12.9
44.8
22.0
503
1,832
1,155
742
344
501
585
864
2,387
150
611
2,437
528
653
1,028
4,063
584
857
514
1,247
Neutral
Neutral
Buy
Buy
Sell
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
169
1,326
241
Buy
Neutral
Buy
379
71
809
97
177
382
1,297
25
781
522
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Neutral
Neutral
Buy
241
313
148
249
80
119
54
660
318
Buy
Neutral
Buy
Buy
Neutral
Buy
Sell
Neutral
Buy
266,122
51,041
57,840
149,094
20,983
24,442
138,572
325,089
213,073
1,246,256
October 2017
53

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Quarterly performance
Sector
CMP
(INR)
Oil & Gas
BPCL
GAIL
Gujarat Gas
Gujarat State Petronet
HPCL
IOC
Indraprastha Gas
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Oil & Gas Sector Aggregate
Oil & Gas Excl. OMCs
Retail
Jubilant Foodworks
Titan Company
Sector Aggregate
Technology
Cyient
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
L&T Infotech
Mindtree
MphasiS
NIIT Tech.
Persistent Systems
Tata Elxsi
TCS
Tech Mahindra
Wipro
Zensar Tech
Sector Aggregate
Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Tata Comm
Sector Aggregate
Utilities
CESC
Coal India
JSW Energy
NTPC
Power Grid Corp.
Tata Power
Sector Aggregate
Others
Arvind
Avenue Supermarts
Bata India
BSE
Castrol India
Delta Corp
480
431
907
195
436
406
1,438
127
349
171
239
824
Rating
Buy
Sell
Sell
Neutral
Buy
Buy
Neutral
Sell
Buy
Buy
Buy
Neutral
Sales (INR m)
Var
Var
Sep-17
% YoY % QoQ
35.6
11.2
19.9
39.2
29.3
32.5
18.0
14.3
3.0
9.2
-1.1
23.7
26.4
17.2
11.0
15.0
14.2
5.8
8.5
9.3
1.5
5.8
6.9
2.5
4.0
4.6
7.6
15.0
4.1
5.5
0.3
-2.1
3.8
-12.0
10.0
-18.3
-2.7
-10.7
-6.4
14.8
1.0
4.3
16.4
-1.4
7.6
12.0
39.9
10.0
-18.7
10.2
34.0
6.1
15.6
0.4
20.5
1.8
0.6
8.3
11.0
-0.9
4.7
1.7
14.8
5.6
11.6
8.8
-23.9
-19.2
6.6
2.9
0.5
2.9
1.0
2.5
3.0
2.7
2.3
4.1
7.9
3.0
3.0
1.4
2.4
2.7
-1.2
2.7
-6.9
1.8
-1.7
-13.6
-2.8
-7.4
0.6
1.0
2.0
-1.2
5.5
8.7
-13.6
-3.6
-3.9
39.9
EBITDA (INR m)
Var
Var
Sep-17
% YoY % QoQ
35,783
20,585
2,281
3,129
33,364
116,073
2,849
13,578
7,588
104,151
7,793
126,447
473,621
288,400
677
2,692
3,368
1,356
26,620
1,636
45,455
759
2,865
1,570
2,402
1,179
1,167
882
78,720
10,356
26,380
801
202,148
74,824
16,166
15,332
5,863
112,186
5,253
27,902
8,678
57,397
65,169
17,557
181,957
2,506
3,521
629
185
2,186
684
106.8
35.8
7.2
39.4
79.4
87.1
10.6
72.9
1.5
9.2
7.3
19.8
37.8
17.4
5.3
3.4
3.7
5.6
6.0
3.8
-4.0
-17.0
-5.9
-3.2
-2.5
3.0
5.4
18.4
-2.9
-3.2
-0.6
-27.9
-1.8
-20.7
11.5
-46.0
-11.5
-22.1
-11.1
275.7
-9.9
6.5
16.8
20.1
23.5
7.9
40.6
17.6
-59.4
4.1
20.6
82.9
8.4
-15.4
13.4
3.7
27.3
2.7
133.0
-13.2
5.4
4.7
9.1
16.4
9.3
-15.0
-26.2
-24.2
16.9
-0.7
2.4
-0.3
-4.6
2.4
9.4
4.7
6.4
11.9
20.2
6.2
10.8
-1.1
7.1
3.0
-3.6
2.6
-18.2
5.0
-4.7
-13.5
-20.8
-0.1
8.9
3.9
-4.1
-0.9
21.1
16.1
-34.1
-39.6
4.4
50.9
PAT (INR m)
Var
Var
Sep-17
% YoY % QoQ
39,135
12,207
904
1,793
31,860
92,189
1,735
7,338
5,386
43,488
4,932
88,212
329,177
165,993
215
1,892
2,107
1,054
22,055
1,257
35,503
505
2,772
1,091
2,053
643
764
541
63,594
7,772
19,544
543
159,690
2,086
8,154
-16,313
361
-5,712
2,513
20,624
2,043
24,356
20,897
5,444
75,877
835
2,103
404
592
1,504
413
199.8
32.0
25.8
38.1
354.3
195.3
11.8
76.5
-7.2
-12.6
7.3
14.5
60.2
7.7
-0.3
3.0
2.6
8.3
9.5
12.9
-1.5
-10.1
19.2
15.1
-5.2
8.9
3.9
15.6
-3.4
20.5
-5.5
-22.9
-0.1
-85.8
5.4
PL
-57.2
PL
3.8
243.7
-6.0
4.0
11.4
61.9
35.2
9.4
68.6
16.7
-7.5
7.6
27.6
425.6
19.0
-13.4
17.5
244.5
244.4
7.6
213.6
19.6
11.9
12.7
7.6
73.3
13.3
-9.8
-24.1
-22.8
20.3
1.6
2.7
1.8
-9.1
3.7
17.2
9.7
25.3
1.7
8.8
7.0
-2.7
-5.9
15.0
2.9
-46.4
22.8
Loss
9.8
PL
41.2
-12.3
-6.0
-5.4
1.8
232.4
0.7
34.0
20.3
-33.2
19.0
9.1
95.3
606,020
131,905
14,836
3,569
543,603
1,060,179
11,360
113,907
23,102
199,763
65,436
737,250
3,510,930
1,301,129
7,388
30,319
37,707
9,665
124,999
9,884
175,683
8,794
17,131
13,280
15,780
7,249
7,578
3,488
304,737
75,582
138,122
7,544
919,516
216,952
36,201
76,001
43,857
373,010
18,869
186,200
20,671
202,242
72,542
71,080
571,604
26,109
39,118
6,421
1,132
8,366
1,800
1,482
596
Sell
Neutral
506
891
265
903
129
805
478
610
562
636
827
2,430
451
284
746
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Buy
Neutral
Buy
Neutral
Buy
378
405
74
698
Buy
Buy
Buy
Buy
1,003
273
77
171
205
79
Buy
Buy
Sell
Buy
Buy
Sell
382
1,104
725
985
356
209
Neutral
Neutral
UR
Neutral
Buy
Buy
October 2017
54

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Quarterly performance
Sector
CMP
(INR)
Indo Count Inds.
Info Edge
Interglobe Aviation
Kaveri Seed
MCX
Manpasand Beverages
Navneet Education
P I Industries
Quess Corp
SRF
S H Kelkar
Team Lease Serv.
Sector Aggregate
108
1,059
1,100
519
1,048
477
163
739
824
1,560
265
1,620
Sales (INR m)
Var
Var
Rating
Sep-17
% YoY % QoQ
Neutral 5,763
0.0
33.5
Buy
2,313
10.2
4.0
Neutral 49,659
19.2
-13.7
Buy
745
10.0
-87.4
Buy
647
8.6
16.2
Buy
1,281
25.0
-57.5
Buy
2,142
25.0
-62.1
Buy
6,256
15.0
7.0
Buy
15,030
47.7
26.5
Buy
14,037
15.5
1.1
Buy
2,953
12.0
16.7
Buy
9,121
26.2
6.9
192,894
21.6
-4.1
EBITDA (INR m)
Var
Var
Sep-17
% YoY % QoQ
986
-15.3
50.9
741
6.6
5.3
11,911
23.1
-38.9
43
28.1
-97.9
176
-9.4
79.4
268
20.4
-52.5
428
43.8
-73.6
1,091
51.2
-16.3
877
59.1
38.2
2,541
9.2
21.5
523
25.6
22.4
137
59.6
5.5
29,435
18.3
-24.0
PAT (INR m)
Var
Var
Sep-17
% YoY % QoQ
517
-17.5
61.8
667
-16.7
3.9
2,198
57.2
-72.9
73
-6.1
-96.4
371
-1.5
24.7
62
15.3
-82.6
278
49.7
-74.6
759
66.4
-24.2
540
79.4
63.1
1,147
1.0
10.5
333
37.0
24.2
146
61.3
-11.1
12,942
23.7
-37.5
PL: Profit to Loss; LP: Loss to Profit; UR: Under Review; *Grasim: Financials are only for VSF and chemical business and does
not include impact of ABNL merger
October 2017
55

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Quarterly performance
Sector
CMP
(INR)
Financials
Private Banks
Axis Bank
DCB Bank
Equitas Holdings
Federal Bank
HDFC Bank
ICICI Bank
IDFC Bank
IndusInd Bank
Kotak Mahindra Bank
RBL Bank
Yes Bank
Pvt Banking Sector Aggregate
PSU Banks
Bank of Baroda
Bank of India
Canara Bank
Indian Bank
Punjab National Bank
State Bank
Union Bank
PSU Banking Sector Aggregate
NBFC
Bajaj Finance
Bharat Financial
Capital First
Chola. Inv & Fin.
Dewan Housing
GRUH Finance
HDFC
Indiabulls Housing
L&T Fin.Holdings
LIC Housing Fin
M & M Financial
Muthoot Finance
PNB Housing
Repco Home Fin
Shriram City Union
Shriram Transport Fin.
NBFC Banking Sector Aggregate
Financials Sector Aggregate
Rating
SALES (INR M)
Var
Var
Sep-17
% YoY % QoQ
EBDITA (INR M
Var
Var %
Sep-17
% YoY
QoQ
NET PROFIT (INR M)
Var % Var %
Sep-17
YoY
QoQ
501
187
152
114
1,799
272
57
1,691
1,031
513
359
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
47,308
2,355
2,262
8,707
97,661
56,199
5,745
18,498
23,037
4,302
18,624
284,698
4.8
23.7
12.8
19.9
22.2
7.0
15.9
26.7
15.5
42.0
31.9
16.0
2.3
-5.4
11.1
15.1
0.9
2.2
1.9
2.6
46.6
5.5
44.5
23.1
26.2
30.5
17.2
33.9
19.9
10.1
23.8
16.1
64.0
16.4
14.6
19.4
24.2
10.9
2.5
1.0
4.7
8.7
4.2
0.5
48.1
4.3
2.6
13.7
3.0
3.8
2.9
1.6
0.0
0.8
1.6
5.1
3.4
3.5
-1.6
13.3
9.7
5.2
9.7
6.8
4.1
-0.2
9.2
1.8
12.8
4.1
9.0
9.6
3.2
2.0
4.1
3.7
42,134
1,237
318
5,904
75,559
53,666
3,200
16,378
17,662
3,389
17,314
236,763
27,539
15,805
22,761
10,470
29,941
181,012
18,623
306,151
11,523
1,631
2,668
4,381
5,065
1,371
25,304
11,166
9,000
8,499
5,735
5,919
3,496
947
5,250
13,082
115,036
657,951
2.8
22.6
-64.0
24.3
25.4
8.3
-45.0
27.8
22.6
54.7
24.9
14.6
2.4
-36.6
6.3
4.1
-9.6
29.4
2.3
11.5
44.9
5.3
45.3
28.7
27.5
30.6
17.3
21.2
37.3
7.5
27.3
23.4
89.2
13.1
16.0
23.9
24.9
14.8
-1.8
-9.3
-54.1
5.8
0.5
3.5
-50.6
3.1
10.7
8.8
1.6
0.3
4.0
-33.6
-7.9
-16.4
-6.9
52.4
-9.4
18.2
-4.8
17.5
11.1
5.3
9.2
0.6
6.7
5.3
11.7
3.3
17.2
6.0
5.5
10.2
5.5
3.1
5.6
8.9
13,057
630
58
2,798
42,286
25,538
2,067
8,962
10,259
1,622
10,210
117,485
5,383
-2,748
5,355
3,992
4,159
29,034
1,169
46,343
5,670
1,231
749
2,133
2,947
751
21,661
8,303
3,230
5,337
1,448
3,750
1,947
534
2,307
4,717
66,716
230,544
309.2
29.9
-87.5
39.0
22.4
-17.7
-46.7
27.3
26.1
80.4
27.4
17.8
-2.5
PL
50.0
-1.5
-24.3
LP
-33.9
188.4
39.1
-15.6
30.1
24.8
26.7
21.2
18.6
21.3
30.2
7.9
52.8
26.4
41.4
16.9
12.8
21.7
21.4
35.0
0.0
-3.4
-62.8
33.1
8.6
24.6
-52.8
7.1
12.4
15.0
5.7
8.5
164.6
PL
112.8
7.2
21.1
44.8
0.2
37.1
-5.8
LP
11.6
3.2
13.1
4.0
39.2
5.3
4.5
13.5
205.7
6.8
5.4
18.3
19.0
5.1
19.9
16.6
140
139
310
268
132
251
126
Buy
35,041
Neutral 25,727
Neutral 27,138
Buy
14,711
Buy
39,167
Buy
184,996
Neutral 23,197
349,976
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
20,393
2,233
4,552
7,219
6,211
1,727
26,924
11,809
11,206
9,534
9,698
8,780
3,745
1,051
8,421
16,161
149,664
784,339
1,866
968
745
1,087
559
532
1,752
1,259
194
648
416
477
1,511
642
2,083
1,056
PL: Profit to Loss; LP: Loss to Profit; UR: Under Review
October 2017
56

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Full year valuations
Sector / Companies
Automobiles
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
CEAT
Endurance Tech.
Eicher Motors
Escorts
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
Capital Goods
ABB
Bharat Electronics
BHEL
Blue Star
CG Consumer Elect.
CG Power & Indl.
Cummins India
GE T&D India
Havells India
K E C International
Larsen & Toubro
Siemens
Solar Inds.
Thermax
Va Tech Wabag
Voltas
Sector Aggregate
Cement
ACC
Ambuja Cements
Birla Corporation
Dalmia Bharat
Grasim Industries
India Cements
J K Cements
JK Lakshmi Cem.
Orient Cement
Prism Cement
Ramco Cements
Shree Cement
Ultratech Cement
Sector Aggregate
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
CMP
(INR)
Rating
705
123
3,131
632
20,781
1,718
1,055
30,788
665
204
3,757
1,301
7,838
423
655
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
28.0
4.6
132.3
13.1
473.1
93.3
23.5
612.7
20.0
8.1
169.1
54.3
248.6
19.8
11.7
EPS (INR)
PE (x)
EV/EBIDTA (x)
RoE (%)
FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E
25.6
5.3
144.4
18.3
540.8
94.2
29.6
826.7
37.1
8.9
185.0
69.5
285.5
20.0
15.1
32.9
7.0
174.3
25.5
698.6
126.8
39.3
1119.2
45.8
10.8
197.1
81.7
381.7
61.3
24.5
25.2
26.9
23.7
48.3
43.9
18.4
44.9
50.3
33.3
25.1
22.2
23.9
31.5
21.4
55.8
28.8
70.5
26.0
62.5
60.6
46.1
19.6
34.7
68.0
52.9
26.2
26.8
68.1
44.6
29.8
19.7
33.5
34.9
27.6
23.0
21.7
34.6
38.4
18.2
35.6
37.2
17.9
22.8
20.3
18.7
27.5
21.1
43.4
25.3
61.9
24.4
30.8
45.7
42.9
39.6
33.2
41.9
47.1
23.8
24.3
56.0
38.0
30.5
16.9
30.9
30.9
33.4
39.5
22.4
43.8
16.4
24.2
24.7
40.4
35.0
29.9
25.7
36.9
42.3
31.3
51.9
51.1
44.5
40.9
40.9
44.6
31.6
51.8
21.4
17.4
18.0
24.8
29.7
13.5
26.9
27.5
14.5
19.0
19.1
15.9
20.5
6.9
26.7
15.9
43.9
22.0
22.2
30.6
34.2
31.7
26.3
34.5
36.3
18.9
20.0
36.3
30.7
27.5
14.7
27.1
24.8
25.4
33.3
15.6
31.2
11.5
16.8
18.0
23.9
21.8
18.6
20.5
34.2
28.1
23.1
43.5
41.7
36.6
34.6
33.2
38.9
27.4
43.4
17.6
9.8
15.3
20.7
32.6
9.1
14.6
29.7
20.6
15.1
12.6
5.9
15.0
4.2
25.3
9.5
33.6
17.7
34.9
28.6
29.0
17.7
32.0
40.0
32.9
8.7
19.5
40.5
22.7
21.9
12.6
19.4
22.6
20.1
29.0
15.5
11.7
5.7
9.2
13.6
20.0
22.2
21.3
14.6
23.8
21.8
15.3
33.2
33.9
28.4
30.6
32.1
31.0
22.3
31.7
14.6
11.9
16.0
18.4
24.1
10.2
16.8
28.2
15.8
11.6
13.0
4.9
16.8
5.0
28.0
10.3
32.1
17.5
10.9
25.8
27.2
21.4
27.7
25.2
30.7
10.4
17.4
36.2
21.6
20.5
8.5
22.1
19.6
19.6
29.0
10.0
12.9
4.7
9.2
12.2
14.6
12.6
15.2
15.4
24.3
19.3
14.0
33.1
36.2
26.9
33.6
31.6
31.3
21.0
35.8
11.3
9.1
12.9
14.5
18.8
8.0
13.9
21.3
12.7
9.5
12.4
4.2
12.4
2.9
18.0
7.2
23.8
15.9
10.1
18.6
22.2
17.8
21.5
20.0
23.0
8.3
14.4
24.3
17.8
17.7
7.3
19.1
16.0
14.9
23.5
8.5
11.2
3.7
7.6
10.4
10.7
9.9
11.1
12.7
18.6
14.3
10.9
27.5
29.1
22.2
28.3
26.1
27.3
18.2
30.0
20.3
23.1
25.3
16.2
15.8
16.9
20.8
37.1
10.6
13.9
35.7
14.2
20.3
9.8
25.6
17.3
12.7
20.6
1.5
18.0
76.4
6.2
21.2
12.4
18.2
21.2
12.5
9.3
19.8
14.3
16.8
18.0
10.3
7.9
5.1
7.1
7.2
10.8
3.4
14.4
6.1
-3.2
1.4
19.0
18.4
11.6
9.4
28.5
36.9
50.4
28.4
35.8
24.6
22.2
66.5
15.8
23.8
23.2
19.3
17.8
14.8
21.8
36.1
17.3
13.8
34.0
13.5
20.4
11.0
26.7
17.3
12.6
17.1
3.1
20.9
49.7
3.0
19.7
21.5
18.3
19.5
12.4
9.8
19.8
12.7
17.6
15.8
10.7
10.8
7.0
9.2
10.7
10.0
4.4
14.8
8.0
8.8
17.0
16.1
20.8
10.1
10.2
26.7
34.3
50.8
26.0
32.0
24.2
21.1
76.2
17.7
27.0
25.3
22.9
20.5
17.3
24.0
36.4
18.3
14.8
31.4
14.3
23.0
27.4
34.2
22.8
15.8
17.0
4.1
28.9
48.8
3.7
22.8
22.7
20.9
20.9
13.8
13.8
20.9
12.8
17.4
16.0
12.2
13.5
7.9
12.2
13.3
12.9
6.1
17.5
12.3
12.8
22.9
17.5
18.8
14.0
12.4
28.1
34.5
58.2
26.3
33.9
22.8
22.6
87.2
1,388
164
84
780
216
81
919
390
506
311
1,132
1,214
920
920
586
518
Sell
Buy
Sell
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Sell
19.7
6.3
1.3
12.9
4.7
4.1
26.5
5.7
9.6
11.9
42.3
17.8
20.6
30.8
29.8
15.5
22.4
6.7
2.7
17.1
5.0
2.0
27.7
9.3
10.7
13.1
46.5
21.7
24.2
30.1
34.6
16.8
31.6
7.4
3.8
25.5
6.3
2.5
35.0
11.3
13.9
16.4
56.6
33.4
30.0
33.4
39.8
19.1
1,702
274
918
2,755
1,160
182
980
393
155
104
705
18,718
3,897
Neutral
Buy
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
36.1
4.9
28.5
38.8
67.8
5.6
33.7
7.0
-1.6
0.3
27.3
384.4
96.1
51.0 66.9 47.1
7.0
8.2
56.1
40.9 58.9 32.2
62.9 88.3 71.1
70.6 101.2 17.1
7.5
10.8 32.4
39.7 54.4 29.1
9.7
16.4 56.5
4.4
7.1 -98.8
3.5
5.6 381.0
27.4 34.4 25.8
507.1 547.8 48.7
92.1 138.8 40.6
36.9
22.2 26.5 54.8
85.3 104.6 59.2
24.5 29.8 51.3
7.7
9.1
43.7
26.9 33.1 41.5
21.5 24.7 50.8
158.1 182.1 32.0
22.9 27.4 60.5
1,152
4,360
1,088
317
1,101
961
4,990
1,188
Neutral
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
21.0
73.7
21.2
7.2
26.5
18.9
156.1
19.6
October 2017
57

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Full year valuations
Sector / Companies
ITC
Jyothy Labs
Marico
Nestle
P&G Hygiene
Page Industries
Parag Milk Foods
Pidilite Inds.
United Breweries
United Spirits
Sector Aggregate
Healthcare
Alembic Pharma
Alkem Lab
Ajanta Pharma
Aurobindo Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’ s Labs
Fortis Health
Glenmark Pharma
GSK Pharma
IPCA Labs.
Jubilant Life
Lupin
Sanofi India
Sun Pharma
Shilpa Medicare
Strides Shasun
Torrent Pharma
Sector Aggregate
Logistics
Allcargo Logistics
Concor
Gateway Distriparks
Sector Aggregate
Media
D B Corp
Den Networks
Dish TV
Ent.Network
Hindustan Media
HT Media
Jagran Prakashan
Music Broadcast
PVR
Siti Networks
Sun TV
Zee Entertainment
Sector Aggregate
Metals
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
CMP
(INR)
266
396
313
7,257
8,527
18,501
262
794
839
2,399
Rating
Neutral
Neutral
Neutral
Neutral
Neutral
Buy
Neutral
Neutral
Buy
Neutral
EPS (INR)
FY17 FY18E FY19E
8.4
9.3
10.3
11.2
9.8
11.1
6.3
6.8
8.2
118.0 115.0 133.6
132.9 151.6 176.0
238.7 294.7 398.4
3.6
9.1
12.5
16.7
18.1 20.6
8.7
9.9
14.0
26.7
34.5 51.5
FY17
31.6
35.3
49.8
61.5
64.1
77.5
72.6
47.4
96.7
89.7
46.2
PE (x)
FY18E
28.6
40.3
45.9
63.1
56.3
62.8
28.7
44.0
84.8
69.5
41.7
25.4
25.3
21.9
16.5
35.4
28.6
27.7
25.5
32.9
68.7
15.4
52.1
31.8
13.9
24.8
30.4
34.1
27.7
18.1
23.4
26.6
16.5
31.3
27.4
28.3
EV/EBIDTA (x)
FY19E FY17 FY18E FY19E
25.7 22.5 19.6 17.5
35.6 27.2 27.0 22.9
38.0 33.0 32.3 27.0
54.3 34.7 38.1 32.4
48.4 36.6 35.5 30.2
46.4 39.5 39.7 29.7
21.0 19.1 13.4 10.9
38.6 27.7 28.9 24.9
59.9 31.1 32.1 26.0
46.6 35.7 35.7 26.8
35.7 28.3 28.2 24.1
19.7
19.6
18.0
14.9
24.3
21.2
22.5
21.4
19.9
26.9
12.4
44.4
19.7
11.5
18.3
25.3
22.1
19.2
11.4
18.5
19.8
13.1
27.3
19.8
23.9
19.1
25.7
21.8
12.2
19.9
25.5
20.7
10.4
18.8
25.0
15.3
64.4
18.8
12.3
15.8
19.5
17.9
29.9
18.8
20.0
18.2
8.9
18.4
9.6
15.1
10.7
9.9
12.7
31.5
5.7
2.2
8.9
20.8
23.6
22.4
17.3
24.6
16.9
7.3
10.0
12.1
7.9
10.4
8.2
16.1
18.8
15.8
11.1
17.0
19.9
16.8
17.3
16.8
11.3
10.9
44.4
16.4
8.8
13.8
16.2
20.2
19.7
11.9
14.8
16.0
8.6
24.1
8.9
18.7
9.0
6.4
8.4
25.2
3.0
1.9
7.5
18.6
16.6
10.0
15.0
22.3
13.8
6.8
8.8
10.2
7.8
7.9
5.7
12.8
14.5
12.7
9.8
12.6
14.8
13.9
14.0
11.3
8.1
9.1
35.8
11.6
7.5
10.5
13.2
13.7
13.8
8.8
11.6
12.3
6.8
21.1
6.9
16.0
7.6
4.9
6.7
17.6
1.8
0.9
6.4
14.1
12.4
7.5
12.0
16.6
10.9
5.9
6.3
6.9
7.2
6.1
5.6
FY17
23.5
21.1
36.7
39.0
39.3
40.0
6.0
28.2
10.2
21.3
27.7
23.0
23.4
37.7
27.6
12.3
23.0
10.2
22.0
9.7
11.3
24.7
14.5
8.6
18.1
20.9
17.1
18.1
14.4
10.7
23.8
16.8
13.7
10.8
7.3
10.6
25.1
-19.1
25.1
6.7
18.2
7.9
18.5
11.2
10.4
-28.7
26.0
19.3
14.5
7.4
24.4
-7.9
17.3
7.2
12.8
RoE (%)
FY18E FY19E
24.8 26.3
16.5 18.4
34.9 37.7
35.5 38.1
64.9 62.8
39.6 43.1
11.0 13.3
25.2 23.5
10.7 13.6
18.0 20.3
28.4 29.5
18.4
19.0
26.5
24.8
11.1
23.5
12.1
17.0
9.7
2.1
20.3
23.0
8.2
19.5
13.2
16.6
9.6
17.0
14.7
19.5
13.6
13.4
11.4
9.2
11.2
24.7
-6.4
19.9
6.6
16.5
7.3
18.6
9.3
12.1
-7.5
27.0
14.7
15.0
14.3
31.8
-5.5
21.6
8.3
15.5
20.5
20.9
25.9
22.1
14.5
26.0
13.2
19.5
14.4
4.9
20.4
30.9
12.2
19.6
16.0
18.1
13.8
20.4
20.2
21.5
16.0
15.1
12.4
12.1
12.5
23.9
0.2
35.2
10.3
16.6
7.3
19.0
12.4
17.3
6.4
31.6
18.7
18.2
15.4
37.9
0.6
20.8
10.1
16.2
503
1,832
1,155
742
344
501
585
864
2,387
150
611
2,437
528
653
1,028
4,063
514
584
857
1,247
Neutral
Neutral
Buy
Buy
Sell
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
21.6
75.7
58.4
39.3
10.2
14.2
15.9
39.9
72.6
10.3
39.3
34.4
16.1
37.0
56.6
129.1
26.1
14.0
32.3
55.2
19.8 25.5 23.3
72.5 93.3 24.2
52.8 64.2 19.8
44.9 50.0 18.9
9.7
14.2 33.7
17.5 23.6 35.3
21.1 26.0 36.8
33.9 40.4 21.6
72.6 119.9 32.9
2.2
5.6
14.5
39.7 49.1 15.6
46.8 54.9 70.9
16.6 26.8 32.8
47.1 56.7 17.7
41.4 56.3 18.2
133.6 160.6 31.5
15.1 23.3 19.7
21.1 30.4 41.7
47.4 74.8 26.6
53.4 67.3 22.6
23.7
10.3
42.4
8.8
12.9
48.6
12.2
17.2
34.9
35.4
31.5
169
1,326
241
Buy
Neutral
Buy
9.8
38.0
6.8
379
88
71
809
248
97
177
382
1,297
25
781
522
Buy
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
Neutral
Buy
20.4
-9.3
1.0
11.4
25.8
7.4
10.7
6.4
20.5
-1.8
24.9
13.9
23.7
-2.9
1.0
12.2
28.5
7.3
12.2
9.3
26.5
-0.4
28.8
12.2
28.0
0.1
2.4
20.6
33.6
7.8
13.4
14.0
43.6
0.4
36.9
17.8
18.6 16.0 13.6
-9.5 -29.9 1238
69.7 70.4 29.8
70.8 66.4 39.2
9.6
8.7
7.4
13.1 13.2 12.4
16.6 14.5 13.2
59.4 40.9 27.3
63.2 48.9 29.8
-13.8 -56.7 66.7
31.4 27.2 21.2
37.6 42.9 29.3
34.8 31.1 22.8
28.1
15.9
-7.1
16.8
21.4
12.0
12.1
14.0
-8.5
11.2
17.8
9.1
9.8
10.7
73.4
9.7
13.8
9.2
241
313
148
249
80
119
Buy
Neutral
Buy
Buy
Neutral
Buy
8.6
19.7
-20.9
14.8
3.7
10.0
19.8
22.4
-17.4
22.3
4.5
13.1
24.5
29.3
2.0
25.7
5.8
12.9
October 2017
58

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Full year valuations
Sector / Companies
SAIL
Tata Steel
Vedanta
Sector Aggregate
Oil & Gas
BPCL
GAIL
Gujarat Gas
Gujarat State Petronet
HPCL
Indraprastha Gas
IOC
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Sector Aggregate
Oil & Gas Ex OMCs
Retail
Jubilant Foodworks
Titan Company
Sector Aggregate
Technology
Cyient
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
L&T Infotech
Mindtree
MphasiS
NIIT Tech.
Persistent Systems
TCS
Tata Elxsi
Tech Mahindra
Zensar Tech
Wipro
Sector Aggregate
Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Tata Comm
Sector Aggregate
Utilities
CESC
Coal India
JSW Energy
NTPC
Power Grid Corp.
Tata Power
Sector Aggregate
Others
Arvind
Avenue Supermarts
Bata India
BSE
CMP
(INR)
54
660
318
Rating
Sell
Neutral
Buy
EPS (INR)
PE (x)
FY17 FY18E FY19E FY17 FY18E
-6.2
-7.7 -4.2 -8.8 -7.0
37.9
66.9 63.4 17.4
9.9
15.1
25.4 37.5 21.0 12.5
23.0 14.6
48.3
22.6
16.2
8.8
40.7
44.0
43.0
14.8
19.3
16.4
11.4
48.3
49.2
26.5
31.6
12.1
45.9
49.6
51.1
10.7
29.1
17.8
14.1
54.7
52.0
30.0
44.0
13.3
42.9
54.8
46.5
11.6
34.1
19.2
18.0
62.6
9.9
19.1
55.9
22.1
10.7
32.7
9.4
8.6
18.1
10.4
21.0
17.1
13.2
15.1
9.8
16.3
28.7
16.2
9.5
29.0
7.9
11.9
12.0
9.6
16.9
15.1
11.7
13.5
EV/EBIDTA (x)
RoE (%)
FY19E FY17 FY18E FY19E FY17 FY18E FY19E
-12.9 131.5 27.2 14.0 -6.7 -9.1 -5.3
10.4
7.1
6.6
6.7
15.7 19.1 15.9
8.5
5.2
5.6
3.8
9.7
15.0 20.3
10.8
8.3
7.5
6.0
7.6
11.5 14.1
9.2
14.4
20.6
14.7
10.2
26.3
8.7
10.9
10.2
8.9
13.3
13.2
11.0
12.0
71.5
47.5
50.1
12.0
12.9
16.1
13.6
9.5
12.3
14.5
14.2
11.1
12.3
16.6
20.6
12.1
10.7
14.5
15.0
8.7
11.2
17.1
10.4
5.6
14.1
6.0
4.6
10.1
5.6
11.9
7.8
7.0
7.2
29.7
34.7
33.9
9.3
10.9
10.6
10.5
6.0
9.3
10.3
12.2
4.3
8.5
13.4
14.7
10.4
10.2
9.5
11.5
6.5
9.2
7.7
11.0
7.3
7.8
11.7
7.6
11.1
9.7
12.4
10.6
13.4
40.1
24.3
18.5
7.7
10.2
14.0
9.0
6.1
17.2
4.7
5.8
9.0
4.0
11.4
7.1
6.0
6.1
31.3
39.0
37.6
8.8
9.9
11.9
8.7
5.9
10.9
11.9
12.7
6.1
8.4
13.8
13.7
10.1
8.2
11.6
11.4
7.8
10.6
11.9
10.2
8.9
7.1
7.7
8.9
10.7
8.2
10.3
9.0
12.3
50.5
27.0
31.7
7.3
9.3
11.2
7.9
6.3
15.3
4.7
5.5
7.7
3.7
8.5
5.4
5.3
5.1
24.8
32.2
30.8
7.0
8.6
10.7
7.8
4.0
9.2
9.3
10.8
5.2
7.0
12.0
11.2
8.2
5.8
9.9
9.9
7.1
9.7
10.0
7.5
7.9
6.5
7.0
9.1
8.5
7.3
9.6
7.8
10.0
37.1
21.5
24.3
32.4
9.6
14.2
11.6
32.4
21.0
21.2
31.4
5.7
10.1
23.2
11.6
13.2
10.5
8.2
20.6
17.2
16.2
27.5
26.5
22.0
14.3
40.4
16.8
13.2
13.7
17.0
32.6
37.1
18.4
17.2
16.9
22.9
28.5
11.3
23.9
14.3
31.0
21.7
21.9
17.3
7.9
10.2
23.9
11.7
13.5
10.9
11.1
21.0
18.6
16.7
25.5
25.6
19.6
13.3
33.3
17.2
14.4
14.7
17.7
30.7
33.6
17.9
14.9
16.2
22.8
25.2
11.9
27.0
14.1
24.2
20.4
17.4
16.5
8.8
10.5
25.5
12.1
13.0
11.4
14.0
22.2
19.6
17.4
24.6
23.1
19.1
14.7
28.3
20.1
16.2
16.0
20.6
33.3
32.4
17.1
17.9
16.4
22.0
480
431
907
195
436
1,438
406
127
349
171
239
824
Buy
Sell
Sell
Neutral
Buy
Neutral
Buy
Sell
Buy
Buy
Buy
Neutral
1,482
596
Sell
Neutral
10.0
9.0
14.8
10.5
20.7 148.1 100.1
12.6 66.0 56.9
72.2 61.0
14.2
14.0
16.9
14.5
11.9
13.2
16.8
15.2
13.0
14.8
18.4
24.4
12.9
14.5
15.6
16.4
506
891
265
903
129
805
478
610
562
636
2,430
827
451
746
284
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
30.6
59.8
13.7
62.9
11.9
55.5
24.9
38.9
38.0
37.7
133.4
28.1
30.9
52.1
16.9
35.7 42.3 16.5
63.5 68.9 14.9
15.6 16.5 19.3
62.3 66.3 14.4
10.8 13.6 10.8
60.9 65.3 14.5
28.4 32.9 19.2
40.2 43.0 15.7
43.3 50.8 14.8
42.9 51.9 16.9
132.0 146.3 18.2
33.8 40.2 29.4
34.8 37.3 14.6
51.5 70.0 14.3
18.2 19.5 16.8
16.5
378
405
74
698
Buy
Buy
Buy
Buy
11.1
14.9
-1.1
27.2
2.4
3.2
34.0 157.7 117.8
17.3 19.7 27.3 23.4 20.6
-15.5 -14.9 -66.5 -4.7 -5.0
8.3
25.4 25.6 84.4 27.4
36.2 -226.1 960.8
88.9
19.8
3.3
13.5
17.4
7.3
99.3
22.0
2.7
15.7
20.6
7.3
19.3
18.3
20.0
14.3
14.4
10.6
15.5
11.3
13.8
22.9
12.7
11.8
10.9
12.8
29.6
86.8
46.2
23.4
10.1
12.4
28.4
10.9
10.0
10.7
11.3
20.6
62.6
37.3
22.1
6.7
1.4
1.9
16.2 20.7 23.2
-1.6 -25.6 -32.6
132.2 13.8 33.1
6.9
-1.2
0.3
6.5
37.8
6.3
10.5
16.2
17.1
14.6
10.3
17.9
13.9
8.3
10.6
47.6
5.3
11.0
17.3
15.8
16.3
9.1
19.3
14.4
8.5
10.8
50.5
4.2
11.9
17.8
14.2
16.9
12.0
23.0
15.8
7.7
1,003
273
77
171
205
79
Buy
Buy
Sell
Buy
Buy
Sell
51.9
14.9
3.8
12.0
14.2
7.4
382
1,104
725
985
Neutral
Neutral
UR
Neutral
12.4
7.7
13.5
41.0
12.9
12.7
15.7
42.2
18.6 30.9
17.6 144.0
19.4 53.6
44.6 24.0
October 2017
59

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Full year valuations
Sector / Companies
Castrol India
Coromandel International
Delta Corp
Eveready Inds.
Indo Count Inds.
Info Edge
Interglobe Aviation
Kaveri Seed
MCX
Manpasand Beverages
Monsanto India
Navneet Education
P I Industries
Quess Corp
S H Kelkar
SRF
Team Lease Serv.
Trident
TTK Prestige
V-Guard Inds
Sector Aggregate
UR: Under Review
CMP
(INR)
356
456
209
301
108
1,059
1,100
519
1,048
477
2,422
163
739
824
265
1,560
1,620
102
6,254
188
Rating
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
EPS (INR)
FY17 FY18E FY19E
13.6
12.6 13.3
16.6
24.1 29.0
3.1
5.6
7.7
12.9
13.6 16.3
13.0
8.9
10.8
15.7
21.8 24.7
43.2
55.2 81.6
19.1
34.0 41.0
24.8
29.4 40.7
6.3
9.7
15.3
86.2 105.0 126.6
7.3
8.4
10.4
33.4
30.4 35.8
10.0
19.1 27.8
7.2
7.6
9.9
85.9
80.2 103.0
38.8
36.8 56.0
6.6
8.3
10.4
132.1 137.8 176.1
3.6
4.5
6.0
FY17
26.1
27.5
68.4
23.4
8.3
67.6
25.5
27.2
42.2
75.1
28.1
22.4
22.1
82.4
36.6
18.2
41.7
15.5
47.4
52.6
37.5
PE (x)
FY18E
28.1
18.9
37.4
22.0
12.1
48.7
19.9
15.2
35.7
49.0
23.1
19.4
24.3
43.2
34.9
19.4
44.0
12.4
45.4
41.9
31.4
EV/EBIDTA (x)
FY19E FY17 FY18E FY19E
26.7 20.8 17.7 17.1
15.7 11.0 11.9 10.4
26.9 26.1 21.2 15.5
18.5 15.6 15.4 13.1
10.0
9.7
6.7
5.7
42.9 37.7 41.8 35.6
13.5
6.1
4.6
3.3
12.6 22.5 13.6 11.1
25.8 98.1 67.8 34.2
31.3 25.9 25.3 16.9
19.1 25.6 20.3 16.6
15.7 14.2 12.5 10.1
20.7 20.6 16.7 14.1
29.7 39.8 30.7 23.7
26.7 25.7 21.6 17.0
15.1 11.4 10.3
8.3
28.9 33.8 43.0 29.8
9.8
8.0
7.5
6.1
35.5 31.8 27.2 22.0
31.6 33.8 29.7 22.3
23.9 15.3 14.8 11.7
FY17
115.2
17.5
8.1
37.7
34.8
10.2
51.0
13.6
9.9
7.3
31.5
26.7
32.8
19.0
13.7
16.6
19.2
13.0
19.5
27.4
18.6
RoE (%)
FY18E FY19E
99.8 95.8
22.5 23.4
11.9 12.4
30.8 30.1
18.6 18.3
12.7 13.1
41.1 46.6
23.3 27.4
10.7 13.9
8.2
13.4
32.5 34.5
26.3 27.9
23.4 22.9
15.6 15.0
12.9 15.2
13.7 16.0
15.3 19.5
14.5 16.1
18.0 20.7
26.9 28.8
18.4 21.4
October 2017
60

India Strategy | Turbulence behind; Clear skies ahead
Ready reckoner: Full year valuations
Sector / Companies
Banks-Private
Axis Bank
DCB Bank
Equitas Holdings
Federal Bank
HDFC Bank
ICICI Bank
IDFC Bank
IndusInd Bank
J&K Bank
Kotak Mahindra Bank
RBL Bank
South Indian Bank
Yes Bank
Private Bank Aggregate
Banks-PSU
Bank of Baroda
Bank of India
Canara Bank
Indian Bank
Punjab National Bank
State Bank
Union Bank
PSU Bank Aggregate
NBFC
Bajaj Finance
Bharat Financial
Capital First
Chola. Inv & Fin.
Dewan Housing
GRUH Finance
HDFC
Indiabulls Housing
L&T Fin.Holdings
LIC Housing Fin
M & M Financial
Muthoot Finance
PNB Housing
Repco Home Fin
Shriram City Union
Shriram Transport Fin.
NBFC Aggregate
Sector Aggregate
UR: Under Review
CMP
(INR)
501
187
152
114
1,799
272
57
1,691
74
1,031
513
30
359
Rating
Neutral
Neutral
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
EPS (INR)
PE (x)
PB (x)
RoE (%)
FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E
15.4
7.0
5.0
4.8
56.8
15.3
3.0
47.9
-31.3
26.8
11.9
2.2
14.6
21.8
8.4
1.7
5.4
68.2
14.5
2.8
61.9
3.9
32.4
17.2
2.9
18.5
38.1
10.4
6.1
6.8
82.6
16.6
3.2
76.8
8.3
41.0
22.5
3.7
22.9
32.6
26.7
30.1
23.7
31.7
17.8
18.9
35.3
-2.4
38.4
43.2
13.7
24.6
29.7
22.9
22.4
89.5
21.2
26.4
18.8
20.4
27.3
19.3
31.8
29.8
10.4
19.5
24.2
13.2
18.0
25.1
16.7
21.8
16.4
17.5
22.0
9.0
25.1
22.8
8.1
15.7
19.0
6.7
21.1
6.6
7.0
12.0
9.4
6.6
8.9
29.7
17.6
17.6
16.0
11.9
45.7
30.1
11.9
19.1
13.3
23.5
10.8
23.2
16.7
13.4
10.3
20.6
16.6
2.2
2.7
2.3
2.2
5.4
2.0
1.3
5.1
0.7
5.0
4.5
1.2
3.8
3.4
0.9
0.6
0.7
0.9
0.7
1.2
0.4
0.9
11.1
5.5
3.2
3.9
2.2
19.6
6.9
4.4
4.4
3.1
3.7
2.9
4.6
3.5
2.7
2.1
5.1
2.6
2.1
2.2
2.3
1.8
4.6
1.9
1.3
4.4
0.7
4.4
3.2
1.1
3.3
3.0
0.9
0.6
0.6
0.8
0.7
1.1
0.4
0.8
6.6
4.4
2.8
3.3
2.0
16.1
6.3
3.9
3.8
2.6
3.5
2.5
4.1
3.0
2.4
1.9
4.4
2.3
1.8
2.0
2.1
1.7
4.0
1.7
1.2
3.8
0.6
3.8
2.9
1.0
2.8
2.7
0.8
0.6
0.6
0.8
0.7
1.0
0.4
0.8
5.5
3.6
2.5
2.8
1.7
13.3
5.2
3.4
3.3
2.3
3.2
2.1
3.6
2.6
2.1
1.6
3.7
2.1
6.9
10.8
9.5
9.9
18.3
10.2
7.2
15.4
-27.0
13.8
12.3
9.5
18.9
11.5
4.0
-6.7
4.2
10.1
3.6
-0.2
2.7
1.2
21.6
15.1
12.0
18.0
14.4
32.5
18.9
25.5
12.4
19.4
6.5
19.4
13.8
17.4
11.7
11.7
15.9
7.7
9.3
11.4
2.5
10.0
18.8
8.6
6.3
17.3
3.5
15.0
13.0
10.8
18.3
12.5
6.1
-5.2
6.2
10.9
3.2
7.0
3.0
4.6
20.1
15.1
13.2
18.6
14.1
33.0
18.6
27.6
14.7
18.2
12.0
21.8
13.8
17.1
14.6
15.0
17.0
9.9
14.7
11.8
8.6
10.5
19.7
9.3
6.9
18.5
7.2
16.3
13.3
12.7
19.5
14.2
12.4
3.0
9.1
11.2
5.9
11.4
6.1
8.6
20.2
22.4
15.0
19.2
15.6
31.8
17.8
30.6
18.5
18.5
14.2
21.2
16.6
16.7
16.8
16.9
17.9
12.6
140
139
310
268
132
251
126
Buy
Neutral
Neutral
Buy
Buy
Buy
Neutral
6.0
-14.8
18.8
29.3
6.2
0.3
8.1
9.5
-11.2
30.1
34.4
5.8
14.6
9.0
20.8
6.6
47.0
38.3
11.0
26.8
19.1
23.3 14.6
-9.4 -12.4
16.5 10.3
9.2
7.8
21.3 22.7
845.0 17.2
15.6 13.9
73.9 17.4
58.3
46.1
30.2
23.7
18.9
65.4
37.4
18.3
37.0
17.0
58.8
16.2
47.8
22.0
24.7
19.0
31.9
33.3
41.1
32.4
22.7
19.4
14.8
53.5
33.6
15.0
28.3
15.6
30.0
12.3
31.4
19.0
17.6
13.2
25.6
23.2
1,866
968
745
1,087
559
532
1,752
1,259
194
648
416
477
1,511
642
2,083
1,056
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
32.0
21.0
24.6
46.0
29.6
8.1
46.8
69.0
5.2
38.2
7.1
29.5
31.6
29.1
84.3
55.6
45.4 62.9
29.9 54.9
32.8 42.4
56.0 68.1
37.7 47.1
9.9
11.7
52.2 58.2
84.2 105.6
6.8
10.1
41.6 48.9
13.9 17.8
38.7 44.4
48.1 65.1
33.7 38.4
118.3 155.3
80.0 102.4
October 2017
61

India Strategy | Turbulence behind; Clear skies ahead
Sectors & Companies
BSE Sensex: 31,592
S&P CNX: 9,889
October 2017
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 5 October 2017, unless otherwise stated.
October 2017
62

September 2017 Results Preview |
October 2017
Automobiles
Company name
Amara Raja Batteries
Ashok Leyland
Bajaj Auto
Bharat Forge
BOSCH
CEAT
Eicher Motors
Endurance technologies
Escort
Exide Industries
Hero MotoCorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor Company
Regulatory impact waning – retail improving gradually
Strengthening commodity prices could exert pressure on margins in 2HFY18
Regulatory actions had materially influenced auto volumes since 3QFY17. However,
given the waning regulatory impact, the automobile sector has witnessed gradual
volume growth August onward, supported by pre-festive inventory build-up and
improving rural sentiment.
Our channel checks indicate healthy retail growth in key segments like PV and 2W.
However, its sustainability can be threatened by below-average monsoon in the key
markets of UP (-29%), Bihar (-9%) and MP (-20%).
EBITDA margin for our auto OEM (ex-JLR) universe is likely to contract (-100bp YoY;
+160bp QoQ) for the fourth consecutive quarter to 13.4%. This is without any impact
of an increase in commodity prices (which is expected to be realized in 2HFY18).
We have lowered our FY19 EPS estimates for AMRJ (-13%), and increased for BJAUT
(+7%) and ENDU (+4%).
Our top picks are TTMT and MSIL among large caps, and AL and AMRJ among mid-
caps. We also believe that MM is the best play on a rural market recovery.
Regulatory actions (demonetization, emission norm changes and pre-GST de-
stocking) had materially influenced auto volumes since 3QFY17. However, given the
waning regulatory impact, the automobile sector has witnessed gradual volume
growth August onward. This was partly led by pre-festive inventory filling and
positive rural sentiment in key markets. Our channel checks suggest above-average
volume growth in key rural markets during this festive season.
Volume recovery across segments; first quarter post regulatory hiccups
EBITDA margin of our auto OEM (ex-JLR) universe is likely to contract (-100bp YoY;
+160bp QoQ) for the fourth consecutive quarter to 13.4%, impacted by commodity
price inflation. However, operating leverage to some extent limits the contraction in
margins. We expect BJAUT’s margin to shrink the most by 240bp YoY, followed by
MSIL (-190bp), HMCL (-130bp) and AL (-100bp). However, margins are expected to
expand for TVSL (+50bp), EIM S/A (+40bp) and TTMT S/A (+80bp).
Fourth straight quarter of YoY contraction in EBITDA margin; healthy QoQ
recovery
Our channel checks suggest above-average festive demand growth in key rural
markets. However, its sustainability can be impacted by below-average monsoon in
the key markets of UP (-29%), Bihar (-9%) and MP (-20%). We estimate 2W and PV
volumes CAGR of ~11% over FY17-19E. We estimate M&HCVs to grow at ~8% CAGR
and LCVs to grow ~12.5% CAGR (on low base). Sharp increase in commodity prices
(refer Exhibit 4) may impact EBITDA margin from 2HFY18.
Below-normal monsoon may result in slower rural recovery; higher
commodity prices may hurt margins
Valuation and view
We have lowered our FY19 EPS estimates for AMRJ (-13%), and increased for BJAUT
(+7%) and ENDU (+4%). Demand environment and changing competitive landscape
would be the key determinants of the stock performance. Our top picks are Tata
Motors, Maruti Suzuki, Ashok Leyland and Amara Raja. We also believe MM is the
best play on a rural market recovery.
Jinesh Gandhi – Research Analyst
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Deep Shah – Research Analyst
(Deep.Shah@MotilalOswal.com) |
Suneeta Kamath – Research Analyst
(Suneeta.Kamath@MotilalOswal.com)
October 2017
63

September 2017 Results Preview | Sector: Automobiles
Exhibit 1: Summary of expected quarterly performance (INR m)
Sector
CMP
(INR)
Automobiles
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
CEAT
Eicher Motors
Endurance Tech.
Escorts
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Sector Aggregate
705
123
3,131
632
20,781
1,718
30,788
1,055
665
204
3,757
1,301
7,838
423
655
Reco
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Sales (INR m)
Var
Var %
Sep-17
% YoY
QoQ
15,474
61,281
65,803
12,430
34,211
17,515
22,080
16,250
11,944
21,680
86,146
122,241
219,928
690,313
40,304
1,437,601
15.0
32.6
8.7
39.5
31.0
9.7
25.8
12.2
20.0
12.7
10.5
20.2
23.3
4.8
17.6
12.0
3.3
44.6
20.9
3.5
29.2
7.5
10.4
4.8
2.7
3.1
8.1
10.2
25.3
18.0
18.6
17.9
EBDITA (INR m)
Var
Var %
Sep-17
% YoY
QoQ
2,006
6,477
12,537
3,560
6,329
1,839
7,000
2,256
1,069
3,278
15,201
17,543
33,188
72,832
3,472
188,589
-12.7
20.7
-3.3
43.8
34.8
-0.8
29.1
12.4
71.1
12.0
2.5
19.5
9.3
15.9
25.5
13.5
4.0
111.6
33.6
6.8
44.2
236.5
12.8
5.6
9.6
1.1
8.6
20.7
42.4
46.7
64.2
35.9
Net Profit (INR m)
Var
Var %
Sep-17
% YoY
QoQ
1,108
3,787
11,189
1,913
4,384
921
5,509
1,082
657
2,016
10,017
13,591
23,323
12,322
2,209
94,029
-18.7
28.6
-0.3
50.8
0.9
-13.9
33.3
21.2
91.3
11.2
-0.3
8.5
-2.7
50.4
24.5
9.4
10.9
215.7
18.2
9.2
44.9
8614.6
19.9
12.1
4.8
6.7
9.6
76.9
49.9
304.7
70.6
53.5
Exhibit 2: Volume snapshot for 2QFY18 ('000 units)
Two wheelers
Three wheelers
Passenger cars
UVs & MPVs
Total PVs
M&HCV
LCV
Total CVs
Total
2QFY18
6,240
257
759
341
1,100
90
135
225
7,822
2QFY17
5,599
232
711
293
1,004
77
118
195
7,031
YoY (%)
11.4
10.8
6.7
16.4
9.5
16.4
14.3
15.2
11.3
1QFY18
5,544
187
634
273
907
57
110
167
6,806
QoQ (%)
12.5
37.6
19.8
24.9
21.3
56.5
22.8
34.3
14.9
1HFY18
11,784
444
1,393
614
2,007
147
245
392
14,628
1HFY17
10,717
438
1,312
548
1,860
158
231
388
13,403
YoY (%)
10.0
1.5
6.2
11.9
7.9
-6.6
6.4
1.1
9.1
Exhibit 3: Trend in segment-wise EBITDA margins (%)
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
Exhibit 4: Commodity prices remain at higher levels
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
2W
Cars
CVs
Source: Company, MOSL
Steel
Lead
Alu
Rubber
Source: Company, MOSL
October 2017
64

September 2017 Results Preview | Sector: Automobiles
Exhibit 5: Trend in key currencies v/s INR
120
USD
GBP
JPY
Exhibit 6: QoQ Margin expansion (ex-JLR) post three
quarters
Aggregate (excld JLR)
17
14
11
Aggregate (incl JLR)
100
80
8
Source: Bloomberg, MOSL
Source: Company, MOSL
Exhibit 7: Revised estimates
Bajaj Auto
Hero MotoCorp
TVS Motor
Maruti *
M&M *
Tata Motors *
Ashok Leyland
Eicher Motors *
Amara Raja
Bharat Forge *
BOSCH
Exide Industries
Endurance Tech*
* Consolidated
Rev
144.4
185.0
15.1
285.5
69.5
20.0
5.3
826.7
25.6
18.3
540.8
8.9
29.6
FY18E
Old
137.2
189.3
14.4
281.7
68.5
22.4
5.2
852.9
28.2
18.2
547.2
9.2
29.3
Chg (%)
5.2
-2.3
4.8
1.4
1.4
-10.7
3.1
-3.1
-9.4
0.3
-1.2
-2.8
1.2
Rev
174.3
197.1
24.5
381.7
81.7
61.3
7.0
1119.2
32.9
25.5
698.6
10.8
39.3
FY19E
Old
163.6
199.1
23.7
374.5
82.4
59.8
7.0
1092.8
37.9
25.3
705.7
11.0
37.9
Chg (%)
6.6
-1.0
3.4
1.9
-0.8
2.5
0.8
2.4
-13.2
0.7
-1.0
-2.1
3.6
Volumes ('000 units)
YoY
QoQ
2QFY18
(%)
(%)
Bajaj Auto
1072
3.8
20.6
Hero MotoCorp
2004
9.9
8.3
TVS Motor
949
16.3
18.3
Maruti Suzuki
492
17.6
24.7
M&M
218
16.3
8.4
Tata Motors (S/A)
153
13.9
39.5
Tata Motors (Cons) 154
10.5
11.1
Ashok Leyland
Eicher(Consol)
41
22.6
43.9
JLR
203
21.5
10.3
Eicher - RE
15
12.0
29.6
Eicher - VECV
Agg. (ex JLR)
5146
11.3
15.1
EBITDA margins (%)
YoY
QoQ
2QFY18
(bp)
(bp)
19.1
-240
180
16.3
-130
0
8.6
50
240
15.1
-190
180
14.4
-10
120
4.5
80
440
10.8
-10
290
10.6
100
210
10.6
-100
330
31.7
40
30
8.5
130
20
31.7
40
30
13.4
-100
160
Adj PAT (INR m)
YoY
QoQ
2QFY18
(%)
(%)
11,189
-0.3
18.2
10,017
-0.3
9.6
2,209
24.5
70.6
23,323
-2.7
49.9
13,591
8.5
76.9
-4,736
NM
-1.4
172
29.6
38.5
12,322
50.4
305
3,787
28.6
215.7
5,043
27.3
2.0
1,095
56.8
68.4
5,509
33.3
19.9
64,890
8.1
46.6
October 2017
65

September 2017 Results Preview | Sector: Automobiles
Exhibit 8:
Relative performance – Three months (%)
107
104
101
98
Sensex Index
MOSL Automobiles Index
Exhibit 9:
Relative performance – One year (%)
120
110
100
90
Sensex Index
MOSL Automobiles Index
Source: Bloomberg, MOSL
Source: Bloomberg, MOSL
Exhibit 10:
Comparative valuation
Sector / Companies
Automobiles
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
CEAT
Endurance Tech.
Eicher Motors
Escorts
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor
Auto Sector Aggregate
CMP
(INR)
705
123
3,131
632
20,781
1,718
1,055
30,788
665
204
3,757
1,301
7,838
423
655
Reco.
EPS (INR)
PE (x)
EV/EBIDTA (x)
RoE (%)
FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
25.6
32.9
43.0
5.3
7.0
9.2
144.4 174.3 202.9
18.3
25.5
32.6
540.8 698.6 820.2
94.2 126.8 145.4
29.6
39.3
49.2
826.7 1119.2 1395.8
37.1
45.8
52.5
8.9
10.8
13.0
185.0 197.1 215.6
69.5
81.7
91.9
285.5 381.7 440.3
20.0
61.3
63.1
15.1
24.5
33.8
27.6
23.0
21.7
34.6
38.4
18.2
35.6
37.2
17.9
22.8
20.3
18.7
27.5
21.1
43.4
25.3
21.4
17.4
18.0
24.8
29.7
13.5
26.9
27.5
14.5
19.0
19.1
15.9
20.5
6.9
26.7
15.9
16.4
13.3
15.4
19.4
25.3
11.8
21.5
22.1
12.7
15.7
17.4
14.2
17.8
6.7
19.4
14.1
14.6
11.9
16.0
18.4
24.1
10.2
16.8
28.2
15.8
11.6
13.0
4.9
16.8
5.0
28.0
10.3
11.3
9.1
12.9
14.5
18.8
8.0
13.9
21.3
12.7
9.5
12.4
4.2
12.4
2.9
18.0
7.2
8.7
6.8
10.9
11.6
15.8
6.8
11.4
16.9
10.4
7.6
11.1
4.0
10.2
2.6
13.1
6.3
15.8
23.8
23.2
19.3
17.8
14.8
21.8
36.1
17.3
13.8
34.0
13.5
20.4
11.0
26.7
17.3
17.7
27.0
25.3
22.9
20.5
17.3
24.0
36.4
18.3
14.8
31.4
14.3
23.0
27.4
34.2
22.8
19.8
29.5
27.1
24.5
21.2
17.1
25.0
33.9
17.9
15.8
29.8
14.8
22.6
22.0
35.5
21.5
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
October 2017
66

September 2017 Results Preview | Sector: Automobiles
Amara Raja Batteries
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
Financial Snapshot (INR b)
Y/E March
Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/Sales (x)
25.2
4.7
14.1
2.3
27.7
4.1
14.9
1.9
21.5
3.5
11.5
1.6
16.5
3.0
8.8
1.3
2017 2018E 2019E 2020E
53.2
8.5
4.8
28
(2.7)
152
20.3
19.4
61.6
8.0
4.4
26.6
(8.7)
173
15.8
15.0
73.0
10.1
5.6
32.9
28.8
200
17.7
16.9
85.6
12.7
7.3
43.0
30.4
235
19.8
18.9
AMRJ IN
170.8
120 / 2
1075 / 695
-11 / -27 / -45
CMP: INR705
TP: INR854 (+21%)
Buy
We expect AMRJ’s revenue to grow 15% YoY (+3% QoQ) to
INR15.5b. AMRJ has taken price hike of ~1-1.5% in automotive
segments to pass on lead inflation costs.
Spot LME lead prices increased ~7.6% QoQ (+~19% YoY) in
2QFY17.
EBITDA margin is likely to contract 410bp YoY (+10bp QoQ) to
13%.
We expect PAT to decline 18.7% YoY to INR1.1b.
We are reducing EPS estimates of FY18E/FY19E by 9.4%/13.2% as
we factor in lead price inflation. The stock trades at 27.7x FY18E
and 21.5x FY19E EPS; Maintain
Buy.
Key issues to watch
Update on demand environment for OEMs, auto replacement
and industrial battery segments.
Update on entry into new segments like E-rickshaw, solar and
motive power.
Outlook for raw material cost trend, recent pricing action.
Update on capacity expansion plans across product segments.
Update on progress made on product development in lithium
ion battery space and plans thereof.
FY18
2QE
3QE
15,474
15,538
15.0
17.0
70.0
69.5
5.2
5.1
11.8
12.5
2,006
1,997
13.0
12.9
550
550
14
12
175
190
1,617
1,625
31.5
31.5
1,108
1,113
-18.7
-0.9
FY17
4QE
15,626
16.2
68.7
5.2
12.8
2,084
13.3
598
12
198
1,672
31.4
1,147
15.7
53,172
15.1
65.6
4.7
13.9
8,499
16.0
1,912
58
492
7,022
31.9
4,785
-2.7
FY18E
61,612
15.9
69.5
4.2
11.6
8,016
13.0
2,242
51
700
6,422
32.0
4,367
-8.7
Quarterly Performance
Y/E March (INR m)
Net Sales
YoY Change (%)
RM Cost (% of sales)
Staff Cost (% of sales)
Other Exp (% of sales)
EBITDA
Margins (%)
Depreciation
Interest
Other Income
PBT
Rate (%)
Adj PAT
YoY Change (%)
E: MOSL Estimates
1Q
13,081
15.0
65.7
5.0
11.9
2,273
17.4
441
14
90
1,908
31.5
1,307
8.0
FY17
2Q
3Q
13,455
13,280
16.9
9.5
64.3
65.0
5.2
5.4
13.5
14.1
2,297
2,051
17.1
15.4
457
480
15
14
120
133
1,945
1,689
29.9
33.5
1,363
1,123
10.4
-17.9
4Q
13,445
17.4
68.0
5.2
13.0
1,844
13.7
499
15
151
1,480
33.0
992
-9.1
1Q
14,975
14.5
70.0
5.4
11.7
1,929
12.9
544
14
137
1,508
33.7
999
-23.6
October 2017
67