2 May 2017

Corporate performance

4QFY17: Expectations v/s delivery

Today’s top research idea

Tata Power (INITIATING COVERAGE): Leading supplier struggling for

RoE accretive growth

v

The regulated business is facing growth headwinds on slowing capex and

stricter operating norms. The drag at Mundra will increase with rising coal

prices, inflation and declining capacity charge.

v

Renewable energy would drive growth but with IRR on projects just meeting

cost of equity, it will not drive value. TWPR's RoE would hardly cover it's CoE

while leverage is high (2.7x D:E). This is not reflected in its current valuation,

trading at 1.2x FY19 book.

v

We initiate with

Sell

valuing at 1x FY19E at INR69/sh.

(no of

companies)

Sales

EBIDTA

PAT

Growth (YoY, %)

MOSL

Nifty

Sensex

(36)

(14)

(7)

15.9

17.0

17.8

12.0

7.6

8.7

5.6

6.9

3.1

Research covered

Cos/Sector

Tata Power

Big Leap

Auto

Dabur India

Ambuja Cem.

Biocon

Federal Bank

JSW Energy

Bharat Financial

Coromandel Inter

IDFC

CEAT

Kitex Garments

Results Expectation

Key Highlights

(Initiating Coverage) Leading supplier struggling for RoE accretive growth

(Thematic) Huge opportunity, but challenges too

April 2017 volumes: Maruti, Tata Motors, Hero Motocorp, Eicher Motor

Weak performance, sharp cut in ad-spends cushions profits

Muted volume growth; utilization headroom lends confidence

Weak results; monetization of Biosimilars key catalyst

Strong beat on all fronts; asset quality showing encouraging trends

Lower generation, shutdown and higher fuel cost impacts performance

Biting the bullet; Stressed loans pool largely stable

(Flash Note) PAT beat, but revenues miss estimate

Subdued performance by IDFC Bank hurts overall results

RawMat headwinds to continue in 1QFY18; Maintain Buy

Results below estimates

Inox Leisure | Marico | RBL Bank | Shriram City Union

Market snapshot

Equities - India

Close

Chg .%

Sensex

29,918

-0.4

Nifty-50

9,304

-0.4

Nifty-M 100

18,086

0.4

Equities-Global

Close

Chg .%

S&P 500

2,388

0.0

Nasdaq

6,092

0.7

FTSE 100

7,204

-0.5

DAX

12,438

0.0

Hang Seng

10,220

-0.4

Nikkei 225

19,311

0.3

Commodities

Close

Chg .%

Brent (US$/Bbl)

51

0.0

Gold ($/OZ)

1,263

-0.1

Cu (US$/MT)

5,711

0.7

Almn (US$/MT)

1,903

-0.6

Currency

Close

Chg .%

USD/INR

64.3

0.3

USD/EUR

1.1

0.4

USD/JPY

111.3

-0.1

YIELD (%)

Close

1MChg

10 Yrs G-Sec

7.0

0.0

10 Yrs AAA Corp

7.9

0.0

Flows (USD b)

28-Apr

MTD

FIIs

-0.2

-0.4

DIIs

0.3

1.4

Volumes (INRb)

28-Apr

MTD*

Cash

309

304

F&O

2,914

5,255

Note: YTD is calendar year, *Avg

YTD.%

12.4

13.7

26.0

YTD.%

6.7

13.2

0.9

8.3

8.8

1.0

YTD.%

-8.4

8.9

3.4

11.7

YTD.%

-5.2

3.7

-5.0

YTDchg

0.4

0.3

YTD

6.3

1.6

YTD*

282

4,635

Piping hot news

Core sector output up 5%, signals industrial recovery

low growth rate of 1 per cent in February.

v

Core sector output rose by 5 per cent in March, recovering from the one-year

Chart of the Day: Big Leap

(Tiles)

- Huge opportunity, but challenges

too

Unorganized value market share at 60%in FY08;

reduced to 51% in FY16

Quote of the day

There's every financial incentive in the

world to stay in the conservative

movement forever.

Research Team (Gautam.Duggad@MotilalOswal.com)

Source: Company, MOSL

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Investors are advised to refer through important disclosures made at the last page of the Research Report.

In the news today

Kindly click on numbers for the detailed news link

1

Apollo Health expects partner

Sanofi to help expand

diabetes care business

Apollo Health and Lifestyle, the

subsidiary of Apollo Hospitals

Enterprise Ltd, has said that the

synergy with the Sanofi Group in

its diabetes care business would

help it to grow its presence in

India and abroad…

2

Bharat Financial Inclusion, which on Monday reported a net loss of Rs 235

crore for the quarter ending on March 31 (Q4), has confirmed the market

buzz that the microfinance institution (MFI) is open to a merger or

acquisition. In a communication to stock exchanges, Bharat Financial,

formerly SKS Microfinance, said, “In the changing landscape of MFI sector,

the company continues to explore a range of strategic options, including

merger with or acquisition of a bank or financial institution.” For some

time, there has been a strong buzz that the micro lender could merge its

operations with IndusInd Bank….

Bharat Financial says open to merger or acquistion

3

Sun shines on $300-billion

global fund for clean energy

The International Solar Alliance,

launched by Prime Minister

Narendra Modi and French

President Francoise Hollande in

November 2015, will channel

$300 billion in 10 years to

promote renewable energy

projects under a global mega fund

for clean energy.…

4

In April, auto companies put pedal

to metal; Maruti Suzuki logs best-

ever volume growth

Automobile companies started the

new fiscal year with bumper sales

in April with most of them

registering year-on-year double-

digit growth in sales of passenger

vehicles. The country’s largest car

manufacturer, Maruti Suzuki

posted its best ever volume

growth to 144,492 units …

5

Britannia gets SC relief on

selling NutriChoice Zero

biscuits in ITC case

6

Stocks at Peak, Domestic

Funds Camp on Mount Everest

of Cash

A sharp, short-term equity market

correction is probably unlikely to

dent the enthusiasm of Indian

institutional investors who are

sitting on a Rs . 70,000crore cash

pile, according to data collated by

two leading research firms and

ET's own calculations…

7

A central government ministry

and a state government may have

made public up to 135 million

Aadhaar numbers, according to a

research report issued by

Bengaluru-based think tank

Centre for Internet and Society

(CIS) late on Monday…

Govt may have made 135

million Aadhaar numbers

public: CIS report

The Supreme Court on Monday

refused to restrain Britannia

Industries from manufacturing

and selling its digestive biscuit

NutriChoice Zero, an injunction

sought by rival ITC which sells its

biscuits under the brand Sunfeast

Farmlite Digestive All Good

biscuit.…

2 May 2017

2

Initiating Coverage | Sector: Utilities

Tata Power

Sell

BSE Sensex

29,918

S&P CNX

9,304

CMP: INR84

TP: INR69 (-18%)

Leading supplier struggling for RoE accretive growth

Initiating with Sell

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

Avg Val, INRm

Free float (%)

TPWR IN

2,705

91 / 67

-7/0/5

227.2

3.4

403

67.0





Financial Snapshot (INR b)

Y/E Mar

2017E 2018E 2019E

Sales

315.1 341.6 358.7

EBITDA

57.5 67.1 69.5

NP

15.6 18.2 18.9

EPS (INR)

5.8

6.7

7.0

EPS Gr. (%)

35.1 16.9

3.9

BV/Sh. (INR )

58.0 63.1 68.6

RoE (%)

10.8 11.1 10.6

RoCE (%)

5.9

6.1

6.1

P/E (x)

14.6 12.5 12.0

P/BV (x)

1.4

1.3

1.2

Shareholding pattern (%)

As On

Mar-17 Dec-16 Mar-16

Promoter

33

33

33

DII

23.5

24

24.5

FII

27.3

26.5

26.2

Others

16.2

16.5

16.3

FII Includes depository receipts













Tata Power (TPWR) is a leading private sector power supplier, with capacity of

10,477MW (71% thermal, ~7% hydro, ~10% wind, 9% solar and 3% waste heat

recovery), largely in India. It is also engaged in electricity distribution in

Mumbai/Delhi, and has stakes in coal mining assets in Indonesia and certain

overseas power generation assets. It has consolidated its position in renewable

energy (RE) – a key driver of growth – with the acquisition of Welspun’s assets.

The company’s earnings would get a boost on sharp increase in thermal coal

prices and inorganic growth. However, RoE will still hover at ~11% over next three

years, which is lower than its cost of equity.

Regulated business, which earns superior RoE, has many challenges and lacks

material growth. The strategic engineering division has tailwinds in the form of

high growth from defense opportunity, but it contributes just 1-2% of EBITDA.

The recent Supreme Court (SC) order has dashed the hope of compensatory tariff

(CT) for CGPL Mundra, leading to losses. The declining structure of capacity charge

and rising O&M costs would remain drags.

Coal prices are strong on supply-side discipline, which is a silver lining because of

its net long position in mining assets in Indonesia.

RE is expected to drive capex and growth. However, it is unlikely to boost RoE due

to high competition.

Coal prices and interest rates are the key sources of earnings volatility, which

drives up cost of equity.

At CMP, the stock trades at ~1.3x FY19E P/BV. Valuations are rich because TPWR’s

RoE is less than its cost of equity and growth is not RoE-accretive. We value the

stock at 1x FY19E P/BV, with a target price of INR69/share. Initiating with Sell.

Regulated business: Many challenges stalling growth



Tata Power

Struggling for growth











Dhruv.Muchhal@motilaloswal.com

Please click here for Video Link

+

91 22 3027 8033

TPWR’s electricity distribution business in Mumbai and Delhi (51% holding),

which represented ~70% of its regulated equity in FY16, is coming under

pressure due to:

Declining capitalization (from ~INR7b p.a. to ~INR4b) on network roll-out

issues in Mumbai

Stricter operating norms impacting ~200-300bp on RoE

Disallowance of capex in Delhi pending physical verification

Declining regulatory asset base in Delhi (releases working capital but

reduces earnings)

Moreover, PPAs for generation capacity in Mumbai (Trombay), which

represent ~50% of Mumbai business regulated equity, are expiring in 2018

and may not be extended due to high cost of generation. Maithon power

will see boost to earnings on securing PPA for its last 150MW capacity. We

expect PAT of regulated business to growth at a modest ~5% CAGR over

FY16-19E.

3

2 May 2017

Stock Performance (1-year)

Mundra: Aggressive bid and coal prices driving losses; SC denies CT

Aggressive bidding for the CGPL Mundra 4,000MW UMPP and the change in

Indonesian law for supply of coal are driving fuel cost under-recoveries of

~INR14-15b in FY18/19E (INR0.51/0.53 kWh), assuming USD60/t free on board

(FOB) price for 5,400kcal/kg Indonesia coal.



The Supreme Court has denied compensatory tariff for the under-recoveries,

citing that the UMPP tender did not restrict sourcing of coal from any particular

country. Hence, the change in Indonesian law does not invoke force majeure.



We estimate Mundra EBITDA at ~INR6b in FY18/19E, which will decline

gradually as O&M cost increases on aging & inflation and capacity charge

declines as per the structure of the PPA. CGPL Mundra accounts for ~25% of the

group’s total capital employed.



Strong coal prices – only silver lining

TWGR has 30% stake in coal mining assets in Indonesia with its share of 18mt in

coal production assuming the sale of Arutmin. After adjusting for its

requirement for CGPL sale of Arutmin, it will have net long position of 8mt.

Hence, coal prices are the key driver of consolidated earnings.



Declining thermal coal price over last few years was one of the key reasons for

weak earnings at TPWR. As coal business EBITDA declined from ~INR19b in FY11

to ~INR13 in FY16, TPWR’s consolidated PAT fell from ~INR20b to ~INR11b over

the same period.



International coal prices have recovered due to the closure of high-cost mines

across the world and production management by China. We estimate Indonesia

5,400kCal coal to average ~USD60/t in FY18/19E, up from ~USD46/t in FY16.

Resultantly, EBITDA of coal mines would almost double to ~INR25b by FY19E.



We will factor in the sale of Arutim in our model only after the transaction is

executed due to repeated delays in past.



RE is the only growth driver; will it drive RoE accretion?

The company has consolidated its position in RE with the acquisition of

Welspun’s assets. RE is the key driver of growth for TPWR. With the acquisition

of Welspun’s RE assets, TPWR’s scale at ~2.3GW capacity, one of the largest in

India, gives it a competitive edge in sourcing credit, in our view.



We estimate 400MW of annual RE capacity addition and PAT to increase from

INR0.2b in FY16 (~2% of consol. PAT) to INR3.5b by FY20E (~18% of consol. PAT).



Rapidly declining cost of solar panel and the lack of alternative investment

opportunities have attracted hordes of investors and heated up competition.

Equity IRR is generally lower at ~12% v/s distribution business’ ~15%. This barely

covers cost of equity. Therefore, we are not sure if the reinvestment will drive

RoE accretion.



RoE improving, but hardly covers cost of equity



TPWR’s consolidated adjusted PAT is expected to increase by ~64% from

~INR11b in FY16 to ~INR19b in FY19E, led by a sharp increase in thermal coal

prices and Welspun acquisition. Despite the jump in earnings, RoEs would

remain modest at ~10.5-11% over FY17-20E. Superior RoE business of

4

2 May 2017

distribution is facing challenges. Growth in RE business is unlikely to be RoE

accretive.



Net debt to equity ratio is expected to decline from ~2.7x to 2.1x over FY17-20E.

The dilution in TPWR’s RoE (on declining leverage) will be compensated by new

investment in the superior-RoE distribution business, keeping RoE stable at

~11%.



Coal business would represent ~23-25% of TWPR’s consolidated EBITDA (under

old accounting standards) over FY17-20E. Such heavy reliance on volatile coal

prices has its risk on the deleveraging trajectory, increasing cost of equity.

Value at 1x FY19E P/BV on low RoE and growth; Initiating with Sell











At current CMP, TPWR is trading at FY19E rich P/BV of 1.2x in view of its RoE

hovering at ~11% for next 2-3 years, as against cost of equity of ~12%. There are

limited growth opportunities that can boost RoE. Therefore, we believe the

stock is expensive. NTPC also trades at similar valuations, but its RoE is expected

to increase, led by a strong pipeline of high-RoE projects.

FCF (pre-interest) to enterprise value yield (cash return to the business) is at just

~6%, as against ~10% for peers.

We value the stock at 1x FY19E P/BV, implying a target price of INR69/share.

With 18% downside, we initiate with

Sell.

The pending sale of (i) stake in the Arutmin coal mine (INR27b), (ii) quoted

investments (~INR12b) and (iii) 1.65% stake in Tata Sons would be key toward

value unlocking.

Key risks:

Higher-than-estimated coal prices, resolution of capital under-

recovery issue in Delhi, and the sale of non-core assets.

2 May 2017

5

27 April 2017

The Big Leap: Tiles

Huge opportunity, but challenges too

Lower GST rates - the key catalyst

India is set to see a major overhaul in the trade structure in favor of the organized

sector (Refer our inaugural edition of “The

Big Leap”

series). Although the

government’s initiatives (demonetization, GST, etc.) are in the right direction, we

continue believing that the shift will be prompt for some sectors, gradual for

others and may remain challenging for a few.

In this edition, we will focus on the INR260b Indian tiles industry. We chose to

look at the tiles industry from the trade shift perspective, given that it is highly

fragmented and has presence of numerous unorganized players (accounting for

51% of value and 60% of volume of the industry). Our ground research and

channel checks suggest that the changes in administrative procedures under the

GST using technology platform are unlikely to accelerate the shift trade toward

formal trade in the tiles sector over the medium term. However, a reduction in

indirect taxes (from the current ~25-28% to 18%) could be a key catalyst to

accelerate shift toward formal trade.

The Big Leap | Tiles

Organized market share rising…opportunity size still huge

Tiles industry remains highly fragmented. Over the years, high indirect tax

incidence, liberal tax administration/monitoring and a short B2C supply chain

have led the industry to remain dominated by unorganized players, which

account for 51% of value and 60% of volume for the industry.



However, we note that rising per capita income, aspirational buying, brand

awareness and product innovation have led to a gradual increase in value

market share of organized players from 40% in FY08 to 49% now. Furthermore,

the outsourcing model has helped organized players to ramp-up their

businesses faster with minimal investments.



Administrative policy changes unlikely to bring cheers to the sector

Over past few years, the Indian government has been taking a number of

initiatives to curb the shadow economy and shift trade from unorganized to

organized. The government plans to move in this direction by bringing in new

administrative procedures using technological platforms and altering tax rates

under the GST. This will present investors with opportunities to take advantage

of the shift in favor of organized names.



We believe that the tile industry with short B2C supply chain can continue

operating end-to-end in a parallel economy and that the changes in

administrative procedures are unlikely to accelerate the shift to organized trade

in this industry.



2 May 2017

6

Lower effective tax rate can be a driver for the big shift

Indirect tax incidence of ~25-28% for the tiles industry leads to a price

differential of 15%-20% between organized and unorganized players. As a result,

unorganized players are able to attract price-sensitive Indian consumers with

their low-cost offerings.



While the GST rate for the tiles Industry is still not made public, it is expected to

be either at 18% or 28%. Our discussions with various sector participants and

experts suggest that the potential reduction in the GST rate to 18% could aid the

shift away from unorganized trade, with the price gap between organized and

unorganized players lowering to a mere 5-10%.



However, if the GST rate is fixed at 28% (not materially different from current

rates), we believe the industry would miss a much-needed trigger in the form of

a lower effective tax rate to accelerate the shift to formal trade over the

medium term.



Unorganized value market share at 60%in FY08..

…reduced to 51% in FY16

Organized,

40%

Organized,

49%

Unorganized,

51%

Unorganized

, 60%

Source: Industry, MOSL

Source: Industry, MOSL

Narrowing of price differential under GST: Illustrative pricing summary pre and post GST

Current Regime

Particulars

Organized Player

RM cost + margin (A)

100.0

Excise (Cenvat not available) / GST (cenvat available) (B)

12.5

Cost for the dealer C = (A) + (B - if CENVAT not

available)

112.5

Margin (5%)

5.6

VAT/ GST

14.8

Gross Price

132.9

Other Costs

Additional branding cost (1-2%)

1-2

Additional cost to manage trade channels (8-10%)

-

Price to the consumer

133.9-134.9

GST Regime @ 18%

Organized Player

100.0

18.0

100.0

5.0

18.9

123.9

1-2

0

124.9-125.9

GST Regime @28%

Organized Player

100.0

28.0

100.0

5.0

29.4

134.4

1-2

0

135.4-136.4

Unorganized

player

100.0

0.0

100.0

5.0

0.0

105.0

8.5-10.5

113.4-115.5

Source: MOSL

2 May 2017

7

Sector Update | 2 May 2017

Automobiles

Maruti Suzuki

CMP: INR6,526

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

MSIL IN

302.1

6,585/3,730

7/4/57

TP: INR7,319 (+12%)

Buy

Above est at 151.2k units (v/s est. 136k), growth of ~20%YoY

Domestic vols up a strong ~23% YoY driven by growth across segments;

Exports decline by 29% YoY



M.Cap. (INR b) / (USD b) 1971.2/30.6

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

MSIL’s Apr-17 wholesales were above est at ~151,215 units (v/s est 136,290 units),

~20% YoY growth (+8% MoM). FY18 volume is est at 1.78m with a residual monthly

run rate of 147.8k units. Retail sales up 25-30% YoY. Inventory below normal at 3-3.25

weeks.

Domestic volumes grew by a strong ~23% YoY (+13% MoM) to 144k (v/s est 125k) led

by growth across segments despite phase out of old Dzire & Dzire tour. Dzire Tour is

now reported under compact segment with reduction in length and is likely to have a

benefit of lower excise rate.

Mini segment increased by ~22% YoY led by rural recovery and partly low base.

The compact segment grew by 39% YoY led by premium hatchback Baleno along with

support from newly launched Ignis despite phase out of old Dzire/Dzire Tour. Dzire

Tour is now included under compact segment with length reduced below 4 mtr.

Mid-size segment led by Ciaz increased 23% YoY. Ciaz clocked in 7,024 units.

UVs continued their momentum, with a ~29% YoY growth, primarily aided by

incremental volumes of Vitarra Brezza, which continues to enjoy a waiting period of 5-

6 months.

Export volumes declined ~29% YoY growth to 6,723 units (v/s est 11,000 units).

The stock trades at 21.8x/17.6x FY18E/19E consolidated EPS of ~INR300/371. Maintain

Buy.

Snapshot of volumes for Apr-17

YoY

Company Sales

Maruti Suzuki

LCVs

C (Vans)

A2 (Compacts incl Dzire

Tour)

A3 (Mid Size- CIAZ)

UV (Ertiga, S-Cross)

Total Domestic

Export

Apr-17

Apr-16

YoY

(%) chg

19.5

-4.0

26.9

23.2

28.6

23.4

-29.4

MoM

Mar-17

139,763

304

11,628

92,838

4,918

18,311

127,999

11,764

MoM

FY18 estimate

(%) chg

8.2

19.9

10.4

42.8

12.7

12.9

-42.9

1,776,723

Gr. (%)

13.3

Residual

Gr.

(%)

12.7

Residual FY18 YTD

Monthly Monthly

Run rate Run rate

147,773

151,215

151,215 126,569

411

0

13,938 14,520

102,481 80,779

7,024

5,702

20,638 16,044

144,492 117,045

6,723

9,524

1,645,202

131,521

13.9

6.0

13.0

9.0

136,428

11,345

144,492

6,723

2 May 2017

8

Tata Motors

CMP: INR458

Bloomberg

Equity Shares (m)

M.Cap.(INR b) / (USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

TTMT IN

3395.9

1525/22.8

599 / 300

-21/-19/24





TP: INR609 (+33%)

Buy

Below est at 31k units (v/s est 38.9k), decline of 21% YoY

PVs grew 27% YoY led by Tigor & Hexa; CVs decline by ~40% YoY

Tata Motors Apr-17 sales volumes declined by 21% YoY (down 46% MoM) to 30,972

units (v/s est 38,900 units) led by a 40% decline in CV segment with MHCV & LCV

declining by 53% & 29% respectively. While, Passenger vehicle segment and UV

segment grew by 30% & 12% YoY respectively. FY18 volume est. at 632.7k units.

As per management commentary, “Tata Motors commercial vehicles were affected by

the Supreme Court judgement announced on March 29, with the ban on BS3 sales,

leading to the need for a higher quantity of BS4 stock for April sales. The higher

demand at short notice was not met in production, as vendors struggled to meet with

the higher demand, especially in the MHCV segment. Moreover, after the strong pre-

buying of BS3 vehicles in March, and the price increase of BS4 vehicles (especially in

the MHCV and Buses at 8-10%), demand for BS4 vehicles was also weak.” It expects

production, wholesales and retails to pick up in May and June.

Overall M&HCV sales (incl. exports) declined by ~53% YoY to 6,231 units (v/s est. 7,500

units)

LCV sales (incl. exports) declined by ~29% YoY to 10,968 units (est 15,000 units).

Total CV volumes declined by ~40% YoY (-~58% MoM), led by impact of ban on BS3

vehicles in April 2017 volume.

Car sales (incl exports) grew by ~30% YoY (-9% MoM) to 12,048 units (v/s est 14,000

units) led by new launches like Hexa and Tigor along with consistent performance

from Tiago.

UV sales (incl exports) were at 1,726 units (est. 2,400 units).

The stock trades at 15.6x/7.4x FY18E/19E consol. EPS respectively. Maintain Buy.

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Snapshot of volumes for Apr-17

YoY

Company Sales

Tata Motors

HCV's

LCV's

CV's

Cars

UV's

Apr-17

30,973

6,231

10,968

17,199

12,048

1,726

Apr-16

39,382

13,117

15,449

28,566

9,275

1,541

MoM

YoY (%)

MoM

Mar-17

chg

(%) chg

-21.4

-52.5

-29.0

-39.8

29.9

12.0

57,145

20,548

20,714

41,262

13,282

2,601

-45.8

-69.7

-47.1

-58.3

-9.3

-33.6

FY18

estimate

632,683

188,700

229,569

418,269

184,364

30,050

Gr.

(%)

16.7

7.3

9.8

8.7

34.6

47.0

Residual

Residual

Monthly

Growth (%)

Run rate

19.6

12.1

12.9

12.6

34.9

49.8

54,701

16,588

19,873

36,461

15,665

2,575

FY18 YTD

Monthly

Run rate

30,973

6,231

10,968

17,199

12,048

1,726

2 May 2017

9

Hero MotoCorp

CMP: INR3,310

Bloomberg

Equity Shares (m)

M.Cap. (INR b) / (USD b)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

HMCL IN

199.7

661/10.3

1509/1142

4/-9/-16







TP: INR3,390 (+2.5%)

Neutral

Above est at ~591k (v/s est ~580k); decline of 3.5% YoY

Management expects better volume with ongoing marriage season

HMCL’s Apr-17 volumes declined by ~3.5% YoY (-3% MoM), to 591,306 units (v/s est.

580,000).

Overall FY18 volume est. at 7.14m, up 7% YoY.

As per management commentary, ‘’ The two-wheeler industry witnessed heavy retail

off-take towards the end of March 2017 in view of the transition from BS III to BS IV

vehicles. With the ongoing marriage season, the Company expects to maintain the

trend of robust retail sales in May.’’

The Company raised the prices – ranging from INR500 to INR2,200 - to partially offset

st

the commodity cost increases, effective from May 1 .

The stock trades at 17.3/17x FY18/19 EPS. Maintain Neutral





Snapshot of volumes for Apr-17

YoY

Company Sales

Hero MotoCorp

MoM

Residual FY18 YTD

Residual

Monthly Monthly

MoM (%)

Apr-17

Apr-16 YoY (%) chg Mar-17

FY18 estimate Gr. (%) Growth (%)

Run rate Run rate

chg

591,306 612,739

-3.5 609,951

-3.1

7,136,788

7.1

8.2 595,044 591,306

2 May 2017

10

Eicher Motors

CMP: INR26,022

Bloomberg

EIM IN

Equity Shares (m)

27.2

M.Cap. (INR b)/(USD

700/10.4

b)

52-Wk Range (INR) 26602 / 18006

1, 6, 12 Rel. Per (%)

3/1/12

TP: INR28,828 (+7.5%)

Buy

RE (+25% YoY) in line and VECV (-42%YoY) below est

RE growth stable; VECV growth impacted post BS-3 ban















RE volumes grew ~25% YoY (flat MoM) to 60,142 units (v/s our estimate of ~60,000

units). FY18 volume est at 833k units.

VECV's overall volumes declined ~42% YoY to 3,077 units (v/s our estimate of 5,423

units). The decline was witnessed across segments.

Domestic sales de-grew by ~45% YoY (and ~60% MoM) to 2,578 units (v/s our estimate

of 4,650 units).

LMD volumes, declined by ~43% YoY (down 60% MoM) to 1,178 units (v/s our

estimate of 2,450 units).

HD volumes declined by ~68% YoY (and 78% MoM) to 356 units (v/s our estimate of

1,000 units). Bus volumes declined by ~28% YoY to 1,044 units (v/s our estimate of

1,200 units).

VECV exports decreased 27% to 499 units (v/s our estimate of 773 units).

The stock trades at 30x/25x FY18E/FY19E EPS. Maintain Buy.

Snapshot of volumes for Apr-17

YoY

Company Sales

Eicher Motors

Royal Enfield

VECV

Domestic LMD

Domestic HD

Domestic Buses

Total Domestic

Exports

Apr-17

60,142

3,077

1,178

356

1,044

2,578

499

Apr-16

48,197

5,326

2,081

1,116

1,444

4,641

685

YoY (%) chg

24.8

-42.2

-43.4

-68.1

-27.7

-44.5

-27.2

MoM

Mar-17

60,113

7,088

2,947

1,646

1,817

6,410

678

MoM

(%) chg

0.0

-56.6

-60.0

-78.4

-42.5

-59.8

-26.4

FY18 estimate

833,113

63,007

39,301

13,318

13,465

66,084

8,603

Gr. (%)

25.0

7.9

51.6

19.9

9.7

31.0

7.1

Residual

Gr. (%)

34.7

19.0

65.1

34.0

24.6

44.5

17.4

Residual

Monthly

Run rate

75,735

5,743

3,577

1,217

1,227

6,020

785

2 May 2017

11

2 May 2017

4QFY17 Results Update | Sector: Automobiles

Dabur India

Neutral

BSE SENSEX

29,918

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

S&P CNX

9,304

DABUR IN

1761.5

503.3/7.4

320/259

2/-9/-10

435

32.0

CMP: INR287



TP: INR295 (+3%)

Weak performance, sharp cut in ad-spends cushions profits



Financials & Valuations (INR b)

2017 2018E 2018E

Y/E Mar

Net Sales

77.0

82.6

93.5

EBITDA

15.1

15.7

18.3

NP

12.8

13.6

16.1

EPS (INR)

7.2

7.7

9.1

EPS Gr. (%)

1.9

6.7

18.3

BV/Sh. (INR)

27.5

32.1

37.5

RoE (%)

28.4

26.0

26.3

RoCE (%)

24.6

22.6

23.3

P/E (x)

39.5

37.1

31.3

P/BV (x)

10.4

8.9

7.6







Estimate change

TP change

Rating change

5%

5%



Dabur’s (DABUR) 4QFY17 results witnessed consolidated sales decline of 4.7%

YoY to INR 19.1b (est. 2.2% growth). EBITDA posted 0.6% YoY growth to INR

4.2b (est. 0.5% decline). Adj. PAT grew 0.5% YoY to INR3.3b (est. 2.7% growth).

Domestic FMCG business sales grew 0.7% YoY led by volume growth of 2.4%

(est. 4% growth). While lower than estimates, domestic volumes were still not

poor given high base of 7% volume growth in 4QFY17. Oral Care, Beverages

and Healthcare, (the latter boosted by strong growth in Chyawanprash)

reported sales growth of 3.6%, 10% and 5% YoY respectively while hair care

sales declined 4.2%, Home Care by 6.5% and OTC by 4% YoY. International

business sales declined 4.5% YoY on constant currency.

Consol. EBITDA margin expanded 110bp YoY to 21.8%

mainly due to steep

140bp decline in A&P to sales (multi-year low at 6.4%, 21.4% absolute decline)

and 100bp decline in staff costs, which offset 160bp YoY lower gross margins.

FY17 highlights:

FY17 witnessed another year of poor topline with 2.1% decline

in sales to INR77b, while EBITDA was flat at INR15b and PAT grew by 2.1% YoY

to INR12.8b. There was 20% YoY decline in receivables YoY.

Concall highlights:

a) Owing to currency pressures and poor geopolitical

outlook in the MENA region, international business (25% of sales) is likely to

have a poor FY18 as well. b) Worst seems to be over on the competitive

intensity from Patanjali with honey and Chyawanprash sales recovering.

Valuation and View:

While new launches in the science based Ayurveda space

in FY18, potential recovery in rural consumption and recent investments

behind distribution expansion should aid medium term growth, we have

reduced EPS forecasts for FY18/FY19 by around 6%/5% due to delay in earnings

growth. Stock is fairly valued at 31.3x FY19E EPS. Maintain

NEUTRAL

with

revised target price of INR295 (valued at 32x FY19 EPS, 10% discount to 3 year

average P/E).

FY17

FY16

FY17

2Q

3Q

4Q

4.5

-5.0

2.4

4.5

2.0

19,757 18,477 19,147 78,688 77,014

1.0

-6.1

-4.7

0.8

-2.1

15,730 15,190 14,971 63,505 61,925

4,028 3,286 4,176 15,183 15,089

20.4

17.8

21.8

19.3

19.6

0.7 -12.0

0.6

17.2

-0.6

357

333

395 1,332 1,429

166

139

117

485

540

952

883

650 2,172 2,984

4,456 3,697 4,314 15,538 16,104

873

753

977 2,999 3,303

19.6

20.4

22.6

19.3

20.5

11

7

6

28

31

3,572 2,938 3,331 12,512 12,769

6.2

-7.5

0.5

17.4

2.1

(INR Million)

FY17

Var.

4QE

(%)

4.0

20,242

-5.4%

2.2

16,149

4,092

2.0%

20.2

-0.5

378

142

686

4,258

1.3%

851

20.0

1

3,406

-2.2%

2.7

Quarterly Performance (Consolidated)

0%

Y/E March

Domestic Vol Growth (%)

Net Sales

YoY Change (%)

Total Exp

EBITDA

Margins (%)

YoY Growth (%)

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Minority Interest

Adjusted PAT

YoY Change (%)

E: MOSL Estimates

1Q

8.1

19,017

15,861

3,157

16.6

325

118

531

3,244

620

19.1

10

2,615

FY16

2Q

3Q

5.5

-2.5

19,553 19,675

15,551

4,001

20.5

328

125

558

4,106

744

18.1

0

3,362

12%

15,942

3,733

19.0

322

110

644

3,945

767

19.4

2

3,176

4%

4Q

7.0

20,101

15,949

4,152

20.7

358

132

539

4,201

868

20.7

18

3,315

27%

22%

1Q

4.1

19,239

1.2

15,796

3,443

17.9

9.1

343

118

655

3,637

701

19.3

8

2,927

12.0

2 May 2017

12

28 April 2017

4QFY17 Results Update | Sector: Healthcare

Biocon

Sell

BSE SENSEX

29,918

Bloomberg

Equity Shares (m)

M.Cap.(INR b)/(USD b)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, (INR m)

Free float (%)

S&P CNX

9,304

BIOS IN

200

201.2 / 3.0

1188 / 570

-4/13/75

907

39.3

CMP: INR1,105



TP: INR900 (-19%)

Weak results; monetization of Biosimilars key catalyst

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

Sales

38.8

48.9

EBITDA

9.3

11.8

Net Profit

6.1

6.6

Adj. EPS (INR)

30.6

33.1

EPS Gr. (%)

31.7

8.1

BV/Sh. (INR)

224.4 247.8

RoE (%)

13.6

13.3

RoCE (%)

9.3

9.5

Payout (%)

Valuations

P/E (x)

36.1

33.4

P/BV (x)

4.9

4.5

EV/EBITDA (x)

23.9

19.2

Div. Yield (%)

0.7

0.7

2019E

60.2

15.4

9.0

44.9

35.8

279.5

16.1

15.1





24.6

4.0

14.5

1.0



Estimate change

TP change

Rating change

Revenue (Ind-AS) fell 2% YoY to INR9.3b, driven by lower income from Syngene

and Small Molecules. EBITDA fell 1.7% YoY to INR1.8b (est. of INR2.8b), with

the margin flat at 19.7%, primarily due to muted revenue and forex loss of

INR170m above EBITDA. PAT (Ind-AS) declined 62% YoY to ~INR1.3b (est. of

INR1.8b). FY17 revenue grew 14% to INR40.8b, while EBITDA margin expanded

to 24.1% (+13bp YoY) led by strong growth in Biologics and Licensing Income.

R&D expense stood at INR9,700m in 4Q (including capitalization of INR320m).

Syngene:

Biologics remained flat YoY in 4Q due to delay in approvals in some

emerging markets. In FY17, Biologics sales stood at ~USD75m, with

management maintaining its segmental sales guidance of USD200m by FY19E

(primarily driven by Ems). Syngene (~29% of revenue) declined 14% YoY due to

temporary disruptions led by fire in Dec-16. Small Molecules declined 2% YoY

due to pricing pressure, partially offset by launches in new geographies.

Branded Formulations delivered ~25% YoY growth, led by recovery in domestic

business and pick-up in tender business in the Middle East.

Malaysia plant commissioning update:

Biocon will stop capitalizing against this

plant from 1QFY18. It has spent ~USD250m to develop this plant. Depreciation

expense will increase by ~USD18m p.a. from FY18 due to this (a part of this will

be borne by Mylan). Operating expense is expected to go up by USD30m p.a.

Biocon expects Malaysia plant to incur marginal PAT loss in FY18. Profitability

will improve as contribution from developed markets starts.

Biosimilars pipeline progressing well:

Recent stock price run-up is mainly led

by positive developments in Biosimilars. Although the progress is impressive,

we believe there are some uncertainties capping upside potential. In the near

term, commissioning of Malaysia plant would pressurize profits. Maintain

Sell

with revised a TP of INR900 @ 20x FY19E EPS (v/s INR800 @ 20x 1HFY19E EPS).

(INR Million)

Quarterly Performance

Y/E March

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Minority Interest

PAT

YoY Change (%)

Margins (%)

1Q

8,105

12.8

6,127

1,978

24.4

591

44

304

1,647

376

22.8

33

1,238

20.2

15.3

FY16

2Q

3Q

7,860 8,282

4.9

8.8

6,270 6,483

1,590 1,799

20.2

21.7

610

621

30

15

-750

289

200 1,452

290

241

145.0

16.6

20

181

-110 1,030

-4.9

13.4

12.3

12.4

4Q

9,450

13.8

7,598

1,852

19.6

647

166

3,014

4,053

591

14.6

159

3,303

-63.2

7.9

1Q

9,814

21.1

7,276

2,538

25.9

661

57

502

2,322

552

23.8

104

1,666

34.6

17.0

FY17

2Q

3Q

9,400 10,290

19.6

24.2

7,150

7,680

2,250

2,610

23.9

25.4

680

710

70

90

520

630

2,020

2,440

420

550

20.8

22.5

130

180

1,470

1,710

51.5

66.0

15.6

16.6

FY16

4Q

9,250

-2.1

7,430

1,820

19.7

730

50

490

1,530

110

7.2

150

1,270

-61.6

13.7

34,507

12.8

26,654

7,853

22.8

2,423

102

1,192

6,520

1,131

17.3

744

4,646

-7.0

13.5

FY17

38,760

12.3

29,421

9,339

24.1

2,772

260

2,024

8,331

1,616

19.4

597

6,118

31.7

15.8

FY17E

4QE

vs Est

11,286 -18.0%

19.4

8,514

2,772 -34.3%

24.6

714

35

548

2,571 -40.5%

536

20.8

186

1,849

-44.0

16.4

2 May 2017

13

28 April 2017

4QFY17 Results Update | Sector: Financials

Federal Bank

Buy

BSE SENSEX

29,918

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

S&P CNX

9,304

FB IN

1,719.0

184.7 /2.7

109 / 44

17/24/115

693

100.0

CMP: INR107



TP: INR125 (+16%)

Strong beat on all fronts; asset quality showing encouraging trends

Federal Bank’s (FB) 4QFY17 results strongly beat our estimates on all fronts,

with higher total income growth (+22% YoY, 8% beat), controlled opex (5%

beat) and lower provisions (19% beat). Core PPoP grew 45% YoY (+29% QoQ) to

INR4.8b.

NIM improvement of 10bp QoQ to 3.4%, continued movement in loan growth

(+5% QoQ, +26% YoY) and pick-up in fee income growth (+23% YoY) were the

key highlights.

Loan growth of 5% QoQ (+26% YoY) was broad-based across segments, with

corporate (+6% QoQ), SME (+8% QoQ) and agri (+11% QoQ) all showing robust

growth. Retail loans grew 2% QoQ, but 26% YoY.

The bank delivered an impressive asset quality performance, with GNPAs

declining 12% QoQ in absolute terms (GNPA % down 44bp QoQ to ~2.3%).

Incremental slippages moderated to INR2.44b from INR2.73b in 3Q (annualized

slippage ratio of ~1.7% – lowest in last eight quarters), led by lower slippages in

corporate and retail. Strong recoveries/upgradations and sale to ARC of

INR3.18b led to a decline in GNPAs.

FY17 was a strong year for the bank, with a) loan/CASA growth of 26%/24%

YoY, b) 15bp NIM improvement to 3.3%, c) decline in GNPA ratio by 50bp to

2.3%, with healthy PCR of 71%, d) fall in CI ratio by 550bp+ to 51% and e)

business outside Kerala picking up significant scale (SA+ 29% YoY, CA +16% YoY

and loans +50% YoY).

Valuation and view:

We are enthused by FB’s core operating performance,

driven by its strong balance sheet. We believe the bank is ahead of corporate

lending peer banks on the asset quality curve. Considering asset quality

distractions in the PSU space, we believe FB is well positioned to gain market

share in highly rated corporates. The bank has board approval to raise INR25b,

and in the event of capital raise, tier 1 (currently 11.8%) should be

strengthened further. We upgrade estimates for FY18/19 by 9-10%, and retain

Buy

with a TP of INR125 (2x FY19 BV) based on RI model.



Financials & Valuations (INR b)

Y/E Mar

2017 2018E 2019E

NII

30.5

36.4

43.4



OP

19.2

22.2

26.9

NP

8.3

9.9

12.5

NIM (%)

3.3

3.1

3.1



EPS (INR)

4.8

5.8

7.3

EPS Gr. (%)

74.1

19.5

26.3

BV/Sh. (INR)

51

55

61

ABV/Sh. (INR)

47

52

58

ROE (%)

9.9

10.9

12.5

ROA (%)

0.8

0.8

0.8

Payout (%)

21.5

20.3

19.7



Valuations

P/E(X)

22.3

18.7

14.8

P/BV (X)

2.1

1.9

1.8



2 May 2017

14

RESULTS

FLASH

2 May 2017

Results Flash | Sector: Utilities

JSW Enegry

Buy

BSE SENSEX

29,918

S&P CNX

9,304

CMP: INR67





TP: INR73

We will revisit our estimates

post earnings call/management

interaction.

Lower generation, shutdown and higher fuel cost impacts performance

EBITDA was down 48% YoY / 11% QoQ to INR5.9b (v/s. est. of INR6.5b) on

lower generation at Vijaynagar, shutdown at Ratnagiri and higher coal prices.

Generation was down 32% YoY / 13% QoQ to 4.01BU on lower generation at

Vijaynagar due to weak demand, shutdown at Ratnagiri and seasonally lower

hydro generation (QoQ impact).

Unit fuel cost ex-hydro generation increased 27% YoY / 9% QoQ to

INR2.74/kWh on higher coal prices.

PAT was down 92% YoY to INR242m.

Reported interest cost declined 18bps YoY/9bps QoQ to 10.2%. Reported net

debt to equity was at 1.29x (excludes acceptances)

Conference Call Details

Date:

2 May 2017

Time:

11:00am IST

Dial-in details:

+91-22-3960 0663

nd







Financials & Valuations (INR b)

2017E 2018E 2019E

Y/E Mar

Net Sales

837.1 901.6 1,037.3

EBITDA

33.9

32.3

33.3

NP

6.3

3.8

1.2

EPS (INR)

3.9

2.3

0.8

EPS Gr. (%)

-49.1

-40.8

-66.7

BV/Sh. (INR)

53.6

53.6

52.1

RoE (%)

7.3

4.3

1.4

RoCE (%)

9.2

8.4

7.7

P/E (x)

17.2

29.1

87.5

P/BV (x)

1.2

1.2

1.3

Key questions for the management



Outlook on extension of short-term PPA for Vijaynagar plant with Karnataka



Update on signing of long-term PPA with Punjab post the tariff approval for

Karcham Wangtoo hydro power plant



Update on approval of pending capital cost for Rajwest power plant



Valuation and view:

We will revisit our estimates post earnings call. The near-

to-medium term earnings outlook is clouded due to open merchant capacities

and over-supplied power market. However, with a healthy balance sheet and

strong FCF generation from contracted capacities, JSW Energy is one of the

best placed companies to benefit as the electricity market balances. At current

valuations the open merchant capacities are available at significant discount to

replacement cost. We have a Buy rating with a TP of 73/sh. (FY18E basis).

(INR million)

1Q

24,500

16.3

13,328

11,173

45.6

2,398

4,293

416

4,899

0

4,899

1,248

25.5

-14

3,665

3,665

32.1

FY17

2Q

3Q

4Q

20,470 19,043 18,621

-19.1

-28.1

-30.6

10,843 12,468 12,752

9,627 6,575 5,869

47.0

34.5

31.5

2,471 2,444 2,379

4,356 4,229 3,970

516

505

732

3,316

407

253

0

0

0

3,316

1,167

35.2

-25

2,174

2,174

-42.3

407

249

61.2

-56

214

214

-93.3

253

22

8.6

-11

242

242

-92.1

FY16

99,690

6.3

58,244

41,446

41.6

9,502

15,032

2,100

19,013

-1,500

20,513

6,051

29.5

507

13,955

12,897

-6.0

FY17

82,634

-17.1

49,391

33,244

40.2

9,692

16,848

2,170

8,875

0

8,875

2,685

30.3

-106

6,295

6,295

-51.2

FY17

4QE

19,696

-26.5

13,167

6,529

33.1

2,487

4,030

559

571

0

571

-90

-15.7

370

290

290

-90.5

vs Est

(%)

-5

-3

-10

-4

-2

31

-56

Quarterly Performance (Consolidated)

Y/E March

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before EO

Extra-Ord

PBT

Tax

Rate (%)

MI & Asso. Cos.

Reported PAT

Adj PAT

YoY Change (%)

1Q

21,070

-17.6

12,897

8,173

38.8

1,984

2,640

691

4,239

0

4,239

1,155

27.2

310

2,775

2,775

-15.2

FY16

2Q

3Q

4Q

25,314 26,491 26,814

12.4

11.3

22.5

15,332 14,579 15,436

9,983 11,913 11,378

39.4

45.0

42.4

2,240 2,650 2,627

3,511 4,491 4,389

898

264

247

5,129 5,035 4,610

-1,500

0

0

6,629

1,537

23.2

172

4,920

3,767

16.4

5,035

1,816

36.1

12

3,206

3,206

-19.0

4,610

1,543

33.5

12

3,054

3,054

-5.9

-56

-17

2 May 2017

15

RESULTS

FLASH

Bharat Financial

BSE SENSEX

29,918

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

S&P CNX

9,304

BHAFIN IN

137.1

110.9/1.7

939 / 459

-5/-16/20

2496

98.3

2 May 2017

Results Flash | Sector: Financials

CMP: INR804



TP: INR859 (+7%)

Neutral

Biting the bullet; Stressed loans pool largely stable



Financials & Valuations (INR b)

2017 2018E 2019E

Y/E March

8,972 10,654 14,376



NII

5,522 7,503 10,320

PPP

2,897 5,684 6,990

PAT

21.0

41.2

50.7

EPS (INR)

177.3 218.5 269.2

BV/Share (INR)

3.3

4.4

3.9

RoA on AUM (%)

15.1

20.8

20.8

RoE (%)



Valuations

38.3

19.5

15.9

P/E (x)

4.5

3.7

3.0

P/BV (x)





BHAFIN reported 4QFY17 net loss of INR2.35b driven by a provision hit of

INR3.35b. The company chose to make adequate provisions on the stressed

loans pool, which have remained stable since the last analyst update.

Collection efficiency trends have been stable. Collection efficiency in the

due month remains at 90-92% and continues to inch up every month.

Collection efficiency of November seems to have stabilized at 98.5%.

Collection rate for April (collections/dues for the month) remained stable

MoM at 96.7%.

Underlying stressed pool of assets has stabilized. Total overdues (net of

accounts that have paid once in the past two weeks) have remained stable

at ~INR3.6b since the last update in March. However, 8 weeks+ overdues

increased marginally from INR3.06b to INR3.31b MoM as accounts that

were less than 8 weeks overdue slipped into the higher bucket. We view this

stabilization in underlying asset quality as a positive sign.

BHAFIN incurred provisioning expense of INR3.35b in the quarter, thus

providing for 57% of on-BS NPLs as well as for 100% provision on the first

loss on the managed loans portfolio. Given that NPA provisions on the BS

stand at INR2.4b and overall stressed pool stands at INR3.6b, we believe

BHAFIN could incur provisioning expense of INR1-1.5b in FY18.

Disbursements were up 32% YoY to INR39b in the quarter driven by an

increase in average ticket size from ~INR17k to INR22k. We believe this

could be due to higher share of loans to existing borrowers, which generally

have higher ticket sizes.

Valuation and view:

Large unmet demand, low competitive intensity,

supportive regulations, strong balance sheet and best-in-class operating

metrics have put BHAFIN on a high growth path. While there has been a hit

due to demonetization and other external factors, we believe that the long-

term growth story remains unchanged. We look to revise our estimates and

TP post the analyst concall on May 2nd.

2 May 2017

16

RESULTS

FLASH

Coromandel International

BSE SENSEX

29,918

S&P CNX

9,304

27 April 2017

Results Flash | Sector: TelecomRs

CMP: INR348

PAT beat, but revenues miss estimate



Under Review

We will revisit our estimates

post earnings call/management

interaction.

CRIN reported overall revenue of INR22.6b (est. of INR30.5b) in 4QFY17, as

against INR30.5b in 4QFY16, marking a decline of 26%.

Conference Call Details



EBITDA margin expanded 440bp in 4QFY17 to 12.1% (est. of 8.1%).

nd

Consequently, EBITDA increased 16% to INR2,724m (est. of INR2,471m).

Date:

2 May 2017



Consequently, reported PAT grew from INR1,274m in 4QFY16 to INR1,446m

Time:

2:30pm IST

(est. of INR1,286m) in 4QFY17.

Dial-in details:

Key questions for management

+91-22-3938 1075



Impact of poor monsoon in south and reservoir levels



Capacity utilization in fertilizer business and change in realization

Financials & Valuations (INR b)



Changes in raw material prices

2016

2017E

2018E

Y/E Mar



Performance of agro chemicals, and any impact of recent ban on some

Sales

109.6

121.9

134.4

companies

EBITDA

NP

Adj EPS (INR)

EPS Gr. (%)

BV/Sh (INR)

RoE (%)

RoCE (%)

9.6

4.6

16.0

35.1

92.0

18.2

13.5

10.0

5.3

18.3

14.8

101.9

18.9

14.6

11.8

6.9

23.6

28.6

115.3

21.7

17.9

Valuation and view:

We will revisit our estimates post the earnings call. Based on

our current estimates, at CMP of INR348, the stock trades at 19x/15x P/E on

FY17E/FY18E EPS. Currently, we have the stock rating under review, and will

update post the earnings call.

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

21.8

3.8

11.7

19.0

3.4

10.9

14.8

3.0

8.9

2 May 2017

17

28 April 2017

4QFY17 Results Update | Sector: Financials

IDFC

Buy

BSE SENSEX

29,918

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

S&P CNX

9,304

IDFC IN

1,589

87.4 / 1.3

71 / 35

-2/-3/25

327.0

100.0

CMP: INR62

TP: INR81 (+30% )

Subdued performance by IDFC Bank hurts overall results

IDFC Bank: Financials & Valuations (INR b)

2017 2018E 2019E

Y/E March

NII

20.2

23.0

29.8

OP

17.5

18.3

24.0

NP

10.2

11.2

14.5

NIM (%)

2.3

2.0

2.1

EPS (INR)

3.0

3.3

4.3

EPS Gr. (%)

10.1

28.8

BV/Sh. (INR)

43.2

45.7

49.0

RoE (%)

7.2

7.4

9.0

RoA (%)

1.0

0.9

0.9

Cons. PAT

10.2

11.2

14.4

IDFC Limited’s (IDFC) operating profit declined to INR3.3b in 4QFY17 from

INR5.5b in the previous quarter (YoY comparison not available), primarily due to

lower contribution from IDFC Bank. Lower sequential margins and trading losses

(v/s trading gains in the prior quarter) drove subdued performance at the bank

(refer

to our latest note here).



IDF business:

IDFC IDF (now rechristened IDFC Infrastructure Finance)

continues to expand its loan book (up 19% QoQ from INR22.6b to INR26.8b,

driven by an increase in the number of accounts from 36 to 37). While

growth has been strong, we believe that sustaining such levels would be

difficult due to the operating environment, especially after the rate cut by

banks. Note that IDF can refinance only projects that have been operational

for at least a year. Given the scarcity of such projects right now, banks are

unwilling to let go of such projects. As a result, management expects spreads

to compress from 2% now to ~1.4%. IDF is well capitalized, with a CAR of

28.9%. Operating profit was INR190m v/s INR220m in 3QFY17.



AMC business:

IDFC acquired the 25% stake held by Natixis Global in the

AMC business in 4QFY17 for INR2.44b. Average AUM was largely stable QoQ

(+14% YoY) at INR595b, with share of equity AUM stable at 22%. However,

total income grew in excess of AUM growth at 8% QoQ, while expense

growth was relatively modest (+2% QoQ). This led to 16% QoQ growth in

operating profits in the quarter to INR370m.



Other highlights:

(a) Profits in Alternative Management segment declined

QoQ from INR70m to INR40m; (b) IDFC Securities witnessed a spike in

revenue from INR140m in 3QFY17 to INR250m in 4QFY17.



Valuation and view:

In the near term, quarterly trends are not very relevant,

and most of the profitability will be derived from banking operations. We

expect balance sheet growth for the bank to remain modest, while asset

quality issues are likely to persist. While trading gains at IDFC Bank

supported earnings in 9MFY17, it is unlikely to continue in this magnitude.

Increase in IDF leverage (leading to higher RoE), continued traction in asset-

light businesses (Securities, Asset Management) and build-up of banking

business will lead to value creation for shareholders. We use SOTP to arrive

at a target price of INR81.

Buy.

(INR b)

112.3

48.4

8.6

9.5

2.8

27.4

32.1

128.6

(USD b)

1.7

0.7

0.1

0.1

0.0

0.4

0.5

1.9

Per Share (INR)

71

30

5

6

2

17

20

81

55

47

Valuation Rationale

Based on TP of INR68 for IDFCB

1x Net worth

5.6% of FY19E AUM

10x FY19 EPS; PBV 1.5x; ROE 16%

4.2% of FY19E AUM

20% holdco discount

SOTP: FY19 based

A] IDFC Bank (53% direct stake)

B] Other Ventures

IDF

Alternative assets mgt

IB and Broking

Mutual Fund Business

Hold Co discount

IDFC Ltd

CMP (INR)

Upside (%)

Source: MOSL

2 May 2017

18

29 April 2017

Q4FY17 Results Update | Sector: Automobiles

CEAT Ltd

Buy

BSE SENSEX

29,918

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

S&P CNX

9,304

CEAT IN

RawMat headwinds to continue in 1QFY18; Maintain Buy

40



In-line revenue and adj. PAT; EBITDA below estimates:

4QFY17 revenue

61.5 / 1.0

grew 5% YoY to INR16.4b (est. of INR16.5b), driven by volume growth of

1575 / 731

4.4% and pricing mix. EBITDA margin shrunk 390bp YoY to 8.1%, impacted by

15/18/14

gross margin contraction of 600bp, partly offset by lower other expenses.

1075

49.2

EBITDA fell by 29% YoY to INR1,325m and adj. PAT by 25% to INR798m (est.

CMP: INR1,521

TP: INR1,741(+14%)

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

64.4

71.5

Net Sales

6.6

7.9

EBITDA

3.8

4.2

PAT

93.3

104.9

EPS (INR)

-16.9

12.4

Gr. (%)

597.0

688.0

BV/Sh (INR)

16.9

16.3

RoE (%)

13.5

13.4

RoCE (%)

16.3

14.5

P/E (x)

2.5

2.2

P/BV (x)

Estimate change

TP change

Rating change

Quarterly Performance (Consolidated)

of INR777m). Tax was negative at INR45m due to R&D expenses (200%

deduction in income tax) and capitalization of project (investment allowance

2019E

of 15%). For FY17, revenue grew 1% YoY, EBITDA margin shrunk 270bp YoY

77.5

to 10.2%, while adj. PAT declined 17% YoY to INR3,775m.

9.3



Replacement market performs well, while OEM and exports were laggards:

5.4

Replacement market grew 10% YoY in 4QFY17, while the OEM and exports

133.9

segments declined. OEM was impacted post demonetization (was growing

27.7

at 15% before), while exports were affected by import restrictions placed in

804.2

Indonesia. In the replacement market, CV volumes were flattish, motorcycle

17.9

and scooter were positive, and PV grew in northwards of 25%. In case of

15.5

OEM, tractors was weak, 3Ws exhibited negative growth, while PVs/UVs

11.4

1.9

registered positive growth.



Further price hike of 4-5% required to offset RM inflation:

Management

highlighted that it has taken average price hike of 3-4% across categories

and requires further hike of 4-5% to offset the impact of raw material price

inflation. 1QFY18 is expected to see a contraction in margins, as peak

purchase of natural rubber (made in February 2017) is likely to be utilized in

May and June 2017. Additionally, advertisement expenses are expected to

be on the higher side.



Valuation and view:

In FY18, management is expected to take further price

hikes, while volume growth will be driven by strong demand in UVs. In this

view, we expect revenue/PAT CAGR of 10%/20%, driven by EBITDA margin

expansion of 180bp to 12% over FY17-19E. We value the company at a P/E

of 13x FY19E EPS, and continue maintaining

Buy

rating with a target price of

INR1,741 (15% upside).

(INR Million )

2 May 2017

19

RESULTS

FLASH

27 April 2017

4QFY17 Results Update | Sector: Textiles

Kitex Garments

Buy

BSE SENSEX

29,918

S&P CNX

9,304

CMP: INR500

Results below estimates





TP: INR551(+10%)

We will revisit our estimates

post earnings call/management

interaction.

Financials & Valuations (INR b)

2016

2017E

Y/E Mar

Sales

5.9

6.8

EBITDA

1.9

2.3

NP

1.2

1.5

Adj EPS (INR)

26.0

31.0

EPS Gr. (%)

10.1

19.1

BV/Sh (INR)

96.3

119.1

RoE (%)

29.9

28.7

RoCE (%)

27.8

29.0

Payout (%)

27.0

26.5

Valuations

P/E (x)

19.2

16.2

P/BV (x)

5.2

4.2

EV/EBITDA (x) 10.9

8.9

Div Yield (%)

1.2

1.4



7.9

2.7

1.7

36.7



18.7



145.9

27.7

28.2



27.1

2018E

KTG reported overall revenue of INR1,772m (est. of INR2,240m) in 4QFY17, as

against INR1,844m in 4QFY16, marking a decline of 21%.

Garments segment declined 8% YoY to INR1,494m, while fabrics segment (net

of inter segment sales) grew 31% to INR278m.

EBITDA margin shrunk 1,060bp from 37.6% in 4QFY16 to 27.1% (est. of 35.5%)

in 4QFY17. EBITDA declined 31% to INR479m (est. of INR795m), as against

INR693m in 4QFY16.

Interest cost increased to INR23m in 4QFY17 from INR4m in 4QFY16.

Consequently, PAT declined 40% from INR449m in 4QFY16 to INR270m (est. of

INR580m) in 4QFY17.

The company has recommended issue of bonus shares in the ratio of 2:5 and a

final dividend of INR0.75 per share (total dividend being INR1.5 per share).

13.6

Key questions for management

3.4



Impact of INR appreciation v/s the USD. Excluding that, what would have been

7.1

EBITDA margins

1.7



Order visibility for the garments business, and what impacted performance in



4QFY17

Traction from new clients and in-licensed brand

Valuation and view:

We will revisit our estimates post the earnings call. Based on

our current estimates, at CMP of INR500, the stock trades at 16x/14x P/E on

FY18E/FY19E EPS. Currently, we have

Buy

rating on the stock, which we will update

post the earnings call.

2 May 2017

20

March 2017 Results Preview | Sector: Media

Inox Leisure

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

Financial Snapshot (INR Billion)

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)

35.2 118.9

4.8

13.8

4.7

19.5

36.4

4.1

11.6

25.8

3.6

9.1

2016 2017E 2018E 2019E

11.6

1.9

0.8

8.4

61.4

14.9

13.2

12.2

1.7

0.4

4.1

65.4

6.2

6.6

14.5

2.4

0.8

8.6

73.6

11.8

10.4

17.2

2.8

1.0

10.9

27.0

84.0

13.2

11.6

INOL IN

96.2

28 / 0

305 / 191

21 / 4 / 29



CMP: INR294





TP: INR230 (-22%)

Sell

We expect revenue to grow 9% YoY to INR2.7b in 4QFY17.

Margins are likely to improve by 50bp YoY to 6.5%. We expect

EBITDA to improve by 18% to INR177m.

We expect loss of INR76m, as against profit of INR161m in 4QFY16.

Maintain

Sell.

284.0 -51.2 108.3

Key things to watch for



Footfalls during the quarter and pick-up post demonization.



Number of screen additions.



Pick up in ad revenue.

Consolidated Quarterly performance

Y/E Mar

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before EO expense

Extra-Ord expense

PBT

Tax

Rate (%)

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOSL Estimates

1Q

3,025

30.2

2,380

645

21.3

197

62

15

400

0

400

148

36.9

253

253

452.0

8.4

FY16

2Q

3Q

3,078

2,979

15.7

-0.9

2,512

2,445

565

534

18.4

17.9

197

197

62

61

20

18

327

0

327

115

35.0

213

213

302.5

6.9

293

-50

244

73

29.9

171

205

43.6

6.9

4Q

2,513

15.4

2,363

151

6.0

207

59

16

-100

0

-100

-262

N.M

161

161

N.M

6.4

1Q

3,369

11.4

2,748

621

18.4

203

58

25

385

0

385

136

35.2

250

250

-1.3

7.4

FY17

2Q

2,974

-3.4

2,702

272

9.1

208

58

21

27

0

27

11

41.7

17

17

-92.1

0.6

3Q

2,980

0.0

2,663

317

10.6

214

65

22

60

0

60

23

38.8

37

37

-82.2

1.2

4QE

2,729

8.6

2,552

177

6.5

255

75

15

-138

0

-138

-62

N.M

-76

-76

N.M

-2.8

(INR Million)

FY16

FY17E

11,595

14.0

9,700

1,895

16.3

798

244

68

921

-50

871

74

8.5

797

843

305.6

7.3

12,054

18.5

10,672

1,382

11.5

865

259

84

343

0

343

113

33.0

230

230

-72.8

1.9

2 May 2017

21

March 2017 Results Preview | Consumer

Marico

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

MRCO IN

1289.6

384 / 6

307 / 235

3 / -2 / 1

CMP: INR298

TP: INR340 (+14%)

Buy

Financial Snapshot (INR b)

Y/E March

2016 2017E 2018E 2019E

Sales

EBITDA

Adj. PAT

Adj. EPS (INR)

EPS Gr. (%)

BV/Sh.(INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

Div. Yield (%)

53.2

18.3

36.5

1.1

49.0

14.7

34.2

1.0

42.5

12.7

29.9

1.1

35.4

11.8

24.9

1.8

60.1

10.4

7.2

5.6

26.1

16.3

36.9

31.4

60.2

59.5

11.0

7.8

6.1

8.5

20.2

33.3

29.4

49.3

67.9

12.5

9.0

7.0

15.3

23.4

32.1

28.5

45.6

78.1

15.0

10.9

8.4

20.1

25.3

34.6

30.7

65.3



We expect sales to grow by 4.4% YoY to INR13.4b, with 7% increase

in domestic volumes. In our opinion, Parachute volumes would

grow in low-double-digit, while Saffola and VAHO volumes would

grow in mid-single-digit (in the base quarter, Saffola and VAHO

volumes grew by 10% and 15% respectively).



We observe that copra prices are up 49% YoY (data available till

Feb-2017) and kardi oil prices are up 10% YoY. We are modeling

300bp YoY gross margin contraction and 40bp EBITDA margin

contraction for 4QFY17.



PAT is projected to grow by 6.2% YoY to INR1.4b.



The stock trades at 35.4x FY19E EPS of INR8.4; maintain Buy. We

like MRCO’s franchise, portfolio strength, management quality and

its multiple growth driver models.

Key issues to watch for:



Comments on volume growth trends across key categories.



Outlook for raw materials.



Margin expansion and guidance for the international business.

Quarterly Performance

Y/E March

Domestic volume growth (%)

Net Sales

YoY Change (%)

COGS

Gross Profit

Gross margin (%)

Other Expenditure

% to Sales

EBITDA

Margins (%)

YoY Change (%)

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Minority Interest

Adjusted PAT

YoY Change (%)

E: MOSL Estimates

1Q

6.0

17,482

9,662

7,821

44.7

4,657

26.6

3,164

18.1

188

45

337

3,267

982

30.1

0

2,285

FY16

2Q

3Q

5.5

10.5

14,518

15,285

7,595

6,922

47.7

4,652

32.0

2,271

15.6

221

37

193

2,206

676

30.7

0

1,530

7,526

7,759

50.8

4,877

31.9

2,881

18.9

229

57

180

2,776

717

25.8

2

2,057

4Q

8.4

12,878

5,993

6,885

53.5

4,782

37.1

2,102

16.3

311

68

320

2,044

678

33.2

4

1,362

1Q

8.0

17,499

0.1

8,419

9,079

51.9

5,384

30.8

3,695

21.1

16.8

208

54

319

3,753

1,072

28.6

2

2,679

17.2

FY17

2Q

3Q

4QE

3.4

-4.0

7.0

14,390

14,140 13,442

-0.9

-7.5

4.4

6,847

6,859 6,657

7,543

7,281 6,785

52.4

51.5

50.5

5,050

4,585 4,639

35.1

32.4

34.5

2,493

2,697 2,146

17.3

19.1

16.0

9.8

-6.4

2.1

209

213

334

21

44

53

285

260

304

2,548

2,700 2,063

740

781

615

29.1

28.9

29.8

2

2

2

1,806

1,916 1,446

18.1

-6.8

6.2

(INR Million)

FY16

FY17E

7.0

61,224

7.0

30,614

30,610

50.0

20,052

32.8

10,558

17.2

23.1

1,018

202

830

10,167

2,956

29.1

118

7,092

23.7

3.6

59,471

-2.9

28,783

30,688

51.6

19,657

33.1

11,031

18.5

4.5

964

171

1,168

11,064

3,209

29.0

8

7,847

14.6

2 May 2017

22

March 2017 Results Preview | Sector: Financials - Banks

RBL Bank

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

RBK IN

361.7

193 / 3

547 / 274

13/69/-

CMP: INR535

Under Review

Financial Snapshot (INR b)

Y/E MARCH

2016 2017E 2018E 2019E

NII

8.2

12.1

15.8

20.8

OP

5.4

9.0

12.4

16.6

NP

2.9

4.6

6.7

8.8

NIM (%)

2.7

3.0

3.1

3.2

EPS (INR)

9.0

12.7

18.5

24.3

EPS Gr. (%)

27.6

41.3

45.4

31.2

BV/Sh. (INR)

92.0 114.7 129.6 149.2

ABV/Sh. (INR) 89.5 114.1 128.8 148.1

RoE (%)

11.2

12.9

15.2

17.4

RoA (%)

0.9

1.1

1.2

1.3

Valuations

P/E(X)

59.4

42.0

28.9

22.0

P/BV (X)

5.8

4.7

4.1

3.6

P/ABV (X)

6.0

4.7

4.2

3.6

Div. Yield (%)

0.3

0.4

0.6

0.7



Loan growth (+10% QoQ) and deposit growth (+38% YoY) would

be significantly above industry average.



We expect NII to grow 44% QoQ, led by strong loan growth and

stable NIMs, and helped by strong CASA inflows and fall in bulk

deposit rates.



Overall non-interest income is expected to grow by ~44% YoY, led

by strong growth in fee income and digital initiatives. We expect

opex growth of 31%, led by continued capacity expansion.

However, opex is expected to trail total income growth of 44%,

driving 62% YoY increase in PPoP.



Asset quality is expected to remain largely stable in 4QFY17,

though some stress could materialize, particularly in the MFI

segment. Credit costs would largely be under control.



We expect PAT growth of 12% QoQ and 72% YoY. RBK trades at

3.6x FY19E BV and 22x FY19E EPS. We await management

commentary on asset quality and growth outlook, and change our

rating to Under Review.

Key issues to watch for



Management commentary on slippages in SME segment.



Update and commentary on balance sheet growth strategy.



CASA ratio and traction on NIMs.

Quarterly Performance

Interest Income

Interest Expense

Net Interest Income

% Change (Y-o-Y)

Other Income

Net Income

Operating Expenses

Operating Profit

% Change (Y-o-Y)

Other Provisions

Profit before Tax

Tax Provisions

Net Profit

% Change (Y-o-Y)

Operating Parameters

NIM (Reported,%)

Deposit Growth (%)

Loan Growth (%)

CD Ratio (%)

Tax Rate (%)

Asset Quality

Gross NPA (INR b)

Gross NPA (%)

1Q

6,049

4,382

1,667

1,259

2,926

1,810

1,116

227

889

286

603

FY16

2Q

6,644

4,744

1,899

1,123

3,022

1,814

1,209

223

986

316

669

3Q

7,131

4,907

2,224

1,096

3,321

1,829

1,492

316

1,176

366

811

4Q

7,619

5,218

2,402

1,427

3,829

2,221

1,608

379

1,230

388

842

1Q

8,637

6,190

2,447

46.8

1,675

4,122

2,277

1,845

65.3

426

1,419

445

973

61.4

2.8

FY17

2Q

9,019

5,990

3,029

59.5

1,691

4,721

2,530

2,191

81.3

781

1,410

512

899

34.3

3.4

37.8

44.0

89.0

36.3

2.7

1.1

3Q

9,612

6,396

3,216

44.6

1,823

5,038

2,687

2,351

57.6

362

1,989

703

1,287

58.8

3.4

43.9

46.3

89.2

35.3

2.9

1.1

4QE

10,861

7,404

3,457

43.9

2,052

5,509

2,899

2,610

62.3

430

2,180

734

1,446

71.7

(INR Million)

FY16

27,443

19,251

8,192

47.2

4,905

13,097

7,673

5,424

50.6

1,144

4,280

1,355

2,925

41.2

3.1

42.4

46.9

87.2

31.7

2.1

1.0

FY17E

38,129

25,981

12,149

48.3

7,241

19,390

10,393

8,996

65.9

1,998

6,998

2,393

4,605

57.4

3.3

38.0

40.0

88.5

34.2

3.3

1.10

3.0

3.0

3.2

3.2

32.2

85.2

32.1

1.6

0.9

87.8

31.1

2.0

1.1

87.2

31.5

2.1

0.98

86.3

31.4

2.5

1.1

38.0

40.0

88.5

33.7

3.3

1.1

2 May 2017

23

March 2017 Results Preview | Sector: Financials

Shriram City Union Fin.

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

SCUF IN

65.9

148 / 2.2

2650 / 1480

17 / -3 / 33

CMP: INR2,285 TP: INR2,689 (+18%)

Buy

Financial Snapshot (INR b)

Y/E March

NII

PPP

PAT

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoA (%)

RoE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

Div. Yield (%)

2016

23.9

13.6

5.3

80

-5

685

3.0

12.3

23

28.4

3.3

0.7

2017E

28.7

17.2

6.1

92

14

757

3.0

12.7

21

24.9

3.0

0.7

2018E 2019E

33.8 40.1

20.3 24.2

8.9 10.9

134 165

46

22

870 1008

3.7

3.9

16.5 17.5

16

16

17.0

2.6

0.8

13.9

2.3

1.0



SCUF’s AUM is expected to grow 2% QoQ and 17% YoY to

INR229b, driven by 4% YoY growth in disbursements. There was a

visible pick-up in growth in February and March, post the lifting of

the cash withdrawal limits by the RBI.



Margins are expected to decline slightly due to the impact of

interest reversals. Hence, NII growth is expected to be ~10% YoY.



Slower growth in operating expenses (5% YoY) is expected to

drive 13% YoY PPoP growth.



We expect GNPL ratio to increase to 7.5%, driven by migration to

120dpd NPA recognition. We factor in provisions of INR2.95b, as

against INR2.24b in 3QFY17 and INR2.56b in 4QFY16.



The stock trades at 2.6x FY18E and 2.3x FY19E consolidated BV.

Maintain Buy.

Key issues to watch for



Trends in asset quality in each segment.



Business growth and momentum, and management

commentary on the same.



Movement in borrowing costs and margins.



Performance of the housing finance subsidiary.

Quarterly Performance

Y/E March

FY16

FY17

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4QE

Interest Income

9,129

9,455 10,008

9,757 10,535 11,153 11,557 10,857

Interest expenses

3,398

3,436

3,531

3,534

3,672

3,802

3,933

4,040

Net Interest Income

5,731

6,019

6,477

6,223

6,863

7,351

7,624

6,817

Y-o-Y Growth (%)

14.6

18.0

13.2

10.8

19.7

22.1

17.7

9.5

Fees and Other Income

42

5

3

163

15

3

6

176

Net Operating Income

5,772

6,024

6,480

6,386

6,878

7,354

7,630

6,993

Y-o-Y Growth (%)

12.6

13.5

11.9

11.9

19.2

22.1

17.8

9.5

Operating Expenses

2,361

2,524

2,584

2,961

2,739

2,829

2,977

3,110

Operating Profit

3,411

3,500

3,896

3,425

4,139

4,525

4,653

3,883

Y-o-Y Growth (%)

9.9

10.8

15.5

3.4

21.3

29.3

19.5

13.4

Provisions

1,167

1,179

1,257

2,561

1,356

1,390

2,242

2,945

Profit before Tax

2,244

2,321

2,639

864

2,784

3,135

2,412

938

Tax Provisions

767

798

896

309

966

1,090

835

326

Net Profit

1,477

1,523

1,743

555

1,818

2,045

1,577

612

Y-o-Y Growth (%)

15.6

10.5

13.9

-60.3

23.1

34.3

-9.5

10.3

Int Exp/ Int Earned (%)

37.2

36.3

35.3

36.2

34.9

34.1

34.0

37.2

Cost to Income Ratio (%)

40.9

41.9

39.9

46.4

39.8

38.5

39.0

44.5

Tax Rate (%)

34.2

34.4

34.0

35.8

34.7

34.8

34.6

34.8

E: MOSL Estimates; * Quaterly nos and full year nos will not tally due to different way of reporting financial nos

FY16

37,723

13,834

23,889

14.2

250

24,139

12.6

10,494

13,645

9.2

5,577

8,068

2,771

5,298

-5.1

36.7

43.5

34.3

INR m

FY17E

44,103

15,447

28,656

20.0

200

28,856

19.5

11,655

17,201

26.1

7,932

9,269

3,216

6,052

14.2

35.0

40.4

34.7

2 May 2017

24