15 May 2017

Corporate performance

4QFY17: Expectations v/s delivery

Today’s top research idea

Nestle India: All-round disappointment despite weak base

v

Net sales were up only 8.7% YoY (est. of +20%) to INR24.8b (Ind-AS). EBITDA

declined 7.5% YoY (est. of +28%) to INR5.1b, while PAT rose 1.8% YoY (est. of

+36.1% YoY) to INR3.1b.

v

Gross margin contraction was higher than expected at 80bp (est. of -50bp) to

55.8%. EBITDA margin shrunk 370bp YoY (est. of +150bp) to 20.6%.

v

Nestle is no longer the business it was before CY11 (when it used to report

consistent double-digit volume growth with over 100% RoCEs) and may never

be so. Considering that valuations are rich at 48.9x CY18E EPS, we downgrade

to Sell with a revised target price of INR5,715 (39x CY18E EPS, at a 20%

discount to three-year avg. multiple).

(no of

companies)

Sales

EBIDTA

PAT

Growth (YoY, %)

MOSL

Nifty

Sensex

(80)

(24)

(13)

11.0

11.7

11.8

6.7

14.4

1.6

6.3

-1.2

4.4

Research covered

Cos/Sector

Economy – CPI

Economy – IIP

Yes Bank

Idea Cellular

Nestle India

Dr Reddy's Lab

Titan Company

J K Cements

Oriental Bank

J&K Bank

SH Kelkar

Inox Wind

Glenmark Pharma

GSK Consumer

Results Expectation

Key Highlights

What can stop the RBI from cutting rates further now?

IIP grew 5% in FY17, not 0.5%; Like GDP

Divergence with RBI audit fully accounted for

EBITDA up 1% QoQ to INR21.9b, 19% above estimate

All-round disappointment despite weak base; downgrade to Sell

Weak quarter; US FDA resolution is key

Remarkable growth in Jewellery; Margin below estimates

Realization improvement & higher other operating income drive profits

Another weak quarter; Stress addition increases to AQR levels

Balance sheet clean up phase; high provisioning leads to pre-tax loss

Results below estimates, impact temporary; Maintain Buy

Results below estimates due to regulatory headwinds

Dismal results; US performance significantly below expectations

Structural story remains weak; market share decline the last straw

Bata India | Colgate | Indo Count | MRPL | Vedanta

Market snapshot

Equities - India

Close

Chg .%

Sensex

30,188

-0.2

Nifty-50

9,401

-0.2

Nifty-M 100

18,240

-0.7

Equities-Global

Close

Chg .%

S&P 500

2,391

-0.1

Nasdaq

6,121

0.1

FTSE 100

7,435

0.7

DAX

12,770

0.5

Hang Seng

10,283

0.2

Nikkei 225

19,884

0.4

Commodities

Close

Chg .%

Brent (US$/Bbl)

50

0.3

Gold ($/OZ)

1,229

0.5

Cu (US$/MT)

5,539

0.3

Almn (US$/MT)

1,886

0.9

Currency

Close

Chg .%

USD/INR

64.3

-0.1

USD/EUR

1.1

0.1

USD/JPY

113.6

-0.5

YIELD (%)

Close

1MChg

10 Yrs G-Sec

6.9

0.0

10 Yrs AAA Corp

7.4

-0.8

Flows (USD b)

12-May

MTD

FIIs

0.1

0.3

DIIs

-0.1

0.1

Volumes (INRb)

12-May

MTD*

Cash

291

294

F&O

3,714

4,551

Note: YTD is calendar year, *Avg

YTD.%

13.4

14.8

27.1

YTD.%

6.8

13.7

4.1

11.2

9.4

4.0

YTD.%

-9.2

6.0

0.3

10.7

YTD.%

-5.2

3.1

-3.0

YTDchg

0.4

-0.2

YTD

6.6

1.7

YTD*

283

4,627

Piping hot news

GST enters the last mile, all eyes on Srinagar

v

Later this week, the goods and services tax (GST) Council made up of finance

ministers of states and Union territories and headed by finance minister Arun

Jaitley will convene in Srinagar.

Chart of the Day: Economy - Contribution of alcohol taxes by

states budgeted for FY18 (% of total receipts)

Quote of the day

Only buy something that you’d be

perfectly happy to hold if the market shut

down for 10 years.

Research Team (Gautam.Duggad@MotilalOswal.com)

Source: Aggregate data for 17 states

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

The international taxation arm of

the income tax (I-T) department

has sought details of end

beneficiary subscribers of

participatory notes (P-notes) from

some leading offshore derivative

instrument (ODI) issuers in the

country…

2

Southwest monsoon arrives three days early in Andaman and

Nicobar islands

The southwest monsoon has hit the Nicobar Islands and the entire south

Andaman Sea three days ahead of time, the official weather office said.

The southwest monsoon, which irrigates most of India’s farm lands,

normally reaches the Andaman Sea on 17 May.

It’s too early, however, to predict an early onset of monsoon over the

Indian subcontinent, the India Meteorological Department (IMD) said on

Sunday. The IMD will release its forecast on the monsoon onset over the

subcontinent in the coming week…

International tax wing of I-T

Dept seeks end beneficiary

details of P-notes

3

Amazon, Flipkart not alone,

even offline retailers are

offering huge discounts

Several of India's brick-and-

mortar retailers are striking back

at online giants Amazon and

Flipkart with their own mini sales,

which are being held over

weekends or whenever the

ecommerce sites offer discounts…

4

Real Estate revival signs: Piramal

Fund likely to extend Rs 1,800

crore loan to Lodha Developers

Piramal Fund Management, the

financial services arm of billionaire

Ajay Piramal-led Piramal Group, is

extending a fresh loan of about Rs

1,800 crore to Mumbai-based

Lodha Developers, builder of

premium residential project...

5

FPIs pump in Rs 5,000 crore so

far in May in debt market

Overseas investors have so far

pumped in over Rs 5,000 crore in

the country's debt market this

month, helped by a stable outlook

for the rupee. With the latest

inflow, total investment in debt

markets has crossed over Rs

54,000 crore this year…

6

LIC to clear Rosneft Essar Oil

acquisition only after part

payment of dues

Life Insurance Corp. of India (LIC)

will clear Rosneft PJSC’s $12.9

billion acquisition of Essar Oil only

after the Essar group pays at least

a part of its dues to the insurer,

said four people with direct

knowledge of the matter,

including an LIC official…

7

Food-technology start-up Zomato

Media Pvt. Ltd is in advanced talks

to acquire delivery start-up Runnr

(Carthero Technologies Pvt. Ltd)

in a move that will help Zomato

strengthen its food delivery

business, according to two people

aware of the development…

Zomato in talks to buy

delivery start-up Runnr in $20

million deal

15 May 2017

2

E

CO

S

COPE

What can stop the RBI from cutting rates further now?

Inflation eased to record-low in April 2017

n

12 May 2017

The Economy Observer

In contrast to market consensus (and our expectation) of 3.3%, CPI inflation eased sharply from 3.9% YoY in March 2017

to 3% last month, marking the lowest level since the new series began in 2012.

Although IIP (with new base) grew decently in March 2017, a sharper-than-expected fall in CPI provides sufficient room

for further rate cuts. With CPI expected to remain below 4% in 1HFY18, we believe the RBI will find it difficult to resist

rate cuts. We would not be surprised if the rate cut happens as early as June 2017.

n

n

More importantly, the fall in inflation was broad-based. CPI excluding vegetables also fell to the lowest level since 2012,

while core inflation eased from 5% in March to 4.4% in April.

The IIP series was presented with a new base of 2011-12 (updated from 2004-05), based on which industrial activity

grew 2.7% YoY in March from 1.9% in the previous month.

n

I. Retail inflation at new low of 2.99% in April 2017

n

Higher inflation was

primarily due to fuel items,

as core core inflation eased

to 4.1% last month

n

n

n

n

CPI inflation posts new low…:

CPI-based inflation eased from 3.9% YoY in March

2017 to 2.99% last month, lower than market consensus (and our expectation)

of 3.3%

(Exhibit 1).

…led by broad-based deceleration:

Exhibit 2

shows the key drivers of lower

headline inflation last month. As apparent, inflation eased in almost all

components in April 2017. In terms of our estimates, while we were spot-on

with vegetables inflation (-9.8% in April 2017), inflation in almost all other food

items was lower than our forecasts. Consequently, while we expected food

inflation to ease from 2% in March to 1.5% in April, it turned out to be 0.6% –

the lowest as per new series. This is also evident from the fact that CPI inflation

excluding vegetables fell to 3.78% in April, marking the lowest level as per new

series

(Exhibit 3).

Core inflation too eased in April:

Further, core inflation (all items excluding

‘food & beverages’ and ‘fuel & light’) edged down from 5% in March to 4.4% last

month – the lowest in 20 months

(Exhibit 3).

Core inflation excluding

petrol/diesel (the so-called core core inflation) too eased to 4.1% from 4.5% in

March.

Inflation in ‘core services’ at new low:

Further refinement of CPI items shows

that inflation in ‘core services’ eased to 4.1% last month – the lowest since 2015,

and in ‘goods’ softened to 2.6%

(Exhibit 4).

We believe that CPI inflation may remain under 4% in 1HFY18, while it would

move toward 5.5% by March 2018 (primarily due to low base).

We thus expect

CPI inflation to average ~3.7% for the full-year FY18, lower than 4.5% in FY17

and also the RBI’s expectation of 4.75%. In our view, this presents a very

strong case for at least one rate cut in 2017.

15 May 2017

3

E

CO

S

COPE

IIP grew 5% in FY17, not 0.5%

Like GDP, the new IIP series shows way more robust growth than the old series

n

12 May 2017

The Economy Observer

As per the new series with 2011-12 as the base year, the index of industrial production (IIP) grew 2.7% YoY in March

2017, better than +1.9% in February. In March 2017, while the manufacturing sector grew at the slowest pace in three

months, mining activities increased rapidly.

n

One of the most important changes in the new IIP series was the introduction of the infrastructure/construction

component (with 12.3% weight) and capturing of ‘work in progress’ in the capital goods sector.

A comparison of the old series with the new series reveals huge differences. Although IIP contracted 9 times in past 16

months, there has not been a single decline in IIP since June 2013, as per the new series. In fact, IIP is estimated to have

grown 5% as per the new series, way better than +0.5% in April-February FY17.

n

n

Although the new series has revised IIP growth upward, it still does not match with real GVA growth of the industrial

sector. This, thus, continues to remain the biggest drawback of the IIP series.

n

IIP grew 2.7% in March, as per the new series:

The Central Statistics Office

(CSO) changed the base year to 2011-12 from 2004-05 among other things for

calculating IIP, which showed factory output rise by 2.7% in March 2017, lower

than +5.5% in March 2016, but higher than +1.9% in February 2017. According

to the old series, IIP would have grown 2.5% in March this year, much better

than -1.2% in February. Our forecast for IIP for the month was -1.7%, as per the

old series. Annual IIP growth in FY17 is 5% v/s 3.4% in FY16, as per the new

series.

Manufacturing sector performance dips monthly/annually:

The manufacturing

sector – which has the highest weightage of 77.633% in IIP – was up by 1.2% in

March. Growth, however, was lower than +1.4% in February and +5% in the

year-ago period, as per the new series. Among the changes made, the

weightage of the manufacturing sector has been increased from 75.527%

earlier. Also, at a broad level, 809 items form the heavy-weight sector in IIP,

which saw addition of 149 new items and omission of 124. The old series had

620 items, comprising of 397 item groups. Growth for the sector in FY17 at 4.9%

is better than +3% in FY16.

Electricity generation growth better at 6.2%:

Electricity output, which has been

generally doing well over the past year, surged 6.2% in March from 1.2% in the

previous month. Growth, however, was lower than +11.9% in March 2016.

Weightage of this sector has been revised downward to 7.994% in the new

series, from 10.316% earlier. Also, the new series data would now reflect

electricity generation from renewable sources; however, this is incorporated

only from April 2014 as data for previous months are not available, as per the

CSO.

n

n

15 May 2017

4

15 May 2017

Update

| Sector:

Financials

Yes Bank

Buy

BSE SENSEX

30,188

S&P CNX

9,401

CMP: INR1,491

TP: INR2,110 (+42%)

Divergence with RBI audit fully accounted for

n

Overall net stress loans just at ~2.2% despite accounting for divergence

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

12M Avg Val (INR M)

Free float (%)

YES IN

453.8

1570 / 827

5/16/66

704.8

10.3

3855

78.2

n

Financials Snapshot (INR b)

Y/E March

2017 2018E 2019E

NII

58.0

74.8

95.3

OP

58.4

69.7

88.4

NP

33.3

41.3

52.0

NIM (%)

3.4

3.5

3.6

EPS (INR)

73.0

90.5 114.0

EPS Gr. (%)

20.8

24.1

25.9

BV/Sh. (INR)

468.7 540.7 631.5

ABV/Sh. (INR)

453.4 533.7 622.1

RoE (%)

18.9

17.9

19.4

RoA (%)

1.8

1.7

1.8

P/E(X)

20.5

16.5

13.1

P/BV (X)

3.2

2.8

2.4

Shareholding pattern (%)

As On

Dec-16 Sep-16 Dec-15

Promoter

21.8

21.9

22.0

DII

23.8

23.1

23.6

FII

42.0

42.6

41.4

Others

12.4

12.4

13.1

FII Includes depository receipts

Stock Performance (1-year)

Yes Bank

Sensex - Rebased

1,800

1,550

1,300

1,050

800

n

n

Reported GNPA % was 76bps for FY16 whereas, RBI estimated GNPAs were ~5%. Our

interactions from bankers suggest, communication from RBI related to divergence in

NPA reporting comes after the Annual Financial Inspection (AFI - normally 1-2

quarters lag post closure of books). From rule based accounting perspective banks

may keep account standard, however if there is inherent weakness in the account as

per regulators view then it would be asked to be classified as NPA

Divergences are possible due to difference of opinion between RBI and Banks and

this year onwards RBI has mandated banks to report the same in the Annual report.

YES is the first bank to come out with the annual report and disclosure (first year of

disclosure for banking sector) which in our view created a bigger issue. ICICIBC and

AXSB has reported INR53.8B (1.2% of loans; 2.5%+ of corporate loans) and INR94.8B

(2.5% of loans; 6%+ of corporate loans) in their result conference call.

YES has fully recognized divergences in FY17 earnings and now there is no back log of

same in the ensuing quarter. Of the total divergence of ~INR41.8b, INR10.4b is

outstanding as NPA and rest are either repaid, exited or have demonstrated

improvement in behavior.

YES remains our top pick in the mid-sized private banks with strong capitalization

(CET1 of 11.4%), focus on return ratios (ROA of 1.8% and ROE of 20%) and market

leading growth rates (expect atleast 2x of the industry growth). AR indicates towards

significant improvement in Liability profile (a key concern in the past). We reiterate

buy with a target price of INR2110/share.

Divergences fully accounted for–No recognition impact in ensuing quarters

n

n

n

n

YES Bank in its FY17 AR has declared a divergence of INR41.8b/33.2b/8.6b/5.6b

in FY16 GNPA/NNPA/NPA provision/PAT between reported and RBI AFI

numbers. Of the total divergence of ~INR41.8b, INR10.4b is outstanding as NPA

and rest are either repaid, exited or have demonstrated improvement in

behavior. Of the o/s NPA of INR10.4b, one large account amounts to INR9.1b

which bank expects to recover soon (on back of M&A action).

In FY17, bank reported upgrades (INR3.7b) and recoveries (INR8.5b) of

INR12.2b and large part of which in our view is related to accounts being

classified as NPA from RBI divergence letter during the year. In FY16, upgrades

and recoveries were INR2b if one were to assume the same for FY17 then

divergence related upgrades and recoveries were ~INR10b.

Bank had also sold INR9.6b (INR0.6b in FY16) worth of accounts to ARCs in

FY17 and we expect it also to be largely driven by divergence related accounts.

Hence of the total divergence, in our view, INR12b+ (INR41.8b divergence =

INR10b recoveries/upgrades+ INR10.4b still NPA+ INR9b sold to ARC+INR12.4b

repaid) have been repaid in the normal course of business during the year .

15 May 2017

5

Net stress loans remains one of the lowest in the system

n

n

n

Despite taking into account high divergence bank’s outstanding net stress loans

(NNPA+other forms of stress loans) stands at ~2.2%. This is significantly lower

than other private corporate banks like ICICIBC ~8% and AXSB ~5%. In the

comparison we remove watch-list accounts as YES has not reported the same.

ICICIBC and AXSB has reported INR53.8B (1.2% of loans) and INR94.8B (2.5% of

loans) in their result conference call. We await for the annual report to get the

final figures.

YES quantum of divergence looks on the higher side as it is so far largely a

corporate lender as compared to ICICIBC and AXSB which have more than 50%

of the loans in the retail segment. As a %age of corporate loans, divergence

related disclosure of ICICIBC and AXSB works out to be 2.5% and 6.1%

respectively.

Sharp improvement in the deposits profile and capitalization

n

n

n

n

Bank has seen sharp improvement in deposits profile with less than one year

deposits maturity declining to 56% of total deposits from 64% a year ago and

~85% from FY12 levels.

Improvement in deposits profile is largely a function of sharp improvement in

CASA ratio (+800bp in FY17 to 36%+) with a YOY growth of 65%+. Helped by

demon and ageing of branches average SA balance per branch increased (+29%

YoY) to INR352m vs INR274m a year ago.

Top 20 customers Concentration has also seen improvement – Deposits at

11.1% (11.7%), loans at 12.4% (13.8%) and exposure at 12.6% (13.2%)

Tier 1 CAR improved to 13.3% vs 10.3% a year ago despite 40% YoY growth in

RWA. During the year bank added INR30b (+160bp) of AT1 bonds and INR49b

(+260bp) via QIP

Other takeaways from Annual report

n

n

n

n

n

n

Investment into branches and employees continue with 34% addition in number

of employees (20,125) and 16% growth in branches to 1000

Non-interest income

– a) Fees grew 43% YoY to INR35b and share of retail in

overall fees increased to ~30% vs 25% a year ago. B) Trading gains were healthy

at INR7.1b (12% of PPoP) vs INR2.6b (6%) a year ago

Outstanding real estate exposure (largely exposure to residential real estate

exposure) stands at INR110b (+9% YoY) and as %age of loans declined to 8.3% vs

10.2% a year ago.

YES securities reported a PAT of INR98m vs a loss of INR98m a year ago. Total

revenues grew 1.6x to INR638m.

Bank raised INR21.4b of infra bonds during the year

Bank granted 0.4% of equity as ESOPs during the year and 0.7% of equity is

diluted on account of exercise of ESOPs. Outstanding ESOPs stands at 3.74% vs

4.6% a year ago.

15 May 2017

6

Exhibit 1. Divergence in asset classification and provisioning for NPAs

Particulars

Gross NPAs as on March 31, 2016 as reported by the Bank

Gross NPAs as on March 31, 2016 as assessed by RBI

Divergence in Gross NPAs

Net NPAs as on March 31, 2016 as reported by the Bank

Net NPAs as on March 31, 2016 as assessed by the RBI

Divergence in Net NPAs

Provision for NPAs as on March 31, 2016 as reported by the Bank

Provision for NPAs as on March 31, 2016 as assessed by RBI

Divergence in provisioning

Reported PAT for the year ended March 31, 2016

Adjusted (notional) PAT for the year ended FY16 after taking into account the divergence

in provisioning

INR b

7.5

49.3

41.8

2.8

36.0

33.2

4.6

13.2

8.6

25.4

19.8

Source: MOSL, Company

Exhibit 2. Divergence fully accounted for during FY17 (our estimates)

Divergence break up

Outstanding NPA (FY17)

Upgrades and recoveries during FY17

Sale to ARC

Repayment of loans

Total divergence

INR b

10.4

10

9

12.4

41.8

Source: MOSL, Company

Exhibit 3.

Sharp improvement in CASA ratio (+800bps

YOY)

Exhibit 4.

Deposits profile improved sharply (%)

Less than one year maturity (%)

SA ratio

CA ratio

13.4

9.8

84.3

80.7

72.6

67.9

63.5

8.5

1.8

9.9

5.1

10.0

9.0

9.5

12.6

9.3

13.8

18.3

22.9

56.0

FY12

Source: MOSL, Company

FY13

RsFY14

FY15

FY16

FY17

Source: MOSL, Company

15 May 2017

7

Valuation and view

n

n

n

n

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We see divergence related issues and noise around that transitory in nature.

Despite the significant recognition during the year bank has best in the class net

stress loans of ~2.2% vs peer corporate banks like ICICIBC and AXSB of

11.8%

and

4.7%.

Risk management and focus on the return ratios have been tested

time and again and bank has emerged stronger from that.

With the continued investment in franchise, people and processes, YES is well

positioned to leverage on to the opportunity that Indian economy presents.

Bank has strong capitalization (CET1 of ~11.4%), branch network has increased

to 1,000 v/s 214 in FY11 and employee strength is up to 20,000+ v/s 3,929 in

FY11.

Comfortable liquidity, low inflation and bulk deposit rate is a significant positive

for YES from NIMs (higher short term liabilities) and bond gains perspective

(~9% share of corporate bonds in customer assets). Further bank has room to

reduce savings deposits rate leading to stability over margins. Stable/improving

NIM and traction in fees will keep core PPP/ earnings CAGR strong at ~27%/26%

over FY17/20E despite strong investments in building liability franchise.

With an incremental market share of 3.5%+, aggressive roll-out of retail/SME

products and strong corporate relationships, YES is expected to register loan

CAGR (FY17-20) of 28% – at least 2x of system loan growth.

YES has a well-laid strategy for growing small business loans (most of which

qualify as priority sector loans) and cross-selling to acquired customers which

would help granular retail fees growth. On balance-sheet front, initial focus of

the bank will be on growing the liability side first and as customer relationships

age, focus would be on cross-selling its retail assets. The bank has been

expanding its branch network at an increasing pace.

YES’s total stress loan (NNPA+OSLR+SDR+5:25+S4A) remains one of the lowest

in the industry) at ~2%. Robust loan growth, NIM expansion (~30bp led by

capital raise, higher CASA and share of retail loans) and rising fee income

contribution are expected to drive a ~25% PAT CAGR through FY20. This will see

RoA remaining healthy at 1.8% and RoE being maintained at ~20%.

The stock trades at 2.4x FY19 BV and 13.1x FY19 EPS. Reiterate Buy with a target

price of INR2,110 (3.3x FY19 BV) – based on residual income model (Average

growth of ~18% over FY16-36E, Terminal growth of 5%, 14.2% cost of equity –

risk free rate of 7%, beta of 1.4, and 5% market risk premium).

15 May 2017

8

Financials and valuations

Income Statement

Y/E March

Net Interest Income

Change (%)

Non Interest Income

Net Income

Change (%)

Operating Expenses

Pre Provision Profits

Change (%)

Provisions (excl tax)

PBT

Tax

Tax Rate (%)

PAT

Change (%)

Equity Dividend (Incl tax)

Core PPP*

Change (%)

*Core PPP is (NII+Fee income-Opex)

2013

22,188

37.3

12,574

34,762

40.6

13,345

21,417

39.1

2,160

19,257

6,251

32.5

13,007

33.1

2,510

19,860

32.2

2014

27,163

22.4

17,216

44,378

27.7

17,499

26,880

25.5

3,617

23,263

7,085

30.5

16,178

24.4

3,397

25,218

27.0

2015

34,878

28.4

20,465

55,343

24.7

22,847

32,496

20.9

3,395

29,101

9,047

31.1

20,054

24.0

4,528

31,075

23.2

2016

45,667

30.9

27,121

72,789

31.5

29,764

43,025

32.4

5,363

37,662

12,268

32.6

25,394

26.6

5,062

40,419

30.1

2017E

57,973

26.9

41,568

99,541

36.8

41,165

58,375

35.7

7,934

50,441

17,140

34.0

33,301

31.1

6,324

53,769

33.0

2018E

74,785

29.0

46,407

121,192

21.8

51,457

69,735

19.5

8,528

61,207

19,892

32.5

41,315

24.1

8,423

65,129

21.1

2019E

95,286

27.4

57,472

152,758

26.0

64,321

88,437

26.8

11,941

76,496

24,479

32.0

52,017

25.9

10,605

83,830

28.7

(INR Million)

2020E

122,327

28.4

71,293

193,619

26.7

78,991

114,628

29.6

16,884

97,744

31,278

32.0

66,466

27.8

13,551

110,022

31.2

Balance Sheet

Y/E March

Share Capital

Reserves & Surplus

Net Worth

Of which Equity Networth

Deposits

Change (%)

of which CASA Dep

Change (%)

Borrowings

Other Liabilities & Prov.

Total Liabilities

Current Assets

Investments

Change (%)

Loans

Change (%)

Fixed Assets

Other Assets

Total Assets

2013

3,586

54,490

58,077

58,077

669,556

36.2

126,875

71.6

209,221

54,187

991,041

40,658

429,760

54.8

469,996

23.7

2,295

48,332

991,041

2014

3,606

67,611

71,217

71,217

741,920

10.8

163,447

28.8

213,143

63,877

1,090,158

58,917

409,503

-4.7

556,330

18.4

2,935

62,473

1,090,158

2015

4,177

112,622

116,800

116,800

911,758

22.9

210,790

29.0

262,204

70,942

1,361,704

75,572

432,285

5.6

755,498

35.8

3,190

95,160

1,361,704

2016

4,205

133,661

137,866

137,866

1,117,195

22.5

313,428

48.7

316,590

80,983

1,652,634

82,184

488,385

13.0

982,099

30.0

4,707

95,259

1,652,634

2017E

4,565

209,383

213,947

213,947

1,428,739

27.9

518,697

65.5

386,067

121,846

2,150,599

195,494

500,318

2.4

1,322,627

34.7

6,835

125,325

2,150,599

2018E

4,565

242,274

246,839

246,839

1,757,348

23.0

646,325

24.6

437,427

146,136

2,587,750

143,340

600,382

20.0

1,692,962

28.0

6,943

144,123

2,587,750

2019E

4,565

283,687

288,252

288,252

2,249,406

28.0

856,551

32.5

510,982

175,401

3,224,041

163,051

720,458

20.0

2,166,992

28.0

7,798

165,742

3,224,041

(INR Million)

2020E

4,565

336,102

340,667

340,667

2,901,734

29.0

1,117,306

30.4

600,491

210,672

4,053,564

216,009

864,549

20.0

2,773,749

28.0

8,653

190,603

4,053,564

Asset Quality

GNPA (INR m)

NNPA (INR m)

GNPA Ratio

NNPA Ratio

Slippage Ratio

Credit Cost

PCR (Incl Tech. Write off)

E: MOSL Estimates

943

70

0.20

0.01

0.64

0.34

92.6

1,749

261

0.31

0.05

0.85

0.26

85.1

3,134

877

0.41

0.12

0.70

0.20

72.0

7,490

2,845

0.76

0.29

1.21

0.57

62.0

20,186

10,723

1.52

0.81

2.68

0.58

46.9

17,016

4,927

1.00

0.29

1.20

0.60

71.0

24,799

6,586

1.13

0.30

1.30

0.65

73.4

(%)

35,955

8,106

1.28

0.29

1.30

0.65

77.5

15 May 2017

9

Financials and valuations

Ratios

Y/E March

Spreads Analysis (%)

Avg. Yield-Earning Assets

Avg. Yield on loans

Avg. Yield on Investments

Avg. Cost-Int. Bear. Liab.

Avg. Cost of Deposits

Interest Spread

Net Interest Margin

Profitability Ratios (%)

RoE

RoA

Int. Expense/Int.Income

Fee Income/Net Income

Non Int. Inc./Net Income

Efficiency Ratios (%)

Cost/Income*

Empl. Cost/Op. Exps.

Busi. per Empl. (INR m)

NP per Empl. (INR lac)

* ex treasury

Asset-Liability Profile (%)

Loans/Deposit Ratio

CASA Ratio

Investment/Deposit Ratio

G-Sec/Investment Ratio

CAR

Tier 1

2013

10.5

12.7

8.1

8.0

7.9

2.5

2.8

2014

10.6

12.7

8.1

7.9

8.0

2.7

2.9

2015

10.6

12.2

8.0

7.6

7.9

3.0

3.2

2016

10.0

11.2

7.6

6.9

7.1

3.1

3.4

2017E

9.5

10.6

7.7

6.5

6.4

3.0

3.4

2018E

9.3

10.2

7.2

6.2

6.1

3.1

3.5

2019E

9.1

9.7

6.8

5.8

5.7

3.3

3.6

2020E

9.1

9.7

6.8

5.7

5.7

3.4

3.7

24.8

1.5

73.2

31.7

36.2

25.0

1.6

72.8

38.8

38.8

21.3

1.6

69.9

37.0

37.0

19.9

1.7

66.3

37.3

37.3

18.9

1.8

64.7

41.8

41.8

17.9

1.7

62.3

38.3

38.3

19.4

1.8

60.1

37.6

37.6

21.1

1.8

59.4

36.8

36.8

40.2

49.1

143.1

18.5

41.0

44.8

138.5

18.4

42.4

42.9

137.2

18.6

42.4

43.6

125.6

16.9

43.4

43.8

120.5

16.5

44.1

43.8

132.5

17.7

43.4

43.8

144.8

19.2

41.8

42.8

163.4

21.5

70.2

18.9

64.2

54.8

18.3

9.5

75.0

22.0

55.2

54.8

14.4

9.8

82.9

23.1

47.4

69.4

15.6

11.5

87.9

28.1

43.7

72.0

16.5

10.7

92.6

36.3

35.0

70.9

17.0

13.3

96.3

36.8

34.2

80.4

16.6

13.1

96.3

38.1

32.0

84.3

15.0

12.1

95.6

38.5

29.8

89.1

13.7

11.2

Valuation

Book Value (INR)

Change (%)

Price-BV (x)

Adjusted BV (INR)

Price-ABV (x)

EPS (INR)

Change (%)

Price-Earnings (x)

Dividend Per Share (INR)

Dividend Yield (%)

E: MOSL Estimates

161.9

22.2

9.2

161.8

9.2

36.3

31.0

40.9

6.0

0.4

197.5

21.9

7.5

197.0

7.5

44.9

23.7

33.1

8.0

0.5

279.6

41.6

5.3

278.2

5.3

48.0

7.0

30.9

9.0

0.6

327.8

17.3

4.5

323.4

4.6

60.4

25.8

24.6

10.0

0.7

468.7

43.0

3.2

453.4

3.3

73.0

20.8

20.3

12.0

0.8

540.7

15.4

2.7

533.7

2.8

90.5

24.1

16.4

15.8

1.1

631.5

16.8

2.4

622.1

2.4

114.0

25.9

13.0

19.9

1.3

746.3

18.2

2.0

734.7

2.0

145.6

27.8

10.2

25.5

1.7

15 May 2017

10

RESULTS

FLASH

Idea Cellular

BSE SENSEX

30,188

S&P CNX

9,401

15 May 2017

Results Flash | Sector: Telecom

CMP: INR92

TP: INR120 (+30%)

Buy

We will revisit our estimates

post earnings call/management

interaction.

EBITDA up 1% QoQ to INR21.9b, 19% above estimate; Network cost

savings drive EBITDA

Revenue in-line, but EBITDA beats estimate:

Revenue declined 6% QoQ and 14%

YoY to INR81.3b, in line with our estimate. EBITDA, however, grew 1% QoQ (but

declined 39% YoY) to INR21.9b, beating our estimate of INR18.5b. Network cost

reduced 5% QoQ, supported by reduction in 2G sites, cost optimization measures,

and provisional write backs. EBITDA margin expanded 200bp QoQ (but declined

1,110bp YoY) to 27%, 410bp above our expectation. Net loss was flat QoQ at

INR3.8b, lower than our estimate, aided by higher than estimated EBITDA, but

partly offset by finance and tax cost.

Double-digit traffic growth, but realizations declining:

Voice revenue declined 3%

QoQ and 11% YoY to INR59.7b. Voice traffic jumped 10% QoQ and 15% YoY to

231b, potentially due to high incoming traffic from free usage on Reliance-Jio.

However, low IUC charge on incoming traffic and low price offerings led to RPM

decline of 12% QoQ and 22% YoY to INR0.259.

Data revenue declined 16% QoQ and 22% YoY to INR14.6b. Data traffic jumped

17% QoQ and 55% YoY to 127b, while ARMB dropped 28% QoQ to INR0.115.

Blended ARPU declined 10% QoQ and 22% YoY to INR142. Data ARPU was INR110,

down 1% QoQ and 25% YoY.

Capex guidance for FY18 lower than FY17 capex:

Consolidated net debt stood at

INR501b, with FY17 net-debt-to-EBITDA at 4.9x. Capex spent during FY17 was

INR78.5b. Capex guidance for FY18 is INR60b.

Key questions for management

n

Is network cost reduction sustainable?

n

Why is capex guidance for FY18 lower than FY17 capex?

n

What initiatives have you taken to curb subscriber churn?

Conference Call Details

Date:

16 May 2017

Time:

02:30pm IST

Dial-in details:

+91-22-3960 0817

th

Financials & Valuations (INR b)

2017 2018E 2019E

Y/E Mar

Net Sales

355.8 332.8 353.3

EBITDA

102.8

84.6

89.1

NP

-4.0

-48.1

-55.0

EPS (INR)

-1.1

-13.3

-15.3

EPS Gr. (%)

-112.5 -255.8 1,275.9

BV/Sh. (INR) 68.7

55.3

41.3

RoE (%)

-1.6

-21.5

-31.6

RoCE (%)

1.5

-0.5

-0.7

P/E (x)

-79.1

-6.6

-5.7

P/BV (x)

1.3

1.6

2.1

Consolidated - Quarterly Earning Model

Y/E March

Gross Revenue

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Share in Profits from Associates

Interest

PBT before EO expense

PBT

Tax

Rate (%)

Reported PAT

Margins (%)

E: MOSL Estimates

1Q

87,915

16.3

58,122

29,793

33.9

14,117

927

3,240

2,726

3,349

13,364 12,464 11,705

13,364 12,464 11,705

4,816

4,371

4,063

36.0

35.1

34.7

8,548

8,093

7,642

9.7

9.3

8.5

FY16

2Q

3Q

86,891 90,097

14.8

12.4

56,320 58,812

30,570 31,285

35.2

34.7

15,381 16,231

4Q

94,839

12.6

58,678

36,160

38.1

19,737

7,678

8,745

8,745

2,989

34.2

5,756

6.1

1Q

94,866

7.9

64,124

30,742

32.4

19,192

1,035

9,224

3,362

3,362

1,158

34.4

2,204

2.3

FY17

2Q

3Q

93,002 86,627

7.0

-3.9

64,601 64,973

28,401 21,655

30.5

25.0

19,543 19,653

1,057

1,143

8,753

9,232

1,162 -6,087

1,162 -6,087

247 -2,248

21.3

36.9

915 -3,839

1.0

-4.4

4Q

81,261

-14.3

59,316

21,945

27.0

19,885

983

10,112

-7,069

-7,069

-3,792

53.6

-3,277

-4.0

(INR Million)

FY16

FY17

359,809

14.0

229,510

130,300

36.2

66,508

16,545

47,247

47,247

16,447

34.8

30,799

8.6

355,758

-1.1

252,995

102,763

28.9

78,272

4,218

37,342

-8,633

-8,633

-4,636

53.7

-3,997

-1.1

15 May 2017

11

12 May 2017

Q1CY17 Results Update | Sector: Consumer

Nestle India

BSE SENSEX

30,188

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm/ Vol m

Free float (%)

S&P CNX

9,401

NEST IN

96.4

660.7 / 10.3

7390 / 5601

3/-4/3

254

37.2

CMP: INR6,820

TP: INR5,715(-16%) Downgrade to Sell

All-round disappointment despite weak base; downgrade to Sell

n

n

Financials & Valuations (INR b)

Y/E Dec

2016 2017E 2018E

Net Sales

91.6 100.4 112.2

EBITDA

18.0

18.4

21.4

PAT

11.4

11.4

13.5

EPS (INR)

118.0 118.6 139.5

n

Gr. (%)

-1.6

0.6

17.6

BV/Sh (INR)

312.6 339.6 375.3

RoE (%)

39.0

36.4

39.0

RoCE (%)

38.8

36.1

38.7

P/E (x)

57.8

57.5

48.9

P/BV (x)

21.8

20.1

18.2

n

Estimate change

TP change

Rating change

Net sales were up only 8.7% YoY

(est. of +20%) to INR24.8b (Ind-AS). EBITDA

(Ind-AS) declined 7.5% YoY (est. of +28%) to INR5.1b, while PAT rose 1.8% YoY

(est. of +36.1% YoY) to INR3.1b (Ind-AS). Being a calendar year-end company,

this was the first quarter of Ind-AS numbers.

Weak base makes revenue performance particularly disappointing:

The base

quarter had witnessed an 8% decline in sales as Maggi was only gradually

scaling up after its re-launch in November 2015. 4QCY16 had actually posted

decent growth YoY, despite demonetization. Gross sales increased 9.7% YoY in

1QCY17, but net sales growth was weaker owing to end of tax holiday at the

Pantnagar unit from June 2016.

EBITDA margin shrinks 370bp YoY:

Gross margin contraction was higher than

expected at 80bp to 55.8% (est. of -50bp), which management attributed to

rising cost of milk derivatives. Staff costs increased by 60bp YoY and other

expenses by 200bp YoY, the latter attributed to high energy and distribution

costs due to a steep rise in fuel prices and stepped-up brand building/demand-

generating activities. Consequently, EBITDA margin shrunk 370bp YoY to 20.6%

(est. of +150bp).

Valuation and view:

As we pointed out in our annual report analysis, it has

now been over five long years of abysmal volumes. It has been close to two

years since the new CEO stepped in, and while the pace of new launches has

markedly improved, there has been no material improvement on price actions

to boost growth or advertising to support new products. Double-digit volume-

led sales growth seems long time away. Nestle is no longer the business it was

before CY11 (when it used to report consistent double-digit volume growth

with over 100% RoCEs) and may never be. Considering that valuations are rich

at 48.9x CY18 EPS, we downgrade to

Sell

with a revised target of INR5,715 (39x

CY18E EPS, at a 20% discount to three-year avg. multiple).

15 May 2017

12

12 May 2017

4QFY17 Results Update | Sector: Healthcare

Dr Reddy’ s Labs

Neutral

BSE SENSEX

30,188

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

9,401

DRRD IN

Weak quarter; US FDA resolution is key

166

n

Operating performance in-line:

Net sales fell 5% YoY to ~INR35.5b (est. of

428.2 / 6.7

~INR37.5). EBITDA margin shrunk ~550bp YoY (-650bp QoQ) to 16.4%,

3689 / 2525

primarily led by lower gross margin of 51% due to pricing pressure in the US

-3/-33/-30

1219

and certain one-off charges. R&D expense for 4Q stood at 12.9% v/s 13.9%

73.2

for the full year. 4QFY17 PAT was INR3.1b v/s our estimate of INR4.6b.

CMP: INR2,585

TP: INR2,600(+0.5%)

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

Net Sales

140.8

163.6

EBITDA

24.2

34.3

PAT

12.0

18.3

EPS (INR)

72.6

107.1

Gr. (%)

-45.1

47.5

BV/Sh (INR)

740

897

RoE (%)

9.6

13.3

RoCE (%)

6.3

9.4

P/E (x)

35.6

24.1

P/BV (x)

3.5

2.9

n

2019E

190.4

44.9

24.7

144.5

35.0

1,023

15.1

11.5

17.9

2.5

n

n

Estimate change

TP change

Rating change

n

US sales muted in 4Q; expect pick-up in 1Q:

US sales were USD228m in 4Q

(v/s ~USD246m in 3Q). Limited meaningful launches in FY17, coupled with

pricing pressure in key products, led to muted growth in the US business.

We expect revenue pick-up from 1Q as DDRD has launched Vitorin (could be

>USD125m product annually). DDRD expects 10-15 ANDA launches in FY18.

India delivered single-digit growth; EM performance impressive:

India

business grew at a muted pace of ~8% YoY due to impact from price control

and demonetization. EM sales grew ~25% YoY in INR terms. Russia (>50% of

EM) grew ~26% YoY in CC (tender business contributed USD15-20m in FY17).

Key call takeaways:

(1) Received 1 CBE-30 approval from Miryalaguda. (2)

Copaxone 20mg response to US FDA was submitted in Dec-16; TAD is six

months from now. (3) Expects 15 ANDA launches in FY18 (incl. 4-5

meaningful ones). (4) 13 ANDAs filed in 4Q; 26 in FY17. (5) Proprietary

business to become FCF positive in 3-4 years, from ~USD80m EBITDA loss

last year. (6) Received CRL for NuvaRing; DRRD will respond in two weeks.

US FDA remediation key; maintain Neutral:

Although long-term

fundamentals remain intact, the stock will remain range bound in the near

term due to regulatory concerns. We value the company at 18x FY19E PER,

at a 10-15% discount to peers, due to added regulatory uncertainty related

to Duvvada and Bachupalli. Maintain

Neutral

with a TP of INR2,600 @ 18x

FY19E PER.

15 May 2017

13

Titan Company

BSE SENSEX

30,188

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm/ Vol m

Free float (%)

S&P CNX

9,401

TTAN IN

887.8

445.5 / 6.9

506 / 296

0/35/15

632

47.0

12 May 2017

4QFY17 Results Update | Sector: Retail

CMP: INR495

n

TP: INR505 (+2%)

Neutral

Remarkable growth in Jewellery; Margin below estimates

Titan’s (TTAN) 4QFY17 revenue grew 43.4% YoY (est. of +23.3%) to IN34.3b.

EBITDA grew by 30.3% YoY to INR2.7b (In-line with estimates) and recurring

PAT by 8.6% YoY to INR2.03b (est. of INR1.72b).

Gross margin shrunk 420bp YoY to 25.1%,

with EBITDA margin contracting

80bp YoY (est. of +80bp) to 7.9% in 4QFY17. There was a reduction of 290bp

YoY in other expenses to sales to 8.2% and of 50bp YoY in staff costs to sales to

5.1%, partially offsetting gross margin contraction.

Jewelry sales were up 55% YoY to INR28.6b

(52% same-store growth), with

segment margin contracting 140bp YoY to 9.9%. Gold tonnage increased 37%

YoY in 4QFY17. Watches sales grew 10.8% YoY to INR4.98b, with 70bp EBIT

margin expansion to 2.4%. Eyewear sales grew 13% YoY to INR1.1b. At the end

of the quarter, the company had 1,366 stores with an area of 1.8m sq.ft.

FY17 performance:

Sales, EBITDA and adj. PAT were up 14%, 34.7% and 21.5%,

respectively. Jewellery sales were up 17%, crossing INR100b mark, with

segmental margins expanding 100bp YoY to 10.1%.

Concall highlights:

1) FY18 – will pursue growth and maintain EBIT margin in

Jewelry. April also witnessed double-digits growth in Jewelry. 2) In FY18, the

focus will be on growth and cost efficiencies. 3) Tax rate will be 28-29% in FY18.

Valuation view:

There are minor adjustments to our FY18E/FY19E EPS. There

has been strong revival as well as market share gain in Jewellery. Management

is confident of healthy growth after GST implementation as well. EPS growth is

not as high as 15%/20% EBITDA growth for FY18/FY19 due to an increase in

income tax rate over FY17 levels. Valuations at 40.7x FY19E are rich. Maintain

Neutral

with a revised target price of INR505 (valued at 41.4x Mar’2019 EPS, in

line with three-year average multiple).

n

Financials & Valuations (INR b)

Y/E Mar

2017 2018E 2019E

Net Sales

129.8 147.1 173.0

EBITDA

11.6

13.2

15.7

PAT

7.0

9.1

10.8

EPS (INR)

9.0

10.3

12.1

Gr. (%)

18.5

13.8

18.2

BV/Sh (INR)

47.7

53.9

62.2

RoE (%)

20.6

20.2

20.9

RoCE (%)

21.1

20.9

21.4

P/E (x)

54.8

48.1

40.7

P/BV (x)

10.4

9.2

8.0

n

n

n

Estimate change

TP change

Rating change

n

15 May 2017

14

RESULTS

FLASH

15 May 2017

Results Flash | Sector: Cement

J K Cement

Buy

BSE SENSEX

30,188

S&P CNX

9,401

CMP: INR1071

TP: INR1291(+20%)

We will revisit our estimates

post earnings call/management

interaction.

Realization improvement and higher other operating income drive profits

Profitability improvement in 1QFY18 to continue

n

White Cement volume growth at 5% YoY to at 0.29mt (est 0.3mt) and grey

Cement volume declined by 2%YoY to 1.86mt (est 1.79mt). Grey cement

volumes were better than estimates as volume decline in North operations

were partially offset by better volumes from south operations.

n

Revenue at INR10.2b, +7.7%YoY (est INR9.8b) led by better than estimated

realization in grey cement due to price hikes in its focus markets.

n

Grey cement realizations stood at INR 3720/ton (+8% YoY, +4% QoQ). The

realisations were better than estimated due to sharp price hikes in North and

Maharashtra markets. The full impact of price hikes in North and Maharashtra

would be seen in 1QFY18.

n

EBITDA at INR1.8b, +6%YoY (est INR1.57b) | margins 17.8% (+0.9pp QoQ, -

0.4pp YoY) as full impact of power and fuel cost were not witnessed due to low

cost inventory.

n

Grey cement EBITDA/t at INR 670 (+31%YoY) led by higher realization as also

increase in other operating income due to one time provisions in 4QFY17.

n

White cement realizations continue to be firm resulting in improved

profitability on YoY basis.

n

Adj.PAT at INR983mn (+ 40% YoY) due to higher other operating income and

lower tax rate.

Key questions for the management

n

Volume guidance for FY18 given weak industry

n

Pricing trend in its focus markets

n

Impact of increase in input cost in profitability in coming quarters.

Valuation and view:

We will revisit our estimates post earnings call. We continue

to maintain our positive stance on the stock due to stable profitability from white

cement and improving profitability from the grey cement division. The stock trades

at 12x FY19 EV/EBITDA which we believe is attractive given higher proportion of

white cement profits as also strong earnings growth in grey cement.

Conference Call Details

Date:

16 Mayl 2017

Time:

04:00pm IST

Dial-in details:

+91-22-3938 1073

th

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

Net Sales

37.0

41.3

EBITDA

6.4

7.5

NP

2.8

2.9

EPS (INR)

39.3

41.3

EPS Gr. (%)

166.2

5.1

BV/Sh. (INR)

260.2 293.4

RoE (%)

16.0

14.9

RoCE (%)

10.0

10.0

P/E (x)

27.2

25.9

P/BV (x)

4.1

3.7

2019E

46.3

8.5

3.7

53.6

29.7

338.8

17.0

10.5

20.0

3.2

15 May 2017

15

Oriental Bank of Commerce

BSE SENSEX

30,188

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

Financials & Valuations (INR b)

Y/E March

2017 2018E

NII

49.1

52.9

OP

41.7

37.6

NP

NM

5.9

EPS (INR)

-31.6

17.1

EPS Growth (%)

NM

NM

BV/Sh. (INR)

365.3

382.3

RoE (%)

-8.4

4.6

RoA (%)

-0.4

0.2

P/E (x)

-5.2

9.6

P/BV (x)

0.45

0.43

S&P CNX

9,401

OBC IN

Another weak quarter; Stress addition increases to AQR levels

346.2

n

OBC reported loss of INR12.2b (~2x of FY15 and FY16 PAT combined) v/s est.

43.3 / 0.6

loss of INR1.1b, primarily due to elevated credit costs of INR30.5b (8.2%

138 / 75

annualized, highest in the history of the bank). Asset quality remains under

7/4/4

469

pressure, led by elevated stress additions (INR39b v/s INR27b in 3Q) and

41.6

muted recoveries/upgrades.

11 May 2017

4QFY17 Results Update | Sector: Financials - Banks

CMP: INR163

TP: INR150 (-8%)

Neutral

n

2019E

58.2

41.4

7.4

21.4

25.3

403.7

5.4

0.3

7.6

0.40

n

n

n

n

Overall pool of NSL (NNPA+ OSRL+ all other forms of stress) was stable QoQ

at ~14.5%; large relapse into NPA from restructured portfolio (INR9.4b) and

SDR/S4A accounts (8 accounts amounting to INR16.9b). Steel accounted for

28% of overall slippages. This sector already has 68% NPA, and management

does not expect incremental large slippages from this book. Absolute GNPAs

increased 12% QoQ, but remained stable in % terms at 13.7% due to strong

sequential loan growth (11%) and large write-offs (INR11b).

NII grew 21% QoQ to INR13b (in-line), led by NIM improvement of ~40bp

QoQ to 2.5%. NIM was aided by a sharp fall in CoF of ~38bp QoQ.

FY17 highlights:

(1) Operating profit for FY17 grew 13% YoY; however, high

NPL provisions of ~57b led to pre-tax loss. (2) Overall gross advances grew

8.3%, with strong growth in retail loans of ~37.2%.

Other highlights:

(1) Trading gains declined 70% QoQ, driving 15% miss in

other income. (2) CASA ratio declined 180bp QoQ to 30.5% owing to

redemption of temporary SA deposits (-6% QoQ) built up post demon. (3)

CET1 declined 113bp, led by large quantum of losses during the quarter.

Valuation and view:

Sharp rise in slippages continues to remain a concern

for the bank. NPL ageing will result in high expected credit costs in FY18/19.

Return ratios are likely to be sub-optimal at 0.2/5% RoA/RoE, and hence, we

downgrade our earnings by 19% for FY18. Resolutions in key stress sectors

like steel remain a key trigger for the bank. Maintain

Neutral

with a TP of

INR150 (0.4x FY19BV).

15 May 2017

16

RESULTS

FLASH

15 May 2017

Results Flash | Sector: Financials-Banks

J&K Bank

BSE SENSEX

30,188

S&P CNX

9,401

CMP: INR84

Balance sheet clean up phase; high provisioning leads to pre-tax loss

n

JKBK reported net loss of INR5.5b in 4QFY17 owing to elevated credit costs

(~5% annualized). High provisioning was on account of high net stress addition

(~2.8% net slippage ratio) and strong focus of management to clean up balance

sheet (calculated PCR increased to ~59.6% v/s 52.8% in 3Q).

n

Strong recoveries and upgrades at INR3.6b (4Q is seasonally high) helped partly

offset high stress additions (INR6.5b v/s INR1.9b in 3Q).Focus on increasing PCR

led to 10% sequential decline in NNPAs (4.9% of loans v/s 6% in 3Q). Addition

to restructured accounts of INR33.5b led to OSRL book increasing to 11.1% of

loans (5.3% in 3QFY17). The bank implemented INR3.1b in S4A and INR1.1b in

SDR during the quarter.

n

NII grew 12% QoQ (+1% YoY) led by strong sequential loan growth (+10% QoQ)

and sharp improvement in NIMs to 3.5% (+50bp QoQ).

n

Despite net income growth of 11% QoQ high opex led to 6% QoQ decline in

PPoP (-27% YoY). Opex grew 23% QoQ led by sharp increase in other expenses

(+51% QoQ). Employee expenses also grew 9% QoQ. Awaiting further details.

n

FY17 highlights:

(1)

Loan growth was flat YoY (although picked up to 10% QoQ

after 3 consecutive quarters of decline); Share of J&K State loans stood at ~50%

v/s 48.6% in FY16,

(2)

CASA ratio stood at 51.7% (+760b YoY) - highest ever, led

by robust growth in SA deposits of 19% YoY, and

(3)

The bank has raised

INR2.5b during FY16-17– allotted 36.6m shares to J&K State government at

INR68.39/share.

Valuation and view:

The bank has Board approval to raise INR10b which provides

comfort on capital (8.7% Tier 1). While we like the management’s focus to clean up

balance sheet, continued high stress additions and high proportion of restructured

book remain a cause for concern. Recoveries in corporate book in non J&K State

portfolio could be a significant trigger for the bank. We will revisit our estimates

post earnings call.

We will revisit our estimates

post earnings call/management

interaction.

Conference Call Details

Date:

15 May, 2017

Time:

04:00pm IST

Dial-in details:

+91-22-3938 1076

th

Financials & Valuations (INR b)

Y/E March

2017 2018E 2019E

NII

25.1

31.6

35.0

OP

12.9

17.9

19.6

NP

-16.3

8.2

9.5

NIM (%)

3.5

4.1

4.1

EPS (INR)

-31.3

15.7

18.3

BV/Sh. (INR) 108.8 121.4 136.0

RoE (%)

-27.0

13.6

14.2

RoA (%)

-2.0

0.9

1.0

P/E(X)

-2.7

5.4

4.6

P/BV (X)

0.8

0.7

0.6

15 May 2017

17

S H Kelkar and Co.

BSE SENSEX

30,188

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

9,401

SHKL IN

145

46.0 / 0.7

362 / 201

0/-8/23

40

43.1

12 May 2017

4QFY17 Results Update | Sector: Others

CMP: INR311

TP: INR367(+18%)

Buy

Results below estimates, impact temporary; Maintain Buy

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

Net Sales

9.8

11.4

EBITDA

1.7

2.2

PAT

1.0

1.4

EPS (INR)

7.2

9.6

Gr. (%)

43.5

32.6

BV/Sh (INR)

56.1

63.0

RoE (%)

13.7

16.1

RoCE (%)

19.0

23.5

P/E (x)

42.9

32.4

P/BV (x)

5.5

4.9

2019E

13.6

2.8

1.8

12.2

27.4

71.7

18.2

27.2

25.4

4.3

Estimate change

TP change

Rating change

Sharp decline in Fragrance business impacted growth in 4QFY17:

SHKs

consolidated revenue de-grew 7% YoY to INR2,475m (est: INR2,844m).

Fragrance business de-grew by 15% YoY while Flavor business grew by 118% YoY

for 4QFY17. EBITDA margins declined by 130bp to 14.9% mainly due to negative

operating leverage despite gross margins improving by 60bp. EBITDA de-grew by

14% to INR370m on YoY basis. Tax rate was lower at 21% which led to PAT

growing by 12.5% to INR274m on YoY basis. For FY17, revenue increased by 6%

to INR9,805m while EBITDA margins improved by 70bp to 16.9%. Adj. PAT

increased by 44% to INR1,048m mainly due to EBITDA margin expansion and

lower interest payment at INR52m vs INR202m in FY16. Despite subdued

performance, management indicated market share gain of 0.5%.

Domestic fragrance business to recover going ahead:

In 4QFY17, domestic

fragrance business declined by 12% on account of 1) domestic fragrance (excl.

service income) declining by 8% impacted due to slowdown in new launches in

FMCG companies and continuing impact of demonetization, 2) Decline in service

income (contributing 4% to decline) from INR120m to INR40m mainly on

account of destocking carried out by customers in view of GST. However,

management indicated that fragrance business is seeing gradual recovery and

2HFY18 to see good recovery while service income is back to normal levels.

Overseas fragrance business declined by 21% due to unfavorable currency

movement (3% impact) and sluggish global environment.

Flavor business continues to show robust performance:

In 4QFY17, flavor

business grew by 118% to INR1,240m driven by domestic growth of 134% and

overseas growth of 104%. The organic domestic business grew by 58%. The

management guided that in long run company intends to grow at 25%.

Valuation and view:

We believe that slowdown in fragrance business is

temporary and remain confident about its structural growth. In view of some

impact continuing in 1HFY18, we cut our earnings estimates by 5%/6% for

FY18/FY19 and expect SHK to post revenue and PAT CAGR of 18% and 30% over

FY17-19E. We maintain Buy with a target price of INR367 (30x FY19E EPS).

15 May 2017

18

12 May 2017

4QFY17 Results Update | Sector: Capital Goods

Inox Wind

Under Review

BSE SENSEX

30,188

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

9,401

INXW IN

221.9

40.4 / 0.6

253 / 161

5/-10/-32

109

14.4

CMP: INR201

n

TP: Under Review

Results below-estimates due to regulatory headwinds

Financials & Valuations (INR b)

Y/E MAR

Net Sales

EBITDA

Adj PAT

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

2015

27.0

4.2

2.6

11.9

59.3

62.7

32.7

21.8

16.9

3.2

2016

44.5

7.2

4.7

21.1

77.1

85.0

28.1

19.1

9.6

2.4

2017

34.2

5.4

2.8

12.8

-39.3

98.7

14.9

11.7

15.8

2.0

n

n

n

4QFY17 meaningfully below estimates:

4QFY17 sales fell 45% YoY to INR10.2b,

much below our estimate of INR20b. Supplies were curtailed at 94MW (-71%

YoY) as states stopped signing PPAs post end-Feb. Gross margin expanded

10.5% YoY to 36%, which, in turn, led to EBITDA margin of 21.5% (+530bp YoY;

est. of 17%). PAT of INR1.2b (-37% YoY) came in lower than our estimate of

INR2.5b. FY17 sales stood at 0.52GW (-37% YoY), while commissioning was at

0.7GW (-17% YoY).

Order book at 0.3GW; low revenue visibility:

INXW’s order book of 1.3GW (as

of 3QFY17) has been reduced to 0.3GW, as the earlier order book was on feed-

in tariff (FIT) basis, which is now redundant since states have stopped signing

PPAs on FIT basis. Execution of this 0.3GW would start only in 3QFY18, implying

limited sales visibility for next few quarters. Revenues beyond 3QFY18 would

be determined by INXW’s ability to win fresh orders in the upcoming wind

auction for 1GW. The company had ~150-200MW of orders under execution

during 4QFY17 without PPAs, which have been reallocated to public tenders

and private utilities with PPAs.

Core net working capital (NWC) remains elevated:

NWC stood at 153 days

(185 days as of 3QFY17, 82 days as of 4QFY16). Debt as of 4QFY17 was

INR15.3b, higher by INR1b v/s 4QFY16, primarily to fund working capital.

Changing rating to Under Review:

Post the regulatory change, wherein states

are only signing PPAs under the reverse auction route, INXW’s order book has

reduced to 0.3GW, which would start execution from 3QFY18. Given (1)

uncertainty over execution in FY18/FY19 due to order book depletion and

difficulty in estimating the company’s success rate in upcoming wind auctions,

(2) margin pressures as auction-determined tariffs are significantly lower than

FIT, (3) potential for write-down on debtors (INR24b as of 4QFY17) on WTGs

supplied without PPAs, we put our estimates and rating Under review. We will

review our estimates, rating and TP once we get more clarity on the

aforementioned issues.

(INR Million)

3Q

9,481

1.9

1,652

7

17.4

93

201

138

45.6

1,451

393

27.1

1,058

4.3

1,103

5.8

4Q

18,402

98.2

2,983

110

16.2

113

272

179

-140.9

2,918

906

31.1

2,011

70.6

1,870

104.7

1Q

4,350

-32.2

433

(57)

10.0

98

387

207

-23.7

179

60

33.8

118

(80.4)

94

-86.5

FY17

2Q

3Q

7,977 11,591

-20.7

22.3

958

1,794

(32)

9

12.0

15.5

108

118

316

407

184

159

-29.0

-31.3

747

1,460

182

385

24.4

26.4

565

1,075

(36.6)

1.6

536

1,043

-43.4

-5.4

FY16

4Q

10,192

-44.6

2,191

(27)

21.5

113

442

143

-104.3

1,883

608

32.3

1,275

(36.6)

1,171

-37.4

44,507

64.7

7,211

72.2

16.2

360

978

698

238

6,334

1,882

29.7

4,451

50.2

4,689

77.1

FY17E

34,150

-23.3

5,416

(24.9)

15.9

437

1,551

653

188

3,893

1,235

31.7

2,657

(40.3)

2,845

(39.3)

MOSL

4Q Est

19,970

9.3

3,427

14

17.2

111

341

370

0.0

3,345

903

27.0

2,442

16.7

2,442

23.3

Var.

Vs Est

-49

-36

Quarterly Performance

(Consolidated)

Y/E March

Sales

Change (%)

EBITDA

Change (%)

As of % Sales

Depreciation

Interest

Other Income

Extra-ordinary Items

PBT

Tax

Effective Tax Rate (%)

Reported PAT

Change (%)

Adj PAT

Change (%)

1Q

6,418

111.7

1,014

143.0

15.8

69

221

214

98

839

235

28.0

604

157.2

702

261.8

FY16

2Q

10,059

86.0

1,402

73

13.9

79

284

230

55.5

1,214

323

26.6

891

63.6

947

87.0

-44

-52

15 May 2017

19

Glenmark Pharma

BSE SENSEX

30,188

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

9,401

GNP IN

Dismal results; US performance significantly below expectations

282

n

GNP FY17 sales came at INR90b (18% YoY) with EBITDA margin at 20.3% and

214.3 / 3.3

PAT at INR11.1b (up 58% YoY).Net sales for the quarter grew ~11.5% YoY

993 / 729

(-2% QoQ) to ~INR24.2b (est. of ~INR30b). This strong disappointment is

-14/-26/-29

attributed to lower US sales of INR10b (INR12b in 3Q). EBITDA margin came

539

in at 17%, below our estimate of 33%, due to ~USD50m lower US sales, R&D

53.5

12 May 2017

4QFY17 Results Update | Sector: Healthcare

CMP: INR759

TP: INR800 (+5%)

Neutral

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

Net Sales

89.7

99.8

EBITDA

18.2

19.9

PAT

11.1

12.7

EPS (INR)

39.3

45.0

Gr. (%)

58.0

14.6

BV/Sh (INR)

159.2

200.6

RoE (%)

24.7

22.4

RoCE (%)

19.1

19.3

P/E (x)

19.3

16.9

P/BV (x)

4.8

3.8

2019E

n

114.9

22.9

15.1

53.5

18.8

250.4

21.3

20.9

14.2

3.0

n

Estimate change

TP change

Rating change

n

expense of ~14.5% and forex impact of ~INR1.4b. PAT increased 23.5% YoY

to INR1.8b (est. of INR6.2b).

Significant miss in US numbers; muted growth in India:

Although the US

business grew 53% YoY to INR10b, it was below our estimate of INR13.8b,

primarily due to lower-than-expected sales from Zetia and price erosion of

>10% in the base business. Zetia would have contributed sales of ~USD45m

in 4Q v/s estimate of ~USD95m. GNP reduced its Zetia sales guidance to

USD180-200m (prior: USD200-250m). Although the company should have

booked 4.5-5 months of sales by March quarter, GNP stated that it has

booked only 3.5 months of sales by now and the rest will come in 1Q. India

business reported only 6% YoY growth due to the impact of demonetization.

Europe business declined 15% YoY.

Earnings call highlights:

(1) Guided for sales growth of 12-15%, with flat

EBITDA margin in FY18. (2) Net debt down marginally to INR36b v/s ~INR38b

in 3Q. (3) Cash interest cost payment was ~INR450m out of total interest

cost of INR690m. (4) GNP took write-off of INR3.25b against cash sitting in

Venezuela. (5) R&D as % of sales expected at 11-12% (in line with FY17). (6)

Other expense includes forex loss of INR850m. 7) GNP expects 10-15 ANDA

approvals in FY18.

Maintain Neutral:

The significant miss on sales/profit guidance is a key

overhang. Weak cash flow conversion and high net debt remain key

concerns. Maintain

Neutral

with a TP of INR800 @ 15x FY19E EPS (v/s

INR990 @18x 1HFY19E). We cut our target multiple due to limited visibility

of margin expansion, debt reduction and pick-up in US base business. We

cut FY18E/19E EPS by 8.5%/11.6%, building in the impact of lower US sales.

Any big in-licensing deal in the innovation business could act as a positive

catalyst.

15 May 2017

20

12 May 2017

4QFY17 Results Update | Sector: Consumer

GSK Consumer

BSE SENSEX

30,188

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm/ Vol m

Free float (%)

S&P CNX

9,401

SKB IN

42.1

221.2 / 3.3

6584 / 4650

0/-14/-30

126

27.5

CMP: INR5,260

TP: INR4,380(-17%) Downgrade to Sell

Structural story remains weak; market share decline the last straw

n

n

Financials & Valuations (INR b)

Y/E Dec

2017 2018E 2019E

Net Sales

42.0

40.1

45.7

EBITDA

8.8

8.6

9.7

PAT

6.6

6.5

7.3

EPS (INR)

156.5 153.9 173.1

Gr. (%)

12.8

-1.7

12.5

BV/Sh (INR)

581.5 672.3 770.4

RoE (%)

28.9

24.6

24.0

RoCE (%)

28.9

24.6

24.0

P/E (x)

32.7

33.2

29.6

P/BV (x)

8.8

7.6

6.6

n

n

n

Estimate change

TP change

Rating change

Net sales (including operating income) grew 2.3% YoY (our estimate: 1.3% YoY

decline) to INR11b. EBITDA grew 1.5% YoY (our estimate: 3.5% decline) to

INR2.17b, while adjusted PAT grew 8.4% YoY (our estimate: 1.8% decline) to

INR1.76b. MFD volumes declined ~1% YoY (our estimate: 5% decline).

Gross margin contracted 210bp YoY to 65.8%. EBITDA margin contracted 10bp

YoY (our estimate: 50bp decline) to 19.7%. EBITDA grew 1.5% YoY (our

estimate: 3.5% decline) to INR2.17b. Adjusted PAT grew 8.4% YoY to INR 1.76b,

ahead of EBITDA growth due to high other income (up 42% YoY).

FY17 performance:

Sales, EBITDA and adjusted PAT declined by 3.6%, 1% and

4.5%, respectively. EBITDA margin expanded 55bp YoY to 20.9%.

Concall highlights:

(1) In FY17, SKB lost market share in

Horlicks

by 160bp to

49.3% in volume terms and by 130bp in value terms to ~44%; (2) After

demonetization, rural up-stocking is likely to return to normal levels only by

June-end, by which time there could be down-stocking due to GST.

Valuation and view:

Structurally, competition in the child nutrition space from

breakfast cereals, flavored oats, muesli, and milk additives has affected

category growth. Volumes remain moribund for three years. Now, we have

market share losses as well, which might not entirely be due to demonetization

affecting SKB more. Margins are at all-time highs due to overt focus on

profitability. Massive cash accumulation along with poor operating

performance is leading to consistent reduction in return ratios. EPS CAGR over

FY17-19 is likely to be muted at 9%. We do not think the core business

deserves to trade at over 26x. Since outlook might worsen if market share

declines persist, we downgrade the stock to SELL. Our target price of INR4,380

(26x FY19E core EPS + cash) implies 17% downside.

15 May 2017

21

March 2017 Results Preview | Sector: Consumer

Bata India

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

BATA IN

128.5

73 / 1

614 / 400

10 / 9 / -10

n

CMP: INR565

n

Under Review

We expect revenue to grow 2% YoY (-13% QoQ) to INR5.5b in

4QFY17. In our view, despite demonetization, the launch of new

designs and the focus on ladies/kids footwear are expected to drive

revenues.

EBITDA is likely to improve 11% to INR540m, with the margin

contracting 340bp to 9.5%.

On a high base, adjusted PAT is expected to de-grow 30% YoY to

INR314m.

Financial Snapshot (INR Billion)

Y/E March

2016 2017E 2018E 2019E

Sales

EBITDA

NP

EPS (INR)

EPS Gr. (%)

BV/Sh.(INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

Dividend yield

49.9

6.1

25.3

0.6

41.5

5.5

24.7

0.4

35.8

4.9

20.9

0.5

28.9

4.3

16.6

0.6

24.3

2.7

1.4

11.2

-31.2

13.1

13.2

25.4

24.5

2.7

1.7

13.5

20.2

13.9

14.0

19.6

27.6

3.2

2.0

15.6

16.0

14.5

14.6

23.2

31.3

3.9

2.5

19.3

24.0

15.9

16.0

21.8

n

92.0 101.9 113.8 129.0

Key things to watch for

Ø

SSS growth during the quarter.

Ø

Share of accessories in total revenue.

Ø

Impact on margins due to promotional campaigns.

Ø

New store additions.

Quarterly Performance

Y/E March

Consolidated

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

6,849

10.1

6,015

834

12.2

194

5

78

713

430

1,143

240

33.7

902

473

-22.3

6.9

FY16

2Q

3Q

5,747

6,255

4.9

16.4

5,267

5,473

480

782

8.4

12.5

192

195

6

2

97

89

380

318

697

154

40.6

543

226

-42.1

3.9

674

0

674

226

33.5

448

448

28.2

7.2

4Q

5,447

10.9

4,894

553

10.2

206

3

104

447

0

447

169

37.7

279

279

10.5

5.1

1Q

6,746

-1.5

5,926

820

12.2

162

7

110

761

0

761

257

33.8

504

504

6.6

7.5

FY17

2Q

3Q

5,837

6,408

1.6

2.5

5,302

5,651

535

757

9.2

11.8

160

162

13

5

141

190

504

0

504

158

31.3

346

346

53.2

5.9

780

217

563

186

23.8

377

594

32.5

9.3

4QE

5,556

2.0

4,945

611

11.0

180

3

100

528

0

528

180

34.0

349

349

25.1

6.3

(INR Million)

FY16

FY17E

24,298

NM

21,648

2,650

10.9

788

16

368

2,214

747

1,467

789

35.7

2,185

1,439

315.9

5.9

24,543

1.0

21,819

2,724

11.1

657

28

541

2,581

217

2,364

780

33.0

1,584

1,729

20

7.0

15 May 2017

22

March 2017 Results Preview | Sector: Consumer

Colgate

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

CLGT IN

272.0

272 / 4

1033 / 788

6 / -4 / 0

n

CMP: INR1,001

n

TP: INR1,200 (+20%)

Buy

We expect Colgate’s (CLGT) sales to grow 3.5% YoY to INR10.1b,

with a 2% decline in toothpaste volumes.

We estimate gross and EBITDA margin expansion of 160bp and

40bp to 59.1% and 25.5%, respectively. Hence, we have modeled

EBITDA growth of 5% and adjusted PAT decline of 17.3% for the

quarter mainly due to low tax rate base of 15.8% in the base

quarter.

The stock trades at 31.6x FY19E EPS of INR31.6; we have a Buy

rating on the stock.

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 (%)

44.1

26.7

28.4

1.1

46.2

24.1

28.0

1.5

38.8

22.6

23.3

1.8

31.6

20.8

19.2

2.2

38.0

9.5

6.2

22.7

10.4

37.5

68.9

68.0

48.4

39.2

9.6

5.9

21.7

-4.4

41.5

54.9

53.8

70.0

44.5

11.5

7.0

25.8

18.9

44.3

60.1

59.0

70.0

51.3

13.8

8.6

31.6

22.7

48.1

68.5

67.3

70.0

n

Key issues to watch for:

Ø

Volume growth in toothpaste and market share movement.

Ø

Ad spends and competitive intensity in toothpaste, especially

from Patanjali.

Quarterly Performance

Y/E March

Toothpaste Volume Gr %

Net Sales

YoY Change (%)

COGS

Gross Profit

Gross Margin (%)

Other operating Expenses

% to sales

Other operating Income

EBITDA

Margins (%)

YoY Growth (%)

Depreciation

Interest

Financial other Income

PBT

Tax

Rate (%)

Adj PAT

YoY Change (%)

E: MOSL Estimates

1Q

2.0

9,237

3,641

5,596

60.6

3,630

39.3

72

2,038

21.9

253

0

81

1,866

626

33.5

1,241

FY16

2Q

3Q

3.0

1.0

9,581

9,484

3,658

5,924

61.8

3,448

36.0

67

2,543

26.4

269

0

107

2,380

812

34.1

1,569

3,529

5,955

62.8

3,653

38.5

85

2,387

24.9

295

0

98

2,190

724

33.1

1,466

4Q

3.0

9,714

4,125

5,589

57.5

3,320

34.2

227

2,495

25.1

297

0

51

2,248

354

15.8

1,894

1Q

5.0

10,056

8.9

3,818

6,238

62.0

4,197

41.7

76

2,117

20.9

3.9

316

0

96

1,897

640

33.7

1,257

1.3

FY17

2Q

4.0

10,483

9.4

3,910

6,574

62.7

3,909

37.3

83

2,748

26.0

8.1

333

0

113

2,527

714

28.3

1,813

15.6

(INR Million)

FY16

3Q

-12.0

8,650

-8.8

3,159

5,491

63.5

3,446

39.8

96

2,141

24.5

-10.3

342

0

109

1,908

650

34.1

1,258

-14.2

4QE

-2.0

10,057

3.5

4,117

5,939

59.1

3,524

35.0

204

2,620

25.5

5.0

322

0

39

2,337

770

33.0

1,567

-17.3

2.3

38,016

-3.9

14,953

23,063

60.7

14,051

37.0

451

9,463

24.6

15.1

1,114

0

336

8,685

2,516

29.0

6,169

10.4

FY17E

-1.3

39,246

3.2

15,003

24,242

61.8

15,075

38.4

458

9,625

24.2

1.7

1,313

0

357

8,669

2,774

32.0

5,895

-4.4

15 May 2017

23

March 2017 Results Preview | Sector: Textiles

Indo Count Industries

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

ICNT IN

197.4

39 / 1

216 / 135

18 / 29 / -20

n

CMP: INR199

n

TP: INR232 (+17%)

Buy

We expect revenue to grow 4% YoY (9% QoQ) to INR5.5b in

4QFY17.

We estimate 70bp contraction in margin YoY to 21.5%, and flattish

EBITDA growth to INR1.17b.

PAT is also expected to largely remain flat YoY at INR669m, v/s

INR660m in 4QFY16.

Buy.

Financial Snapshot (INR Billion)

Y/E March

2016 2017E 2018E 2019E

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)

14.8

5.9

7.1

1.5

14.5

4.1

6.6

1.4

11.3

3.0

5.4

1.2

9.4

2.2

4.3

1.0

22.1

4.7

2.6

13.4

61.6

33.3

48.9

33.3

22.8

4.8

2.7

13.7

2.0

47.7

33.8

28.4

25.5

5.7

3.5

17.5

28.2

66.2

30.8

29.2

28.7

6.6

4.2

21.1

20.5

88.7

27.3

26.8

n

Key things to watch for

Ø

Any addition of clients and geographies, and ramp-up there.

Ø

Progress on the brands business.

Ø

Foreign exchange gains and losses.

Standalone - Quarterly Earning Model

Y/E March

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOSL Estimates

1Q

4,579

44.9

3,567

1,012

22.1

67

146

0

798

277

34.6

522

522

109.4

11.4

FY16

2Q

3Q

5,765 5,009

20.4

16.9

4,713 3,858

1,052 1,151

18.2

23.0

69

72

156

94

0

0

828

985

311

213

37.6

21.6

516

773

516

773

21.5

77.1

9.0

15.4

4Q

5,250

15.0

4,087

1,163

22.2

51

119

0

993

333

33.5

660

660

44.5

12.6

1Q

4,926

7.6

3,824

1,103

22.4

80

98

0

924

321

34.8

603

603

15.6

12.2

FY17

2Q

3Q

5,763

5,029

0.0

0.4

4,599

4,009

1,164

1,020

20.2

20.3

73

79

116

91

0

0

975

849

348

287

35.7

33.8

627

562

627

562

21.5

-27.3

10.9

11.2

4QE

5,460

4.0

4,286

1,174

21.5

80

80

0

1,014

345

34.0

669

669

1.4

12.3

(INR Million)

FY16

FY17E

22,128

24.2

17,393

4,735

21.4

188

549

0

3,998

1,351

33.8

2,647

2,647

61.6

12.0

22,814

3.1

18,046

4,768

20.9

357

380

0

4,031

1,330

33.0

2,701

2,701

2.0

11.8

15 May 2017

24