19 January 2018
Market snapshot
Equities - India
Close
Chg .%
Sensex
35,260
0.5
Nifty-50
10,817
0.3
Nifty-M 100
21,098
-1.9
Equities-Global
Close
Chg .%
S&P 500
2,798
-0.2
Nasdaq
7,296
0.0
FTSE 100
7,701
-0.3
DAX
13,281
0.7
Hang Seng
13,095
1.8
Nikkei 225
23,763
-0.4
Commodities
Close
Chg .%
Brent (US$/Bbl)
69
-0.4
Gold ($/OZ)
1,327
0.0
Cu (US$/MT)
7,032
0.5
Almn (US$/MT)
2,244
2.3
Currency
Close
Chg .%
USD/INR
63.9
0.0
USD/EUR
1.2
0.4
USD/JPY
111.1
-0.2
YIELD (%)
Close
1MChg
10 Yrs G-Sec
7.3
0.04
10 Yrs AAA Corp
7.9
0.04
Flows (USD b)
18-Jan
MTD
FIIs
0.3
0.8
DIIs
-0.1
0.0
Volumes (INRb)
18-Jan
MTD*
Cash
486
418
F&O
16,580
6,846
Note: YTD is calendar year, *Avg
CY17%
31.8
31.8
49.9
CY17%
25.2
35.6
8.2
14.8
37.0
24.9
CY17%
25.3
15.2
26.6
28.7
CY17%
-5.9
15.9
-4.8
CY17%
0.7
0.3
CY17
7.7
14.0
YTD*
418
6,846
Today’s top research idea
Yes Bank: Loan growth accelerates further; asset quality
largely stable
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 fee growth.
On the balance sheet front, the initial focus of the bank will be on growing the
liability side first, and as customer relationships age, the focus would be on
cross-selling its retail assets.
We believe that while YES is likely to maintain industry leading growth, the
improvement in asset quality (we expect PCR to improve to 61.4% by FY19E)
and consistency in operating metrics are critical for sustained re-rating of the
stock.
We estimate YES to deliver 30% earnings CAGR over FY18-21E and revise our
TP
to INR410 (2.7x Mar-20E ABV)
Research covered
Cos/Sector
GST
Bharti Airtel
Hindustan Zinc
UltraTech Cement
Yes Bank
Bharti Infratel
D B Corp
Cyient
DCB Bank
Zensar Tech
Results Expectation
Key Highlights
Another step to make GST more palatable
Robust Africa EBITDA partly cushions India wireless EBITDA fall
In-line; LME and volume gains partly offset by cost increase
Margin miss led by lower realizations
Loan growth accelerates further; asset quality largely stable
Telco consolidation hurts earnings
Quarter dragged by lower ad spend from key sectors
Stellar broad-based services growth
Income beat offset by elevated opex; advances growth picks up
Beat on revenue and margins; IMS performance still a concern
HCLT | HDFCB | ITC | JUBI | KMB | NITEC | PCJL | RIL | TELX | WPRO
Chart of the Day: Yes Bank: Loan growth accelerates further; asset quality largely stable
Strong loan growth (+15%
QoQ, +46% YoY)
Strong deposits growth continues
Source: Company, MOSL
Source: Company, MOSL
Research Team (Gautam.Duggad@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

In the news today
Kindly click on textbox for the detailed news link
1
Torrent Pharma to buy US-
based Bio-Pharm
Ahmedabad-based Torrent
Pharmaceuticals Ltd on Thursday
announced the acquisition of Bio-
Pharm Inc., a drugmaker based in
Pennsylvania, US. The company
did not disclose the deal size or
other financial details. “This
acquisition is an important step
for increasing Torrent’s…
2
Biocon ties up with Swiss pharma company for biosimilars
Biopharmaceutical company Biocon and Sandoz, a unit of Swiss pharma
giant Novartis, will partner to develop, manufacture and commercialize
multiple biosimilars in immunology and oncology for patients, the two
companies said. Biosimilars are biologic products, made inside living cells
and has no clinical differences in terms of safety and effectiveness from
the main product.
3
Tech Mahindra to pick up 17.5
per cent stake in Altiostar for
$15 million
Tech Mahindra to pick up 17.5 per
cent stake in Altiostar for $15
million
IT company Tech Mahindra today
announced it will acquire 17.5 per
cent stake in US-based telecom
software development company
Altiostar Networks for USD 15
million in a cash deal. The
investment committee of the…
4
Six firms show interest in 55
oil, gas blocks on offer
India is testing new waters in the
oil and gas exploration segment
with the launch of bids for the
Open Acreage Licensing
Programme (OALP), which allows
companies to pick their own areas
for hydrocarbon exploration.
Sounding optimistic, Oil Minister
Dharmendra Pradhan said: “This is
the first time that bidders have
carved out blocks for themselves.
5
Enforcement Directorate to
sell Rs 4k-cr Vijay Mallya
shares in United Breweries
The Enforcement Directorate
plans to sell a large chunk of
unpledged shares owned by
Vijay Mallya in United Breweries,
to raise more than Rs 4,000
crore, or nearly half of the
money owed by the liquor baron
to lenders. Top officials close to
the issue said ED has secured
custody of 4 crore unpledged
shares, constituting about 15.2%
stake, owned by Mallya in India's
largest beermaker.
6
Improve pricing of risk-based
loans, RBI tells banks
Banks in India must improve pricing
of loans based on risk assessment,
a skill that would have helped
them avoid non-performing assets,
said N.S. Vishwanathan, deputy
governor of the Reserve Bank of
India on Thursday. He also asked
banks to improve underwriting
standards by writing strong loan
covenants—agreements with the
borrowers—as well as …
7
‘India will need $125 bn to
fund renewables dream’
India will need at least $125 billion
to fund its ambitious plan to
increase the share of renewable
power supply in the countrys grid
by 2022, a top government official
told Reuters, underlining the
immense financing challenge
ahead. India is one of the world's
most important growth markets for
renewable energy. Millions of
Indians are not yet linked up …
19 January 2018
2

Strategy | 18 January 2018
GST
Another step to make GST more palatable
Rates reduced for more categories of goods and services
The GST Council – in its 25 meeting held on 18 January 2018 – decided to prune tax rates
on 29 categories of goods and 53 categories of services. The Council also laid emphasis on
easing compliance burden for assessees. According to the Council, GST collections have
remained low due its dependence on unilateral declarations by assessees. However, it sees
the situation improving with the roll out of anti-evasion measures, such as E-way Bill for
st
interstate-trade from 1 February 2018. Noting weak revenues (INR3.1b) from ~1.7m
dealers registered under the composition scheme, the Council is now likely to amend the
GST laws to apply a reverse charge mechanism under this scheme. Overall, we believe that
companies like Wonderla and Adlabs Entertainment would particularly benefit from the
changes in the GST rates. Jain Irrigation, Maruti, L&T, P&G, Titan, PC Jewelers, IOC, BPCL,
HPCL, ONGC, Oil India, RIL and Vedanta (holding co of Cairn India) could see marginally
positive impact.
th
th
More categories of goods/services brought under lower tax bracket
The GST Council, in its meeting held on 18
th
January 2019, reduced tax rates on
29 categories of goods and 53 categories of services – in line with what we had
cited in our previous
GST note.
The revised rates will be applicable from 25
th
January 2018.
We believe the move will particularly be beneficial for companies engaged in
the business of theme parks (Wonderla/ Adlabs Entertainment), drip irrigation
systems (Jain Irrigation), jewellery (Titan, PC Jewelers), as well as OMCs (IOC,
BPCL, HPCL), E&P companies (ONGC, Oil India, RIL, Vedanta [Cairn India]), auto
manufacturers (Maruti), sugar boiled confectionery players (P&G) and
metro/monorail asset owners (L&T).
Duty on cigarette filter rods is hiked to 18% (from 12%). However, since the GST
rate on cigarette is already higher than the revised duty on filer rods, the impact
will be nil for cigarette manufacturers (ITC, Godfrey Phillips), as the increase in
filer rods duty will be adjusted as input credit.
GST revenue collections have been declining consistently. GST receipts,
according to latest data in Dec’17, declined to INR808.1b from INR940.6b in
Aug’17.
Further, revenue collection in Jan’18 is expected to be lower, considering the
impact of rate rationalization (applicable from 15
th
November 2017) undertaken
in the previous Council meeting.
However, the Council highlighted that current GST collections are based on
‘Unilateral Declaration,’ and with ‘Anti-Evasion’ measures being implemented,
GST revenue collection is likely to improve.
Furthermore, the implementation of ‘E-way Bill’ on inter-state movement of
goods from 1
st
February would help reduce tax evasion. The Council has also
highlighted that 15 states are voluntary implementing E-way bill on intra-state
movement of goods.
The Council has also decided to provisionally distribute IGST collection of
INR350b equally between the centre and the states.
Anti-evasion measures may help boost low GST collections
19 January 2018
3

Exhibit 1:
GST – monthly collections remained weak
GST receipts (INRb)
940.6
906.7
921.5
833.5
808.1
Exhibit 2:
GST – return filing too has declined
Return filed (m)
5.9
5.9
5.7
5.0
5.3
Aug
Sept
Oct
Nov
Dec
Aug
Sept
Oct
Nov
Dec
Source: MOF, MOSL
Source: MOF, MOSL
Efforts on to simplify compliance; composition scheme may be amended
The GST Council discussed the current return filing mechanism, and three
presentations were made on how this mechanism could be simplified. The new
compliance procedure, once finalized and implemented, will simplify the tax filing
process, in our view. The next Council meeting is likely to be held in 10 days.
Noting weak revenues (INR3.1b) from ~1.7m dealers registered under the
composition scheme, the Council is likely to amend the CGST, SGST and IGST Act
to bring ‘Reverse Charge Mechanism (RCM)’ under this scheme.
RATE REVISION
COMPANIES
Maruti – Slightly Positive
With a reduction in rates, we expect partial restoration of normalcy in the
used car market, which was impacted by higher GST rates. This would
boost demand for new cars emanating from the replacement segment.
Maruti Suzuki would be one of the beneficiaries, as the replacement
segment represents ~25% of its volumes.
P&G (Vicks) – Slightly Positive
ITC/ Godfrey Phillips – unlikely to be impacted
Since the GST rate on cigarettes is already higher than the revised duty
on filer rods, the impact will be nil for cigarette manufacturers, as the
increase in filer rods duty will be adjusted as input credit.
Titan, PC Jewelers – Slightly Positive
Jain Irrigation - Slightly Positive
COMPANIES
L&T – Slightly Positive
Construction of mono/metro rail gets cheaper by 6%. L&T's Hyderabad
metro, which is under construction, may see a slightly positive impact.
Exhibit 3: Impact of current pruning of GST rates
PRODUCTS
Auto
Old and used motor vehicles (medium and large
28% to 18%
cars and SUV)
Old and used motor vehicles (Other than medium
28% to 12%
and large cars and SUV)
Consumer
Sugar boiled confectionary
Cigarette filter rods
Diamonds and Precious stones
Agri Goods
Drip irrigations systems, including laterals,
sprinkles/mechanical sprayers
SERVICES
18% to 12%
12% to 18%
3% to 0.25%
18% to 12%
RATE REVISION
Construction
Construction of metro and monorail projects
18% to 12%
Oil & Gas
Transportation of petroleum crude and
petroleum products (MS, HSD, ATF).
18% to 5%
without ITC and
12% with ITC
IOC, BPCL, HPCL – Slightly Positive
Mining or exploration services of petroleum crude
and natural gas; drilling services in respect to the 12%
said goods
ONGC, Oil India, RIL ,Cairn India (Vedanta) – Slightly Positive
Others
Admission to theme parks, water parks, joy rides,
28% to 18%
merry-go-rounds, go-carting and ballet
Job work services for manufactures of leather
goods and footwear
5%
Wonderla, Adlabs Entertainment – Positive Impact
Bata – unlikely to be impacted
~60% of manufacturing is outsourced; however, since duty on final goods
remains unchanged, there may not be a material impact
Source: MoF, MOSL
19 January 2018
4

RESULTS
FLASH
Bharti Airtel
TP: INR680
Buy
18 January 2018
Results Flash | Sector: Telecom
BSE SENSEX
35,260
S&P CNX
10,817
CMP: INR495
Robust Africa EBITDA partly cushions India wireless EBITDA fall
India wireless drags performance; Africa biz exceeds estimates, though
Conference Call Details
Date:
19th Jan 2018
Time:
02:30pm IST
Dial-in details:
+91-11 4444 9999
Consol. revenue declined sharply by 7% QoQ (-13% YoY) to INR203.2b (2%
miss).
Consol. EBITDA declined 6% QoQ (-12% YoY) to INR74.7b (2% beat), with the
margin expanding 40bp QoQ/YoY to 36.8%.
2018E
Y/E Mar
Net Sales
851.3
EBITDA
310.9
NP
11.3
EPS (INR)
2.8
EPS Gr. (%)
-74.4
BV/Sh. (INR)
169.8
RoE (%)
1.7
RoCE (%)
3.8
P/E (x)
174.2
P/BV (x)
2.9
EV/EBITDA (x)
9.9
2019E 2020E
910.8 1,012.4
353.2 406.1
23.2
35.9
5.8
9.0
104.6
54.7
174.4 182.1
3.4
5.0
4.9
6.0
85.1
55.0
2.8
2.7
8.4
7.1
India wireless business
India wireless revenue declined 12% QoQ (-22% YoY) to INR107.5b (est. of
INR109b).
India wireless EBITDA fell 17% QoQ (-34% YoY) to INR35b (1% miss),
with the
margin contracting 170bp/570 QoQ/YoY to 32.6%. We note that India wireless
revenue/EBITDA were impacted by IUC cut (10% impact) and intense
competition (2%/7% impact).
Network/employee cost declined 6%/4% QoQ, partially mitigating the impact
on India EBITDA.
India wireless ARPU declined 15% QoQ (or by INR22 – INR16 due to IUC cut
and INR6 due to undercutting in the market) to INR123.
Data usage/sub jumped 31% QoQ to 5.3GB/sub, with 41% data traffic growth
to 369m GB/month. This, however, still is only 25% of RJio’s 2Q data traffic of
1.5b GB/month. Bharti’s data subs increased 8% QoQ to 70.8m.
Africa business
Africa revenue fell 1%/4% QoQ/YoY to INR51.3b (in-line) due to divestment of
Ghana operations. On a like-to-like basis, Africa revenue increased 2% QoQ in
INR/dollar terms.
Africa EBITDA increased 10%/46% QoQ/YoY to INR18.1b (9% beat), driven
by a 7% drop in opex.
Africa EBITDA margin shot up by 360bp to 35.2%. This is
largely due to 270bp improvement in SG&A, employee and network costs.
Unlike the last quarter, the sharp improvement in Africa EBITDA is driven by
cost efficiencies and not revenue growth.
PAT declined 11% QoQ (-39% YoY) to INR3.1b, above our estimate of INR814m
due to lower depreciation and interest cost.
Capex
Bharti incurred capex of INR65b in 3QFY18, of which INR49b was India
wireless capex.
The company added ~33,000 MBB base stations to take the total to 259k
(~130k unique MBB towers).
Valuation and view:
At CMP of INR495, the stock trades at 9.9x/8.4 on FY18/19E
EBITDA. We have a
Buy
rating on the stock with a TP of INR680.
19 January 2018
5

Consolidated - Quarterly Earning Model
Y/E March
FY17
1Q
2Q
3Q
4Q
1Q
Gross Revenue
2,55,465 2,46,515 2,33,357 2,19,346 2,19,581
YoY Change (%)
7.9
3.4
-3.0
-12.1
-14.0
Total Expenditure
1,59,985 1,52,113 1,48,542 1,40,746 1,41,997
EBITDA
95,480 94,402 84,815 78,600 77,584
Margins (%)
37.4
38.3
36.3
35.8
35.3
Depreciation
50,402 49,560 48,350 49,418 48,192
Interest
19,399 19,057 19,356 19,162 18,274
Other Income
2,787 1,568 3,487 2,494
3,698
PBT before EO expense
28,466 27,353 20,596 12,514 14,816
Extra-Ord expense
3,536
66
2,040 6,055
503
PBT
24,930 27,287 18,556 6,459 14,313
Tax
10,089 11,136 11,841 1,753
8,136
Rate (%)
40.5
40.8
63.8
27.1
56.8
MI & P/L of Asso. Cos.
222
1,544 1,678
972
2,504
Reported PAT
14,619 14,607 5,037 3,734
3,673
Adj PAT
16,724 14,646 5,775 8,146
3,890
YoY Change (%)
70.7
25.9
-54.6
-45.5
-76.7
Margins (%)
6.5
5.9
2.5
3.7
1.8
Mobile ARPU (INR/month)
195.7 187.9 172.0 157.6 154.5
QoQ Growth (%)
0.8
-4.0
-8.4
-8.4
-2.0
(INR m)
FY18
2Q
2,17,769
-11.7
1,38,549
79,220
36.4
46,873
23,266
3,907
12,988
1,786
11,202
5,341
47.7
2,431
3,430
4,364
-70.2
2.0
144.7
-6.3
3Q
2,03,186
-12.9
1,28,498
74,688
36.8
48,375
20,882
2,950
8,381
2,395
5,986
379
6.3
2,549
3,058
5,301
-8.2
2.6
122.8
-15.2
FY17
FY18E
4QE
3QFY18E Var (%)
2,10,728 9,54,683 8,51,264 2,06,642
-1.7
-3.9
-1.1
-10.8
-11.4
1,31,290 6,01,386 5,40,334 1,33,265 -3.6
79,438 3,53,297 3,10,930 73,377
1.8
37.7
37.0
36.5
35.5 124.9
57,790 1,97,730 2,01,230 53,083 -8.9
25,308 76,974 88,841
21,841 -4.4
2,950 10,336 13,505
3,907 -24.5
-710 88,929 34,364
2,361
255.0
0
11,697 4,684
0
-710 77,232 29,680
2,361
153.5
-298 34,819 13,558
992
42.0
45.1
45.7
42.0
-167
4,416 7,317
555
-245 37,997 8,805
814
275.6
-245 44,421 11,350
814
-103.0
-9.5
-74.4
-85.9
-0.1
4.7
1.3
0.4
122.8
177.0 136.4
127.4
-3.6
0.0
-8.2
-23.0
-12.0
19 January 2018
6

18 January 2018
3QFY18 Results Update | Sector: Metals
Hindustan Zinc
Neutral
BSE SENSEX
35,260
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
10,817
HZ IN
4,225
1,305 / 20.0
331/227
-1/0/-23
672.0
35.1
CMP: INR309
TP: INR354 (+14%)
In-line; LME and volume gains partly offset by cost increase
Zinc outlook bullish, but priced in
HZL’s 3QFY18 EBITDA increased 17% YoY/7% QoQ to INR32.4b (in-line), driven
by higher LME and volumes, partly offset by an increase in cost. Other income
declined 39% QoQ to INR2.9b due to lower surplus cash and the market-to-
market impact of an increase in the G-Sec rate. PAT declined 4% YoY/12% QoQ
to INR22.3b (est. of INR23.9b) due to a higher tax rate.
Mine metal production increased 10% QoQ (-13% YoY, strong base) to
240kt. Zinc production rose 7% QoQ (-18% YoY) to 194kt, while lead
production increased 21% QoQ/18% YoY to 46kt. Silver production growth
was slower at 4% QoQ to 132t on WIP build-up.
Reported CoP (ex-royalty) increased, on expected lines, by USD38/t QoQ to
USD1,022/t due to higher coke and coal cost, and grade mix.
CoP is guided at USD950-975/t for FY18, implying some moderation in 4Q,
driven by better grade and coal linkage.
RAM underground and SK mines crossed their rated output of 2mt/4.5mt
during the quarter. Production through shafts at both the mines is on track
to start from 3QFY19. Civil work at the Fumer project is 70% complete, with
the project on track for commissioning by mid-FY19.
Zinc price outlook remains bullish, but priced in; Maintain Neutral
Zinc market remains tight even as demand growth is modest on lag in supply
response. Thus, the price outlook remains bullish. At zinc LME of USD3,800/t for
FY19E, the stock is trading at 5.5x EV/EBITDA, leaving limited upside potential.
Maintain
Neutral
with a TP of INR354/share, based on 6.5x FY19E EV/EBITDA.
FY18
2Q
3Q
193
200
40
45
146
132
2,950 3,236
53,090 59,220
30,240 32,440
45.6
16.5
57.0
54.8
840
170
3,940 4,810
4,870 2,980
30,330 30,440
-2,910
0
33,240 30,440
7,790 8,140
23.4
26.7
25,450 22,300
22,540 22,300
18.5
-3.9
FY17
4QE
209
41
124
3,200
62,227
36,372
-3.0
58.4
0
5,105
3,596
34,862
0
34,862
7,321
21.0
27,541
27,541
-9.9
696
138
447
2,366
172,964
97,390
43.7
56.3
2,017
17,871
24,496
101,998
-5
102,003
18,837
18.5
83,166
83,161
-0.7
FY18E
792
160
512
2,994
220,297
122,892
26.2
55.8
2,380
17,455
16,746
119,802
-2,910
122,712
28,661
23.4
94,051
91,141
9.6
vs Est.
%
-1
14
10
0
5
2
Financials & Valuations (INR b)
Y/E March
2018E 2019E
Sales
220
295
EBITDA
122.9
181.4
NP
91.1
140.9
Adj. EPS (INR)
21.6
33.3
EPS Gr(%)
9.6
54.6
BV/Sh. (INR)
67.3
88.7
RoE (%)
30.8
42.7
RoCE (%)
39.3
57.6
Payout (%)
36.0
36.0
Valuations
P/E (x)
15.6
10.1
P/BV
13.1
8.8
EV/EBITDA (x)
8.8
5.5
Div. Yield (%)
1.9
3.0
2020E
285
170.5
135.6
32.1
-3.8
109.2
32.4
42.7
36.0
10.5
9.0
5.2
2.9
Estimate change
TP change
Rating change
Quarterly Performance (Standalone) – INR million
Y/E March
Zinc refined (kt)
Lead refined (kt)
Silver (tonnes)
Zinc LME (USD/t)
Net Sales
EBITDA
Change (YoY %)
As % of Net Sales
Finance cost
DD&A
Other Income
PBT (before EO item)
EO exp. (income)
PBT (after EO item)
Total Tax
% Tax
Reported PAT
Adjusted PAT
Change (YoY %)
1Q
120
23
88
1,918
25,306
11,309
-42.5
44.7
712
3,644
6,101
13,053
-5
13,059
2,680
20.5
10,379
10,374
-53.4
FY17
2Q
3Q
148
211
32
36
107
117
2,252 2,518
35,257 49,799
20,767 27,834
2.6
88.3
58.9
55.9
712
451
4,317 4,589
7,702 5,882
23,440 28,676
0
0
23,440 28,676
4,421 5,477
18.9
19.1
19,019 23,199
19,019 23,199
-11.4
28.1
4Q
217
47
135
2,777
62,602
37,480
186.5
59.9
142
5,321
4,811
36,829
0
36,829
6,259
17.0
30,570
30,570
42.2
1Q
190
34
110
2,589
45,760
23,840
110.8
52.1
1,370
3,600
5,300
24,170
0
24,170
5,410
22.4
18,760
18,760
80.8
3QE
203
39
120
3,229
56,254
31,702
13.9
56.4
0
5,054
-5
3,636
-18
30,283
1
0
30,283
1
6,359
28
21.0
23,923
-7
23,923
-7
3.1 -224.1
19 January 2018
7

Ultratech Cement
BSE SENSEX
35,260
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
10,817
UTCEM IN
275
1209 / 18.7
Volumes exceed estimates led by JPA ramp-up
4,594 / 3,377
Volumes rise as JPA operates at 60% utilization:
3QFY18 volume rose 35%
-3/-5/-3
YoY (+21% QoQ) to 15.85mt (est. of 14.02mt), as JPA’s average utilization for
984
the quarter was 51%. However, realization fell 4% QoQ to INR4,789 (est. of
37.9
18 January 2018
Q3FY18 Results Update | Sector: Cement
CMP: INR4,409
TP: INR5,131 (+16%)
Buy
Margin miss led by lower realizations
Financials & Valuations (INR b)
2018E 2019E
Y/E Mar
Net Sales
301.3 378.0
EBITDA
60.5
81.3
PAT
24.4
37.4
EPS (INR)
89.0 136.2
Gr. (%)
-7.4
53.0
BV/Sh (INR)
956.2 1,062.8
RoE (%)
9.7
13.5
RoCE (%)
8.0
9.4
P/E (x)
49.5
32.4
P/BV (x)
4.6
4.1
2020E
436.8
99.4
49.0
178.4
31.1
1,193.5
15.8
11.0
24.7
3.7
Estimate change
TP change
Rating change
INR5,132) due to weak pricing in south and west. Net sales stood at
INR75.8b (+15% QoQ), exceeding our estimate of INR73.7b.
Margins hit by lower realization:
P&F cost/t rose 15% YoY due to higher
petcoke prices. However, the impact was mitigated by better efficiency due
to higher proportion of WHRS. Other expenses increased 19% QoQ due to
higher shutdown and maintenance expenses for the acquired units. EBITDA
declined 6% QoQ to INR12.7b (est. of INR14.2b), translating into EBITDA/ton
of INR801 (-INR228/t QoQ; our estimate: INR985), and a margin of 16.7% (-
3pp YoY; -3.8pp QoQ) due to lower QoQ realization. Reported PAT stood at
INR4.2b (-2% QoQ), while adj. PAT came in at INR3.5b (-19% QoQ; est.
INR4.6b) as INR1.04b of provision toward DMF for earlier years was reversed
in other income.
Management commentary:
1) All-India cement prices corrected by 4-5%
QoQ. 2) Petcoke usage has been banned in thermal power plants. 3)
Proportion of trade has declined from 68% to 65% due to higher demand
from infrastructure. 4) UTCEM plans to incur capex of INR20-25b.
Valuation view:
While short-term profitability is impacted by JPA
acquisition, we believe addition of ~31% of present capacity at virtually zero
lead time is critical for a large-scale player like UTCEM to retain market
share. Also, the expanded capacity would give it an edge when there is an
upturn. We value UTCEM at FY20E EV/EBITDA of 14.5x. Our TP of INR5,131
implies 16% upside.
(INR m)
FY18E
59.2
21.1
4,981
301,301
60,502
20.1
17,708
11,895
4,500
35,399
10,974
31.0
24,426
24,426
-7.4
FY18
3QE
14.02
23.0
5,132
2.6
73,754
14,160
19.2
4,900
3,800
1,500
6,960
2,332
34
4,628
4,628
-17.9
Var.
(%)
13
-7
3
-10
Quarterly Performance
FY17
FY18
FY17
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4QE
Sales (m ton)
13.19 11.18 11.73 14.07 13.19 13.14 15.85 18.32
48.9
YoY Change (%)
8.6
3.5
2.3
2.7
0.0
17.5
35.1
30.2
1.6
Blended Realn.(INR/ton) *
4,723 4,827 4,781 4,689 5,025 5,001 4,789 5,100
4,762
QoQ Change (%)
3.9
2.2
-0.9
-1.9
7.2
-0.5
-4.2
6.5
Net Sales
62,295 53,966 56,091 65,953 66,265 65,713 75,899 93,425 238,914
EBITDA
14,225 10,938 11,135 12,782 15,601 13,513 12,691 18,697 49,690
Margins (%)
22.8
20.3
19.9
19.4
23.5
20.6
16.7
20.0
20.8
Depreciation
3,027 3,139 3,156 3,357 3,098 4,988 4,744 4,878 12,679
Interest
1,525 1,367 1,293 1,529 1,285 3,759 3,472 3,379
5,714
Other Income
1,504 2,335
970 2,401 1,652 1,680
518
650
6,600
PBT before EO expense
11,177 8,767 7,655 10,297 12,870 6,447 4,993 11,090 37,896
Tax
3,428 2,757 2,021 3,276 3,963 2,135 1,816 3,060
11,482
Rate (%)
30.7
31.4
26.4
32.2
30.8
33.1
30.1
27.6
30.4
Reported PAT
7,749 6,011 5,634 6,883 8,906 4,312 4,215 8,030 26,277
Adj PAT
7,749 6,011 5,634 6,976 8,906 4,312 3,489 8,030 26,372
YoY Change (%)
28.3
31.4
6.7
-10.7
14.9
-28.3
-38.1
15.1
11.3
E: MOSL Estimates; YoY numbers are not comparable due to JPA acquisition
Y/E March
-28
-9
-25
19 January 2018
8

18 January 2018
3QFY18 Results Update | Sector: Financials - Banks
Yes Bank
Buy
BSE SENSEX
35,260
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
2018E 2019E
NII
76.5
99.3
OP
78.6
102.5
NP
41.5
54.5
NIM (%)
3.4
3.5
EPS (INR)
18.2
23.9
EPS Gr. (%)
24.8
31.2
BV/Sh. (INR)
110.1
130.2
ABV/Sh. (INR)
105.0
125.4
RoE (%)
17.6
19.9
RoA (%)
1.7
1.7
Valuations
P/E(X)
18.7
14.2
P/BV (X)
3.1
2.6
S&P CNX
10,817
YES IN
Loan growth accelerates further; asset quality largely stable
2282.4
YES reported robust PPoP growth of 38% YoY/5% QoQ to INR20.02b (2.5%
776/11.9
beat), led by strong overall revenue growth of 32% YoY and controlled opex.
383/265
However, higher provisions of INR4.21b – partly led by INR1b requirement
4/-2/-3
toward NCLT-referred assets – led to lower 22% YoY growth in net profit.
3965
79.9
Advances growth accelerated to 46% YoY at INR1.71t, while deposits grew
CMP: INR340
TP: INR410 (+21%)
2020E
125.1
130.3
70.2
3.5
30.8
28.8
156.6
151.5
21.5
1.8
11.0
2.2
30% YoY to INR1.72t. CASA deposits maintained strong traction, growing by
48% YoY, and thus, resulting in an 80bp QoQ increase in CASA mix to 38%
(470bp improvement over FY18YTD).
Margin shrunk 20bp QoQ to 3.5%, led by (i) INR15b/INR54.15b of Tier-2/AT-
1 bond raising and (ii) sale of a standard account to ARC, which led to an
INR4.2b increase in SR portfolio. However, management guided to achieve
4% margin by FY20. Core cost-income ratio declined 143bp QoQ (employee
count declined by 1,656, while the bank opened only 10 branches), and
management guided for a 37-38% C/I ratio in the medium term.
GNPLs increased by 9% QoQ, but the GNPL ratio improved by 10bp QoQ.
PCR ratio improved 339bp QoQ to 46.7%, and the bank guided for PCR of
60% by Sep’18E. Gross slippages stood at INR4.95b, which include slippages
of INR2.45b from SDR/5:25/NCLT accounts. Sensitive sector exposure
declined by 160bp QoQ to 7.7%, led by a reduction in telecom exposure. YES
has total exposure of INR13.4b (9 borrowers) toward two NCLT lists.
Valuation view:
We believe that while YES is likely to maintain industry
leading growth, an improvement in asset quality (we expect PCR to improve
to 61.4% by FY19E) and consistency in operating metrics are critical for
sustained re-rating of the stock. CET-1 ratio has declined to 10.7%, given
strong balance sheet growth, even though the bank has raised adequate
amount of Tier-2/AT-1 capital to support growth. Net stressed assets remain
stable at ~2.5% of advances and equate to half yearly operating profit. We
estimate earnings CAGR of 30% over FY18-21, and revise our
TP
to INR410
(2.7x Mar-20E ABV). Maintain
Buy.
19 January 2018
9

18 January 2018
3QFY18 Results Update | Sector: Telecom
Bharti Infratel
Neutral
BSE SENSEX
35,260
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
10,817
BHIN IN
1,896.7
652.2 / 10.1
482 / 283
-9/-26/-31
2159
42.0
CMP: INR344
TP: INR380(+11%)
Telco consolidation hurts earnings
Flat rental revenue pulls down overall growth:
Muted rental revenue at
INR22.6b (flat QoQ, in-line) arrested consolidated revenue growth (flat QoQ;
+8% YoY) at INR36.6b (in-line). Energy revenue grew 1% QoQ to INR14b.
Consolidated EBITDA declined 1% QoQ ( grew 8% YoY) to INR16b (1% beat) due
to 22% QoQ decline in energy EBITDA to INR1b, partly offset by 1% QoQ rise in
rental EBITDA to INR15b. Consolidated margin declined ~50bp QoQ to 43.7%
(70bp miss). Net finance cost of INR15m (v/s net finance income of INR510m in
2QFY18) led to a sharp 8% QoQ PAT decline to INR5.9b (our estimate: INR8.5b).
High tenancy exits stalled rental EBITDA:
Colocations dropped 3% QoQ to
213,476, resulting from net tenancy exits of 6,612 (possibly driven by smaller
operator closures), diluting gross colocations adds of 1,950. However, a 1% QoQ
rise in tenancy rate to INR34.8k coupled with 20% QoQ saving in other expenses
led to some solace – rental EBITDA margin grew 60bp to 66.4%. Energy margin
declined 210bp QoQ (flat YoY) to 6.9% due to 3% QoQ rise in power & fuel cost.
Telco exits/mergers should continue to hurt tenancies:
We have cut our overall
tenancies by 5%, expecting tenancy additions of 11,040/14,400 in FY19/20. We
have cut our EBITDA by 6-7% for FY19/20E. We understand tenancy growth from
incumbents remains steady; however, smaller operators’ exit from the telecom
market (contributing 8-10% of total colocations) should put pressure.
Additionally, risk of tenancy cut from Vodafone-Idea also hovers.
Maintain Neutral rating with lower TP of INR380:
Given the cut in EBITDA, we
have lowered our DCF-based TP to INR380 from INR440 earlier. The stock is
valued at EV/EBITDA of 8.2x (FY20E), EV/Tenancy of 2.4x (FY20E) and EV/Tower
of 5.8x (FY20E). The risk of tenancy exits may impact EBITDA growth over the
next 12 months, despite healthy tenancy adds from the top three operators. The
acquisition of Indus Towers may provide cash deployment source and improve
RoE; however, any material upside from the acquisition would be dependent on
the valuation discount compared to Bharti Infratel’s price. We remain
Neutral.
(INR m)
4Q
35,204
10.6
19,481
15,723
44.7
5,684
287
414
10,166
4,200
41.3
5,966
5,966
-17.0
16.9
1Q
35,239
9.8
19,489
15,750
44.7
5,905
-627
474
10,946
4,307
39.3
6,639
6,639
-12.2
18.8
FY18
2Q
3Q
36,482 36,553
10.8
7.5
20,336 20,571
16,146 15,982
44.3
43.7
5,941 5,895
-109
510
401
495
10,715 10,072
4,331 4,218
40.4
41.9
6,384 5,854
6,384 5,854
-17.5
-5.6
17.5
16.0
4QE
FY17
FY18E 3QFY18E
36,511 1,34,237 1,44,785
36,634
3.7
8.9
7.9
7.7
20,472 75,268 80,868 20,877
16,039 58,969 63,917 15,758
43.9
43.9
44.1
43.0
6,045 22,626 23,786
6,054
-501
-4,414
-727
-3,183
0
1,455
1,370
0
10,494 42,212 42,227 12,887
3,568 14,742 16,424
4,382
34.0
34.9
38.9
34.0
6,926 27,470 25,803
8,505
6,926 27,470 25,803
8,505
16.1
22.2
-6.1
37.1
19.0
20.5
17.8
23.2
Var (%)
-0.2
-1.5
1.4
71bps
Financials & Valuations (INR b)
2018E 2019E
Y/E Mar
Net Sales
144.8
152.1
EBITDA
63.9
64.4
PAT
25.8
30.0
EPS (INR)
14.0
16.2
Gr. (%)
-6.1
16.5
BV/Sh (INR)
80.3
79.1
RoE (%)
17.0
20.4
RoCE (%)
14.7
15.6
P/E (x)
24.6
21.2
P/BV (x)
4.3
4.3
EV/EBITDA (x)
8.9
8.7
2020E
163.6
69.2
33.0
17.8
9.7
79.5
22.5
17.2
19.3
4.3
8.2
Estimate change
TP change
Rating change
Consol Quarterly Performance
Y/E March
Revenue from operations
YoY Change (%)
Total Expenditure
EBITDA
Margins (%)
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Reported PAT
Adj PAT
YoY Change (%)
Margins (%)
1Q
32,106
6.9
18,159
13,947
43.4
5,648
-1,281
352
9,932
2,369
23.9
7,563
7,563
71.0
23.6
FY17
2Q
3Q
32,919 34,007
8.3
9.5
18,421 19,206
14,498 14,801
44.0
43.5
5,629 5,664
-2,472
-947
333
357
11,674 10,441
3,936 4,237
33.7
40.6
7,738 6,204
7,738 6,204
30.8
25.3
23.5
18.2
-21.8
-31.2
-31.2
19 January 2018
10

18 January 2018
Q3FY18 Results Update | Sector: Media
D B Corp
Buy
BSE SENSEX
35,260
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
10,817
DBCL IN
Quarter dragged by lower ad spend from key sectors, but sanguine print
184
outlook provides comfort
65.1 / 1.0
PAT declines 34% YoY on weak ad revenue:
Consolidated revenue declined
395/338
4.6% YoY to INR6.0b (8% miss) due to subdued print ad revenue growth.
-2/-16/-29
138
Consequently, EBITDA fell 30% YoY to INR1.4b (32% miss). Excluding last
30.2
year’s one-offs related to festival billing and private treaty, ad revenue grew
CMP: INR355
TP: INR420 (+18%)
Financials & Valuations (INR b)
2018E 2019E
Y/E Mar
Net Sales
23.4
25.6
EBITDA
6.0
6.9
PAT
3.5
4.2
EPS (INR)
18.8
23.0
Gr. (%)
-7.6
22.0
BV/Sh (INR)
100.7
118.9
RoE (%)
20.1
20.9
RoCE (%)
19.5
20.4
P/E (x)
18.9
15.5
P/BV (x)
3.5
3.0
EV/EBITDA (x)
10.3
8.5
2020E
27.8
7.9
5.1
27.6
20.1
141.7
21.2
20.7
12.9
2.5
6.9
Estimate change
TP change
Rating change
in mid-single-digits. EBITDA margin shrunk sharply by 830bp to 23.3%.
EBITDA disappointment boiled down to PAT, which fell 34% YoY to INR781m.
Lower local advertiser spend pulls down print, radio ad revenue:
Print ad
revenue fell 6% YoY to INR3.8b,
led by (i) lingering effects of GST and (ii)
preponement of festive season to 2QFY18. Sector-wise, real estate ad
revenue declined 40%, while education/electronic ad revenue fell 7%/20%.
Circulation revenue grew 6% YoY to INR1.3b, with overall circulation copies
growing 5.3% YoY to 5.64m. Radio ad revenue declined 7% YoY to INR336m
due to weak ad spend from the real estate and government sectors.
Recovery in sight:
Management indicated that ad revenue grew in double
digits in Dec’17, with the momentum continuing in Jan’18 as well. Further,
the upcoming state elections in DBCL’s legacy markets in FY19, coupled with
the crucial general election in 2019, bode well for ad growth. We expect
revenue/PAT CAGR of 9%/21% over FY18-20. Management indicated a 40%
rise in print readership based on IRS data, which may lead to healthy print
ad growth.
Maintain Buy with a revised TP of INR420:
We cut PAT estimate by 9% for
FY18/19 due to a delayed recovery in print ads. We have revised our TP to
INR420 (prior: INR430), rolling forward our valuation to Dec’19E, assigning
16x EPS (~10% discount to three-year average P/E of 18x). Maintain
Buy.
FY18
2Q
3Q
5,683
5,986
5.4
-4.6
4,284
4,590
1,399
1,396
24.6
23.3
229
232
20
11
57
39
1,207
1,191
0
0
1,207
1,191
421
410
34.8
34.4
787
781
787
781
-8.3
-33.9
13.2
13.0
FY17
4QE
5,754
11.3
4,402
1,352
23.5
232
26
117
1,211
0
1,211
417
34.4
794
794
23.7
13.8
22,580
10.1
16,158
6,422
28.4
863
74
170
5,654
0
5,654
1,907
33.7
3,748
3,748
28.3
16.6
FY18E
23,366
3.5
17,356
6,010
25.7
913
73
283
5,307
0
5,307
1,844
34.8
3,463
3,463
-7.6
14.8
3Q
FY18E
6,515
3.9
4,458
3.0
2,057
-32.2
31.6 -826bps
226
2.8
16
-32.3
78
-50.3
1,893
-37.1
0
1,893
-37.1
646
34.2
1,246
-37.3
1,246
-37.3
5.5
19.1
(INR m)
Var
(%)
-8.1
Consolidated Quarterly Earning Model
Y/E March
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 (%)
1Q
5,746
21.4
3,934
1,812
31.5
211
34
41
1,608
0
1,608
568
35.3
1,040
1,040
62.0
18.1
FY17
2Q
3Q
5,391
6,273
12.7
6.3
3,885
4,290
1,505
1,982
27.9
31.6
216
218
6
30
41
36
1,325
1,771
0
0
1,325
1,771
440
590
33.2
33.3
885
1,181
885
1,181
43.8
6.6
15.1
18.8
4Q
5,171
1.5
4,049
1,122
21.7
218
5
51
950
0
950
309
32.5
642
642
6.2
12.4
1Q
5,943
3.4
4,079
1,864
31.4
220
16
70
1,698
0
1,698
597
35.1
1,101
1,101
5.9
18.5
19 January 2018
11

18 January 2018
Q3FY18 Results Update | Sector: Technology
Cyient
Buy
BSE SENSEX
35,260
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
10,817
CYL IN
113
65.4 / 1.0
…encouraged more by quality rather than quantum
605 / 435
Strength despite seasonality:
4.2% QoQ growth in Services was a significant
-1/-1/-8
beat to our estimate of -0.7% QoQ, especially given the aggravated seasonal
152
weakness CYL faces. A 23% QoQ decline in Rangsons to USD12m was led by
77.8
CMP: INR581
TP: INR675(+16%)
Stellar broad-based services growth…
Financials & Valuations (INR b)
Y/E Mar
2018E 2019E
Net Sales
39.1
45.5
EBITDA
5.4
6.4
PAT
4.1
4.6
EPS (INR)
36.2
40.6
Gr. (%)
18.1
12.1
BV/Sh (INR)
207.5
228.6
RoE (%)
17.4
17.8
RoCE (%)
16.7
17.2
P/E (x)
16.1
14.3
P/BV (x)
2.8
2.5
Estimate change
TP change
Rating change
an order getting pushed to 4Q, weighing upon overall growth, which at 1.3%
QoQ was still above estimates. EBITDA margin at 14.6% was steady, as
strong growth provided support. The operational beat resulted in PAT of
2020E
INR1,086m, a beat of 20% to our estimate.
51.2
Robust vertical performance:
Growth was broad-based, with seven out of
7.2
eight service units growing in double-digits YoY (11-44% YoY). With this
5.2
momentum expected to continue into 4Q and no foreseeable threats to
45.9
existing trajectory even in the next year, CYL should be able to clock 13% YoY
13.2
growth in Services in both FY18 and FY19. This expectation gets further
252.5
cemented by 17% YoY growth in the order book in 9MFY18. Although
18.2
Rangsons saw a steep decline in 3Q, the guidance of 20% volume growth in
17.6
12.6
FY18E was maintained, implying ~USD22m revenue in 4Q.
2.3
Resilience demonstrated yet again:
Despite the shift in aerospace demand
from design to manufacturing, CYL has continued growing in double-digits,
actively reconstituting its service offerings organically and via acquisitions.
Even with its top customer exhibiting softness in spend in near term, it has
been able to demonstrate overall strength aided by other accounts. The
show of adjusting to long-term demand trends and successful mitigation of
weak pockets leave us more confident about double-digit growth in FY19.
Industry leading growth along with long-term opportunities:
At current
momentum, we expect CYL to continue leading industry growth. Also, over
the longer term, it remains well placed to address opportunities in
Engineering and Defense. The fact that multiple areas are simultaneously
seeing strength leaves room for error while still leaving expectations
unhampered. We see favorable risk-reward at 14.3/12.9x FY19/20E
earnings. Our TP of INR675 discounts forward earnings by 15x.
Buy.
FY17
2Q
3Q
137
136
9.5
-0.5
9,136
9,171
18.4
17.3
34.4
34.0
20.4
20.6
1,283
1,228
14.0
13.4
11.5
10.7
184
309
22.6
25.8
973
940
31.5
-3.4
-1.2
8.3
8.7
8.4
12,286
12,155
78.0
78.3
22.7
22.6
40.1
40.4
4Q
141
3.8
9,410
15.3
34.4
21.1
1,249
13.3
10.6
264
18.1
785
-16.5
-7.0
7.0
12,048
77.4
15.6
39.2
1Q
141
0.0
9,070
8.6
34.9
22.1
1,160
12.8
9.9
350
31.2
876
11.6
18.4
7.8
12,201
74.1
16.6
40.4
FY18E
2Q
150
6.5
9,654
5.7
35.4
20.8
1,410
14.6
11.9
407
28.0
1,116
27.4
14.7
9.9
12,537
75.9
14.2
41.2
FY17
3Q
152
1.3
9,834
7.2
35.6
21.1
1,431
14.6
11.8
273
18.3
1,086
-2.7
15.5
9.7
12,799
78.6
42.8
4Q
164
8.0
10,589
12.5
33.6
20.6
1,374
13.0
10.6
263
26.0
983
-9.5
25.2
8.8
12,999
78.0
42.6
538
14.0
36,065
16.5
34.4
21.0
4,848
13.4
10.8
874
24.2
3,699
7.4
32.9
12,048
FY18E
607
12.9
39,147
8.5
34.9
21.1
5,375
13.7
11.1
1,293
25.7
4,061
9.8
36.2
12,999
Est. Var. (% /
bp)
3QFY18
147
3.2
-1.9
312bp
9,540
3.1
4.0
321bp
35.1
58bp
21.3
-24bp
1,310
9.3
13.7
82bp
11.3
44bp
175
56.0
26.0
904
20.1
-19.0
1627bp
-3.8
1930bp
8.1
12,537
2.1
75.9
270bp
41.2
160bp
Quarterly Performance (Consolidated)
Y/E March
Revenue (USD m)
QoQ (%)
Revenue (INR m)
YoY (%)
GPM (%)
SGA (%)
EBITDA
EBITDA Margin (%)
EBIT Ma rgi n (%)
Other i ncome
ETR (%)
PAT
QoQ (%)
YoY (%)
EPS (INR)
Headcount
Uti l i ncl . tra i nees (%)
Attri ti on (%)
Offs hore rev. (%)
1Q
125
3.1
8,349
15.0
35.0
22.0
1,090
13.1
10.4
116
25.5
740
-12.3
-1.1
6.6
12,082
73.5
19.9
40.7
19 January 2018
12

18 January 2018
3QFY18 Results Update | Sector: Financials
DCB Bank
Neutral
BSE SENSEX
35,260
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
10,817
DCBB IN
Income beat offset by elevated opex; advances growth picks up
307.1
DCB Bank (DCBB) reported PPoP growth of 12% YoY (1% above estimate), as
56.6 / 0.9
8% beat on total income was offset by 23% growth in opex. NII growth of
213 / 117
20% YoY was led by 17bp expansion in reported NIM, while other income
-10/-16/26
grew 17% YoY (core fee income increased 41% YoY).
419
85.0
However, total income growth trailed opex growth (+20% YoY adjusted for
CMP: INR184
TP: INR188 (+2%)
Financials & Valuations (INR b)
Y/E MARCH
2018E 2019E
NII
9.7
11.4
OP
4.9
6.0
NP
2.3
2.8
EPS (INR)
7.4
9.0
EPS Gr. (%)
5.3
22.2
BV/Sh. (INR)
82.7
91.2
RoE (%)
10.1
10.4
RoA (%)
0.8
0.9
P/E (x)
25.0
20.5
P/BV (x)
2.2
2.0
2020E
13.4
7.3
3.4
10.9
21.4
101.7
11.3
0.9
16.9
1.8
Quarterly Performance
1Q
1,770
26.1
601
2,372
1,444
927
3.4
205
722
252
470
0.3
18.2
27.9
85.1
1.7
0.9
INR50m of bond issue-related expenses). Adjusted for the one-off expense,
the CI ratio stood at 60.8% compared to 60.3% in 2Q and 57.2% in 1Q.
Provisions at INR343m (+12% YoY) were 4% below estimate, while higher-
than-expected taxes resulted in PAT of INR570m (+11% YoY, 5% miss).
Strong growth in corporate (+35%), MSME (+39%) and AIB (+28%) books led
to 7%/28% QoQ/YoY growth in loan book to INR186b. Other smaller
categories such as CV/CE (+59%), gold (+28%) and construction finance
(+91%) also showed strong growth.
Elevated slippages of INR1b (2.8%) were led by one restructured corporate
account and a 9% sequential increase in LAP GNPA. Healthy recoveries and
upgrades at INR576m led to a 12% QoQ increase in GNPA to INR3.5b. NNPA
increased 3% QoQ to INR1.6b, reflecting a 410bp increase in PCR to 54.3%.
GNPA/NNPA (%) increased 9bp/-3bp to 1.89%/0.87%.
Other highlights: a) CASA ratio was largely flat QoQ at 26%. b) Tier I ratio
stood at 12.54%, with CAR of 15.77%. c) During the quarter, the bank raised
INR3b of Tier II bonds.
Valuation view:
We expect loan growth (23% CAGR) to stay ahead of system
loan growth. We have cut FY18E/FY19E/FY20E PAT by 9%/8%/5% to account
for backend loaded costs of branch addition. Return ratios are likely to
remain muted in the near term, with RoA/ RoE at ~1%/10-11%. Valuations at
2.0x/20.5x FY19E BV/EPS leave limited upside. We maintain
Neutral
with a
TP of INR188 based on 1.9x Dec’19E BV.
FY17
2Q
1,903
26.9
616
2,519
1,511
1,009
29.2
265
744
259
485
31.3
30.4
29.1
81.6
1.8
0.8
3Q
2,095
30.5
641
2,736
1,643
1,093
29.7
305
787
274
513
24.5
33.8
24.3
77.4
1.6
0.7
4Q
2,203
30.6
636
2,839
1,685
1,153
18.9
339
814
286
529
-24.0
29.2
22.4
82.0
1.6
0.8
1Q
2,332
31.7
858
3,189
1,825
1,364
47.1
355
1,009
357
652
38.7
22.2
22.0
84.9
1.7
0.9
FY18E
2Q
2,481
30.4
653
3,134
1,890
1,244
23.4
302
942
353
589
21.5
16.3
20.5
84.6
1.8
0.9
FY17
3Q
2,505
19.6
749
3,254
2,029
1,225
12.2
343
883
313
570
11.1
13.0
27.5
87.3
1.9
0.9
4Q
2,588
17.5
759
3,347
1,996
1,350
17.1
397
953
250
703
33.1
23.9
33.4
83.4
1.9
0.9
7,971
28.7
2,495
10,465
6,283
4,182
19.8
1,115
3,067
1,070
1,997
2.6
29.2
22.4
82.0
1.6
0.8
(INR m)
FY18E
Net Interest Income
% Change (Y-o-Y)
Other Income
Total Income
Operating Expenses
Operating Profit
% Change (Y-o-Y)
Provisions
Profit before Tax
Tax
Net Profit
% Change (Y-o-Y)
Operating Parameters
Deposit Growth (%)
Loan Growth (%)
CD Ratio (%)
Asset Quality
Gross NPA (%)
Net NPA (%)
9,653
21.1
3,018
12,671
7,740
4,932
17.9
1,397
3,534
1,272
2,262
13.3
21.0
23.0
83.4
1.9
0.9
19 January 2018
13

RESULTS
FLASH
Zensar Technologies
TP: INR1020(+14%)
Buy
18 January 2018
Results Flash | Sector: Technology
BSE SENSEX
35,260
S&P CNX
10,817
CMP: INR898
Beat on revenue and margins; IMS performance still a concern
Conference Call Details
Quarterly performance exceeds estimates
th
Date:
19 January 2018
ZENT’s 3.4% QoQ growth was higher than our estimate of +1.5%.
EBITDA margin expanded 170bp QoQ to 13.3%, 120bp above our estimate of
Time:
16:00 IST
12.1%. Our expansion expectations were tepid based on the recent history of
Dial-in details:
disappointment, lack of organic growth and continued investments.
+91-22-3960 0818
PAT of INR574m (-5.7% QoQ) was above our estimate of INR549m (-9.7% QoQ),
led by the overall operational beat.
2020E
Financials & Valuations (INR b)
2018E
2019E
Y/E Mar
Net Sales
31.1
34.8
EBITDA
3.8
4.6
NP
2.4
2.9
EPS (INR)
53.8
63.8
EPS Gr. (%)
3.3
18.6
BV/Sh. (INR)
364.8
415.0
RoE (%)
15.6
16.4
RoCE (%)
19.0
21.0
Payout (%)
23.6
18.3
Div. Yield
1.4
1.3
39.7
5.8
3.8
84.6
32.6
479.8
18.9
23.7
20.0
1.9
Continued weakness in US; strong Digital growth
Growth in Digital was encouraging, as Foolproof and Keystone got added to the
portfolio, leading to 35% YoY growth. Sequential growth stood at 9%, taking
Digital’s contribution to 38.8% of total revenue.
Infrastructure revenue declined 23% YoY. The ideal situation would be for
shrinkage in Maintenance and strong growth in Services. However, both areas
have declined. While Application margin improved to 17.5% from 14.2% in the
previous quarter, IMS margin was lower QoQ at -3.7% (-3.4% in the previous
quarter). Improvement in Infrastructure margin, and the consequent boost on
overall profitability, has been one of the core points of our thesis.
Valuation and view:
Outlook on growth, especially in top accounts and in the US,
and insights on execution of strategy would be keenly watched. Based on current
estimates, it trades at 14.1/10.6x FY19/20E EPS. Maintain
Buy.
Quarterly Performance (Consolidated)
Y/E March
Revenue (USD m)
QoQ (%)
Revenue (INR m)
YoY (%)
GPM (%)
SGA (%)
EBITDA
EBITDA Margin (%)
EBIT Ma rgi n (%)
Other i ncome
ETR (%)
PAT
QoQ (%)
YoY (%)
EPS (INR)
Headcount
Uti l i za ti on (%)
Offs hore rev. (%)
1Q
114
3.1
7,554
7.2
29.1
15.4
1,037
13.7
12.3
198
32.6
741
5.4
-2.8
16.4
8,238
79.8
31.2
FY17
2Q
116
1.8
7,703
1.8
30.1
15.6
1,111
14.4
12.8
70
29.6
704
-5.0
-22.9
15.6
8,316
80.1
33.8
3Q
118
1.3
7,865
3.9
30.2
16.4
1,085
13.8
12.3
201
30.2
800
13.7
11.9
17.7
8,564
79.5
33.5
4Q
112
-4.9
7,433
-0.4
27.7
19.9
585
7.9
6.2
-228
45.5
104
-87.0
-85.2
2.3
8,524
79.2
34.5
1Q
114
2.2
7,367
-2.5
27.6
17.4
748
10.2
7.7
203
32.0
472
354.7
-36.3
10.5
8,567
83.2
37.5
FY18E
2Q
119
3.8
7,626
-1.0
28.8
17.2
884
11.6
9.3
194
26.8
608
29.0
-13.6
13.5
8,414
85.9
37.5
FY17
3Q
123
3.4
7,937
0.9
30.1
16.8
1,054
13.3
11.3
49
33.7
574
-5.7
-28.3
12.7
8,597
84.8
37.0
4Q
124
1.2
8,129
9.4
29.9
16.0
1,131
13.9
11.7
192
28.0
772
34.5
644.2
17.1
8,747
81.0
35.3
459
1.4
30,556
3.1
29.3
16.8
3,819
12.5
10.9
241
31.6
2,349
-24.1
52.1
8,524
79.7
33.2
FY18E
480
4.4
31,058
1.6
29.1
16.8
3,817
12.3
10.1
638
29.9
2,426
3.3
53.8
8,747
83.7
36.8
Est.
3QFY18
120
1.5
7,794
-0.9
28.6
16.5
941
12.1
9.8
75
28.0
549
-9.7
-31.4
12.2
8,764
82.0
35.7
Var. (% /
bp)
1.9
189bp
1.8
182bp
152bp
32bp
12.0
120bp
144bp
-34.5
4.5
405bp
308bp
-1.9
280bp
133bp
19 January 2018
14

December 2017 Results Preview | Sector: Technology
HCL Technologies
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
HCLT IN
1412.9
1260 / 20
941 / 778
5 / -5 / -20
CMP: INR891
TP: INR970 (+9%)
Neutral
Financial Snapshot (INR b)
y/e JUNE
2017 2018E 2019E 2020E
Sales
EBITDA
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuation
P/E (x)
P/BV (x)
EV/EBITDA(x)
Div yld (%)
14.9
3.7
10.9
2.7
14.3
3.6
10.4
2.0
13.8
3.2
9.5
3.6
12.8
3.0
9.9
4.0
467.2
103.1
84.6
59.8
49.2
239.0
27.5
25.3
40.1
505.0
111.1
87.6
62.4
4.2
250.0
25.6
23.2
28.9
554.0
118.9
90.3
64.6
3.6
275.9
24.5
22.8
49.5
602.0
127.2
97.5
69.6
7.7
302.1
24.0
22.4
51.8
We expect HCLT’s USD revenue to grow 2.2% QoQ and 2.0% QoQ
on a constant currency basis.
It is expected to be equally split between organic growth and new
IP partnerships.
Organic momentum has taken a step down for HCLT. Its 10.5-12.5%
CC guidance implies organic growth of ~5.5-7.5%.
EBIT margins are likely to shrink by 30bp to 19.4% because of
continued investments in the business and slower organic growth.
With this, we expect 19.7% EBIT margin for FY18, within the mid-
point of the 19.5-20.5% guidance range.
Adjusted PAT estimate for the quarter is INR20.6b (-5.7% QoQ) on
the back of lower margins and other income.
The stock trades at 13.8x FY19E and 12.8x FY20E EPS. Maintain
Neutral.
Key issues to watch for
Traction in IMS and Engineering Services.
Margin movement, given lower organic growth.
Traction in Digital.
HCL Tech Quarterly Performance (US GAAP, INR Million)
Y/E March
Revenue (USD m)
QoQ (%)
Revenue (INR m)
YoY (%)
GPM (%)
SGA (%)
EBITDA (INRm)
EBITDA Margin (%)
EBIT Margin (%)
Other income
ETR (%)
PAT before EOI
QoQ (%)
YoY (%)
EPS
Headcount
Util excl. trainees (%)
Attrition (%)
Fixed Price (%)
E: MOSL Estimates
1Q
1,691
6.5
113,360
15.9
34.4
12.1
25,210
22.2
20.6
2,530
21.0
20,430
6.1
14.6
14.5
107,968
85.8
17.8
60.9
FY17
2Q
3Q
1,722
1,745
1.9
1.4
115,190 118,140
14.1
14.2
33.6
33.9
11.8
11.7
25,110
26,280
21.8
22.2
20.1
20.4
2,350
2,310
21.1
21.5
20,150
20,710
-1.4
2.8
10.5
7.9
14.3
14.7
109,795 111,092
85.3
84.6
18.6
17.9
61.3
63.2
4Q
1,817
4.1
120,530
12.7
33.7
11.8
26,490
22.0
20.0
2,150
11.5
20,250
-2.2
5.2
16.5
115,973
85.7
16.9
61.6
1Q
1,884
3.7
121,490
7.2
33.7
11.6
26,810
22.1
20.1
2,690
20.0
21,710
7.2
6.3
15.1
117,781
85.7
16.2
59.8
FY18E
2Q
3QE
1,928
1,970
2.3
2.2
124,340 127,585
7.9
8.0
34.0
33.3
11.8
11.6
27,590
27,749
22.2
21.7
19.7
19.4
2,980
1,216
20.4
20.4
21,880
20,637
0.8
-5.7
8.6
-0.4
15.7
14.8
119,040 121,940
86.0
86.2
15.7
60.4
FY17
4QE
2,010
2.0
131,623
9.2
33.5
11.5
28,995
22.0
19.7
3,530
20.4
23,397
13.4
15.5
16.8
124,490
85.7
6,975
11.9
467,220
14.2
33.9
11.8
103,090
22.1
20.3
9,340
18.8
84,570
13.5
59.8
115,973
83.1
FY18E
7,792
11.7
505,038
8.1
33.6
11.6
111,143
22.0
19.7
10,416
20.3
87,625
3.6
62.4
124,490
83.8
19 January 2018
15

December 2017 Results Preview | Sector: Financials
HDFC Bank
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
HDFCB IN
2562.5
4747 / 75
1905 / 1182
-2 / 3 / 29
CMP: INR1,853
TP: INR2,150 (+16%)
Buy
Financial Snapshot (INR b)
Y/E MARCH
2017 2018E 2019E 2020E
NII
OP
NP
NIM (%)
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
ABV/Sh. (INR)
RoE (%)
RoA (%)
Payout (%)
Valuations
P/E(X)
P/BV (X)
P/ABV (X)
Div. Yield (%)
32.6
5.5
5.6
0.6
27.3
4.9
5.2
0.8
22.1
4.2
4.4
0.9
17.8
3.5
3.7
1.0
331.4 407.0 481.0 580.0
257.3 329.3 395.2 485.2
145.5 176.1 217.0 270.1
4.6
56.8
16.7
4.6
68.7
21.0
4.5
23.2
4.5
24.5
84.7 105.4
336 381.4 449.8 537.2
331 357.3 421.8 503.7
18.3
1.8
23.4
18.8
1.9
23.4
20.4
1.9
23.4
21.4
2.0
23.4
Loan growth would be strong at 27% YoY. Deposit growth would
trail loan growth at ~12% YoY, led by CASA inflows.
COF decline would help to negate the impact of declining yields
environment, and we expect HDFCB to report only a marginal
~10bp contraction in margins to 4.7% (calculated). NII is expected
to grow at 22% YoY.
Other income growth is expected to moderate to ~13% YoY,
factoring in lower trading gains. Fee income should remain healthy.
Tie-up with new banca partners would drive fee income growth.
Opex growth would be lower than total income growth at ~15%
YoY, aided by the bank’s strong digital initiatives and focus on
cutting excess flab.
Healthy PPoP growth would lead to 20% YoY PAT growth, largely
in line with 20% growth trend exhibited by the bank in the last
few years. Asset quality is expected to remain stable, with GNPA
at ~1.3%.
HDFCB trades at 4.2x FY19E BV and 22.1x FY19E EPS. Comfort on
earnings (~23% CAGR over FY17-20) remains high. Maintain Buy.
Key issues to watch for
Performance in retail loan/agri portfolio, especially in CV/CE.
Trends in digital banking/payments and various initiatives;
overall B/S growth outlook and economic recovery.
(INR M)
Quarterly Performance
1Q
1,65,160
87,346
77,814
21.8
28,066
1,05,881
47,689
58,192
20.0
8,667
49,525
17,136
32,389
20.2
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 (Cal, %)#
4.7
4.5
4.6
4.8
Deposit Growth (%)
18.5
16.7
21.1
17.8
Loan Growth (%)
23.2
18.1
13.4
19.4
CD Ratio (%)
82.0
83.6
78.0
86.2
Asset Quality
Gross NPA (INR B)
49.2
50.7
52.3
58.9
Gross NPA (%)
1.0
1.0
1.1
1.1
E: MOSL Estimates; * Reported on total assets; # Cal. on interest earning assets
FY17
FY18E
FY17
FY18
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1,70,699 1,76,056 1,81,144 1,86,687 1,96,703
0 2,23,155 6,93,060 8,12,534
90,764
92,965
90,593
92,980
99,182
0 1,10,954 3,61,667 4,05,534
79,936
83,091
90,551
93,707
97,521 1,01,371 1,12,201 3,31,392 4,07,000
19.6
17.6
21.5
20.4
22.0
22.0
23.9
20.1
22.8
29,010
31,427
34,463
35,167
36,059
35,554
39,693 1,22,965 1,47,558
1,08,945 1,14,518 1,25,014 1,28,874 1,33,580 1,36,925 1,51,894 4,54,357 5,54,558
48,700
48,425
52,220
53,675
55,401
55,754
60,400 1,97,033 2,25,230
60,246
66,093
72,794
75,199
78,179
81,171
91,494 2,57,324 3,29,328
19.5
15.2
26.9
29.2
29.8
22.8
25.7
20.4
28.0
7,490
7,158
12,618
15,588
14,762
10,914
15,678
35,933
60,500
52,756
58,935
60,176
59,612
63,417
70,256
75,816 2,21,391 2,68,828
18,202
20,281
20,275
20,673
21,907
24,079
26,086
75,894
92,746
34,553
38,653
39,901
38,938
41,510
46,177
49,730 1,45,496 1,76,082
20.4
15.1
18.3
20.2
20.1
19.5
24.6
18.3
21.0
4.7
17.0
23.4
86.5
72.4
1.2
4.8
16.5
22.3
87.7
77.0
1.3
4.7
11.6
27.3
88.9
81.8
0.0
5.1
18.1
21.5
88.6
86.6
1.3
4.6
17.8
19.4
86.2
58.9
1.1
4.6
18.1
21.5
88.6
86.6
1.3
19 January 2018
16

December 2017 Results Preview | Consumer
ITC
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
ITC IN
12147.4
3170 / 50
353 / 240
-1 / -32 / -20
CMP: INR261
TP: INR276 (+6%)
Neutral
We expect net sales to grow 4% YoY to INR96b, with cigarette
volume decline of 3% YoY (base quarter saw 1% volume decline).
We expect cigarette EBIT to stay flattish YoY.
We have factored in EBITDA growth of 6.7% YoY to INR37.8b
overall for the company, with EBITDA margin expansion of 100bp
YoY to 39.3% in 3QFY18.
We expect other FMCG to post revenue growth of ~11% YoY.
We estimate adj. PAT growth of 6.9% YoY to INR28.3b.
The stock trades at 26x/22.9x FY19E/20E EPS of INR10/INR11.4;
maintain Neutral.
Financial Snapshot (INR b)
Y/E March
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 (%)
31.1
7.0
20.3
2.2
28.7
6.3
18.8
2.5
26.0
5.9
16.8
3.0
22.9
5.5
14.7
3.7
2017 2018E 2019E 2020E
396.4 410.7 456.2 511.2
146.0 155.6 171.7 194.8
102.0 110.6 121.9 138.2
8.4
9.4
37.3
23.5
22.5
68.1
9.1
8.5
41.1
23.2
22.4
72.0
10.0
10.2
44.6
23.4
22.7
78.0
11.4
13.3
47.6
24.7
23.9
84.0
Key issues to watch for
Trends in cigarette volume.
Demand outlook for FMCG categories and segmental
profitability.
Quarterly Performance
Y/E March
Cigarette Vol Gr (%)
Net Sales
YoY Change (%)
Total Exp
EBITDA
Growth (%)
Margins (%)
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Adj PAT
YoY Change (%)
E: MOSL Estimates
1Q
3.0
100,540
9.8
65,278
35,262
8.4
35.1
2,613
101
4,205
36,754
12,907
35.1
23,847
10.1
FY17
2Q
3Q
4.0
-1.0
96,607 92,484
9.8
4.3
60,307 57,020
36,300 35,464
7.3
2.1
37.6
38.3
2,684
2,665
107
136
4,754
6,879
38,262 39,542
13,262 13,075
34.7
33.1
25,000 26,467
10.5
5.7
4Q
0.0
111,255
14.0
72,502
38,754
7.5
34.8
2,418
-115
4,021
40,471
13,777
34.0
26,695
12.1
1Q
1.0
99,547
-1.0
62,083
37,464
6.2
37.6
2,682
104
4,768
39,446
13,841
35.1
25,605
7.4
FY18
2Q
3QE
-6.0
-3.0
97,639 96,183
1.1
4.0
60,024 58,339
37,615 37,844
3.6
6.7
38.5
39.3
2,824
3,065
290
136
4,942
7,567
39,443 42,210
13,045 13,929
33.1
33.0
26,398 28,281
5.6
6.9
FY17
4QE
3.0
122,253
9.9
79,585
42,668
10.1
34.9
3,135
-76
4,414
44,023
13,675
31.1
30,347
13.7
1.5
400,887
9.6
255,106
145,780
6.3
36.4
10,380
230
19,859
155,030
53,021
34.2
102,009
9.5
FY18E
-1.3
415,622
3.7
260,030
155,591
6.7
37.4
11,707
454
21,691
165,122
54,490
33.0
110,632
8.5
19 January 2018
17

December 2017 Results Preview | Sector: Retail
Jubilant Foodworks
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
JUBI IN
65.8
122 / 2
1854 / 818
3 / 76 / 87
CMP: INR1,848 TP: INR1,359 (-26%)
We expect JUBI’s revenue to grow by 13.5% YoY in 3QFY18 to
INR7.5b.
Sell
SSSG is likely to be 10% for the quarter on a base of 3.3% decline.
We anticipate addition of 13 Dominos stores this quarter.
Gross margin is likely to contract by 90bp to 74.6%.
We expect EBITDA margin to expand by 250bp YoY to 12%, and
EBITDA to grow by 39.8% YoY to INR895m.
We estimate Adj. PAT to grow by 65% to INR330m.
The stock trades at 67.3x/51.1x FY19E/FY20E EPS of
INR27.4/INR36.2, respectively. Maintain Sell.
Financial Snapshot (INR b)
Y/E March
2017 2018E 2019E 2020E
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 (%)
184.7
15.1
50.0
0.1
86.2
14.2
33.6
0.6
67.3
14.1
28.0
1.2
51.1
14.8
23.7
1.9
25.8
2.4
0.6
10.0
28.6
3.6
1.4
21.4
32.5
4.2
1.8
27.4
28.0
20.9
21.0
80.2
37.4
4.9
2.4
36.2
31.8
28.9
28.2
96.8
-32.1 114.2
8.2
8.4
25.0
16.5
17.0
51.3
122.1 130.0 131.0 125.2
Key issues to watch for:
Demand outlook for QSR and Pizza space, as well as competition.
Benefits of cost-saving efforts.
Performance of
Dunkin Donuts
and margin guidance.
Quarterly Stdl. Perf.
Y/E March
No of Stores
LTL Growth (%)
Net Sales
YoY Change (%)
Gross Profit
Gross Margin (%)
Other Expenses
EBITDA
EBITDA Growth %
Margins (%)
Depreciation
Other Income
PBT
Tax
Rate (%)
Adjusted PAT
YoY Change (%)
E: MOSL Estimates
1Q
1049
-3.2
6,089
6.7
4,675
76.8
4,098
577
-14.2
9.5
326
31
282
92
32.7
190
-31.1
FY17
2Q
1081
4.2
6,655
13.3
4,979
74.8
4,336
643
6.4
9.7
366
43
320
104
32.5
216
-1.3
3Q
1107
-3.3
6,588
3.9
4,938
74.9
4,297
641
-11.9
9.7
381
35
295
95
32.2
200
-31.9
4Q
1117
-7.5
6,128
-0.9
4,710
76.9
4,104
605
-15.1
9.9
438
36
203
53
26.4
149
-46.3
1Q
1125
6.5
6,788
11.5
5,183
76.4
4,387
796
37.8
11.7
462
30
364
125
34.4
238
25.6
FY18
2Q
1125
5.5
7,266
9.2
5,388
74.1
4,366
1,022
59.0
14.1
326
36
733
248
33.8
485
124.8
3QE
1138
10.0
7,478
13.5
5,577
74.6
4,681
895
39.8
12.0
438
43
499
170
34.0
330
65.0
4QE
1152
12.0
7,056
15.1
5,337
75.6
4,494
843
39.3
11.9
480
183
546
185
33.9
361
141.6
FY17
1117
-2.5
25,834
7.2
19,526
75.6
17,115
2,411
-11.3
9.3
1,554
147
1,004
345
34.3
660
-38.1
FY18E
1152
8.5
28,588
10.7
21,484
75.1
17,928
3,556
47.5
12.4
1,706
292
2,142
728
34.0
1,414
114.2
19 January 2018
18

December 2017 Results Preview | Sector: Financials
Kotak Mahindra Bank
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
KMB IN
1834.4
1834 / 29
1114 / 692
-3 / -3 / 14
CMP: INR1,000 TP: INR1,179 (+18%)
Buy
Financial Snapshot (INR b)
Y/E MARCH
2017 2018E 2019E 2020E
NII
OP
NP
Cons. NP
NIM (%)
Cons. EPS (INR)
EPS Gr. (%)
Cons. BV. (INR)
Cons. RoE (%)
RoA (%)
Valuations
P/E(X) (Cons.)
P/BV (X) (Cons.)
37.3
4.8
31.2
4.3
24.1
3.7
19.3
3.1
81.3
59.8
34.1
49.4
4.4
26.8
42.3
208
13.8
1.7
99.9 112.0 134.6
75.0
43.5
61.0
4.4
32.1
19.4
232
14.8
1.8
90.4 114.6
54.0
79.1
4.4
41.6
29.7
272
16.5
1.9
68.6
98.8
4.3
51.9
25.0
323
17.4
2.0
We expect the standalone bank to report 23% loan growth and
14% deposit growth in 3QFY18. NIM is likely to increase
marginally by 5bp QoQ to 4.35%. Overall, we expect NII growth of
18% YoY. CASA retention would be a key driver of NII and NIM.
With strong digital initiatives, fast-paced customer acquisition and
merger synergies from eIVBL, fee income would be a key growth
driver for the bank. We factor in other income growth of 12% in
3Q, driven mostly by healthy fee traction and expect an improving
trend in the coming quarters.
We expect asset quality to remain stable, with GNPA at ~2.46%
and NNPA at 1.2%, led by a high provision coverage ratio.
On a reported basis, we expect standalone bank earnings to grow
26% YoY. The stock trades at 3.7x FY19E consolidated BV and
24.1x FY19E consolidated EPS. Maintain Buy.
Key issues to watch for
Guidance on balance sheet growth.
Performance on CASA, fees and growth.
Performance of non-banking subsidiaries and their contribution
to overall profit.
Quarterly Performance
Y/E March
Net Interest Income
% Change (Y-o-Y)
Other Income
Net Income
% Change (Y-o-Y)
Operating Expenses
Operating Profit
% Change (Y-o-Y)
Other Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (Y-o-Y)
Loan growth (%)
Cost to Income Ratio (%)
Tax Rate (%)
1Q
19,191
20.1
7,332
26,523
21.1
13,373
13,150
120.3
1,795
11,355
3,936
7,420
291.0
16.6
50.4
34.7
FY17
2Q
19,954
18.9
8,311
28,265
23.2
13,864
14,401
37.8
1,978
12,423
4,290
8,133
42.8
12.9
49.1
34.5
3Q
20,503
16.1
9,102
29,605
19.0
14,328
15,277
26.8
1,921
13,356
4,558
8,798
38.6
12.1
48.4
34.1
4Q
21,614
16.4
10,027
31,640
24.6
14,620
17,020
42.5
2,674
14,346
4,582
9,765
40.3
14.7
46.2
31.9
1Q
22,456
17.0
9,069
31,524
18.9
15,571
15,954
21.3
2,037
13,916
4,789
9,127
23.0
17.9
49.4
34.4
FY18E
2Q
3Q
23,127
24,237
15.9
18.2
9,539
10,165
32,665
34,401
15.6
16.2
15,417
15,482
17,248
18,920
19.8
23.8
2,165
2,070
15,083
16,850
5,140
5,729
9,943
11,121
22.3
26.4
21.1
22.5
47.2
45.0
34.1
34.0
(INR M)
FY17
FY18E
4Q
24,972
81,261
99,886
15.5
17.8
22.9
10,006
34,772
40,022
34,977 1,16,033 1,39,908
10.5
22.0
20.6
16,223
56,185
64,891
18,754
59,848
75,018
10.2
48.1
25.3
1,793
8,367
8,490
16,961
51,481
66,528
5,767
17,366
23,067
11,194
34,115
43,461
14.6
63.2
27.4
18.4
14.7
-100.0
46.4
48.4
46.4
34.0
33.7
34.7
19 January 2018
19

December 2017 Results Preview | Sector: Technology
NIIT Technologies
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
NITEC IN
61.2
39 / 1
697 / 401
-1 / 2 / 24
CMP: INR644
TP: INR600 (-7%)
Neutral
Financial Snapshot (INR b)
y/e march
2017 2018E 2019E 2020E
Sales
27.8
29.4
32.1
34.5
EBITDA
4.6
4.8
5.4
5.7
PAT
2.6
2.6
3.0
3.3
EPS (INR)
38.0
43.9
50.8
56.7
EPS Gr. (%)
-16.9
15.4
15.8
11.5
BV/Sh. (INR) 286.5 291.4 323.0 335.4
RoE (%)
13.7
15.2
16.5
17.2
RoCE (%)
15.7
14.6
16.2
16.6
Payout (%)
32.9
31.9
31.5
28.2
Valuations
P/E (x)
16.1
14.0
12.1
10.8
P/BV (x)
2.1
2.1
1.9
1.8
EV/EBITDA
6.4
6.6
5.6
5.1
(x) Yld (%)
Div
2.0
2.3
2.6
2.6
We expect 0.7% QoQ CC revenue growth for NITEC in 3QFY18.
While strength is being seen in Digital, we expect some of that to be
offset by seasonal weakness and a ramp-down in one of its top
customers.
The company would have a tailwind of 50bp because of cross-
currency movements leading to USD revenue growth of 1.2% QoQ.
We expect EBITDA margin to expand by 60bp QoQ to 16.7%
because of a better mix of revenue and improved operational
efficiencies.
Our PAT estimate is INR660m, -1.7% QoQ. While the operational
performance supports decent growth in PAT, lower other income
would result in the decline.
The stock trades at 12.1x FY19E and 10.8x FY20E earnings. Neutral.
Key issues to watch for
Traction in the international business.
Progress on succession and development of strategy under new
leadership.
Deal wins and outlook for the year.
Quarterly Performance (IFRS)
Y/E March
Revenue (USD m) Ex. forex
QoQ (%)
Revenue (INR m)
YoY (%)
GPM (%)
SGA (%)
EBITDA
EBITDA Margin (%)
EBIT Margin (%)
Other income
ETR (%)
Minority Interest
PAT
QoQ (%)
YoY (%)
EPS (INR)
Headcount
Util excl. trainees (%)
Attrition (%)
Offshore rev. (%)
Fixed Price (%)
1Q
99
-2.2
6,707
4.6
35.1
19.9
1,015
15.1
10.3
83
10.4
46.0
285
-63.9
-51.4
5.1
9,022
79.8
13.4
39.0
46.0
FY17
2Q
3Q
103
101
4.2
-2.4
6,929
6,938
2.2
2.2
35.3
36.0
18.8
19.2
1,145
1,162
16.5
16.7
11.9
12.1
29
59
24.9
25.3
54.0
48.0
590
624
107.0
5.8
-13.6
-15.8
9.7
10.6
8,868
8,809
81.0
80.0
12.9
12.9
39.0
40.0
46.0
48.0
4Q
104
3.1
7,176
4.8
36.2
18.6
1,260
17.6
13.2
-12
13.4
72.0
739
18.4
-6.5
12.6
8,853
81.0
12.7
41.0
48.0
1Q
107
2.9
7,089
5.7
35.4
19.8
1,108
15.6
11.2
58
34.7
42.0
513
-30.6
80.0
8.7
8,963
81.2
12.1
40.0
49.0
FY18E
2Q
3QE
111
112
3.6
1.2
7,372
7,372
6.4
6.3
35.0
34.2
18.9
17.5
1,190
1,234
16.1
16.7
11.5
12.1
87
63
21.8
24.0
61.0
65.0
671
660
30.8
-1.7
13.7
5.7
11.4
11.2
9,022
9,202
79.5
79.0
11.4
39.0
48.0
FY17
4QE
114
1.7
7,597
5.9
34.3
17.0
1,318
17.3
12.8
96
24.0
72.0
740
12.1
0.1
12.6
9,327
79.0
408
0.5
27,750
3.5
35.7
19.1
4,582
16.5
11.9
159
18.6
220.0
2,238
-20.1
38.0
8,853
80.4
39.8
(INR m)
FY18E
445
9.0
29,430
6.1
34.7
18.3
4,849
16.5
11.9
304
25.8
240.0
2,583
15.4
43.9
9,327
79.7
39.2
19 January 2018
20

December 2017 Results Preview | Sector: Retail
PC Jeweller
Bloomberg
Equity Shares (m)
M. Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel Perf. (%)
PCJL IN
394.2
188 / 3
479 / 177
19 / 81 / 116
CMP: INR476
TP: INR556 (+17%)
Buy
We expect PCJ’s revenue to grow by 21% YoY in 3QFY18 to
INR24.5b led by strong SSSG in domestic business.
Store additions are likely to be subdued this quarter.
Gross margins are likely to expand 120bp YoY to 13.5%.
We expect EBITDA margin to expand by 170bp YoY to 10.1%, and
EBITDA to grow by 45.1% YoY to INR2.6b.
We estimate Adj. PAT to grow by 34.3% to INR1.4b.
The stock trades at 25.8x/20.2x FY19E/FY20E EPS of
INR18.4/INR23.5. Maintain Buy.
Financial Snapshot (INR b)
INR b
FY17 FY18E FY19E FY20E
Sales
EBITDA
NP
EPS (Rs)
EPS Growth (%)
BV/Share (Rs)
RoE (%)
RoCE (%)
Valuation
P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/Sales (x)
44.6
5.6
24.0
2.2
31.6
4.9
18.2
1.8
25.8
4.2
15.1
1.5
20.2
3.6
12.4
1.2
84.8 103.6 123.9 149.8
7.6
4.2
10.7
5.7
85.0
14.6
16.9
10.2
5.9
15.1
41.0
16.5
17.5
12.1
7.3
18.4
22.3
17.5
18.0
14.7
9.3
23.5
27.8
19.3
19.5
97.7 112.5 131.1
Key issues to watch for:
Pace of shift from unorganized to organized.
Update on Prevention of Money Laundering act (PMLA)
regulations specifically for jewellery sector.
Standalone - Qtrly Earning Model
Y/E March
Sales
YoY Change (%)
Gross Profit
Margins (%)
Total Expenditure
EBITDA
YoY Change (%)
Margins (%)
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Adj PAT
YoY Change (%)
Margins (%)
E: MOSL Estimates
1Q
16,645
10.2
2,658
16.0
14,588
2,057
22.0
12.4
50
636
101
1,472
406
27.6
1,066
31.2
6.4
FY17
2Q
21,746
30.2
2,419
11.1
19,959
1,787
-8.9
8.2
55
710
504
1,527
457
30.0
1,069
16.3
4.9
3Q
21,074
-3.4
2,601
12.3
19,307
1,767
-20.6
8.4
56
699
139
1,150
81
7.0
1,070
-27.4
5.1
4Q
21,581
15.3
2,644
12.3
19,813
1,769
6.7
8.2
59
702
508
1,515
415
27.4
1,101
39.7
5.1
1Q
21,185
27.3
3,060
14.4
18,853
2,332
13.4
11.0
49
596
215
1,901
543
28.6
1,358
27.4
6.4
FY18
2Q
26,223
20.6
3,497
13.3
23,438
2,785
55.9
10.6
49
764
207
2,178
672
30.9
1,506
40.8
5.7
FY17
3QE
25,499
21.0
3,446
13.5
22,936
2,563
45.1
10.1
60
600
150
2,053
616
30.0
1,437
34.3
5.6
4QE
25,897
20.0
3,302
12.8
23,584
2,313
30.8
8.9
60
500
450
2,203
661
30.0
1,542
40.1