23 April 2018

Market snapshot

Equities - India

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34,416

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1MChg

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7.7

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Flows (USD b)

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Note: YTD is calendar year, *Avg

YTD.%

1.1

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-0.1

3.5

-4.2

-2.9

2.9

-2.6

YTD.%

10.2

2.5

-3.6

10.1

YTD.%

3.5

2.4

-4.5

YTDchg

0.4

0.5

YTD

1.5

4.7

YTD*

376

8,043

Today’s top research Idea

Maruti Suzuki – More of the same: increasing share, margins &

growth

Upgrade cycle to continue led by higher volumes and margins



MSIL would be the biggest beneficiary of rural market recovery and first time

buyers coming back as reflected in Alto sales growing 5.6% in FY18.



MSIL is targeting ~4k sales outlets (~12.8% CAGR in FY18-20E), along-with focus

on upgrading entire network to improve customer experience.



Further timely capacity addition to ensure CAGR of 13% in FY18-20 in volumes.

Mar-18 annualized production stood at 2.07m units, with additional ~250k

units capacity coming up by Jan-19 (~60k for 4QFY19).



MSIL’s EBIT margin to improve by 220bp to ~14.3% in FY20 due to (a) continued

mix improvement, (b) discount reduction, (c) lower royalty, (d) ramp-up at

Gujarat plant, and (e) benefits of operating leverage. Maintain

Buy.

Research covered

Cos/Sector

HDFC Bank

Maruti Suzuki

Healthcare

Phoenix Mills

EcoScope

Indiabulls Hous.

Mahindra CIE

Results Expectation

Key Highlights

Steady quarter; fee growth surprises positively

More of the same: increasing share, margins & growth

US base business to remain weak

PHNX acquires 2nd land parcel in Bangalore under CPPIB deal

Higher employment or better jobs?

Growth surprises positively; asset quality stable

Strong quarter; India business drives superior consol. performance

BHIN | CIFC | LICHF | DELTA

Piping hot news

Economic recovery on firm footing: RBI governor Urjit Patel



India is witnessing a revival in investment activity after several quarters of

downturn, putting the nation’s economic recovery on a surer footing, Reserve

Bank of India (RBI) governor Urjit Patel said at the International Monetary and

Financial Committee meeting in Washington DC.

Chart of the Day: Maruti Suzuki – More of the same: increasing share, margins & growth

Rural markets account for a third of total sales

Rural recovery helps outpace urban growth

Research Team (Gautam.Duggad@MotilalOswal.com)

Source: Company, MOSL

Source: Company, MOSL

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

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

In the news today

Kindly click on textbox for the detailed news link

1

Petrol prices today hit Rs 74.40 a

litre - the highest level under the

BJP-led government, while diesel

rates touched a record high of Rs

65.65, renewing calls for cut in

excise duty to ease the burden on

consumers…

2

Sebi may seek forensic probe of ICICI Bank books, disclosures

Markets watchdog Sebi is mulling getting a forensic examination done on

financial statements and disclosures made by ICICI Bank in last few years

amid a controversy over alleged conflict of interest involving the lender's

CEO Chanda Kochhar and her husband. According to top officials, the

capital markets regulator will also consult the Reserve Bank of India (RBI)

on the matter to avoid any intra-regulatory jurisdiction issues…

Petrol hits Rs 74.40; diesel

scales new high of Rs 65.65

3

Baba Ramdev-led Patanjali

Ayurved has placed a ₹9,000-crore

bid to acquire the debt-ridden

Ruchi Soya Industries Ltd (RSIL)

through the ongoing insolvency

process under the National

Company Law Tribunal (NCLT)…

4

FPI outflows in April at Rs

8,000 crore on trade

negotiations

Foreign investors have pulled out

nearly Rs 8,000 crore from the

Indian capital markets so far this

month due to 'considerable'

volatility in global markets on

account of the ongoing trade

negotiations and firming up of

bond yields...

At ₹9,000 crore, Patanjali could

be top bidder for Ruchi Soya

5

True North in talks to buy

26% stake in Federal Bank’s

NBFC

Private equity (PE) fund True

North Capital is in advanced talks

to buy a 26% stake in Fedbank

Financial Services (Fedfina) for

Rs400 crore, two people in the

know said…

6

TCS doesn’t believe in

sacrificing profitability to

drive growth

Tata Consultancy Services Ltd

(TCS) believes that its half-a-

century experience has made the

management realize that

sacrificing profitability is not

enough to drive growth and

contrary to popular belief,

following this model can be

counterproductive…

7

Tiago rides to 2nd position in

small cars, becomes most

sold car after Alto

A new pecking order has

emerged in the country’s highly

price-sensitive small car market.

The Tiago, the two-year-old

small car from Tata Motors’

stable, has notched the highest

sales in the entry segment after

Maruti Suzuki’s Alto…

23 April 2018

2

21 April 2018

4QFY18 Results Update | Sector: Financials

HDFC Bank

Buy

BSE SENSEX

34,465

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

10,564

HDFCB IN

Steady quarter; fee growth surprises positively

2,595



HDFCB reported 24% YoY core PPoP growth (in-line; 21% PPoP growth on

5089 / 79

muted capital gains of INR220m), led by steady revenue growth and controlled

2014 / 1450

opex. However, higher provisions (INR15.4b, 15% miss owing to a contingent

2/0/17

provision towards an agri account) resulted in 20% YoY PAT growth.

2780.0

79.1



Loans grew 19% YoY (+3% QoQ) to INR6.58t. Incremental growth in the

CMP: INR1,961

TP: INR2,400(+22%)

Financials & Valuations (INR b)

Y/E MARCH

2018 2019E

NII

400.9 464.8

OP

326.2 391.6

NP

174.9 210.6

NIM (%)

4.4

4.2

EPS (INR)

67.8

79.3

EPS Gr. (%)

19.4

16.9

BV/Sh. (INR)

409.6 527.9

ABV/Sh. (INR)

385.9 500.0

RoE (%)

17.9

16.9

RoA (%)

1.8

1.8

Valuations

P/E(X)

28.9

24.7

P/BV (X)

4.8

3.7

P/ABV (X)

5.1

3.9

Div. Yield (%)

0.8

0.8

2020E

568.4

487.3

257.0

4.3

94.5

19.3

604.4

570.6

16.7

1.8

20.7

3.2

3.4

0.9

quarter was driven by retail loans (6.0%/30% QoQ/YoY), resulting in an

increase in its loan mix share to 69.7%. Post 4 quarters of trailing loan

growth, deposits grew faster than advances at 22.5% YoY to INR7.89t,

bringing down credit deposit ratio to 83% (90% in 3QFY18).



Other income reported robust 23% YoY growth to INR42.3b (12% beat), led

by 32% YoY growth in fees and commissions, while treasury gains were

muted at INR0.22b vs INR1.8b in 4QFY17. Total core other income grew 29%

YoY. Opex grew 16% YoY to INR60.6b (5% miss), partly offsetting the other

income beat; cost to core income declined 46bp QoQ to 40.7%



CASA deposits grew 12% YoY, but term deposits registered a robust 33% YoY

growth, leading to CASA ratio declining 50bp QoQ to 43.5%. Reported NIM

was stable at 4.3%



GNPL increased by 5% QoQ, but the bank improved its PCR to 69.8% (66% in

3Q), leading to 6% decline in NNPA.

Valuation and view:

HDFCB has been consistently gaining market share across

most products in the retail segment (personal loans, business banking, credit

cards and auto loans), and the upcoming capital raise will enable it to sustain

this growth momentum. Operating expenses have been under control, and

significant digital initiatives have led to a consistent decline in the C/I ratio to

~40%.

We have built in INR240b of capital raise in FY19 and arrive at a TP of

INR2,400 at 4.0x Mar-20E ABV for the bank. Maintain Buy.

23 April 2018

3

Maruti Suzuki

BSE SENSEX

34,465

S&P CNX

10,564

20 April 2018

Update

| Sector:

Automobiles

CMP: INR9,039

TP: INR10,560(+17%)

Upgrade cycle to continue led by higher volumes and margins

Buy

More of the same: increasing share, margins & growth

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

Avg Val, INRm

Free float (%)

MSIL IN

302.1

10000 / 6183

-2/10/27

2,741.8

41.7

4231.0

43.8

Financials Snapshot (INR b)

2018E 2019E 2020E

Y/E Mar

Sales

794.6 933.2 1,093.6

EBITDA

123.8 149.4 189.8

Adj. PAT

81.4 103.6 134.7

Cons.Adj.EPS(INR)

275.1 349.0 452.3

EPS Gr. (%)

10.6 26.9

29.6

BV/Sh. (INR)

1,365 1,575 1,859

RoE (%)

19.7 21.8

24.0

RoCE (%)

27.8 30.2

33.1

P/E (x)

33.0 26.0

20.1

P/CE (x)

24.8 20.1

16.1

Shareholding pattern (%)

As On

Dec-17 Sep-17 Dec-16

Promoter

56.2

56.2

56.2

DII

11.0

11.5

12.4

FII

25.8

25.3

24.5

Others

7.0

7.0

6.9

FII Includes depository receipts

Stock Performance (1-year)

Maruti Suzuki

Sensex - Rebased

10,000

9,000

8,000

7,000

6,000



Demand recovery getting broad based, led by rural markets:

We see demand

recovery from rural areas as model like Alto witnessed ~5.6% growth in FY18

following six years of de-growth (except FY15). Coupled with rural recovery,

this is a reflection of first-time buyers making a comeback. MSIL would be the

biggest beneficiary of rural market recovery due to (a) its unparalleled reach,

(b) large part of its dealer addition being targeted at rural markets, and (c) over

35% of volumes coming from rural markets.



Expanding market reach would aid faster than industry growth:

MSIL is

targeting ~4k sales outlets (~2.8k in FY18E, implying 12.8% CAGR in FY18-20E)

and ~5k workshops (~3.3k in FY18) by 2020. To support dealer viability, it is

also investing in land parcels for leasing it to dealers on long-term leases. MSIL

should grow much faster than the industry, led by ~13% CAGR in distribution

network and continued healthy growth with existing dealers due to favorable

product lifecycle.



Upgrading customer experience through Nexa, Arena and True value:

MSIL

has taken initiatives to strengthen its distribution moat by transforming the

entire network on the pillars of design, technology and experience. It is

converting the existing mainstream dealerships to the Arena format, migrating

the pre-owned car network to the new True Value format, and is building the

Nexa service network for Nexa customers.



Timely capacity addition to ensure double digit growth:

We believe MSIL has

headroom to squeeze more production from its existing operations, as visible

in March 2018 annualized production of ~2.07m units as well as addition of

~60k units from phase 2 of Gujarat plant from January 2019. While this implies

producible capacity of 2.13m units for FY19, considering maintenance

shutdowns and other holiday, we believe it should be able to attain our volume

estimate of ~2m for FY19 (~12.5% growth). We estimate volume CAGR of 13%

in FY18-20 (v/s 11.6% CAGR in FY16-18) given increase in producible capacity.



Lower royalty, localization at Gujarat plant to drive margin expansion:

We

expect MSIL’s EBIT margin to improve by 220bp to ~14.3% in FY20 due to (a)

continued mix improvement, (b) discount reduction, (c) lower royalty, (d)

ramp-up at Gujarat plant, and (e) benefits of operating leverage.



Valuation:

We believe earnings upgrade cycle for MSIL to continue, driven by

higher volumes and margins. Our FY19/20 consol. EPS is higher by 5%/13%

than the consensus, led by higher margins. The stock trades at 26x/20.1x

FY19/20E consol. EPS. Maintain

Buy

with a 1yr TP of INR10,525 (~25x Mar-20

core EPS + ~INR1,544 cash/share). Over 3 years, we estimate total return of

15.3% CAGR with TP of ~INR14,213 (~25x Mar-22 core EPS + INR2,323

cash/share + INR330 of cumulative dividend).

23 April 2018

4

Sector Update | 20 April 2018

Healthcare

US base business to remain weak

Potential approvals remain key for growth

Healthcare - P/E Relative to

Sensex PE (%)

PE Relative to Sensex PE (%)

Avg (x)

80.0

50.0

20.0

-10.0

-40.0

Sandoz’s 1QCY18 results indicate that its generics business is impacted by

6% YoY price reduction

Novartis’ generics arm, Sandoz reported 4% YoY reduction in 1QCY18 net sales on

constant currency basis. The decline is largely due to 6% YoY price erosion, mainly in

the US market. The price decline was partially offset by 2% YoY increase in volumes.

Ex-US business grew 5% YoY on constant currency basis.

31.8

16.5

Interestingly, Sandoz’s base business has seen consistent price erosion for

three years now

We examined Sandoz’s price data for the past 12-13 quarters. The base business has

seen consistent price erosion of 6-8% (3QCY15 data-point being exceptional) in

CY15, CY16 and CY17. Even the 1QCY18 data point implies continued pricing

pressure in base business. Novartis has guided in-line to slightly lower revenue for

Sandoz in CY18. Since ex-US business continues to grow well (5% YoY on constant

currency basis in 1QCY18), the guidance implies continued weakness in US base

business.

Lack of potential approvals for coverage companies has impacted financial

performance for past one year

Though Sandoz’s generics business has continued to show price decline for the past

three years, the pharmaceuticals companies under our coverage have shown

phenomenal growth during the period.

This implies that though the base business

for most of the companies continued to decline, new approvals and subsequent

launch of higher value-added products not only offset the adverse impact on base

business but also helped deliver growth in sales and profitability.

YoY contraction

in 9MFY18 US revenue for most of the companies under our coverage implies lack of

high-value approvals or price cuts in key products due to faster ANDA approvals by

USFDA. The high base of last year and continued price erosion in older products

further worsened the situation.

Expect healthy growth for under coverage companies in 4QFY18

For the pharmaceuticals companies under coverage, we expect weakness to

continue in the base business. However, there would be healthy YoY growth in

overall US sales in 4QFY18 on low base of last year. Product-specific opportunities

would also aid better growth for some companies.

Valuation and view

The base business remains impacted by pricing pressure. Companies have been

developing niche molecules to offset decline in base business and have better

profitability. The timing of approvals and evolving competitive scenario for

respective products remain the key parameters to track the US generics growth over

the next 2-3 years. We remain positive on Sun Pharma among large caps, and

Granules, Ipca and Shilpa Medicare among midcaps.

23 April 2018

5

Consistent price erosion in base business for 3 years now for Sandoz

Price Change YoY (%)

(4)

(6)

(8)

(12)

1QCY15

2QCY15

3QCY15

4QCY15

1QCY16

(7)

(5)

(6)

(6)

(8)

(8)

(7)

(6)

(8)

2QCY16

3QCY16

4QCY16

1QCY17

2QCY17

3QCY17

4QCY17

1QCY18

Source: Company, MOSL

Volume growth muted in 1QCY18 for Sandoz

21

17

13

8

11

8

5

Volume Growth YoY (%)

9

9

4

8

4

2

1QCY18

1QCY15

2QCY15

3QCY15

4QCY15

1QCY16

2QCY16

3QCY16

4QCY16

1QCY17

2QCY17

3QCY17

4QCY17

Source: MOSL, Company

Considerable decline in US Sales in 9MFY18

INR b

Sun Pharma

Growth (%)

Dr. Reddys

Growth (%)

Lupin

Growth (%)

Aurobindo

Growth (%)

Glenmark

Growth (%)

Cadila

Growth (%)

Cipla

Growth (%)

Torrent Pharma

Growth (%)

Alembic

Growth (%)

Alkem

Growth (%)

Ajanta Pharma

Growth (%)

FY14

97.8

59.0

55.3

46.1

48.9

29.6

34.0

94.2

20.3

20.0

21.7

44.0

FY15

137.2

40.2

64.7

17.0

56.6

15.8

48.3

42.0

20.4

0.6

33.9

56.4

FY16

135.2

-1.5

75.4

16.6

59.4

5.0

60.8

25.8

24.2

18.7

40.2

18.5

21.1

26.7

221.2

10.8

9.9

53.3

0.14

250.0

FY17

137.6

1.8

63.6

-15.7

82.6

39.1

68.3

12.3

37.0

52.9

37.1

-7.8

26.2

24.7

13.5

-49.6

9.1

-15.4

12.0

21.5

1.85

1221.4

9MFY18

4QFY18E

64.0

21.4

-42.8

-16.2

45.3

16.2

-6.0

5.8

44.0

14.0

-30.9

-26.2

57.0

20.1

10.0

22.4

25.1

7.2

-7.1

-27.7

41.9

14.2

53.9

44.2

19.1

7.4

-3.3

14.0

7.9

3.0

-25.6

6.9

6.4

2.2

-11.1

16.5

9.6

3.4

5.1

17.1

1.5

0.6

7.9

33.3

Source: MOSL, Company

7.8

118.6

8.3

7.2

4.2

127.8

6.5

53.2

0.04

23 April 2018

6

21 April 2018

Update | Sector: Real Estate

Phoenix Mills

BSE SENSEX

34,465

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

Avg Val, INRm

Free float (%)

Financials Snapshot (INR b)

Y/E Mar

FY18E

FY19E

FY20E

S&P CNX

10,564

PHNX IN

nd

153

PHNX acquires 2 land parcel in Bangalore under CPPIB deal

717 / 390

0/6/41

PHNX plans to develop mall of 1msf in Hebbal, Bangalore

97.4



Company has acquired land parcel in North Bangalore for INR6.5b under

1.5

Canada Pension Plan Investment Board (CPPIB) deal with a development

73.0

potential of 1.81msf (full base Floor Space Index). PHNX plans to develop

37.2

CMP: INR632

TP: INR732(+16%)

Buy

Net Sales

EBITDA

PAT

EPS (INR)

Gr. (%)

BV/Sh (INR)

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

16.2

7.7

2.2

14.1

28.4

187.5

8.5

6.6

43.0

3.2

18.9

9.2

3.2

20.9

48.1

236.9

9.8

7.4

29.0

2.6

21.3

10.5

4.0

26.3

26.2

260.6

10.6

8.1

23.0

2.3







Shareholding pattern (%)

As On

Dec-17 Sep-17

Promoter

62.8

62.9

DII

2.8

2.2

FII

29.8

30.1

Others

4.6

4.8

FII Includes depository receipts

Stock Performance (1-year)

Phoenix Mills

Sensex - Rebased

750

650

550

450

350



Dec-16

62.9

3.3

30.0

3.9



premium retail development (mall) of 1msf and balance for mixed use

development.

Post approval cost and stamp duty, the total cost of land would stand at

INR7.4b converting into psf land cost of INR4,088.

The land is bought from L&T where it is developing residential and

commercial properties. L&T is developing an integrated township on 65

acres land, of which PHNX has bought land with a development potential of

1.81msf.

Hebbal is located in north of Bangalore, which has seen launch of over

40,000 residential units since 2014 and office space of 20msf. The site is in

close proximity to the airport.

The land parcel is located on Bellary Road which connects Hebbal to the

airport and the areas beyond. This location is close to the upcoming

economic hubs in the north such as the Aerospace Park and the Hardware

Park. These key initiatives house expansive units of large companies that are

to be operational in the short to medium terms. Hebbal and Yelahanka, its

strategic location between the airport and the Central Business District

(CBD) of the city has established Hebbal as a high-end residential market.

PHNX already has an operational mall of 1msf in Whitefield catering to

eastern parts of Bangalore.

Our View



The total land cost would be INR7.4b and construction cost of INR4.5b for

constructing 1msf. The total psf cost would stand at INR8,588 psf.



Recently, an office space transaction in the same vicinity took place at

INR70-80psf pm and applying a cap rate of 8% converts into a realization of

INR12,000psf.



Company is expecting to start with the lease rental of INR150psf pm by FY23

which we believe in today’s present value terms is INR94psf at 13% discount

rate.



Brigade's Orion mall (10km away from the site) is generating lease rental of

INR100psf pm converting into a realization of INR15,000psf.



PHNX being leader in mall development and management typically

commands higher lease rentals and thus in our view this makes it a decent

buy. We reiterate our

BUY

rating on the stock.

23 April 2018

7

E

CO

S

COPE

Higher employment or better jobs?

Evidence of The Lewis Model in India’s labor market



20 April 2018

The Economy Observer

Early this year, we released a

theme report

on India’s labor market, wherein we noted two striking features that make

it unique: (1) a fall in labor force participation ratio (LFPR) in the second-most populous and one of the youngest

economies in the world, and (2) the robust inverse correlation between employment and real GVA/GDP growth during

the post-liberalization period. In this note, we provide evidence of the existence of ‘The Lewis Model’ in India, and link

the two most striking features with each other.



The existence of a relatively large accommodative unorganized sector and related under-employment makes it difficult

to achieve the dual objective of higher employment and better jobs. Even in the past, we have achieved only one:

either higher employment growth with deteriorating quality of jobs (between FY00 and FY05) or better jobs with slow

employment growth (between FY05 and FY12). The latter, we believe, is more pertinent than the former for the Indian

economy.

Data on labor market indicators is hard to come by in the second-most populous and

one of the youngest economies in the world. The most comprehensive data on

India’s labor market is available through National Sample Survey Office (NSSO),

which conducted its last survey in 2011-12. While the Labour Bureau has published

Employment-Unemployment Survey (EUS), it doesn’t provide information on the

organized and unorganized employment, and thus, is not useful for this note. We,

therefore, use NSSO’s three thick surveys for 1999-2000, 2004-05 and 2011-12. We

compare 2004-05 with 1999-2000 and 2011-12 with 2004-05 – the former being the

slow GDP-growth phase and the latter being the high GDP-growth phase.

Exhibit 1:

India’s labor force participation ratio (LFPR) has

fallen drastically in the past decade

700

650

600

550

500

1987-88

(per 1000 persons)

LFPR

Exhibit 2:

GDP growth and employment are inversely

correlated in the context of Indian economy

Non-farm GVA

11

9

7

Non-farm employment (RHS)

4.5

4.0

3.5

3.0

2.5

FY87

FY91

FY95

FY99

FY03

FY07

FY11

3-year centered moving average

Source: Reserve Bank of India (RBI), KLEMS database, MOSL

649

634

614

512

1994-95

2000-01

2005-06

2011-12

5

3

Source: National Sample Survey Office (NSSO), MOSL

Earlier this year, we released a detailed

thematic note

on India’s labor market. We

argued that the two most striking features of India's labor market are: (1) sharp

decline in labor force participation ratio in the past decade

(Exhibit 1),

and (2) robust

inverse correlation between employment and GVA/GDP growth

(Exhibit 2).

23 April 2018

8

Indiabulls Housing Finance

BSE SENSEX

34,465

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

20 April 2018

4QFY18 Results Update | Sector: Financials

S&P CNX

10,564

IHFL IN

Growth surprises positively; asset quality stable

421.3



Indiabulls Housing Finance's (IHFL) core operating performance was

570.9/8.6

robust. AUM grew strongly by 34% YoY to INR1.23t v/s our expectation of

1439 / 957

9/-7/22

INR1.17t. A decline in reported spreads (-13bp YoY), an increase in

2144.0

leverage, and moderation in liquid money-related income led to 22% NII

76.5

CMP: INR1,356

TP: INR1,650 (+22%)

Buy

Financials & Valuations (INR b)

Y/E March

2018 2019E

Net Fin inc

54.1

66.5

PPP

61.0

72.8

PAT

38.5

46.4

EPS (INR)

90.2

108.8

EPS Gr. (%)

31.5

20.6

BV/Sh. (INR)

303

353

RoA on AUM (%)

3.5

3.3

RoE (%)

30.7

33.2

Payout (%)

46.6

45.0

Valuations

P/E (x)

15.0

12.5

P/BV (x)

4.5

3.8

P/ABV (x)

4.5

3.8

Div. Yield (%)

3.1

3.6



2020E

82.2

88.0

56.1

131.5



20.9

413

3.1

34.3

45.0



10.3



3.3

3.3

4.4



growth. Tax rate was at (18%) for the quarter.

Disbursements for the quarter were up 30% YoY to INR195b, driven by

50%+ YoY growth in core home loans. This drove 34% AUM growth.

Management cited strong traction in affordable housing finance. We

expect IHFL to continue delivering 25-30% AUM growth over the medium

term.

Loan mix and borrowing mix both were steady. Yield on loans was down

~80bp YoY, while CoF was down ~65bp. IHFL increased its PLR by 20bp on

1

st

April 2018. Hence, we expect the impact of rising GSec yields to be

somewhat mitigated.

Management targets to gradually increase the share of securitization in

its loan book from 10% currently to 20% over the medium-to-long term.

Asset quality was stable, with GNPL ratio of 77bp and NNPL ratio of 34bp.

Credit costs are guided to decline to 50bp over the medium-to-long term.

Valuation view:

IHFL's transformation from a diversified lender to a

focused mortgage player has yielded returns, with RoE/RoA improving

from 3%/0.8% in FY09 to 26%/3.4% in FY17. Focus on core mortgage

loans and market share gains should drive AUM growth of 25%+ over the

next three years. Asset quality trend is likely to remain stable. We

increase our FY19/20E EPS estimates by 3-4% to factor in higher growth.

Maintain

Buy

with a TP of INR1,650 (4.0x FY20E book).

3Q

25,859

4,186

30,045

30.2

16,329

13,716

26.8

3,658

10,058

24.9

2,555

7,502

13

7,515

24.7

30.8

26.7

25.4

4Q

29,314

2,935

32,249

21.8

17,391

14,858

15.6

5,160

9,698

9.0

1,325

8,373

32

8,405

24.4

32.9

34.7

13.7

1Q

29,560

2,690

32,250

24.2

17,722

14,528

22.4

3,928

10,600

21.1

2,764

7,836

46

7,882

25.1

33.0

27.0

26.1

FY18

2Q

30,670

2,755

33,425

16.3

18,355

15,070

20.8

3,935

11,135

20.9

2,615

8,520

91

8,611

25.8

33.1

26.1

23.5

(INR Million)

3Q

33,492

7,565

41,057

36.7

19,531

21,525

56.9

5,932

15,594

55.0

3,939

11,655

23

11,677

55.4

31.8

27.6

25.3

4Q

36,897

2,775

39,672

23.0

20,930

18,742

26.1

6,315

12,427

28.1

2,182

10,245

59

10,304

22.6

34.3

33.7

17.6

FY17

103,990

13,027

117,017

26.8

64,108

52,910

24.4

15,192

37,718

20.5

8,633

29,085

-22

29,064

24.0

32.9

22.9

FY18

130,619

15,785

146,404

25.1

76,539

69,865

32.0

20,110

49,756

31.9

11,501

38,255

219

38,036

30.9

28.1

25.0

Quarterly Performance

Y/E March

Income from opera ti ons

Other Income

Total income

Y-o-Y Growth (%)

Interes t expens es

Net Income

Y-o-Y Growth (%)

Opera ti ng Expens es

Profit before tax

Y-o-Y Growth (%)

Ta x Provi s i ons

Net Profit

Mi nori ty Int

Net Profit after MI

Y-o-Y Growth (%)

AUM Growth (%)

C/I Ra ti o i ncl provi s i ons (%)

Ta x Ra te (%)

1Q

23,720

2,255

25,975

28.3

14,109

11,866

33.9

3,116

8,750

26.4

2,401

6,349

-49

6,301

23.2

31.5

26.3

27.4

FY17

2Q

25,098

3,651

28,749

28.0

16,279

12,470

24.6

3,258

9,212

24.3

2,352

6,861

-18

6,843

23.2

29.3

26.1

25.5

23 April 2018

9

20 April 2018

1QCY18 Results Update | Sector: Automobiles

Mahindra CIE

Buy

BSE SENSEX

34,465

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

10,564

MACA IN

Strong quarter; India business drives superior consol. performance

378



Consol. revenue grew 27% YoY to INR20b (est. of INR16.6b), driven by strong

86.4 / 1.3

volume growth in India/Europe and INR depreciation. EBITDA increased

270 / 199

~37% YoY to INR2.6b (est. of INR2.3b), with the margin of 13% missing our

5/-6/-13

71.0

estimate of 13.7% due to absorption of higher RM costs in the EU (to be

30.2

passed on subsequently). PBT grew ~62% YoY to INR1.9b (est. of INR1.4b).

CMP: INR236

TP: INR298(+26%)

Financials & Valuations (INR b)

CY17 CY18E

Y/E Dec

Sales (INR m)

65,200 78,263

EBITDA (%)

12.6

13.6

PAT (INR m)

3,632

5,197

EPS (INR)

9.6

13.7

EPS Growth (%)

107.8

43.1

BV/Share (INR)

98.3

112.0

RoE (%)

10.4

13.1

RoCE (%)

8.7

11.2

P/E (x)

24.6

17.2

EV/EBITDA (x)

12.2

9.0

CY19E

84,476

14.9

6,265

16.6

20.5

128.6

13.8

12.5

14.2

7.1

Estimate change

TP change

Rating change

Quarterly performance

Consolidated (INR m)

Net Sales

YoY Change (%)

EBITDA

Margins (%)

PBT before EO exp

YoY Change (%)

1Q

15,781

18.9

1,889

12.0

1,170

49.0

4,645

14.9

443

9.5

171

33

24

264

36.9

166

-2.1

India business

revenue grew ~26% YoY (17% QoQ) to INR8.3b, driven by

strong growth in the BFL, castings, forgings and gears divisions. EBITDA

increased ~50% YoY (+41% QoQ) to INR1.1b, with the margin expanding

220bp YoY (+240bp QoQ) to 13.9%, led by a favourable mix and operating

leverage. PBT grew 88% YoY (+138% QoQ) to INR967m, also benefiting from

~INR107m of FX gain at BFL Mexico.



EU business

revenue grew ~27% YoY to INR11.8b (CC growth of 17%).

EBITDA margin contracted ~170bp QoQ (flat YoY) to 12.2%, mainly due to

higher RM costs. PBT grew ~46% YoY to INR930m.



Key earnings call takeaways:

(a) Won orders from Kia and Hyundai in the

foundry and forging divisions, respectively; revenue contribution to begin

from CY19. (b) BFL’s Mexico plant ramp-up is on track; complete ramp-up is

likely by Sep-19, with peak revenue of USD30-35m p.a. (c) New projects and

ramp-up in existing projects at Metalcastello, MFE and Lithuania would

enable MCIE Europe to outperform market in CY18. (d) In EU business, most

customers have agreed for price increases for commodity inflation.

Valuation view:

We upgrade CY18E/19E EPS by 12.5%/9.5% to factor in (a) higher

EUR/GBP and (b) higher growth in S/A business. The stock trades at 17.2x/14.2x

CY18/19E consol. EPS. Maintain

Buy

with a TP of INR298 (18x CY19E EPS).



CY17

CY18E

CY17 CY18E

Est.

2Q

3Q

4Q

1Q

2QE

3QE

4QE

1QE

15,849 16,494 17,077 19,965 19,177 19,463 19,658 65,200 78,263 16,570

5.0

15

32

25.2

26.5

21.0

18.0

15.1

1,995 2,052 2,283 2,586 2,589 2,725 2,774 8,219 67,589 2,270

12.6

12.4

13.4

13.0

13.5

14.0

14.1

13.7

1,233 1,334 1,330 1,898 1,729 1,855 1,759 5,135 7,240 1,423

58.3

98.5 250.0

62.2

40.2

39.0

31.8

89.8

41.0

21.6

4,495

11.2

427

9.5

182

18

43

269

34.4

176

25.1

4,847

21.0

488

10.1

178

13

27

325

37.3

204

86.2

5,615

39.6

583

10.4

228

33

38

291

49.6

181

65.7

6,120

31.7

739

12.1

188

15

61

597

35.4

386

131.8

6,069

35.0

758

12.5

230

22

38

544

35.0

354

100.4

6,058

25.0

812

13.4

235

22

35

590

35.0

384

88.4

6,403 19,601 24,649

14.0

21.7

25.8

722 1,946 3,032

11.3

9.9

12.3

242

759

895

22

99

81

31

127

165

490 1,146 2,221

34.6

39.7

35.0

320

733 1,443

57.4

27.7

97.0

5,754

24.0

647

11.2

230

30

35

422

34.0

279

67.5

Var.

(%)

20.5

13.9

-70bp

33.4

Standalone (INR m)

Net Sales

YoY Change (%)

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT

Rate (%)

Adj. PAT

YoY Change (%)

E: MOSL Estimates

6.4

14.2

80bp

41.3

38.4

23 April 2018

10

March 2018 Results Preview | Sector: Telecom

Bharti Infratel

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

BHIN IN

1896.7

641 / 10

482 / 319

1 / -23 / -9

CMP: INR338





TP: INR380 (+12%)

Neutral

Financial Snapshot (INR Billion)

Y/E March

2017 2018E 2019E 2020E

Net Sales

EBITDA

Adj. NP

AdjEPS INR

Gr. (%)

BV/Sh (INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

Div. Yld (%)

22.8

4.0

9.6

4.7

24.4

4.2

8.8

4.4

22.1

4.3

9.0

4.4

20.1

4.4

8.4

4.3

134.2 144.3 147.9 159.4

59.0

27.5

14.9

25.3

83.7

16.2

13.2

63.6

25.6

13.8

-6.9

80.2

16.9

14.6

61.7

28.2

15.3

10.4

78.0

19.3

14.6

66.5

31.1

16.8

10.0

77.4

21.6

16.5







125.0 125.8 114.0 103.6

We expect consolidated revenue to decline 2% QoQ (but grow 2%

YoY) to INR36b.

Consolidation in the sector is likely to continue pressurizing

tenancies. We expect 2% QoQ decline in tenancies leading to 2%

QoQ decline in consolidated rental revenue to INR22.1b. We

expect energy and other reimbursements to remain flat QoQ at

INR13.9b.

We expect consolidated EBITDA too to decline 2% QoQ to

INR15.7b. Though rental EBITDA margin is expected to drop 90bp

QoQ to 65.5%, 190bp expansion in energy EBITDA margin to 8.8%

would enable consolidated EBITDA margin of 43.6%.

We expect PAT to rise 14% QoQ to INR6.7b.

Bharti Infratel trades at EV/EBITDA of 9x FY19E and 8.4x FY20E.

Maintain Neutral.

Key monitorables



Consolidated net co-location deletions (we expect ~3,720 QoQ tenancy

deletions in 4QFY18).



Consolidated revenue per sharing operator (expected to remain flat

QoQ).

Consolidated

Quarterly Performance

Y/E March

Revenue from operations

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

32,106

6.9

18,159

13,947

43.4

5,648

-1,281

352

9,932

0

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

0

0

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

4Q

35,204

10.6

19,481

15,723

44.7

5,684

287

414

10,166

0

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

0

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

0

0

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

35,990

2.2

20,287

15,703

43.6

6,045

-489

0

10,146

0

10,146

3,450

34.0

6,696

6,696

12.2

18.6

FY17

1,34,237

8.9

75,268

58,969

43.9

22,626

-4,414

1,455

42,212

0

42,212

14,742

34.9

27,470

27,470

22.2

20.5

(INR m)

FY18E

1,44,264

7.5

80,683

63,581

44.1

23,786

-715

1,370

41,879

0

41,879

16,306

38.9

25,573

25,573

-6.9

17.7

23 April 2018

11

March 2018 Results Preview | Sector: Financials

Cholamandalam Inv & Fin

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

CIFC IN

156.3

156.3

237 / 4

1530 / 964



CMP: INR1,517



TP: INR1,750 (+15%)

Buy

Financial Snapshot (INR b)

Y/E March

NII

PPP

Adj. PAT

EPS (INR)

EPS Gr. (%)

BV (INR)

BVPS Gr. %

RoAA (%)

RoE (%)

Valuations

P/E (x)

P/BV (x)

Div. Yld. %

33.0

5.5

0.3

24.8

4.6

0.4

21.2

3.9

0.5

17.6

3.2

0.5

2017

23.5

13.9

6.9

46.0

26.3

276.0

18.0

2.6

18.0

2018E

30.0

18.2

9.6

61.3

33.3

330.0

20.0

3.0

20.2

2019E

34.9

21.7

11.2

71.7

17.0

393.0

19.0

3.0

19.8

2020E

40.9

26.4

13.5

86.2

20.2

470.0

19.0

3.1

20.0











With strong growth in the VF segment, coupled with gradual

improvement in LAP, we expect AUM growth to pick up to 22% in

4QFY18 compared to 20% in the prior quarter.

Calculated spreads are expected to be stable sequentially, but up

30bp on a YoY basis, largely due to lower cost of funds.

As a result, NII is expected to grow 26% YoY to INR8.3b.

Calculated cost-to-income ratio should decline 160bp to 39.7%. We

expect C/I ratio to remain at 40-41% for the next few quarters.

We believe GNPLs have peaked out and should decline going

forward, as the company has started invoking SARFAESI. We expect

provisions of INR0.9b (at similar level in 3QFY18 and at INR0.5b in

4QFY17).

Net profit is likely to grow 25% YoY to INR2.75b.

The stock trades at 3.9x FY19E and 3.2x FY20E BV. Maintain Buy.

Key issues to watch for

Management expectation of growth in home equity.

Asset quality trend, especially in home equity.

Trend in opex, given management’s intent to reduce expense ratio to

2.5% by FY20.

Quarterly Performance

Y/E March

FY17

FY18E

1Q

2Q

3Q

4Q

1Q

2Q

3Q

Income from Operations

11,017 11,558 11,698 12,069 12,273 12,884 13,758

Interest Expenses

5,481

5,694

5,658

5,476

5,410

5,568

5,903

Net Interest Income

5,536

5,864

6,040

6,594

6,863

7,317

7,855

YoY Growth (%)

13.8

20.6

20.1

22.5

24.0

24.8

30.1

Other Op. and Other Income

68

69

60

65

76

76

76

Net Operating Income

5,604

5,933

6,100

6,659

6,939

7,392

7,931

YoY Growth (%)

14.3

21.0

20.5

22.6

23.8

24.6

30.0

Operating Expenses

2,264

2,527

2,588

2,754

2,777

3,089

3,237

Operating Profit

3,341

3,405

3,512

3,905

4,162

4,304

4,694

YoY Growth (%)

20.4

22.7

17.9

19.1

24.6

26.4

33.7

Provisions & Loan Losses

804

772

1,003

529

981

832

902

Profit before Tax

2,537

2,634

2,509

3,376

3,181

3,472

3,792

Tax Provisions

880

924

884

1,181

1,116

1,199

1,300

Net Profit

1,657

1,709

1,625

2,196

2,066

2,273

2,492

YoY Growth (%)

50.3

41.9

11.5

14.3

24.6

32.9

53.3

AUM Growth (%)

18.3

18.7

16.7

14.6

13.5

14.4

19.5

Disbursement Growth (%)

30.1

21.0

2.7

5.5

6.4

23.6

54.6

NIM on AUM (%)

7.3

7.5

7.5

7.9

7.9

8.2

8.3

Cost to Income Ratio (%)

40.4

42.6

42.4

41.4

40.0

41.8

40.8

Tax Rate (%)

34.7

35.1

35.2

35.0

35.1

34.5

34.3

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

FY2017

4QE

14,560

6,253

8,307

26.0

81

8,388

26.0

3,333

5,055

29.5

875

4,180

1,431

2,749

25.2

21.6

40.8

8.2

39.7

34.2

45,790

22,308

23,482

13.4

529

24,011

12.0

10,133

13,878

6.9

3,106

10,771

3,868

6,903

21.4

15.2

13.5

7.6

41.7

35.0

(INR M)

FY2018E

53,097

23,133

29,964

27.6

685

30,650

27.6

12,436

18,214

31.2

3,589

14,625

5,046

9,580

38.8

21.6

31.5

7.9

40.6

34.5

23 April 2018

12

March 2018 Results Preview | Sector: Financials

LIC Housing Finance

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

LICHF IN

505.0

279 / 4

794 / 478

11 / -20 / -23



2019E

40.5

36.1

22.4

44.3

13.8

286.0

1.4

16.5

19.7

12.5

1.9

1.4

2020E

47.1

42.2

26.6

52.6

18.7

328.0

1.4

17.1

19.7

10.5

1.7

1.6







CMP: INR552



TP: INR610 (+10%)

Neutral

Financial Snapshot (INR b)

Y/E March

NII

PPP

Adj. PAT

Adj. EPS INR

EPS Gr. (%)

BV/Sh. INR

RoAA (%)

RoE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

Div. Yld %

14.4

2.5

1.1

14.2

2.2

1.2

2017 2018E

36.5

32.4

19.3

38.2

16.3

219.0

1.5

19.1

18.8

36.6

32.7

19.7

38.9

1.8

251.0

1.3

16.6

19.7

We expect loan growth of 13% YoY, driven primarily by the LAP

segment. The share of builder loans is likely to remain ~4% of

overall book. Growth in the retail home loan book would be the

key monitorable.

Calculated margins are likely to remain largely stable at 2.4%,

driven by falling loan yields.

Operating expenses would decrease 4% YoY, with the C/I ratio

increasing 40bp YoY to ~18%.

Asset quality is likely to remain stable. We model provisions of

INR420m as against INR484m in 3QFY18 and INR893m in 4QFY17.

The stock trades at 1.9x FY19E and 1.7x FY20E BV. Maintain

Neutral.

Key issues to watch for

Trend in incremental spreads.

Performance of corporate loan book and loans against property.

Management commentary on increasing competitive intensity and

margin trends.

Quarterly Performance

Y/E March

Interest Income

Interest Expenses

Net Interest Income

YoY Growth (%)

Fees and other income

Net Income

YoY Growth (%)

Operating Expenses

Operating Profit

YoY Growth (%)

Provisions and Cont.

Profit before Tax

Tax Provisions

Net Profit

YoY Growth (%)

Loan Growth (%)

Cost to Income Ratio (%)

Tax Rate (%)

E: MOSL Estimates

1Q

33,263

25,018

8,245

25.1

535

8,780

24.2

1,382

7,399

18.7

1,165

6,234

2,156

4,078

6.7

15.4

15.7

34.6

FY17

2Q

3Q

34,283 35,125

25,626 25,972

8,657

9,154

20.8

22.6

616

362

9,273

9,516

18.8

18.7

1,364

1,407

7,909

8,109

17.3

19.2

303

453

7,606

7,656

2,659

2,663

4,948

4,993

20.2

19.2

14.9

15.3

14.7

14.8

35.0

34.8

4Q

36,096

25,699

10,396

26.6

523

10,919

22.7

1,965

8,954

22.3

893

8,061

2,769

5,292

18.1

15.5

18.0

34.4

1Q

36,332

26,962

9,370

13.6

214

9,583

9.1

1,354

8,229

11.2

1,045

7,185

2,484

4,701

15.3

15.4

14.1

34.6

FY18E

2Q

3Q

36,581 37,124

27,705 28,148

8,875

8,976

2.5

-1.9

586

552

9,461

9,528

2.0

0.1

1,402

1,477

8,059

8,050

1.9

-0.7

578

484

7,481

7,566

2,589

2,655

4,891

4,911

-1.1

-1.6

15.5

15.4

14.8

15.5

34.6

35.1

FY17

4QE

38,197

28,540

9,657

-7.1

568

10,225

-6.4

1,880

8,345

-6.8

420

7,925

2,766

5,159

-2.5

12.9

18.4

34.9

138,767

102,315

36,452

23.8

2,036

38,489

21.1

6,118

32,371

19.4

2,813

29,558

10,247

19,311

16.3

15.5

15.9

34.7

(INR M)

FY18E

148,234

111,356

36,878

1.2

1,919

38,797

0.8

6,114

32,684

1.0

2,527

30,156

10,494

19,662

1.8

12.9

15.8

34.8

23 April 2018

13

March 2018 Results Preview | Sector: Others

Delta Corp

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

DELTA IN

267.1

74 / 1

401 / 139

-20 / 35 / 18



CMP: INR276



TP: INR332 (+20%)

Buy

We expect revenue to grow 42% YoY to INR1,535m, driven by

traction in Goa casinos and ramp-up of online business.

EBITDA margin is likely to expand 1,390bp to 45.7%, and EBITDA is

expected to grow 104% YoY to INR702m on a low base.

Net profit is likely to increase 287% YoY to INR440m.

We maintain our target price at INR332/share. Buy.

Financial Snapshot (INR Billion)

Y/E MARCH

2017 2018E 2019E 2020E

Net Sales

EBITDA

Adj. EPS (INR)

BV/Sh (INR)

RoE (%)

RoCE (%)

Valuations

P/E (x)

P/BV (x)

Div. Yield (%)

81.9

6.3

0.1

43.6

4.2

32.2

0.5

33.6

3.8

26.0

0.5

24.1

3.4

18.8

0.6

4.5

1.6

3.1

39.7

8.1

8.7

5.9

2.5

1.5

5.7

59.4

12.2

11.7

25.0

7.7

3.2

2.0

7.4

25.7

65.4

11.9

11.9

21.0

9.7

4.4

2.8

10.4

39.7

74.1

14.9

22.2

16.2





Adj. Net Profit 0.7

Adj. EPS Gr. (%) 125.5 87.7

Key things to watch for



Company strategy w.r.t increase in annual license fee.

Div. Payout (%) 13.2







Goa - move from offshore to onshore - policy to be announced by Goa

government.

Daman - grant of casino license

Sikkim -commencement of new airport.

EV/EBITDA (x) 53.0

Quarterly Performance

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 (%)

Minority Interest & P/L of Asso. Cos.

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOSL Estimates

1Q

1,087

34.6

671

415

38.2

91

87

9

246

-46

292

85

29.2

4

202

170

2,539.9

15.6

FY17

2Q

3Q

1,343

1,036

43.8

3.4

776

723

567

313

42.2

30.2

93

89

87

82

11

11

399

152

2

5

397

91

22.9

-16

322

323

494.1

24.1

147

40

27.2

6

101

105

-9.4

10.1

4Q

1,081

5.3

737

344

31.8

87

94

19

182

0

181

64

35.4

3

114

114

-29.3

10.5

1Q

1,286

18.4

833

453

35.2

89

70

37

332

-18

350

127

36.1

1

223

211

24.4

16.4

FY18E

2Q

3Q

1,453

1,622

8.2

56.6

798

935

655

687

45.1

42.4

94

94

22

3

86

79

624

669

0

0

624

194

31.1

-2

433

433

33.8

29.8

669

225

33.6

-3

447

447

327.8

27.6

4QE

1,535

42.0

834

702

45.7

100

5

70

667

0

667

227

34.0

0

440

440

286.4

28.7

(INR Million)

FY17

4,547

21.2

2,907

1,640

36.1

361

350

49

978

-42

1,020

280

27.4

2

738

707

126.5

15.6

FY18E

5,896

29.7

3,398

2,498

42.4

372

100

280

2,306

-18

2,324

779

33.5

2

1,543

1,531

116.5

26.0

23 April 2018

14

In conversation

1. TCS : Happy that we are on a double-digit growth trajectory;

Rajesh Gopinathan, MD and CEO

















Will not like to downplay expectations but realistically speaking, happy that

company is on a double digit trajectory. Have broken in to double digit on dollar

terms. On constant currency, it is still work in progress.

Don’t see structural challenges to margins but currency has to be benevolent

and many other factors have to come in. But structurally company is

comfortable and focused on getting back to our preferred margin band.

Believe that there is reasonable amount of opportunities for company to play.

Seeing enormous demand in security, digital and blockchain.

Talks with clients suggest that client’s budgets are holding well.

Quite confident retail will deliver double-digit growth this year.

Will wait for one more quarter before confirming the recovery in BFSI.

This quarter have won about 250 plus digital wins. All this gives the confidence

that there is going to be scale in digital that should play well on the margin side

as well because these deals come up at a slightly improved margin. Believe that

company is in a good wicket and year-on-year have grown 35 percent on digital

services. Expect that to grow in a much more aggressive manner.

2. NALCO : Expect alumina prices to be at $700/tonne to

$800/tonne in coming years; T K Chand, Chief Managing Director









Aluminium prices are completely driven by the supply disruption, shortage and

sentiment. So these prices are quite high but for some time it will be there, till

the time some kind of adjustment in the market takes place.

The price trend is going up and expect that somewhere between $700 per tonne

and $800 per tonne, the prices will move.

Latest tender of Alumina at USD 718/t v USD 601/t earlier this month.

EBITDA will double in coming years owing to price spike in alumina and

aluminium.

3. GSFC: Price trajectory for caprolactam, melamine positive; A

M Tiwari, Managing Director











Caprolactam Benzene spread increased to $1265/tonne and the prices levels

could continue for the better part of 2019

“GSFC produced 65,000 tonne of caprolactam annually while 65% of company’s

revenues comes from fertilizers.

The prices of melamine are currently hovering around $1,500 per tonne

GSFC’s third plant will be commissioned by August 2018, as the company is

aggressively trying to improve volume and profitability

GSFC is aiming at Rs 1,000 crore PBT in the next four years

23 April 2018

15

From the think tank

1. Disruptive innovation in technology can truly transform the

country



A part of my job that keeps me energized includes the numerous opportunities I

get to interact with bright innovators, researchers and entrepreneurs. Every time I

meet them, I get inspired not only by their infectious energy and commitment,

but the tremendous possibilities they unleash by creating compelling technology

solutions and use cases that truly transform lives. Some of the innovations can

stretch one’s imagination, such as the artificial intelligence (AI)-based smart eye

wear that assists visually impaired to navigate independently, search objects and

recognize faces. Or, an Internet of Things (IoT)-based intelligent waste

management solution that enables civic authorities with real-time data for

ensuring faster and efficient cleaning. Or, a smart helmet that enables two-

wheeler riders with voice-based navigation. These innovations, developed by

start-ups, involve extremely sophisticated and complex systems engineering

combining hardware, software, firmware and application capabilities.

2. Demographic dividend, growth and jobs



India has one of the youngest populations in an aging world. By 2020, the

median age in India will be just 28, compared to 37 in China and the US, 45 in

Western Europe, and 49 in Japan. Demographics can change the pace and

pattern of economic growth. While China’s spectacular growth has already

benefited from a demographic dividend, India is yet to do so. Demographic

dividend can increase economic growth through six channels. The first channel

is through the swelling of the labour force, as more people reach working age.

The second channel is the increased fiscal space created by the demographic

dividend to divert resources from spending on children to investing in physical

and human infrastructure. The third channel is the rise in women’s workforce

that naturally accompanies a decline in fertility, and which can be a new source

of growth. The fourth is the increase in savings rate, as the working age also

happens to be the prime period for saving. The fifth channel is an additional

boost to savings that occurs as the incentive to save for longer periods of

retirement increases with greater longevity. The sixth channel is a massive shift

towards a middle-class society that is already in the making.

3. The finance commission and the thiruvananthapuram

conclave



The Finance Commission is one of the key institutions of our federal system.

Unfortunately, the terms of reference (ToR) of the recently appointed 15th

Finance Commission have become exceptionally controversial. The Kerala

government convened a conclave of southern state finance ministers in

Thiruvananthapuram on 10 April to discuss six broad issues arising out of these

ToR. This article discusses each of these issues based on some preliminary

remarks about preserving the spirit of cooperative federalism and the

foundational principle of equity that has guided the awards of all Finance

Commissions. The conclave was convened because the southern state

governments felt they have some shared features and interests, and they should

therefore consider a collective stance on such issues.

23 April 2018

16

4. Govt wants more oil/gas, but hits producers hard



With the government wanting to reduce oil/gas dependency by 10% by 2022

and 50% by 2050, you would think it would go out of its way to encourage

investors by removing onerous levies—70% of all oil/gas profits go to the

government—and by rolling out new sops. Instead, it continues with the old

anti-industry policies and keeps adding new ones to them. The fact that the two

largest private producers—Reliance and Cairn—are locked in court battles with

the government, of course, tells its own story of how unfriendly the policy

environment is. If the government’s high levies weren’t bad enough, when Cairn

found more oil and wanted to extend its licence to extract this, instead of being

grateful for increased self-sufficiency, the government decided to hike its share

of profits by a whopping 10 percentage points three years ago. And when, two

years ago, the government decided to move from a high—and fixed—cess on

oil, this resulted in it rising from Rs 4,500 per metric tonne in 2016 to Rs 6,600

today, or a hike of 47%. Last year, the government compounded the industry’s

problems by issuing service tax notices on ‘cost petroleum’ (the share of oil/gas

the companies get to compensate for their costs), cash calls (the amount a

consortium leader asks others to pay for production costs) and royalty paid to

the government. While industry outrage resulted in this getting partially fixed,

the industry is still being asked to pay an 18% GST on the royalty it pays the

government.

International

5. The west’s crisis of confidence



In an age defined by US President Donald Trump’s rage, Russian President

Vladimir Putin’s revisionism, and Chinese President Xi Jinping’s unbridled

ambition, the international order is becoming increasingly disorderly,

dysfunctional, and even dangerous. How did we arrive at this state of affairs?

And how can we leave it behind? Until recently, the era following World War II

was a time of benevolent liberal internationalism. The postwar order had begun

to take shape as early as 1941, when US President Franklin D. Roosevelt and

British Prime Minister Winston Churchill drafted the Atlantic Charter on a ship

anchored in Canada’s Placentia Bay. Though Hitler had been victorious on the

battlefields of Europe, Churchill and Roosevelt were determined not only to

defeat the Nazi onslaught, but also to lay the groundwork for a future of peace

and democracy. They succeeded beyond what they probably imagined was

possible. After the Atlantic Charter came the United Nations, the Bretton Woods

institutions, the global trade system, the Universal Declaration of Human Rights,

and much more. During the postwar decades of decolonization, many new

countries emerged, and former enemies united under new alliances and an

overarching structure of integration.

23 April 2018

17

Click excel icon

for detailed

valuation guide

Valuation snapshot

Company

Reco

Automobiles

Amara Raja

Buy

Ashok Ley.

Buy

Bajaj Auto

Buy

Bharat Forge

Buy

Bosch

Neutral

CEAT

Buy

Eicher Mot.

Buy

Endurance Tech. Buy

Escorts

Sell

Exide Ind

Buy

Hero Moto

Neutral

M&M

Buy

Mahindra CIE

Buy

Maruti Suzuki

Buy

Motherson Sumi Buy

Tata Motors

Buy

TVS Motor

Neutral

Aggregate

Banks - Private

Axis Bank

Buy

DCB Bank

Neutral

Equitas Hold.

Buy

Federal Bank

Buy

HDFC Bank

Buy

ICICI Bank

Buy

IDFC Bank

Neutral

IndusInd

Buy

J&K Bank

Buy

Kotak Mah. Bk Buy

RBL Bank

Buy

South Indian

Buy

Yes Bank

Buy

Aggregate

Banks - PSU

BOB

Buy

BOI

Neutral

Canara

Neutral

Indian Bk

Buy

PNB

Buy

SBI

Buy

Union Bk

Neutral

Aggregate

NBFCs

Aditya Birla Cap Buy

Bajaj Fin.

Buy

Capital First

Buy

Cholaman.Inv.&F

Buy

n

Dewan Hsg.

Buy

GRUH Fin.

Neutral

HDFC

Buy

HDFC Stand. Life Buy

Indiabulls Hsg

Buy

L&T Fin Holdings Buy

CMP TP % Upside

EPS (INR)

EPS Gr. YoY (%)

P/E (x)

P/B (x)

ROE (%)

(INR) (INR) Downside FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY18E FY19E FY18E FY19E

853

155

2854

762

19463

1581

31155

1312

961

242

3745

801

237

9037

350

336

668

1000

179

3550

869

19096

1787

34529

1531

826

286

3922

889

289

10560

437

528

710

17

15

24

14

-2

13

11

17

-14

18

5

11

26

17

25

57

6

28.3

5.4

147.9

20.0

459.1

61.1

814.4

27.9

39.1

8.0

186.1

39.7

9.6

275.1

8.1

25.5

14.1

34.0

7.2

167.8

26.4

582.9

84.7

1,045.3

38.2

49.5

9.9

202.0

46.9

12.2

349.0

12.5

56.6

22.4

40.0

9.2

197.2

34.8

694.4

111.7

1,337.1

51.0

59.0

12.1

221.3

51.2

15.2

457.0

17.5

58.7

32.4

0.9

28.8

4.8

52.8

-3.0

-34.6

32.1

18.8

103.5

-1.3

10.0

45.1

107.8

10.6

5.0

28.8

20.4

18.7

-17.0

13.8

-79.9

15.3

17.7

-27.2

0.3

25.2

LP

21.9

29.3

-22.9

25.0

12.4

20.3

33.1

13.5

32.1

27.0

38.6

28.4

37.0

26.5

23.3

8.5

18.0

27.0

26.9

54.7

121.8

58.8

45.1

93.7

22.4

526.1

22.0

22.5

63.0

7.2

45.2

13.5

26.8

41.5

115.7

28.4

40.4

17.6

27.1

17.5

31.7

19.1

31.9

27.9

33.5

19.3

22.6

9.6

9.3

24.7

30.9

39.6

3.7

44.1

17.1

30.2

28.5

19.3

38.1

42.4

25.9

38.3

47.0

24.6

30.2

20.1

20.2

24.7

32.9

43.3

13.2

47.2

25.8

25.1

21.4

17.0

28.8

33.4

18.7

29.8

34.3

19.4

24.5

18.5

17.1

19.4

25.9

28.0

5.9

29.7

17.8

20.5

20.0

21.4

14.3

24.0

15.5

15.0

20.8

5.8

27.8

23.3

6.3

13.2

20.6

16.1

16.2

11.8

7.3

2,764

12.9

12.1

14.1

29.2

30.5

14.4

21.9

12.2

56.7

37.4

74.5

13.0

18.0

4.9

6.5

4.4

7.4

6.2

2.4

12.3

9.0

3.9

3.8

6.4

3.3

2.4

6.6

7.8

1.6

10.9

4.6

1.9

2.3

2.2

1.5

4.1

1.8

1.1

4.6

0.6

4.6

3.3

1.0

2.7

3.0

0.9

0.6

0.6

0.9

0.6

1.0

0.5

0.8

4.1

6.6

2.4

4.7

2.1

19.4

4.9

3.3

4.2

2.7

4.2

5.5

4.0

6.2

5.6

2.2

9.2

7.5

3.4

3.4

5.6

3.0

2.1

5.7

6.5

1.3

8.5

3.8

1.8

2.1

2.0

1.4

3.6

1.7

1.0

4.0

0.6

4.0

2.9

0.9

2.3

2.7

0.9

0.5

0.6

0.9

0.6

0.9

0.4

0.8

3.2

5.6

2.1

4.0

1.8

16.1

4.3

2.7

3.7

2.4

17.3

24.3

23.9

20.9

15.2

9.8

36.3

20.8

18.3

12.6

34.1

14.6

10.4

19.7

19.2

13.5

25.3

17.7

5.1

10.9

1.7

9.6

16.2

7.2

6.8

16.5

9.1

11.3

11.9

6.9

17.4

10.5

18.0

27.6

24.6

23.3

17.5

12.4

35.5

23.8

18.7

14.0

32.2

14.8

11.7

21.8

25.4

24.0

32.0

21.6

9.0

11.1

10.0

10.2

16.2

11.1

6.9

20.6

9.9

13.5

13.2

13.7

19.1

13.1

506 650

195 175

151 185

97

124

1961 2400

282 370

49

65

1814 2150

58

100

1154 1302

506 628

26

38

308 382

28

-10

23

28

22

31

34

19

72

13

24

46

24

12.8

8.0

1.1

5.6

66.8

11.1

3.0

60.2

8.8

32.7

15.4

1.9

18.2

24.7

9.7

7.0

6.8

81.8

18.1

3.2

87.4

10.0

41.5

21.8

4.1

23.4

44.0

11.5

10.7

8.5

102.3

25.5

3.8

106.9

14.4

54.1

29.3

5.3

30.2

78.2 39.7

17.9 24.4

51.2 133.8

25.9 17.4

25.0 29.4

40.8 25.3

19.2 16.1

22.3 30.1

43.6

6.6

30.5 35.3

34.7 32.9

28.9 13.6

28.9 16.9

35.3 28.9

42.1

NM

NM

10.0

NM

84.4

NM

0.0

42.4

42.0

18.8

25.6

15.7

66.1

42.9

89.8

14.9

25.0

143

102

259

303

94

241

92

185

112

280

371

160

362

104

29

10

8

22

71

50

13

3.4

-18.8

-2.4

30.3

-5.7

2.9

-38.8

8.9

6.3

21.9

41.6

0.0

18.7

7.6

15.7

12.1

61.3

47.7

14.3

34.0

17.1

-43.1 161.5 75.6

Loss

LP

91.8

PL

LP 179.6

3.7 37.2 14.5

PL

LP 42,272

861.1 553.8 81.6

PL

LP 125.6

PL

LP 101.3

NA

39.8

38.9

33.3

25.9

21.9

7.3

23.5

32.6

26.0

45.2

37.8

30.2

17.0

28.7

16.6

14.7

20.4

15.0

39.1

42.4

34.2

27.5

20.2

26.0

20.4

16.9

25.8

21.8

29.0

2.0

5.0

-7.7 3.0

-0.4 4.1

9.7 12.3

-3.0 0.0

-0.3 5.7

-16.0 3.4

-0.8 5.5

12.6

19.8

13.7

20.2

14.0

32.6

18.3

21.7

29.8

13.1

12.4

19.9

15.6

19.8

15.9

31.0

17.5

21.7

30.3

14.0

156 225

1880 2330

642 960

1567 1750

585 720

656 600

1832 2225

496 475

1355

1650

165 240

44

24

49

12

23

-9

21

-4

22

46

3.7

44.8

34.2

61.3

37.3

9.9

42.7

5.5

90.9

6.6

5.3

61.7

44.6

71.7

48.0

11.6

49.0

6.6

104.6

9.2

7.6

82.8

56.8

86.2

60.5

13.9

57.3

8.4

127.4

11.8

23 April 2018

18

Click excel icon

for detailed

valuation guide

CMP TP % Upside

EPS (INR)

EPS Gr. YoY (%)

(INR) (INR) Downside FY18E FY19E FY20E FY18E FY19E FY20E

540 608

13

38.9 44.3

52.6

1.8 13.8 18.7

612 750

22

18.6 24.2

30.0 24.0 29.6 24.1

506 575

14

13.9 19.2

23.0 95.8 38.7 19.4

431 475

10

44.0 44.7

49.8 48.9 1.6

11.4

1355 1750

29

50.9 67.5

88.1 61.0 32.7 30.4

612 740

21

32.9 39.0

46.0 13.0 18.5 18.1

2295 2550

1571 1925

11

23

115.2 138.7

77.5

110.6

167.3

134.5

36.6

39.8

28.6

12.1

3.7

135.9

36.0

8.9

-72.2

-13.2

48.1

79.8

16.5

36.6

15.5

10.9

18.4

3.1

76.4

16.4

17.1

29.5

31.3

-74.0

34.0

-29.8

-48.5

-17.7

-11.9

LP

769.4

LP

20.4

42.7

23.2

52.0

11.4

14.2

48.2

27.1

63.3

34.7

9.2

9.7

22.8

16.7

17.2

53.8

21.5

25.3

5.7

18.4

20.6

20.6

21.7

23.0

16.2

7.6

19.4

26.9

18.4

58.8

18.6

19.8

14.2

24.1

28.3

19.8

13.8

23.7

23.9

9.8

13.9

18.5

Valuation snapshot

P/E (x)

P/B (x)

FY18E FY19E FY18E FY19E

13.9 12.2

2.2

1.9

32.8 25.3

4.6

4.1

36.5 26.3

3.4

3.2

9.8

9.7

2.2

1.9

26.6 20.1

3.7

3.2

18.6 15.7

2.9

2.5

19.9

20.3

31.5

64.7

20.2

28.2

47.8

45.2

73.0

32.8

24.2

37.5

49.2

26.7

27.9

54.3

42.6

40.0

15.9

35.3

32.2

16.5

14.2

25.6

42.5

18.2

24.7

32.2

35.6

44.7

24.3

22.2

34.2

40.1

22.8

23.8

35.3

35.1

31.9

15.1

29.8

26.7

30.4

25.8

17.6

40.1

11.3

22.6

27.9

28.5

40.0

24.9

18.6

13.6

35.7

33.0

26.5

45.7

50.7

38.9

39.2

36.9

195.4

45.9

32.5

2.7

2.8

4.6

7.5

3.4

1.0

9.5

19.7

1.2

5.2

3.5

8.2

9.3

5.8

3.5

5.0

7.9

4.6

2.6

5.6

3.5

2.4

3.3

1.8

4.8

1.5

0.9

3.5

4.7

2.9

5.8

2.4

2.0

6.7

4.3

3.3

14.3

19.6

22.3

11.1

12.8

9.8

11.2

7.4

2.3

2.4

4.0

6.6

3.0

1.0

8.8

16.1

1.2

4.8

3.2

7.1

8.2

4.8

3.2

4.5

6.7

4.1

2.3

4.9

3.3

2.3

3.1

1.6

4.3

1.4

0.9

3.1

4.2

2.7

4.8

2.1

1.7

5.7

3.9

3.0

12.7

16.9

20.9

9.9

11.3

9.4

9.8

6.7

ROE (%)

FY18E FY19E

16.6 16.5

20.2 17.0

10.9 12.5

24.5 20.9

14.6 17.0

16.7 16.9

14.2

14.7

14.6

11.6

16.6

3.6

20.4

50.2

1.7

16.5

13.9

23.5

18.9

21.7

13.0

9.1

20.0

11.9

17.1

16.9

11.0

6.1

10.1

1.7

8.9

6.9

1.7

4.8

14.3

2.8

11.9

6.5

9.7

15.4

8.5

7.8

26.8

33.9

49.9

25.4

30.1

-1.8

24.0

20.7

15.1

18.3

15.5

15.4

16.7

4.0

28.3

49.9

2.7

20.7

14.1

22.3

20.5

21.1

13.9

12.9

20.6

13.6

16.0

17.6

12.2

7.8

12.4

9.6

11.3

12.9

3.9

11.7

15.6

7.1

21.2

12.0

15.6

17.3

12.5

11.5

29.4

35.8

55.5

26.7

32.6

4.9

22.8

21.6

Company

Reco

LIC Hsg Fin

Neutral

MAS Financial

Buy

M&M Fin.

Buy

Muthoot Fin

Neutral

PNB Housing

Buy

Repco Home

Buy

Shriram City

Buy

Union

Shriram Trans. Buy

Aggregate

Capital Goods

ABB

Sell

Bharat Elec.

Buy

BHEL

Sell

Blue Star

Neutral

CG Cons. Elec. Buy

CG Power & Indu.Neutral

Cummins

Buy

Engineers India Buy

GE T&D

Neutral

Havells

Buy

K E C Intl

Neutral

L&T

Buy

Siemens

Neutral

Solar Ind

Neutral

Thermax

Buy

Va Tech Wab.

Buy

Voltas

Neutral

Aggregate

Cement

Ambuja Cem.

Neutral

ACC

Neutral

Birla Corp.

Buy

Dalmia Bharat Buy

Grasim Inds.

Neutral

India Cem

Neutral

JK Lakshmi Ce

Buy

Ramco Cem

Buy

Orient Cem

Buy

Prism Cem

Buy

Not

Sagar Cements

Rated

Sanghi Inds.

Buy

Shree Cem

Buy

Ultratech

Buy

Aggregate

Consumer

Asian Paints

Neutral

Britannia

Buy

Colgate

Buy

Dabur

Buy

Emami

Buy

Future Consumer Buy

Godrej Cons.

Neutral

GSK Cons.

Neutral

1281

132

89

792

230

83

754

152

387

548

432

1364

1073

1040

1122

530

636

1240

196

80

880

305

90

1040

200

430

630

385

1670

1285

1100

1350

700

660

-3

48

-10

11

32

8

38

31

11

15

-11

22

20

6

20

32

4

19.8

6.5

3.2

16.6

5.1

1.1

23.0

6.3

10.3

11.1

16.2

48.8

19.8

24.4

28.0

33.3

18.0

30.1

7.3

3.6

24.6

6.5

1.9

31.0

6.9

11.3

13.7

18.9

57.2

30.4

29.6

35.1

35.2

21.3

35.0

7.8

4.3

31.2

7.7

3.0

36.8

8.2

12.9

17.0

24.3

68.6

34.6

36.7

43.5

38.6

24.3

246

1566

746

2900

1101

150

421

846

142

121

941

264

1747

1004

3350

1187

148

470

967

179

159

-

7

12

35

16

8

-1

12

14

26

31

6.0

47.4

7.4

52.0

47.6

2.9

5.7

24.0

1.3

2.4

25.2

8.1

60.7

42.3

72.3

97.9

6.6

15.1

29.7

3.6

4.9

50.6

12.7

79.6

50.5

102.1

111.8

9.4

21.2

37.8

8.3

6.5

70.6

34.2 56.8 40.9

28.1 31.0 33.0

470.3 19.2 100.6

39.1 41.3 55.8

105.6 14.2 23.1

129.3 41.8 51.9

163.8 40.5 73.5

23.4 27.6 35.2

163.6 133.3 105.4

105.1 32.7 51.1

101.0

86.0

29.5

59.5

62.3

18.2

24.8

17.9

19.2

23.8

LP

14.4

14.1

39.7

32.5

43.5

33.4

31.5

20.2

25.1

19.7

16.2

19.1

276.5

14.1

17.4

37.4

25.3

46.2

52.6

43.0

54.0

63.3

45.9

46.8

45.7

NM

52.5

37.1

116 157

16904 19116

4080 4799

36

13

18

4.6

8.5

365.7 473.5

77.5 123.7

11.3 59.3

679.2 -4.9

165.0 -19.3

-9.6

30.5

131.5

33.8

10.5

36.9

1.1

27.8

215.7

2.1

14.3

12.9

4.5

-5.7

Loss

12.7

3.1

1159

5327

1099

354

1143

59

1118

5971

1250

6180

1420

430

1475

76

1140

6230

8

16

29

21

29

29

2

4

21.5 25.4

84.2 105.1

24.0 28.3

7.6

9.0

25.0 31.0

-0.1

0.3

21.3 24.4

161.0 183.8

23 April 2018

19