24 April 2019

Market snapshot

Equities - India

Sensex

Nifty-50

Nifty-M 100

Equities-Global

S&P 500

Nasdaq

FTSE 100

DAX

Hang Seng

Nikkei 225

Commodities

Brent (US$/Bbl)

Gold ($/OZ)

Cu (US$/MT)

Almn (US$/MT)

Currency

USD/INR

USD/EUR

USD/JPY

YIELD (%)

10 Yrs G-Sec

10 Yrs AAA Corp

Flows (USD b)

FIIs

DIIs

Volumes (INRb)

Cash

F&O

Note: *Average

Close

38,565

11,576

17,779

Close

2,934

8,121

7,523

12,236

11,731

22,260

Close

74

1,272

6,394

1,851

Close

69.6

1.1

111.9

Close

7.5

8.6

23-Apr

-0.03

0.03

23-Apr

318

11,890

Chg .%

-0.2

-0.2

0.1

Chg .%

0.9

1.3

0.8

0.1

-0.3

0.2

Chg .%

0.7

-0.2

-1.0

-0.1

Chg .%

-0.1

-0.3

-0.1

1MChg

0.00

0.00

MTD

2.35

-0.14

MTD*

357

11,098

CYTD.%

6.9

6.6

-0.5

CYTD.%

17.0

22.4

11.8

15.9

15.9

11.2

CYTD.%

38.9

-0.8

7.5

-0.7

CYTD.%

-0.2

-2.1

2.0

CYTDchg

0.1

0.1

CYTD

9.23

-1.96

CYTD*

355

10,247

Today’s top research Idea

Lemon Tree Hotels (Initiating Coverage): The Eagle Eyed

Squeezing opportunities in demand-dense, high ARR markets



With the Indian hospitality industry at the cusp of an upcycle, Lemon Tree

(LEMONTRE) seems all set to cash in on the upswing. It plans to increase

owned rooms by 1.5x; of the incremental rooms 68% will come in high

demand and high ARR market.



After establishing itself as a leading player in the mid-priced hotel segment,

the company is now leveraging the same to add rooms through

management contract route. ARR growth in existing hotels will directly flow

to the EBITDA and owned hotels coming up in high ARR markets should also

aid in EBITDA growth as cost of operating hotel does not increase

proportionately to ARR increase.



We expect LEMONTRE to deliver revenue/EBITDA CAGR of 29%/45% over

FY18-21. We ascribe one-year forward EV/EBITDA of 22x and arrive at a

target price of INR90. Initiate coverage with Buy rating.

Research covered

Cos/Sector

Lemon Tree Hotels

(Initiating Coverage)

Maruti Suzuki

Lupin

ACC

AU Small Finance

Coromandel Intl

Automobiles

Result Expectation

Key Highlights

The Eagle Eyed, Squeezing opportunities in demand-dense

New Alto 800 launched at 9-11% premium to old model

OAI leads to ‘Status quo’ from regulatory perspective

Lower realizations restrict margin expansion

Business momentum remains strong

Strong operating performance

Scooter sales decline for the first time in FY19

BHIN | HEXW | IPRU | IHFL | MMFS | SCUF | TELX | UTCEM

Chart of the Day: Lemon Tree Hotels (Initiating Coverage): The Eagle Eyed

In the last upcycle (over FY04-08), as industry occupancy moved above 65%, ARRs increased at 22% CAGR

Research Team (Gautam.Duggad@MotilalOswal.com)

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

RBI announces another Rs

25k-crore OMO in May

The Reserve Bank Monday

announced a Rs 25,000-crore

liquidity injection through

purchase of government

securities in May. The purchase,

called as open market operations

(OMOs), will be undertaken in

two equal tranches with the first

one on May 2, the central bank

said in a statement…

2

Essel Group in talks to sell road assets to CDPQ, Cube Highways

Roads platform Cube Highways and Infrastructure Pte. Ltd and

Canada’s Caisse de dépôt et placement du Québec (CDPQ) are in talks

to buy three toll roads from debt-laden Essel Group, three people

aware of the matter said, requesting anonymity. A potential deal

could be a major reprieve for the Subhash Chandra-led group that is

struggling to repay lenders. Cube Highways, the roads platform of

infrastructure investor I Squared Capital and CDPQ, Canada’s second

largest fund manager are expected to put binding offers in the coming

weeks. According to the first of the three people cited above, the sale

could fetch ₹1,500 crore for the group…

3

Softbank reportedly investing

in Jio as Mukesh Ambani

deleverages business

Japan's Softbank is reportedly

looking to make a USD 2-3 billion

investment in India's fastest-

growing telecom firm Reliance

Jio as billionaire Mukesh Ambani

looks to deleverage business by

selling stakes…

4

Seeking realty business exit,

Indiabulls sounds out ally

Blackstone, others

The Indiabulls Group is believed

to have sounded out joint

venture partner Blackstone and

other leading players such as

Godrej Properties to offload its

stake in Indiabulls Real Estate

(IBREL)…

5

Tata arm to buy branded tea

business of Dhunseri

Tata Global Beverages Ltd.

(TGBL) announced its decision to

acquire the branded tea business

of city-based Dhunseri Tea &

Industries Ltd. for ₹101 crore

subject to due diligence and

necessary approvals. Dhunseri

currently owns the Lalghoda and

Kalaghoda brands which are

among Rajasthan’s local brands.

The move is in line with TGBL’s

ambition to grow its branded tea

business in India, the company

said in a statement…

6

RBI approves proposal of

HDFC for holding 9.9 pc stake

in Bandhan Bank

The Reserve Bank of India (RBI)

has given its nod to HDFC Ltd for

acquiring up to 9.9 per cent

stake in Bandhan Bank following

the Gruh Finance deal. Gruh

Finance, the affordable housing

finance arm of HDFC Ltd, was

taken over by Bandhan Bank in a

share-swap deal in January…

7

ITC moves NCLT against Hotel

Leelaventure, alleges oppression

of minority shareholders

ITC has moved the National

Company Law Tribunal (NCLT)

against Hotel Leelaventure,

alleging “oppression and

mismanagement” of minority

shareholders. ITC, which has a

7.92% stake in Hotel Leelaventure,

has objected to a transaction

involving the sale of properties by

Hotel leelaventure to Brookfield…

24 April 2019

2

Initiating Coverage | Sector: Hospitality

BSE Sensex

38,565

S&P CNX

11,576

Lemon Tree Hotels

CMP: INR74

TP: INR90 (+21%)

Buy

Lemon Tree Hotels (LEMONTRE) is the largest hotel chain operator in the mid-priced

hotel segment in India. It manages 5,342 rooms across India through its three brands:

(i) Lemon Tree Premier (LTP) – catering to the upper-midscale segment, (ii) Lemon

Tree Hotels (LTH) – for the midscale segment, and (iii) the Red Fox Hotel (RFH) -

targeted towards the economy segment.

Stock Info

Bloomberg

Equity Shares (m)

MCap.(INR b)/(USD b)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

LEMONTRE IN

786

58.9 / 0.8

91 / 62

-8/-1/-24

80

69.1

The Eagle Eyed

Squeezing opportunities in demand-dense, high ARR markets



Financial Snapshot (INR b)

Y/E Mar

FY19E FY20E FY21E

Sales

5.6

7.8

10.4

EBITDA

1.8

2.8

4.1

NP

0.4

0.8

1.5

EPS (INR)

0.5

1.0

1.9

EBITDA Gr. (%)

28.6

60.3

47.1

EPS Gr. (%)

149.7 115.2

94.2

RoE (%)

4.3

8.6

14.8

RoCE (%)

4.6

6.9

9.5

EV/ EBITDA (x)

42.6

27.4

19.0

P/E (x)

163.7

76.1

39.2

Shareholding pattern (%)

As On

Sep-18 Jun-18 Sep-17

Promoter

39.1

39.1

38.7

DII

27.2

40.5

40.8

FII

14.6

0.0

0.0

Others

19.1

20.4

20.6









Lemon Tree Hotels

The Eagle Eyed

With the Indian hospitality industry at the cusp of an upcycle, LEMONTRE seems

all set to cash in on the upswing. Currently, it plans to increase owned rooms by

1.5x to 4,899 rooms; of this 68% will come up in the high demand and high

average room rate (ARR) markets of Mumbai and Udaipur. We expect revenue to

grow at 29% CAGR over FY18-21 to INR10.4b, backed by room addition and ARR

CAGR of 12% (FY18-21) to INR5,434.

After establishing itself as a leading player in the mid-priced hotel segment, the

company is now well poised to leverage the same and add rooms through the

management contract route. We expect revenue from management contracts to

grow at 62% CAGR over FY18-21 to INR378m.

Existing hotels of LEMONTRE are already operating at 75% occupancy (FY18)

level, thus, any increase in ARR will directly flow to the EBITDA (as 75-80% is fixed

cost). Moreover, 68% of its owned rooms are coming up in high ARR markets,

which should aid EBITDA growth as cost of operating the hotel does not increase

proportionately to ARR increase.

We expect LEMONTRE to deliver revenue/EBITDA CAGR of 29%/ 45% over FY18-

21 to INR10.4b/INR4.1b and expect RoE to improve to 14.8% by FY21 from 1.8%

in FY18. We expect adjusted PAT to grow 10x to INR1,484m by FY21, mainly led

by EBITDA growth.

We ascribe one-year forward EV/EBITDA of 22x to LEMONTRE (10% premium to

Indian Hotels 14-year average of ~20x) considering its strong growth prospects.

We arrive at a target price of INR90 and initiate coverage on LEMONTRE with a

Buy rating.

Room addition in high ARR market to drive revenue

The Indian hospitality industry is at the cusp of an upcycle with occupancy rates

already breaching the optimum level of 65%. Cashing in on this upswing,

LEMONTRE plans to increase owned rooms by 1.5x to 4,899 rooms over FY18-

21; 68% of this incremental room addition is in the demand-dense and high ARR

markets of Mumbai and Udaipur. In FY18, ARR of LEMONTRE (across brands)

stood at INR3,868; this is expected to increase regardless of an upcycle playing

out as 68% of the incremental room addition is in markets where the ARR is

>INR6,000. According to our estimates, LEMONTRE’s existing hotels located in

NCR, Bangalore, Hyderabad and Goa contribute ~69% to the revenue. Since

hotels located in these cities are already operating at >65% occupancy level, it is

likely that an ARR increase will be witnessed at an earlier stage in the

impending upcycle. Therefore, we expect the company to post revenue CAGR

Please click here for Video Link

Sumant Kumar

24 April 2019

3

Stock Performance (1-year)

of 29% over FY18-21 to INR10,352m, backed by room addition, improvement in

occupancy (230bp over FY18-21 to 77.8%) and ARR CAGR of 12% (FY18-21) to

INR5,434.

Leveraging its brand via management contracts

After establishing its presence and brand in the mid-priced hotel segment,

LEMONTRE is now well set to leverage it by adding rooms under the ‘management

contract’ model. LEMONTRE added two hotels under management contract in FY14,

adding rooms at 75% CAGR over FY14-18. Hereon, the focus of the company is to

add rooms majorly through management contracts, expecting room addition at 32%

CAGR over FY18-21 to 3,696 rooms. We expect revenue from management contact

to grow at 62% CAGR over FY18-21 to INR378m on account of room addition and

stabilization of existing hotels. Company announced a JV with Warburg to explore

opportunities in the co-living spaces with a corpus of INR30b in the Indian market.

The venture is currently at a nascent stage, but offers a huge growth opportunity for

the company.

Higher ARRs to foster EBITDA growth

Existing hotels of LEMONTRE are already operating at 75% occupancy (FY18) level,

thus, any increase in ARR will directly flow to the EBITDA (as 75-80% is fixed cost).

Additionally, 68% of hotels that will be added incrementally come under the high

ARR markets of Mumbai and Udaipur (>INR6,000) v/s FY18 ARR (INR3,868). This

should aid EBITDA growth as cost of operating the hotel does not increase

proportionately to an ARR increase. Thus, the overall EBITDA/occupied room (ex-

management contract income) is expected to grow at 23% CAGR over FY18-21 to

INR2,661 in FY21. Hence, we expect EBITDA CAGR of 45% over FY18-21 to

INR4,130m. Additionally, LEMONTRE is all set to acquire ‘Keys Hotel’. LEMONTRE

will use its distribution network, which should aid in improving occupancies and

ARRs, thereby increasing EBITDA margins.

Initiating coverage with a Buy rating

We believe that LEMONTRE is well placed to capitalize on the impending

opportunity in the domestic hospitality industry and the expected upcycle due to (a)

its strong presence in the mid-priced hotel segment, (b) line-up of hotel launches in

high demand and high ARR markets, and (c) an increase in the number of rooms

through management contracts. We expect LEMONTRE to deliver revenue/ EBITDA

CAGR of 29%/ 45% over FY18-21 to INR10.4b/ INR4.1b and expect RoE to improve to

14.8% by FY21 from 1.8% in FY18. In FY18, LEMONTRE’s adjusted PAT turned

positive for the first time since FY13 and stood at INR142m. We expect adjusted PAT

to grow 10x to INR1,484m by FY21, mainly led by EBITDA growth. On one-year

forward EV/EBITDA, Indian Hotels (IHIN) has historically traded at a 14-year average

of ~20x. However, we ascribe one-year forward EV/EBITDA of 22x to LEMONTRE

(10% premium) considering its strong growth prospects and arrive at a target price

of INR90. Our target price does not capture the value of its upcoming 669-room

hotel near the Mumbai airport in FY22; value/share stands at INR11 using the DCF

method. We initiate coverage on LEMONTRE with a

Buy

rating.

24 April 2019

4

Initiating with a ‘Buy’ rating (INR m)

Particulars

EBITDA (FY21)

EV/ EBITDA (x)

EV

Less: Net Debt (FY21)

Less: Minority Interest (FY21)

Target Value

No. of shares (m)

Target Price (INR)

CMP (INR)

Upside (%)

FY21

4,130

22.0

90,855

(15,577)

(4,598)

70,680

786

90

74

21

Source: MOFSL

Peer comparison

Company Name

Indian Hotels Co

EIH Ltd

Chalet Hotels

Lemon Tree Hotels

MCap

(INR b)

183

109

64

63

EV/ EBITDA (x)

FY20E

19.9

23.4

18.9

29.0

FY21E

15.9

23.8

15.9

20.0

51.2

43.4

46.6

81.8

PE (x)

FY20E

FY21E

37.4

46.5

30.7

42.1

8.0

8.1

8.8

8.6

RoE (%)

FY20E

FY21E

10.2

7.2

11.6

14.8

Revenue CAGR % EBITDA CAGR %

FY18-21E

FY18-21E

9.5

10.1

11.5

28.8

24.3

16.7

20.3

44.7

Source: Bloomberg, MOFSL

24 April 2019

5

Maruti Suzuki

BSE SENSEX

38,565

S&P CNX

11,576

23 April 2019

Update | Sector: Automobiles

CMP: INR7,043

TP: INR8,003 (+14%)

The new Alto complies with all safety and BS6 norms

Buy

New Alto 800 launched at 9-11% premium to old model

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)



MSIL IN

302

2127.4 / 30.5

9923 / 6324

6/-9/-34

5885

43.8

















Financials Snapshot (INR b)

2019E 2020E 2021E

Y/E Mar

851.1 940.1 1,060.9

Net Sales

110.2 126.7 151.8

EBITDA

71.8

84.0 103.0

PAT

241.6 284.4 348.0

EPS (INR)

-9.4

17.7

22.3

Gr. (%)

1,504 1,632 1,805

BV/Sh (INR)

16.1

17.0

18.9

RoE (%)

22.4

24.2

26.4

RoCE (%)

29.2

24.8

20.2

P/E (x)

4.7

4.3

3.9

P/BV (x)

Shareholding pattern (%)

As On

Mar-19 Dec-18 Mar-18

Promoter

56.2

56.2

56.2

DII

13.4

13.4

11.5

FII

22.3

22.7

25.2

Others

8.1

7.7

7.2

FII Includes depository receipts

Stock Performance (1-year)

Maruti Suzuki

Sensex - Rebased

12,500

10,000

7,500

5,000





MSIL, on 23

rd

Apr’19, launched the new Alto 800 with BSVI-compliant engine

(796cc) at a price range of INR294k-372k (ex-showroom, Delhi).

The pricing of new Alto is higher by 9-11.5% due to compliance cost for new

safety norms (6-7%) and BS6 (3-4%).

The new Alto becomes the first entry-level segment car to be compliant with

the contemporary safety and BS6 regulations.

It also comes with features such as driver airbag and ABS (antilock braking

system) with EBD (electronic brake force distribution).

Other standard safety features in the new Alto include reverse parking sensor,

speed alert system and seat belt reminder for driver/co-driver across variants.

It also complies with new upcoming crash and pedestrian safety regulation

(from Oct-19).

The market size of the mini segment is approximately 46,000-48,000 units a

month, despite declining by ~5% in FY19.

Currently, MSIL is the dominant player in the segment with a market share of

~72% as of FY19.

As shared by Mr. R S Kalsi, Senior ED, sales and marketing, MSIL, “We are

committed to bring innovations in India’s best-selling car brand Alto, which

now has a stylish makeover with additional safety features. With cumulative

sales of over 3.7 million since launch in 2000, Alto has been a symbol of pride

for Indian car users. Nearly 58% of Alto customers have chosen it as their first

car purchase. The New Alto is India’s first BSVI compliant entry segment car

with a powerful engine and high fuel efficiency of 22.05 km/l. We are

confident that the New Alto will be a car that young Indians will be proud to

own.”

We expect new the WagonR and the new Alto to help MSIL recoup its recent

decline in market share in the mini segment to 68% in Mar’19 from 75% in

Apr’18. These upgrades would be relevant as the entry level segment (Mini)

has witnessed product fatigue (~3.5% CAGR decline over FY17-19).

Valuation view:

MSIL’s stock has underperformed due to prevailing demand-

related uncertainties. With ~75% of the product portfolio being petrol

dependent, MSIL is the best placed OEM to face BS6 challenges v/s

incumbents. We believe the current price largely factors in these challenges

and offers an attractive entry price for the structural opportunity. MSIL trades

at 25x/20x FY20/21E EPS. Maintain

Buy

with a TP of INR8,003 (23x Mar’21

EPS).

24 April 2019

6

Maruti’s New Alto comply with safety and BS6 regulations

Source: MOSL, Company

Price comparison

Model

Standard

LXI

VXI

New model

293,689

350,375

371,709

Old model

263,493

321,561

340,561

Difference

11.5%

9.0%

9.1%

Note: Price increase is effective for new safety, upcoming pedestrian safety and BS6 norms

Source: Company, Industry

24 April 2019

7

24 April 2019

Update

| Sector:

Healthcare

Lupin

BSE SENSEX

38,565

S&P CNX

11,576

CMP: INR 864

TP: INR1,000 (+16%)

Buy

OAI leads to ‘Status quo’ from regulatory perspective

Base business to continue while new approvals gets delayed further



USFDA has classified recent inspection conducted at Pithampur (Unit 2) as Official

action indicated (OAI).

Pithampur (Unit 2) is one of the sites under warning letter. Post recent inspection at

this site, USFDA has maintained its OAI classification at this site.

We maintain our estimates for LPC, noting that the OAI status does not stop it from

selling products in the US market.

We expect LPC to strongly outperform in domestic formulation market/Japan market

and drive US sales from recent approvals/launches. The low base of FY19 would also

support higher growth in earnings to some extent. Basis this, we expect 36% earnings

CAGR over FY19-21E. We maintain BUY with price target of INR1,000 (based on 20x

12M forward earnings.

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

LPC IN

452

391.1 / 5.6

986 / 720

15/-13/-5

2226

53.0







Financials Snapshot (INR b)

Y/E MARCH

2019E 2020E 2021E

Net Sales

165.3 180.4 201.5

EBITDA (Rs b)

25.5

35.6

41.9

NP

11.8

17.2

21.6

EPS

26.2

38.3

47.9

EPS Gr (%)

-18.2

46.0

25.4

BV/Share (Rs)

307.0 334.7 372.0

P/E (x)

33.0

22.6

18.0

P/BV (x)

2.8

2.6

2.3

RoE (%)

8.6

11.9

13.6

RoCE (%)

5.2

8.9

10.2

Shareholding pattern (%)

As On

Mar-19 Dec-18 Mar-18

Promoter

47.0

47.0

47.0

DII

12.2

11.5

12.2

FII

25.9

27.4

25.4

Others

15.0

14.2

15.4

FII Includes depository receipts

Stock Performance (1-year)

Enhanced efforts required to resolve regulatory issues at Pithampur (Unit 2):

Post

issuance of warning letter at Pithampur (Unit 2) and Goa site in November 2017,

LPC has implemented CAPA (Corrective and preventive actions) at these sites.

Based on response from USFDA, LPC had taken further taken actions to resolve

regulatory issues. Subsequently, USFDA had inspected both the sites during Jan-

Feb 2019. USFDA issued form 483 with six and two observations at Pithampur and

Goa site, respectively. Based on further response by LPC, USFDA has maintained

OAI status at PIthampur (Unit 2), while we await clarity on Goa site inspection. OAI

status at Pithampur (Unit 2) would continue to impact new approvals and

resolution of regulatory issues may require re-inspection. The base business would,

however, continue as OAI status technically does not stop selling of approved

products in US market.

Overall mixed regulatory scenario for LPC:

Over past one year, LPC has faced eight

USFDA inspections with two at sites under Warning letter. Particularly, USFDA has

classified inspection at Pithampur (Unit 3) as Voluntary action indicated (VAI).

USFDA has classified Mandideep and Somerset site inspection as OAI. Classification

of inspection at Goa site is awaited.

Valuation and view:

Pithampur (Unit 2) being under warning letter, we have not

factored any incremental business till regulatory issues resolves at this site. We

maintain our estimates as LPC would continue to have revenues from operation of

this site. We expect 36% earnings CAGR over FY19-21E, led by better-than-industry

growth in domestic formulation market/Japan market and new launches in US

market from compliant sites. We maintain Buy with price target of INR1,000, based

on 20x 12M forward earnings.

24 April 2019

8

23 April 2019

1QCY19 Results Update | Sector: Cement

ACC

Buy

BSE SENSEX

38,565

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

S&P CNX

11,576

ACC IN

188

311.3 / 4.5

1721 / 1255

4/7/-6

1096

45.5

CMP: INR1,658



TP: INR1,913 (+15%)

Lower realizations restrict margin expansion

Financials & Valuations (INR b)

Y/E Dec

2018 2019E 2020E

Sales

148.0 158.7 171.7

EBITDA

21.2

22.0

26.8

NP

10.8

12.5

16.0

Adj. EPS (INR)

57.3

66.3

85.4

EPS Gr. (%)

22.1

15.8

28.7

BV/Sh (INR)

560.0 609.4 677.9

RoE (%)

10.8

11.3

13.3

RoCE (%)

11.8

11.2

13.1

P/E (x)

29.1

25.1

19.5

P/BV (x)

3.0

2.7

2.5

EV/EBITDA (x)

13.1

11.5

8.9

EV/Ton (x)

117

107

101





Estimate change

TP change

Rating change

A miss on volumes/realizations:

Volumes grew 5.5% YoY to 7.5mt (our

estimate: 7.61mt) in 1QCY19. Cement realizations were flat QoQ at

INR4,701/t (our estimate: INR4,794), as higher prices in south were offset by

weaker prices in east. Revenue grew 8% YoY to INR39.2b (our estimate:

INR40.5b).

Higher-than-estimated cost leads to margin miss:

Blended cost/t increased

3% YoY (flat QoQ) to INR4,518 (our estimate: INR4,484). Blended EBITDA/t

stood at INR708 (+2% YoY, +4% QoQ; our estimate: INR839), resulting in

EBITDA of INR5.3b (+8% YoY, +4% QoQ; our estimate: INR6.38b). Operating

margin came in at 13.5% (flat YoY, +0.45pp QoQ). During the quarter, receipt

of Orders Giving Effect (OGE) to the CIT(A) orders for certain assessment

years on disposal of certain appeals sanctioning income tax refunds resulted

in interest income and reversal of provision for interest on income tax

aggregating INR2.76b. The company has made provision of INR1.77b against

this due to the uncertainty of its ultimate realisability. Net income of

INR994.8m is included in other income. Reported PAT grew 38% YoY to

INR3.38b (our estimate: INR3.53m), while adj. PAT declined 3% YoY to

INR2.38b.

Valuation view:

We cut our EBITDA/PAT estimate by 11%/9% for CY19 and by

9%/9% for CY20 to factor in lower growth in volumes and realizations. The

stock trades at 9x CY20E EV/EBITDA. We raise our valuation multiple to 10x

Jun’21E EV/EBITDA, as we reduce the valuation multiple discount to UTCEM

(we value UTCEM at 14.5x FY21EV/EBITDA) to factor in the higher RoCE

improvement of ACC relative to UTCEM. We, thus, arrive at a TP of INR1,913

(implied EV/tonne of USD 120 on CY20).

MOFSL

1QE

7.61

7.0

4,794

3.5

1.7

40,497

11.7

6,385

15.8

1,544

225

300

4,916

0

4,916

1,376

28.0

3,539

3,539

8.7

44.4

Quarterly Performance (Standalone)

Y/E December

Cement Sales (m ton)

YoY Change (%)

Cement Realization

YoY Change (%)

QoQ Change (%)

Net Sales

YoY Change (%)

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before EO Item

EO Income/(Expense)

PBT after EO Item

Tax

Rate (%)

Reported PAT

Adjusted PAT

Margins (%)

YoY Change (%)

1Q

7.11

7.7

4,631

5.8

0.9

36,246

14.2

4,911

13.5

1,474

193

468

3,712

0

3,712

1,261

34.0

2,451

2,451

6.8

15.9

CY18

CY19

CY18

CY19E

2Q

3Q

4Q

1Q

2QE

3QE

4QE

7.24

6.55

7.50

7.50

7.60

6.88

7.84

28.40

29.82

7.4

9.9

8.4

5.5

5.0

5.0

4.5

8.3

5.0

4,872 4,778 4,714 4,701 4,821 4,881 4,873

4,749

4,819

3.3

0.6

2.8

1.5

-1.0

2.2

3.4

2.7

1.5

5.2

-1.9

-1.3

-0.3

2.6

1.2

-0.2

38,483 34,332 38,954 39,191 40,211 37,120 42,146 1,48,014 1,58,668

11.5

10.2

11.5

8.1

4.5

8.1

8.2

11.4

7.2

6,677 4,461 5,101 5,309 5,683 4,743 6,223 21,150

21,958

17.3

13.0

13.1

13.5

14.1

12.8

14.8

14.3

13.8

1,481 1,499 1,543 1,467 1,485 1,495 1,501

5,996

5,948

275

201

223

209

210

210

222

892

850

316

313

288

530

530

530

560

1,385

2,150

5,236 3,076 3,623 4,164 4,518 3,568 5,060 15,647

17,310

-438

-36 4,776

995

0

0

0

4,303

0

4,798 3,040 8,400 5,159 4,518 3,568 5,060 19,949

17,310

1,543

984 1,095 1,774 1,265

999

808

4,883

4,847

32.2

32.4

13.0

34.4

28.0

28.0

16.0

24.5

28.0

3,255 2,056 7,305 3,384 3,253 2,569 4,252 15,066

12,464

3,693 2,091 2,528 2,389 3,253 2,569 4,252 10,764

12,464

9.6

6.1

6.5

6.1

8.1

6.9

10.1

7.3

7.9

14.8

17.7 257.2

-2.5

-11.9

22.8

-41.8

22.1

15.8

(INR Million)

Var

(%)

-1

-2

-3

-17

-15

5

-4

-32

24 April 2019

9

AU Small Finance Bank

BSE SENSEX

38,565

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

S&P CNX

11,576

AUBANK IN

292

178.1 / 2.6

747 / 502

7/2/-19

375

67.8

23 April 2019

4QFY19 Results Update | Sector: Financials

CMP: INR609

TP: INR720 (+18%)

Buy

Financials & Valuations (INRb)

Y/E March

FY19 FY20E

NII

13.4

18.9

PPP

7.2

10.5

PAT

3.8

5.4

NIM (%)

5.2

4.9

EPS (INR)

13.2

18.2

EPS Gr. (%)

28.9

37.6

BV/Sh. (INR)

106.7 138.4

ABV/Sh. (INR) 101.1 131.7

RoE (%)

14.2

14.8

RoA (%)

1.4

1.3

Valuations

P/E(X)

46.0

33.4

P/BV (X)

5.7

4.4

P/ABV (X)

6.0

4.6

FY21E

25.6

14.5

7.5

5.0

24.8

36.2

163.2

154.7

16.4

1.4

24.5

3.7

3.9

Business momentum remains strong; margin compression cycle nearing end



AUBANK’s PAT increased 42% YoY to INR1.18b (our estimate: INR1.05b) in

4QFY19. NII grew 35% YoY (+11% QoQ) to INR3.9b (3% beat), while margins

compressed further by 20bp QoQ to 5.1%.

For FY19,

NII/PPoP/PAT grew

~43%/25%/31%. CI ratio stood at 60.0% in FY19 v/s 56.7% in the previous year.



Other income grew 23% QoQ (-3% YoY) to INR1.3b, driven by an increase in core

and distribution fees. Operating expenses increased 13% YoY (+9.6% QoQ) to

INR3.0b, leading to a 232bp QoQ decline in the C/I ratio to 58.3%.



AUM rose 51% YoY to INR242b, with strong disbursements growth in

vehicle/MSME/NBFC books. Retail assets formed 82% of gross AUM. Retail AUM

grew 13% QoQ, while wholesale AUM rose 9.0% QoQ, driven by NBFC book.

Wheels/secured MSME/secured SME formed 42%/32%/4.0% of total AUM.



Deposit base increased to INR194b, taking the CD ratio to ~117.5%. CASA ratio

moderated to ~21%. CASA + retail TD now forms 45% of total deposits. The

bank's average cost of funds stood at 8.0% in 4QFY19 (v/s 7.9% in 3QFY19).



Fresh slippages were at INR1.52b (4.6% annualized), driving a 12% QoQ rise in

GNPLs. However, GNPL/NNPL ratios fell 5bp/2bp QoQ to 2.04%/1.29%.

Provisions grew 32%/21% YoY/QoQ to INR392m (in-line), while PCR was at

37.4%.



Other highlights:

(a) Tier-1 stands at 16.0%, with a total CAR of 19.3%. (b) The

bank expects to achieve breakeven in branch banking by end-FY20.



Valuation view:

AUBANK is making strong progress in scaling up its business and

alongside making adequate investments to support this momentum. We expect

business growth to remain robust, while a gradual recovery in margins and cost-

ratios will support earnings over the medium term. We revise up our PAT

assumption by ~9%/6% for FY20/21, now estimating a PAT CAGR of 40% over

FY19-21. Maintain

Buy

with an unchanged TP of INR720 (4.4x FY21E BV).

3Q

2,504

24.8

1,060

3,565

2,035

1,529

5.5

329

1,200

411

789

-4.8

2.9

1.9

2.8

1.9

34.4

4Q

2,869

26.7

1,345

4,213

2,668

1,545

6.8

296

1,249

419

830

6.6

2.7

1.7

2.0

1.3

37.2

1Q

2,864

56.1

1,031

3,894

2,370

1,524

22.4

351

1,173

404

768

24.2

3.3

2.1

2.2

1.4

36.8

FY19

2Q

3,210

46.1

1,225

4,435

2,683

1,752

22.2

350

1,402

488

914

34.0

3.7

2.3

2.0

1.3

37.6

3Q

3,480

39.0

1,059

4,539

2,752

1,787

16.8

325

1,462

509

953

20.8

4.2

2.6

2.1

1.3

37.6

4Q

3,869

34.9

1,306

5,174

3,018

2,157

39.6

392

1,764

582

1,182

42.4

4.7

2.9

2.0

1.3

37.4

FY18

9,405

20.0

3,881

13,285

7,526

5,759

-53.6

1,326

4,433

1,513

2,920

-12.4

2.7

1.7

2.0

1.3

37.2

FY19 4QFY19E v/s Est

13,425

3,790

2.1

42.7

32.1

2.7

4,620

1,711

-23.7

18,045

5,501

-5.9

10,826

3,526

-14.4

7,219

1,975

9.2

25.3

27.8

11.8

1,418

402

-2.5

5,801

1,573

12.2

1,983

517

12.5

3,818

1,055

12.0

30.7

27.1

15.3

4.7

4.3

8.1

2.9

2.7

8.6

2.0

2.0

0.1

1.3

1.2

0.1

37.4

37.7

-0.3

Source: Company, MOFSL

Quarterly performance (INR m)

INRm

Net Interest Income

% Change (Y-o-Y)

Other Income

Total Income

Operating Expenses

Operating Profit

% Change (Y-o-Y)

Other Provisions

Profit before Tax

Tax Provisions

Net Profit

% Change (Y-o-Y)

Asset Quality

GNPA (INRb)

Net NPA (INRb)

GNPA (%)

NNPA (%)

PCR (%)

1Q

1,835

9.1

579

2,413

1,169

1,245

16.0

291

954

335

618

-89.5

2.2

1.5

3.0

2.1

28.6

FY18

2Q

2,197

12.4

926

3,122

1,689

1,433

-9.1

403

1,030

348

682

-3.0

2.7

1.8

3.1

2.1

32.8

24 April 2019

10

RESULTS

FLASH

BSE SENSEX

38,565

S&P CNX

11,576

Coromandel International

TP: INR604 (+42%)

23 April 2019

Results Flash | Sector: Fertilizers

CMP: INR426



Buy

Conference Call Details

Date:

24th Apr 2019

Time:

14:30pm IST

Dial-in details:

+91-22-6280 1149

Strong op. performance; revenue misses but PAT exceeds estimate

CRIN’s revenue increased 9.4% YoY to INR26,383m (our estimate:

INR29,649m) in 4QFY19. Nutrient & other allied business grew by 11% YoY to

INR22,807m, while Crop Protection grew by 1% YoY to INR3,629m.

EBITDA margin expanded 210bp YoY to 9.8% (our estimate: 6.7%) in the

quarter, led by a decline of 300bp (to 7.8%) in other expenses and 70bp (to

8.2%) in freight cost, partly offset by a rise of 140bp (to 70.2%) in raw material

cost and 20bp (to 4%) in employee expenses.

Margin expanded by 170bp YoY to 8.8% in nutrient & other allied business and

by 180bp YoY to 14.1% in crop protection.

EBITDA grew 40% YoY to INR2,590m (our estimate: INR1,977m).

Consequently, adj. PAT grew 26% YoY to INR1,129m (our estimate: INR864m).

FY19 performance:

Revenue grew 19.3% YoY to INR132.3b. Margins shrank

40bp to 10.9%, led by gross margin contraction of 196bp to 29.4%. Other

expenses declined by 36bp, freight cost by 103bp and employee expenses by

16bp. Adj. PAT grew 6.5% YoY to INR7,362m.

Board has recommended a final dividend of INR3.5 per equity share (350%) for

FY19.



Financials & Valuations (INR b)

2019 2020E

Y/E Mar

Sales

132.2 147.7

EBITDA

14.4

16.8

NP

7.4

9.2

Adj EPS (INR)

25.2

31.3

EPS Gr. (%)

6.5

24.3

BV/Sh (INR)

123.1 146.0

RoE (%)

21.9

23.3

RoCE (%)

14.6

15.7

Valuations

P/E (x)

16.9

13.6

P/BV (x)

3.5

2.9

EV/EBITDA (x)

10.3

8.9

EV/Sales (x)

1.1

1.0



161.3

18.8

10.5



35.8



14.3



173.4

22.4

16.2

2021E

11.9



2.5

7.8

0.9

Valuation view

Based on our current estimates, at CMP of INR426, the stock trades at 13.6x/11.9x

P/E on FY20/21E EPS. We have a

Buy

rating on the stock.

24 April 2019

11

Sector Update | 23 April 2019

Automobiles

Scooter sales decline for the first time in FY19

125cc segment sales grew ~48% in FY19, while 110cc declines for the first time

We analyzed the brand-wise data of the domestic 2W industry; we learnt that the 2W

industry in India grew at 4.9% in FY19. For the first time in many years, motorcycle growth

at 7.8% outpaced scooter sales, which declined 0.3% in FY19. This led to a decline in share

of scooters by 160bp to 31.6%. Growth of 7.8% in motorcycle sales was led by the

economy segment, which grew ~23% for the second consecutive year, whereas the

premium segment grew 8.8%.



In FY19, for the first time, motorcycle sales growth at 7.8% outpaced sales of the

scooter segment, which declined 0.3%, leading to share of scooter declining to 31.5%

(v/s 33.1% in FY18). The exit month scooter share also declined to 26.7%.



The decline in the scooter industry was restricted by the 125cc category, which is

estimated to have grown ~47% in FY19 (~25% contribution to scooters), whereas the

110cc category witnessed a decline for the first time of ~10%.



Rural recovery and price actions by Bajaj drove healthy growth in the economy

segments, which grew ~23% in FY19 (+23% in FY18). While the premium segment grew

~9% (premium ex-RE grew ~12%), the executive segment was flat.



BJAUT gained significant share in the economy segment (+670bp), but it came at the

expense of TVSL (-310bp) and HMCL (-360bp).



Unlike previous years, the growth in the premium segment at 8.8% in FY19 was driven

by growth in non-RE brands, which grew by 11.3% (led by Apache, Pulsar and Xblade).

RE grew 14.8% during the same period.



2W market share: BJAUT/TVSL gained market share by 220bp/60bp to 12%/14.8% in

FY19, whereas HMCL (-70bp) and HMSI (-250bp) saw market share contraction.



HMCL/HMSI/TVSL cut Mar’19 production by 20%/ 67%/6% while BJAUT’s production

grew 21%. Production cuts should last in 1QFY20 as demand is expected to remain

tepid.

“The green shoots of

demand pick-up are not

visible and we anticipate a

tough quarter ahead,

especially on account of the

new price points of

CBS/ABS introduction and

the upcoming general

elections.”

Mr. Y S Guleria,

SVP – Sales & Marketing,

HMSI

Motorcycle growth outpaces scooter growth in FY19













Strong pick-up in rural demand (especially in 1HFY19) resulted in motorcycle

sales growing 7.8% in FY19. For the first time, motorcycle sales outpaced

scooter sales, which declined 0.3%.

The economy segment in motorcycles showed significant growth of 22.7% v/s

the motorcycle industry for the second consecutive year, helped by rural

recovery and pricing actions by BJAUT in its CT100 (spoke wheel) category.

The executive segment remained flat in FY19. Within this segment, Executive

100 witnessed a better growth of 4.7% v/s decline of 10.1% in Executive 125.

BJAUT made a comeback in the Executive 100cc segment in Jan’18 with

Discover 110;

its wholesales averaged 6.2k units in FY19.

HMSI’s

Shine

continued gaining share from HMCL’s

Glamour

and BJAUT’s

V

and

Discover

in the executive 125cc segment. Consequently, the market share gap

between HMSI and HMCL has widened, with HMSI achieving rank-1 spot with

53.5% market share in FY19 (+560bp YoY). HMCL’s share stood at 40.8%.

Moped sales increased 2.4% YoY to 880k units, although its contribution in the

2W sales mix declined to 4.2% in FY19 from 5.7% in FY13.

24 April 2019

12

“Much could be attributed

to the fact that by-and-

large, scooters are not as

fuel-efficient as bikes. And

the fact is that fuel prices

went through the roof.

And, therefore, from a

value point of view, it got

challenged as far as

scooters are concerned and

demand got compressed.”

Mr.Sanjay Bhan, Head of

Sales and After Sales, Hero

MotoCorp

Scooters: 110cc segment witnessed a decline for the first time limiting its

growth, while the 125cc segment heated up











For the first time, scooter segment sales declined 0.3% in FY19. This was partly

led by healthy rural recovery benefitting motorcycle sales, but leading to lower

sales in 100cc scooter segment.

Sales of 110cc scooters are estimated to have declined by 10% for the first

time in FY19 to 4.98m units. On the other hand, sales of 125cc scooters are

estimated to have grown 47.6% in FY19, restricting the sharp decline in scooter

segment growth.

According to our estimates, 125cc accounts for ~25% of FY19 scooter sales.

Market share movement: Suzuki gained maximum share of 290bp to 9.2%; it

was followed by TVSL, which gained 220bp market share to 18.6%, led by

strong response to Ntorq.

HMSI and HMCL lost 200bp and 240bp market share to 55.2% and 10.8%,

respectively.

Premium segment growth led by non-RE brands



In premium motorcycles -

RE, HMCL and HMSI lost

200bp, 100bp and 40bp

market share while Bajaj,

Yamaha and TVS gained

210bp, 140bp, 100bp,

respectively.









Premium segment sales showed consecutive growth of 8.8% for the sixth year

in FY19. RE’s domestic sales increased 0.5%. However, premium segment (ex-

RE) sales grew 11.9%.

BJAUT’s premium segment grew 12% in FY19, as growth in Pulsar (+40.5% YoY)

compensated the decline in Avenger (-48% YoY) and V15 (-78% YoY) sales. The

growth in Pulsar was led by the launch of

Pulsar Twin Disc

and

Pulsar Neon.

TVSL’s premium segment grew 17.1% led by growth in Apache (+16.4%) while

HMSI’s premium portfolio increased 5.2% due to the launch of Xblade, which is

recording an average volume of 5.9k units per month in FY19. However, sales

momentum declined sharply to average 2.4k units/month since Dec’18.

Yamaha’s premium motorcycle sales increased by 24%, led by healthy growth

in FZ (+12.7%) and R15 (+131.4%).

Market share movement YTD: BJAUT gained the maximum market share by

210bp to 32.7%, followed by Yamaha gaining 140bp to 11.7%, and TVSL gaining

100bp to 14.5%. However, RE, HMCL and HMSI lost 210bp, 100bp and 40bp to

25%, 1.4% and 13.2%, respectively.

Production cuts to continue even in 1QFY20





In line with higher inventory levels in the system, HMCL/HMSI/TVSL Mar’19

production was lower by 20%/67%/6%, while BJAUT’s production grew 21%.

According to reports in the media, the trend of lower production should

continue even in 1QFY20 as demand remains tepid. As shared in the media,

HMSI has indicated a 15-20% production cut in 1QFY20 as well.

Valuation and view





We prefer 4Ws over 2Ws and CVs due to stronger volume growth in the

segment. Also, it is the least impacted segment in BS6 and offers a stable

competitive environment.

Our top picks in Autos are

MSIL and MSS

in large caps and

AL and EXID

in mid-

caps.

24 April 2019

13

March 2019 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

596 / 9

349 / 242

-1 / 11 / -24



CMP: INR314



Neutral

Financial Snapshot (INR Billion)

Y/E March

2018 2019E 2020E 2021E

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 (%)

23.0

3.4

8.4

4.5

22.2

3.5

8.7

4.5

22.0

3.6

8.8

4.8

22.8

3.8

8.9

4.8

144.9 147.2 151.4 155.9

63.8

25.2

13.6

-8.1

91.7

15.6

13.7

60.6

26.1

14.1

3.6

89.4

15.6

12.4

58.8

26.4

14.3

0.9

86.3

16.2

12.7

58.5

25.5

13.8

-3.4

82.7

16.3

12.7







120.5 115.8 122.0 126.3

We expect consolidated revenue to grow 3% QoQ/2% YoY to

INR37.4b, led by healthy rental and energy revenue growth.

Consolidated EBITDA is expected to grow 3% QoQ to INR15.5b;

margins to remain flat at 41.4%.

We expect 2% QoQ growth in tenancies to 1,77,709. This coupled

with 1% QoQ uptick in rental/tenant should drive 2% QoQ rental

revenue growth (INR21.4b). Further, 4% QoQ uptick in energy and

other reimbursement revenue (INR16.1b) should drive overall

revenue.

Rental EBITDA margin at 67.4% is likely to expand 30bp QoQ;

expect 40bp QoQ expansion in energy margin.

PAT is likely to grow 9% QoQ to INR7.1b led by EBITDA growth.

Bharti Infratel trades at EV/EBITDA of 9x FY20E/21E. Maintain

Neutral.

Key issues to watch



Consolidated net co-location (expect to grow 2% QoQ to 1,77,709).



Consolidated revenue sharing per operator (expect to grow 1% QoQ).

Consolidated quarterly performance

Y/E March

Revenue from operations

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Net Interest expense

Other Income

PBT before EO expense

Extra-Ord expense

PBT

Tax

Rate (%)

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOFSL Estimates

1Q

35,239

9.8

19,489

15,750

44.7

5,905

-530

571

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

4Q

36,622

4.0

20,699

15,923

43.5

5,721

129

956

11,029

500

10,529

4,469

42.4

6,060

6,348

6.4

17.3

1Q

36,735

4.2

21,539

15,196

41.4

5,389

-285

609

10,701

0

10,701

4,321

40.4

6,380

6,380

-3.9

17.4

FY19

2Q

36,683

0.6

21,819

14,864

40.5

5,625

-442

557

10,238

357

9,881

3,883

39.3

5,998

6,215

-2.7

16.9

FY18

3Q

36,402

-0.4

21,361

15,041

41.3

5,727

-601

460

10,375

0

10,375

3,891

37.5

6,484

6,484

10.8

17.8

(INR m)

FY19E

4QE

37,426 1,44,896 1,47,246

2.2

7.9

9.7

21,947

81,095

86,666

15,479

63,801

60,580

41.4

44.0

41.1

5,859

23,462

22,600

-1,087

0

-4,041

0

2,423

0

10,708

42,762

42,022

0

500

357

10,708

42,262

41,665

3,641

17,325

15,736

34.0

41.0

37.8

7,067

24,937

25,929

7,067

25,232

26,146

11.3

-8.1

-4.8

18.9

17.4

17.8

24 April 2019

14

March 2019 Results Preview | Sector: Technology

Hexaware Technologies

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

HEXW IN

301.8

108 / 2

557 / 295

-8 / -24 / -31

CMP: INR359





Neutral

Financial Snapshot (INR b)

y/e Dec

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 (%)

21.6

5.4

15.3

1.1

18.6

4.5

13.3

2.2

17.1

4.0

11.3

2.6

15.2

3.6

9.8

3.1

39.4

6.6

5.0

16.6

21.2

66.0

26.9

24.6

23.5

46.5

7.3

5.8

19.3

16.5

79.7

26.5

24.7

40.2

53.6

8.4

6.3

21.0

8.5

89.2

24.9

24.7

44.0

61.3

9.3

7.1

23.6

12.6

99.8

25.0

24.6

45.2







We expect USD revenue to grow at 2.5% QoQ, with cross-

currency tailwind of 30bp.

HEXW declared revenue guidance for CY19 at 12-14%, ahead of

previous year’s guidance. HEXW cited that most of the growth will

be clocked in during the latter part of the year, due to calendar

impact ad 4Q deal ramp-up.

EBITDA margin at 15.1% is 20bp lower, primarily on account of

supply situations. Regulators are also engaging in post-approval

checks, verifying facts with clients.

Our PAT estimate for the quarter is INR1,441m, up 6% from the

previous quarter despite marginal increase in operational income.

This is due to lower base of previous quarter.

HEXW trades at 17x of CY19E and 15.1x CY20E earnings. Neutral.

Key issues to watch for



1QCY19 deals TCV



Commentary on acquisitions



Margin outlook given the recent commentary on supply issues

Quarterly Performance (Indian GAAP, INR m)

Y/E Dec

1Q

Revenue (USD m)

162.2

QoQ (%)

3.9

Revenue (INR m)

10,490

YoY (%)

9.2

GPM (%)

32.9

SGA (%)

17.4

EBITDA

1,626

EBITDA Margin (%)

15.5

EBIT Margin (%)

14.1

Other income

204

ETR (%)

20.0

PAT

1,343

QoQ (%)

10.9

YoY (%)

17.9

EPS (INR)

4.5

Headcount

14,619

Utilization (%)

81.3

Attrition (%)

13.4

Offshore rev. (%)

34.6

E: MOFSL Estimates

CY18

2Q

168.3

3.8

11,367

15.6

31.8

16.2

1,773

15.6

14.0

327

20.0

1,534

14.2

25.3

5.1

15,357

78.2

14.4

34.8

3Q

171.1

1.7

12,096

21.8

32.8

16.0

2,023

16.7

15.4

264

19.1

1,722

12.3

21.3

5.7

16,050

79.0

15.7

35.1

4Q

176.1

2.9

12,524

24.6

31.6

16.3

1,913

15.3

14.0

-215

19.9

1,234

-28.3

1.9

4.1

16,205

78.7

17.0

36.1

1Q

180.5

2.5

12,725

21.3

31.4

16.3

1,916

15.1

13.8

56

20.5

1,441

16.8

7.3

4.8

16,513

80.0

0.0

36.8

CY19

2Q

186.8

3.5

13,078

15.1

31.6

16.2

2,012

15.4

14.2

66

20.5

1,525

5.8

-0.6

5.1

17,128

80.0

0.0

36.9

CY18E

3Q

193.4

3.5

13,541

11.9

31.6

15.0

2,250

16.6

15.4

52

20.5

1,699

11.4

-1.3

5.6

17,774

80.0

0.0

37.1

4Q

203.0

5.0

14,212

13.5

30.3

14.8

2,205

15.5

14.3

58

20.5

1,664

-2.1

34.9

5.5

18,697

80.0

0.0

37.2

678

11.6

46,477

17.9

32.2

16.5

7,335

15.8

14.4

580

19.7

5,833

16.8

19.3

16,205

80.9

35.2

CY19E

764

12.7

53,556

15.2

31.2

15.5

8,384

15.7

14.4

232

20.5

6,329

8.5

21.0

18,697

81.4

37.0

24 April 2019

15

March 2019 Results Preview | Sector: Financials

ICICI Prudential Life Insurance

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

Financial Snapshot (INR B)

Y/E MARCH

Net Premiums

Surplus / Deficit

Sh. holder's PAT

New bus.gr-unwtd. %

New bus gr- APE. %

NBP margin (%)

RoE (%)

RoEV (%)

Total AUMs (INR b)

VNB(INRb)

EV (INRb)

Valuations

P/EV (x)

P/EPS (x)

2.8

32.7

2.4

40.2

2.1

36.3

1.9

31.3

FY18 FY19E FY20E FY21E

268.1 309.1 353.6 407.0

13.6

16.2

16.2

16.0

16.5

24.4

16.1

12.9

188

10.0

11.5

12.0

0.4

16.5

16.6

16.0

15.3

12.6

217

11.1

12.7

15.0

13.9

14.5

16.9

16.4

14.3

14.5

248

13.3

14.8

17.0

16.5

15.1

17.4

17.5

14.0

17.5

282

IPRU IN

1,435.3

529 / 7.5

461 / 278

6 / 5 / -21

CMP: INR369



Buy







We expect net premium income to grow by 20% YoY, with

renewal premium expected to grow by 18% YoY and first-year

premium to grow by 25%, mainly due to ULIP-dominated

business.

Total commission and operating expenses are likely to increase

by 43% YoY, led by a 53% YoY increase in operating expenses.

We expect surplus to decline by 35% YoY and PAT in

shareholders' account to decline by 21% YoY to INR2.7b.

IPRULIFE trades at 1.9x FY21E EV. Maintain

Buy.

Total prem.gr – unwtd. % 20.3

1,395 1,601 1,819 2,070

Key issues to watch for



New business growth in ULIP segment due to volatile market

conditions.



Value of new business and the margin trajectory after

reporting sharp expansion in FY18.

Quarterly Performance

Policyholder's account

Net premium income

Growth (%)

Commission paid

Operating expense

Surplus/(Deficit)

Growth (%)

Shareholders' Account

Total income

PBT

Tax

PAT

Growth (%)

Key metrics (INRb)

AUM

EV

1Q

48,202

37.4

2,162

4,120

3,965

74.7

4,373

4,281

221

4,059

0.3

1,266

NA

FY18

2Q

3Q

65,395 67,951

20.6

19.3

3,632

3,773

4,921

5,211

3,554

3,372

12.5

15.2

4,578

4,491

279

4,212

0.6

1,306

172

4,904

4,810

289

4,521

0.5

1,383

NA

4Q

86,558

15.0

4,466

6,048

2,740

15.0

4,482

3,614

208

3,406

-16.6

1,395

188

1Q

54,378

12.8

2,795

5,952

3,009

-24.1

3,864

2,840

24

2,816

-30.6

1,427

NA

(INRm)

FY19E

FY18

FY19E

2Q

3Q

4QE

76,012 74,830 1,03,911 2,68,107 3,09,131

16.2

10.1

20.0

21.0

15.3

3,951

3,671

5,816

14,033 16,233

6,585

5,785

9,260

20,299 27,582

2,003

3,254

1,768

13,630 10,035

-43.6

-3.5

-35.5

27.0

-26.4

2,910

3,032

24

3,009

-28.6

1,461

192

4,046

2,975

8

2,968

-34.4

1,500

205

3,046

3,636

944

2,692

-21.0

0

217

18,362

17,189

997

16,192

-3.7

1,395

188

13,865

12,483

999

11,485

-29.1

1,601

217

24 April 2019

16

March 2019 Results Preview | Sector: Financials - NBFCs

Indiabulls Housing

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

IHFL IN

426.6

359 / 5

1397 / 576

17 / -14 / -50



CMP: INR841



Under Review

Albeit a sequential improvement, we expect this quarter to be

tepid for Indiabulls. Disbursements should improve from INR39b in

3Q to INR87b in 4Q. This would result in 1% QoQ growth in AUM to

INR1.26t.

Quantum of sell-downs will be a key monitorable. In 3QFY19, IHFL

recorded INR5b+ upfront income from direct assignments. We

estimate lower upfront income in 4Q, resulting in total income

declining sequentially from INR20.3b to INR18.2b.

Opex is expected to decline sequentially as the company upfronted

INR500m+ of CSR in 3Q itself. We estimate INR3.0b opex in 4Q v/s

INR3.35b in 3Q.

Financial Snapshot (INR b)

Y/E March

Net Fin inc

PPP

PAT

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoA on AUM (%)

RoE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

P/ABV (x)

Div. Yield (%)

2019E 2020E 2021E

61.2 66.3 74.6

61.1 65.5 73.8

41.6 46.0 52.6

97.6 107.9 123.3

8.2 10.6 14.3

396

446

503

3.3

3.5

3.6

26.1 25.6 26.0

45.0 45.0 45.0

7.6

1.9

1.9

5.9

6.9

1.7

1.7

6.5

6.0

1.5

1.5

7.4



We expect provisions of INR832m in 4QFY19 v/s INR1.7b in 3QFY19

(one-off provisions made). Asset quality trends would be a key

monitorable.

Key issues to watch for









Asset quality trends in the corporate segment

Quantum of sell-downs in the quarter

Movement in incremental spreads and margins



AUM growth trend and guidance

Quarterly Performance

Y/E March

(INR M)

3Q

34,197

7,593

41,790

39.1

20,737

21,053

53.5

6,161

14,892

48.1

3,492

11,401

23

11,423

52.0

31.4

13.7

23.4

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

11.7

17.6

1Q

38,903

1,811

40,713

23.8

23,351

17,362

19.9

3,337

14,024

32.1

3,538

10,487

60

10,547

30.3

33.4

15.5

25.2

FY19

2Q

39,804

2,749

42,553

23.3

25,564

16,989

10.2

3,123

13,866

25.1

3,516

10,349

92

10,442

21.2

28.6

16.0

25.4

3Q

42,368

2,434

44,802

7.2

24,492

20,310

-3.5

6,435

13,875

-6.8

4,147

9,728

127

9,855

-13.7

16.2

16.5

29.9

FY18

4QE

40,932 132,816

2,257 16,053

43,189 148,869

8.9

27.2

25,017 79,188

18,172 69,681

-3.0

31.7

3,822 20,663

14,350 49,019

15.5

30.0

3,669 10,802

10,680 38,217

120

219

10,800 38,435

4.8

32.2

2.4

34.3

16.5

12.7

25.6

23.1

FY19E

162,007

9,250

171,257

15.0

98,424

72,833

4.5

16,718

56,115

14.5

14,870

41,244

400

41,644

8.3

2.4

16.1

26.5

FY18

1Q

2Q

Income from operations

30,165

31,557

Other Income

2,718

2,968

Total income

32,882

34,525

Y-o-Y Growth (%)

26.6

20.1

Interest expenses

18,408

19,113

Net Income

14,475

15,412

Y-o-Y Growth (%)

22.0

23.6

Operating Exp (Incl Prov)

3,856

4,332

Profit before tax

10,619

11,080

Y-o-Y Growth (%)

21.4

20.3

Tax Provisions

2,571

2,557

Net Profit

8,049

8,523

Minority Int/Profit from associates

46

91

Net Profit after MI

8,095

8,614

Y-o-Y Growth (%)

28.5

25.9

AUM Growth (%)

33.0

33.1

C/I Ratio (%)

13.9

16.0

Tax Rate (%)

24.2

23.1

E: MOFSL Estimates; Note: FY19 numbers as of Ind-AS

24 April 2019

17

March 2019 Results Preview | Sector: Financials - NBFCs

Mahindra Financial Services

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

MMFS IN

614.5

256 / 4

538 / 351

-7 / -6 / -29

CMP: INR416



Buy

Financial Snapshot (INR b)

Y/E March

NII

PPP

PAT

EPS (INR)

BV/Sh.(INR)

ABV/Sh (INR)

RoA on AUM (%)

RoE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

P/ABV (x)

Div. Yield (%)

2018 2019E 2020E 2021E

35.3 47.0 55.2 65.1

21.7 30.4 35.6 42.6

10.1 13.3 16.1 19.1

17.4 21.7 26.1 31.1

156.6 172.0 190.5 212.6

134.1 139.2 154.6 172.2

2.3

2.4

2.4

2.4

12.5 13.2 14.4 15.4

32.1 29.3 29.3 29.3

23.8

2.7

3.1

1.0

19.2

2.4

3.0

1.3

15.9

2.2

2.7

1.6

13.4

2.0

2.4

1.9









Given the slowdown in growth for key auto OEMs, we expect

AUM growth to slow down to 18% YoY in the quarter. Further

company has also moderated growth towards SME and Smaller

NBFCs considering the liquidity situation which would have

temporary issues in growth.

Given the strong parentage, MMFS has been able to raise money

from multiple sources at attractive rates. It’s 90-day CPs are

raised at sub-7.5% levels – lower than the pre-crisis levels. Hence,

margins are expected to be sequentially stable at 8.0%.

With operating expenses expected at INR4.8b, operating profit

should improve to INR7.8b.

We factor in INR2.3b provisions in 4QFY19 v/s INR2.2b in 3QFY19

and INR1.6b in 4QFY18.

The stock trades at 2.4x FY19E and 2.2x FY20E BV. Maintain Buy.

Key issues to watch for



Management commentary on performance of rural areas



Potential for further market share gains



Margin and growth trends



Performance of subsidiaries

Quarterly Performance

Y/E March

Operating Income

Other Income

Total income

YoY Growth (%)

Interest Expenses

Total income

YoY Growth (%)

Operating Expenses

Operating Profit

YoY Growth (%)

Provisions

Profit before Tax

Tax Provisions

Net Profit

YoY Growth (%)

AUM growth (%)

Borrowings growth (%)

Cost to Income Ratio (%)

Tax Rate (%)

E: MOFSL Estimates

1Q

14,980

107

15,087

9.7

7,553

7,534

10.0

3,274

4,260

18.8

1,269

2,991

977

2,014

131.5

16.2

17.8

43.5

32.7

FY18

2Q

3Q

15,174

18,186

221

125

15,395

18,311

1.6

21.8

7,344

8,159

8,051

10,153

-0.3

33.7

3,309

3,531

4,742

6,622

5.3

67.7

2,237

1,228

2,506

5,394

866

2,081

1,640

3,314

73.0 -2,219.0

7.2

5.3

16.1

8.8

41.1

34.8

34.5

38.6

4Q

20,600

138

20,738

12.5

7,550

13,188

16.8

4,927

8,261

13.9

1,572

6,688

2,443

4,245

81.4

19.5

14.1

37.4

36.5

1Q

19,258

138

19,397

28.6

8,488

10,909

44.8

3,849

7,060

65.8

2,938

4,122

1,432

2,691

33.6

21.9

19.9

35.3

34.7

FY19

2Q

21,033

451

21,484

39.5

9,367

12,117

50.5

4,248

7,869

65.9

2,311

5,558

1,744

3,814

132.5

26.8

22.9

35.1

31.4

FY18

3Q

22,225

237

22,462

22.7

10,185

12,277

20.9

4,833

7,444

12.4

2,247

5,197

2,010

3,187

-3.8

31.5

29.7

39.4

38.7

4QE

23,168

274

23,441

13.0

10,655

12,786

-3.0

4,795

7,990

-3.3

2,343

5,647

1,997

3,650

-14.0

18.5

16.2

37.5

35.4

66,295

592

66,887

7.2

30,995

35,892

6.2

14,233

21,659

12.3

5,681

15,979

5,907

10,072

151.6

19.6

8.0

39.7

37.0

(INR M)

FY19E

85,684

1,100

86,784

29.7

38,695

48,089

34.0

17,725

30,364

40.2

9,840

20,525

7,183

13,342

32.5

18.2

9.7

36.9

35.0

24 April 2019

18

March 2019 Results Preview | Sector: Financials - NBFCs

Shriram City Union Finance

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

SCUF IN

66.0

118 / 2

2454 / 1480

1 / 2 / -36







CMP: INR1,796



Buy

Financial Snapshot (INR b)

Y/E March

NII

PPP

PAT

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoA (%)

RoE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

Div. Yield (%)

2018 2019E 2020E 2021E

33.7

36.7

40.5

45.8

20.7

22.8

25.2

28.7

6.6

9.6

10.7

12.2

100.8 145.9 162.2 184.3

19.5

44.8

11.2

13.6

822

950 1,094 1,257

2.8

3.5

3.7

3.9

12.7

16.5

15.9

15.7

21.5

12.4

11.1

11.7

17.8

2.2

1.0

12.3

1.9

0.8

11.1

1.6

0.8

9.7

1.4

1.0



While business conditions have improved since 3QFY19, yet, SCUF

is expected to have a tough quarter. On account of liquidity

tightness, disbursements are expected to be 18% lower YoY to

INR55b. The decline would be broad-based across segments.

Hence, we expect AUM to be sequentially stable at INR288b. The

company has been securitizing assets more intensively, though.

We expect margins to be largely stable at 12.3%, resulting in NII

of INR8.8b.

We expect asset quality to remain largely stable. We factor in

provisions of INR2.15b, as against INR1.34b in 3QFY19 and

INR4.12b in 4QFY18.

The stock trades at 1.9x FY19E and 1.6x FY20E BVPS. Buy.

Key issues to watch for



Trends in asset quality in each segment.



Business growth and momentum, and management

commentary on the same.



Impact of GST.



Performance of the housing finance subsidiary.

Quarterly performance

Y/E MARCH

FY18

FY19

FY18

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4QE

Interest Income

12,274

12,790

13,384

12,428

13,893

14,721

14,131

14,205 50,358 56,950

Interest expenses

4,040

4,152

4,242

4,310

4,640

4,952

5,302

5,373 16,677 20,267

Net Interest Income

8,234

8,638

9,142

8,118

9,253

9,769

8,829

8,832 33,681 36,683

Y-o-Y Growth (%)

20.0

17.5

19.9

13.8

12.4

13.1

-3.4

8.8

18.4

8.9

Fees and Other Income

16

113

399

10

109

437

271

432

658

1,250

Net Operating Income

8,250

8,751

9,541

8,128

9,362

10,206

9,100

9,265 34,339 37,933

Y-o-Y Growth (%)

20.0

19.0

25.0

13.9

13.5

16.6

-4.6

14.0

18.4

10.5

Operating Expenses

3,209

3,433

3,878

3,251

3,677

3,963

3,740

3,840 13,624 15,094

Operating Profit

5,041

5,318

5,664

4,877

5,685

6,243

5,361

5,425 20,715 22,839

Y-o-Y Growth (%)

21.8

17.5

21.7

12.8

12.8

17.4

-5.3

11.2

17.4

10.3

Provisions

1,968

1,718

1,825

4,122

2,154

2,506

1,335

2,153 10,537

8,148

Profit before Tax

3,073

3,600

3,838

756

3,532

3,737

4,025

3,272 10,178 14,691

Tax Provisions

1,072

1,251

1,299

285

1,236

1,244

1,438

1,150

3,531

5,068

Net Profit

2,001

2,349

2,540

470

2,296

2,493

2,588

2,122

6,647

9,622

Y-o-Y Growth (%)

10.0

14.9

61.0

291.5

14.8

6.1

1.9

351.2

19.5

44.8

Int Exp/ Int Earned (%)

32.9

32.5

31.7

34.7

33.4

33.6

37.5

37.8

33.1

35.6

Cost to Income Ratio (%)

38.9

39.2

40.6

40.0

39.3

38.8

41.1

41.4

39.7

39.8

Tax Rate (%)

34.9

34.8

33.8

37.8

35.0

33.3

35.7

35.2

34.7

34.5

E: MOFSL Estimates; *Quarterly nos and full year nos will not tally due to different way of reporting financial nos; Note: FY19 numbers on Ind-

AS basis

(INR m)

FY19E

24 April 2019

19

March 2019 Results Preview | Sector: Technology

Tata Elxsi

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

TELX IN

62.3

61 / 1

1492 / 826

-1 / -23 / -20









CMP: INR982



Buy

Financial Snapshot (INR b)

y/e march

2018 2019 2020E 2021E

Sales

EBITDA

PAT

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

Div. Yield (%)

22.8

7.5

16.5

1.1

19.4

5.9

12.7

1.4

18.1

4.0

10.7

2.0

15.3

3.0

8.2

2.0

13.9

3.5

2.4

38.7

37.7

37.2

37.2

31.1

16.2

4.3

2.8

45.6

17.7

34.1

34.1

33.0

18.7

4.7

3.0

48.8

7.0

26.5

39.7

44.5

22.1

5.6

3.6

57.8

18.6

299.1

22.3

33.4

37.5

Growth on a YoY basis has been picking up and has increased

from 12.5% in 1QFY18 to 17.8% in 3QFY19, also aided by

depreciation of the INR.

We expect this to be altered led by weakness in its top client. We

expect YoY growth of 13.8% in INR terms.

EBITDA margin is expected to remain constant at 25.5%.

PAT is expected to remain constant with sequential increase of

1%.

The stock trades at 18.1x FY19E and 15.3x FY20E earnings. Buy.

118.6 149.1 219.6

Key issues to watch for



Addition of new customers and subsequent realization



JLR’s contribution to revenue



Outlook on growth and profitability for the year

Consolidated - Quarterly Earning Model

Y/E March

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Other Income

PBT before EO expense

PBT

Tax

Rate (%)

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOFSL Estimates

1Q

3,232

9.3

2,498

734

22.7

65

79

749

749

251

33.6

497

497

19.3

15.4

FY18

2Q

3Q

3,422

3,455

12.5

11.4

2,581

2,520

840

935

24.6

27.1

64

63

89

68

864

940

864

940

292

313

33.8

33.2

572

628

572

628

25.9

42.2

16.7

18.2

4Q

3,754

15.1

2,803

951

25.3

61

196

1,086

1,086

383

35.3

703

703

58.0

18.7

1Q

3,820

18.2

2,755

1,065

27.9

61

78

1,083

1,083

378

34.9

705

705

41.7

18.5

FY19

2Q

3Q

4,028

4,070

17.7

17.8

2,961

3,037

1,067

1,033

26.5

25.4

61

62

233

-27

1,240

944

1,240

944

418

284

33.7

30.1

822

660

822

660

43.6

5.1

20.4

16.2

FY18

4Q

4,274

13.8

3,184

1,090

25.5

65

-28

996

996

332

33.3

664

664

-5.5

15.5

13,863

12.4

10,403

3,460

25.0

254

432

3,639

3,639

1,227

33.7

2,412

2,412

37.7

17.4

(INR m)

FY19E

16,192

16.8

11,936

4,255

26.3

249

256

4,263

4,263

1,423

33.4

2,840

2,840

17.7

17.5

24 April 2019

20