4QFY19 | June 2019
VOICES
VOICES
India Inc on Call
VOICES, a quarterly product from Motilal Oswal Research, provides a ready reference for all the post results earnings calls attended by
our research analysts during the quarter. Besides making available to readers our key takeaways from these interactions, it also
provides links to relevant research updates, and transcripts links of the respective conference calls.
This quarterly report contains
Key takeaways from the post results management commentary for 160 companies, with links to the full earnings call
transcripts
Links to our Results Updates on each of the companies included
Research & Quant Team
(Gautam.Duggad@MotilalOswal.com); Tel: +91 22 6129 1522
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.
24 November 2015
1

Contents
Summary
..................................................................................................................................................................................................................................
3
Sectors
...............................................................................................................................................................................................................................
8-157
Automobiles ......................................................................................................... 8-17
Amara Raja ........................................................................................................................ 9
Ashok Leyland ................................................................................................................... 9
Bajaj Auto ........................................................................................................................ 10
Bharat Forge.................................................................................................................... 10
Eicher Motors.................................................................................................................. 11
Endurance Tech............................................................................................................... 11
Escorts............................................................................................................................. 12
Hero MotoCorp. .............................................................................................................. 13
Mahindra CIE................................................................................................................... 13
Mahindra & Mahindra..................................................................................................... 14
Maruti Suzuki .................................................................................................................. 15
Motherson Sumi.............................................................................................................. 15
Tata Motors..................................................................................................................... 16
TVS Motors...................................................................................................................... 17
Capital Goods ..................................................................................................... 18-26
BHEL ................................................................................................................................ 18
Blue Star .......................................................................................................................... 19
Crompton Greaves CG ..................................................................................................... 20
GE T&D ............................................................................................................................ 20
KEC International ............................................................................................................ 21
L&T .................................................................................................................................. 22
Siemen ............................................................................................................................ 23
Solar Inds......................................................................................................................... 24
Thermax .......................................................................................................................... 24
Voltas .............................................................................................................................. 25
Cement............................................................................................................... 27-33
Ambuja Cements ............................................................................................................. 27
Birla Corp ........................................................................................................................ 28
Dalmia Bharat ................................................................................................................. 28
Grasim Inds ..................................................................................................................... 29
India Cements ................................................................................................................. 30
JK Cements ...................................................................................................................... 30
JK Lakshmi Cements ........................................................................................................ 31
Ramco Cements .............................................................................................................. 31
Shree Cement.................................................................................................................. 32
Ultratech Cement ............................................................................................................ 32
Consumer ........................................................................................................... 34-51
Asian Paints ..................................................................................................................... 35
Britannia Inds .................................................................................................................. 36
Colgate ............................................................................................................................ 38
Dabur India...................................................................................................................... 39
Emami ............................................................................................................................. 40
Godrej Consumer ............................................................................................................ 41
GSK Consumer................................................................................................................. 42
Hindustan Unilever.......................................................................................................... 43
Jyothy Labs ...................................................................................................................... 45
Marico ............................................................................................................................. 46
Page Inds ......................................................................................................................... 47
Parag Milk Foods ............................................................................................................. 48
Pidilite Inds...................................................................................................................... 49
United Spirits................................................................................................................... 50
Financials- Banks ................................................................................................ 52-65
AU Small Fin. ................................................................................................................... 53
Axis Bank ......................................................................................................................... 54
Bank of Baroda ................................................................................................................ 55
DCB Bank ......................................................................................................................... 55
Federal Bank ................................................................................................................... 56
HDFC Bank....................................................................................................................... 57
ICICI Bank ........................................................................................................................ 58
Indian Bank ..................................................................................................................... 59
IndusInd Bank.................................................................................................................. 59
Kotak Mahindra Bank ...................................................................................................... 61
Punjab National Bank ...................................................................................................... 62
RBL Bank ......................................................................................................................... 62
South Indian Bank ........................................................................................................... 63
State Bank of India .......................................................................................................... 64
Financials – NBFC ................................................................................................ 66-76
Aditya Birla Capital .......................................................................................................... 66
Bajaj Finance ................................................................................................................... 67
Equitas Holdings .............................................................................................................. 68
HDFC Life ......................................................................................................................... 69
ICICI Pru Life .................................................................................................................... 69
IndiaBulls Housing Finance .............................................................................................. 70
Indostar Capital ............................................................................................................... 71
L&T Finance..................................................................................................................... 72
LIC Housing Fin. ............................................................................................................... 72
M&M Financial ................................................................................................................ 73
MAS Financial .................................................................................................................. 73
Muthoot Fin .................................................................................................................... 74
PNB Housing.................................................................................................................... 74
Repco Home Fin .............................................................................................................. 75
Shriram Transport Finance .............................................................................................. 76
Healthcare .......................................................................................................... 77-86
Alembic Pharma .............................................................................................................. 77
Alkem Labs ...................................................................................................................... 78
Aurobindo Pharma .......................................................................................................... 78
Biocon ............................................................................................................................. 79
Cadila Healthcare ............................................................................................................ 79
Cipla ................................................................................................................................ 80
Dr Reddy’s Labs ............................................................................................................... 81
Glenmark Pharma ........................................................................................................... 81
Granules India ................................................................................................................. 82
IPCA Labs ......................................................................................................................... 82
Laurus Labs...................................................................................................................... 83
Lupin ............................................................................................................................... 84
Strides Pharma ................................................................................................................ 84
Sun Pharmaceuticals ....................................................................................................... 85
Torrent Pharma ............................................................................................................... 86
Media..................................................................................................................87-96
D B Corp .......................................................................................................................... 87
Entertainment Network .................................................................................................. 88
Jagran Prakashan............................................................................................................. 90
Music Broadcast .............................................................................................................. 91
PVR Ltd ............................................................................................................................ 92
Sun TV Network .............................................................................................................. 94
Zee Entertainment .......................................................................................................... 95
Metals ............................................................................................................. 97-100
Hindalco Inds................................................................................................................... 97
Jindal Steel ...................................................................................................................... 98
JSW Steel ......................................................................................................................... 99
NMDC.............................................................................................................................. 99
SAIL ............................................................................................................................... 100
Vedanta......................................................................................................................... 100
Oil & Gas ......................................................................................................... 101-103
GAIL India ...................................................................................................................... 101
Petronet LNG................................................................................................................. 102
Reliance Inds ................................................................................................................. 103
Retail .............................................................................................................. 104-112
Aditya Birla Fashions ..................................................................................................... 105
Jubilant Foodworks ....................................................................................................... 107
Shoppers Stop ............................................................................................................... 108
Titan .............................................................................................................................. 109
V-Mart ........................................................................................................................... 110
Technology ...................................................................................................... 113-128
Cyient ............................................................................................................................ 114
HCL Tech ....................................................................................................................... 115
Hexaware Technologies ................................................................................................ 117
Infosys ........................................................................................................................... 118
L&T Infotech .................................................................................................................. 119
Mindtree ....................................................................................................................... 120
Mphasis ......................................................................................................................... 121
NIIT Technologies .......................................................................................................... 122
Persistent Systems ........................................................................................................ 123
TCS ................................................................................................................................ 124
Tech Mahindra .............................................................................................................. 125
Wipro ............................................................................................................................ 126
Zensar Technologies ...................................................................................................... 127
Telecom .......................................................................................................... 129-134
Bharti Infratel ................................................................................................................ 129
Vodafone Idea ............................................................................................................... 131
Tata Comm .................................................................................................................... 132
Utilities ........................................................................................................... 135-139
JSW Energy .................................................................................................................... 135
NHPC ............................................................................................................................. 135
NTPC.............................................................................................................................. 136
Power Grid .................................................................................................................... 137
Torrent Power ............................................................................................................... 138
Others ............................................................................................................. 140-157
Allcargo Logistics ........................................................................................................... 140
Ashoka Buildcon ............................................................................................................ 140
BSE Ltd .......................................................................................................................... 141
Brigade Entp. ................................................................................................................. 141
Castrol .......................................................................................................................... 142
CEAT .............................................................................................................................. 142
Container Corp .............................................................................................................. 143
Coromandel Intl ............................................................................................................ 144
Godrej Agrovet .............................................................................................................. 145
Indian Hotels ................................................................................................................. 146
Info Edge (India) ............................................................................................................ 147
Interglobe Aviation........................................................................................................ 148
Kaveri Seeds .................................................................................................................. 148
KNR Constructions......................................................................................................... 149
Lemon Tree Hotels ........................................................................................................ 149
MCX............................................................................................................................... 150
Phoenix Mills ................................................................................................................. 150
Piramal Entp .................................................................................................................. 151
PI Inds............................................................................................................................ 151
Quess Corp .................................................................................................................... 152
Sadbhav Engg ................................................................................................................ 154
SRF Ltd .......................................................................................................................... 154
Tata Chemicals .............................................................................................................. 155
Team Lease ................................................................................................................... 156
UPL ................................................................................................................................ 157
Note:
All stock prices and indices are as on 6th June 2019, unless otherwise stated.

Voices | 4QFY19
4QFY19 | India Inc on Call
Voices
BSE Sensex: 39,616
S&P CNX: 11,871
In-line quarter; Financials drive performance off low base
Commentary weakens in Autos and Consumption
As India Inc bids a goodbye to the FY19 earnings-report season, we – like always –
choose to look at corporate commentaries as a sidelight to questions of how
businesses across sectors have been performing in a constantly changing environment.
In this report, we present detailed takeaways as we refine the essence of India Inc
‘Voices’.
The 4QFY19 corporate earnings-report season was in line with our expectations
for both the Nifty and the MOFSL Universe. Domestic Cyclicals continued driving
earnings growth for the second consecutive quarter, led by Financials, which
contributed almost the entire earnings delta but still fell short of expectations.
The EBITDA margin for the MOFSL (ex-Financials & OMCs) Universe shrank by
100bp to 19.1%, dragged by Automobiles, Consumer, Metals, O&G and Telecom.
On the other hand, Cement and Utilities delivered YoY expansion in the operating
margin. Corporate Banks continued reporting an improvement in the
slippage/asset quality trends. Domestic Cyclicals drove the quarterly performance,
led by Financials. Defensives' growth was dragged by Telecom losses, while Global
Cyclicals reported flattish growth with Metals and Oil & Gas delivering better-
than-expected numbers.
In BFSI, asset quality worries appear to be diminishing,
with banks reporting a
decline in stressed assets, led by benign slippages and higher recoveries/write-offs
during the quarter. However, credit costs for most corporate banks remain elevated
due to ageing-related provisions toward NCLT accounts (Essar Steel, Alok and
Bhushan Power), downgrade of the ILFS exposure, and a few other names getting
added to the stressed pool. Coverage ratios across several banks have improved
strongly. AXSB/ICICIBC among private corporate banks and SBIN among PSBs guided
for normalization in credit cost. Most banks like HDFCB, AXSB, KMB and ICICICBC
guided for faster growth in retail term deposits.
Most NBFCs
continue facing a key
challenge of liquidity. Nevertheless, they have managed this situation well but
curtailed disbursements. All vehicle financiers have guided for a slowdown in
growth in FY20 too.
Consumer
companies across the board indicated a near-term slowdown, mostly led
by rural. During the past quarter, the operating environment was marred by
subdued consumer demand, liquidity crunch in the channel and prolonged winter.
However, companies have started witnessing some improvement in the liquidity
situation post elections in their respective regions and are anticipating rural markets
to benefit from government measures over the coming quarters. In Autos, demand
was impacted by (a) weak buying sentiment in rural areas, (b) liquidity crunch and
(c) a high base. While most OEMs have slashed their growth guidance for FY20,
demand is likely to be driven by BS-VI-related pre-buy from 2QFY20. In FY20, the PV
industry is likely to grow at 3-5%, 2W at mid-single-digit and the tractor industry at
5-8%.
In IT,
revenue growth was healthy, but there was a pause in acceleration with
commentary and guidance suggesting moderate conservatism on the growth front
in the coming quarters. Pressures continued on the margins side. Low
June 2019
3

Voices | 4QFY19
unemployment levels in the US, high attrition and a tightening visa regime have
been the main factors behind the contraction in the gross margins.
In Healthcare,
the base business in the US generics segment continues facing pricing
pressure, albeit at low intensity. Companies are selectively looking at opportunities
stemming from portfolio rationalization by peers and are directing their R&D spend
mostly toward high-value complex generics with low competition.
In Capital Goods,
overall execution was healthy, given the liquidity crunch in the
economy. Order inflows declined due to weakness in domestic ordering in the run
up to the general elections. Management commentary suggests that small- and
medium-sized orders are flowing in, but large-ticket orders are on hold and should
see finalization now that election uncertainty is behind.
In Cement,
managements indicated that demand slowed down in Apr-May'19 due
to the unavailability of labor on account of elections. However, the long-term
demand outlook remains optimistic, given the government's increasing focus on
housing, infra and irrigation projects.
Autos
In 4QFY19, auto demand was impacted (a) weak buying sentiment in rural
areas, (b) liquidity crunch and (c) a high base. While most OEMs have slashed
their growth guidance for FY20, demand is likely to be driven by BS-VI-related
pre-buy from 2QFY20. In FY20, the PV industry is likely to grow at 3-5%, 2W at
mid-single-digit and the tractor industry at 5-8%. Furthermore, most OEMs
expect the positive impact of softening RM inflation to start reflecting in
1HFY20.
Capital Goods
Domestic execution healthy, continuity of government to improve ordering outlook
Execution was healthy given the liquidity crunch in the economy. Order inflows
declined due to weakness in domestic ordering in the run up to the general
elections. Management commentary suggests that small- and medium-sized
orders are flowing in, but large-ticket orders are on hold and should see
finalization now that the election uncertainty is behind. Room AC companies
have seen a strong start to the summer season and inventory levels have
normalized. However, the scope to pass on import duty hikes and currency
depreciation through price hikes remains limited.
Cement
Managements indicated that demand slowed down in Apr-May’19 due to the
unavailability of labor on account of elections. However, the long-term demand
outlook remains promising, led by the government’s increasing focus on
housing, infra and irrigation projects. Players also indicated that they have
initiated price hikes of INR 30-35/bag in Apr-May’19 across regions (except
south).
Consumer
Companies across the board indicated a near-term slowdown, mostly led by
rural. During the past quarter, the operating environment was marred by
subdued consumer demand, liquidity crunch in the channel and prolonged
winter. However, companies have started witnessing some improvement in the
liquidity situation post elections in their respective regions and are anticipating
rural markets to benefit from the government measures over the coming
quarters.
June 2019
4

Voices | 4QFY19
Financials
Banks
Asset quality worries are diminishing,
with banks reporting a decline in stressed
assets, led by benign slippages and higher recoveries/write-offs during the
quarter. However, credit cost for most corporate banks remains elevated due to
ageing-related provisions toward NCLT accounts (Essar Steel, Alok and Bhushan
Power), downgrade of the ILFS exposure and a few other names getting added
to the stressed pool. Coverage ratios across several banks have improved
strongly. AXSB/ICICIBC among private corporate banks and SBIN among PSBs
guided for normalization in credit cost. Recoveries from NCLT-related cases and
resolution of stressed power assets have been delayed. However, this is
expected to get resolved in FY20, driving a further improvement in asset quality
for the underlying banks.
Most banks like HDFCB, AXSB, KMB and ICICICBC have guided for faster growth
in retail term deposits. The outlook for corporate banks is improving, given the
moderation in slippages, the reduction in total stressed loans and the improving
profitability.
NBFC
4QFY19 was a key quarter for our coverage universe. The performance and
outlook were divergent across companies. Well-rated HFCs like HDFC and LICHF
expect a ‘business-as-usual’ FY20, although corporate growth may be marginally
tepid for HDFC. IHFL expects a gradual recovery in disbursements (INR100b in
1QFY20). The company will continue to sell down loans aggressively – hence,
management is guiding for 10% balance sheet growth, despite 20% AUM growth
in FY20. In the vehicle finance space, all companies are expecting a reasonable
slowdown in AUM growth in FY20 – CIFC guided for 15% AUM growth in the
vehicle finance book v/s 20% earlier. SHTF expects a gradual recovery in FY20
compared to 2HFY19. Diversified players like BAF, LTFH and ABCL have not
witnessed much impact from the liquidity crisis, and thus, managements have
not guided for anything different. However, all companies are looking to
aggressively tap the ECB market.
Healthcare
The base business in the US generics segment continues facing pricing pressure,
albeit at low intensity. Companies are selectively looking at opportunities
stemming from portfolio rationalization by peers and are directing their R&D
spend mostly toward high-value complex generics with low competition. The Jan
Aushadhi scheme introduced by the Government of India, coupled with trade
generics, is hurting the branded business in India. Pharma companies intend to
increase their focus on markets other than the US (like branded generics in
emerging markets) for better growth in revenue and profitability. Near-term
prospects have been bolstered by the completion of inventory rationalization in
domestic formulations, strong momentum in ANDA approvals, and the favorable
environment for the API business.
Media
Broadcasters (ZEE and SUNTV) hinted that the TRAI’s new tariff order will impact
the performance this quarter as well. Managements alluded that they would
continue stepping up investments in digital. PVR remained focused on robust
screen adds. The print pack was bullish on moderation of newsprint prices and
hinted that benefits should start flowing from 2QFY20.
June 2019
5

Voices | 4QFY19
Metals
According to Tata Steel, higher offtake from (1) industrial products/projects and
(2) branded products and retail segments led to a strong sequential increase in
volumes. 3Q had witnessed significant deferral in purchases amid volatility in
steel prices. SAIL highlighted that steel pricing has remained subdued amid
general elections. The company also noted that realizations have been on a
downtrend, with average NSR for April and May at INR40,500/t and
INR39,600/t, respectively (v/s ~INR40,311 in 4Q). Hindalco expects domestic
demand for aluminum to grow at 7-8% in FY20 and its cost of production to
decrease led by lower caustic soda, CPC and furnace oil prices. It expects LME
aluminum prices to show an uptrend in 2HCY19. Vedanta highlighted a decrease
in its aluminum cost of production (CoP) due to higher local bauxite sourcing
and continued availability of linkage coal. The company estimates aluminum hot
metal CoP at USD1,725-1,775/t in FY20.
Oil & Gas
Refining margin outlook for FY20 is likely to remain weak owing to higher global
capacity additions and lower-than-expected boost in diesel yields. OMCs expect
better marketing margins post the overhang on retail prices during elections.
RIL’s chemical cracks are expected to remain subdued, with strong growth in
retail business. MAHGL foresees higher opex challenges, which would normalise
its EBITDA margins. IGL expects volume growth of ~10-11% from its high-growth
Gas, supported by government regulations. PLNG plans to increase capacity at
Dahej to ~19.5mtpa and expects ramp-up at the Kochi terminal.
Retail
Retail companies witnessed a slowdown during the quarter, but things have
started picking up now. Increasing competition and a change in mix toward the
value fashion business have exerted pressure on margins though. Managements
reiterated their focus on increasing the store count.
Titan maintained its overall sales growth target of 20% for the next fiscal.
Commentary also indicated that growth prospects in Jewelry remain robust with
market share gains in cities where its presence was weak. JUBI indicated an
evident slowdown in dine-in and also guided for aggressive 100 Dominos store
additions in the coming fiscal. Also, it intends to use the price increase lever
sometime in FY20 after over two years of no pricing action.
Technology
Overall, demand and revenue growth outlook remained healthy, backed by a
period of sanguine large deals activity and Digital traction in the recent quarters.
However, pockets of stress exist, particularly within BFSI (small banks in the US for
INFO, the largest customer for TCS and WPRO). Enterprises’ Digital
Transformation is witnessing continued traction, with increasing deal sizes, which
could help offset near-term demand pressures from select segments. Margins
remain a challenge (outlook lowered by INFY and HCLT) amid investments in
localization, digital capabilities and rising attrition rates with talent crunch.
Telecom
Managements of Bharti/Vodafone Idea sounded bullish given the over-
subscription of rights issue and the turnaround in the India wireless
performance in 4Q. However, they remained cautious on subscriber churn in the
near term and plan to deleverage balance sheet (through monetization of
assets). Bharti Infratel reiterated that the exits are behind and gross additions
will gain momentum. TCOM appeared optimistic given promising prospects in
Growth/Innovation services.
June 2019
6

Voices | 4QFY19
Utilities
NTPC expects ~5GW of capacities to achieve commercialization in FY20.
According to the company, higher captive mine production, import order for
3mt of coal and possible enhancement of ACQ should help address fuel
availability issues. Power Grid (PWGR) has targeted capitalization of INR200-
250b of projects in FY20. However, its guidance may be at risk if RoW issues for
the Raigarh-Pugalur line continue. PWGR has also undertaken provisions of
INR3.9b pertaining to payment delays from a private generator. The company
cited it may require further annual provisioning of INR1b for the next two years.
In terms of new projects awards, PGCIL highlighted that INR190b of projects are
under different stages of bidding. JSW Energy noted that power tariff would be
the most important factor while acquiring assets. The company would consider
acquiring assets with tariff lower than INR4-4.5/kWh.
June 2019
7

AUTOMOBILE | Voices
Key takeaways from management commentary
AUTOMOBILES
In 4QFY19, auto demand was impacted (a) weak buying sentiment in rural areas, (b) liquidity crunch and (c) a
high base. While most OEMs have slashed their growth guidance for FY20, demand is likely to be driven by BS-
VI-related pre-buy from 2QFY20. In FY20, the PV industry is likely to grow at 3-5%, 2W at mid-single-digit and
the tractor industry at 5-8%. Furthermore, most OEMs expect the positive impact of softening RM inflation to
start reflecting in 1HFY20.
Stability in RM in 1HFY20
KEY HIGHLIGHTS FROM CONFERENCE CALL
Outlook for FY20
Ashok Leyland
Domestic CV industry growth guided at 10-12% in
FY20 due to BS6-related pre-buying from 2QFY20.
Guided ~15% volume growth (v/s 24% fall in FY19).
FY20 domestic 2W industry growth now cautious
v/s 8-10% growth expected earlier.
3W: Expect some growth in domestic 3W markets,
whereas 3W exports will be muted due to Egypt
regulatory streamlining issue.
Average discounts remain high at average INR425-
440k/unit.
To launch new products from modular platform in
BS6 in the ‘greater than 16 ton’ segment.
ABS cost inflation is passed through, though it has
passed it with mark-up in only certain models.
Expect some RM pressure in 2HFY20 (v/s 1HFY20).
However, 1HFY20 is expected to remain benign.
Encouraging response to Twin 650 both in India
and in international markets. Twin 650 has waiting
period of ~4 months currently.
100% of the product portfolio has been shifted to
ABS.
Phase 2 capacity of Vallam Vadagal plant is
underway and expects to commence production in
2HFY20.
Inventory corrected significantly in Mar-19 to 45-
50 days, with further correction in 1QFY20 toward
the target of 4-6 weeks.
Price increase of INR100-150/unit in 4QFY19 and
INR300-350 in Apr-19.
FES inventory comfortable at 4-5 weeks (v/s
industry inventory at 7-8 weeks).
JAWA booking trends continue to be healthy.
Expect to launch one more product before BS6.
Expect to improve PBIT margins of key global
subsidiaries to 5% in 3-5 years.
Average discounts at ~INR15k (v/s ~INR24k per
unit in 3QFY19 and ~INR14k per unit in 4QFY18).
FY19 retail volumes in rural markets grew over
10%, while urban demand declined 2%.
JLR: Key operational KPIs are stabilizing in China
like reduction in stock, improvement in dealer
return, etc.
Substantial success in cutting investments/WC
(~GBP1.1b achieved in FY19 v/s target of GBP1.5b
by FY20).
Bajaj Auto
Eicher Motors
Production target of 950k for FY20 and it is working
toward growing in FY20.
It expects to protect margins around current levels.
Expects to take total dealer count to 1,000 in FY20
(from 915 dealers as of Mar-19).
Hero MotoCorp
FY20 industry volumes expected to grow in mid-
single-digit. HMCL expects to grow ahead of
industry.
FY20 EBITDA margins are expected to remain
around 4QFY19 levels.
Domestic tractors/PV/CV industry to grow ~5%/3-
5%/10-12% in FY20.
RM price showing signs of moderation. Expect
stable RM in 1HFY20.
Rural market grew ~9% in FY19 with total
contribution at 51%.
Expects to grow faster than the SIAM’s growth
outlook of 3-5% growth in FY20.
Currently ~40% models on INR royalty; expect INR-
based royalty for all models by 2022.
Capex guidance of ~INR45b (same as FY19).
JLR: FY21 retail sales growth to be higher in
premium segment.
JLR: Lowered EBIT margins guidance to 4-6% for
FY22/23 (v/s 7-9% earlier).
M&M
Maruti
Tata Motors
June 2019
8

AUTOMOBILE | Voices
Amara Raja Batteries
Current Price INR 634
Click below for
Results Update
Buy
Market share in telecom segment was stable at ~55% in 4QFY19; it gained 0.5-
1% share in auto OEM and replacement segment in FY19.
Realized lead priced at INR154k/t in 4QFY19 (v/s INR150-152k/t in 3QFY19).
Capex guidance of INR4-5b for increasing 4W capacity by ~4m units to 14.5m,
2W capacity by 3m units to 17m and ~30% increase in tubular battery to 1.3m
units.
It plans to launch tubular batteries for E-rickshaw applications in the next few
months.
AMRJ – gearing up to be leader: AMRJ is gearing up to be a leader through i)
consolidating in existing areas, ii) entering new business opportunities within
battery space, mainly home UPS, Solar and Motive Power and iii) aided by
capacity and network expansion. In the telecom segment, AMRJ expects to
maintain its market share at current levels for FY19 (~55% as of 4QFY19).
Ashok Leyland
Current Price INR 91
Click below for
Detailed Concall Transcript &
Results Update
Buy
Demand:
Domestic CV industry growth was guided at 10-12% for FY20, driven
by pre-buying (ahead of BS6), which should start from end of 2QFY20. However,
expect subdued growth in 1QFY20 led by a high base.
Exports demand impacted
by weak sales in the Middle East, Sri Lanka and
Africa. Expect ~15% increase in exports in FY20 led by (a) launch of new
products in LCV/ICV segments,( b) signs of recovery in African markets and (c)
entry in to new markets like Russia and expansion in ASEAN region.
M&HCV capacity at 180k units. Don’t see greenfield/brownfield capacity
addition currently.
AL has inventory of ~ 8,900 vehicles as of Mar-19 and has a dealer inventory at
~20 days.
Running project Phoenix (for new product introductions),
particularly in mid
LCVs segment (>5.5 ton to +6 tons), to play a critical role in export business
ramp-up.
To launch new products from modular platform in BS6 in greater than 16 ton
segment.
Spares revenues
grew at 20-25% in FY19 and 4QFY19.
Revenues from the defense segment declined to INR1.5b in FY19 (v/s 4.8b in
FY18). Has completed trial orders of 8-9 tenders (v/s 31-32 tenders received).
Average discounts of INR425-440k/unit in 4QFY19
(v/s INR400-420k/unit in 3Q,
INR400-410k/unit in 2Q and INR375k in 1Q).
Captive finance (HLFL)
has book size of INR260b as of FY19.
Capex guidance:
Spent INR9.5b in FY19. FY20 capex to be at INR15b for LCVs,
BS6, EVs and new initiatives. Additionally, it will invest INR2b in subsidiaries.
June 2019
9

AUTOMOBILE | Voices
Bajaj Auto
Current Price INR 2,991
Click below for
Detailed Concall Transcript &
Results Update
Neutral
Cautious on FY20 domestic 2W industry growth v/s 8-10% growth expected
earlier.
The demand environment remains weak with ~10% decline in retail in
Apr’19, which was a negative surprise considering small festivals in few states.
Expect to surpass FY19 domestic 3W volumes in FY20.
Focus on increasing
market share in large passenger and diesel 3W portfolio.
3W export volumes likely to be weak in FY20
led by market specific issues such
as Egypt (regulations mandating license plate for 3Ws – currently able to sell
only 25% of demand) and Sri Lanka (sales were weak due to geo-political issues).
BJAUT is planning to expand its 3W product portfolio in export markets.
3W export competition:
No threat from Indian competition in the export
markets, except in Nigeria and Tanzania, despite competition’s product being
priced 5-10% lower.
ABS cost inflation is being passed through,
though it has passed it with a
markup in only certain models.
Company is planning frequent product actions (almost every month) in its
existing domestic motorcycle brands, particularly in the Entry segment (~100cc)
and the Middle segment (~125cc).
It has launched Pulsar Neon in 180cc (de-spec’d variant). Neon series (both
150cc and 180cc) has got a good response.
Expect some RM pressure in 2HFY20 (v/s 1HFY20).
However, 1HFY20 is
expected to remain benign.
Expect stable EBITDA margins going forward.
Increase in debtor days was due to extended credit to dealers
on higher
inventory levels; this is not a ‘new normal’, but FY20 is an abnormal year and the
trend might continue.
Bharat Forge
Current Price INR 460
Click below for
Detailed Concall Transcript &
Results Update
Buy
New orders:
BHFC secured new orders worth over USD50m from the CV and
industrial segment in FY19, of this, ~60-70% is from new segments.
Domestic CV:
Muted 1QFY20 outlook led by slowdown in production. However,
FY20E outlook remains positive, with strong demand expected due to pre
buying on account of BS6 (particularly in 2Q and 3Q).
Lost market share in domestic CVs (especially in beams) led by capacity
constraints.
Expect to regain lost market share with commencement of new
forging and machining lines (engine and chassis) for cars and trucks at Baramati.
BS6: Expect slight increase in content for existing products.
However, expect an
increase of INR8-10k/vehicle post BS6, especially in driveline/axle components.
Management expects 3-5% growth at 335k units in the US class 8 truck orders
in CY19
due to strong order backlog.
Revenue from
O&G segment
was stable in 4QFY19. With new products and
customers, management expects O&G revenues to witness good growth over
the next two years.
Aerospace and Defense
recorded revenues of INR4.4b (domestic + exports)
while railway segment revenues stood at INR0.8b.
It is setting up an aluminum forging plant in Europe (subsidiary) with an
investment of ~EUR55m over CY18/19. Also, the company has an investment of
10
June 2019

AUTOMOBILE | Voices
EUR30m in a new line at CDP. Both these investments should double its
aluminum capacity.
Capex:
Project capex at INR8.5b and maintenance capex at INR4b over FY19/20.
Expect capex intensity to decline significantly post on-going capex.
Eicher Motors
Click below for
Results Update
Current Price INR 20,100
Buy
Royal Enfield
Production target of 950k for FY20; it is working toward growing in FY20.
Demand: Continues to witness a drop in inquiries since Diwali due to price hikes,
slowdown in the industry and no buying from CSD segment. Conversion trend
remains intact. Sales from Kerala have come back, but not to the level of the
past.
Encouraging response to Twin 650 both in India and international markets. Twin
650 has waiting period of ~four months currently, with production run-rate of
3.5-4k units in Apr-19, which is expected to inch up to 5k by Jul-19. ~50% of
production is exported.
More than 50% of customers are owners of RE less than 2 years. In smaller cities
there is aspiration for 350cc, but in larger cities 350cc is not growing.
Phase 2 capacity of Vallam Vadagal plant is underway; expects to commence
production in 2HFY20.
Added 37 dealers in India (to 915 dealers as of Mar'19). Expects to take total
dealer count to 1,000 in FY20 (mostly in new and smaller towns).
Currently inventory level of 20-22 days of stock, including depots.
100% of the product portfolio has been shifted to ABS.
International:
Added one store in Korea, taking the total store count to 42.
Currently, it has 42 exclusive stores outside India spread across 19 countries,
with plan to double the same in the next 1.5-2 years.
Financing has been stable at 50-55% in 4QFY19 (similar to 3QFY19).
FY20 capex of up to INR7b for (a) Phase-2 of Vallam Vadagal plant, (b)
construction of the technology center, (c) development of new products and to
expand RE’s portfolio for global markets.
VECV
Prevailing higher discounting in heavy trucks segment impacted EBITDA margins.
Have launched CVs in Indonesia and South Africa markets under the UD brand,
where distribution of the same will be taken care by Volvo.
Capacity to increase from 90,000 trucks to 130,000 post greenfield capacity
(Bhopal) addition of ~40k by Apr-20 with a capex of ~INR4b.
Endurance Technologies
Current Price INR 1,209
Buy
Click below for
Detailed Concall Transcript &
Results Update
In FY19, ENDU received new business of around INR10.3b from Kia, Hyundai,
HMSI, HMCL, Yamaha, RE, Tata Motors and TVSL in its standalone business. The
new business could also replace some of its existing business.
In FY19, new order wins in the Europe business was at ~EUR60m, taking the
total Europe order book to EUR280-290m; ~35% of the orders were for the
EV/hybrid technology.
June 2019
11

AUTOMOBILE | Voices
The first-ever order from TVSL of INR400m for disc brake assemblies (1,000 sets
per day) would commence from 3QFY20. Additionally, suspension, transmission
and casting product supplies are under discussion.
ENDU’s 2W suspension plant at Halol commenced supplies to HMCL in Sep’18.
Current supply is 2.6k units/day, which should reach 4k units/day in 1QFY20.
Have also got orders for disc brakes from HMCL; supply should commence next
month. CVT is also under testing stage.
ABS tie-up with BWI is progressing well, with an initial capacity of 400k
assemblies per annum. The product is facing some delay due to longer time for
testing under different road conditions in India.
Supply of front forks and shock absorbers to HMSI from Karnataka plant will
commence from 2QFY20.
ENDU has purchased land in Vallam to set up a second die-casting and
machining plant for supplies to Hyundai, Kia and RE. This would commence
production in 3QFY20.
Revenue from the replacement market grew ~13.6% YoY in FY19 to ~INR2.7b
while exports grew 26% YoY to INR2.7b, led by increased supply of castings to
Getrag, KTM and aftermarket.
ENDU has received incentive from the Maharashtra Government, totaling
INR315m in 4QFY19.
Fonpresmetal has EUR7m revenue, EBIT of EUR0.6m and EBITDA margins of
~10%. Focus to increase EBITDA margins by 2% in FY20 through economies of
scale as well as efficiency program.
Europe: Other expenses have increased due to Fonpresmetal acquisition (due to
the machining process as Fonpresmetal buys from the market v/s ENDU EU’s in-
house process). Depreciation has increased due to Fonpresmetal and there has
been accelerated depreciation for certain diesel component. FY20 Capex: INR3b
in India and EUR25m for Europe.
Escorts
Click below for
Detailed Concall Transcript &
Results Update
Current Price INR 578
Neutral
Domestic tractor industry is expected to grow at 5-8% in FY20.
Market share expanded by 110bp to 11.8% in FY19 and by 190bp to 15% in
4QFY19. ESC expects to correct the inventory level from ~4 weeks to ~3-3.5
weeks by June. Financing availability is not a constraint yet.
FY20 capex guided at INR2.5-3b.
CE and Railway businesses to grow 10-12% and 15-18%, respectively, in FY20.
The price increase of ~4-5% in CE covers entire RM inflation.
Increased variable consulting fee and inventory provisioning expense of INR160-
170m (for inventory >365 days) impacted margins.
June 2019
12

AUTOMOBILE | Voices
Hero Motocorp
Current Price INR 2,781
Click below for
Results Update
Neutral
Domestic 2W industry to grow in mid-single digit in FY20, led by 10% growth in
2HFY20, whereas 1HFY20 growth should be flat. HMCL expects to grow slightly
ahead of industry.
Scooter volumes for the industry declined ~16% in 4QFY19, led by ~ 23% decline
in 110cc scooters. 125cc scooters grew ~21%. For FY19, scooter volumes were
flat as 110cc volumes declined ~8% whereas 125cc volumes grew ~56%.
Entry motorcycle segment’s market share recovered, with 4QFY19 market share
at ~60% (v/s 53% in 3QFY19 and 66% in 4QFY18), driven by launch of a lower
priced variant.
125cc Scooters: HMCL’s Destini 125 is witnessing good ramp-up with exit market
share of ~19.2% in Mar’19 (pan-India launch by Nov’18). It will launch Maestro
Edge 125cc next month.
In the premium motorcycle segment, the recently launched Xtreme 200R has
garnered ~10.4% market share. This would be followed by XPulse’s launch next
month.
Penetration of scooters in urban market very high. In markets where scooters
were not strong (UP, Bihar), scooters have not been able to make fresh inroads.
Spare-parts’ business grew 8.4% YoY (+6% QoQ) at INR7.9b. In FY19, spare parts’
sales grew 13% to INR28.4b.
Inventory corrected significantly in Mar’19 to 45-50 days, with further
correction in 1QFY20 towards target of 4-6 weeks. Mar’19 retails over 700k
were flat YoY despite festivals in Mar’18 (v/s Apr’19). Expects Apr’19 retails to
be flat, but May’19 should see some growth.
Undertaken price increase of INR300-350/unit in Apr’19, in addition to price
increase of ~INR400/unit in Jan-Feb 2019.
Capex of INR8b in FY19; FY20 capex to be at INR15b due to the Andhra Pradesh
plant and BS6-related investments.
RM Cost: Saw some softening of commodity costs in 3Q, benefit of which should
be visible 4Q onwards.
Financing penetration for HMCL has improved to ~40% in FY19 (v/s 37% in
FY18). This is expected increase up to 42-45% in the medium term. Hero FinCorp
had 43% share of financing with HMCL in 4QFY19 (40% for FY19). Hero FinCorp
has loan book size of ~INR200b as of Mar’19.
Mahindra CIE
Click below for
Results Update
Current Price INR 245
Buy
India operations
Bill Forge had flat sales in 1QCY19 due to 2W slowdown.
India business should recover in 2HCY19.
BF Mexico should see an improvement in 2QCY19 in both revenues and margins
as supplies have started to second customer from Apr’19. It should double
revenue run-rate by end-CY19 from current EUR10-12m. By end-CY19, margins
should be comparable with BF India.
Stokes UK assets should be transferred to Bill Forge India and JLR, Volvo and
Honda should be added to BF's portfolio. This will start reflecting in financials
towards later part of CY19.
June 2019
13

AUTOMOBILE | Voices
AEL: Utilization levels are high at 90-95%. It is investing in expanding capacity
through de-bottlenecking (~INR1.1b each in FY19 and FY20). It is targeting to
attain 14-15% over the next 12-18 months.
New stamping capacity would commission by Jun-Jul 2019. It is a state-of-art
plant and would have higher margins than existing stamping division.
EU operations
It does not see material headwinds for Metalcastello and CIE Forgings. CV
volumes (impacting MFE Germany) are expected to moderate in 2HCY19. CV
business is the lowest margin business and hence should not impact much.
Metalcastello is adding capacity for continuous growth. It is fully booked and
working at 21 shifts per week (including weekends).
Others
Net debt at ~INR6.8b will go up by INR9-9.5b as AEL acquisition is completed
now.
Focusing on automation and efficiency improvement program to improve
profitability of existing business. Also, looking to add more complex/higher
value-added products, which will aid margins.
Mahindra & Mahindra
Current Price INR 635
Buy
Click below for
Results Update
MM expects domestic tractor industry to grow ~5% in FY20, driven by healthy
growth in 2HFY20, as 1HFY20 volumes are likely to remain weak. Medium-term
tractor growth outlook maintained at 8-10%.
Expect domestic PV industry growth to be better than SIAM outlook of 3-5%. CV
industry growth is expected to be 10-12% (SIAM).
Inventory level comfortable at 4-5 weeks in Farm segment (v/s industry
inventory at 7-8 weeks).
Rural market grew ~9% in FY19 with total contribution at 51%.
Healthy response to recently launched models such as Marazzo, Alturas G4 and
XUV300. ~30% of XUV3OO sales come from the petrol variant. Company
working on 1.5ltr petrol variant of MPV Marazzo.
Ford alliance related financials to start kicking in from FY21. MM can consider
Fords Aspire model for EV, while a new model based on Ford’s B platform is
subject to approval.
Electric vehicles – Sold ~10.3k units in FY19 (v/s 4k units in FY18), of which ~8k
units were of E-Alfa (lead acid battery operated E-Rickshaw).
Treo (lithium ion based E-Auto) sales at 500 units/month. It has production
capacity of 1k units/month; can be increased to 2k units/month.
Commodity price showing signs of moderation. Expect stable RM in 1HFY20.
Expects to launch third product under JAWA brand before BS-6. Booking trends
remain healthy with supply to existing customers to be completed by Sep-19.
Already working on increasing production capacities for JAWA.
Portfolio rationalization due to regulatory changes:
ABS norms (Apr-19) - Have discontinued Thar Di, Xylo D and Jeeto minivan.
Crash norms (July-19) – Thar CRDe, Xylo H, Old Bolero (EX and LX) to be
discontinued.
BS-6 norms (Apr-20) – Verito D, Imperio and Old Bolero (long).
June 2019
14

AUTOMOBILE | Voices
Large SUVs to stay relevant in BS6 and price increase is expected to be small
considering higher ticket size.
Farm machinery business growing at healthy pace with revenues of INR4b in
FY19 (v/s INR2.8b in FY18 and INR2.2b in FY17).
Expect to improve PBIT margins of key global subsidiaries to 5% in 3-5 years.
Maruti Suzuki
Click below for
Detailed Concall Transcript &
Results Update
Current Price INR 6,984
Buy
Demand:
MSIL is expected to outperform SIAM’s industry forecast of 3-5%.
Retail volume in rural markets grew at +10%
in FY19, while urban demand
decreased (-2%). 2HFY19 rural sales growth declined to 8.5% (v/s 13% in
1HFY19).
Exports:
Currency devaluation and import restrictions impacted exports in FY19,
which declined 7.8% in value and 13.7% in volumes.
Management expects subdued exports even in FY20, but the Toyota alliance
should help tap African markets.
Inventory levels
remain at an average ~25-28 days in the domestic market.
Would closely look at demand-supply to keep discounts under check.
Commodity inflation:
Management indicated that there was no impact of RM in
4QFY19. Expect stable RM in 1QFY20.
Forex impact:
Adverse forex movement impacted margins by 60bp. Expect
positive impact of forex from 1QFY20. Move to complete INR-based royalty in
2022 years to help reduce forex impact.
Average discounts at INR15,125/unit (v/s INR24,300/unit in 3QFY19 and
INR13,880/unit in 4QFY18).
Gujarat plant update:
Contributed ~96.3k units to production in 4QFY19 (total
production of 287k units in FY19 v/s 157k in FY18). The second line was
inaugurated in Jan’19, which impacted fixed cost and depreciation.
Royalty
in 4QFY19 was at 5% (5.5% in 3QFY19 and 5.4% in FY18) of net sales.
Currently, ~40 of models are based on INR-based royalty. Management expects
all models to be linked to INR-based royalty by 2022.
LCV Carry dealer network
has been expanded to 310 dealers in 230 cities.
Diesel contribution
for MSIL was at 23% in 4Q (25% in FY19).
Capex
is estimated at INR45b in FY20 for new models, R&D, maintenance capex
and land acquisitions.
Motherson Sumi
Current Price INR 114
Click below for
Detailed Concall Transcript &
Results Update
Buy
SMP - Highlights from the earnings call
WLPT regulations and weak demand had impact on the SMP business, resulting
in weak revenue in 4QFY19.
No impact of cut down in Daimler guidance in existing orders.
No change/cancellation in orders/order book due to uncertain market
conditions.
Expect normalization in margins in 2-3 quarters once new product launch phase
comes through.
SMRPBV’s order book stood at EUR18.2b (including ~EUR2.3b order book of
Reydel).
June 2019
15

AUTOMOBILE | Voices
In the last cycle to execute legacy orders at SMP, which typically has order life
cycle of 7-9 years.
Greenfield capacity utilization: Kecskemet - ~60%,Tuscaloosa - 40-45%
Other highlights
Expect overall capex to be at INR20-22b in FY20 with SMRPBV capex at
EUR200m.
Expect capex intensity be lower with commencement of new plants at SMP.
S/A: In addition to PV, also supply to PV and 2W segments in domestic market.
S/A: Expect to commence new plant from 4QFY19 in India.
Tata Motors
Click below for
Detailed Concall Transcript
& Results Update
Current Price INR 170
Neutral
FY21 retail sales growth to be higher in premium segment.
A loss with negative cash flow expected in 1QFY20, led by an extra week of plant
shutdown for potential hard Brexit. However, profit is expected in subsequent
quarters with improving cash flow.
While volumes in China core premium segment grew 3.3% YoY in 1QCY19, in
luxury SUV segment it declined 15-19%. This manifests into higher discounts for
JLR (at ~21% v/s ~15% for premium segment).
JLR – in China, key operational KPIs are stabilizing,
viz., achievement rate of
retail targets, reduction in stock, improvement in dealer return on sales. China
stock reduced to lowest level since 2017, resulting in improved dealer returns.
Retail target achievement improved to above 90% (v/s 62% in Jul-18 and 70% by
end CY18).
While US market is expected to decline slightly, increasing share of SUVs
bodes well for JLR (SUVs 70% of total volumes in FY19 v/s 65% in FY18 and
55% in FY15).
JLR’s US EBITDA margins improved gradually from EBITDA margin loss in FY17,
to slightly lower than corporate average margins in FY19.
Guidance:
For FY20-21, it has guided for EBIT margins of 3-4% (maintained) and
negative FCF (earlier expected FY21 to be FCF positive). This is primarily due to
impact of full model change of RR/RR Sport in FY21. Also, earlier for FY22 and
beyond, it had guided for EBIT margins of 7-9%, which now stands revised to 4-
6% for FY22/23.
It has attained substantial success in cutting investments/WC (~GBP1.1b
achieved in FY19 v/s target of GBP1.5b by FY20). Cost cutting initiatives resulted
in savings of GBP150m (of targeted GBP1b). It expects large part of cost savings
to fructify in FY20 through workforce reduction (GBP0.4b), D&A reduction (gross
savings of ~GBP0.4b), reducing in marketing expenses, overheads, etc.
Evoque Launch: UK and Europe (Mar-19), North America (Apr-19) and China
(Aug-19).
June 2019
16

AUTOMOBILE | Voices
TVS Motors
Click below for
Results Update
Current Price INR 489
Neutral
Demand outlook: Management expects FY20 domestic 2W industry to see
marginal growth (healthy single-digit) for 2QFY20 and 3QFY20, and possibly a
weak 4QFY20 due to BS6. However, TVSL should outperform the industry.
Decline in scooter demand is attributed to (a) urban slowdown, and (b) price
reduction in commuter motorcycle segment.
Electric start 2Ws account for ~90% of moped sales.
Exports: Management has guided for its growth momentum to continue in
exports. Stability in key export markets led by rising crude oil prices and stable
currency is helping demand. TVSL should continue to outgrow industry.
Saw good growth in 2Ws in Africa (57% of 2W exports), Asia (33% of 2W
exports) and others (10% of 2W exports).
Price hike: TVS has taken a price increase of 0.4% in 4QFY19 to dilute the impact
of RM cost inflation. It has fully passed on regulatory price increase of ~INR6-
6.5k per unit for ABS in Apache and INR300 per unit for CBS.
Inventory level remains comfortable at 4-5 weeks.
Expect import content to decline to 10% in FY20 post decline of 12% in FY19 (v/s
14% in FY18).
Expect significant reduction in cost through alternate sourcing, VAVE, and fixed
cost reduction.
TVS Credit Services’ ramp-up continues with healthy disbursal growth in FY19,
with book size of INR83.4b (FY18 — INR61.5b), PAT of INR1.48b (FY18 —
INR1.38b). The NBFC now has ~49% share of volumes financed for TVS (~49% of
TVSL’s volumes are financed currently).
The retail finance penetration has gradually increased in FY19 from 39% in 1Q,
43% in 2Q, 47% in 3Q and 51% in 4QFY19.
Capex of INR6.5b is demarcated for FY20; capex is in non-capacity creation and
in areas of technology. Further, it would be investing ~INR2-2.5b in its subsidiary
in FY20.
Plans to launch electric 2W in FY20.
Indonesia subsidiary loss narrowed to USD3m in FY19 (v/s USD3.7m in FY18).
Expect to breakeven in FY20.
Added 150 new dealers and 150 sub-dealers in FY19.
June 2019
17

CAPITAL GOODS | Voices
CAPITAL GOODS
Domestic execution healthy, continuity of government to improve ordering outlook: Execution was healthy
given the liquidity crunch in the economy. Order inflows declined due to weakness in domestic ordering in
the run up to the general elections. Management commentary suggests that small- and medium-sized orders
are flowing in, but large-ticket orders are on hold and should see finalization now that the election
uncertainty is behind. Room AC companies have seen a strong start to the summer season and inventory
levels have normalized. However, the scope to pass on import duty hikes and currency depreciation through
price hikes remains limited.
Outlook for FY20
KEY HIGHLIGHTS FROM CONFERENCE CALL
ABB
Robotics and Automation to continue to drive growth
over the medium term.
Domestic Capex Cycle
Seeing opex-related enquiries rather than
higher capex spending.
Slowdown in Power Grid capex has
impacted the project business. State
orders have picked up but needs to be
careful on working capital cycle.
Domestic business to drive growth for the
company.
Exports remain uncertain due to currency
volatility, trade wars, etc.
Government orders saw slowdown owing
to elections. With strong mandate to the
incumbent government, capex spending
should pick up.
Muted activity on execution and ordering
during April-May owing to elections;
outlook remains robust over medium
term.
Not witnessing any pickup in private
capex at broader level, except in roads
and airports.
Cummins
KKC has provided healthy FY20 guidance for its domestic
business at 10-15% YoY, while guidance for exports
remains weak (flat to negative).
Consumption slowdown, liquidity crunch and election
overhang to impact the business in 1QFY20, but expect
consumption to pick up in a few months.
Competition is strong in white goods space (AC segment),
limiting scope for price hikes.
Havells
Larsen and
Toubro
FY20 order inflow guidance at 10-12%, revenue guidance
at 12-15% and EBITDA margin for the core E&C business
at 10.5%.
Voltas
AC sales have started off well in the summer season for
the months of April-May; however, the scope for price
hikes remains limited.
Expect UCP segment margins at 11% on a sustainable
basis.
BHEL
Click below for
Results Update
Current Price INR 68
Neutral
Order inflow stood at INR240b for FY19; it is L1 in INR245b worth of orders.
Order backlog stands at INR1.1t, providing revenue visibility of 3.7x its FY19
revenue.
Improvement in receivables with trade receivables down by INR10b (INR320 v/s
INR330b earlier).
MOU for FY20 signed at INR310b on very good basis and INR340b on excellent
basis.
Received FGD orders of INR86b in FY19; is well placed for orders worth INR83b.
Total order visibility of 20GW, of which 15.5GW is tendered and 4.5GW is yet to
be tendered.
June 2019
18

CAPITAL GOODS | Voices
Forex exchange variation loss in 4QFY19 stood at INR850m, and for FY19, forex
gain is at INR670.
Total debtors stood at INR159b (-9%YoY). Of the total debtors, 50% is from
states, 32% from central, 12% from private and 6% from exports.
Blue Star
Click below for
Results Update
Current Price INR 803
Neutral
Room AC — Margin improvement supported by better revenue mix
Expect industry to register 10-12% value growth for FY20, while Blue Star is
expected to better industry growth.
RAC segment saw 6% YoY sales growth in 4QFY19 and 3% for full-year FY19, as
market declined by 4-5% during the same period. UCP segment margins
improved 350bp on account of (a) price hikes taken by the company, (b) better
revenue mix, and (c) cost rationalization measures undertaken by the company;
market share improved to 12.3% (+80bp).
With summer season picking up, inventory level in the channel has now declined
and is at sustainable levels.
Blue Star expects UCP margins to stabilize at 9% in the medium term.
Market share in the Deep Freezer segment stands at 29%, dispenser segment at
25-35% and Modular Cold-Rooms at 30%.
RAC currently forms 70% of the UCP segment sales; the balance 30% is from the
Commercial Refrigeration segment (Deep Freezer, Water Dispenser, Medical
Refrigeration, Kitchen Refrigeration, Retail Refrigeration, Air Cooler, Air Purifier
and Water Purifier).
Water Purifier segment
It continues to do well, helped by concentrated ads and an offer of lifetime
warranty.
Market share was at 2.0% in FY19; distribution network has been beefed up to
2,800 across 1,500 towns and cities.
Expect market share to reach 10% by 2021. Additionally, with volume growth,
we expect cash burn to reduce.
Electro Mechanical Projects segment (+21% YoY, 4.3% margin)
INR8.4b of sales in 4QFY19, +21% YoY and 4.3% of EBIT margin.
Margin to be in the range of 5.5-6% in FY20.
Seeing good orders in MEP and Commercial Refrigeration.
MEP segment (order book at INR24.3b v/s INR20.2b in Mar’18)
Office, malls, healthcare segment and industrial segment provide robust
business opportunity.
Expect growth to continue with malls and offices driving growth.
Metro and airport jobs are seeing many new tenders.
June 2019
19

CAPITAL GOODS | Voices
Crompton Greaves Consumer Elec
Current Price INR 240
Click below for
Detailed Concall Transcript &
Results Update
Buy
Overall business environment
ECD registered 16% YoY growth for FY19 and margins remained healthy at
19.2%. 4QFY19 growth in the ECD segment stood at 10% YoY impacted by
delayed summer. Even margins declined by 220bp YoY given input cost increase.
Despite cost pressures, margins were up 50bp YoY.
ECD can grow a further 15% due to an increase in its product range and
geographic expansion.
Would like to enter into new product categories via the inorganic route.
Management elaborated that any acquisition should make business sense,
which adds value to the product portfolio.
Lighting – launched an innovative anti-bacterial bulb
The LED sale (ex EESl) business was up 25% in volumes. Price erosion in bulbs
has moderated. Fixtures constitute 70% of sales, with lamps at 30% of sales.
Launched anti-bacterial bulb in Lighting — available at 25% premium to current
products. Based on proprietary technology and recommended by Indian
Medical, it is expected to accelerate growth and garner market share in lighting
volumes. It claims that the bulb is able to kills 85% of the bacteria at home.
Company has been able to scale back to double-digit margins; it expects margins
to be maintained, going ahead.
EESL sales for the quarter stood at INR470m and INR1.4b for FY19.
Incrementally, Crompton has an order backlog of INR900m yet to be executed.
Expect double-digit bottom line growth in the lighting segment, going ahead.
Fans
Market share continues in the fans segment (4QFY19 at 25.1%; FY19 at 23.8%).
Launched new range of Fans specialty fans — Air buddy for kitchens and V Sense
for voltage fluctuation. Focus is on continuously introducing innovative fans.
Premium fans contribute 25% to sales as against 13% three years back.
Pumps (+20% YoY in volume, +15% in value)
CREST Mini is doing well and taking share from competition, volume growth has
been in double-digit and South India will be driving growth.
Growth is being driven by (a) residential product range, and (b) East and North
India, where Crompton has a firm hold with strong channel partners that play a
critical role in guiding customers.
Water heater
The winter quarter is critical for CROMPTON; it had revamped its whole
portfolio and has seen strong results. Witnessed 19% YoY growth in the
segment.
GE T&D India
Click below for
Results Update
Current Price INR 256
Neutral
Orders: +9.7b, (+17% YoY)
Good quarter in orders: PGCIL 400/220/66kv GIS in Shapar, AIS substation
package as part of TBCB scheme in Jawaharpur, 500 MVAR Thyristor controlled
reactors (TCR) package in Kurukshetra.
TBCB orders for next green corridors are upcoming.
June 2019
20

CAPITAL GOODS | Voices
Green energy corridors to be ordered in CY19; expect PGCIL tendering and
orders in 1QFY20.
Bangladesh HVDC - GE T&D has also participated and faces competition from
Indian and Chinese players; payment not an issue and ADB funded and finalized
by Mar19; Price by July and award by Sep19.
Sri Lanka HVDC - SAARC inter connectivity project to happen in FY21/22.
Very little thermal capacity is coming up – so less transmission needed; more of
renewable capacity is getting added and new opportunities coming up for GE
&D.
Execution
50 MW solar power plant for Marine Electrical in Tirunelveli, Tamil Nadu.
400/220 kV Gas Insulated Substation (GIS) for PGCIL at Bongaigaon and Salakati
in Assam.
11 bays of 400kV GIS substation for Neyveli Lignite Corporation Limited (NLC) in
Neyveli, Tamil Nadu.
60% of order book are private; balance is from PGCIL and states in equal
proportion.
CK2 in the order book is at INR1.4b and will be complete in Mar19/1QFY20.
Working Capital
Have seen some delays in payments from customer having financial issue.
Margins
Pricing pressures remain in the market; execution, along with the cost cutting
actions by the company.
KEC International
Current Price INR 312
Click below for
Detailed Concall Transcript
& Results Update
Buy
Orders and overall business environment
KEC is L1 in INR24b of orders.
INR130-140b worth of projects approved by CEA for upcoming renewable
projects.
INR110-120b worth of TBCB tenders floated and RFQ has been done.
Bunching up of tenders has happened at state level; expect ordering to improve
from states like Tamil Nadu.
Total visibility of INR250b worth of tenders.
Growth in non-T&D business strong; expect revenue of INR24b in Rail and
INR10b in Civil business for FY20.
FY20 sales growth expected at 15-20% YoY.
Railways execution will remain strong in FY20.
Margins
Margin for FY20 to be maintained at 10-10.5%.
T&D – weak growth on funding issues with TBCB
Delays in EC clearance in overseas and SAE led to subdued growth in 4QFY19.
Domestic T&D business impacted by delay in execution of private projects.
T&D business is expected to be driven by international business, especially
SAARC, Brazil and Africa.
Working capital
Debt has declined to INR18b v/s INR32b in 1HFY19, reduction in debt was
supported by sale of BoT asset, Saudi collections and change in vendor terms.
For FY20, debt is expected at INR25b as against INR18b in FY19. Interest cost is
expected at 2.4% of sales as compared to 2.8% in FY18.
June 2019
21

CAPITAL GOODS | Voices
INR4.5b received from Saudi in 4QFY19 and INR7b still pending.
60% is domestic debt and 40% is overseas debt.
Railways
Expect revenue growth of 25% for FY20. Margins in the segment are similar to
that of T&D business.
Civil
Expect revenue of INR10b in FY20.
Larsen & Toubro
Current Price INR 1,517
Click below for
Results Update
Buy
Strong order inflow was supported by large-ticket-size wins:
LT witnessed
INR400b of order inflows with ticket size > INR25b v/s INR150b of similar awards
last year. Most of these orders should start execution next year and aid revenue
growth.
Guidance:
The company guided for FY20 revenue growth of 12-15%, order
inflow growth of 10-12% and core E&C margins of 10.5%. Management has
baked in the uncertainty of general elections in 1QFY20 in its guidance, as the
new government will settle down only in June.
Ordering outlook:
Overall, LT expects the traction to be good in ordering as
most of the prospects have got funding tied up, and hence, orders will be
awarded eventually. Private capex remains selective in certain areas, rather
than broad sectors. Buildings segment had record orders in FY19. Water
segment has done well. Even in power transmission, order inflows were at
record highs.
INR9t of prospective order pipeline:
Total prospects (domestic + overseas)
stand at INR9t. Of this, 25% is in the international market, while 75% in the
domestic market. LT enjoys a strike rate of ~15% in the international markets
and ~25-26% in the domestic market. Thus, the overall strike rate could be
~20%, implying INR1.8-2.0 t of fresh orders. Segment wise: Infrastructure forms
INR4-4.5t, power T&D at INR1t, power generation at INR0.5t and Hydrocarbon
at INR2.0-2.5t. Mumbai Ahmedabad High Speed Rail is included in the prospects
for FY20.
Public sector continues to dominate order book:
77% of the order book is
composed of public sector clients, whereas the private sector formed the
remaining 23%.
Working capital as percentage of sales
improved to 18%. Management will look
to keep working capital in the range of 16-18%.
FY19 margins impacted by commodity price inflation and provisions:
Infrastructure segment faced problems in transportation segment related to
projects in Oman and a few ones in India. This was mainly due to right of ways
related issues. Overall, there was INR3b of negative impact on PAT on account
of provisions in infrastructure sector. However, margins should expand next
year for the segment. Margins were also impacted by commodity price
increases as it affected fixed price contracts.
Real estate opportunity:
Currently, LT is executing four real estate projects,
with total 4,000 flats to be delivered. Of these, it has already delivered 1,500
flats, and thus, the remaining 2,500 flats need to be delivered. As and when the
delivery happens, there will be lumpy revenue/profits booked in P&L, according
to the new accounting rule. The company is also trying to test the lease model in
commercial real estate. The idea is to have steady-state base income.
June 2019
22

CAPITAL GOODS | Voices
Siemens
Click below for
Results Update
Current Price INR 1,244
Buy
Outlook on capex activity
Muted capex in general industry – focus is on improving efficiencies.
Renewables continue to lead bulk of power generation capacity addition;
however, conventional power is still not picking up.
Indian Railways achieved highest-ever capex (maximum spent on electrification;
signaling and safety yet to pick up) and metro rail execution is on track.
April and May have seen slowdown across verticals, mainly on account of
elections.
Private capex still 3-4 months away.
Enquiry levels high and conversion low.
Emphasis on energy efficiency, automation and digitalization across sectors Power
Growing demand for turbines in CPPs (chemicals, sugar, paper) and waste heat
recovery (cement).
Higher maintenance required for ageing power plants – increased requirement
for services.
Infra
SEBs drive ordering in T&D; investments on grid quality and stability likely over
the medium term.
Metro rail execution on track – 140 km commissioned in 2018-19.
Strong demand for smart infrastructure in data centers, hospitals, commercial
offices and airports.
Industry
Capital expenditure growing in certain segments (F&B, chemicals, water).
Interest in digitalization for operational flexibility and enhanced efficiency
continues to grow.
Order inflow stands healthy and order book at six-year high
Base order inflow grew by 16.2% YoY in 2QFY19; overall order inflow increased
24% YoY to INR36.3b.
Order backlog stood at INR130.2b providing visibility of 1.1x its TTM sales.
Execution remains strong across segments
Power & Gas:
Sales (+18% YoY) supported by the small steam turbine business
across the cement, chemicals and sugar segments; margin at 21.6% supported
by forex gains during the quarter.
Energy Management:
Revenue decline 4% YoY impacted by lower PGCIL spend;
margin was at 12.7% (+290bp YoY) supported by forex gains during the quarter.
Building Technologies: Revenue growth of 12.4% supported by growth across end
users for energy efficiency and advanced surveillance solutions in data centers,
hospitals, commercial offices and airports and margin of 6.8% (-190bp YoY).
Mobility:
Sales growth of 23.4% YoY supported by execution of order backlog in
the metro segment and margin of 9.1%. Present in electrification and signaling
and is not in rolling stock. Spending is done on electrification and signaling is yet
to pick up.
Digital factory:
Sales growth of 24% YoY supported by digitalization initiatives
across automotive, F&B and machine building, driving growth and margin of
10.4% YoY. Provides factory automation, motion control and process
automation services in the segment
June 2019
23

CAPITAL GOODS | Voices
Process industries and drive:
Sales growth of 33% YoY, supported by wind,
water and pharma segment.
Restructuring of the segmental reporting:
Segmental reporting has been
reclassified in four segments compared to five segments earlier. New segments
are (a) Gas and Power (38% of sales), (b) Smart infrastructure (28% of sales), (c)
Digital infrastructure (18% of sales), (c) Mobility (8% of sales) and (d) Portfolio of
companies (7% of sales)
Exports:
Not actively driving exports but has access to more than 100 markets as
it is part of the global supply chain. Exports will fluctuate given global slowdown.
Siemens exports only products and is not present in services.
Solar Industries
Current Price INR 1,165
Click below for
Detailed Concall Transcript &
Results Update
Neutral
Revenue growth supported by growth in volume (15%) and realization (25%).
Margins during the quarter were impacted by (a) raw material price (ammonium
nitrate) increase not being completely passed on to end consumers, and (b)
forex loss of INR55m being impacted due to INR appreciation.
SOIL has commissioned its South African facility and has begun trial runs for its
Australia and Ghana facilities.
Defense revenue stood at INR1.7b in FY19; management expects it to reach
INR3b in FY20. It has scaled down its FY20 defense revenue guidance by INR1b
to INR3b, given the delay in RFP finalization.
Solar expects Akash, pyros and fuse order to materialize in FY20.
Solar has capex plans of INR2.7b for FY20; in FY19, it incurred capex of INR2.7b.
Solar plans to expand its overseas reach by increasing its manufacturing facilities
(from five to 10 countries). The company has begun trial runs for its Australia
and Ghana facilities; it expects contribution from them to start in FY20.
Expect revenues from CIL and SCCL to pick up in FY20 given its plans to increase
overburden removal.
Vision 2020
SOIL plans to increase sales volume from 3.00lac metric tons to 4.5lac metric
tons. To enable this, SOIL will expand its capacity to produce 7lac metric tons.
Plans to increase overseas revenue three-fold from current INR3.5b; to enable
this, it plans to increase its manufacturing reach from five to 10 countries.
Plans to generate defense revenue of INR5b+.
Thermax
Click below for
Detailed Concall Transcript &
Results Update
Current Price INR 1,016
Buy
Margins
Lower gross margin on higher RM costs. Some were low-margin orders and raw
material price increase hurt margins. However, margin should improve going
forward and reach 9%, if raw material prices remain stable.
Margins in Dangote orders are not inferior to other orders. Project has been
progressing well and payment was received on time.
Margins are negative in Danstoker due to cost over-runs in the project business.
Thermax has now shifted focus to standard products and will not take up project
orders.
June 2019
24

CAPITAL GOODS | Voices
Margins should also improve as its factory in Poland has started operations and
1,000 man hours have been registered, which is expected to double by the start
of the next year and triple by next year-end. This should help improve margins.
Orders
Orders: Enquiries are present, but conclusion is getting delayed.
Order booking supported by overseas, while domestic ordering remains muted.
Orders at INR11.6b (-28% YoY) and backlog at INR53.7b (-6% YoY).
Ordering from small projects is active and getting finalized, but ordering and
enquiries from medium- and large orders stand muted.
Expect order inflow for FY20 to be better than FY19 supported by base orders.
Sectoral ordering trend
Food Processing/FMCG: Doing well across the country and ordering healthy.
Chemical has been doing well.
Steel: Expansion program not taking off given consolidation from NCLT still
happening. Sponge iron orders are picking up.
Cement: Enquiry level is high and expected to continue.
Refining: PMC has been appointed in three government projects and expect
ordering to start in FY20. Expect at least one order.
Fertilizers: Nothing worth noting for the next one year.
FGD
FGD: Payment terms have partially improved and retention money has been
scaled down to 13.5% as compared to 35% earlier.
Thermax is well placed in two orders worth INR10b.
Voltas
Click below for
Results Update
Current Price INR 588
Neutral
Unitary cooling products: Challenging business environment given weak demand
and cost pressures
The performance of this segment was muted due to erratic summer conditions,
leading to industry de-growth of 3% in FY19.
Inability to take price hikes given weak demand and intense competitive
pressure in the industry, coupled with increasing input costs, depreciating INR
and custom duty hike, added to the industry’s woes and impacted the margins.
40% of the split AC sales come from inverter AC sales.
Delayed onset of summer and channel inventory impacted primary sales in
4QFY19.
Inventory has now been liquidated and primary sales have seen revival in
1QFY20.
Margin guidance of 11% for the UCP segment as against earlier margins of 15%
(FY18) given high competitive intensity and difficulty to take price hikes.
Voltas continued to be the market leader, increasing its YTD market share
(across multi-brand outlets) from 22.1% to 23.9%.
Voltas continues to focus on expanding its reach across the Tier 1&2 cities,
opening brand shops that will also leverage the entire range of consumer
durable products from Voltas and Voltas Beko.
Air coolers business has witnessed a decline for Voltas, given weak demand and
even industry has seen de-growth.
June 2019
25

CAPITAL GOODS | Voices
Voltas has invested in a land parcel near Tirupati to set up a manufacturing
facility for cooling products. This facility will cater to demand from the fast
growing southern and western markets. Once operational by end-2020, the
manufacturing facility will enable greater cost and operational efficiency in
serving these regions.
MEP segment: Execution on track, margins guidance of 7-7.5%
Domestic projects: Continued its steady performance this year with majority of
orders coming in from the electrification sector and infrastructure space.
Strategic focus is on procuring Government/Government funded projects with
reasonable assurance of cash.
With the increasing support and an approaching timeline on the electrification
program through the Saubhagya Scheme, more tender announcements as well
as completion for rural electrification projects are being witnessed.
Rohini Electricals, which executes electrical projects, now contributes 40% of the
domestic order book.
International project: Voltas has received a number of awards in both the UAE
and in Oman, including the District Cooling Company of the Year, the Facilities
Management Company of the Year and MEP Contractor of the Year.
Besides MEP, the company is looking at strengthening its order book in Facility
Management and Water Management solutions.
Volts Beko
JV launched a basket of products, including 39 SKUs of refrigerators, 17 SKUs of
washing machines.
.
June 2019
26

CEMENT | Voices
CEMENT
Managements indicated that demand slowed down in Apr-May’19 due to the unavailability of labor on
account of elections. However, the long-term demand outlook remains promising, led by the government’s
increasing focus on housing, infra and irrigation projects. Players also indicated that they have initiated
price hikes of INR 30-35/bag in Apr-May’19 across regions (except south).
KEY HIGHLIGHTS FROM CONFERENCE CALL
Outlook FY20
Volume Growth
The 4.5mt expansion is in advance stage now. The clinker line
and the 2mt brownfield grinding units will get commissioned by
White cement volumes increased
JK Cement
Sep’19. The greenfield grinding unit in Aligarh will get
9% YoY to 0.35mt in 4QFY19.
commissioned by Dec’19, while that in Gujarat will get
Grey cement volume (including
commissioned by Mar’20.
clinker sales) grew 6% YoY to
The company is taking various initiatives to improve
2.53mt.
profitability. It achieved savings of INR50/t in FY19 via logistics
optimization and INR250m via AFR usage.
The company is undertaking a debottlenecking exercise at its
kiln in Nimbahera, which is likely to result in some power & fuel
savings. It will also be entitled for some GST benefits from 2022.
These benefits, along with cost savings, are likely to result in
annual savings of INR600-700m. The debottlenecking will be
completed by Mar’21 and would need INR3.25b of capex.
The company plans to ramp up utilization of UNCL to 80% level.
Industry grew by 9-10% YoY in
For Century Cement, admission of petition with National
4QFY19, while all-India utilization
Company Law Tribunal (NCLT) has been filed.
stood at 78%. Roads and low-cost
Ultratech
housing projects like Pradhan
Mantri Awas Yojana (PMAY) are
driving growth.
Volumes for UTCEM grew 15.4%
YoY to 21.3mt in 4QFY19.
The company stabilized operations
at UNCL which operated at 72%
utilization in Mar’19.
Ambuja Cements
Current Price INR 222
Neutral
Click below for
Results Update
The company increased sale of premium products (Roof Special, Compocem and
Cool Walls), which grew 14% YoY in 1QCY19.
The quarter saw significant increase in power and fuel costs YoY, however,
continued focus on the use of alternative fuels helped to partly mitigate this
impact. The impact of huge increase in energy prices was also partially mitigated
by internal efficiencies and cost initiatives.
Freight and Forwarding costs were lower YoY due to successful implementation
of cost mitigating initiatives (outbound), namely renegotiation of contracts and
network optimization.
Other expenses were lower due to lower Selling General and Administrative
(SG&A) expenses on YoY basis.
During the quarter, receipt of Orders Giving Effect (OGE) to the CIT(A) orders for
certain assessment years due to disposal of certain appeals sanctioning income
tax refunds, resulted in interest income and reversal of provision for interest on
income tax aggregating to INR1.32b. The company has made provision of
INR810m against this due to uncertainties related to it getting realized. The net
income of INR515.8m is included in other income.
Dividend from ACC of INR1.32b was included in other income.
June 2019
27

CEMENT | Voices
Birla Corp
Click below for
Results Update
Current Price INR 645
Buy
Blended cement accounted for 92% of total sales in 4QFY19.
The share of trade (channel) sales has now crossed 80% of the company's total
sales volumes, of which premium products account for 38%.
The company achieved a turnaround in the performance of the Chanderia unit –
despite low prices in the northern markets throughout the year – driven by a
series of cost-reduction measures and marketing initiatives. The Chanderia unit
has systematically enhanced its capability of mechanical mining, reducing its
dependence on purchased limestone, which has resulted in significant savings in
the cost of production.
As part of ‘co-branding’ initiatives, the premium brands MP Birla Cement Perfect
Plus and MP Birla Cement Ultimate are being manufactured at Chanderia for the
north markets, western MP, Gujarat and western Uttar Pradesh. This had a
notable positive impact on the unit's profitability.
During the quarter, the work for laying permanent rail tracks and mechanical
wagon loading facilities for dispatches was commissioned at Kundanganj.
Mukutban Greenfield Project:
The 3.9mt integrated unit is likely to get
commissioned by FY22. Equipped with 40MW of CPP and 10.6MW of WHRS, the
total cost of the project is INR24.5b.
Kundanganj capacity ramp up:
The company is looking to scale up the
operations of RCCPL's Kundanganj unit as well, where 1.2mt of capacity is being
added. The project is expected to be completed in 2020-21.
A 12.25-MW waste heat recovery system (WHRS) is going to be commissioned
at Maihar in the current quarter. Three solar power plants – one each at Maihar,
Chanderia and Satna – are to be installed in the September quarter.
The company has been steadily ramping up production at its Sial Ghogri coal
mine in Madhya Pradesh. The production is expected to go up to the optimum
level in the next financial year.
Dalmia Bharat
Costs
Click below for
Results Update
Current Price INR 1,128
Buy
The company witnessed an increase in raw material costs as slag prices and
petcoke prices increased during the year.
Slag and petcoke prices have started softening in the last few months, however,
its full benefits was not realized as the company had high-cost inventory of raw
materials.
High diesel prices led to an increase in freight cost/t, however, lead distance for
the company remains less than 300kms.
Prices
Prices remained stable across markets during 4QFY19, except in South India,
which witnessed some increase in Mar’19.
Capex
The 8mt of East project is on track.
The Murli Industries hearing at the NCLT was completed in Feb’19 and the order
is awaited.
Its step-down subsidiary, namely Dalmia DSP Ltd, was commissioned on 31st
Mar’19. Commercial production is expected to start from Apr’19.
28
June 2019

CEMENT | Voices
Other key takeaways
For FY19, incentives received were at INR6.35b, of this, INR1.31b was received
in 4QFY19.
The company reduced INR13.68b of gross debt during the year, of which,
INR8.24b was repaid in 4QFY19.
The company has ramped up production of composite cement; its share was
14% in 4QFY19.
The Government of Assam has granted Mega Project status to Calcom Cement
India Limited (CCIL) under the Industrial and Investment policy of Assam 2014.
This was for the investment towards establishment of the clinkerisation unit at
Umrangshu ("USO") for 15 years in the state of Assam. The said unit will be
entitled to 100% reimbursement of net SGST paid for 15 years from the date of
commercial production. Accordingly, 100% remission of SGST from 1st Jul’17 to
31st Mar’19 of INR 510m has been recognized as income on reasonable
assurance during the current year.
Grasim Industries
Current Price INR 871
Click below for
Detailed Concall Transcript
& Results Update
Neutral
Acquisitions
During the quarter, the company acquired the Chlor Alkali business from KPR
Industries (India) Limited (KPR) by way of slump sale for a cash consideration of
INR2.5b. The business consists of an under-construction ChlorAlkali plant of 200
TPD capacity at Balabhadrapuram, Andhra Pradesh. The company has taken
over the identified assets and liabilities associated with KPR. On commissioning
of this plant, along with other ongoing expansion projects, the company's
caustic soda capacity will increase from 1.15 MMTPA to 1.38 MMTPA.
During the quarter, GRASIM acquired 100% equity shareholding of Soktas India
Private Limited (SIPL) (now known as Grasim Premium Fabrics Private Limited)
from its current promoters SOKTAS Tekstil Sanayi Ve Ticaret A.S., Turkey for a
cash consideration of INR1.3b. Consequent to the acquisition, SIPL has become a
wholly owned subsidiary of the company, w.e.f. 29th Mar'19. SIPL is in the
business of manufacturing and distribution of premium cotton fabrics with its
manufacturing capacity located at Kolhapur, Maharashtra having capacity of
about 10m meters per annum of finished fabrics.
VSF: Global VSF prices weakened during the quarter on account of high
inventory in value chain with commissioning of new capacities in Asia.
Global VSF demand is likely to remain strong with CAGR of ~6%-7% over the
next 2-3 years.
The share of domestic sales volume in overall sales volume improved to 86%
(4QFY19) from 83% (4QFY18).
VSF EBITDA was impacted by a rise in input cost (pulp) and a significant drop in
global VSF prices. Pulp prices have started softening and the impact should be
visible in coming quarters.
Value-added specialty fibre line of 16KTPA based on in-house technology
commissioned at Kharach in May’19 in a record timing ahead of scheduled
timeline.
Chemical business:
The company introduced four new brands of chlorine VAPs for consumer-facing
products.
29
June 2019

CEMENT | Voices
Margins were impacted by lower realizations in Epoxy business.
Work on caustic brownfield expansion (91KTPA) and power plant at Vilayat
started with long lead items already ordered.
Cement business: 4QFY19 UltraTech’s capacity utilization for current quarter in
India stood at 84% against estimated industry utilization of 78%. Average
cement prices up by 1-2% QoQ – eastern and northern flat, western up 2%,
Southern up 4-5% and central up 1%.
Aditya Birla Capital: NBFC lending book grew 23% YoY to INR631b. Revenue
stood at INR47.3b, while net profit after minority interest stood at INR2.58b.
India Cement
Current Price INR 97
Click below for
Results Update
Neutral
The capacity utilization of ICEM during 4QFY19 was 84% v/s 76% in 4QFY18.
Capacity utilization stood at 79% for full-year FY19.
Pricing in South India started improving in Feb-Mar 2019, which resulted in
utilization improvement for the company.
Utilization for South India is 70%.
The demand in South India is majorly led by infrastructure. A major share of the
demand for ICEM comes in from the infrastructure sector, thus, receivables for
the company have increased.
Trade constitutes 60% of the company’s sales mix.
Other expenses for the quarter were higher due to increase in expenses related
to repairs and maintenance, packaging and advertisements.
The cement/clinker ratio for the company is 1.36.
Capacity expansion plan for the company will depend on sustainability of
healthy margins.
Gross debt for the company in FY18 was INR 31.3b, which increased to INR35.4b
in Dec’18. Gross debt as of Mar’19 reduced to INR33.6b.
JK Cement
Click below for
Results Update
Current Price INR 1,009
Buy
The 4.5mt expansion is in advance stage now. The clinker line and the 2mt
brownfield grinding units will get commissioned by Sep’19. The greenfield
grinding unit in Aligarh will get commissioned by Dec’19, while that in Gujarat
will get commissioned by Mar’20.
Realization increase was marginal from north due to sales in better realization
market.
JKCE took a price hike of INR 25-35/bag in April and another INR 10-15/bag in
May, which is largely sustainable.
Demand in April and May was lower compared to March due to elections.
Other expenses were higher sequentially due to an increase in branding efforts
and consultancy charges.
Other income in the quarter was higher by INR100m QoQ due to write-back of
certain provisions.
Grey cement should record growth 10-12% in FY20. The white cement business
should also grow by ~10%.
The company is taking various initiatives to improve profitability. It achieved
savings of INR50/t in FY19 via logistics optimization and INR250m via AFR usage.
Trade sales stood at 69% for FY19.
June 2019
30

CEMENT | Voices
The company is undertaking a debottlenecking exercise at its kiln in Nimbahera,
which is likely to result in some power & fuel savings. It will also be entitled for
some GST benefits from 2022. These benefits, along with cost savings, are likely
to result in annual savings of INR600-700m.
The debottlenecking will be completed by Mar’21 and would need INR3.25b of
capex.
JK Lakshmi Cement
Current Price INR 356
Click below for
Results Update
Buy
Work on 20MW Thermal Power plant in Durg and the grinding unit in Odisha of
0.8mt is likely to be commissioned by 2QFY20.
Raw material cost for the quarter was higher due to clinker purchase.
The company sold 9.65lakh tonnes of clinker in FY19. The company plans to
reduce the sales of clinker in future.
The company has repaid INR2b debt in FY19 and will reduce debt further by
INR2.8b in FY20.
Trade constitutes 55% for JKLC.
OPC constituted 34% of the mix while PPC was 65%. The company expects to
improve PPC proportion to 70% in FY20.
The company expects volume growth of 8-9% in FY20.
Prices had declined in the Gujarat market in 4QFY19. The company took a price
hike of INR30/bag in the northern markets in Apr’19.
No price hikes were witnessed in Chattisgarh in April-May 2019. Odisha,
Jharkhand and Bihar witnessed INR30/bag price increase. Chattisgarh
constitutes ~55-57% of the total eastern sales of JKLC.
Capex for FY19 was INR2b while that for FY20 is expected to be INR70b.
Average fuel cost stood at INR8,300/t in FY19 v/s INR7,100/t in FY18.
The Ramco Cement
Current Price INR 794
Buy
Click below for
Results Update
Sales grew 19% to 11.12mt in FY19, driven by growth in south and east regions.
Demand was driven by retail, infrastructure and affordable housing.
Average diesel prices increased 17% YoY, which led to an increase in logistics
cost.
Petcoke price was ~ USD102-106/t during the first half of the year and softened
during the second half of the year.
The wind power capacity stands at 126MW and the division generated 242.6m
units during the year (262.4m units: PY). Revenue from wind division stood at
INR617.5m in FY19 v/s INR669.6m in FY18.
The company incurred CSR expense and other contribution amounting to
INR421m (FY18: INR109.3m) in FY19. The amount for 4QFY19 was INR286.4m
(INR67.5m in 4QFY18).
Average diesel prices increased 17% YoY in FY19, leading to higher logistics cost.
Petcoke prices were ~U SD102-106/t during the first half of the year, but
softened thereafter.
TRCL expects commissioning of the 3mt grinding capacities by FY20 and of the
1.5mt clinker at Jayantipuram by July’20.
June 2019
31

CEMENT | Voices
Shree Cement
Current Price INR 20,626
Buy
Click below for
Results Update
The company has announced cement grinding unit of 3mt in Pune which is
expected to commission by Sept 2020at a capex of INR 5.2bn
Industry growth for North in FY19 was ~6-7%. The company expects industry to
grow at 7-8% while the growth for Shree should be ~12% over the next two
years
The company launched premium products “Roofon” in North and East and
“Power” in North
The company has expressed its vision to focus on healthy realization.
The month of April witnessed price hikes of INR 30-35 /bag in North and East
over 4QFY19 prices
Average fuel cot for 4QFY19 has come down to INR 8670/t from INR 8900/t in
3QFY19
Sales mix for the company :70% North 30% East
Trade sales for the company stood at 73% in FY19 vs 67% in FY18
Capex for SRCM should be INR 15-16b in FY20 and FY21. Maintenance capex for
the company is INR200crore
Clinker conversion factor is 1.5x
Cement utilization for SRCM in North is 76%while that in East is 100%. The south
plant is operating at a utilization of 30-35%
The company’s subsidiary “Union Cement Company” started operations on 11th
July, 2018 and recorded sales of 2.7mt (cement +clinker). The turnover and
EBITDA for the company stood at INR 8bn and INR 1.3bn respectively for the
year.
Ultratech Cement
Current Price INR 4,570
Click below for
Detailed Concall Transcript
& Results Update
Buy
Utilization and price trend
Industry grew by 9-10% YoY in 4QFY19, while all-India utilization stood at 78%.
Roads and low-cost housing projects like Pradhan Mantri Awaas Yojana (PMAY)
are driving growth.
Prices increased by 4-5% QoQ in south and 2% QoQ in west. Prices increased by
a marginal 1% QoQ in central India but were flat in east and north. Overall
industry pricing improved 1-2% QoQ.
Operations of Ultratech Nathdwara (UNCL)
The company stabilized operations at UNCL which operated at 72% utilization in
March’19.
UTCEM improved the usage of petcoke from zero to ~40% during the quarter.
Routine maintenance was undertaken in Feb’19.
The assets achieved EBITDA/t of INR830 (excluding one offs), an improvement of
INR740/t.
The company plans to ramp up operations to 80% level.
UTCEM also plans to undertake a cost-reduction program in order to improve
efficiency norms and achieve further cost reduction of INR50/t.
Update on Century’s cement asset
NCLT hearing is scheduled on 3rd May 2019
Final order of NCLT is likely in May/June 2019.
June 2019
32

CEMENT | Voices
Cost trend
Power & fuel cost declined 15% QoQ, led by a reduction in blended price of
(imported/domestic) petcoke by 7%.
Logistics costs declined 6% QoQ due to the full benefit of axle load relaxation
and the reduction in diesel prices. The dispatches through railways also
increased.
Share of renewable energy in overall power mix increased by 100bp.
June 2019
33

CONSUMER | Voices
CONSUMER
Companies across the board indicated a near-term slowdown, mostly led by rural. During the past quarter,
the operating environment was marred by subdued consumer demand, liquidity crunch in the channel and
prolonged winter. However, companies have started witnessing some improvement in the liquidity
situation post elections in their respective regions and are anticipating rural markets to benefit from the
government measures over the coming quarters.
Management comment on Rural
KEY HIGHLIGHTS FROM CONFERENCE CALL
Comment on demand scenario
Outlook FY19/20
Capex will be INR7b in FY20.
Asian Paints
Britannia
Growth outlook is uncertain in the
near term. Need to watch out for
progress on monsoon.
Demand is still average; smaller cities
are growing faster. New construction
demand still remains low.
Demand is not too different across
the country, slightly stronger in the
east.
Double-digit steady state volumes
should be possible in the medium-
to-longer term. Expect near-term
disruptions.
Compared to the past, currently
there is a rural slowdown. With
forecast of normal monsoon,
management is hoping for
normalcy to set in.
Britannia is still, nevertheless,
gaining significant market share
in rural areas over peers.
Dabur
Prolonged winter season and weak
agrarian sentiment affected sales
in 4QFY19. Management expects
some recovery going ahead from
4QFY19 levels.
Summer demand has been good;
initial monsoon forecast too is
good.
Macroeconomic indicators are
pointing toward some pressure on
near-term market growth.
Nevertheless, HUVR appears
confident of performing well even
in a relatively difficult
environment.
Saffola
is likely to report high-
single-digit volume growth for the
next couple of quarters. Still ‘work-
in-progress’ toward double-digit
volume growth in
Saffola.
Recovery in
Saffola
is happening
faster than expected. However,
management is still waiting for a
couple of quarters before calling
out a full recovery.
Rural growth for Dabur has
come down from 1.3x urban
growth to 1.1x in 4QFY19.
Manifestos of all political parties
point to higher rural outlay.
Hindustan
Unilever
Rural growth in 4QFY19 was
closer to urban growth (v/s 1.3x
in the earlier quarters).
Innovation share to revenues was 4.5%
of sales in FY19 and management is
targeting to double this number in the
future.
Management desires sales of INR5b
from Salty snacks category over the
next five years.
Capex likely to be around INR4.5b in
FY20.
Targeting high-single-digit volume
growth for India FMCG in FY20 and
around 2-3% realization growth.
Will aim at maintaining operating
margins in FY20.
Do not expect macro recovery in
MENA. However, they aim to gain
market share again in FY20 as they did
in FY19.
Need to watch the impact of
government payouts for the rural
areas started from April.
Cost savings will continue to be a big
factor driving margins. Margins growth
will be modest going forward.
MRCO is targeting 8-10% volume
growth in India and double-digit CC
growth in international biz.
New products as proportion of sales
are likely to double over next few
years.
Mgmt. maintained 15-20% decline
targets in copra costs for the year.
Domestic EBITDA margins are targeted
to be over 20% and international
margins over 18%.
Capex: FY20 is likely to be around
INR1.25-1.5b.
2HFY19 performance will be a better
indicator of growth in the coming
days.
EBITDA margin band at 21-24%;
expansion should be primarily led by
gross margin.
Capex: 2.5-3% of sales for FY20.
Marico
Rural continued to grow ahead
of urban in the traditional
channel (Rural GT grew by 4%,
while urban GT was down 2%).
Management believes if new
products continue to do well
(most of them are urban
premium products),
Saffola
recovery swing happens and
VAHO targets are attained, and
the company should be able to
withstand some near-term
sluggishness in rural demand.
Pidilite
Company expects slower near-
term market growth and is
cautiously optimistic of growth
hereon.
Input cost and forex fluctuation
impacted international subsidiary.
June 2019
34

CONSUMER | Voices
Asian Paints
Click below for
Results Update
Current Price INR 1,428
Sell
Demand scenario and outlook
Growth outlook is uncertain in the near term.
Need to watch out for progress on monsoon.
Demand is still average; smaller cities are growing faster.
New construction demand still remains low.
Demand is not too different across the country, slightly stronger in the east.
Other highlights for decorative paints in 4QFY19
Volume growth was in double-digits for 4QFY19 and comfortably in doubledigits
for the full year.
Economy emulsions, distemper and putties are growing faster, maybe seeing
some gains from the unorganized sector, which is leading to mix deterioration.
Competition, APNT network and operating economics
JSW has entered into the Karnataka market.
APNT is focusing on innovation and network expansion in response to
competition.
Nippon has been spending heavily on marketing in a few states. APNT has also
increased adspend in those markets in response and has been reporting good
growth there. It is not clear when adspend intensity in these states will abate.
The company currently has 46,000 color world machines and over 400 ‘Colour
ideas’ stores.
There are at least 150,000 outlets selling paints in India and ~10,000 are opening
every year. Thus, there is plenty of room to increase distribution reach from one
third of the market that APNT reaches currently. However, cost of reach and
viability of dealers are the constraints leading to calibrated expansion around
3,000 outlets every year by APNT. Indirect dealers rely on credit, which the
company does not provide but which they may get it from other dealers.
Labor costs are going up every year. The mix between labor and material as a
proportion of total painting costs is now at 60:40 and in some markets even
70:30.
Costs and price increase
There was no price increase in 4QFY19. Earlier in FY19, it had taken price
increases in December (~1.7%), October (2.35%) and May (~2).
May take price increases if there is an adverse change in crude. As of
now,management offered no comments.
There was a shift in terms of marketing spend from 3QFY19 to 4QFY19 as a
result of which other expenses were higher in 4QFY19.
There were some impact of provision for debtors in the international business
and some material costs not passed on to customers in the international
business in 4QFY19.
Highlights from other businesses
Sales from ‘Sleek’ kitchen equipment business (started six years ago) grew
24.4% YoY to INR2.14b in FY19. Loss at the end of the year in this business was
INR230m. Management believes that it is likely to be profitable in this business
in the near future.
Ess Ess, the bathroom fittings business, which was started five years ago,
reported 27.8% sales growth to INR2.02b in FY19. Loss at the end of the year in
June 2019
35

CONSUMER | Voices
this business was ~INR300m. Management did not comment on the timeline of
profitability attainment in this business.
It has five ‘AP Home’ stores at the end of FY19. Will set up 4-5 more this year.
The business seems to be working wherever they have launched it.
Adhesives and waterproofing have significant synergies in their own paint dealer
network. Waterproofing and adhesives are both profitable businesses for APNT.
Innovation and value for money have been their forte on the waterproofing
business. They believe training for applicators is also important.
Waterproofing market in India has a size of INR50b. While there are a lot of
players in the institutional market, APNT is focusing only on retail. Growth in the
category has normalized to close to paints market growth, partly because there
is an increasingly large focus on cheaper products by customers leading to mix
deterioration.
APNT entered the waterproofing market five years ago and is now the second
largest player in the retail market.
PPG Asian Paints (automotive business) was affected in the second half by
demand slowdown and inability to pass on material cost increase. Dahej plant is
likely to be commissioned in 3QFY20.
Highlights from International operations
There was sluggish growth in Egypt, Ethiopia, Sri Lanka and Bangladesh in FY19.
The company is No. 1 in Nepal, Bahrain, Fiji and Sri Lanka and among top 3 in
most other markets barring Egypt and Indonesia where they made an entry only
recently.
Indonesia business losses were around INR450m on sales of INR700m.
Management expects profitability only in the seventh year of operations and
they are only into the second year of operations in that country now.
Unlike India, free tinting machines are given to dealers in Indonesia with an aim
to increase distribution rapidly, which leads to further up-fronting of costs.
Capex and other financials
Capex was INR10b in FY19 for the standalone business and will be INR7b in
FY20.
As a result of two new plants in Vizag and Mysore, commissioned in 2HFY19,
operating costs in this region will be lower marginally due to savings on logistics
costs and inventory levels in these markets will reduce. At overall level, there is
unlikely to be any huge improvement in productivity as a result of these two
new plants.
Larger part of capex in FY20 will be toward expansion of capacity at the two new
plants.
In the explosion incident in the new Vizag plant recently, there was no major
impact and production has resumed.
It has completely written off IL&FS exposure, but unlike some peers, this has
been from the other comprehensive income and not from operating expenses.
Britannia Inds
Click below for
Results Update
Current Price INR 2,904
Buy
Macro view
Compared to the past, currently, there is a rural slowdown. With the monsoon
forecast predicting normal rains, management is hoping for normalcy to set in.
June 2019
36

CONSUMER | Voices
Britannia is still, nevertheless, gaining significant market share in rural areas
over peers.
Double-digit steady state volumes should be possible in the medium-to-longer
term. Near-term disruptions should be present.
Market share gain continues
Volume growth was 7% for the quarter with accelerated market share gains
over Parle in FY19. Exit market share in 4QFY19 was even higher than full-year.
The company has witnessed spectacular growth in market share over the past
four months.
Distribution, new launches and being the lowest cost producer are enabling
continued market share gains for BRIT.
Raw material outlook benign, distribution expansion impressive
Material cost Inflation was only 3% YoY for the quarter. Wheat cost increase of
9% YoY was offset by deflation in sugar, RPO and milk prices.
Management expects modest increase in inflation from current levels and will
take price hikes in the future.
Direct reach is now at 2.1m outlets from 1.55m at end-FY17 and 1.84m outlets
at end-FY19.
New launches gaining momentum
Innovation share to revenues was 4.5% of sales in FY19 and management is
targeting to double this number in the future.
Launched democratized version of center-filled biscuits (Treat Burst) in 4QFY19.
Launched Swiss Rolls, Layer Cake and Brownies. Just launched Treat Stars, an
open-face cream biscuit.
The company is nearing the all-India launch for cream wafers. Croissants are
currently available in modern trade and in East India.
Salty snacks have been launched in Tamil Nadu with good initial response; it will
be rolled out in the rest of the country later. One format has been launched and
soon, two more are likely. Salted snacks are INR250-260b category; Britannia’s
products are present in about a third of the salted snacks market. BRIT has
currently launched a baked product in this category, but is deliberately not
adopting a ‘baked’ positioning here as management believes that only taste
matters for customers. Price points are INR5, INR10 and INR20 with key focus on
the INR5 price point (17gram, in line with price-to-kilo and pieces-per-pack v/s
other extruded snack products available). Management desires sales of INR5b
from this category over the next five years.
Milkshakes are an INR22b market in India; including lassi, it is an INR100b
market. The company has received good response to its milk shake launch.
All new categories will be gross margin accretive.
Adspends were up significantly YoY for 4QFY19, but full-year adspends were up
marginally by ~10bp YoY.
Cookies, creams, health segment products, crackers (bridge products), other
adjacencies, and dairy business are likely to be the key innovation areas for
FY20.
Other businesses
Bread growth has been in double-digits along with profitability improvement.
Now, it is expanding to the South as well.
June 2019
37

CONSUMER | Voices
Changed the business model in bread, which means that erstwhile material
costs are now bifurcated into materials and other expenses. This was the key
factor for other expenses increasing and moderating material cost increase.
Dairy segment also reported double-digit growth for the year.
Manufacturing, capex and cost savings
Ranjangaon plant- two lines have been fully scaled up, with two more scale-ups
in the pipeline (trials have started last month). New innovation lines are likely in
the next few months.
Capex likely to be around INR4.5b in FY20, similar to FY19.
Cost savings are likely to be around INR2.7b in FY20 compared to INR2.3b in
FY19.
Group lending
Around 25% of cash and cash equivalents are invested in group entities.
Colgate
Click below for
Results Update
Current Price INR 1,159
Buy
Market share in toothpastes stabilizing in recent quarters, consumer demand soft
in Mar’19 quarter
Toothpaste market share was at 52.4% in CY18 v/s 53.6% in CY17. HUL’s share
was 17.3% in CY18 (-40bp YoY), Dabur’s 15.1% (-30bp YoY) and Patanjali’s 8.6%
(+180bp YoY).
On the other hand, the exit market share for Colgate in the March quarter was
also ~52%. It was similar in December 2018 as well, so there has been some
stability in recent quarters.
Toothbrush market share 45.2% in CY18 v/s 45.1% in CY17. March 2019
toothbrush market share levels were higher at close to 48%.
Management believes that from June 2018, its go-to-market has been working
better; it was aiming first for stability in share (achieving this now) and then
aiming for growth in share.
Management was clear that it will prioritize growth even if it comes at the cost
of near-term EBITDA margins.
Category volume growth likely at 5-6% going forward and Colgate is aiming to
grow market share after a period of stability recently.
Management admitted that there is demand softness in Mar’19 as has been
witnessed in other consumer categories which could affect industry and their
volume growth.
Segmental market share and other details
Colgate naturals had a market share of 8.1% in CY18 compared to ~6.5% in
CY17. Moreover, market share in Naturals is also up 120bp YoY in CY19.
Naturals are growing at double-digits for Colgate over the past few quarters,
albeit off a small base.
Swarna VedShakti has met with very good response. The company launched
sachets as part of a sampling exercise in the Kumbh Mela. Company will
evaluate its usage in general trade as well.
Naturals category growth for the market is in mid-to-high teens in recent
quarters, slower than before.
Management also believes that at an overall category level, premium segment
losses to Naturals could stabilize shortly, leading to a revival of growth in
June 2019
38

CONSUMER | Voices
premium where Colgate is stronger than peers. They have re-launched Colgate
Total recently.
Distribution expansion impressive
Company has increased direct reach by 28% YoY in CY18. This was one way to
reduce high wholesale dependence, haven’t yet seen full impact of this
expansion on sales. It needs to execute well to gain from the direct reach
expansion.
Reached 10m school children as part of Bright Smiles Bright Future (category
development program) in CY18.
Entry into new categories
Have launched Palmolive Facial bars and Palmolive Liquid Hand-wash recently.
Palmolive Facial Bars- Launched in Kerala and Delhi. Pricing is at a premium to
market leader. Now expanding to two more metro cities shortly. Advertising is
largely online and outdoor.
Dabur
Current Price INR 404
Neutral
Click below for
Detailed Concall Transcript
& Results Update
Macro
Prolonged winter season and weak agrarian sentiment affected sales in 4QFY19.
Management expects some recovery going ahead from 4QFY19 levels.
Targeting high single digit volume growth in for India FMCG in FY20 and around
2-3% realization growth.
Summer demand has been good and initial monsoon forecast is good.
Rural growth for Dabur has come down from 1.3x urban growth to 1.1x in
4QFY19. Manifestos of all political parties point to higher rural outlay.
International business was affected by problems in Turkey and Pakistan.
Currency devaluation and weak economy affected sales in MENA region.
Do not expect macro recovery in MENA. However they aim to gain market share
again in FY20 as they did in FY19. Currency could play spoilsport if there is
further deterioration.
USA- Namaste is likely to post revival in sales in FY20.
Distribution
66,000 villages contribute 50% of rural sales in FMCG. Dabur currently reach
44,000 villages, targeting 51,000 villages in FY20.
South India is only 16% of sales for Dabur’s domestic sales whereas it is 25% to
30% of sales for some other peers. Company aims to increase focus going
forward in South India.
Key brands and category performance
Key power brands with disproportionately high investments going forward will
be: Dabur Amla, Dabur Red, Real, Chyawanprash, Pudin Hara, Lal Tail and
Honitus – the last three small brands have witnessed strong growth in FY19.
These power brands contribute 75-80% of sales.
Personal Care (Hair care, Oral Care), Healthcare and Foods will be the key focus
segments. LUPs and INR10 price points will also be in focus.
The company believes that Hair Care can be an INR50b segment from INR10b.
Similarly, it expects juices to be an INR20-INR30b category for them compared
to INR10b currently.
Milk- and yogurt-based products are affecting juices segment growth. No plans
to get into dairy-based beverages yet.
39
June 2019

CONSUMER | Voices
Babool remained weak because of competition. By end-1QFY20, the company
will re-launch the brand. Dabur Red, however, is 70-75% of oral care sales and is
doing well.
Hair Oil market share grew 70bp and Oral Care market share grew 45bp YoY.
Market share in Home care and skin care segment was down YoY.
100% growth in E-Commerce albeit off a low base. Now 1.4% of sales. Targeting
2.2% of sales in FY20. Company has also appointed an E-com vertical head to
drive ambitious growth.
Additional data on financials
Media spends for Dabur came down in 4QFY19. Investment in power brands
increased YoY.
Goodwill write off – 20% CAGR topline and 25% CAGR in PAT in local currency at
Hobi Kozmetik since acquisition. So write-off of INR750m during the quarter was
mainly on account of currency devaluation.
RM costs have been benign. However, currency devaluations and some ESOP
related costs (some write-backs in the corresponding quarter last year and
higher rates assumed for FY19) have resulted in gross/EBITDA margin
contraction. Will aim at maintaining operating margins in FY20.
ESOP costs at INR740m in FY19. There was a write-back last year.
Have taken some credits on tax in 4QFY19, resulting in low tax rate in 4QFY19.
Effective tax rate likely to be around 20-22% for the next five years.
Emami
Current Price INR 346
Buy
Click below for
Detailed Concall Transcript
& Results Update
Performance
Sluggish rural and channel liquidity issue faced in 4QFY19.
Liquidity has been an issue across channels and markets i.e. wholesale, retail,
rural as well as urban.
Domestic growth stood at 3% with flat volumes due to a prolonged winter
impacting the sales of summer products, which accounted for more than 40% of
the domestic business this quarter.
For FY19, volume growth stood at 3% and value growth at 6%.
No payment from CSD in 4QFY19. This along with strong growth in exports led
to higher receivables in FY19.
Segmental 4Q19 Performance
Navratna grew at 1% affected by delayed summer but saw good traction in
1QFY20. Boroplus grew at 17%, Kesh King by 15%, Pancharishta by 2%,
Healthcare by 9%, Pain Management range by just 1%, male grooming saw 4%
decline, 7-in-1 oils grew 24%, and Balms grew 1%.
Navratna volume market share at 66.3% grew by 140bp. Balms volume market
share at 54.8% grew by 140bp. Kesh King volume market share at 26.4% grew by
220bp and Fair and Handsome Face Wash volume market share at 14.7% grew
by 90bp, BoroPlus and Fair and Handsome maintain their leadership in their
respective categories with market share of 73.5% and 64.7%, respectively. In
FY19, domestic business grew 7% on a like-to-like basis, impacted by
unfavorable seasonality in 3Q-4QFY19.
Kesh King reported volume growth of 12% and value growth of 15% in 4QFY19
and 13.5% volume and 11% value growth in FY19. Kesh King’s majority sales still
come from wholesales; 65%-70% wholesale contribution.
40
June 2019

CONSUMER | Voices
International business’ net sales grew 19% during the quarter and by 12% in
FY19. Excluding Crème21, international business grew 13% in 4QFY19 and by
10% in FY19.
Male grooming – It is reworking the male grooming product strategy; same is
expected to be implemented by Aug-Sep’20; product is not facing any
competitive intensity; segment expected to rebound by 3Q-4Q of FY20.
Navratna talc growth declined by 4.5% in 4QFY19.
Gained share from Amrutanjan in Balms.
Distribution
9.4lac direct reach now; ~90k outlets added in FY19.
Modern Trade now 8% of sales from 4% earlier.
Outlook
Focus on volume, rather than price (2.5-3%) led growth in FY20.
Not seeing any competitive pressure in any categories; there is no reason that
Emami cannot grow in double-digits.
Current margins are sustainable (GM at 66% and 27% EBITDA margin).
Priorities for FY20: Growth in male grooming, stability in international business,
cost reduction, focus on 7 oil-in-one, F&H face wash and HE.
Expect double-digit growth in international business in FY20.
20% tax rate for FY20.
Godrej Consumer
Click below for
Detailed Concall Transcript &
Results Update
Current Price INR 700
Neutral
Macro
There was a general slowdown in environment in 4QFY19 in India. Extended
summer and channel liquidity also impacted sales. Post-election, the company
expects an improvement in liquidity.
South is 27% of the India business. This market was weak on the demand front
for the quarter.
Nigeria was affected for 2-3 weeks because of elections. LatAm was affected by
prevailing hyperinflation.
Outlook
India: Strong sales growth expected in FY20 due to innovation and a better goto-
market strategy. Management believes that the problems are temporary. Have
taken steps for a recovery in HI.
Indonesia: Looking to maintain healthy sales momentum.
Africa: Looking for profitable sales growth. Investments in infra and talent
building (which was a feature in FY19) are over. Thus, expect healthy
profitability improvement going forward. Management believes the worst is
over on the Africa front.
LatAm: Cost correction is likely to lead to profitability growth.
India – Brands and categories
Household Insecticides: Incense sticks growth affected sales. Now their recent
foray in this sub-category has been doing well in Andhra Pradesh and Telangana
(high-single-digit market share in both states within a few months of launch);
from June 2020, the category is expected to report strong growth led by wider
incense stick launch in other states. Other segments in the HI category grew
faster than peers in FY19. For FY20, management expects to grow ahead of
June 2019
41

CONSUMER | Voices
peers in all categories, including incense sticks. Naturals and longer efficacy
(over 3 hours) are the key positioning factors for its incense stick HI product.
Reached highest-ever market share in soaps in FY20.
Highest-ever market share in Godrej Expert Rich Crème as well.
Overseas business
Darling: Re-launch will happen in Nigeria in 1QFY20. Have seen good response in
two other countries on re-launch of this brand.
Indonesia: New launches and costs savings will be key focus areas in FY20.
Management believes that there is no need to take goodwill impairment in
LatAm and Africa either on account of currency depreciation or relative
underperformance v/s expectations.
Other queries
Non-mosquito sales are only 12-13% of HI sales.
There will be no big-ticket acquisition for some time owing to keenness to
improve ROCE. Looking for small opportunities, if available, in India and
Indonesia.
Why do elections have an impact on sales in some countries
Markets in some countries are closed for some time because shops are shut
as people go to their native places to vote.
Fear of election-related violence also leads to shop closures.
Cost savings program Project Pi: 2% of sales cost savings in India and Indonesia
again in FY19. This program will focus on Africa and the US business from FY20.
FY19 consol. capex at INR2.5b: A similar number likely in FY20.
Also expanding India R&D facility in FY20.
GSK Consumer
Click below for
Detailed Concall Transcript &
Results Update
Current Price INR 7,709
Neutral
Macro
In the short term, there are some concerns on the topline growth due to the
liquidity crunch, lower consumer confidence and lower farm income.
Second half of 4QFY19 was tougher than the first half.
Market share decline
Management believes its volume market share is relatively more stable v/s
value market share, which has consistently declined in the past two years.
SKB has lost its value market share to ‘Bournvita’ in the past 7-8 quarters.
The company expects its high science product launches in recent years to arrest
the market share decline. Other new launches will also be there.
Additional clarifications and disclosures
HFD volume growth was 6% YoY for the quarter and 10% YoY for the full year.
Horlicks and Boost roughly grew at the same pace.
Business auxiliary income grew 20% for the quarter and at a similar rate for the
full year.
Sachets are contributing more to sales (around 10% of value sales). However,
conversion to larger bottles is not happening and is not expected either, as
there is a huge gap between cost of sachets and cost of bottles. Sachets contain
18 grams in an INR5 pack.
Management expects raw material inflation to continue. Barley/ dairy have seen
30%/40% YoY inflation over the past 3-4 months. Have taken 2.5% price
increase from Jan’19 but not across all products in the portfolio. This price
42
June 2019

CONSUMER | Voices
increase and some forward covers should hopefully protect margins, believes
management.
Export growth was 24% for full-year FY19 with 21% volume growth. Addition of
GSK Malaysia as a customer in the year also played a big part.
Food business rationalization (mainly phasing out Marie biscuits in FY19) is now
complete and will be in the base from Jul’19. For the full year, food business
(~5% of sales) declined by 16%.
One-offs in 4QFY19 and FY19
In Other expenses, there was some one-time provision in the base of INR200m,
and thus, these expenses declined YoY.
One-offs in other income of INR1.14b in FY19 (and INR440m in 4QFY19) due to
some tax reversals and a few other items.
Distribution expansion
Distribution reach was 1.96m outlets at FY19-end compared to 1.77m outlets at
FY18-end. Direct reach was a little less than 1m outlets at FY19-end. Growth in
distribution reach should continue.
SKB is relatively under-indexed on ecommerce in terms of market share for core
HFD brands, but has higher-than-average market share in case of high science
products.
New campaigns and recent launches
‘Horlicks Protein Plus’- started a new campaign in the recent quarter. Also
introduced a new ‘no sugar added’ variant in Mar’19.
New campaign on ‘Women’s Horlicks’ in association with Femina in the digital
platform, celebrating women achievers.
Deliberately not being very aggressive on the Boost RTD launch as it is a nascent
market. Company is happy with the traction so far.
‘Horlicks Protein plus’— 6% market share and INR800m sales likely in FY20.
‘Horlicks Growth plus’ has been more challenging with likely sales of INR350m in
FY20. Company admits its strategy needs improvement, as it is faced with a
strong entrenched player in ‘PediaSure’, and therefore, it has to continue
traction with experts.
Hindustan Unilever
Current Price INR 1,838
Buy
Macro
Click below for
Detailed Concall Transcript &
Results Update
There was some moderation in the market growth rate in 4QFY19. Rural v/s
urban growth is a key indicator of overall volume growth. Rural growth in
4QFY19 was closer to urban growth (v/s 1.3x of urban growth in the earlier
quarters).
Macroeconomic indicators are pointing toward some pressure on near-term
market growth. Nevertheless, HUVR appears confident of performing well even
in a relatively difficult environment.
Need to watch the impact of government payouts from April.
Management view on the business
HUVR believes that the growth rates of the past will come back.
Management is satisfied with the performance on all fronts for the quarter,
given the relatively tough operating environment.
Building blocks – (a) Investing in the core, (b) driving premiumization and market
development and (c) fuel for growth.
43
June 2019

CONSUMER | Voices
Now adding data to people and brand strengths.
Inbuilt agility developed over the past few years will put it in good stead.
The company has deliberately kept realization growth modest in recent years.
Segment and brand highlights
Home Care: All categories have done well – 13% growth in 4QFY19, mainly
volume-led.
Beauty and Personal care – very strong performance in premium products.
Foods and Refreshment- Has done very well in 4QFY19 with 9% growth.
Sunlight is now an INR5b brand.
Domex re-launch during the middle of FY19 has met with good response.
Personal Wash- premium has done very well. Lifebuoy and Lux were below
expectations affected by high penetration and slowdown in 4QFY19.
Extended Brylcreem beyond E-Commerce in 4QFY19.
Launched ‘Simple’ skin care product in India in December- January (initially only
available on Nykaa).
Oral Care had a good quarter. Closeup and Lever Ayush oral care did well.
Good sales in winter portfolio in March quarter due to extended winter.
No dilution in focus on Naturals, despite the reducing threat from Patanjali. Is an
important part of its three-pronged strategy.
Indulekha sales are 4x the sales from the time of the acquisition.
Lever Ayush is doing well on growth and mix in South India. Have made a
tactical retreat from Central and North India, will come back with a better
strategy.
Other points
Exceptional item - current quarter includes true-up of deferred consideration
payable on account of Indulekha acquisition (INR570m out of INR710
exceptional items). This is on account of the better-than-expected performance
in Indulekha. Have to review this every year. There are also some other costs
relating to GSKCH merger (announcement came in December 2018).
Operating margins have now improved for 30 of the last 31 quarters.
Cost savings will continue to be a big factor driving margins. Margins growth will
be modest going forward.
Premiumization and analytics-related margin growth opportunity remains high.
It has obtained approval on GSKCH merger from Competition Commission and
awaiting court convened shareholder’s approval. Maintained earlier guidance of
possibility of all approvals by December 2019.
Tax rate in FY20 to be 100bp higher than FY19 numbers setting aside the GSKCH
impact, which is uncertain as of now.
CSD receivables were at unusually elevated levels in March, leading to higher
debtor days at the end of the year. Situation has normalized in April.
Ecommerce is around 3% of sales and continues reporting very healthy growth
every quarter.
Premium segment is 28-30% of overall FMCG market. HUVR will be overindexed
on this relative to the market.
June 2019
44

CONSUMER | Voices
Jyothy Labs
Click below for
Results Update
Current Price INR 173
Neutral
Macro and outlook
Management believes there is no worry from a demand perspective for FY20.
Rural packs do not point to any major sluggishness, but compared to the
exuberance of the past, there has been some moderation in rural.
Segment and brand performance
Focus segments – Fabric care (Post-wash), Fabric care (Main wash),
Dishwashing, Household Insecticides (HI) and Personal Care.
Fabric Care - Growth in the quarter was muted, but full-year growth was decent
at 7.6%. In erstwhile weak markets, share was up (Maharashtra by 320bp, Bihar
by 140bp and UP by nearly 100bp).
Fabric Care- Ujala detergent is the no. 1 detergent brand in Kerala.
Fabric Care - Henko franchise grew 10.3% for the year, but declined 4.7% in
4QFY19. Premiumization trend remains strong.
Fabric Care - Matics industry sales are at INR7b currently.
Dishwash (32% of sales) grew 22% for the year and 17% YoY in 4Q. Pril Liquid
grew 14% YoY in 4QFY19, and was up 16% YoY in FY19. Pril Tamarind launch has
added 10% to sales. Exo also did very well. Exo Ginger was launched in 4QFY19.
HI (20% of sales) declined 2.5% in FY19 and 2.5% during 4QFY19. JYL has lost
share in both liquid vaporizer (LV) and coil. The company had 7.7% share in LV a
year ago, which is at 6.5% in 1QCY19. Coil had 21.2% share a year ago, and is at
19.7% in 1QCY19.
HI - have launched Maxo 100% natural incense sticks. Have over 1% market
share in Gujarat, and 3-5% share in all the five South Indian states, with
Karnataka an outlier at around 7% market share.
Personal wash is witnessing much discounting, thus growth was 6.9% (GST
adjusted) in FY19 and 2.8% in 4QFY19. Launched Margo Glycerine in West
Bengal and Kerala. There has been some loss of market share in core South India
market as they did not participate in discounting in the category.
T-Shine toilet cleaner has 5% market share in Kerala. Once it reaches 7-8%
share, the company will launch in other markets.
New MD focus areas (Ms. MR Jyothy — taking over from 1st Apr’20)
Invest in brand building.
Sprucing up R&D.
Training and upgrading the sales team.
Performance v/s guidance
Last year, guidance was for 12-14% sales growth in the standalone business and
the company achieved 9.3% growth (non-HI 11.3%). It would have surpassed its
guidance, if adjusted for Kerala floods. EBITDA margin guidance was 15-16% for
standalone business in FY19, company achieved 16.2%.
Guidance for FY20
12-14% topline growth.
15-16% EBITDA margin, despite increase in A&P from INR850m in FY19 to
~INR1.5b in FY20.
Gross margins likely to expand 200bp to around 49%. Better volume growth and
cost rationalization will help absorb ad spend hike.
However, if it grows higher than targeted sales, the company may look at
compromising on EBITDA margins.
45
June 2019

CONSUMER | Voices
Key focus area for FY20
Accelerating Ujala category.
Dishwashing- stepping up investments in the ‘star’ category.
Margo- investing to leverage ‘naturals’ platform.
Innovation and new geographies.
Other points
Total reach 2.8m outlets with 0.86m direct reach.
Online is 15% of the modern trade business. Online — 1% of overall sales, lower
than peers because key categories like HI are not salient in online.
If 15% of modern trade is online then modern trade is around 9% of sales, also
lower than peers.
NWC days have declined from 31 days in FY18 to 23 days in FY19.
Marico
Click below for
Results Update
Current Price INR 375
Buy
Macro comments
Management is reasonably satisfied with 4QFY19 performance with volume
growth and margin expansion attaining targets despite sluggish March (some
rural sluggishness).
Believe if new products continue to do well (most of them are urban premium
products), Saffola recovery swing happens and VAHO targets are attained, the
company should be able to withstand some near-term sluggishness in rural
demand.
Urban general trade in top 6 cities is weak. Three factors are affecting the same
(a) cash and carry leakage, (b) e-Commerce and (c) shrinking urban wholesales.
Management outlook and targets
MRCO is targeting 5-7% volume in Parachute.
VAHO- high single digit growth targeted in 1QFY20 and double digit volume
growth for the full year FY20. Based on input costs and being first destination
for upgraded customers, company has taken 5-6% price cuts in April 2019 in a
few select VAHO brands.
Saffola is likely to report high-single-digit volume growth for the next couple of
quarters. Still ‘work-in-progress’ toward double-digit volume growth in Saffola.
Recovery in Saffola is happening faster than expected. However, management is
still waiting for a couple of quarters before calling out a full recovery.
Food business should cross INR2b sales in FY20.
VAHO usually witnesses 4-5% realization growth every year. Likely to be lower in
FY20 before increasing in subsequent years.
Going forward, targeting over 20% margins in India and 18% plus (with an
upward bias) in the international business.
Commentary on new launches performance
FY19 was characterized by an unprecedented level of new products
introductions from the company.
Parachute Aloe Vera continues to do well.
Nihar Naturals Extra Care Hair Fall Control Oil, launched in West Bengal earlier
this year, gained some traction.
The initial reception for True Roots Botanical Hair Tonic, which tackles the
common consumer problem of premature hair greying, has been positive.
June 2019
46

CONSUMER | Voices
Parachute Advansed Coconut Crème Oil, available in Bangalore, Maharashtra
and Modern Trade & E-commerce across India, has gained reasonable traction.
Set Wet Hair Waxes, also available in an affordable price point pack (INR30),
received very healthy feedback from trade and consumers.
Parachute Advansed Men Hair Creams is seen gaining traction in the
Ecommerce channel.
NPD contribution is expected to double over the next two years.
Commentary on input costs
During the quarter, average market price of domestic copra was down 19% YoY.
With the onset of the flush season, prices have softened on expected lines after
the sharp spike due to the aftermath of Cyclone Gaja in Tamil Nadu late last
year. Other key input prices for the India business during Q4FY19 - Rice Bran Oil
was flat, while Liquid Paraffin (LLP) and HDPE were down 3% and 9% YoY,
respectively. Safflower Oil was up 11% YoY.
Copra prices are trending downwards as anticipated and are expected to stay
benign unless monsoons disappoint.
Management maintained 15-20% decline targets in copra costs for the year.
There is unlikely to be any material price cuts in Parachute. In some ways, the
gradual and not extremely sharp decline in copra costs is enabling healthy
volume growth and less volatility in product prices.
Can attain 150bp gross margin expansion in FY20 even after some increases in
crude prices.
Comments on channels
Owing to robust growth throughout the year, the contribution of Modern Trade
and E-commerce to the India business jumped to 13% and 4% respectively. CSD
sales (7% of India business) grew 9%.
Pursuant to the focus on increasing its rural footprint, the Company has
expanded its direct reach to cover almost every town with a population of 5,000
and above.
Investing in distribution and quality of distribution after a hiatus of 3 years. Also
investing significantly in digital capabilities.
Page Inds
Click below for
Results Update
Current Price INR 20,002
Neutral
Macro
Post GST, inventory held by retailers has been lower than the past. But liquidity
issues were more severe in the trade in 4QFY19.
No sign of an uptick in the last two months, but expect situation to improve.
130m customers targeted for Jockey. The company has 19-20% share in their
target market for men’s innerwear, 5-6% in women’s innerwear, and 6-8% in
ath-leisure.
For target market calculations, the company is assuming six pieces for men’s
innerwear annually, seven pieces for women’s innerwear and four pieces for
ath-leisure.
Reasons for weak realization in 4QFY19
In 4QFY19, some schemes were undertaken to boost sales.
Guidance
10% volume growth targeted, which should lead to 20% sales growth. Price
increase, better mix and greater share of higher priced ath-leisure products are
47
June 2019

CONSUMER | Voices
likely to boost realization. Price increase is usually around 4-6%. This is a big
divergence from earlier management guidance.
Looking to maintain EBITDA margin at 21-22%.
Inventory increase of 32% YoY
Regards to the sharp increase in inventory, company stated that it is preparing
for stronger demand in 1QFY20.
Capacity expansion and new categories
Capex- INR470m in FY19, similar number expected in FY20 as well.
Doubling own capacity from current 260m pieces in five years.
New plant commencement dates—Andhra Pradesh 4QFY21, Karnataka 3QFY20.
Have set up 100+ people team in kids wear with focused marketing as well.
Have only 1.9% market share in kid’s innerwear, so growth opportunity is huge.
Have also launched outerwear products for kids recently.
Stores and channel details
The company had 620 EBO stores at end-FY19. Sales from these contribute
around 16% to total turnover.
Reached ~55,000 stores on the MBO front.
Online sales now at ~4%.
Other points
Attrition is in line with industry standards.
No sharp increase in material costs are being witnessed now.
Parag Milk Foods
Current Price INR 241
Click below for
Results Update
Buy
Performance
Volume growth for FY19 stood at 25-26%.
Lower gross margin during the quarter (3% impact on QoQ basis) was due to
higher SMP sales (2.5% impact) and increased milk prices (~1% impact).
There was INR1-1.5 increase in milk price during the quarter. Due to the lag in
passing, the quarter saw a QoQ impact of ~1% on the gross margin. The
company expects a further increase in milk price (6-7% rise in average
procurement for FY20); to stay at INR26-27 on an annual basis. Average milk
procurement price for FY19 was ~INR24-25.
EBITDA margin contraction in 4QFY19 is temporary and will normalize in the
subsequent quarters.
Reason for higher other expenses: increase in ad spends, volumes linked
variable expenses, and one-offs.
Total one-offs for the quarter stood at ~INR150m. PSI incentive reversal of
INR70m and expected credit loss provisioning of INR80m.
Other highlights
Danone: Response from Delhi has been good; so expect INR70-80m run-rate on
a monthly basis for FY20 (~INR1b for FY20). Sales from Danone unit stood at
INR45m for 4QFY19.
Doubled retail presence in Mumbai.
Total retail touch points now at 0.35m.
Procurement: 14-15llpd for FY19.
Key investments during the year: Investments on brand will lead to savings in
other expenses (e.g. investment to generate own power and investments on
reducing third party packaging costs), investment on distribution front.
48
June 2019

CONSUMER | Voices
Inventory days for the year improved from 82 to 71; will see further
improvement of 5-10 days in FY20.
Capex for FY19 stood at INR800m: as per IPO (INR300m), Danone (INR220-
230m) and rest was maintenance capex.
To cater to South India, it intro
uced
d
Gowardhan Swarna (different aroma and texture) and is priced at a premium
(INR605/kg).
O/s PSI incentive at start of FY19 was INR620m and as on 31st Mar’19 was
INR520m. INR250m annual run-rate going forward.
Milk subsidy from Maharashtra govt. o/s was INR380-400m (majority of which
received in April).
Govt. subsidy scheme of INR5 seems to have been taken off.
60% of SMP sales come from customized products now (Nestle, HUVR and
Mondelez).
Outlook
The company is on way to achieve the vision it had set last year for 2020.
Ad spends to be in the range of 3-3.5% of sales.
Net margins are expected in excess of 5% in FY20.
Tax rate for FY20/21 to be at 24-25%.
Pidilite Industries
Current Price INR 1,270
Neutral
Performance
Click below for
Detailed Concall Transcript
& Results Update
Company expects slower near-term market growth and is cautiously optimistic
of growth hereon.
Price hike in FY18-19 with softer input cost should lead to margin expansion.
Currently, VAM at USD950 spot rate v/s USD1,100 in 4QFY19 (consumption
cost); USD1,300 in 3QFY19 (consumption cost).
Prices unchanged in 4QFY19. Company believes there is no need for price
increase currently as VAM is sequentially improving. Until now, only increased
discount on some products.
Provision for current tax has been made after considering excess provision
written back in earlier years of INR528.7m in Mar’19 and INR464.7m in Mar’18.
Exception item for the quarter was decrease in value of investment of INR110m
for 4QFY19; same was INR180.2m for FY19.
Ind-AS adjustment on option valuation in CIPY led to higher interest cost in FY19
on consol. level.
Ad spends as % of sales was 4.1% for 4QFY19 and 3.6% for FY19.
Subsidiary
24.9% value growth in domestic subsidiaries during the quarter.
Nina subsidiary saw provision of INR44m during the quarter due to IL&FS
investment; it is now fully provided for.
Input cost and forex fluctuation impacted international subs.
Middle East — investing to grow construction chemical, but slowdown and
competition has impacted the business.
Exports to Middle East doing well, but sales are getting captured in domestic
sales.
Egypt — will stay committed for few more years.
Nina & Percept and CIPY are largely B2B businesses while the other construction
business of PIDI is largely B2C. The performance of Nina & Percept during the
June 2019
49

CONSUMER | Voices
quarter was lower as company refrained from accepting certain orders due to
risk in B2B.
New products
In domestic C&B business, variants HEATX and Hi-Per have done very well; Ezee
spray has also performed well.
New product introduced in tiling portfolio has fared well.
Guidance
2HFY19 performance will be a better indicator of growth, in the coming days.
EBITDA margin band at 21-24%; expansion should be primarily led by gross
margin.
Capex: 2.5-3% of sales for FY20.
Tax rate: 32-33% for FY20.
United Spirits
Click below for
Results Update
Current Price INR 558
Buy
Macro and one-offs affecting sales in 4QFY19
In addition to overall consumption slowdown in 4QFY19, impact of excise
changes in Maharashtra and Karnataka affected sales on a one-off basis. In
Maharashtra, surprise excise increase from 1st Jan’19 meant that new stock
effectively took three weeks to reach the market. In Karnataka, there was
upstocking in 4QFY18 ahead of the sharp excise increase from 1st Apr’18.
However, there was no such up-stocking in 4QFY19 as excise increase was only
moderate in the FY20 budget for Karnataka.
Underlying momentum remains strong particularly in Prestige and Above.
1QFY20 will witness some slowdown due to election related disruption and
weak consumer sentiment. The company had called out the election related
impact at the end of 3QFY19 call as well. Management revealed that they are
seeing some recovery in sentiment post elections and expect this improvement
to continue.
Guidance on sales and margins
Management reiterated medium-term target of double-digit sales growth as
well as mid-to-high teen operating margins.
Popular segment is likely to grow at low single-digits going forward.
Consumer opportunity is massive in Prestige and Above and the recent
improved sentiment should help. In addition, management is also working on
the next phase of investments and activity on key P&A brands to boost growth
opportunity.
In addition to faster growth in P&A compared to popular, each premium level is
growing faster than the segment below. Therefore, mix should continue to be a
factor driving operating margin improvement.
P&A share of revenues grew 300bp YoY to 66% of sales in FY19 and will continue
to grow faster.
Despite absorbing some impact of excise increase in Maharashtra in the lower
end of the P&A segment, both growth and margins in Maharashtra are higher
than the national average.
A range of 1.5-5% price increase was received from 10 odd states over the last
5-6 months (most of them in the last 2-3 months) and should help margins. The
increases received so far are adequate to cover half of the ongoing material cost
increases. Further, price increases from these and other states will help margins.
50
June 2019

CONSUMER | Voices
Cost savings and mix effect will also help.
A&P will remain between 9-10% of sales going forward.
Working capital reduction
Management believes that improvements in working capital in FY19 are
sustainable. Average working capital is a key management review metric.
In the earlier years, some of the improvement was aided by changes in business
model (franchising, etc.) but that was not a factor in FY19 reduction in working
capital.
Other points
Launched branded hip flask for scotch.
Income from franchise sales was in line with expectations in FY19.
IPL franchise revenue stood at INR3.1b, EBITDA at INR1.5b and margins ~48%.
Andhra Pradesh constitutes 3-4% of the topline and bottom line for UNSP.
Awaiting more clarity on prohibition news
Mid Prestige segment- Royal Challenge is holding on to its share in most states.
Launched McDowell’s platinum in this segment, which has received a good
response.
Upper Prestige- Signature Premier is reporting higher than peer growth.
Duty free trade in Indian ports and airports will be higher than domestic sales of
Diageo brands.
Asset sales in FY19
Sold four floors of office space in UB Tower in Bangalore and leased it back. Also
sold Four Seasons brand in FY19.
June 2019
51

FINANCIALS/BANKS| Voices
FINANCIALS/BANKS
Asset quality worries are diminishing, with banks reporting a decline in stressed assets, led by benign
slippages and higher recoveries/write-offs during the quarter. However, credit cost for most corporate
banks remains elevated due to ageing-related provisions toward NCLT accounts (Essar Steel, Alok and
Bhushan Power), downgrade of the ILFS exposure and a few other names getting added to the stressed
pool. Coverage ratios across several banks have improved strongly. AXSB/ICICIBC among private corporate
banks and SBIN among PSBs guided for normalization in credit cost. Recoveries from NCLT-related cases and
resolution of stressed power assets have been delayed. However, this is expected to get resolved in FY20,
driving a further improvement in asset quality for the underlying banks.
Most banks like HDFCB, AXSB, KMB and ICICICBC have guided for faster growth in retail term deposits. The
outlook for corporate banks is improving, given the moderation in slippages, the reduction in total stressed
loans and the improving profitability.
Outlook for FY20
Easing provisioning pressure
Exposure towards troubled sectors/accounts
Yields are expected to improve led
Management is focusing to
The bank maintains higher provision on
by improving asset mix and rising
apply a consistent conservative
the stressed sectors, identified two more
mix of performing loans. However,
provisioning policy, but expects
stressed assets and made additional
margins are likely to remain flat as
credit cost to stabilize at its
provision of INR1.6b.
funding cost stays elevated.
long-term average levels of
~60% of the BB & below portfolio is from
Expects cost to assets to decline to
~110-115bp.
the power, Iron & steel and infra
<2% in next three years.
Elevated downgrade cycle of
construction sector.
Guided target RoE of 18% over
the corporate book is now
Non-fund based exposure on NPA book is
medium term (FY22), driven by
complete. BB & below book is
INR29b, while non-fund exposure
improving credit cost, margins
expected to be stable at ~2-3%
outstanding in the BB & below portfolio is
expansion, lower opex and higher
of the corporate book (at its
INR22b.
fee income.
long-term average).
On the merger, expect system
BOB will bring provision
Exposure towards ILFS is INR45.7b in
integration to take 18 months to
coverage of Dena & Vijaya
BOB, INR12.2b in Dena & Vijaya. Total
complete.
Bank to the level of the bank.
NPL is INR22b, on which it holds provision
The bank expects merged entity to
Expect NNPA to reach 2.75% by
of 25%. The other assets in the amber
grow in double digits.
FY20 from 3.65% (merged
and green category are secured.
It is focused on improving its sales
entity) currently.
Total DHFL exposure is INR30b in BOB
force team, which could support
and INR10b in Dena/Vijaya.
business growth.
The bank has INR20b exposure to ADAG
BoB is providing additional
group.
products/services such as working
Nil exposure to Jet Airways.
capital solutions, wealth
management products, etc., to
generate fee income.
Believes 10% ROE for the merged
entity is achievable.
The bank expects margins to
ICICIBC guided for credit cost of
Exposure to power assets stood at
remain stable at ~3.4% with a
1.2%-1.3% in FY20 as PCR has
INR374b (~31% of total power assets are
positive bias.
already crossed targeted ~70%.
either NPLs or rated BB and below). Out
Expects SME/corporate loan book
It expects credit cost to sustain
of the remaining exposure to power
to pick up going forward. Also,
at ~20% of PPOP on a long
assets (excluding SEBs), ~76% is currently
growth in retail momentum to
term basis.
rated A- or higher.
remain strong.
Exposure towards NBFC, HFC (incl non-
Bank is expecting higher growth in
fund) stood at INR432b (~7.4% of total
the term deposits over CASA
net advances) while exposure towards
growth momentum.
builder portfolio (incl non-fund) stood at
Bank maintained its guidance to
INR196.5b (3.3% of total net advances)
achieve 15% RoE by Jun ’20.
Total provision coverage on ILFS exposure
of INR8.2b (includes fund based and non-
fund) stands at 75%.
KEY HIGHLIGHTS FROM CONFERENCE CALL
Axis Bank
Bank of Baroda
ICICI Bank
June 2019
52

FINANCIALS/BANKS | Voices
St. Bank
of India
Bank guided for domestic margins
of ~3.25% for FY20.
Expects credit growth of 12%-14%
in FY20.
C/I ratio to improve on the back of
lower wage provisions and
improved digitalization.
ROA for FY20E in the range of
0.75%-1%, though believes that
1% ROA is achievable if the same
trend continues.
SBIN made more than the
required provisions on all
legacy assets. It, thus, expects
provision write-backs from
legacy accounts in future.
It expects fresh slippages in the
range of 1.4%-1.5% for FY20
and credit cost to remain
below 1%. Thus, credit cost are
likely to moderate significantly.
The bank expects to recover INR160b
from three NCLT accounts resolutions
(Essar Steel, Bhushan Power and Alok
Industries).
Non-fund exposures on gross NPLs stand
at INR87b.
Total ILFS exposure is INR34.87b, of
which INR23.6b is standard. Total PCR
maintained on NPA is 40%, while it holds
provisions of 22% on its standard
exposure under ‘Red’ category.
AU Small Finance Bank
Current Price INR 705
Click below for
Detailed Concall Transcript &
Results Update
Buy
Balance sheet and P&L related
Average SA cost was at 6.3% for FY19.
Reduction in SA rate in April is in line with the market rate. There is more
traction in retail TD and therefore reducing SA rate made sense.
Bank is expecting to break even in branch banking this fiscal. It is expecting ROA
to come in at (-0.1%) for the branches which are already in existence.
Out of total disbursement of INR160b, ~INR3.6b is non-fund based (BG), which is
the sanctioned amount.
Out of INR15b of retail TD accretion, ~INR3.8 is retail deposits less than
INR10m/INR20m.
Bank is not expecting cost of funds to come down drastically in coming fiscal.
Bank has started increasing yields from Nov/Dec and therefore AUM IRR should
reflect the disbursements yield in a quarter or two.
Bank has added more names on co-operative banks and govt. side on the deposit
side. Co-operative bank money is non-callable and is for more than 1 year.
Almost 70% of the NBFC book is rated investment grade, and ~15% is unrated as
they are relatively new NBFCs in the market.
Real estate has around ~320 to 350 accounts…
One book consists of affordable housing which typically consists of G+2 floor
developers.
Another book is INR50m to INR100m which are small developers.
More than 70% of the real estate book is from Rajasthan.
Cross sell income: 1HFY19 had some one-time opportunistic cross-sell income.
Collection efficiency is focused on low-buckets category.
The bank has 170 accounts in NBFC book and lends to high-rated entities.
Asset Quality
Last quarter focused on collection from the small buckets/early buckets. The
collection efficiency is focused on low buckets category.
Major contributors to GNPA are from wheels and SBL.
Excluding the below 90 days overdue loans, PCR is 55%.
Guidance
Fee income is expected to grow at 20%.
Largely SBL, MSME and wheels will continue to grow handsomely (+30% growth
in FY20). Focusing more on used wheel and cash on wheel which normally has
higher yields.
Bank is expecting the CI ratio to be around the current levels.
Bank is planning to open 27 branches in the metros (Mumbai/ Delhi/ Jaipur /
Pune). There would be smaller in size and therefore opex is expected to trend
downward.
June 2019
53

FINANCIALS/BANKS | Voices
Axis Bank
Click below for
Detailed Concall Transcript &
Results Update
Current Price INR 809
Buy
Balance sheet & P/L related
The bank aims for a cost-to-assets ratio under 2% in three years.
Yields will continue improving because of better pricing power of banks.
The bank believes that the margin will remain flat in the coming year but expand
slightly over FY21.
The bank is moving toward retail deposits aggressively and is ready to offer
higher interest rates. Hence, cost of deposits has increased in this quarter.
The corporate banking fees have now stabilized and will start picking up slowly
in the coming quarters.
Asset quality
The bank is using a conservative formula-driven provisioning policy on the
corporate-lending portfolio.
Expect credit cost to stabilize below its long-term three-year average.
Net security receipts (SR) stood at INR29b and hold a provision of INR2.5b.
Maintains higher provision on the stressed sectors, identified two more stressed
sectors and made an additional provision of INR1.6b.
Exposure of INR21.4b on land parcels: Advised by the RBI to provide 100%
provision against land assets over four quarters starting 31st Mar’19.
Accordingly, the bank has provided INR5.4b by debiting the P&L account in the
current quarter and the balance of INR16.1 b has been provided by debiting the
reserves which would be charged to P&L over the next three quarters by
recouping from the reserves.
Non-fund exposure on BB & below pool is INR22b, which remains standard.
Downgrade of INR9.8b in BB & below pool in the current quarter.
~60% of the BB & below portfolio is from the power, iron & steel and infra
construction sector.
Slippages: One account of INR3.1b slipped from Engineering & Electronics
sector.
Net slippages from agri sector were negative due to higher upgrades &
recoveries.
BB & below book is expected to be stable at ~2-3% of the corporate book (at its
long term average).
The bank has accumulated PWO (write-offs) of INR187b and recovered 13% over
the last 12 months.
Others
The wealth management business ‘Burgundy’ is one of the largest with total
AUM of INR1,327b.
The bank has ~6m credit cards in force and is the fourth largest credit card
issuer in the country with a market share of 12%.
Share of working capital (WC) loans in SME loans is ~79%.
Around ~52% of total incremental SA accounts opened through tab banking.
Also, ~46% of the total personal loans disbursements made through digital
channels.
The bank’s penetration rate is still low in the unsecured book, and thus, offers a
huge room for growth.
Mr. Ganesh Sankaran joined as head of wholesale banking.
The bank created a separate sales force team focusing on branch banking.
June 2019
54

FINANCIALS/BANKS | Voices
Bank of Baroda
Current Price INR 124
Click below for
Results Update
Buy
Balance sheet
International portfolio has stabilized now and expected to improve going
forward. Introduced new products in International business which will be
margin accretive.
Focusing on continuous improvement in RWAs.
Market share in auto loans has improved.
In certain states like Karnataka, Gujarat and Maharashtra, it has 10%+ market
share.
Plans to sell down some non-core assets.
P&L related
Cost of domestic deposits increased by 10bp QoQ.
Domestic margins improved as a result of one-offs due to income tax refund.
Asset quality
Fresh slippages in Agri portfolio have increased.
Slippages breakup: Corporate-INR10b; Retail-INR2b and SME/Agri -INR7b each.
Recoveries delayed in Essar Steel, Bhushan and Alok Industries.
Provisions breakup: (i) INR10b made on account of accounting entry made in
Bhushan, Alok, Essar Steel. (ii) INR18.75b accelerated provision made on
Videocon, Rcom, Aircel. Now holds 70%+ provision coverage on these accounts.
(iii) Normal provisions of INR12b. (iv) Fraud account provisioning of INR2.5b and
the rest are SME/retail provisions.
ILFS exposure: Dena and Vijaya Bank exposure: INR12.22b. BOB exposure:
INR45b. Thus, total ILFS exposure is INR57.90b. Total NPAs exposure in ILFS is
INR22b on which it holds provisions of 25%.
Reliance commercial and Home finance exposure is INR20b.
DHFL exposure: Exposure of INR30b in BoB and INR10b in Dena & Vijaya. All
exposure is secured.
Religare exposure is minimal.
Nil exposure to Jet Airways.
Total AUCA book stood at INR180b.
Consolidated entity
Same technology to be implemented in the merged entity and thus integration
will require six months.
Combined entity NNPA is 3.7%
Expect NNPA to be below 2.8% by FY20.
Absolute NNPA is INR220-230b.
Deposits – INR7t.
RWA – INR5.07t.
Guidance:
Expect merged entity to grow loan book in double digits.
Expect ROE of 10% and credit cost of 1%. Expect NNPA to reach 2.75% by FY20.
DCB Bank
Click below for
Detailed Concall Transcript &
Results Update
Current Price INR 235