Highlights of this edition
§
Sensex crossed 21k again with
3% returns MoM in Feb-14
§
Capital Goods (9%), Auto (9%)
were top performing sectors
§
Cyclicals continue to trade at
huge discount to historic avg.
March 2014
 Motilal Oswal Financial Services
Summary
q
Indian Equities: Feb saw positive returns
–
–
Feb-2014 saw Indian markets cross 21k again with 3% returns MoM. Indian equities are trading
at 13.6x FY15E earnings, below its long period average.
Mid-caps performance was in-line with the market with 3% returns.
q
Capital Goods (9%) and Auto (9%) were the top performing sectors. Telecom (-9%) on increased
About the product
spectrum outlay and Metals (-5%) due to cancellation of coal blocks were top underperformers. As the tagline suggests,
–
Continuous outperformance in JLR estimates resulted in Tata Motors giving 19% returns. NTPC
BULLS & BEARS
is a
remained the worst performer on back of new CERC regulations with -11% returns.
handbook on valuations in
India. Every month it will
q
Sector valuations: Tech, Healthcare continue to impress; Autos attractive
cover:
–
Healthcare is trading at 23.4x and at 7% premium to historical average; it trades at 69%
§
Valuations of Indian
premium to Sensex PE. The sector is trading at its recent high valuations.
markets vis-à-vis global
–
Consumer sector premiums have come down from highs of 34x in May-13 to 29x currently, it
markets
still trades at 21% premium to its PE average. The sector will continue to see volume slowdown
§
Current valuation of
and earnings moderation in FY15.
companies in various
sectors
q
Nifty-50 highlights: Cyclicals continue to trade at huge discount
§
Sectors which are
–
All financial companies are trading at a discount to its historic averages expect Kotak Bank.
currently valued at
–
In Auto, Bajaj Auto and M&M remain the only stock trading at premium to its historical avg.
premium/discount to
–
Companies with significant discount to their averages are: IDFC (-58%), NMDC (-51%), NTPC (-
their historical long-
41%), Tata Power (-37%), JP Associates (-35%), Cairn (-33%), Power Grid (-29%), BPCL (-23%).
period averages
Research & Database Teams (Rajat@MotilalOswal.com)
–
Sector performance: Capital Goods, Auto lead the pack
BULLS & BEARS | March 2014
2
 Motilal Oswal Financial Services
Contents
q
q
q
q
q
Global Equities: Performance and valuation snapshot
Indian Equities: Key valuation metrics
Sensex and Sector performance
Nifty companies valuations
Sector highlights: Overview and specific sector valuations
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
Ø
NOTES:
§
Prices as on 28 Feb 2014
§
BULL icon:
Sectors trading
at premium to historic
averages
§
BEAR icon:
Sectors trading
at discount to historic
averages
AUTO
BANKS / FINANCIALS
CAPITAL GOODS
CEMENT
CONSUMER
HEALTHCARE
MEDIA
METALS
OIL & GAS
REAL ESTATE
RETAIL
TECHNOLOGY
TELECOM
UTILITIES
3
§
Valuations are on
12-month forward basis
unless otherwise
mentioned
§
Sector valuations are
based on MOSL coverage
companies
§
Global equities data
sourced from Bloomberg.
Sensex valuations based
on MOSL estimates
BULLS & BEARS | March 2014
 Motilal Oswal Financial Services
Global equities:
Sensex performance flat CY14YTD; Indonesia outperforms
Ø
Indian equities are trading at 13.6x FY15E earnings; at a premium to most other EMs.
Ø
Japan, US, Taiwan and Indonesia trade at premium to India.
Ø
Indonesia market remains the best performing market for CY14YTD. Indonesian markets have shown resilience due to
the elections spending supporting consumer and media companies.
Ø
India’s RoE remains superior to most EMs (except Indonesia) - an important differentiator for valuation premium.
Sensex v/s Other Markets
PE (x)
Mkt Cap YTD Chg
(USD T)
(%)
Japan
US
Taiwan
Indonesia
UK
MSCI EM
Brazil
Korea
China
Russia
India
4.5
22.6
0.9
0.4
4.0
7.3
0.9
1.2
3.3
0.7
1.1
-9
1
0
8
1
-4
-9
-2
-3
-4
0
CY13 /
FY14
20.3
17.2
24.1
21.0
17.8
11.5
17.7
10.0
10.3
4.7
15.8
CY14 /
FY15
19.2
15.8
15.0
14.4
13.6
10.6
9.5
9.2
7.9
4.7
13.6
Prem / Disc to India
PE (%)
CY13 /
FY14
28
9
53
33
13
-27
12
-37
-35
-70
CY14 /
FY15
41
16
10
5
0
-22
-31
-32
-42
-65
PB (x)
CY13 /
FY14
1.5
2.6
1.8
2.6
2.0
1.5
1.1
1.0
1.4
0.7
2.6
CY14 /
FY15
1.6
2.4
1.6
2.6
1.9
1.3
1.0
0.9
1.1
0.6
2.3
RoE (%)
CY13 /
FY14
7.5
15.2
7.7
12.2
11.5
12.6
6.3
10.2
13.3
13.9
16.2
CY14 /
FY15
8.2
15.5
10.9
18.1
13.7
12.7
10.7
9.4
13.9
12.2
16.5
Source: Bloomberg/MOSL
BULLS & BEARS | March 2014
4
 Motilal Oswal Financial Services
Global equities:
India at discount to long period average
Ø
Indian markets trade at 13.8x, 10% discount to long period average. Indonesia trades 5% above its historic average.
Ø
India’s contribution to World Market cap is at 1.8%, marginally below its long period average.
Ø
India’s market cap appreciated 4.0x in last 10 years. Indonesia and China are the best growing equity market in the
last 10 years.
Developed economies trading at premium to LPA
Mkt cap appreciation since Dec 2003 (x)
7.2
6.5
4.2
4.0
PE (x)
Country
Current
LPA
Prem/Disc (%)
UK
13.6
11.4
19.3
US
15.8
14.8
6.4
Indonesia
14.4
13.7
4.6
Taiwan
15.0
14.8
0.9
MSCI EM
10.6
11.3
-6.2
India
13.8
15.3
-9.9
Korea
9.6
10.8
-10.6
Japan
19.2
22.5
-14.5
Russia
4.7
6.6
-28.4
Brazil
9.5
13.8
-31.5
China
7.9
16.3
-51.2
Source: Bloomberg, 12 month forward valuation.
3.6
3.3
2.2
1.7
1.7
1.4
India's Contribution to World Market cap (%)
India's Contribution to World Mcap (%)
3.50
2.75
Average of 2%
2.00
1.25
0.50
0.7
1.8
3.0
3.3
BULLS & BEARS | March 2014
5
 Motilal Oswal Financial Services
Indian Equities:
Valuations below long period average
Ø
BSE Sensex PE at 13.8x is at 10% discount to averages; PB at 2.3x is at 15% discount to its averages.
Ø
Sensex RoE at 16.6% is below the long period average of 19.4%.
12-month forward Sensex P/E (x)
27
22
17
12
10.7
7
1.3
10 Year Avg: 15.3x
24.6
12-month forward Sensex P/B (x)
4.3
3.5
2.8
10 Year Avg: 2.7x
4.2
13.8
2.0
1.6
2.3
12-month forward Sensex RoE (%)
25.0
22.5
20.0
17.5
15.0
15.8
10 Year Avg: 19.4%
India’s market cap to GDP (%)
103
82
Average of 69% for
the period
24.2
83
95
88
69
64
42
52
55
60
16.6
23
BULLS & BEARS | March 2014
6
 Motilal Oswal Financial Services
Indian Equities:
Tech, Healthcare saw earnings upgrade post 3QFY14 results
Ø
Healthcare and Technology saw earnings uptick post 3QFY14 results aiding in healthy PAT growth.
Ø
Financials should see a rebound in earnings in FY15, after a flat FY14 due to high credit cost and stress creation.
Ø
Export led beneficiaries - Healthcare and Technology are expected to continue its healthy PAT growth in FY15
also, albeit at a lower pace.
Ø
Auto sector is likely to report double-digit PAT growth largely led by superior performance of Tata Motors (JLR).
Ø
After two consecutive years of de-growth, Capital Goods is expected to show flat growth in FY15.
Ø
Consumer to witness moderate growth over FY14-15 due to slowdown in volumes.
Ø
Oil & Gas is expected to see double-digit growth in FY15 after two years of slow growth.
SENSEX GROWTH & VALUATIONS
PAT Growth (%) #
PE (x)
Weight
Mcap
Sector
(%)
(USD b) FY13 FY14E FY15E FY13 FY14E FY15E
Auto
10.8
55
-5.4 29.8 12.6 15.7 12.1 10.7
Banking & Financial 25.5
92
21.7 1.4
17.4 13.3 13.1 11.2
Capital Goods
5.8
23
-1.5 -34.8 -0.6
12.5 19.1 19.2
Consumer
12.1
61
22.3 13.2 15.2 35.4 31.2 27.1
Healthcare
6.0
35
21.3 46.2 13.1 37.3 25.5 22.6
Metals
3.3
17
-21.7 19.4 23.7 11.3 9.4
7.6
Oil & Gas
12.1
90
-0.9
6.2
13.3 11.3 10.6 9.4
Technology
19.8
131
21.9 26.7 19.7 27.5 21.7 18.2
Telecom
1.9
19
-46.6 30.7 86.8 50.5 38.6 20.7
Utilties
2.8
43
6.5
3.1
3.0
9.6
9.3
9.1
Sensex
100
566
5.4 12.9 15.7 17.8 15.8 13.6
# for Sensex we have taken EPS Growth; Sensex numbers are free float adjusted.
PB (x)
FY14E
3.2
1.9
2.2
13.3
5.8
0.7
1.4
6.1
1.9
1.9
2.6
ROE (%)
FY14E
26.6
14.2
11.5
42.7
22.6
7.6
13.2
28.2
5.0
20.2
16.2
FY13
4.0
2.2
2.4
15.0
6.8
0.8
1.6
7.4
2.3
1.9
2.9
FY15E
2.6
1.7
2.0
12.0
4.7
0.7
1.3
5.0
1.8
1.7
2.3
FY13
25.7
16.4
19.3
42.5
18.2
6.9
13.8
27.0
4.5
19.6
16.5
FY15E
24.2
14.8
10.6
44.2
20.7
8.7
13.5
27.3
8.5
19.0
16.5
BULLS & BEARS | March 2014
7
 Motilal Oswal Financial Services
Sector performance:
Cap Goods, Auto lead the pack; Tata Motors stands out
Ø
Indian markets gave 3% returns
MoM during the month of
February 2014.
Ø
Capital Goods (9%) and Auto
(9%) were the top performing
sectors followed by Retail (8%)
and Healthcare (7%). Telecom
(-9%) on increased spectrum
outlay and Metals (-5%) due to
cancellation of coal blocks were
top underperformers.
Ø
Continuous outperformance in
JLR estimates resulted in Tata
Motors giving 19% returns,
followed by Axis Bank (13%),
L&T (12%), Dr Reddy’s (11%),
M&M (9%) and Sun Pharma
(9%).
Ø
NTPC remained the worst
performer on back of new
CERC regulations with -11%
returns followed by Bharti
Airtel (-9%), Cipla (-6%), Sesa
Sterlite (-6%) and Hindalco (-
4%).
BULLS & BEARS | March 2014
8
Best and worst performing sectors MoM Feb-14 (%)
9
9
8
7
7
5
4
3
3
3
3
2
0
0
-1
-1
-5
-9
Best & worst performers in Sensex MoM Feb-14 (%)
19
13 12 11
9 9
7 6 6 6
4 3 3 3 2
2 1 1 0
0 -1
-3 -3 -3 -4 -4 -4
-6 -6
-9
-11
 Motilal Oswal Financial Services
Nifty:
Cyclicals continue to trade at huge discount
Ø
All Financials companies are trading at a discount to its long term averages except Kotak Mahindra Bank.
Ø
In the Auto space, Bajaj Auto and M&M remain the only stock trading at premium to its historical average.
Ø
Companies with significant discount to their averages are: IDFC (-58%), NMDC (-51%), NTPC (-41%), Tata Power (-37%),
Jaiprakash Associates (-35%), Cairn India (-33%), Power Grid (-29%), BPCL (-23%).
Name
Sector
Bajaj Auto
Auto
Hero MotoCorp
Auto
Mahindra & Mahind Auto
Maruti Suzuki
Auto
Tata Motors
Auto
Axis Bank
Banks - Private
HDFC Bank
Banks - Private
ICICI Bank
Banks - Private
IndusInd Bank
Banks - Private
Kotak Mahindra Ban Banks - Private
Bank of Baroda
Banks - PSU
Punjab National Ban Banks - PSU
State Bank
Banks - PSU
HDFC
Banks - NBFC
IDFC
Banks - NBFC
BHEL
Capital Goods
Larsen & Toubro
Capital Goods
ACC
Cement
Ambuja Cements
Cement
Grasim Industries Cement
Jaiprakash AssociateCement
Ultratech Cement
Cement
Asian Paints
Consumer
Hind. Unilever
Consumer
ITC
Consumer
Current
14.7
14.0
11.8
13.8
8.3
8.7
15.2
10.9
12.8
18.6
5.2
4.9
7.1
20.6
6.4
16.7
20.5
19.2
15.7
8.6
26.4
19.8
30.9
30.6
29.9
PE (x)
Relative to Sensex P/E (%)
10 Yr Avg Prem/Disc (%)
Current
10 Yr Avg
12.5
18
7
-18
14.7
-5
1
-4
11.2
5
-15
-27
14.7
-6
0
-4
11.4
-27
-40
-25
12.5
-31
-37
-19
20.8
-27
10
36
16.9
-35
-21
10
17.2
-26
-7
12
17.8
5
35
16
6.7
-22
-62
-56
6.3
-22
-65
-59
8.8
-19
-48
-42
22.0
-7
49
44
15.2
-58
-54
-1
17.5
-5
21
14
20.5
0
48
34
15.2
26
39
-1
15.0
5
14
-2
7.7
12
-38
-50
40.9
-35
91
167
13.7
45
44
-11
22.9
35
124
50
26.5
15
122
73
21.7
38
117
41
Current
5.0
5.7
2.9
2.0
2.0
1.4
3.2
1.5
2.1
2.5
0.7
0.5
0.7
4.1
0.8
1.2
2.9
2.6
2.5
1.0
0.7
2.7
10.0
17.7
10.4
PB (x)
10 Yr Avg Prem/Disc (%)
5.5
-9
6.7
-16
3.1
-7
2.5
-19
2.9
-29
2.0
-33
3.3
-5
1.8
-13
1.9
10
2.6
-1
1.0
-37
1.1
-52
1.2
-39
4.6
-9
2.0
-58
4.2
-71
4.2
-33
2.9
-12
3.0
-17
1.4
-33
1.8
-64
2.9
-8
8.2
22
20.4
-13
6.5
60
Relative to Sensex P/B (%)
Current
10 Yr Avg
121
105
148
150
25
13
-12
-8
-11
6
-40
-24
39
24
-32
-34
-7
-29
11
-5
-71
-62
-76
-59
-67
-55
81
69
-63
-24
-47
55
25
58
13
9
8
10
-57
-46
-71
-32
17
8
338
205
676
656
356
142
BULLS & BEARS | March 2014
9
 Motilal Oswal Financial Services
Nifty:
Cyclicals continue to trade at huge discount
Name
Cipla
Dr Reddy’ s Labs
Lupin
Ranbaxy Labs
Sun Pharma
Hindalco
JSPL
NMDC
Sesa Sterlite
Tata Steel
BPCL
Cairn India
GAIL
ONGC
Reliance Inds.
DLF
HCL Technologies
Infosys
TCS
Wipro
Bharti Airtel
Coal India
NTPC
Power Grid Corp.
Tata Power
Sensex
Sector
Healthcare
Healthcare
Healthcare
Healthcare
Healthcare
Metals
Metals
Metals
Metals
Metals
Oil & Gas
Oil & Gas
Oil & Gas
Oil & Gas
Oil & Gas
Real Estate
Technology
Technology
Technology
Technology
Telecom
Utilities
Utilities
Utilities
Utilities
Current
19.0
20.6
23.9
34.8
24.8
8.4
8.6
7.3
7.4
7.9
9.9
5.6
12.1
8.2
9.6
35.3
16.9
17.0
20.0
16.4
21.5
8.6
9.7
10.2
10.9
13.8
PE (x)
Relative to Sensex P/E (%)
10 Yr Avg Prem/Disc (%)
Current
10 Yr Avg
21.1
-10
38
38
33.8
-39
49
121
17.6
35
73
15
42.0
-17
152
174
20.3
22
80
32
8.6
-3
-39
-44
9.8
-13
-38
-36
14.9
-51
-47
-3
6.7
11
-46
-56
10.9
-27
-43
-29
12.8
-23
-29
-16
8.4
-33
-59
-45
11.3
7
-12
-26
9.7
-16
-40
-37
12.3
-22
-31
-20
36.9
-4
156
141
14.4
17
22
-6
19.3
-12
23
26
18.1
10
45
18
16.8
-2
19
9
24.3
-11
56
58
12.2
-30
-38
-20
16.5
-41
-30
8
14.3
-29
-26
-7
17.3
-37
-21
13
15.3
-10
Current
2.7
4.4
5.4
3.5
6.0
0.9
0.9
1.6
1.2
1.3
1.4
1.0
1.6
1.3
1.1
0.9
4.7
3.9
6.8
3.7
1.7
3.1
1.0
1.3
1.4
2.3
PB (x)
10 Yr Avg Prem/Disc (%)
3.8
-30
3.2
36
4.1
31
5.2
-33
4.4
35
1.7
-48
3.2
-71
4.8
-67
2.2
-46
2.4
-46
1.3
6
1.2
-22
2.1
-23
2.1
-35
1.7
-35
2.3
-61
3.0
56
5.7
-31
6.3
8
4.1
-10
3.3
-50
4.7
-33
2.1
-51
2.0
-34
2.1
-33
2.7
-15
Relative to Sensex P/B (%)
Current
10 Yr Avg
17
41
93
20
137
53
55
95
163
65
-61
-37
-59
19
-31
79
-47
-17
-44
-13
-41
-53
-58
-55
-31
-24
-41
-24
-53
-39
-61
-14
108
12
71
110
200
134
61
51
-27
24
37
73
-55
-23
-42
-25
-38
-21
BULLS & BEARS | March 2014
10
 Motilal Oswal Financial Services
Midcap:
Feb-14 performance in-line with market
Ø
During Feb-14, Mid-caps delivered returns in-line with the market at 3%.
Ø
Top mid-cap performers in Feb-14 were Symphony (19%), PTC India (12%), Phoenix Mills (12%), Crompton Greaves (11%),
TVS Motors (11%), CESC (10%), Petronet LNG (10%) and Sobha Developers (10%). However, except Symphony and Petronet
LNG, all other companies trade at discount to their averages.
Ø
Underperformers in Feb-14 were Indiabulls Real Estate (-12%) and NALCO (-2%). Both these companies trade at huge
discount to long period averages.
Company
Symphony
PTC India
Phoenix Mills
Crompton Greaves
TVS Motor Co.
CESC
Petronet LNG
Sobha Developers
Thermax
Exide Inds.
HPCL
Ipca Labs.
South Ind.Bank
LIC Housing Fin.
JP Associates
ING Vysya Bank
Torrent Pharma.
India Cements
Bajaj Finance
Britannia Inds.
PVR
Havells India
Natl. Aluminium
Indbull.RealEst.
Current
17.8
6.4
21.9
15.1
11.1
8.5
11.6
10.8
24.5
17.4
11.4
17.9
5.2
7.2
26.4
13.5
17.5
16.4
9.0
24.3
31.6
17.0
10.5
5.0
PE (x)
10 Yr Avg Prem/Disc (%)
7.7
132
17.8
-64
43.5
-50
20.6
-26
11.7
-5
9.0
-6
11.2
4
18.4
-41
18.6
31
16.5
6
12.4
-8
12.2
46
6.4
-18
7.8
-8
40.9
-35
12.8
5
12.7
37
15.3
7
16.1
-44
21.9
11
45.3
-30
17.5
-3
16.2
-35
20.8
-76
Relative to Sensex P/E (%)
Current
10 Yr Avg
29
-50
-54
16
59
184
10
34
-19
-24
-38
-41
-16
-27
-22
20
77
21
26
7
-17
-19
30
-20
-62
-59
-48
-49
91
167
-2
-16
27
-17
19
0
-35
5
76
43
129
196
23
14
-24
6
-64
35
Current
6.2
0.7
1.7
2.2
2.4
0.9
1.6
1.2
3.6
2.3
0.6
4.7
0.8
1.2
0.7
1.3
4.4
0.4
1.7
11.2
3.1
4.5
0.7
0.3
PB (x)
10 Yr Avg Prem/Disc (%)
2.8
124
1.5
-54
3.1
-45
4.4
-49
1.4
71
1.1
-16
2.8
-42
2.3
-48
4.6
-20
3.1
-26
0.9
-35
2.6
79
0.8
-7
1.4
-14
1.8
-64
1.3
4
3.3
34
1.3
-67
1.1
57
7.0
60
2.0
51
4.1
10
1.8
-62
0.8
-65
Relative to Sensex P/B (%) Price Chg (%)
Current
10 Yr Avg
MoM
174
3
19
-69
-43
12
-25
14
12
-1
63
11
7
-47
11
-59
-58
10
-29
4
10
-48
-16
10
59
69
9
2
16
9
-73
-65
8
105
-3
7
-66
-69
6
-47
-48
5
-71
-32
4
-41
-52
3
92
21
3
-82
-53
3
-26
-60
3
390
158
0
35
-25
-1
99
53
-1
-71
-35
-2
-87
-69
-12
BULLS & BEARS | March 2014
11
 Motilal Oswal Financial Services
Sector valuations:
Tech, Healthcare continue to impress; Autos attractive
Ø
Export-oriented sectors of Technology and Healthcare are best placed, despite their impressive run, with valuations above
their historical averages. Autos, led by Tata Motors (superior performance by JLR) and excise duty cut, is attractively placed
(5% below long period average).
Ø
Private Banks have better asset quality. PSU Banks on the other hand have concerns on growth moderation as well as asset
quality, resulting in them trading at significant discount (-48%) vis-à-vis Pvt Banks (-8%).
Ø
Capital Goods trades at 43% discount to historic PB average. However, expectation of earnings recovery in FY15, aided by
excise duty cut, results in them trading marginally above their historic PE average (+7%).
Ø
Though Consumer sector premiums have come down from highs of 34x in May-13 to 29x currently, it still trades at 21%
premium to its PE average. The sector will continue to see volume slowdown and earnings moderation in FY15.
Ø
Telecom trades at 5.9x EV/EBITDA (31% discount to average) and close to its all-time lows. Post passive consolidation, strong
revenue growth is expected in FY15, however, current spectrum auction outlay will impact earnings growth.
Sector
Auto
Banks - Private
Banks - PSU
NBFC
Capital Goods
Cement
Consumer
Healthcare
Media
Metals
Oil & Gas
Real Estate
Retail
Technology
Telecom
Utilities
Current
11.3
11.9
5.5
9.2
21.5
16.1
29.0
23.4
19.3
7.8
8.9
21.7
20.9
17.7
18.3
9.6
PE (x)
Relative to Sensex
P/E (%)
Current
2.6
2.1
0.6
1.8
2.5
1.7
10.1
4.9
3.8
0.8
1.2
0.8
3.5
4.8
1.6
1.0
PB (x)
Relative to Sensex
P/B (%)
10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
11.9
-4.6
-18
-23
15.1
-21.1
-14
-3
7.0
-20.3
-60
-54
11.2
-17.6
-33
-29
20.0
7.5
56
28
13.3
21.7
17
-12
24.0
20.8
110
59
21.8
7.2
69
46
21.2
-9.1
40
36
9.3
-15.3
-43
-41
11.0
-19.2
-36
-28
20.5
6.1
57
29
28.7
-27.1
51
84
17.1
3.8
28
13
22.1
-17.3
33
46
14.2
-32.5
-31
-9
10 Yr Avg Prem/Disc (%) Current 10 Yr Avg
3.0
-11.4
15
10
2.3
-8.4
-8
-15
1.1
-48.0
-74
-58
2.1
-15.7
-21
-21
4.4
-43.0
10
58
2.4
-26.1
-23
-13
8.2
23.3
343
212
4.2
15.1
114
60
3.5
6.6
65
30
1.8
-52.7
-63
-36
1.8
-32.8
-48
-35
1.3
-39.5
-64
-53
4.2
-16.6
55
57
5.1
-6.2
111
90
2.5
-36.8
-30
-7
1.7
-39.3
-55
-37
BULLS & BEARS | March 2014
12
 Motilal Oswal Financial Services
Auto:
Attractively placed; excise duty cut may aid volume growth
Auto sector PE trades at discount of 5% to
its average PE. With the recent excise duty
cut from 12% to 8% across 2Ws, UVs and
CVs and election spending led macro
environment improvement, makes the
sector attractively placed.
Hero Motocorp/TVS Motor is at attractive
valuations; earnings momentum to
continue in 4QFY14/FY15.
JLR led growth of Tata Motors and margin
improvement from product/geographical
mix will continue to drive earnings in FY15.
5.0
4.0
3.0
2.0
1.0
3.0
2.6
Auto Sector P/E (x)
31
24
17
10
3
11.9
10 Yr Avg (x)
50
25
Relative to Sensex PE (%)
11.3
0
-25
-50
-23
-18
Auto Sector P/B (x)
10 Yr Avg (x)
40
25
10
-5
-20
Relative to Sensex PB (%)
10
15
Sector Performance CY14 YTD
Auto
Company
Ashok Leyland
Bajaj Auto
Eicher Motors
Exide Inds.
Hero Motocorp
M&M
Maruti Suzuki
Tata Motors
TVS Motor Co.
Current
-
14.7
22.8
17.4
14.0
11.8
13.8
8.3
11.1
+3%
PE (x)
10 Yr Avg Prem/Disc (%)
15.5
-
12.5
18
12.3
86
16.5
6
14.7
-5
11.2
5
14.7
-6
11.4
-27
11.7
-5
Relative to Sensex P/E (%)
Current
10 Yr Avg
-
1
7
-18
65
-20
26
7
1
-4
-15
-27
0
-4
-40
-25
-19
-24
Current
0.9
5.0
5.5
2.3
5.7
2.9
2.0
2.0
2.4
PB (x)
10 Yr Avg Prem/Disc (%)
3.2
-72
5.5
-9
2.1
165
3.1
-26
6.7
-16
3.1
-7
2.5
-19
2.9
-29
1.4
71
Relative to Sensex P/B (%)
Current
10 Yr Avg
-60
20
121
105
143
-23
2
16
148
150
25
13
-12
-8
-11
6
7
-47
BULLS & BEARS | March 2014
13
 Motilal Oswal Financial Services
Banks – Private:
Healthy asset quality; valuations attractive
Private banks are trading at 8% discount
to their historical average PB and 15%
discount to market PB.
HDFC Bank and ICICI Bank look
attractively placed at 5% and 13%
discount to long period PB average. Good
growth in retail business will continue to
drive their performance.
Yes Bank and Axis Bank trade at big
discounts of 46%/33% respectively to its
PB averages; IndusInd Bank trade at
premium of 10% (highest in the sector).
33
26
19
12
5
15.1
11.9
Private Banks P/E (x)
10 Yr Avg (x)
40
20
0
-20
-40
Relative to Sensex PE (%)
-3
-14
4.0
3.3
2.5
1.8
Private Banks P/B (x)
10 Yr Avg (x)
16
2
Relative to Sensex PB (%)
2.3
2.1
-12
-26
-40
-15
-8
Sector Performance CY14 YTD
Private Banks
Company
Axis Bank
Federal Bank
HDFC Bank
ICICI Bank
IndusInd Bank
ING Vysya Bank
J & K Bank
Kotak Mah. Bank
South Ind.Bank
Yes Bank
Current
8.7
7.3
15.2
10.9
12.8
13.5
5.4
18.6
5.2
6.0
1.0
-3%
PE (x)
10 Yr Avg Prem/Disc (%)
12.5
-31
7.4
-1
20.8
-27
16.9
-35
17.2
-26
12.8
5
6.8
-20
17.8
5
6.4
-18
14.0
-57
Relative to Sensex P/E (%)
Current
10 Yr Avg
-37
-19
-47
-51
10
36
-21
10
-7
12
-2
-16
-61
-56
35
16
-62
-59
-56
-8
Current
1.4
0.9
3.2
1.5
2.1
1.3
1.0
2.5
0.8
1.3
PB (x)
10 Yr Avg Prem/Disc (%)
2.0
-33
0.9
-7
3.3
-5
1.8
-13
1.9
10
1.3
4
1.0
-2
2.6
-1
0.8
-7
2.4
-46
Relative to Sensex P/B (%)
Current
10 Yr Avg
-40
-24
-62
-66
39
24
-32
-34
-7
-29
-41
-52
-56
-63
11
-5
-66
-69
-43
-11
BULLS & BEARS | March 2014
14
 Motilal Oswal Financial Services
Banks – PSU:
Valuations at decadal low; ~50% discount to averages
PSU banks trade at 0.6x at 48% discount
to historical PB and 74% discount to
market PB. It is one of the worst
performing sector of CY14YTD.
Stress creation is expected to remain
high. Recovery in macro-economic
environment is critical for the sector to
recover from these low valuations.
All PSU banks, except SBI and BOB, trade
at more than 50% discount to historical
average PB multiples.
11
9
7
5
3
7.0
PSU Banks P/E (x)
10 Yr Avg (x)
-35
-45
-55
5.5
Relative to Sensex PE (%)
-54
-60
-65
-75
2.3
1.8
1.3
0.8
0.3
PSU Banks P/B (x)
10 Yr Avg (x)
-40
-50
-60
Relative to Sensex PB (%)
-58
Sector Performance CY14 YTD
PSU Banks
Company
Andhra Bank
Bank of Baroda
Bank of India
Canara Bank
Corporation Bank
Dena Bank
IDBI Bank
Indian Bank
Oriental Bank
Punjab Natl.Bank
St Bk of India
Union Bank (I)
Current
3.8
5.2
3.5
4.1
4.9
3.1
4.5
2.9
4.1
4.9
7.1
3.8
1.1
0.6
-70
-80
-74
-10%
PE (x)
10 Yr Avg Prem/Disc (%)
5.9
-36
6.7
-22
6.7
-48
5.6
-26
6.7
-27
5.2
-39
8.7
-48
5.0
-41
6.5
-37
6.3
-22
8.8
-19
5.8
-34
Relative to Sensex P/E (%)
Current
10 Yr Avg
-73
-61
-62
-56
-75
-56
-70
-63
-65
-56
-77
-66
-67
-43
-79
-68
-70
-58
-65
-59
-48
-42
-72
-62
Current
0.3
0.7
0.4
0.4
0.4
0.3
0.3
0.3
0.4
0.5
0.7
0.4
PB (x)
10 Yr Avg Prem/Disc (%)
1.0
-67
1.0
-37
1.1
-61
1.0
-59
1.0
-64
0.7
-56
0.9
-60
0.8
-63
0.9
-62
1.1
-52
1.2
-39
1.0
-64
Relative to Sensex P/B (%)
Current
10 Yr Avg
-85
-63
-71
-62
-82
-61
-83
-64
-85
-64
-86
-74
-85
-68
-86
-69
-84
-65
-76
-59
-67
-55
-84
-62
BULLS & BEARS | March 2014
15
 Motilal Oswal Financial Services
NBFC:
Bajaj Finance at significant premium due to strong sustained growth
NBFCs trade at a discount of 16% to its
historical PB averages; and 21% discount
to Sensex PB.
Bajaj Finance remains the only stock
which trades at more than 50% premium
to historical average driven by sustained
strong growth and better asset quality;
M&M Finance also trades at 26%
premium to average.
HDFC and LIC Housing Finance trades at
9% and 14% discount to its average PB.
All Infra NBFCs are at 45-60% discount to
PB averages; will continue to see stress
on quality of assets.
23
18
13
8
3
11.2
9.2
NBFC P/E (x)
10 Yr Avg (x)
10
-10
-30
-50
-70
Relative to Sensex PE (%)
-29
-33
4.0
3.0
2.0
1.0
0.0
NBFC P/B (x)
10 Yr Avg (x)
25
0
Relative to Sensex PB (%)
2.1
1.8
-25
-50
-75
-21
-21
Sector Performance CY14 YTD
NBFC
Company
Bajaj Finance
HDFC
IDFC
LIC Housing Fin.
M & M Financial
Power Fin.Corpn.
Rural Elec.Corp.
Shriram Trans.
Current
9.0
20.6
6.4
7.2
13.9
3.5
3.6
9.6
-4%
PE (x)
10 Yr Avg Prem/Disc (%)
16.1
-44
22.0
-7
15.2
-58
7.8
-8
11.1
25
8.6
-60
6.8
-46
9.0
7
Relative to Sensex P/E (%)
Current
10 Yr Avg
-35
5
49
44
-54
-1
-48
-49
1
-28
-75
-44
-74
-56
-30
-41
Current
1.7
4.1
0.8
1.2
2.4
0.7
0.8
1.4
PB (x)
10 Yr Avg Prem/Disc (%)
1.1
57
4.6
-9
2.0
-58
1.4
-14
1.9
26
1.4
-52
1.4
-44
1.9
-26
Relative to Sensex P/B (%)
Current
10 Yr Avg
-26
-60
81
69
-63
-24
-47
-48
6
-28
-71
-49
-66
-49
-39
-30
BULLS & BEARS | March 2014
16
 Motilal Oswal Financial Services
Capital Goods:
PBs at 43% discount to average; PE marginally above average
Capital Goods trades at 43% discount to
its historical PB average, however it trades
at 7% premium to its historical PE average.
Excise duty cut from 12% to 8% is likely to
see earnings de-growth bottoming out for
capital goods in FY15.
Cummins and Havells are the most
attractively placed with both PE and PB
close to/above their historical averages.
L&T now trades at 20.5x; at its long period
historical average.
BHEL and Crompton Greaves trade at
50%+ discount to historical PB average.
47
37
27
17
7
20.0
21.5
Capital Goods P/E (x)
10 Yr Avg (x)
90
60
30
0
-30
Relative to Sensex PE (%)
56
28
12.0
9.0
6.0
3.0
0.0
Capital Goods P/B (x)
10 Yr Avg (x)
210
145
80
Relative to Sensex PB (%)
4.4
2.5
15
-50
58
10
Sector Performance CY14 YTD
Capital Goods
Company
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Current
46.9
16.7
15.1
20.8
17.0
20.5
67.3
24.5
+1%
PE (x)
10 Yr Avg Prem/Disc (%)
65.2
-28
17.5
-5
20.6
-26
17.6
18
17.5
-3
20.5
0
46.4
45
18.6
31
Relative to Sensex P/E (%)
Current
10 Yr Avg
240
326
21
14
10
34
51
15
23
14
48
34
387
203
77
21
Current
5.3
1.2
2.2
5.0
4.5
2.9
5.1
3.6
PB (x)
10 Yr Avg Prem/Disc (%)
6.8
-22
4.2
-71
4.4
-49
4.7
7
4.1
10
4.2
-33
8.4
-39
4.6
-20
Relative to Sensex P/B (%)
Current
10 Yr Avg
131
152
-47
55
-1
63
120
73
99
53
25
58
125
211
59
69
BULLS & BEARS | March 2014
17
 Motilal Oswal Financial Services
Cement:
EV/EBITDA at average; expect recovery in FY15
Cement trades at 3% premium to its
historical EV/EBITDA valuations. Recovery
expectation in FY15 results in EV/EBITDA
valuations above average. Shree Cement
is the best placed with 2% disc to PB avg.
27
21
15
9
3
13.3
Cement P/E (x)
10 Yr Avg (x)
65
16.1
Relative to Sensex PE (%)
30
-5
-40
-75
-12
17
Sector Performance CY14 YTD
Cement
13.0
10.5
8.0
5.5
3.0
Cement EV/EBDITA (x)
-2%
10 Yr Avg (x)
5.5
4.3
7.9
8.1
Cement P/B (x)
10 Yr Avg (x)
50
25
Relative to Sensex PB (%)
3.0
1.8
0.5
2.4
1.7
0
-25
-50
-13
-23
Company
ACC
Ambuja Cem.
Birla Corpn.
Grasim Inds
India Cements
JP Associates
Shree Cement
UltraTech Cem.
Current
19.2
15.7
6.2
8.6
16.4
26.4
16.1
19.8
PE (x)
10 Yr Avg Prem/Disc (%)
15.2
26
15.0
5
6.7
-8
7.7
12
15.3
7
40.9
-35
14.2
14
13.7
45
Relative to Sensex P/E (%)
Current
10 Yr Avg
39
-1
14
-2
-55
-56
-38
-50
19
0
91
167
17
-7
44
-11
Current
2.6
2.5
0.6
1.0
0.4
0.7
3.2
2.7
PB (x)
10 Yr Avg Prem/Disc (%)
2.9
-12
3.0
-17
1.7
-61
1.4
-33
1.3
-67
1.8
-64
3.3
-2
2.9
-8
Relative to Sensex P/B (%)
Current
10 Yr Avg
13
9
8
10
-72
-39
-57
-46
-82
-53
-71
-32
42
23
17
8
BULLS & BEARS | March 2014
18
 Motilal Oswal Financial Services
Consumer:
Trades at 29x, down from peak of 34x; however still above avg
Consumer sector PE multiples have
declined from a peak of 34x in May-13 to
29x in Feb-14; however it continues to
trade above its historical average of 24x.
Sector premium over Sensex is also high
with 1.1x premium to Sensex PE.
Every company (except Radico Khaitan) is
at a big premium; Pidilite (+39%), ITC
(+38%), Asian Paints (+35%), GCPL (34%).
We expect the sector earnings to
moderate in FY15 with demand
slowdown/lower volumes.
38
31
24
17
10
24.0
29.0
Consumer P/E (x)
10 Yr Avg (x)
142
104
66
28
-10
Relative to Sensex PE (%)
110
59
12.0
10.0
8.0
6.0
4.0
Consumer P/B (x)
10 Yr Avg (x)
400
10.1
Relative to Sensex PB (%)
8.2
320
240
160
80
212
343
Sector Performance CY14 YTD
Consumer
Company
Asian Paints
Britannia Inds.
Colgate-Palm.
Dabur India
GlaxoSmith C H L
Godrej Consumer
Hind. Unilever
ITC
Marico
Nestle India
Pidilite Inds.
Radico Khaitan
United Spirits
Current
30.9
24.3
30.6
27.3
30.2
29.7
30.6
29.9
25.4
32.8
25.5
16.7
58.0
-1%
PE (x)
10 Yr Avg Prem/Disc (%)
22.9
35
21.9
11
24.6
24
23.9
15
19.8
53
22.1
34
26.5
15
21.7
38
22.2
14
28.6
15
18.4
39
26.3
-37
48.7
19
Relative to Sensex P/E (%)
Current
10 Yr Avg
124
50
76
43
122
61
98
56
119
29
115
44
122
73
117
41
84
45
138
87
85
20
21
72
320
218
Current
10.0
11.2
27.6
9.5
9.3
6.7
17.7
10.4
6.4
16.5
6.2
2.2
4.0
PB (x)
10 Yr Avg Prem/Disc (%)
8.2
22
7.0
60
23.1
20
8.7
9
5.6
67
14.3
-53
20.4
-13
6.5
60
7.6
-15
22.5
-27
4.6
34
3.5
-37
3.3
22
Relative to Sensex P/B (%)
Current
10 Yr Avg
338
205
390
158
1111
757
316
224
308
106
194
431
676
656
356
142
182
181
624
734
171
71
-5
28
77
23
BULLS & BEARS | March 2014
19
 Motilal Oswal Financial Services
Healthcare:
Trades at recent high valuations; US generics to drive earnings
Healthcare sector is trading at 23.4x and
at 7% premium to historical average; it
trades at 69% premium to Sensex PE. The
sector is now trading at recent high
valuations and is the best performing
sector CY14YTD.
Sun Pharma, Lupin, Ipca, Cadila and Divi’s
trades at a premium of 20-45% to its
historical PE averages.
We expect earnings momentum to
continue for these companies driven by
strong US generics demand growth and
increasing capacity utilization.
6.0
5.0
4.0
3.0
2.0
30
26
22
18
14
21.8
Healthcare P/E (x)
10 Yr Avg (x)
23.4
120
90
60
30
0
Relative to Sensex PE (%)
69
46
Healthcare P/B (x)
10 Yr Avg (x)
4.9
4.2
140
100
60
20
-20
Relative to Sensex PB (%)
114
60
Sector Performance CY14 YTD
Healthcare
Company
Biocon
Cadila Health.
Cipla
Divi's Lab.
Dr Reddy's Labs
Glaxosmit Pharma
Glenmark Pharma.
Ipca Labs.
Lupin
Ranbaxy Labs.
Sanofi India
Sun Pharma.Inds.
Torrent Pharma.
Current
20.1
23.1
19.0
20.3
20.6
41.8
19.7
17.9
23.9
34.8
20.9
24.8
17.5
+9%
PE (x)
10 Yr Avg Prem/Disc (%)
16.0
26
17.9
29
21.1
-10
16.3
25
33.8
-39
25.8
62
36.3
-46
12.2
46
17.6
35
42.0
-17
20.2
3
20.3
22
12.7
37
Relative to Sensex P/E (%)
Current
10 Yr Avg
46
4
67
17
38
38
47
6
49
121
203
68
43
137
30
-20
73
15
152
174
52
32
80
32
27
-17
Current
2.8
5.1
2.7
5.4
4.4
12.4
3.9
4.7
5.4
3.5
4.0
6.0
4.4
PB (x)
10 Yr Avg Prem/Disc (%)
2.4
20
4.3
18
3.8
-30
4.5
20
3.2
36
7.7
62
4.6
-16
2.6
79
4.1
31
5.2
-33
4.1
-2
4.4
35
3.3
34
Relative to Sensex P/B (%)
Current
10 Yr Avg
24
-12
123
60
17
41
136
66
93
20
444
184
69
72
105
-3
137
53
55
95
77
52
163
65
92
21
BULLS & BEARS | March 2014
20
 Motilal Oswal Financial Services
Media:
Trades below average; ad revenue is expected to grow at 10-12%
Media trades at a discount of 9% to its
historical average PE.
Zee is the only stock to trade above its
historical PE averages (+32%) driven by
strong earnings growth.
PVR is at significant discount to its
historical PE average, but at premium to
its PB average. With synergies of Cinemax
acquisition kicking-in, the stock may see
strong earnings in FY15/16.
Elections driven growth might see print
media improving its valuation from 40%+
discount to its historical average.
47
37
27
17
7
21.2
19.3
Media P/E (x)
10 Yr Avg (x)
150
100
50
0
-50
Relative to Sensex PE (%)
36
40
7.2
5.7
4.2
2.7
1.2
Media P/B (x)
10 Yr Avg (x)
100
60
20
Relative to Sensex PB (%)
30
65
3.5
3.8
-20
-60
Sector Performance CY14 YTD
Media
Company
H T Media
Jagran Prakashan
PVR
Sun TV Network
Zee Entertainmen
Current
9.9
11.4
31.6
17.6
28.3
-3%
PE (x)
10 Yr Avg Prem/Disc (%)
28.1
-65
19.6
-42
45.3
-30
24.5
-28
21.4
32
Relative to Sensex P/E (%)
Current
10 Yr Avg
-28
83
-18
28
129
196
28
60
105
40
Current
0.9
2.4
3.1
4.3
5.6
PB (x)
10 Yr Avg Prem/Disc (%)
2.6
-67
4.0
-41
2.0
51
5.8
-26
3.2
75
Relative to Sensex P/B (%)
Current
10 Yr Avg
-62
-2
4
50
35
-25
89
117
147
19
BULLS & BEARS | March 2014
21
 Motilal Oswal Financial Services
Metals:
Trades at big discount to PB; expect double-digit growth in FY15
Metals trade at 0.8x PB, 53% discount to
its historical PB average and the sector
trades at 15% discount to its PE average.
We expect double-digit earnings recovery
in FY15.
EV/EBIDTA valuations is at 5.0x, which is
15% discount to its historical average.
Tata Steel, NALCO and NMDC trades at a
huge discount to its historical average PE;
rest all stocks are close to historic avg.
All stocks trade at 40%+ discount to
historical PB average except Hind Zinc
and JSW Steel.
20
15
10
5
0
9.3
7.8
Metals P/E (x)
10 Yr Avg (x)
0
-20
-40
-60
-80
-41
Relative to Sensex PE (%)
-43
5.0
3.8
2.5
1.3
0.0
Metals P/B (x)
10 Yr Avg (x)
20
-5
Relative to Sensex PB (%)
1.8
0.8
-30
-55
-80
-36
-63
Sector Performance CY14 YTD
Metals
Company
Hind.Zinc
Hindalco Inds.
Jindal Steel
JSW Steel
Natl. Aluminium
NMDC
SAI L
Sesa Sterlite
Tata Steel
Current
6.6
8.4
8.6
13.7
10.5
7.3
8.3
7.4
7.9
-13%
PE (x)
10 Yr Avg Prem/Disc (%)
7.1
-6
8.6
-3
9.8
-13
10.8
26
16.2
-35
14.9
-51
9.4
-12
6.7
11
10.9
-27
Relative to Sensex P/E (%)
Current
10 Yr Avg
-52
-54
-39
-44
-38
-36
-1
-29
-24
6
-47
-3
-40
-39
-46
-56
-43
-29
Current
1.1
0.9
0.9
1.2
0.7
1.6
0.5
1.2
1.3
PB (x)
10 Yr Avg Prem/Disc (%)
1.9
-39
1.7
-48
3.2
-71
1.2
-3
1.8
-62
4.8
-67
1.6
-70
2.2
-46
2.4
-46
Relative to Sensex P/B (%)
Current
10 Yr Avg
-50
-30
-61
-37
-59
19
-47
-54
-71
-35
-31
79
-78
-39
-47
-17
-44
-13
BULLS & BEARS | March 2014
22
 Motilal Oswal Financial Services
Oil & Gas:
Trades at all-time low valuations (PE and PB)
Oil & Gas sector continues to trade at PB of
1.2x at its all-time low valuations. PE
valuations at 8.9x are also at all-time lows.
Despite the continuous increase in retail
diesel prices by INR0.50 per fortnight, net
under-recovery stands at INR8.4/litre.
GAIL (India) and Petronet LNG are the only
companies to trade above their historic PE
averages. All others trade at discount.
BPCL is only company which trades above
historic averages PB (6%).
21
17
13
9
5
11.0
8.9
Oil & Gas P/E (x)
10 Yr Avg (x)
-13
-21
-29
-37
-45
Relative to Sensex PE (%)
-28
-36
3.0
2.5
2.0
1.5
1.0
Oil & Gas P/B (x)
10 Yr Avg (x)
-15
-25
-35
Relative to Sensex PB (%)
1.8
-35
-48
Sector Performance CY14 YTD
Oil & Gas
Company
BPCL
CPCL
Cairn India
GAIL (India)
Guj.St.Petronet
HPCL
IOCL
Indraprastha Gas
MRPL
O NGC
Petronet LNG
Reliance Inds.
Current
9.9
2.3
5.6
12.1
6.7
11.4
9.2
8.9
6.5
8.2
11.6
9.6
1.2
-45
-55
-5%
PE (x)
10 Yr Avg Prem/Disc (%)
12.8
-23
5.8
-61
8.4
-33
11.3
7
14.2
-53
12.4
-8
10.2
-10
11.6
-23
13.9
-53
9.7
-16
11.2
4
12.3
-22
Relative to Sensex P/E (%)
Current
10 Yr Avg
-29
-16
-84
-62
-59
-45
-12
-26
-51
-7
-17
-19
-33
-33
-35
-24
-53
-9
-40
-37
-16
-27
-31
-20
Current
1.4
0.4
1.0
1.6
0.9
0.6
0.9
1.7
0.9
1.3
1.6
1.1
PB (x)
10 Yr Avg Prem/Disc (%)
1.3
6
1.0
-60
1.2
-22
2.1
-23
2.0
-57
0.9
-35
1.3
-34
3.0
-43
2.3
-61
2.1
-35
2.8
-42
1.7
-35
Relative to Sensex P/B (%)
Current
10 Yr Avg
-41
-53
-82
-62
-58
-55
-31
-24
-61
-25
-73
-65
-62
-52
-24
12
-60
-14
-41
-24
-29
4
-53
-39
BULLS & BEARS | March 2014
23
 Motilal Oswal Financial Services
Real Estate:
Trades at 0.8x BV; earnings recovery in FY15
Real estate trades at 64% discount to
market PB. The sector trades at <1x PB
(0.8x).
The sector was worst performer with
negative 16% returns during CY14YTD.
Mahindra Life, Phoenix Mills and Sobha
Developers trade at 43%-48% discount to
historical PB averages.
DLF trades at 0.9x PB but at 61% discount
to average, while Phoenix trades at 1.7x
PB, 45% discount to its historical average.
52
39
26
13
0
20.5
21.7
Real Estate P/E (x)
10 Yr Avg (x)
300
200
100
0
-100
Relative to Sensex PE (%)
29
57
8.0
6.0
4.0
2.0
Real Estate P/B (x)
10 Yr Avg (x)
100
50
0
Relative to Sensex PB (%)
1.3
0.8
-50
-100
-53
-64
Sector Performance CY14 YTD
Real Estate
Company
DLF
Indbull.RealEst.
Mahindra Life.
Sobha Developers
Phoenix Mills
Current
35.3
5.0
15.7
10.8
21.9
0.0
-16%
PE (x)
10 Yr Avg Prem/Disc (%)
36.9
-4
20.8
-76
28.6
-45
18.4
-41
43.5
-50
Relative to Sensex P/E (%)
Current
10 Yr Avg
156
141
-64
35
14
86
-22
20
59
184
Current
0.9
0.3
1.0
1.2
1.7
PB (x)
10 Yr Avg Prem/Disc (%)
2.3
-61
0.8
-65
1.8
-43
2.3
-48
3.1
-45
Relative to Sensex P/B (%)
Current
10 Yr Avg
-61
-14
-87
-69
-56
-35
-48
-16
-25
14
BULLS & BEARS | March 2014
24
 Motilal Oswal Financial Services
Retail:
Titan at premium on approval of gold hedging, but headwinds remain
Retail sector trades at 27% discount to its
historical PE average.
The government measures on import of
gold during previous year saw massive
reduction in Titan Inds premium,
however, the recent RBI approval on gold
hedging resulted in premiums increasing
to 15% above historical average; Future
Retail trades at 71% discount to its
average.
68
51
34
17
0
28.7
20.9
Retail P/E (x)
10 Yr Avg (x)
250
175
100
25
-50
Relative to Sensex PE (%)
84
51
9.0
7.0
5.0
Retail P/B (x)
10 Yr Avg (x)
250
175
4.2
3.5
Relative to Sensex PB (%)
100
25
-50
57
55
Sector Performance CY14 YTD
Retail
Company
Future Retail
Titan Inds.
Current
6.6
26.3
3.0
1.0
+5%
PE (x)
10 Yr Avg Prem/Disc (%)
23.0
-71
22.9
15
Relative to Sensex P/E (%)
Current
10 Yr Avg
-52
50
91
50
Current
0.5
7.2
PB (x)
10 Yr Avg Prem/Disc (%)
1.5
-67
8.4
-15
Relative to Sensex P/B (%)
Current
10 Yr Avg
-78
-43
215
213
BULLS & BEARS | March 2014
25
 Motilal Oswal Financial Services
Technology:
Best performing sector; trades above avg; Infy, TechM at discount
Technology remains the top performing
sector in FY14/CY14YTD with 42/8%
returns, and the sector trades marginally
above its historical PE average at 17.7x.
Infosys trades at 17.0x, at its 20-month
high, due to higher utilization and margin
led FY14-FY15 earnings growth. However,
it still trades at 12% disc to its PE average.
Tech Mahindra and Wipro also trade at
20% and 2% discount respectively to its
historical PE average.
TCS and HCL Tech, on the back of strong
performance over the last few years,
trade at 10/17% premium to PE averages.
27
22
17
12
7
17.1
Technology P/E (x)
10 Yr Avg (x)
100
17.7
Relative to Sensex PE (%)
65
30
-5
-40
28
13
10.0
8.0
6.0
4.0
2.0
Technology P/B (x)
10 Yr Avg (x)
240
180
4.8
Relative to Sensex PB (%)
120
60
0
111
90
5.1
Sector Performance CY14 YTD
Technology
Company
HCL Technologies
Infosys
MphasiS
TCS
Tech Mahindra
Wipro
Current
16.9
17.0
9.3
20.0
12.9
16.4
+8%
PE (x)
10 Yr Avg Prem/Disc (%)
14.4
17
19.3
-12
16.6
-44
18.1
10
16.2
-20
16.8
-2
Relative to Sensex P/E (%)
Current
10 Yr Avg
22
-6
23
26
-33
8
45
18
-6
6
19
9
Current
4.7
3.9
1.8
6.8
3.6
3.7
PB (x)
10 Yr Avg Prem/Disc (%)
3.0
56
5.7
-31
3.8
-53
6.3
8
4.4
-20
4.1
-10
Relative to Sensex P/B (%)
Current
10 Yr Avg
108
12
71
110
-23
41
200
134
56
64
61
51
BULLS & BEARS | March 2014
26
 Motilal Oswal Financial Services
Telecom:
Valuations at decade low; spectrum auction outlay to impact earnings
On EV/EBITDA basis, the sector trades at
5.9x close to all-time low of 5.5x and is at
31% discount to its historical average.
Telecom PE trades at 17% discount to
historical averages.
Post passive consolidation, strong
revenue growth is expected in FY15,
however, current spectrum auction
outlay will impact earnings growth.
56
42
28
14
0
22.1
18.3
Telecom P/E (x)
10 Yr Avg (x)
300
200
100
0
-100
Relative to Sensex PE (%)
46
33
6.5
5.0
3.5
2.0
Telecom P/B (x)
10 Yr Avg (x)
90
55
Relative to Sensex PB (%)
Sector Performance CY14 YTD
Telecom
17.0
14.0
11.0
8.0
5.0
8.6
5.9
-16%
2.5
1.6
20
-15
-50
-7
-30
Telecom Sector EV/EBDITA (x)
0.5
Company
Bharti Airtel
Idea Cellular
Rel. Comm.
Current
21.5
16.7
11.6
PE (x)
10 Yr Avg Prem/Disc (%)
24.3
-11
25.0
-33
22.2
-48
Relative to Sensex P/E (%)
Current
10 Yr Avg
56
58
21
63
-16
45
Current
1.7
2.3
0.8
PB (x)
10 Yr Avg Prem/Disc (%)
3.3
-50
2.1
12
1.6
-52
Relative to Sensex P/B (%)
Current
10 Yr Avg
-27
24
1
-24
-67
-42
BULLS & BEARS | March 2014
27
 Motilal Oswal Financial Services
Utilities:
Valuations at 9-yr lows
Utilities is trading at 1.0x PB, which is
39% discount to historical average PB and
55% discount to market PB.
Power Grid is trading at 34% discount to
its historic average; we expect double-
digit growth in FY15.
Coal India is the only stock trading at
premium to Sensex PB at 37%. None of
the stocks trade above their historical PE
and PB averages.
CERC water-tight regulations could
incrementally be negative for NTPC and
PGCIL as it leads t lower core returns.
32
24
16
8
0
14.2
9.6
Utilities P/E (x)
10 Yr Avg (x)
60
20
-20
-60
-100
Relative to Sensex PE (%)
-9
-31
4.0
3.0
2.0
1.0
0.0
Utilities P/B (x)
10 Yr Avg (x)
40
5
-30
Relative to Sensex PB (%)
1.7
1.0
-37
-55
-65
-100
Sector Performance CY14 YTD
Utilities
Company
Coal India
CESC
NTPC
Power Grid Corpn
PTC India
Reliance Infra.
Tata Power Co.
Current
8.6
8.5
9.7
10.2
6.4
6.6
10.9
-10%
PE (x)
10 Yr Avg Prem/Disc (%)
12.2
-30
9.0
-6
16.5
-41
14.3
-29
17.8
-64
18.0
-63
17.3
-37
Relative to Sensex P/E (%)
Current
10 Yr Avg
-38
-20
-38
-41
-30
8
-26
-7
-54
16
-52
17
-21
13
Current
3.1
0.9
1.0
1.3
0.7
0.4
1.4
PB (x)
10 Yr Avg Prem/Disc (%)
4.7
-33
1.1
-16
2.1
-51
2.0
-34
1.5
-54
1.4
-69
2.1
-33
Relative to Sensex P/B (%)
Current
10 Yr Avg
37
73
-59
-58
-55
-23
-42
-25
-69
-43
-81
-48
-38
-21
BULLS & BEARS | March 2014
28
 Motilal Oswal Financial Services
Motilal Oswal Securities Limited
MEMBER OF BSE AND NSE
Motilal Oswal Tower, Sayani Road, Prabhadevi, Mumbai 400 025, INDIA
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BULLS & BEARS | March 2014
 Motilal Oswal Financial Services
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"Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based
in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited.
("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated
persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with
a subject company, public appearances and trading securities held by a research analyst account.
BULLS & BEARS | March 2014
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BULLS & BEARS | March 2014