Earnings growth at seven
quarter high !!
Earnings respite after long time
4QFY16 MOSL aggregate:
PAT growth ex
PSU Banks and OMCs at 7.5%.
Sensex EPS:
FY17E EPS cut by 2.3% to
INR1,519, led by Banks and Cyclicals.
Valuations:
Sensex trades at 17.6x FY17E
EPS.
India Strategy &
Earnings Review
Research Team
(Gautam.Duggad@MotilalOswal.com)
June 2016
 Motilal Oswal Financial Services
Discussion points
Aggregate 4QFY16 Review
Earnings ex PSU Banks and OMCs grew 7.5%; at seven-quarter high
Sector: Key Surprises and Guidance
4QFY16 surprises
Markets & Valuation
Valuations at long-term averages; flows continue to be positive
Sector Highlights
4QFY16 review and outlook
Annexure
MOSL Universe: Annual performance & valuations
REVIEW | June 2016
2
 Motilal Oswal Financial Services
INDIA STRATEGY: Mar-16 Results Review
Refer our Mar-16 Quarter Preview
MOSL Universe (ex OMCs, PSU Banks) aggregate PAT grows 7.5%; a seven-quarter high:
Aggregate sales of MOSL universe (ex OMCs) grew 3.8% (estimate of 2.7% growth), EBITDA was
up 9.6% (estimate of 5.5% growth), PAT declined 15.2% (estimate of 5.5% decline). However, ex
PSU Banks aggregate sales grew 3.9% (estimate of 3% growth), EBITDA was up 10.7% (estimate
of 7.9% growth), and PAT grew 7.5% (estimate of 1% growth).
Sensex PAT growth of 2.7%; in-line:
Sensex aggregate sales grew 4.2% (seven-quarter high; our
estimate: 2.1%), EBITDA grew 12.5% (seven-quarter high; our estimate: 6.4%) and PAT grew
2.7% (our estimate: 2.3%). Excluding PSU Banks, Sensex EBITDA grew 12.7% (our estimate:
9.3%) and PAT grew 7.6% (our estimate: 6.8%) – both at seven-quarter highs.
Major earnings surprises
were from Tata Motors, L&T, Ultratech, Nestle, KMB, MMFS,
Hindalco, JSW Steel, BPCL, Tech Mahindra, Bharti Airtel, Idea.
Major disappointments in earnings
were from ICICI Bank, Bank of Baroda, Britannia, Maruti,
BHEL, Cipla, Dr. Reddy, Titan, Coal India.
FY16-18E: 19% CAGR
Sensex EPS trend (INR)
FY93-FY16:
13% CAGR
14%
FY08-16:
6% CAGR
23%
1,872
FY01-08: 21% CAGR
1,024
540
720
833
820
834
1,120
1,182
1,338
1,352
-2%
1,330
1,519
216
FY01
236
272
361
446
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
REVIEW | June 2016
3
 Motilal Oswal Financial Services
Key highlights of 4QFY16
MOSL Universe (ex PSU Banks, OMCs) sales, EBITDA and PAT growth are at seven-quarter highs.
MOSL Universe revenue growth (+4%) has turned positive after five quarters.
Operating margins for MOSL Universe (Ex Financials & OMCs) at 19-quarter high. PAT margin for MOSL Universe (Ex
Financials & OMCs) at 15-quarter high.
Nifty earnings ex the 4 corporate lenders (ICICI, SBI, Axis and BoB) significantly outperformed the estimates (PAT
growth of 13% vs estimate of 6%).
The number of companies that met/beat estimates were 67%, highest in last 10 quarter.
We have raised our FY17 EPS for 51 companies (3% upgrade) and cut our FY17 EPS for 65 companies (3% downgrade).
Intensity of downgrade in select cyclical – banks and commodities still led to an aggregate downgrade.
MOSL Universe ex OMCs & PSU Banks EBITDA growth (YoY %)
17.3
5.6
1.9
-2.0
-3.6
-3.3
Dec-15
Mar-16
June-14
Sep-14
Dec-14
3.9
10.7
5.9
1.2
-4.6
3.3
0.1
2.0
14.5
MOSL Universe ex OMCs & PSU Banks sales growth (YoY %)
June-14 Sep-14
Dec-14
Mar-15 June-15 Sep-15
-2.4
Mar-15 June-15
Sep-15
Dec-15
Mar-16
MOSL Universe ex OMCs & PSU Banks PAT growth (YoY %)
20.8
6.2
-1.2
-2.4
-5.3
-7.2
Dec-14 Mar-15 June-15 Sep-15
7.5
0.2
Sensex Universe ex SBI EBITDA growth (YoY %)
21.4
12.7
6.0
-1.2
4.2
-3.4
Mar-15 June-15
Sep-15
Dec-15
Mar-16
1.4
4.7
June-14 Sep-14
Dec-15 Mar-16
June-14
Sep-14
Dec-14
REVIEW | June 2016
4
 Motilal Oswal Financial Services
Mar-16 Results Review: Growth in headline numbers at 7-quarter high
Aggregate universe (ex PSU Banks, OMCs) PAT growth at 7.5%
Aggregate sales of MOSL universe (ex PSU Banks, OMCs) grew 3.9% (our estimate: 3% growth), EBITDA was up 10.7% (our estimate: 7.9%
growth) and PAT grew 7.5% (our estimate: 1% growth). Growth in all the three headline numbers is at seven-quarter high.
On aggregate basis, MOSL universe (ex OMCs) grew 3.8% (est of 2.7% growth), EBITDA was up 9.6% (est of 5.5% growth), PAT declined
15.2% (est of 5.5% decline). Aggregate 4QFY16 performance was adversely impacted by the sharp rise in provisions reported by PSU Banks
(PSU Banks reported loss of INR146b v/s our estimate of INR2b loss).
Aggregate EBITDA margin (ex Financials & OMCs) expanded 100bp YoY to 20.1% (our estimate: 19.7%). PAT margin expanded 80bp YoY to
10.7% (our estimate: 9.7%), the highest in 15 quarters.
70 companies reported PAT higher than estimates, 58 companies below, and 46 in-line.
Breadth of meeting/beating estimates: Telecom and Metals stood out, with 100% and 90% of sector coverage universe meeting/beating
estimates. This number for Technology, Oil & Gas, Autos and Capital Goods stood at 83%, 83%, 75% and 75%, respectively.
Sales growth was led by Autos (17%), Private Banks (21%), Technology (17%) and Healthcare (17%). Oil & Gas ex OMCs (-16%) & Metals (-
10%) reported negative sales growth.
EBITDA growth was led by Autos (31%), Cement (19%), Private Banks (23%), Healthcare (47%) and Media (33%). Metals (-17%) and Oil &
Gas ex OMCs (-7%) contributed negatively.
PAT growth was led by Autos (60%), Healthcare (43%), Cement (27%), Media (52%) and Technology (12%). Metals aggregate PAT was
INR33b v/s expectation of INR4b loss. Performance of Capital Goods (6% growth v/s our estimate of -17%) and Telecom (-9% growth v/s our
estimate of -29%) was well ahead of expectations. BFSI (-98%) was the major drag, impacted by sharp rise in provisions in PSU Banks.
Sector performance: Autos, Cement, Metals, Capital Goods and Telecom led aggregate PAT growth
Sensex performance: 2.7% PAT growth; nine companies saw upgrades in FY17E EPS
Sensex aggregate sales grew 4% (our estimate: 2%), EBITDA grew 12.5% (our estimate: 6.4%) and PAT grew 2.7% (our estimate: 2.3%). Ex
PSU Banks, Sensex EBITDA grew 12.7% (our estimate: 9.3%) and PAT grew 7.6% (our estimate: 6.8%), both at seven-quarter high.
Seven Sensex companies reported PAT above estimates, 10 below estimates, and 13 in-line.
Highest PAT growth companies: Tata Motors (158%), Sun Pharma (93%), GAIL (51%), Lupin (48%), Adani Ports (38%), Hero Moto (29%) and
Bajaj Auto (29%). Top PAT de-growth companies: ICICI Bank (-76%), SBI (-66%), Cipla (-69%), BHEL (-62%), ONGC (-30%), Dr Reddy’s (-28%).
5
REVIEW | June 2016
 Motilal Oswal Financial Services
Nifty: 4QFY16 performance highlights
Nifty sales, EBITDA and PAT grew 3.4%, 12.8% and -0.5% v/s our estimates of 2.7%, 7% and 1.6%, respectively.
Excluding PSU Banks and OMCs, Nifty sales, EBITDA and PAT grew 5%, 14.7% and 10% v/s our estimates of 3.6%, 11%
and 7.3%, respectively. Like for MOSL universe, growth in Nifty headline numbers is at seven-quarter high.
Operating margins for Nifty universe came in at a five-year high of 25.3% (our estimate: 24.2%), an expansion of 210bp
YoY. Excluding Financials and OMCs, Nifty operating margins came in at 21.3% (our estimate: 20.7%), an expansion of
170bp YoY, again at a five-year high.
74% of Nifty universe posted in-line or higher than estimated PAT; 84% posted in-line or higher than estimated EBITDA.
Nifty ex OMCs & PSU Banks EBITDA growth (YoY %)
19.3
14.7
4.8
5.0
0.6
-4.8
June-14 Sep-14
Dec-14
-3.1
-3.2
-1.3
Dec-15
Mar-16
June-14 Sep-14
Dec-14
6.7
1.1
5.4
3.9
7.5
Nifty ex OMCs & PSU Banks sales growth (YoY %)
15.5
Mar-15 June-15 Sep-15
-1.5
Mar-15 June-15 Sep-15
Dec-15
Mar-16
Nifty ex OMCs & PSU Banks PAT growth (YoY %)
20.8
7.6
2.3
1.6
7.6
9.9
Nifty operating margins ex Financials and OMCs (%)
20.8
19.3
18.8
19.6
18.8
19.9
21.3
20.1
-5.8
-7.3
June-14 Sep-14 Dec-14 Mar-15 June-15 Sep-15 Dec-15 Mar-16
June-14 Sep-14 Dec-14 Mar-15 June-15 Sep-15 Dec-15 Mar-16
REVIEW | June 2016
6
 Motilal Oswal Financial Services
Mar-16 Results Review: EPS growth de-construct
EPS downgrade de-construct
Sensex stock revision since preview
(INR)
M&M
Maruti Suzuki
Bharti Airtel
Hind. Unilever
Larsen & Toubro
NTPC
Bajaj Auto
Tata Motors
HDFC
GAIL
ONGC
Asian Paints
HDFC Bank
ITC
Cipla
Adani Ports
TCS
Hero MotoCorp
Infosys
Wipro
Sun Pharma
Dr Reddy’s Labs
Lupin
Reliance Inds.
Axis Bank
ICICI Bank
State Bank
Coal India
BHEL
Tata Steel
Sensex (30)
Current EPS (INR)
FY16
53.6
155.5
10.7
18.8
50.6
12.3
126.2
36.9
44.9
18.1
20.4
18.5
48.6
12.3
18.8
13.8
123.2
156.9
59.0
36.1
19.6
132.3
49.9
93.6
34.5
16.7
15.7
22.6
-3.7
7.7
1,330
FY17E
75.7
205.4
12.4
21.1
59.4
11.5
150.7
42.3
45.0
26.2
17.3
21.5
58.5
13.9
24.1
13.5
135.0
177.6
66.9
36.2
27.8
147.8
64.1
105.2
35.0
18.1
19.3
19.0
4.4
-7.4
1,519
FY18E
91.0
251.4
16.9
24.0
72.2
13.7
173.3
53.3
51.9
31.8
23.8
23.9
70.3
15.9
30.1
14.5
155.4
211.4
76.7
42.0
38.5
177.5
80.0
126.8
41.0
20.8
24.3
23.0
5.5
61.9
1,872
EPS UPGRADE /
DOWNGRADE (%)
FY16
FY17E FY18E
-6.2
10.5
11.0
-1.9
5.5
2.7
7.7
5.4
1.3
2.6
3.3
3.1
13.9
3.3
6.4
7.2
2.6
1.7
0.3
2.4
4.8
3.3
2.1
-3.9
-2.0
1.7
3.0
9.1
1.5
1.1
15.6
0.8
-0.1
-1.9
0.6
2.4
-0.1
0.0
-0.1
-0.2
0.0
0.3
-14.3
-0.4
-7.6
13.4
-1.1
-2.8
0.8
-1.3
0.1
-0.8
-2.4
-4
0.9
-3.1
-0.5
0.2
-3.1
-3.6
-1.6
-3.8
-1.3
-9.5
-4.2
-3.2
0.5
-7.8
-2.4
0.8
-8.1
-3.1
-3.1
-10.1
-11.8
-18.9
-18.6
-21.7
-3.9
-19.8
-15.3
-2.6
-22.4
-24.4
Loss
-32.8
-18.5
LP
Loss
112.7
0.7
-2.3
-0.4
EPS GROWTH (%)
FY16
12.0
23.4
-17.6
6.1
7.1
1.7
19.8
-15.5
18.0
-23.2
-3.4
25.0
19.3
2.5
33.5
24.7
11.2
PL
9.4
PL
-0.7
1.7
-6.7
20.6
11.2
-13.2
-30.8
4.0
PL
168.6
-1.6
FY17E
41.4
32.0
16.5
11.7
17.5
-6.4
19.4
14.9
0.3
44.3
-14.8
15.8
20.3
13.4
28.3
-2.3
9.6
Loss
13.2
LP
42.3
11.7
28.4
12.4
1.3
8.0
22.8
-16.0
LP
PL
14.2
FY18E
20.2
22.4
36.0
13.9
21.5
18.8
15.0
25.8
15.2
21.6
37.2
11.3
20.2
14.3
25.0
7.1
15.1
LP
14.7
15.9
38.3
20.1
25.0
20.6
17.2
15.1
25.9
21.3
25.5
LP
23.2
4QFY16 is marked by disproportionate pain inflicted by
PSU Banks on the aggregate earnings performance.
FY16 Sensex EPS has declined 1.6% to INR1,330.
We have revised our FY17/18E Sensex EPS downwards by
2.3%/0.4% to INR1,519/1,872. FY16 EPS has come in at
INR1,330, 0.7% higher than our estimate of INR1,321.
We now expect Sensex EPS to post 14.2% growth in FY17
and 23.2% growth in FY18.
Four stocks – Reliance (21%), Coal India (26%), SBI (28%)
and ICICI Bank (18%) account for 93% of the FY17E
Sensex PAT downgrade.
Three stocks contribute ~100% of FY18E Sensex PAT
downgrade: SBI (31%), ICICI Bank (30%) and Coal India
(43%).
FY17 Sensex EPS growth contributors: Banks (28%), Autos
(24%) and Technology (15%) contribute 2/3rd of the
14.2% FY17E Sensex EPS growth.
REVIEW | June 2016
7
 Motilal Oswal Financial Services
MOSL Universe: Autos, Cement & Healthcare lead PAT growth
Sectoral actual v/s expected - MOSL universe (INR b)
Sector
(no of companies)
High growth sectors
Automobiles (12)
Media (9)
Healthcare (15)
Cement (7)
Med/Low growth sectors
Technology (12)
Others (22)
Consumer (16)
Capital Goods (12)
Oil Ex OMCs (9)
Utilities (4)
PAT de-growth sectors
NBFC (13)
Retail (3)
Telecom (4)
Banks - Private (8)
Metals (9)
Real Estate (8)
Banks - PSU (8)
MOSL Universe (174)
MOSL Ex OMCs (171)
MOSL Ex OMCs & PSU Banks (163)
Sensex (30)
Nifty Ex. BPCL (49)
Mar
2016
1,968
1,383
57
344
184
3,616
825
264
397
614
978
538
2,258
144
40
435
233
1,037
53
315
9,505
7,842
7,527
4,697
5,740
Sales
Chg. % Chg. % Var. over
YoY Exp. (%)
QoQ
7
17
7
8
17
9
-5
15
1
5
17
2
10
10
1
4
1
-1
4
17
0
10
7
3
1
7
0
33
7
-2
-9
-16
-6
6
2
8
6
-1
-1
6
15
0
-20
3
-13
5
9
2
8
21
3
9
-10
-4
-10
4
11
6
0
3
3.8
0.6
1.3
5.6
3.8
1.0
5.6
3.9
0.9
4.9
4.2
2.0
5.1
5.0
1.7
Mar
2016
337
202
16
83
35
796
199
44
89
79
214
172
910
129
3
162
213
125
16
262
2,139
2,043
1,781
1,234
1,532
EBITDA
PAT
EBIDTA Margin
Chg. % Chg. % Var. over Mar Chg. % Chg. % Var. over Mar 2016 Chg.
QoQ YoY Exp. (%) 2016 QoQ YoY Exp. (%)
(%)
YoY bp
11
33
8
181
16
50
5
17
212
15
31
14
98
19
60
8
15
148
-12
33
-2
8
-12
52
-1
29
390
0
47
-5
56
6
43
-2
24
493
26
19
7
19
52
27
16
19
138
9
5
0
520
14
7
7
22
93
4
15
-2
157
3
12
3
24
-54
8
9
3
26
18
9
9
17
27
0
14
1
60
-5
8
-1
22
129
219
3
14
52
454
6
27
13
-50
-6
-7
-1
137
5
3
15
22
218
8
8
-3
88
13
2
-4
32
185
17
7
6
72
-56
-76
-64
40
290
8
14
2
68
-2
-1
-3
89
-86
-22
-8
-23
2
-14
-5
-12
9
-100
10
12
8
27
3
-9
28
37
125
6
23
-1
83
-22
-15
-23
91
146
50
-17
10
33
LP
-19
LP
12
-88
-27
9
-1
4
-36
-27
-14
29
125
31
3
14
-146
Loss
PL
Loss
83
231
12.2
5.3
2.0
826 -0.4 -19.4
-12.1
23
101
12.7
9.6
3.9
773 -0.1 -15.2
-10.2
26
140
10.5 10.7
2.6
919 13.1
7.5
6.5
24
145
13.8 12.5
5.8
587
6.6
2.7
0.4
26
194
13.6 14.0
5.5
675
8.3
-0.1
-2.8
27
210
REVIEW | June 2016
8
 Motilal Oswal Financial Services
Sectoral quarterly PAT trend (INR b)
MOSL Universe quarterly PAT trend (INR b)
Sector
Auto
Capital Goods
Cement
Consumer
Financials
Private Banks
PSU Banks
NBFC
Healthcare
Media
Metals
Oil & Gas
Oil & Gas Ex OMCs
Real Estate
Retail
Technology
Telecom
Utilities
Others
MOSL Univ Excl OMCs
MOSL Univ Ex Metals & Oil
49
22
19
28
32
79
30
17
4
79
35
6
1
55
21
52
11
FY11
Jun Sep Dec Mar
52
29
7
31
35
73
32
21
4
71
51
33
11
33
41
82
35
20
4
70
55
50
20
31
44
53
37
21
5
95
53
23
19
33
42
62
33
20
4
89
56
6
2
66
15
72
14
FY12
Jun Sep Dec Mar
54
29
12
36
45
75
34
22
4
67
38
7
2
68
14
49
11
66
34
16
38
52
84
35
21
4
55
83
65
23
38
57
102
41
23
3
72
59
26
25
41
54
92
44
22
4
75
FY13
Jun Sep Dec Mar
52
27
19
42
57
83
45
28
5
54
49
28
16
47
67
82
50
28
5
42
78
60
20
44
71
83
58
31
4
76
52
14
19
46
70
87
54
34
5
60
94
6
2
16
72
13
FY14
Jun Sep Dec
73
21
11
49
72
61
56
41
5
57
82
22
11
52
80
59
59
45
6
57
Mar
81
52
18
49
85
73
64
43
5
71
92
17
17
51
82
90
60
45
5
67
FY15
Jun Sep Dec Mar
77
19
14
55
85
72
63
51
5
73
77
19
9
58
95
54
64
33
8
61
71
95
6
2
29
69
16
62
48
15
56
98
57
68
37
6
33
247
134
6
3
30
86
17
79
14
14
56
91
71
65
49
7
36
59
14
13
58
98
54
72
51
8
51
FY16
Jun Sep Dec
82
8
12
63
106
-39
69
48
9
-8
Mar
98
50
19
60
5
83
-146
68
53
8
22
191
137
4
2
157
27
88
19
750
591
140 141 158 133
137 154 170 200
189 186 198 213
210 189 198 223
232 220 214 224
227 224 137
238 177 188
8
2
60
23
41
13
9
2
64
20
57
12
7
1
66
18
81
14
284 367
6
2
80
16
71
11
6
2
83
19
98
13
-251
342 217 403
154 173 166 133
6
2
89
14
81
13
5
2
92
13
63
11
7
3
96
9
86
11
5
2
96
15
95
12
203 137 346
5
2
19
67
12
5
2
16
82
14
6
3
22
95
15
187 153
149 149
7
2
24
74
16
5
3
28
54
13
251 131 187
147 128 131
6
2
28
76
16
6
2
23
65
13
7
3
26
77
15
105 143 156 128
150 178 139 139
138 174 175 165
104 119 128 132
131 135 143 141
140 150 152
609 644 701 725
426 430 475 502
702 708 730 866
464 462 536 655
799 770 791 883
570 544 582 674
792 843 896 979
594 612 663 743
930 900 840 894
713 679 683 727
897 864 763
714 686 639
Note:
Comparable Universe, excludes Just Dial, Alembic Pharma, Vedanta due to merger, Hathway and Repco Home Fin., MCX, Inox Wind,
Alkem Lab and Interglobe Aviation.
REVIEW | June 2016
9
 Motilal Oswal Financial Services
Sectoral quarterly PAT trend YoY (%)
Sectoral quarterly PAT growth trend (%)
Sector
Auto
Capital Goods
Cement
Consumer
Financials
Private Banks
PSU Banks
NBFC
Health Care
Media
Metals
Oil & Gas
Oil & Gas Ex OMCs
Real Estate
Retail
Technology
Telecom
Utilities
Others
MOSL Univ Excl OMCs
MOSL Univ Ex Metals & Oil
330
25
15
34
31
31
46
24
69
FY11
Jun Sep Dec Mar
87
24
16
22
33
14
32
21
42
46
22
16
27
36
17
47
93
46
16
68
66
32
87
19
93
48
32
26
21
9
16
22
9
39
-14
24
27
70
5
5
18
6
12
18
132
28
17
19
8
3
5
16
-3
31
-22
13
15
14
13
60
43
-2
68
20
37
31
15
9
FY12
Jun Sep Dec Mar
5
0
73
19
10
28
2
7
4
8
-6
-84
25
17
13
19
-12
10
8
30
2
53
17
8
27
2
-1
8
-8
61
-11
13
24
23
-8
4
13
51
30
15
22
50
29
92
13
8
-34
96
9
52
26
7
21
-9
19
30
11
12
28
24
38
30
48
31
9
-2
PL
3
-3
6
36
-11
14
-9
14
23
FY13
Jun Sep Dec Mar
-4
-5
63
15
20
27
11
31
27
8
-26
-18
-2
23
16
28
-2
44
35
22
-5
-7
-14
18
6
25
-18
40
34
25
6
10
-4
-19
24
15
-3
-9
2
3
-11
FY14
Jun Sep Dec
40
68
Mar
3
77
26
-10
11
11
18
3
12
34
-5
11
99
8
10
-6
25
48
3
22
17
20
FY15
Jun Sep Dec Mar
5
-7
26
12
17
19
18
13
23
3
27
-7
-13
12
8
19
-7
9
33
7
-23
-9
13
0
15
-23
7
17
-53
FY16
Jun Sep Dec
-14 -24
-19 -27
-19
11
-2
10
9
9
37
34
-1
-10
7
14
2
3
-3
0
-2
6
1
14
14
0
47
8
-58
32
8
-36
12
PL
7
44
16
PL
37
16
19
7
-10
12
-7
-9
-6
Mar
60
4
27
8
-98
-15
PL
-1
44
40
-35
-23
3
-27
-5
12
-9
2
14
-16
-19
-47 -25 -20 -13
-26 -44 -33 -11
13
11
29
-5
23
57
26
-20
LP
-10
0
15
17
20
-11
4
-1
4
17
2
26
25
50
12
5
1
-2
5
30
46
6
9
9
13
13
0
20
19
58
18
36
6
-31
-12
34
83
-4
24
13
14
11
5
20
11
42
13
-6
24
18
12
39
47
1
28
11
10
-20 -70 -31
-12 -16
-27 -28 -12
-21 -25
-25 -14
247 144
-78 117
-2
27
273
12
68
14
31
27
30
8
68
16
55
39
28
18
-22 -24
-15 -19 -23
812 -24
-3
-27
14
35
-5
27
-2
9
18
19
22
22
20
21
5
8
9
-47 -30
-14
24
11
-16
19
4
-4
1
-41 -37 -14
-25 -48 -29
-14 -46 -19
2
24
13
44
9
7
11
17
5
11
82
14
-6
3
-6
-2
6
37
14
-9
-2
-14 162
-13 -38 -12
-11 -36
-52 -29 -42 -50
-27 -39 -21
-45 -22
-18 -16 -10
Note:
Comparable Universe, excludes Just Dial, Alembic Pharma, Vedanta due to merger, Hathway and Repco Home Fin., MCX, Inox Wind,
Alkem Lab and Interglobe Aviation.
REVIEW | June 2016
10
 Motilal Oswal Financial Services
Sectors demonstrating trend change
-3
Autos:
Healthy QoQ pick-up in revenue growth and sustenance of margin expansion trend.
Cement:
Consistent QoQ pick-up in revenue growth and acceleration in margin expansion.
Capital Goods:
Decent pick-up in revenue growth and positive PAT growth after six quarters.
Metals:
Revenue decline arrested; return to profitability after loss in 3QFY16.
Private Banks:
PAT decline after multiple quarters – driven by sharp rise in provisions.
Cement PAT growth seeing up-tick
13
10
12
9
14
31
1
-2
-3
-4
5
11
14
26
15.5
8
0
3
5
8
10
19.2
27
PAT growth YoY (%)
9.4
-4
14.3 14.1 13.2 15.0
43
-7
72
124
90
19.6 19.8
-14
-26
13.9 14.3
-44
-33
-11
EBIDTA Margin (%)
13.4
-12
17.8 16.2 16.7 16.7
32
-16 -19
-2
-1
-4
-4
-6
7
16
Automobiles ex JLR margin at all-time high
PAT growth YoY (%)
11.1 11.2 11.5
62
-32
-20
-14
-28
9.6
EBIDTA Margin (%)
10.9 11.1 10.9
37
-14
9.8
16.8 17.1
-10
Sales growth YoY (%)
Capital Goods PAT growth after six quarters
-1
15.7
8.3
-7
-47
9.6
-25
9
12
21
11
3
2
0
-5
3
4
3
7
PAT growth YoY (%)
27
14.1
13.4
10.8
10.4
10.0 9.3
-20
-13
-5
-8
-8
EBIDTA Margin (%)
12.9
6
8.3 8.0
5.4
-16
-24
-55
Sales growth YoY (%)
Metals return to profitability after posting loss in 3QFY16
17
10.0
89
9
17
PAT (INR b)
8.3 8.3 8.2
66
71
75
-6
17
8.4
84
7
0
-11 -9
Share to MOSL PAT (%)
9.1 9.8 8.9
4.5 5.4
87
90
77
41
50
16
-15
6.7
59
-19
-10
4.3
-1.2 33
-10
Sales growth YoY (%)
Sales growth YoY (%)
REVIEW | June 2016
11
 Motilal Oswal Financial Services
Stocks/sectors demonstrating earnings revision trend change
Stocks with upwards earnings revision trend change (earnings upgrade after several quarters of downgrade):
Tata
Motors, L&T, HUVR, HDFC, Bajaj Auto, Bharti Airtel, M&M, Maruti.
Stocks with downwards earnings revision trend change (earnings downgrade after several quarters of upgrade):
Reliance.
Sectors with upward earnings revision trend change (earnings upgrade after several quarters of downgrade):
Metals,
NBFC, Autos, Cement, Telecom.
Sectors with continued downward earnings revision:
Pvt Banks, PSU Banks, Technology, Oil & Gas, Healthcare, Retail.
Sectors with upward trend in FY17E PAT (INR b)
Mar-15
248.5
61.0
53.5
83.4
43.5
51.6
55.7
66.6
FY17E PAT (INR b)
Current
Metals
NBFC
Automobiles
Cement
Telecom
100.1
292.4
393.7
112.8
97.8
Mar-16
72.5
267.1
384.3
110.9
96.5
Dec-15
23.6
300.8
419.4
105.7
106.5
Sep-15
119.9
335.3
459.2
123.5
111.3
June-15
283.3
338.0
490.7
139.0
118.7
Mar-15
290.1
343.6
529.3
163.9
101.2
FY17E PAT (INR b)
Current Mar-16 Dec-15 Sep-15 June-15
143.8
140.9
155.3
182.8
203.7
55.6
53.8
57.2
61.1
64.1
45.5
44.1
44.1
46.4
52.8
71.1
69.7
76.6
81.6
81.6
43.6
42.6
44.3
47.1
48.8
49.7
47.2
48.2
48.2
48.5
45.3
41.0
47.4
47.8
58.6
62.0
58.8
67.8
72.7
73.2
Stocks with upward trend in FY17E PAT (INR b)
Tata Motors
Larsen & Toubro
Hind. Unilever
HDFC
Bajaj Auto
Bharti Airtel
Mahindra & Mahindra
Maruti Suzuki
Stocks with downward trend in FY17E PAT (INR b)
State Bank
Coal India
Reliance Inds.
ICICI Bank
Axis Bank
HCL Technologies
BHEL
Infosys
FY17E PAT (INR b)
Current Mar-16 Dec-15 Sep-15 June-15
150.2
187.3
240.4
239.6
241.5
119.9
154.5
173.0
174.8
179.6
312.1
339.7
328.0
309.1
296.7
105.1
128.7
143.9
149.6
153.0
83.3
92.2
96.7
102.6
103.3
77.9
84.9
89.4
88.0
90.5
10.8
16.1
26.4
37.0
43.7
152.8
157.7
153.5
159.0
150.7
Mar-15
270.3
193.4
308.4
156.5
103.4
94.8
43.2
157.4
Sectors with downward trend in FY17E PAT (INR b)
FY17E PAT (INR b)
Current
Banks-Private
Banks-PSU
Technology
Oil & Gas
Healthcare
Retail
466.3
300.1
643.5
836.2
214.2
10.9
Mar-16
495.8
336.9
662.8
855.8
219.6
11.4
Dec-15
519.4
431.4
682.5
887.2
230.7
11.7
Sep-15
531.5
478.6
703.6
951.7
249.0
12.7
June-15
535.6
488.6
690.0
1002.3
256.5
15.0
Mar-15
547.9
559.4
728.4
989.2
259.8
17.4
REVIEW | June 2016
12
 Motilal Oswal Financial Services
Stocks where FY17 growth forecast is materially different from 3-year average
Stocks with FY17 earnings growth showing positive trend change v/s 3-year average growth:
M&M, KMB, ACC, HCL
Tech, Ultratech, Bosch, Bajaj Auto, L&T, Hindalco.
Stocks with FY17 earnings growth showing negative trend change v/s 3-year average growth:
TCS, Tech Mahindra, Axis
Bank, HDFC, Wipro, BPCL, NTPC, Coal India, Bharti Infratel.
PAT (INR M)
FY16
6,008
32,062
34,589
56,670
21,747
12,459
36,524
47,324
24,717
PAT growth YoY (%)
FY15
FY16
FY17
-5.3
-30.3
62.9
-34.2
12.0
41.4
17.1
-5.4
38.6
14.0
-22.0
37.5
-2.8
7.9
33.5
65.2
-8.2
31.8
-6.0
19.8
19.4
11.5
5.5
17.5
8.7
-11.5
14.0
Stocks with positive trend in FY17E PAT growth
Companies
ACC
Mahindra & Mahindra
Kotak Mahindra Bank
HCL Technologies
Ultratech Cement
Bosch
Bajaj Auto
Larsen & Toubro
Hindalco
FY14
9,108
43,491
31,228
63,709
20,731
8,213
32,420
40,244
25,710
FY15
8,621
28,626
36,571
72,608
20,147
13,568
30,481
44,867
27,943
FY17
9,788
45,322
47,941
77,941
29,027
16,419
43,603
55,599
28,173
FY18
16,326
54,488
61,762
86,954
44,573
21,965
50,140
67,559
31,848
FY14
-29.5
19.3
11.5
58.3
-21.2
-14.3
6.5
-18.4
-20.9
3 Yr Avg
-21.7
-1.0
7.7
16.8
-5.4
14.2
6.8
-0.5
-7.9
Stocks with negative trend in FY17E PAT growth
Companies
Bharti Infratel
TCS
Tech Mahindra
Axis Bank
HDFC
Wipro
BPCL
NTPC
Coal India
FY14
15,179
191,168
25,828
62,177
54,403
77,966
39,107
99,308
159,881
FY15
19,924
216,958
25,992
73,577
59,902
86,558
48,066
90,432
137,316
PAT (INR M)
FY16
23,820
242,146
31,155
82,237
70,931
88,922
79,815
101,624
142,743
FY17
27,858
265,395
32,565
83,315
71,147
89,152
79,987
95,101
119,863
FY18
35,526
305,518
38,204
97,674
81,972
101,653
88,403
112,939
145,418
FY14
51.7
37.1
41.8
20.0
12.2
27.1
107.9
10.2
-9.9
PAT growth YoY (%)
FY15
FY16
FY17
31.3
19.6
17.0
13.5
11.6
9.6
0.6
19.9
4.5
18.3
11.8
1.3
10.1
18.4
0.3
11.0
2.7
0.3
22.9
66.1
0.2
-8.9
12.4
-6.4
-14.1
4.0
-16.0
3 Yr Avg
34.2
20.7
20.8
16.7
13.6
13.6
65.6
4.5
-6.7
REVIEW | June 2016
13
 Motilal Oswal Financial Services
4QFY16: Margins expand 100bp YoY to 20.1%
Mar-16 EBITDA margin (ex OMCs and Financials) at 20.1% (v/s estimate of 19.7%); benefits from RM cost tailwinds
23.2
22.2
20.7
19.0
21.3
21.9
22.0
22.2
21.6
21.9
20.6
20.3
19.8
18.8
19.1
19.3
MOSL Universe EBITDA Margin LPA: 20%
20.1
18.9 18.5
19.5
19.0
18.7
19.1
19.2 19.3 19.4
18.8 18.6
19.0
19.1
20.1
18.6
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Mar-16 PAT margin (ex OMCs and Financials) up 80bp YoY at 10.7% (v/s estimate of 9.7%); highest in 15 quarters
14.6
13.1
13.2
11.4
10.8
12.3
11.7 11.7
12.5
12.2
12.6
12.1 11.8
11.0
11.4
10.5
10.9
10.2
10.6
10.0
MOSL Universe PAT Margin LPA: 11%
10.3
9.7 10.0
10.5 10.3
9.9
9.9
9.2
10.3
9.7
9.4
10.7
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
REVIEW | June 2016
14
 Motilal Oswal Financial Services
Share of global cyclicals witnesses sharp improvement QoQ
Domestic cyclicals share down 1,000bp QoQ, largely impacted by BFSI
100%
Defensives
26
80%
Global cyclicals
60%
37
25
26
39
43
37
36
35
32
29
24
24
23
29
33
34
37
43
45
25
25
34
40%
Domestic cyclicals
20%
37
41
39
37
33
37
38
36
35
37
38
32 22
0%
Defensives
include Consumer, Healthcare, Technology, Telecom and Utilities
Global cyclicals
include Metals, Oil & Gas and JLR
Domestic cyclicals
include Automobiles, Banks, Capital Goods, Cement, Media, NBFCs, Real Estate and Retail
REVIEW | June 2016
15
 Motilal Oswal Financial Services
Sensex: Positive sales growth after five quarters
Trend in Sensex sales growth (YoY %): Sensex sales grows 4% v/s expectation of 2%
37 36 38
22
6
44
31 30
19
32
28
26
34
27
20
23 21
20
16
22
33
30 32
22
18
23
23 25
19
17
LPA:17%
11
8 6
3
15 16 14 15
4
-1
-3
-7 -5 -6
4
-5
-11
-6
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Trend in Sensex EBITDA growth (YoY %): EBITDA grew by 13%, highest in seven quarters
50
37
17
24
24 26
10 11
18
25
31
37
22
27 29
20
23
28
18
31
26 27
20
9
15 13
6
17
8
LPA:15%
8 5
3
1
16 19
14
19
6
0 -4
3 0 5
13
-5
-13 -12
-4
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
REVIEW | June 2016
16
 Motilal Oswal Financial Services
Sensex:
PAT growth of 2.7%; 5 companies saw over 3% upgrade in FY17E EPS
Trend in Sensex PAT growth (YoY %)
39
25
28
42
33
24
12 6
-2
-15
-25
FY05
FY06
FY07
FY08
FY09
43
31 30
33 30
26
25 23
44
26 27
29
22
12
15
6
14
4
17 19
20
LPA:14%
7
11
0
-4
19
12
22
6
1
-8 -9
0
3
3
-7
-21
FY10
FY11
FY12
FY13
FY14
FY15
FY16
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
4QFY16 PAT growth (YoY, %): Tata Motors, Sun Pharma, GAIL, Lupin among key growth leaders; ICICI Bank, Cipla, SBI and BHEL among negative contributors
158
93
51
48
38
29
29
22
20
20
19
19
17
16
7
4
3
3
0
-1
-2
-6
-6
-12 -28
-30
-62 -66 -69 -76
Loss
REVIEW | June 2016
17
 Motilal Oswal Financial Services
Nearly 50% of the Sensex companies saw more than 15% PAT growth
INR B
Company
High PAT Growth
Tata Motors
Sun Pharma
GAIL
Lupin
Adani Ports
Bajaj Auto
Hero Motocorp
Larsen & Toubro
HDFC Bank
Asian Paints
Med/Low PAT Growth
Hind. Unilever
Mahindra & Mahindra
Reliance Inds.
Infosys
TCS
ITC
Bharti Airtel
Coal India
Negative PAT Growth
Axis Bank
Wipro
HDFC
NTPC
Maruti Suzuki
Dr Reddy’ s Labs
ONGC
BHEL
State Bank
Cipla
ICICI Bank
Tata Steel
Sensex Universe
Mar
2016
1,634
807
76
116
42
19
54
75
332
75
39
1,689
79
102
500
166
284
102
250
208
1,373
46
136
25
180
153
38
161
100
153
33
54
295
4,697
SALES
CHQ % CHQ %
QoQ
YoY
11
15
12
19
8
24
-13
-18
18
36
19
12
-3
14
3
11
28
18
5
24
-4
12
-1
3
0
4
-3
11
-12
-11
4
23
4
17
11
9
4
8
9
0
6
-6
9
20
6
12
13
5
4
-6
1
12
-5
-3
-12
-24
88
-21
12
4
5
6
-1
6
5
-12
5
4
VAR. OVER
EXP. (%)
8
15
-2
-7
11
37
4
1
4
3
2
-3
-1
3
-10
0
0
3
1
-2
2
8
-1
-3
26
5
-4
1
-12
12
-1
-2
-7
2
EBITDA
CHQ % CHQ %
Mar 2016
QoQ
YoY
312
20
40
114
21
35
25
16
182
11
3
84
14
56
73
12
16
12
12
-2
37
12
3
40
49
83
35
57
0
21
7
-12
26
438
6
14
15
3
18
13
-10
26
107
4
24
46
7
24
79
2
12
37
2
12
92
8
14
49
17
-9
484
18
-1
44
10
10
28
5
2
27
19
-1
53
18
16
24
8
9
8
-18
0
60
-31
-40
4
LP
-78
142
48
11
2
-52
-57
71
8
30
22
184
43
1,234
14
13
VAR. OVER
EXP. (%)
14
24
0
2
24
0
8
-1
27
2
0
0
10
5
1
2
-3
5
8
-14
6
0
-4
-1
11
7
-13
-14
-47
33
-63
-6
92
6
Mar
2016
167
47
17
8
8
9
8
8
24
34
4
270
10
7
73
36
63
25
13
42
150
22
22
18
26
11
4
27
4
13
1
7
-4
587
PAT
CHQ %
CHQ %
QoQ
YoY
25
55
35
158
21
93
16
51
52
48
42
38
-11
29
2
29
132
22
1
20
-21
20
3
10
1
19
-19
19
1
17
4
16
4
7
-6
4
16
3
15
0
-4
-31
-1
-1
0
-2
16
-6
24
-6
11
-12
-35
-28
-33
-30
LP
-62
13
-66
-76
-69
-77
-76
Loss
Loss
7
3
VAR. OVER
EXP. (%)
11
19
-2
31
4
41
1
-3
32
0
-7
1
9
-2
3
3
2
-1
31
-12
-10
-9
1
-6
14
-6
-33
4
-13
-12
-76
-76
Loss
0
EBITDA Margin (%)
Mar
Chg YoY
2016
(bp)
19
332
14
163
33
1852
10
535
33
706
66
-40
21
360
16
331
15
178
77
-158
17
186
26
241
18
222
12
149
21
608
28
20
28
-138
36
74
37
183
24
-243
35
167
97
-901
21
-210
108
-626
30
584
15
-53
22
71
37
-963
4
-962
93
608
7
-971
132
2385
7
289
26
194
REVIEW | June 2016
18
 Motilal Oswal Financial Services
Number of companies with >30% PAT growth highest in 20 quarters
Nearly one-third (31%) of the companies reported >30% PAT growth, highest in 20 quarters. Companies reporting >15%
and <30% growth increased to 18% from 16% in 3QFY16.
35% of the companies in MOSL universe reported negative earnings growth.
Distribution of PAT growth
Earnings Growth
55 36
34 25 15 24 26 20
-8 -15
>30%
>15-30%
9
13
11
>0-15%
4
18
11
9
<0%
6
0
-3
8
Ex RMs (%)
12
9
17
7
-7
-9
-4
-4
-10
-15
-15 -11 23
42 26 22 24
17 14 14 21
24 23 26
11
42 41
11 11 15
14
19
19 24
19 23
26
23
21
11
18
22
18
18
14
10
60
54 52 48
44 45
35 30
26 27
11
25 24 31
32 35 31 27 30 27
34
14 14
22
10
9
17
9
13
10 20 18 18
22
21
18 23
24 25
32
41 43
51
38 32 39 35
42 40
31
36
38 39 42 40 37 38
45
26
34 39
35
40 35 36
24 19
13 27 17 16
22
21 24
16
18 21
17
18 22
18 17
19 16 18
17 14
19 22
28
25
25 22
22 25
16
18
20
23 16 17 24 16
31
28 26 24
26
21 21 24 25 25
20 25 24 20 20
18 21 20 20 24
PAT Growth Ex RMs (%)
REVIEW | June 2016
19
 Motilal Oswal Financial Services
Sensex EPS estimate cut by 2.3% for FY17 and 0.4% for FY18
Sensex earnings growth muted in FY16; expect rebound in FY16-18, with 19% CAGR
FY93-FY16:
13% CAGR
FY16-18E: 19% CAGR
14%
23%
1,872
FY08-16:
6% CAGR
1,024
834
FY01-08: 21% CAGR
446
540
720
1,120
1,182
1,338
1,352
1,330
-2%
1,519
833
820
216
236
272
361
FY16E EPS up/downgrade (INR)
FY16 EPS (INR)
19.7
18.4
18.5
15.3
11.9
FY16 EPS Growth YoY (%)
FY17E EPS up/downgrade (INR)
FY17 EPS (INR)
21.6
23.3
22.2
21.8
21.7
19.7
FY17 EPS Growth YoY (%)
8.7
21.2
6.0
0.9
-1.6
-2.6
-1.6
20.3
16.4
17.7
14.2
REVIEW | June 2016
20
 Motilal Oswal Financial Services
FY16-18 estimates: Expect 20%+ profit CAGR for MOSL Universe
Sector
(No of Companies)
High PAT CAGR (>25%)
Cement (13)
Financials (35)
PSU Banks (12)
Private Banks (10)
NBFC (13)
Real Estate (10)
Capital Goods (15)
Media (11)
Healthcare (16)
Others (30)
Medium PAT CAGR (20-25%)
Auto (12)
Retail (3)
Low PAT CAGR (up to 20%)
Oil & Gas (12)
Excl. OMCs (9)
Consumer (16)
Metals (9)
Telecom (4)
Technology (12)
Utilities (4)
MOSL Excl. OMCs (199)
MOSL (202)
Sensex (30)
Nifty (50)
Sales Gr. /
CAGR (%)
(FY16-18)
14
13
14
12
17
15
9
12
18
15
17
13
13
17
11
8
12
12
6
10
17
10
12
11
12
11
EBIDTA
Margin (%)
FY16
37.5
16.3
79.0
70.9
87.9
89.7
33.3
9.1
28.1
24.8
15.6
14.4
14.6
8.2
21.9
11.9
20.3
22.5
12.3
36.0
24.2
30.8
25.1
21.6
24.7
24.1
EBIDTA
CAGR (%)
(FY16-18)
17
33
13
11
15
14
14
31
27
20
21
15
15
24
16
16
15
14
25
10
16
15
16.0
16.0
15.1
14.6
EBITDA margin
change (bp)
FY16-18
185
614
-94
-44
-316
-39
299
340
429
207
97
42
41
112
177
171
106
43
489
-6
-59
273
164.9
197.3
159.0
143.3
PAT
(INR B)
FY16
1,167
76
646
-41
403
283
28
92
35
196
93
339
330
9
1,920
763
546
242
134
104
582
312
3,426
3,643
1,200
1,414
FY16
-20
3
-34
-112
6
11
3
-14
64
13
12
8
8
-10
-3
19
2
11
-54
-5
6
9
-9
-6
3
-1
PAT Gr. / CAGR (%)
FY17E
54
47
71
-897
16
10
33
44
14
27
29
24
24
23
4
10
4
14
-25
-6
12
-4
23
23
12
18
FY18E
26
52
22
31
20
17
34
22
45
28
22
24
24
22
22
22
25
16
73
35
15
19
24
23
23
23
(FY16-18)
39
50
45
LP
18
13
34
33
29
28
26
24
24
23
13
16
14
15
14
13
13
7
23
23
17
21
PAT delta
Share (%)
FY16-18
61
5
39
26
9
5
1
4
1
7
3
10
10
0
29
14
9
4
2
2
9
3
100
NA
NA
NA
REVIEW | June 2016
21
 Motilal Oswal Financial Services
Sensex FY16-18 free float PAT CAGR at 17%; sales CAGR at 12%
Company
High PAT Growth (20%+)
BHEL
Tata Steel
Sun Pharma
GAIL
M&M
Maruti Suzuki
Lupin
Cipla
Bharti Airtel
State Bank
HDFC Bank
Tata Motors
Medium PAT Growth (10-20%)
Larsen & Toubro
Bajaj Auto
Reliance Inds.
Hero MotoCorp
Dr Reddy’ s Labs
Infosys
ITC
Asian Paints
Hind. Unilever
TCS
ICICI Bank
Low PAT Growth (<10%)
Axis Bank
ONGC
HDFC
Wipro
NTPC
Adani Ports
Coal India
Sensex (PAT free float)
Sales (INR b)
Sales
FY16 FY17 FY18 CAGR %
8,650 9,774 10,702
11
256 298
333
14
1,172 1,272 1,068
-5
281 315
345
11
516 643
812
25
780 886
989
13
586 701
830
19
137 168
195
19
137 164
190
18
965 1,061 1,159
10
788 878
985
12
276 337
406
21
2,756 3,051 3,390
11
6,790 7,576 8,711
13
1,026 1,131 1,296
12
227 260
290
13
2,332 2,568 2,994
13
286 323
366
13
155 172
198
13
624 733
853
17
368 398
440
9
153 175
204
15
320 344
379
9
1,086 1,249 1,437
15
212 223
254
9
3,674 3,850 4,387
9
168 189
221
15
1,293 1,272 1,454
6
87 98
112
14
512 594
675
15
787 825
966
11
70 78
88
12
756 794
871
7
19,114 21,200 23,800
12
EBIDTA Margin (%)
EBITDA
FY16
FY17 FY18 CAGR %
22
23
25
17
-8
5
6
LP
6
10
18
58
30
32
36
22
8
9
8
29
12
14
14
19
16
15
15
16
24
26
27
27
18
21
22
29
35
35
35
9
71
69
69
10
77
77
77
21
15
15
15
12
24
23
24
14
12
13
14
21
21
21
20
12
17
18
19
20
16
15
15
13
25
24
25
12
27
27
28
18
39
39
40
10
17
17
16
13
18
19
19
12
28
27
27
13
112
96
95
1
33
33
35
13
96
97
97
15
35
36
37
10
96
96
97
14
21
20
21
14
24
27
30
23
67
65
64
10
21
17
19
3
25
25
26
15
PAT (INR b)
FY16 FY17 FY18
598 751 1,013
-9
11
14
7
-7
60
47 67
93
23 33
40
32 45
54
47 62
76
22 29
36
15 19
24
43 50
68
122 150
189
123 148
178
125 144
181
1,043 1,173 1,370
47 56
68
37 44
50
274 312
376
31 35
42
23 25
30
135 153
175
98 112
128
18 21
23
41 46
52
242 265
306
97 105
121
690
635
774
82 83
98
174 149
204
71 71
82
89 89
102
102 95
113
29 28
30
143 120
145
1,200 1,343 1,655
PAT YoY (%)
PAT
Contbn to
FY16 FY17 FY18 CAGR % Delta %
-9
26
35
30
50
-163 -219
25
LP
3
169
-196 -937
184
6
-1
42
38
40
6
-23
44
22
32
2
12
41
20
30
3
23
32
22
27
4
-6
28
25
27
2
33
28
25
27
1
-18
16
36
26
3
-28
23
26
24
8
20
20
20
20
7
-11
15
26
20
7
10
12
17
15
40
5
17
22
19
2
20
19
15
17
2
21
14
21
17
12
25
13
19
16
1
2
12
20
16
1
9
13
15
14
5
2
13
14
14
4
25
16
11
14
1
6
12
14
13
1
12
10
15
12
8
-13
8
15
12
3
5
-8
22
6
10
12
1
17
9
2
-5
-15
37
8
4
18
0
15
8
1
3
0
14
7
2
12
-6
19
5
1
24
-2
7
2
0
4
-16
21
1
0
4
12
23
17
100
REVIEW | June 2016
22
 Motilal Oswal Financial Services
Growth contributors: Growth supported by domestic cyclicals
Stock-wise contribution to growth in FY17E Sensex EPS (INR)
15 13 12 12
20 16
26 25
1 0 0 0
-2 -6 -7
-13
5 4 4 4 3 3 3 2 2
10 10 9 8
10
Stock-wise contribution to growth in FY18E Sensex EPS (INR)
22 18 18 13
7 6 5 5 4 4 4 3 3 3 2 1 1 1
12 12 12 12 8 7
13 13
26
3728
53
1,519
1,330
1,872
1,519
Stock Wise FY17E EPS revision since Preview (%)
11
5
5
3
3
3
2
2
2
1
1
1
0
0
0
-1
-1
-2
-3
-3
-4
-4
-8
-8
-10
-19 -20
-22
-33
Loss
REVIEW | June 2016
23
 Motilal Oswal Financial Services
Mar-16 quarter results: The best &
the worst
(<USD3b market cap)
TOP POSITIVE SURPRISES
Company
Actual
(INR b)
Biocon
Ramco Cements
M & M Financial
Exide Inds.
Muthoot Finance
TTK Prestige
TOP NEGATIVE SURPRISES
Company
Actual
(INR b)
Alstom T&D India
Union Bank
Alembic Pharma
Sobha
Indian Bank
Jain Irrigation
Punjab National Bank
0.8
14.1
1.4
1.5
8.3
2.9
32.3
QoQ
Chg (%)
LP
6
-63
34
9
88
11
EBIDTA
Est. YoY
Chg (%)
25
-4
167
8
1
12
1
YoY
Chg (%)
-19
-15
46
4
1
3
1
Var. Over
Exp. (%)
-35
-12
-45
-4
1
-8
0
Actual
(INR b)
0.3
1.0
0.9
0.4
0.8
0.9
53.7
QoQ
Chg (%)
LP
22
-66
12
100
LP
PL
PAT
Est. YoY
Chg (%)
40
-49
154
9
-35
5
PL
YoY
Chg (%)
-45
-78
29
-42
-59
-14
PL
Var. Over
Exp. (%)
-61
-57
-49
-46
-37
-18
Loss
2.0
3.1
6.8
2.7
6.0
0.3
QoQ
Chg (%)
14
26
53
14
104
-42
EBIDTA
Est. YoY
Chg (%)
11
17
-1
-6
17
46
YoY
Chg (%)
15
30
6
12
117
84
Var. Over
Exp. (%)
4
11
7
20
85
26
Actual
(INR b)
3.6
2.0
3.7
1.8
2.7
0.2
QoQ
Chg (%)
250
74
451
33
42
-42
PAT
Est. YoY
Chg (%)
-48
21
-23
-6
19
73
YoY
Chg (%)
79
119
11
29
61
131
Var. Over
Exp. (%)
242
80
44
37
35
33
REVIEW | June 2016
24
 Motilal Oswal Financial Services
Mar-16 quarter results: The best &
the worst
(>USD3b market cap)
TOP POSITIVE SURPRISES
Company
Actual
(INR b)
31.0
34.7
12.8
91.9
113.9
11.9
14.7
23.5
QoQ
Chg (%)
35
19
23
8
21
-1
3
8
EBIDTA
Est. YoY
Chg (%)
11
-15
-13
6
8
35
7
2
YoY
Chg (%)
46
-14
4
14
35
39
18
9
Var. Over
Exp. (%)
31
1
20
8
24
3
10
7
Actual
(INR b)
10.3
11.3
6.8
12.9
47.0
7.0
10.3
11.3
QoQ
Chg (%)
135
LP
34
16
35
10
1
11
PAT
Est. YoY
Chg (%)
-36
-42
-19
-21
117
13
9
-6
YoY
Chg (%)
77
55
11
3
158
32
19
-12
Var. Over
Exp. (%)
178
168
37
31
19
17
9
-6
Hindalco
Vedanta
Ultratech Cement
Bharti Airtel
Tata Motors
Kotak Mahindra Bank
Hind. Unilever
Maruti Suzuki
TOP NEGATIVE SURPRISES
Company
ICICI Bank
Cipla
Dr Reddy’ s Labs
Britannia
BHEL
United Spirits
Axis Bank
Glenmark Pharma
Note: LP: Loss to Profit; PL:
Profit to Loss
Actual
(INR b)
71.1
2.2
8.2
2.7
3.6
1.7
44.0
2.0
QoQ
Chg (%)
8
-52
-18
-12
LP
-33
10
-42
EBIDTA
Est. YoY
Chg (%)
38
18
15
41
-59
94
9
10
YoY
Chg (%)
30
-57
0
22
-78
30
10
-37
Var. Over
Exp. (%)
-6
-63
-13
-14
-47
-33
0
-43
Actual
(INR b)
7.0
0.8
3.8
1.9
3.7
0.9
21.5
1.7
QoQ
Chg (%)
-77
-76
-35
-11
LP
12
-1
1
PAT
Est. YoY
Chg (%)
0
29
9
42
-56
14
9
1,493
YoY
Chg (%)
-76
-69
-28
14
-62
0
-1
1,514
Var. Over
Exp. (%)
-76
-76
-33
-20
-13
-12
-9
1
REVIEW | June 2016
25
 Motilal Oswal Financial Services
Highest earnings upgrade/downgrade (>USD3b market cap)
TOP EARNINGS UPGRADES
Company
Hindalco
Cairn India
Mahindra & Mahindra
BPCL
ACC
Kotak Mahindra Bank
Nestle
Maruti Suzuki
TOP EARNINGS DOWNGRADES
Company
BHEL
Coal India
State Bank
United Spirits
ICICI Bank
Shree Cement
Axis Bank
Note: LP: Loss to Profit; PL: Profit to Loss
EPS - Post-4QFY16 (INR)
FY16
FY17E
FY18E
12.0
13.6
15.4
11.4
4.5
6.5
53.6
75.7
91.0
110.4
110.6
122.3
32.0
52.1
86.9
18.9
26.1
33.7
119.9
113.0
136.2
155.5
205.4
251.4
FY16
-11.5
-69.2
12.0
66.1
-30.3
-6.0
-7.3
23.4
EPS Growth (%)
FY17E
FY18E
14.0
13.0
-60.4
43.1
41.4
20.2
0.2
10.5
62.9
66.8
38.6
28.8
-5.7
20.5
32.0
22.4
FY16
LP
45.1
-6.2
9.5
0.0
2.7
0.0
-1.9
% Upgrade
FY17E
77.7
14.1
10.5
8.9
8.1
5.8
5.6
5.5
FY18E
60.8
0.3
11.0
5.3
8.0
7.7
7.4
2.7
EPS - Post-4QFY16 (INR)
FY16
FY17E
FY18E
-3.7
4.4
5.5
22.6
19.0
23.0
15.7
19.3
24.3
21.7
41.0
61.5
16.7
18.1
20.8
168.0
293.9
503.8
34.5
35.0
41.0
FY16
PL
4.0
-30.8
LP
-13.2
26.1
11.2
EPS Growth (%)
FY17E
FY18E
LP
25.5
-16.0
21.3
22.8
25.9
88.9
49.9
8.0
15.1
75.0
71.4
1.3
17.2
FY16
Loss
-2.6
-3.9
-24.5
-18.9
-2.8
-3.1
% Downgrade
FY17E
-32.8
-22.4
-19.8
-19.3
-18.6
-11.8
-10.1
FY18E
-18.5
-24.4
-15.3
-17.5
-21.7
-0.7
-11.8
REVIEW | June 2016
26
 Motilal Oswal Financial Services
Highest earnings upgrade /downgrade (<USD3b market cap)
TOP EARNINGS UPGRADES
Company
Crompton Greaves
India Cements
Sobha
M & M Financial
TTK Prestige
Ramco Cements
Arvind
TOP EARNINGS DOWNGRADES
Company
Canara Bank
Dish TV
IPCA Labs.
MCX
Bharat Forge
Amara Raja Batt.
Jubilant Foodworks
Note: LP: Loss to Profit; PL: Profit to Loss
EPS - Post-4QFY16 (INR)
FY16
-51.8
6.5
10.5
19.9
28.2
28.7
15.9
FY17E
33.1
3.4
20.0
29.5
35.0
35.7
24.5
FY18E
42.4
5.2
32.0
48.3
45.2
43.3
35.8
FY16
PL
-
-46.9
-19.0
-10.8
17.7
-6.0
EPS Growth (%)
FY17E
LP
-47.4
90.5
48.3
24.2
24.6
54.0
FY18E
28.1
51.4
59.5
63.5
29.1
21.4
46.1
FY16
-337.7
142.0
-3.7
-3.0
-15.2
-4.3
-12.0
% Downgrade
FY17E
-30.1
-28.3
-22.8
-16.1
-13.6
-8.8
-8.4
FY18E
-23.2
-10.4
-20.3
-14.0
-15.9
-7.3
-5.3
EPS - Post-4QFY16 (INR)
FY16
2.1
4.4
15.6
11.9
100.7
23.4
14.0
FY17E
3.2
8.4
25.7
15.5
145.2
24.5
16.5
FY18E
4.7
12.9
34.9
18.8
180.0
30.3
20.0
FY16
-29.6
LP
-38.6
-19.2
29.6
130.3
6.3
EPS Growth (%)
FY17E
54.3
90.6
64.2
30.2
44.1
4.5
17.8
FY18E
48.7
54.2
36.2
21.2
24.0
23.5
20.8
FY16
LP
7.7
-16.9
20.0
3.5
19.4
5.5
% Upgrade
FY17E
65.1
42.1
21.8
16.6
7.2
6.8
6.3
FY18E
-4.6
38.0
16.9
11.3
4.9
6.5
-2.2
REVIEW | June 2016
27
 Motilal Oswal Financial Services
Sector: Key surprises and guidance
REVIEW | June 2016
28
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
AUTO
Positive/Negative surprises
MSIL:
Realisations grew 5% QoQ , driven by product mix improvement in both domestic and exports along with lower discounts.
Tata Motors:
JLR’s higher volumes and better mix drives realizations (+4.7% QoQ) and EBITDA margins (+180bp QoQ). JLR’s share in Chery
JV’s PAT at GBP49m also surprised positively.
BOSCH:
Lower cost across all heads drives decadal high EBITDA margins (21.5%).
Bajaj Auto:
Above Estimate, EBITDA margin driven by product mix, despite weak exports. Domestic 2W market share recovery continues.
TVS Motor:
While gross margin improved by ~140bp QoQ to ~29.8%, EBITDA margin declined by 40bp QoQ (+20bp YoY) to 6.3% (vs. our
estimate of 7%) due to higher other expenses (+INR550m QoQ) related to Auto Expo (biennial), dealer conference and Victor launch.
Bharat Forge:
Tonnage de-grew by 7.5% YoY (+3.3% QoQ), whereas realizations declined 11% YoY (-7.2% QoQ) impacted by lower non-auto
segment. Gross margins declined ~165bp QoQ (+320bp YoY), however EBITDA margins at 29.6% (v/s est. 29.9%) declined just by 60bp QoQ
(+20bp YoY).
Amara Raja Batteries:
Sales growth moderates to ~10%, higher RM (+110bp QoQ) & other expenses (+100bp QoQ) leads to 8 Qtr low EBITDA
margins.
Guidance highlights
Bajaj Auto:
FY17 volume growth guidance at 4.6m units driven by dom. 2W growth of 37% and dom. 3W of ~17.5% but exports to decline by
7%. Domestic 2W growth to be driven by ramp-up of V, full year benefit of Avenger, Pulsar upgrade in 2HFY17 and all new Platina in June-16 .
MSIL:
Export volumes expected to be flat in FY17. Gujarat plant commissioning in Jan-17 (v/s Mar-17 earlier). Royalty on Vitarra Brezza to be
INR based, with rates lower than 5%. Capex at ~INR44b (~40% to be spent on product development)
Tata Motors:
JLR’s product lifecycle on track with F-Pace launch starting April-16,XE in US in May-16 and XFL in China in 2HCY16. JLR capex
guidance for FY17 AT GBP3.75b in FY16 (v/s GBP3.13b in FY16).
M&M:
It has guided for industry growth in 1QFY17 at 10% for tractors, if monsoons normal then industry growth could be stronger. KUV1OO
has got over 40k bookings since launch. Commodity prices bottomed out in Jan-16,and have started hardening. Impact visible in 2QFY17
Eicher Motors:
Guidance of maximum production for RE at ~675k in FY17 (v/s earlier guidance of~620k for CY16).
BOSCH:
Capex guidance of INR7.7b for FY17 towards new office building in Bangalore and capacity expansion at Nashik and Bidadi plants.
Implementation of BSVI for 2 wheelers, along term opportunity for BOS. Demerger of Starter Motor and Generator business by Aug-16
Bharat Forge:
Expects FY17 revenues to be flat, impacted by weakness in US class 8 trucks. It expects USD100m revenues each from PV (by
FY18), Aerospace(by FY20) and Rails (by FY20). Capex guidance of INR 2-2.5b in FY17.
REVIEW | June 2016
29
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
CAPITAL GOODS
Positive/Negative surprises
L&T
reported above estimate consolidated performance. Revenues at INR331b in 4QFY16 up 18% YoY driven by pick up in domestic E&C
projects (up 21% YoY) and overseas E&C business (19% YoY). EBIDTA at INR48.6b was up 34.6% YoY. EBIDTA margins at 14.7% witnessed
margin expansion of 178bp YoY on account of strong performance in the E&C segment. E&C segment witnessed margin expansion of 220bp to
13.5%. Adjusted Pat is up 22% YoY to INR24.1b (32% above our estimate of INR18.2b).
BHEL
reported below expected operational numbers for 4QFY16, revenue decline of 21% YoY was led by sluggish execution and macro
challenges prevailing in the economy. EBIDTA margins at 3.6% was impacted by drop in gross margins. Gross margins declined 440bps YoY to
36% led by execution of super critical order bagged under Joint deed undertaking clause and also on account of aggressively bagged low
margin projects to maintain company’s market share. BHEL reported Net profit of INR3.7b supported by other income of INR4.1b profit of
INR2.1b.
Alstom T&D
reported below estimated performance. revenues at INR9.7b were down 28.6% YoY (vs our estimates of 2.4% YoY growth), while
Adjusted PAT INR299m declined 45% YoY (estimate of 40% YoY growth). Deterioration in performance has been on account of realignment of
the milestones event for customer and book revenue close to project completion. Push back from customers on delay in acquisition of land
and other clearances also impacted the revenue. Negative operating leverage impacted the profitability of the company
Guidance highlights
L&T has provided its FY17 guidance on order inflow: order intake growth of 15% YoY. Revenue growth of 12-15% YoY and margin guidance at
50bps improvement on YoY basis.
KKC has scaled down its guidance for FY17: Domestic revenues to increase by 8-12% from earlier guidance of 10-15%, Export revenues to
remain flat to negative for FY17 as compared to earlier guidance of 0-5% growth.
BHEL is L1 in 12W+ projects of which it expects 7GW of projects to finalize in FY17. It expects ordering activity to remain at same level as in
FY16 (12 GW)
CEMENT
Positive/Negative surprises
Guidance highlights
Volume growth for south based players
Cost savings stronger than anticipated
South market started witnessing sign of recovery.
Trend reversal in pet coke prices to reduce further cost savings headroom
REVIEW | June 2016
30
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
CONSUMER
Positive / Negative surprises
HUL’s
sales came in below expectations with volume growth of 4% (est. 6%). Challenging demand environment with incremental slowdown
in rural markets, excise duty phase-out and continued pricing deflation impacted sales growth. S&D and PP divisions margins exzpanded
120bp and 490bp respectively. We revise estimates upwards by 3% to build in higher margins.
ITC
reported numbers were better than expectations with CIG volumes flat for 4QFY16 (est. 3% decline) aided by higher growth in the sub
65mm segment, benign base and lower price increases off-late.
APNT
top-line met our expectations with an estimated ~13% volume growth in the Domestic decorative paints business aided by lower
base. Gross and EBITDA margin expanded 390bp and 190bp YoY respectively. While bottom-line came below estimates (grew 19.9% YoY)
led by higher tax rate.
PIDI’s
reported stellar but in-line results. Domestic consumer bazaar volumes grew 13% in our view. Sharp gross margin expansion of
690bp YoY to 54.6% (multi year high) led to EBITDA margin expansion of 630bp to 20.7%. EBITDA and PAT grew 61.6% and 56.3%
respectively. Consumer Bazaar reported a revenue growth of 12.4% YoY, with its underlying EBIT margin expanding by 790bp YoY to 25.8%.
BRIT’s
results were below expectations impacted by excise duty phasing out, slowdown in industry growth to 2% and price decreases.
Biscuits volume growth stood in double digits thus further gaining market share (driven by increasing distribution and focus on weaker
states). EBITDA margin came in at 12.3% (est. 13.7%) up 140bp YoY lower than expected mainly due to gross margin miss.
Jyothy Labs’
consolidated Net sales & EBITDA were above expectations with 15.3% volume growth in power brands. EBITDA margin
expanded sharply by 370bp YoY due to gross margin expansion (up 130bp) and saving in staff costs (down 310bp). S&D revenue grew
10.1% YoY to INR2.9b, 210bp EBIT margin expansion. Home care revenue grew 18.7% YoY to INR1.42b, 740bp EBIT margin expansion.
Emami’s
results were above estimates with no change in rural and urban growth during the quarter YoY. Domestic volumes grew 18% with
6.5% organic volume growth for the quarter. Gross and EBITDA margin expanded 500bp and 180bp YoY. Boroplus Antiseptic Cream and
Zandu HCD posted a value growth of 41% and 30%, respectively.
PAG’s
results were in-line with 7.5% volume growth. Men’s Innerwear, women’s innerwear and leisure wear segment posted (0.9%), 13.8%
and 21.4% growth respectively with volume growth of 5.6%, 19.2% and 23.1% respectively.
UNSP’s
operating performance was subdued. S/L net sales were up 13% YoY to INR22.8b, excluding Diageo brands net sales stood flat.
Recurring EBITDA grew 30% YoY on a low base vs. the reported EBITDA of INR844m, a decline of 36% YoY. Overall 4QFY16 volumes
declined 4%, Popular Segment declined 10% while Prestige and above segment volumes were up 9% YoY. Excluding Diageo, volumes were
down 5.8% – Prestige & above volumes up 4%. We have cut our estimates 17-20% to adjust for the margin miss and also build in lower
volume and margin assumptions.
31
REVIEW | June 2016
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
CONSUMER (Contd.)
Positive / Negative surprises
Nestlé's
posted net sales decline of 8.4% YoY with above estimate EBITDA margin of 22.6% (est. 21%). Sequential Sales, EBITDA and PAT
(half of 4QCY15 did not have Maggi sales) were up 17.9%, 48.4% and 46.3% respectively. We increased EPS estimates by 5-7% for
CY16/CY17 to account for the margin beat as well as lower capex numbers.
Dabur
results were better than expected with consolidated sales posting 10.9% growth YoY led by domestic volume growth of 7% YoY.
Consol. EBITDA margin expanded 150bp YoY to 19.1% led by gross margin improvement of 130bp.
GSK Consumer
posted 8.8% decline in net sales with flat volume growth. In value terms, market share gains continued for Horlicks (70bp
YoY) and its extensions (50bp YoY). Boost saw 30bp YoY decline in market share.
Marico
posted in-line EBITDA but below estimate Sales/PAT. Consolidated volume grew by 10.5%, led by 8.4% growth in domestic volumes
with
Saffola
growing 13% volume (14% value growth), and VAHO at 11% volume growth (12% value growth). Sharp Market share gains
were witnessed across all key segments. Gross and EBITDA margin expanded 630bp and 260bp respectively.
Colgate’s
top-line was above estimates with 3% toothpaste volume growth (est. 1.5%). Toothpaste market share down 230 bps YoY to
55.7%. Gross margin expanded 30bp YoY while EBITDA margin contracted 210bp YoY.
GCPL’s
results were in line with expectations with consol. organic constant currency sales posting 12% growth led by 18% growth in
International and 7% growth in Domestic business. Domestic branded business revenue and volumes grew 6% (+9% incldg. offers).
Guidance highlights
HUVR management believes that commodity prices have bottomed out so pricing element will be higher in FY17. HUVR will be agile in
pricing; however, underlying volume growth remains THE FOCUS AREA for HUVR.
APNT is cautious on overall economic outlook with crude prices to remain volatile. However good monsoon forecast, implementation of
seventh pay commission and OROP could provide fillip to consumption demand, per management.
PIDI’s aspiration remains to grow revenues around mid-teens going forward as well. Pricing will be stable – current margins not sustainable
and are a reflection of low crude prices, per management.
BRIT believes FY17 volume growth may decline by 200-300bp but could be made up by pricing growth, expect ~5% material cost inflation.
Jyothy Labs has set an ambitious revenue target of INR50b by 2020 from levels of INR16.5b in FY16.
Emami looking at 15-16% topline growth in FY17. Price increase and new launches at around 4%.
PAG’s management sees demand pick-up in across region and thus, FY17 will be better vs. FY16.
Dabur expects high single digit volume growth for FY17 led by low double digit growth in H2FY16. 2-3% price increase for the full year.
32
REVIEW | June 2016
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
Financials - Banks
Positive surprises
YES:
Positive surprise on asset quality. The bank reported highest ever quarterly RoA in one of the toughest quarters. There was no 5:25
refinancing, SDR and sale to ARC in the quarter. Overall PAT grew 27% YoY to INR7b (in-line). Strong NII growth (+7% QoQ, 27% YoY – NIM at
all time high), robust CASA growth (49% YoY, +16% QoQ), highest ever quarterly branch addition (110 branches) and impeccable asset
quality were the key highlights.
IIB:
Strong core operating performance centre; Best in class RoA; PAT grew 25% YoY (in-line) to INR6.2b led by strong core PPoP growth
(+41% YoY, +7% QoQ) and largely stable credit costs (70bp). Strong growth in consumer finance division (7% QoQ, 29% YoY) was led by CV
(7% QoQ, 33% YoY), LAP (42% YoY) and unsecured loans (98% YoY). Share of consumer finance stood at 44% adjusted for G&J.
DCBB:
DCBB reported 10% beat on PBT, aided by strong PPoP growth (+43% YoY, +15% QoQ). Both NII (+30% YoY) and non-interest income
growth (+32% YoY) were ahead of est. Despite 30% YoY (+13% QoQ) increase in branches, control opex (+23% YoY, in-line) is commendable.
KMB:
KMB’s standalone PAT grew ~10% QoQ to INR6.96b (17% beat). Strong NII (+5% QoQ) performance on back of stable margins (4.3%),
controlled opex (+5% QoQ) and positive asset quality (GNPA stable at 2.3%) drove the PAT beat. Merger with eIVBL places KMB in a sweet
spot, with strong presence across geographies and products, and continued healthy capitalization (T1 of ~16%). We upgrade the stock to
Buy from Neutral.
Negative surprises
PNB:
Asset quality mars performance; Cut estimates by ~7% led by management guidance of INR300b+ watch-list. Reported pre-tax loss of
INR72.6b and net loss of INR53.7b (v/s loss est. of INR4.7b). Weak core operating performance, sharp rise in credit costs (11.3% v/s 3.9% in
3QFY16) led to significant miss on PBT despite one off income/expense reversal benefit. Reported CET1 has come down to ~7.9% despite
addition of revaluation reserve and DTA etc. RoA/RoE are expected to be moderate at 0.4%/8%.
BOB:
reported second consecutive quarterly net loss of INR32b+ led by focus on strengthening balance sheet (aggressive recognition of
stress loans and increase in PCR by 810bp) and one-time employee benefit provision (INR15.6b). Balance sheet consolidation and focus on
balance sheet clean up led to weak NII growth (-16% YoY, adjusting for interest on IT refund). Net stressed loans (ex. SEB/AI) now stand at
7.7% v/s 8.8% led by 20% QoQ decline in OSRL. CET1 ratio remains healthy at 10.3%.
FB:
Reported a net profit of INR103m (-96% YoY; 95% miss), led by significantly higher credit costs (~2% of loans, annualized vs. 0.75% in
9MFY16), partly offset by a recovery in its core operating performance (+11% YoY vs. -12% YoY in 3QFY16). Gross slippages continued to
remain elevated at INR5.4b (4.2% annualized) vs. INR5.7b (4.8%) in 3QFY16. Net stress loans were down 155bp QoQ to 4.4%; however,
Management has highlighted iron and steel exposure amounting to ~INR1b coming out of moratorium in 2QFY17 as potential area of stress.
REVIEW | June 2016
33
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
Financials - NBFC
Positive
MMFS:
Mahindra & Mahindra Financial Services’ (MMFS) 4QFY16 PAT grew by 11% YoY to INR3.7b (44% beat). Led by intense recovery
efforts and good performance in bigger states GNPLs improved 210bp QoQ; leading to significantly lower provision of INR1.1b. GNPLs
improved 210bp QoQ to 8% v/s 10.1% in 3Q -highest QoQ improvement in last six years. While asset quality witnesses seasonal
improvement in 4Q, this performance is commendable, as during the quarter MMFS migrated to 120dpd NPL reporting norms.
MUTH:
Muthoot Finance’s 4QFY16 grew by 60% YoY and 42% QoQ to INR2.65b (35% beat). The strong performance was led by intense
recoveries efforts, which was further aided by higher gold prices, thus helping MUTH with recoveries of INR1.5b. While the AUM grew
4.1% YoY but down 2.5% QoQ (vs. average of 3% since the last 5 two quarters). The subdued growth can be attributed to much higher
repayments (led by focus on recoveries), coupled with higher auctions amounting to INR12b during the quarter
SHTF:
SHTF’s 4QFY16 PAT de-grew 54% YoY & 62% QoQ to INR1.43b (49% miss). While the operating profit was in-line with expectation;
higher provisions of INR8.6b v/s est. of INR6.1b- led by migration to 150dpd NPL reporting norms coupled with merger of CE subsidiary
(which had INR3.6b of loss) led to PAT miss. While reported NPL inched to 6.2% v/s 4.3% due to NPL migration and merger of troubled
subsidiary. The asset quality performance was much better than expectation as a) On 180dpd NPL stood 4.3% flat QoQ and b) migration
from 180 to 150dpd saw NPL addition of 60bps against the expected 150bps addition.
Negative
LICHF:
LIC Housing Finance’s net profit grew 18% YoY to INR4.48b (7% miss). While the spreads and margins improved by 33/23bps YoY;
lower than expected loan growth of 15.5% (led by higher repayments) coupled with higher operating expenses. Loan growth of 15.5% YoY
(+6.6% QoQ) was weak led by lower retail growth of 10.4% YoY and higher repayments rate, which inched to 11.9% v/s 8.4% in FY15.
Growth in individual segment was largely driven by LAP, which grew +100% YoY.
HDFC:
HDFC’s 4QFY16 headline PBT growth of 32% YoY (to INR36.4b - inline) was driven by one off income on stake sale gain of Insurance
venture (INR15.2b). This was partially compensated by INR4.5b of contingency provisions. Core income growth remains muted at 8% YoY
led by continued weakness in NII growth (+5% YoY).
REVIEW | June 2016
34
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
Positive/Negative surprises
Sun Pharma’s
results were largely in line, as Gleevec drives top line and profitability in 4Q.
Alkem labs
miss our estimates affected by several one offs in 4Q.
Lupin
beat our numbers on the back of higher than expected sales from Glumetza in US.
Torrent pharma
beat our estimates as realized gAbilify profits were relatively higher than our estimates.
Aurobindo
registered in line numbers in 4Q. The US formulations led to 18% overall sales growth.
IPCA Labs
missed our estimates with lower than expected sales in India, US and Institutional business.
Cipla
results were much below our estimates with the inclusion of one off cost during the quarter, impacted overall profitability.
Glenmark
result in line with estimates with US recovering on the back of new product launches.
Dr Reddy’s lab
reported weak numbers in 4Q, margins were hurt by Venezuela and remediation costs for US plants.
GSK Pharma
reported better numbers in 4Q, EBITDA beat estimates by 18% in 4Q.
Divis lab’s
4Q numbers were ahead of our estimates driven by deferral of sales from 3Q.
Guidance highlights - Strong guidance & aspirations
Sun Pharma
issued modest top line guidance of 8-10% growth for FY17.
Divi’s
maintained its revenue guidance at 15-16% and EBITDA margins guidance at 37-38%.
Lupin
expects to achieve USD3.5b top line by FY18.
Dr Reddy’s
has given weak guidance for 1QFY17, affected by emerging market currencies and seasonality in US market.
HEALTHCARE
MEDIA
Positive/Negative surprises
ZEE continued its strong ad growth performance and surprised positively on the subscription front too. ~17% EBITDA beat led by strong ad
and subscription performance and favorable operating leverage. Non-sports segment beats estimates by ~17.5% at the EBITDA level
DITV’s margins disappointed led by higher-than-expected sports related content payout. Subscription revenue too marginally disappointed.
SUNTV’s ad growth was significantly lower than expectations as the Chennai floods overhang continued to hamper ad growth. EBIT/PAT was
in-line/3% above estimates as lower movie-related amortization took some sting out of revenue disappointment.
Guidance highlights
For FY17, Zee expects to outdo its EBITDA margin of 25.8% in FY16 on the back of continued ad momentum, improved monetization of its
FTA channel and and a pick up in subscription in 2H. While content costs could escalate; revenue is expected to outpace the former.
DITV to add 1.5m net subscribers in FY17 (similar to FY16). Seeding in 4Q remained strong at 0.5m (in-line) aided by a sports-heavy quarter.
REVIEW | June 2016
35
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
METALS
Positive/Negative surprises
JSW Steel:
Surprised positively on higher margins on increase in realization and volume leverage.
Tata Steel:
EU business margins surprised positively. India business was in-line.
Hindalco:
Significant positive surprise in aluminum business from lower input costs.
NMDC:
Negative surprise, on lower realization primarily due to weaker mix.
Guidance highlights
Tata Steel:
Volume guidance of ~1mt higher YoY to ~11mt. Kalinganagar is now commissioned. India steel realization to increase INR3000/t.
JSW Steel:
Volume guidance of ~15mt in FY17E. Margins to improve on higher steel prices and operating leverage from volume increase.
Vedanta:
To ramp-up aluminum smelter on improved coal availability. Iron ore volumes to increase as Goa issues resolve.
OIL & GAS
Positive/Negative surprises
Govt. fully reversed 3QFY16 subsidy incurred by OMCs leading to nil subsidy burden in FY16. Similarly, govt. also reduced upstream subsidy
by reversing their 2QFY16 subsidy burden. We continue to model nil sharing for OMC’s in FY16/FY18.
Inventory movements across OMCs diverged; while HPCL had modest inventory gains, BPCL modest losses. IOCL’s GRMs were down by
~USD3/bbl due to crude inventory losses due to its 40 day crude inventory cycle.
RIL reported in-line EBITDA and PAT. GRM stood at USD10.8/bbl (a premium of USD3.1/bbl) supported by efficient crude sourcing.
Launch date for JIO remains uncertain though the management guided that full commercial launch would within a few weeks to months;
Trial user base for JIO crossed 0.5m users and reviews are highly encouraging. Key projects have been partially delayed. Petcoke gasification
project might get delayed by two quarters to 3QFY17 and accordingly we reduced our FY17/FY18 EPS by 8%/3%.
Key actionables
Auto fuels de-regulation likely to boost OMC’s marketing margin in FY17/FY18, buy BPCL/HPCL/IOCL. Valuations are attractive at 5-8x FY18
EPS and dividend yields at 3-5%.
Neutral on GAIL/GSPL/PLNG/IGL as current valuations factor in volume uptick from lower gas prices.
Expect government to launch kerosene DBTL, thereby further reducing subsidy. ONGC/OINL, dividend yield attractive at ~3-5%.
REVIEW | June 2016
36
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
REAL ESTATE
Negative surprises
Overall weakness continued amidst sporadic seasonal uptick; Guidance muted
RETAIL
Positive/Negative surprises
Titan
posted sales decline of 1.5% YoY. Management believes that the segment could have recorded a growth of 20% after adjusting for
the sales impact due to the strike and PAN disclosure norms introduced effective January 1, 2016. The segment’s margin declined by 160bp
YoY to 11.1%.
Jubilant Food Works
reported sales below expectation; while EBITDA and PAT in line. SSSG came in at 2.9% YoY with no QoQ material
pick-up in demand during the quarter, per management. Gross margin expanded 120bp YoY while EBITDA margin contracted 50bp YoY due
to higher staff and rental costs. Margin remained intact on a same stores basis.
Positive/Negative surprises
Shoppers Stop
standalone sales grew 9.7% YoY to INR9b. LTL sales increased by 5.9%, with LTL volume up 5.4%. Gross and EBITDA margin
contracted 80bp and 20bp respectively.
Guidance highlights
Titan’s jewellery revenue growth guidance of 20% given in the annual analyst day stays intact.
JUBI believes Dunkin Donuts to achieve EBITDA break-even in the next 2-3 years. Price increase of ~3% likely in FY17. Expect 130-140 new
dominos store in FY17.
SHOP- FY17 target SSS of 8%+ for SHOP as well as HyperCITY. HyperCITY is targeting positive store level as well as overall EBITDA margin by
4QFY17.
REVIEW | June 2016
37
 Motilal Oswal Financial Services
Positive/Negative surprises and guidance highlights by sector
TELECOM
Positive/Negative surprises
India Mobile biz surprised positively voice traffic growth beat expectations. Voice traffic was higher than expected led by a step-up in
subscriber acquisition. Voice RPM pressures continued. Telemedia , Enterprises and Passive infrastructure too beat expectations.
Africa EBITDA surprise positively. too
Guidance highlights
While Bharti has guided for a capex of USD3b for FY17, Idea marginally pruned its capex guidance (excl. spectrum) to INR65-70b (INR75b) .
Rcom guided for a capex guidance ~INR40b for FY17.
Operators are relatively cautious about voice RPM improvement in near-term.
TECHNOLOGY
Guidance highlights
CTSH’s
outlook for remainder of CY16 implies 4.3-6.0% CQGR, putting concerns around a weak 1Q to bed as a one-off. Also, key verticals of
BFSI and Healthcare are expected to revive, signalling that the spending environment is not all challenged amid the uncertain macro..
INFO
guided for FY17 revenue growth of 11.5-13.5% in constant currency. This implies CQGR of 3.0-3.7% over the course of the year,
substantiating the company’s on track recovery to industry leading growth.
For 1QFY17,
WPRO
guided for revenue growth of 1% to 3% QoQ CC, implying organic growth between -1% to +1% QoQ CC. Again, the ask
rate in the remaining quarters is steep to bridge gap to top-tier peers in FY17.
HCLT
discontinued its guidance on the margin band, amid increasing pressures on profitability going forward. The uncertainty has played on
the valuation multiple as a consequence.
TECHM
delivered continued steady growth in Enterprise and cited bottoming out of Telecom woes, with the pipeline building up and signing
of one large deal.
UTILITIES
Positive/Negative surprises
Powergrid’s
capitalization of INR317b was ahead of our estimate.
NTPC’s
adj. PAT was ahead of our estimate on higher incentives and other income.
Guidance highlights
Powergrid:
Capex of INR225b in FY17. Capitalization to be ~INR300b, similar to FY16.
NTPC:
Targets commercialization of ~3.7gw in FY17 and more than 4.5gw in FY18.
REVIEW | June 2016
38
 Motilal Oswal Financial Services
MOSL Universe EPS Upgrade/Downgrade
Company
AUTOMOBILES
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
Eicher Motors
Exide Inds.
Hero Motocorp
M&M
Maruti Suzuki
Tata Motors
TVS Motor
CAPITAL GOODS
ABB
Alstom T&D India
Bharat Electronics
BHEL
Crompton Greaves
Cummins India
Havells India
Inox Wind
Larsen & Toubro
Siemens
Thermax
Voltas
CEMENT
ACC
Ambuja Cements
Grasim Industries
India Cements
Ramco Cements
Shree Cement
Ultratech Cement
CONSUMER
Asian Paints
Britannia
Colgate
EPS (INR)
FY16 FY17E FY18E
28.7
3.9
126.2
28.2
396.8
470.5
7.3
156.9
53.6
155.5
36.9
9.1
15.8
3.0
56.9
-3.7
2.1
27.1
7.7
20.7
50.6
16.9
23.2
11.7
32.0
5.5
241.7
4.4
23.4
168.0
79.3
18.5
67.8
22.0
35.7
6.7
150.7
35.0
522.9
597.5
8.4
177.6
75.7
205.4
42.3
14.2
19.6
8.7
61.8
4.4
3.2
29.4
10.1
26.4
59.4
20.7
27.1
11.8
52.1
8.2
339.6
8.4
24.5
293.9
105.8
21.5
82.4
24.4
43.3
8.6
173.3
45.2
699.5
826.9
9.8
211.4
91.0
251.4
53.3
17.0
26.1
12.0
69.0
5.5
4.7
33.3
12.5
28.7
72.2
27.5
31.7
14.7
86.9
12.5
434.3
12.9
30.3
503.8
162.5
23.9
94.9
27.7
% Revision
FY16 FY17E FY18E
0.3
2.3
-0.1
-4.3 -8.8
-7.3
3.4
0.9
0.9
0.3
2.4
4.8
-15.2 -13.6 -15.9
5.3
-1.2
2.0
-1.0
3.3
3.6
10.3
5.0
5.6
-0.8 -2.4
-4.1
-6.2 10.5
11.0
-1.9
5.5
2.7
3.3
2.1
-3.9
-1.1 -4.9
-4.7
11.2 -4.0
-0.9
0.0
-8.1
1.2
-37.2 -12.0
-9.7
0.6
1.3
-1.9
Loss -32.8 -18.5
LP
65.1
-4.6
-3.9 -11.7 -11.0
2.7
-6.7
-2.0
5.6 -11.8
-6.6
13.9
3.3
6.4
0.0
-3.0
-0.1
-3.3 -6.1
-6.5
18.1 -1.7
-2.8
4.7
1.3
4.4
0.0
8.1
8.0
0.0
-1.2
4.2
0.2
0.5
4.7
7.7
42.1
38.0
19.4
6.8
6.5
-2.8 -11.8
-0.7
8.1
1.0
0.7
-0.3
0.2
0.8
-1.9
0.6
2.4
-5.5 -2.3
-1.2
0.4
0.0
0.0
EPS Growth (%)
FY16 FY17E FY18E
8.3
24.1
23.6
17.7
24.6
21.4
375.1 72.1
27.7
19.8
19.4
15.0
-10.8
24.2
29.1
-8.2
31.8
33.8
107.2 27.0
38.4
14.1
14.0
17.0
25.5
13.3
19.0
12.0
41.4
20.2
23.4
32.0
22.4
-15.5
14.9
25.8
24.2
55.9
19.5
-15.2
44.7
22.2
22.8
24.6
32.8
-35.7 188.8
36.9
17.0
8.6
11.6
PL
LP
25.5
-29.6
54.3
48.7
-4.3
8.4
13.3
-6.6
30.8
23.4
73.2
27.8
8.6
7.1
17.5
21.5
36.3
22.3
32.6
6.9
16.8
16.6
14.0
1.4
24.3
7.2
42.2
46.7
-30.3
62.9
66.8
-35.9
50.5
52.6
26.8
40.5
27.9
LP
90.6
54.2
130.3
4.5
23.5
26.1
75.0
71.4
7.9
33.5
53.6
11.1
14.1
15.5
25.0
15.8
11.3
41.9
21.6
15.2
6.9
11.1
13.6
Company
CONSUMER
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Jyothy Labs
Marico
Nestle
Page Industries
Pidilite Inds.
Radico Khaitan
United Spirits
FINANCIALS: PVT BANK
Axis Bank
DCB Bank
Federal Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Kotak Mahindra Bank
Yes Bank
FINANCIALS: PSU BANK
Bank of Baroda
Bank of India
Canara Bank
Indian Bank
OBC
Punjab National Bank
State Bank
Union Bank
FINANCIALS: NBFC
Bajaj Finance
Dewan Housing
GRUH Finance
HDFC
EPS (INR)
FY16 FY17E FY18E
7.1
25.0
33.6
163.3
18.8
12.3
8.7
5.5
119.9
212.6
14.8
6.5
21.7
34.5
6.8
2.8
48.6
16.7
38.4
18.9
60.4
-23.4
-74.5
-51.8
14.8
4.9
-20.2
15.7
19.7
8.2
9.4
28.8 34.4
41.1 47.3
179.2 205.6
21.1 24.0
13.9 15.9
8.1
9.2
6.3
7.4
113.0 136.2
265.8 349.1
16.9 19.8
7.4
9.0
41.0 61.5
35.0
7.1
3.7
58.5
18.1
50.5
26.1
77.6
15.8
9.3
33.1
22.2
22.1
15.7
19.3
26.8
41.0
8.4
4.5
70.3
20.8
63.8
33.7
96.0
19.8
23.5
42.4
29.1
27.9
19.9
24.3
36.7
% Revision
FY16 FY17E FY18E
-0.3 0.2
0.8
2.2
1.6
2.8
2.3 -4.4
-2.4
1.3
3.2
3.8
-1.9 -4.8
-1.3
2.6
3.3
3.1
-0.2 0.0
0.3
-1.7 0.4
0.3
-0.9 -1.9
1.8
0.0
5.6
7.4
0.0
0.0
0.0
-0.2 3.1
5.2
0.4 -12.4 -17.9
-24.5 -19.3 -17.5
-6.0 -6.1
-6.9
-3.1 -10.1 -11.8
15.9 2.8
8.2
-27.8 -17.8 -18.9
-0.1 0.0
-0.1
-18.9 -18.6 -21.7
-1.3 -0.6
0.8
2.7
5.8
7.7
-0.1 3.7
2.6
PL -13.8 -10.4
Loss -3.9
-4.0
Loss 130.5 25.8
PL -30.1 -23.2
-6.5 5.4
6.4
-
-11.6 -13.4
PL
-6.7
-7.9
-3.9 -19.8 -15.3
-8.7 -5.0
-4.4
2.4
8.8
10.0
-2.2 1.7
3.9
-1.8 -8.3
-9.6
0.9
0.4
1.4
-2.0 1.7
3.0
EPS Growth (%)
FY16 FY17E FY18E
11.1 14.1
15.5
17.5
15.5
13.8
16.7
15.5
19.5
26.1
22.3
15.1
17.7
9.7
14.7
6.1
11.7
13.9
2.5
13.4
14.3
24.2
-6.7
12.4
23.7
14.6
16.6
-7.3
-5.7
20.5
21.0
25.0
31.3
46.6
13.9
17.4
-2.6
14.7
21.0
LP
88.9
49.9
4.8
16.2
20.0
11.2
1.3
17.2
0.9
3.9
17.5
-52.9 35.0
19.8
19.3
20.3
20.2
-13.2
8.0
15.1
13.4
31.5
26.3
-6.0
38.6
28.8
25.8
28.6
23.6
PL
LP
30.6
PL
LP
25.7
PL
LP
153.7
PL
LP
28.1
-29.2 50.1
31.0
-70.7 355.2
26.1
PL
LP
27.1
-30.8 22.8
25.9
-29.6 36.4
36.8
11.0
9.9
17.0
33.7
28.8
23.6
17.2
17.9
22.8
19.5
24.2
28.0
18.0
0.3
15.2
239.3 308.1 380.8
25.0 29.4 36.2
6.7
8.3
10.7
44.9 45.0 51.9
REVIEW | June 2016
39
 Motilal Oswal Financial Services
MOSL Universe EPS Upgrade/Downgrade
Company
FINANCIALS: NBFC
Indiabulls Housing
LIC Housing Fin
M & M Financial
Muthoot Finance
Power Finance Corp
Repco Home Fin
Rural Electric. Corp.
Shriram Transport Fin.
SKS Microfinance
HEALTHCARE
Alembic Pharma
Alkem Lab
Aurobindo Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’ s Labs
Glenmark Pharma
GSK Pharma
IPCA Labs.
Lupin
Sanofi India
Sun Pharma
Torrent Pharma
MEDIA
D B Corp
Dish TV
Hathway Cable
HT Media
Jagran Prakashan
PVR
Siti Cable
Sun TV
Zee Entertainment
EPS (INR)
FY16 FY17E FY18E
55.7
32.5
11.9
20.3
47.6
24.0
56.9
51.1
24.0
68.6
40.1
15.5
24.9
46.8
30.3
60.9
75.5
34.7
85.4
48.6
18.8
32.0
49.1
39.0
71.1
94.2
49.3
% Revision
FY16 FY17E FY18E
2.4
8.8
10.0
2.1
1.5
4.1
-2.0 -3.8
-1.8
20.0 16.6 11.3
9.0
0.3
0.4
-1.5 12.6 14.2
-2.1 -7.4
-7.1
-1.7 38.1 40.8
-13.3 2.7
2.5
-2.4 1.2
7.7
-3.1 -2.1
-2.0
-10.5 -14.6 -10.0
4.0
4.7
-2.9
1.6 -1.2
0.3
5.8
0.2
1.1
-3.0 4.5
-0.2
-14.3 -0.4
-7.6
7.2
4.2
0.8
-9.5 -4.2
-16.8 10.7
-1.1 1.4
-3.7 -22.8
0.5 -7.8
0.0
-1.6
-2.3
8.2
3.4
142.0
Loss
1.4
8.5
1.4
-99.2
-3.5
-2.5
3.3
-3.8
-1.3
-12.3
5.6
-28.3
PL
1.6
0.0
-6.1
-41.2
-1.4
-6.8
-3.2
2.4
1.8
-20.3
-2.4
0.8
-1.3
0.1
-5.8
8.3
-10.4
-51.7
-1.3
-1.0
-6.2
17.1
-1.3
-7.2
EPS Growth (%)
FY16 FY17E FY18E
11.0
9.9
17.0
4.1
23.3
24.4
21.8 23.6
21.1
-19.2 30.2
21.2
20.4 22.5
28.7
0.0
-1.5
4.8
21.6 26.2
28.7
8.2
7.1
16.6
12.7 47.7
24.9
61.4 44.6
42.1
12.6 27.2
28.2
154.6 -33.9
26.8
67.4 14.2
14.9
25.5 26.3
28.3
15.5 13.0
16.5
27.3
2.4
38.2
33.5 28.3
25.0
30.6 16.5
18.3
1.7
42.0
-29.2
-46.9
-6.7
20.6
-0.7
77.5
58.1
-7.4
-
Loss
-16.2
44.6
664.3
LP
12.8
8.3
11.7
73.1
42.4
90.5
28.4
43.8
42.3
19.1
13.0
23.6
-47.4
Loss
-13.9
5.1
17.6
-
20.3
31.5
20.1
13.4
25.2
59.5
25.0
18.2
38.3
27.4
41.9
16.5
51.4
LP
19.6
9.5
40.8
286.1
17.6
33.1
Company
METALS
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Tata Steel
Vedanta
OIL & GAS
BPCL
Cairn India
GAIL
Gujarat State Petronet
HPCL
Indraprastha Gas
IOC
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
REAL ESTATE
DLF
Godrej Properties
Indiabulls Real Estate
Mahindra Lifespace
Oberoi Realty
Phoenix Mills
Prestige Estates
Sobha
RETAIL
Jubilant Foodworks
Shopper's Stop
Titan Company
EPS (INR)
FY16 FY17E FY18E
12.0
19.8
-18.2
-0.3
2.6
8.4
-9.0
7.7
10.8
110.4
11.4
18.1
7.9
113.9
29.7
40.6
7.4
38.8
20.4
11.2
93.6
3.1
10.7
7.3
22.7
13.0
5.3
9.4
15.6
15.9
5.9
8.2
13.6
17.8
-14.3
120.2
3.4
6.2
-17.1
-7.4
9.3
110.6
4.5
26.2
9.3
118.1
35.8
60.8
12.6
37.8
17.3
14.9
105.2
3.9
12.5
8.8
30.6
25.7
16.5
9.2
25.7
24.5
9.1
9.6
15.4
15.5
-9.1
152.3
4.4
4.2
-15.5
61.9
9.0
122.3
6.5
31.8
10.9
127.7
40.6
74.1
13.2
44.1
23.8
19.9
126.8
5.0
18.6
11.1
37.5
39.4
23.3
9.8
34.9
35.8
13.2
11.0
% Revision
FY16 FY17E FY18E
85.3 38.1 25.3
LP
77.7 60.8
11.5 19.6
3.8
Loss Loss Loss
Loss 3.0
2.6
7.7 61.1 46.1
-0.9 -7.6 -32.8
Loss Loss Loss
LP
Loss 112.7
47.8 8.8
-22.8
5.8 -2.3
-0.7
9.5
8.9
5.3
45.1 14.1
0.3
9.1
1.5
1.1
-3.3 -3.6
-0.6
4.1
5.5
2.7
1.4
2.5
4.8
-10.5 -2.1
-0.4
32.1 -4.6
-4.8
17.7 4.9
2.7
15.6 0.8
-0.1
-0.8 -1.0
0.2
0.8 -8.1
-3.1
-2.1 0.1
9.7
2.6
3.2
11.9
-18.3 -22.3 -12.2
-0.8 6.3
11.1
28.2 -7.5
-8.4
-4.7 0.2
32.5
-30.6 -13.1 -12.1
-0.4 3.0
-11.2
-16.9 21.8 16.9
-5.1 -4.7
-3.8
-12.0 -8.4
-5.3
-11.2 -2.3
2.6
-3.6 -4.2
-4.2
EPS Growth (%)
FY16 FY17E FY18E
-53.9 -25.2
73.3
-11.5 14.0
13.0
1.9
-9.8
-13.0
PL
Loss
Loss
PL
LP
26.7
-44.8 28.4
28.7
-49.7 -25.9
-33.0
PL
Loss
Loss
168.6
PL
LP
-40.4 -13.9
-2.7
19.0
9.6
22.0
66.1
0.2
10.5
-69.2 -60.4
43.1
-23.2 44.3
21.6
23.9
18.0
16.8
41.3
3.7
8.1
-4.9
20.4
13.3
203.8 49.7
21.9
LP
70.8
4.8
-7.2
-2.6
16.8
-3.4
-14.8
37.2
12.2
32.8
33.4
20.6
12.4
20.6
-2.0
41.6
35.3
1.5
27.2
26.6
11.6
17.0
49.1
12.2
20.4
27.2
-65.1 35.0
22.3
34.3
98.0
53.5
118.1 209.9
41.1
5.7
-1.3
6.2
-38.6 64.2
36.2
-9.7
23.5
21.9
-6.0
54.0
46.1
20.3
54.3
45.4
-11.7 17.0
15.3
38.2 25.2 32.0
64.7 74.0 85.0
33.9 42.8 54.9
23.2 26.2 30.6
14.8 15.2 21.0
18.8 24.1 30.1
41.9 48.8 57.7
132.
3 147.8 177.5
24.9 43.1 48.8
44.2 62.9 78.8
10.5 20.0 32.0
49.9 64.1 80.0
103.
2 148.4 175.4
19.6 27.8 38.5
59.3 70.6 89.9
16.2
6.5
-1.9
7.3
10.5
25.5
0.0
21.1
11.0
20.0
3.4
-1.0
6.3
11.0
30.0
1.2
25.4
14.5
23.3
5.2
2.3
7.5
12.1
42.3
4.6
29.8
19.3
REVIEW | June 2016
40
 Motilal Oswal Financial Services
MOSL Universe EPS Upgrade/Downgrade
Company
TECHNOLOGY
Cyient
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
Mindtree
MphasiS
Persistent Systems
Tata Elxsi
TCS
Tech Mahindra
Wipro
TELECOM
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Comm
UTILITIES
Coal India
NTPC
Power Grid Corp.
Tata Power
22.6
12.3
11.5
2.7
19.0
11.5
13.8
5.0
23.0
13.7
15.9
5.7
10.7
12.7
8.6
2.8
12.4
14.9
4.4
1.7
16.9
19.2
6.6
2.1
EPS (INR)
% Revision
EPS Growth (%)
FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
0.9 -2.9 -2.0
5.7 11.6 14.7
30.7
40.1
12.9
59.0
14.1
35.9
34.5
37.2
49.7
35.1
36.1
35.5
54.8
13.6
66.9
15.9
41.8
37.7
42.3
66.8
36.6
36.2
42.2
60.7
16.1
76.7
18.3
50.0
42.4
51.7
87.8
43.0
42.0
-4.6
0.9
0.0
0.9
2.5
1.4
0.9
0.7
2.4
0.8
5.5
0.2
7.4
7.7
2.6
2.5
-0.7
7.2
-1.5
-3.1
-8.3
-9.5
-3.1
3.3
-1.6
3.2
-6.7
2.9
-1.3
-0.1
-3.1
1.3
5.4
-0.7
0.5
-9.7
2.6
0.0
-0.7
-9.9
-8.1
-0.5
2.4
-0.9
4.1
-5.9
3.2
0.1
4.5
-3.6
-2.8
1.3
0.7
-1.5
-11.3
1.7
0.0
-1.5
-1.9
-20.3
22.1
9.4
19.0
12.4
6.8
2.3
50.5
11.2
19.7
2.9
-5.0
-17.6
20.4
-3.6
13.5
8.7
4.0
1.7
18.2
-10.1
15.5
36.6
5.5
13.2
12.6
16.6
9.5
13.7
34.3
9.6
4.5
0.3
-6.3
16.5
17.4
-48.4
-39.0
-3.6
-16.0
-6.4
19.9
85.7
19.0
10.7
18.0
14.7
15.4
19.5
12.4
22.3
31.5
15.1
17.3
15.9
35.2
36.0
29.1
49.7
22.9
18.9
21.3
18.8
15.7
14.7
Company
OTHERS
Allcargo Logistics
Arvind
Bata India
Castrol India
Concor
Coromandel Intl
Dynamatic Tech.
Gateway
Distriparks
Indo Count Inds.
Info Edge
Inox Leisure
Interglobe Aviation
Just Dial
Kaveri Seed
MCX
P I Industries
Sintex Inds.
SRF
TTK Prestige
UPL
EPS (INR)
% Revision
EPS Growth (%)
FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
2.2 0.7 -0.8 10.3 28.3 22.2
11.4
14.0
11.6
12.0
40.6
11.8
19.4
11.4
67.6
13.0
8.4
55.2
20.4
24.9
19.9
22.1
14.2
73.7
14.5
16.5
15.2
14.0
51.9
17.1
17.5
20.0
19.2
15.1
61.3
23.5
6.4
5.5
2.0
0.0
-8.5
0.8
6.3
6.0
4.3
-4.1
0.6
-2.2
8.6
5.4
-3.8
-8.6
9.4
-5.0
4.2
3.0
13.1
6.3
-21.0
24.5
-24.9
-14.9
26.6
17.8
31.2
16.4
27.8
44.6
20.8
20.8
26.5
7.8
18.1
37.3
53.4
52.9
26.0
24.0
28.5
15.5
33.6
19.7
63.5
27.3
34.9
18.3
24.0
18.5
0.6 -14.6
123 23.6
-3.4
1.5
7.7
-5.0
2.7
4.9
83.7 128.3
14.3
21.9
-30.6 332.0
-34.2
62.9
-5.3
25.8
36.6
40.6
6.4
30.1
-16.0
22.6
48.3
27.5
11.9
20.1
44.1
21.4
123.2 135.0 155.4
92.3 116.3
18.2
9.0
71.8
17.2
30.6
29.5
28.2
15.9
22.6
11.5
83.0
22.9
36.6
48.3
35.9
21.4
40.4 -24.9 -24.6 284.0
3.4
2.6
-5.6
3.4
0.0
-5.9
-2.1
-13.2
-8.3
52.6
3.7
-42.9
-19.0
22.8
9.4
39.7
29.6
18.1
73.8 -16.0 -41.3
-2.6 -22.4 -24.4
-3.0 -16.1 -14.0
5.1
3.3
-0.7
3.5
5.4
4.7
-5.4
-1.7
7.2
8.0
4.5
-3.5
-2.3
4.9
7.3
88.5 104.7
100.7 145.2 180.0
31.8
38.6
45.8
-36.9 -1.4
REVIEW | June 2016
41
 Motilal Oswal Financial Services
Markets and Valuations
REVIEW | June 2016
42
 Motilal Oswal Financial Services
Global Equities: India among the positive performing market in CY16YTD
2016 YTD: India is among the positive performing markets, with Sensex delivering 2% positive return in CY16YTD.
China (-10%) and Japan (-9%) are the only negative performers for CY16YTD in local currency.
World Indices Performance CY16YTD (%) —Local Currency
Brazil
Russia MICEX
S&P 500
Taiwan
India - Sensex
MSCI EM
South Korea
UK
Japan
China (HSCEI)
-9
-10
0
3
2
2
2
1
7
12
World Indices Performance CY16 YTD (%) —USD
Brazil
Russia MICEX
Taiwan
S&P 500
MSCI EM
India - Sensex
South Korea
Japan
UK
China (HSCEI)
-10
-1
-2
3
3
2
1
0
19
23
REVIEW | June 2016
43
 Motilal Oswal Financial Services
Sectoral/Stocks Performance: Cement, Metal, Real Estate among top performers
Sectoral performance for CY16 YTD (%): PSU Banks, Healthcare, Telecom and Utilities among worst performer
15
7
6
6
5
5
3
2
2
2
-1
-1
-2
-2
-4
-8
-10
-11
Nifty best and worst stock performance CY16 YTD (%) —30 companies in Nifty gave positive return till now
42
29
24
20 17 16 16
16 15 15 14 13 13 12
11 10 10 9 9 8
7 6 6 4 4 3
3 3 3 3 2
-1 -1 -2 -2 -2
-5 -6 -7 -9 -9
-10-10-11-12-13
-14
-20-20-26
-27 -29
REVIEW | June 2016
44
 Motilal Oswal Financial Services
Institutional flows: Remains positive for CY16YTD
Fund flow into Indian markets
Net FII Flows (USD b)
5.4
3.7
8.1
17.8
16.9
-12.2
5.3
17.6
Net DII Flows (USD b)
29.3
5.9
-0.5
24.5
20.0
16.2
10.2
1.6
3.3
-4.9
2.2
-0.9
-1.2
-1.6
Monthly trend in FIIs Flows (USD b)
3.8
2.9
2.0
2.5
3.7
2.9
2.8
2.3
2.2
1.7
1.6
1.4 1.2
1.2
1.1
0.9
0.1
-0.1
-0.1
-1.0
-0.9
-2.6
-1.1
-1.2
-1.7
4.1
1.1
0.4
0.0
0.9
0.8
0.0
0.60.4
-4.7
-10.9 -13.0
CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16
YTD
Monthly trend in Domestic MFs Flows (USD b)
1.1
1.1
1.0
0.9
0.8
0.7
0.7
0.6 0.7
0.6
0.3 0.1
0.0
1.5
1.6 1.6
1.4
1.0 1.1
0.9
0.7
0.5
Monthly trend in DII ex. MFs Flow (USD b)
1.5
0.9
0.7
0.1
-0.1
-1.0
-1.2
-1.4
-1.4
-0.7
-0.8
-1.5
0.5
0.2
0.7
0.4 0.3
0.9
0.8
0.7
0.3
0.3
0.1
0.3
0.1
-0.3
0.0
-0.1
-0.1 -0.2
-0.4 -0.4
-0.4 -0.4
-0.6
-0.6
-0.7
-0.3 -0.3 -0.4
-0.6
-0.8
-0.9
-1.5 -1.4
-0.7
-0.7
-1.5
-1.6
-1.3
-1.4
-1.0
REVIEW | June 2016
45
 Motilal Oswal Financial Services
Valuations at long-term averages
Valuations of Indian equities remain attractive. The Sensex trades at a P/E of 16.9x, near its long-period average of 16.8x. At
2.5x, Sensex P/B is also near its 10-year average of 2.7x. RoE is at 14.9%, below its long-period average.
12-month forward Sensex P/E (x)
25
21
17
13
9
10.7
1.5
10 Year Avg: 16.8x
16.9
24.6
12-month forward Sensex P/B (x)
4.3
3.6
2.9
2.2
1.6
10 Year Avg: 2.7x
4.2
2.5
12-month forward Sensex RoE (%)
25.0
22.0
19.0
16.0
13.0
23.6
Trend in India’s market cap-to-GDP (%)
103
82
10 Year Avg: 17.3%
52
14.9
83
55
95
88
Average of 76% for
the period
81
71
66
64
70
15.8
REVIEW | June 2016
46
 Motilal Oswal Financial Services
Sector valuations: Premium for growth keeps expanding
Premium for growth keeps expanding
NBFCs now trade at P/B of 2.7x, above the historical average of 2.3x. 4QFY16 results have been largely in-line, with stable
AUM and profit growth. Asset quality too has improved.
Private Banks trade near historical average P/B v/s 30%+ premium a year ago. Significant decline in the premium is a
reflection of significant rise in large corporate stress addition; while uncertainty on quantum of incremental stress is
over, impact on earnings is significant – credit costs will remain elevated for FY17/18.
Healthcare sector trades at a P/E of 22.5x – 8% premium to historical average. It was among the worst performers in May
(-2.2% return MoM). Lupin reported good 4Q numbers, but incremental D&A cost and R&D led to substantial cut in
estimates. Moreover, most of the peer group companies are also increasing their R&D budget for FY17, resulting in
muted margins going ahead.
Sector
Auto
Banks - Private
Banks - PSU
NBFC
Capital Goods
Cement
Consumer
Healthcare
Media
Metals
Oil & Gas
Real Estate
Retail
Technology
Telecom
Utilities
Current
16.5
17.1
7.8
13.1
28.9
23.3
33.6
22.5
21.8
22.6
9.7
19.7
37.0
17.1
25.6
11.6
PE (x)
10 Yr Avg
14.2
16.0
5.8
12.2
25.6
16.1
27.6
20.9
23.0
12.6
11.7
25.4
33.9
16.8
25.7
15.4
Prem/Disc (%)
16.8
7.1
33.2
6.7
13.1
44.7
21.8
7.6
-5.1
79.3
-17.5
-22.8
9.2
1.7
-0.5
-24.6
Relative to
Sensex P/E (%)
Current
-2
1
-54
-23
71
38
99
33
29
34
-43
16
119
1
52
-31
10 Yr Avg
-17
-6
-63
-27
48
-5
67
25
36
-26
-30
53
100
1
57
-7
Current
3.3
2.5
0.7
2.7
2.8
2.9
11.6
4.6
4.8
1.0
1.1
0.9
6.9
4.1
1.5
1.4
PB (x)
10 Yr Avg
3.1
2.1
1.1
2.3
4.3
2.4
9.5
4.2
4.3
1.6
1.6
1.5
8.1
4.7
2.4
1.9
Prem/Disc (%)
5.6
15.3
-39.3
18.6
-34.6
21.3
21.6
8.9
11.1
-41.5
-30.3
-40.7
-15.0
-12.1
-37.4
-28.8
Relative to
Sensex P/B (%)
Current
28
-3
-74
8
10
14
354
80
89
-62
-55
-66
170
63
-41
-46
10 Yr Avg
14
-21
-60
-15
52
-13
258
56
59
-41
-40
-48
200
72
-14
-28
REVIEW | June 2016
47
 Motilal Oswal Financial Services
Sector highlights
REVIEW | June 2016
48
 Motilal Oswal Financial Services
AUTO:
Margins near high, but rising commodity prices to keep it in check
Summary
Broad based recovery seen:
Auto industry volumes grew by ~8% YoY (flat
Trend in Key Operating Indicators
Volumes ('000 units)
EBITDA margins (%)
Adj PAT (INR M)
QoQ
YoY QoQ
QoQ
4QFY16 YoY (%)
4QFY16
4QFY16 YoY (%)
(%)
(bp)
(bp)
(%)
872
11
-8
21.3
360
20 8,031
29
-11
1722
9
2
15.7
330
0 8,142
29
2
659
9
-6
6.3
20
-30 1,178
30
9
360
4
-4
15.4
-50
100 11,336
-12
11
184
14
-5
12.5
150
-100 6,638
19
-19
147
5
20
8.1
540
240 5,014
146 1,369
162
26
8
16.2
-270
180
18
23
54
14.2
170
120
89
201
150
44
29
42
12.6
250
210 4,563
92
122
148
61
18
29.9
380
130 3,593
68
47
16
41
23
8.0
90
60
830
90
26
17
270
140 3,345
71
24
3988
9
-2
13.4
220
50 48,246
90
18
QoQ) driven by 2W and CV’s. Momentum in recovery of M&HCV(+32%YoY)
and LCVs (+11%YoY) continued while 2 wheeler sales were
strong(+8%YoY).PV’s grew by 5% YoY driven by new launches in the UV
segment.
EBITDA margins at 13.4% for Auto universe (ex JLR) up 220bp YoY (+50bp
QoQ) near peak of last 5 years:
Margins improved for all companies in our
Auto universe, excluding MSIL driven by commodity price benefit and
operating leverage. TTMT S/A (+5.4pp), BJAUT(+360bp) and HMCL(+330bp)
saw biggest margin expansion. MSIL margins declined (50bp) due to higher
advt spends on account of new launches.
Expect strong momentum to continue for PVs and CVs; monsoon key to
2Ws and tractors:
For FY17E, We expect recovery to continue for PVs
(~15% growth) and M&HCVs (20% growth). We expect LCVs (25% growth)
recovery to continue. Based on normal monsoon assumption, we expect
2Ws to grow ~12% & Tractors growing ~20%, with possibility of upside risk.
Upgrades across majority of companies:
We raise our 17E EPS for MSIL
and TTMT by 5-7%, MM, BJAUT and EIM - each by 2-4%; whereas cut FY17E
EPS for Amara Raja by ~ 9% and Bharat Forge by ~14%.
Commodity prices recovering:
Almost all companies indicated that
commodity prices have started to harden and impact of which will be
reflected from 2QFY17 onwards, though quantum would be dependent on
on-going negotiations.
Top picks:
Prefer
TTMT
(Transitory issues receding in JLR & cyclical
recovery in CVs),
MSIL
(Strong earnings growth on industry demand
recovery, new launches) and
HMCL
(pure play on rural recovery). Within
mid-caps, we prefer
EIM
(strong domestic growth to continue, with
foundations being laid for exports and recovery/ramp-up in VECV),
TVSL
(3
near term triggers – Victor launch, BMW alliance product launch and
benefit of potential normal monsoon) and
AL
(pure play on CV, with focus
on B/S deleveraging).
BJAUT
HMCL
TVS Motor
MSIL
MM
TTMT (S/A)
TTMT (JLR)
TTMT (Cons)
Ashok Leyland
Eicher (RE)
Eicher (VECV)
Eicher (Consol)
Agg. (ex JLR)
EBITDA Margins (Excl JLR) at near peak levels since FY10
18
15
12
9
6
Aggregate (excld JLR)
Aggregate (incl JLR)
REVIEW | June 2016
49
 Motilal Oswal Financial Services
CAPITAL GOODS:
Execution remains constrained, order inflow stands muted
Summary
For 4QFY16, capital goods sector performance was better than
expectation led by operational improvement displayed by companies on
account of cost rationalization efforts taken over the last few years.
4QFY16 revenues under MOSL coverage universe were muted with
growth of 6.8% YoY basis, EBITDA margins declined 50bps to 12.9% while
PAT improved by 6.2% YoY. Decline in sectoral margins was led by weak
operating performance from BHEL, barring which sector margins
improved by 126bps YoY to 14.7%. Consumer durables like Havells and
Voltas UCP division witnessed revenue growth of 9.3% and 10% YoY
respectively.
In terms of order inflows, ordering activity continues to remain muted for
the broader sector. However increase in inquiry levels of the small ticket
size orders in the conventional segments has been witnessed. order
inflow for the sector witnessed growth of 2.0% YoY on led by weak order
inflow witnessed by Larsen and Toubro of INR433b (down 9% YoY).
Excluding Larsen and Toubro order inflow for the capital goods sector
registered growth 27.6% YoY growth. Most management’s expect
ordering activity to pick up gradually over next 2 quarters.
Siemens
reported strong operational performance, led by pick up in
execution of the orders. Sales witnessed growth of 5% YoY, however
operating profit registered growth of 22%. Operating profit growth was
on account of 157bp margin expansion, EBIDTA margins stood at 11.0% in
2QFY16. Net profit growth stood at 15% YoY.
Voltas
UCP segment reported revenue growth of 10% YoY; as room
conditioner volumes picked up due to strong summer. EBIT margins stood
at 16.2% vs 17.8% YoY, given price cuts and discounts provided by the
company. During the quarter, MEP division registered strong revenue
growth of 37% led by improved execution and EBIT margin at 3.4% was
up 270bps YoY.
4QFY16 Performance Snapshot
INR Million
ABB
Alstom T&D India
Bharat Electronics
BHEL
Crompton Greaves
Cummins India
Havells India
Inox Wind
Larsen & Toubro
Siemens
Thermax
Voltas
Capital Goods
Sales
Mar-16 YoY Chg (%)
20,003
10.2
9,715
-28.6
32,148
9.8
100,048
-21.1
16,699
6.0
10,654
-6.0
14,754
9.3
18,277
96.9
331,570
18.3
27,836
4.9
12,932
-14.3
18,888
26.8
613,525
6.8
EBIDTA
PAT
Mar-16 YoY Chg (%) Mar-16 YoY Chg (%)
1,571
9.4
790
45.5
850
-18.5
299
-44.8
9,988
26.0
8,017
10.9
3,638
-78.4
3,655
-61.7
1,548
-48.3
5,068
83.9
1,708
-2.9
1,642
-13.8
2,196
11.1
1,637
23.6
3,002
111.0
1,980
116.8
48,592
34.6
24,051
22.0
3,061
22.4
1,774
14.9
1,182
-27.3
1,113
-15.9
1,853
29.5
1,485
27.1
79,189
2.8
51,511
6.2
Order inflow remains constrained; Book to bill ratio stands at 3.3x
Order book (INR b)
BTB (x)
REVIEW | June 2016
50
 Motilal Oswal Financial Services
CEMENT:
Growth and cost surprise; spot price augurs well for 1QFY17
Summary
Strong beat in growth accelerates:
MOSL Universe reported strong
volume growth of 17% YoY/QoQ in 4QFY16 as (a) recovery in south
joined the momentum of north, and (b) benign base benefiting
further. Companies with expansions continue to lead with 30-40%
YoY growth (SRCM, JK Lakshmi, Orient). Southern players (Ramco,
ICEM) posted 10-20% growth after long period of de-growth.
Sequential pricing dip, but spot price > 4Q average:
On ground
price recovery lagged volume growth of north and AP market
witnessed interim disruption in discipline. Consequently, average
4QFY16 realizations were down 5%QoQ (-10%YoY) with impact on
north players continue to remain higher. Nonetheless, with sharp
price recovery over March-April and sustenance thereafter,
translates the spot cement prices 5-6% higher than 4Q-average. It
augurs for strong bounce back in profitability in 1QFY17.
Cost steals the show:
Cost continue to offer tailwinds with benefits
of sharp decline in pet coke price, lower packaging cost and positive
operating leverage. Cost savings offset pricing adversity, translating
into QoQ uptick in profitability. EBITDA margins for MOSL universe
stood at 18.1% (+3pp QoQ +1pp QoQ). EBITDA/ton was at INR808
(beat est of INR775). Ramco and Dalmia delivered strongest
profitability of INR1,200-1,500/ton.
Management Commentary:
Some moderation in growth with pre-
monsoon slowdown. However with optimism on good monsoon
expect strong growth in FY17. Despite reversal in pet coke price,
benefits to stay in 1HFY17. Recovery in south market may surprise.
Top picks:
SRCM, Ultratech among large caps and JK cement, JK
Lakshmi and Orient Cement among mid caps.
Volume growth of 17% YoY for MOSL Cement Universe
Volumes (MT) - RHS
Volume growth (%)
36 35 37 42 39 36 38 42 39 37 38 44 43 39 40 42 43 40 42 49
Profitability boost led by cost moderation
EBITDA (INR/ton)
1,300
1,050
800
550
300
Realization (INR/ton)
5,000
4,500
4,000
3,500
3,000
REVIEW | June 2016
51
 Motilal Oswal Financial Services
CONSUMER:
No demand pick-up yet; incremental slowdown in rural India
Summary
4QFY16 Performance Snapshot
INR Million
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Jyothy Labs
Marico
Nestle
Page Industries
Pidilite Inds.
Radico Khaitan
United Spirits
Consumer
Sales
Mar-16 YoY Chg (%)
39,192
12.3
21,898
7.8
10,911
6.8
21,573
10.9
6,708
21.2
22,661
8.8
11,086
-8.8
79,457
3.5
101,687
9.4
4,452
12.4
13,028
6.5
22,957
-8.4
4,356
14.7
10,869
12.3
3,776
10.0
22,836
13.0
397,448
7.0
EBIDTA
PAT
Mar-16 YoY Chg (%) Mar-16 YoY Chg (%)
6,517
26.5
4,088
19.9
2,697
21.9
1,903
13.7
2,412
-2.5
1,459
-10.8
4,114
20.7
3,319
16.6
1,823
29.9
1,496
8.4
4,406
16.7
3,129
17.9
2,343
-11.2
1,807
-8.2
14,668
17.7
10,309
19.5
36,871
11.7
24,952
3.9
628
51.9
356
22.5
2,123
26.4
1,309
19.0
5,180
-13.7
3,052
-17.6
915
19.2
572
21.3
2,251
61.6
1,443
56.3
365
14.7
124
44.4
1,712
30.1
931
0.0
89,020
13.5
60,248
8.1
Overall numbers were in-line with our estimates:
Consumer coverage
universe reported 7% YoY revenue growth (est. 6.7%), 13.5% YoY EBITDA
growth (est. 11.9%) and 8.1% YoY Adjusted PAT growth (est. 8.7%).
Dabur, HUVR and Nestle surprised positively while Britannia, Colgate,
GSK consumer and UNSP performance was below expectation.
No change in sequential volume growth:
Consumer sector’s volume
growth trajectory was unchanged QoQ. APNT again delivered double
digit volume growth, Colgate and ITC surprised with 3% toothpaste
volume growth and flat cigarette volumes while HUVR delivered below
expectation 4% volume growth (est. 6%).
RM benefits flowed through EBITDA level:
11 out of 16 companies in
our universe met/beat our EBITDA estimates. EBITDA posted growth of
13.5% YoY.
With input costs being largely benign and gross margin
benefits being in the base for most of our coverage companies, margin
expansion trajectory will sequentially come down, in our view.
Top picks: Pidilite, Page, Britannia, Emami and UNSP
a) PIDI offers a high quality discretionary play due to its strong
competitive positioning, proven in-market excellence and an impeccable
track record of generating long-term shareholder value over multiple
periods. We are also enthused by Mr. Puri’s strategy of expanding into
portfolio adjacencies. b) We believe Page offers a compelling, capital
efficient long-term lifestyle play on the premiumizing innerwear
category. A widening product and brand portfolio, coupled with
distribution expansion will aid share expansion and drive multiple years
of growth, in our view. c) The four legs on which our positive investment
hypothesis rested for Britannia i.e. 1) Industry wide premiumization 2)
Structural gross margin expansion 3) Significant white spaces in
distribution in Hindi Belt and 4) Opportunity in non-Biscuits space, are
still intact. d) We continue to like Emami due to its strong medium-term
earnings visibility post the Kesh King acquisition.
Volume growth trends
REVIEW | June 2016
52
 Motilal Oswal Financial Services
FINANCIALS:
Asset quality mars earnings performance
We approached 4QFY16 earnings with the fears of another washout quarter led
by sharp rise in the stress loans. While RBI’s AQR has resulted in ~2% addition
to stressed loans (our estimate), large part is also from the restructured loan
book. Led by higher proportion stress addition, in turn credit cost and
additional watch lists, corporate lenders witnessed earnings downgrades.
Capitalization for several banks has improved post RBI relaxation. As expected
within private banks, retail lenders continued to perform better than large
corporate peers.
4QFY16
SBIN
PNB
CBK
BOB
BOI
UNBK
OBC
INBK
PSBs
AXSB
FB
HDFCB
ICICIBC
IIB
YES
PBs
NII Gr. (%)
QoQ
YoY
12
4
(33)
(27)
7
(5)
23
5
18
12
4
(2)
3
4
2
2
6
0
9
20
13
10
5
24
(1)
6
8
37
7
27
5
18
NIM (%)
SBIN
PNB
CBK
BOB
BOI
UNBK
OBC
INBK
AXSB
FB
HDFCB
ICICIBC
IIB
YES
3QFY16
2.8
2.8
2.2
1.7
2.0
2.2
2.6
2.3
3.8
3.0
4.3
3.5
3.9
3.4
4QFY16
3.1
1.8
2.2
2.2
2.1
2.4
2.7
2.4
4.0
3.3
4.3
3.4
3.9
3.4
Private Banks (PBs): Mixed asset quality position yet remains well
manageable:
Asset quality performance was mixed with ICICIBC and AXSB
reported higher than expected fresh stress addition in corporate segment
while YES surprised positively. Retail loans especially mortgages and
unsecured loans remained key driver of loan growth.
expected:
Overall stress additions increased to INR1.05T (12.4% of loans
annualized) from INR731b (9.2%) in 3QFY16 partly led by RBI asset quality
review. While recoveries and upgrades were strong in certain banks, one
needs observe these data points closely over next few quarters before
concluding this as a trend. Overall we expect PSU banks credit costs to
remain elevated for FY17 while core PPoP performance remains under
pressure led by weak margins and muted loan growth.
PSBs: Asset quality stress continues to be significantly higher than
PPP Gr. (%)
QoQ
YoY
48
11
11
1
6
(5)
51
(4)
4
3
6
(15)
15
(28)
9
1
31
3
10
10
21
(16)
(0)
21
8
30
9
35
7
31
6
22
Loan Growth (%)
QoQ
5
5
-2
0
-4
6
1
3
7
10
6
0
8
16
YoY
13
8
-2
-10
-7
6
4
3
21
13
27
12
29
30
PAT Gr. (%)
QoQ
YoY
13
(66)
NM
NM
NM
NM
NM
NM
NM
NM
22
(78)
NM
NM
100
(59)
NM
NM
(1)
(1)
(94)
(96)
1
20
(77)
(76)
7
25
4
27
(24)
(18)
Net Stress Loans (%)*
3QFY16
6.4
14.8
10.1
10.1
9.4
9.1
13.5
9.9
3.3
5.9
0.4
5.2
0.9
0.9
4QFY16
6.4
13.5
10.4
8.6
10.7
8.1
12.7
8.9
3.1
4.4
0.4
5.0
0.9
0.8
View:
In the near term, retail lenders remain well placed as compared to
corporate lenders due to moderate economic growth environment. With the
heightened fear related to asset quality, valuations have corrected sharply for
corporate lenders which provide good entry point from a medium to long term
perspective. With capital and strong branch expansion, PBs are best paced to
leverage on improving macro-economic environment. Growth will remain a key
trigger for sector, especially private banks. Reforms and capitalization are the
need of the hour for PSBs with the weak capital position and higher stress loans
Top picks: Private Banks:
YESB, HDFCB and ICICIBC.
PSBs:
SBIN, INBK and BOB.
NBFCs:
MUTH and SKSM.
*Nets Stress loans = outstanding standard restructured loan (OSRL) + Net NPA
REVIEW | June 2016
53
 Motilal Oswal Financial Services
FINANCIALS:
Asset quality mars earnings performance
PSBs consolidate while PBs continue to gain market share (Loans % YoY)
Despite large interest income reversals, margins remained stable at PSBs helped by
one-off interest on IT refund(%)
3QFY16
4QFY16
Slippage ratio significantly higher than expected (%)
FY14
1Q
SBIN
PNB
BOB
BOI
CBK
UNBK
INBK
OBC
Overall
6.0
4.9
3.0
3.0
4.8
3.4
2.8
2.7
4.6
2Q
3.6
4.1
2.8
2.3
2.8
3.8
3.2
3.4
3.3
3Q
4.7
2.0
2.0
2.5
3.8
2.4
2.2
3.4
3.4
4Q
3.0
4.8
1.4
4.9
3.5
2.3
3.4
3.7
3.2
1Q
3.7
3.9
2.5
4.9
4.2
2.6
3.5
4.5
3.9
FY15
2Q
2.8
5.1
2.2
3.5
4.5
3.6
2.9
3.0
3.3
3Q
2.5
6.8
3.2
3.8
3.2
3.1
3.1
4.0
3.4
4Q
1.6
8.5
1.8
7.1
3.7
2.7
3.4
2.2
3.4
1Q
2.4
3.9
2.0
7.0
3.3
2.6
1.7
4.7
3.2
FY16
2Q
1.9
2.9
7.2
6.4
2.8
3.2
1.8
2.2
3.5
3Q
6.7
16.0
9.2
6.9
5.5
5.8
9.2
4Q
9.3
5.5
16.4
17.7
9.4
10.5
12.4
Despite moderation in OSRL, overall NSL ratio (ex. SEB/AI) increased for most banks
% of loans
SBIN
PNB
BOB
BOI
CBK
UNBK
INBK
OBC
5.1
8.5
9.7
9.2
5.8
7.1
5.6
7.8
GNPA
3QFY16
4QFY16
6.5
12.9
10.0
13.1
9.4
8.7
6.7
9.6
2.9
5.9
5.7
5.3
3.9
4.1
3.2
5.0
NNPA
3QFY16
4QFY16
3.8
8.6
5.1
7.8
6.4
5.3
4.2
6.7
3.5
8.9
4.5
4.3
6.2
5.2
6.9
8.7
OSRL
3QFY16
4QFY16
2.6
4.9
3.6
3.4
4.0
3.1
4.8
6.2
14.0 24.7
11.3 10.9
REVIEW | June 2016
54
 Motilal Oswal Financial Services
HEALTHCARE:
In line quarter
Summary
Operating performance in line:
Overall sector sales and EBITDA
margin were in line with our estimates. US growth picked up for
large cap on the back of a few important product launches.
Lupin, Sun Pharma and Aurobindo reported strong growth in US.
Emerging markets growth for large caps was hit by currency
crisis and political turmoil; registered lower than expected
growth. Dr Reddy’s Lab missed estimates on account of
Venezuela. India formulations sales remained healthy for most
of the companies. EBITDA growth was postively impacted by few
one offs like exclusive drug launches. However, overall margins
stayed in line at 28.8% for the coverage companies. PAT for the
sector was also in line with estimates. Overall, 4QFY16 was
largely in line with our estimates.
Margin surprise:
Sun Pharma, Lupin, Torrent Pharma, Sanofi
and GSK pharma
EBITDA disappointment:
Cipla, Alkem, IPCA and Alembic
4QFY16 Performance Snapshot
INR Million
Alembic Pharma
Alkem Lab
Aurobindo Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’ s Labs
Glenmark Pharma
GSK Pharma
IPCA Labs.
Lupin
Sanofi India
Sun Pharma
Torrent Pharma
Health care
Sales
Mar-16 YoY Chg (%)
6,256
24.7
11,426
25.3
37,468
18.5
9,699
16.8
24,491
7.0
32,665
5.6
10,934
34.2
37,562
-3.0
21,740
24.0
6,861
11.8
6,246
-0.5
41,812
35.8
5,444
11.4
76,342
24.0
14,990
29.9
343,934
17.2
EBIDTA
Mar-16 YoY Chg (%)
1,423
45.9
1,580
19.5
8,824
34.5
2,042
14.9
5,836
9.8
2,190
-56.9
3,960
26.6
8,249
0.3
1,954
-37.0
1,220
2.6
635
88.6
13,674
73.2
1,291
55.7
25,203
182.4
4,840
198.8
82,920
47.3
Mar-16
911
1,577
5,582
3,609
3,836
809
3,222
3,762
1,713
898
405
8,071
806
17,137
3,570
55,906
PAT
YoY Chg (%)
29.5
21.4
38.7
79.2
-0.1
-68.9
40.8
-27.5
1,514.0
-17.3
LP
47.5
66.5
93.0
174.6
42.9
Important approvals boosted US growth (SUNP/LPC), EM impacted by fx
movement
US Growth YoY (%)
India Growth YoY (%)
59
28
15
6
11
11
15
23
35
Emerging Markets Growth YoY (%)
1QFY17 to be similar:
Sun Pharma
issued modest top line
guidance of 8-10% growth for FY17.
Divi’s
maintained its revenue
guidance at 15-16% and EBITDA margins guidance at 37-38%.
Lupin
expects to achieve USD3.5b top line by FY18.
Dr Reddy’s
has given
weak guidance for 1QFY17, affected by emerging market currencies
and seasonality in US market.
Top picks:
Sun Pharma, Aurobindo and Alkem
21
13
(2)
14
22
Sun
DRL
(31)
Lupin
Cadila
Glenmark
*Sun Pharma numbers include Ranbaxy, hence not comparable
REVIEW | June 2016
55
 Motilal Oswal Financial Services
MEDIA:
Ex-SUNTV, Strong operating performance by broadcasters; print lags
Summary
Media sector revenue up 12% YoY:
Agg.revenue/Agg. EBITDA for our
media sector universe increased 12%/23% YoY respectively, largely in-
line with estimates.); PAT growth was much higher at 99% YoY largely
led by a one-time deferred tax reversal by Dish. Adj. PAT grew 30% YoY
(2% above estimates). ZEEL/JAGP/HMVL beat EBITDA estimates. while
SUNTV/DITV/HT media significantly missed estimates.
Strong ad performance for Zee, JAGP/HMVL follows suit:
While ZEE
registered another strong quarter of ad growth (23% YoY); SunTV’s ad
growth was continued to get affected by the Chennai floods overhand
in Nov-Jan. JAGP/HMVL, clocked 13%/15% YoY growth in ad revenues.
DB Corp ad revenues remained flat.
Mixed performance in subscription/circulation:
Zee’s 16% YoY growth
in subscription was underpinned by strong domestic subscription as
well as international revenue. Sun TV subscription revenue grew 12%
YoY. Set-top box seeding continued to be strong for major pay-TV
operators with the Top 3 national MSOs adding ~3m subscribers this
quarter. However, subscription revenues continued to remain subdued
and are expected to pick up in 2HFY17. HATH’s subscription grew 7%
QoQ. While SITI Cable reported subscription revenue growth of 1%
QoQ. Dish TV reported 4% QoQ growth. Circulation revenue grew 5-8%
YoY for print companies ex-DB Corp (15% for DB Corp).
Margins improve across universe ex-SUN/DB Corp:
Favorable
newsprint prices continued to aid margins of Print companies. With
DBCL continuing to sacrifice ad volumes to focus on yields, margin
declined ~240bp YoY. DISHTV reported a margin contraction of ~180bp
QoQ led by a spike in sports-related content cost. ZEE’s margin
improved by ~700bp led by favorable operating leverage.
Ad rebound visible for broadcasters; but elusive for print; phase III
digitization in focus:
While FY16 marked an inflection in ad growth for
broadcasters, rebound for print players is still awaited. Despite
persistent monetization/addressability issues, Digitization remains a
strong theme with Phase III deadline in December 2015.
Top-pick: ZEE
4QFY16: Actual v/s estimates
4QFY16: YoY revenue growth (%)
EBITDA margin trend (%)
REVIEW | June 2016
56
 Motilal Oswal Financial Services
METALS:
Higher realization and cost cuts come to aid
Summary
4QFY16 Performance snapshot
INR Million
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
SAIL
Tata Steel
Vedanta
Metals
Sales
Mar-16 YoY Chg (%)
245,673
-8.1
31,324
-24.1
50,796
7.9
106,975
-15.1
18,744
4.1
15,299
-45.9
113,716
-1.8
295,076
-12.4
159,793
-10.3
1,037,395
-10.5
EBIDTA
PAT
Mar-16 YoY Chg (%) Mar-16 YoY Chg (%)
31,025
45.7
10,272
76.9
13,081
-34.2
21,495
7.0
8,965
13.5
-4,840
Loss
18,246
8.4
1,649
161.4
2,387
-44.2
2,079
-23.7
5,398
-62.0
6,888
-50.9
-11,235
PL
-12,309
PL
22,052
42.9
-3,560
Loss
34,720
-13.7
11,305
54.7
124,639
-16.6
32,979
-18.9
The quarter was mix with few benefiting from higher realization
and operating leverage (primarily in steel) or lower cost (in
aluminum) while other like NMDC suffering from decline in
realization. EBITDA for the coverage universe was down 14% YoY to
INR111b. Adj. PAT declined ~137% YoY to INR10b.
was down 66% YoY.
NMDC:
volumes were up 11% YoY to 8.6mt. EBITDA/t at INR634
Tata Steel:
EBITDA was up 43% YoY to INR22b on improvement in
India business and surprise from its other businesses. India
business volumes were up 14% YoY to 2.7mt and EBITDA/t at
INR7,681 was up 24% QoQ. EU margins at a loss of USD15/t were
down from USD31/t in Q3.
normalized INR4,600/t in 3Q. Volumes were up 7% YoY to 3.3mt.
STEEL EBTIDA (INR/T)
Average
20,000
Tata Steel
SAIL
JSW Steel
JSPL
JSW Steel:
EBITDA/t of INR5,404 saw an improvement from
SAIL:
Sales volume were up ~19% YoY to 3.8mt on de-stocking.
Vednata:
Margins in aluminum, copper and iron ore businesses
improved on lower cost. .
Realization was down 2% QoQ. EBITDA/t loss continued, but down
from INR4,764 in Q3 to INR2,980.
12,000
4,000
Hindalco:
Aluminum segment margins improved ~USD200/t QoQ
led by lower coal and other input costs. Copper was broadly stable.
and decline in cost.
-4,000
Nalco:
EBITDA improved 75% QoQ to INR2.4b on higher volumes
-12,000
REVIEW | June 2016
57
 Motilal Oswal Financial Services
METALS:
Aluminum volumes remain strong
Steel sales (mt) were up 14% YoY
Tata Steel
8.9
9.7
8.5
3.1
2.9
3.5
2.4
2.8
2.1
8.8
SAIL
JSW Steel
9.4
8.8
JSPL
10.8
8.7
9.0
8.5
3.3
3.1
2.7
2.1
3.1
2.7
2.3
2.6
2.9
2.3
3.8
58
51
45
38
32
2.7
25
Steel realization (INR/T) was flat QoQ
Average
Tata Steel
SAIL
JSW Steel
JSPL
3.1
3.0
2.1
3.1
2.9
2.1
3.0
2.9
2.1
3.1
3.2
2.4
Aluminum sales (kt) were up 6% QoQ / 17% YoY
kt
800
600
400
200
0
VEDL
Balco
Hindalco
Nalco
658
560
85
246
84
145
329
83
142
104
Copper sales (kt) were up 5% YoY
kt
240
180
102
120
60
0
103
97
VEDL
Hindalco
200
200
98
REVIEW | June 2016
58
 Motilal Oswal Financial Services
OIL & GAS:
Government reversed 3QFY16 subsidy for OMCs
Summary
Nil subsidy share for OMCs in FY16; partial reversal for upstream:
4QFY16: Earnings snapshot and Actual v/s Estimate
Govt. fully compensated OMC’s 9MFY16 subsidy burdens during the
quarter. Total FY16 subsidy for OMCs are almost nil. Upstream companies
also received partial reprieve for their 1HFY16 subsidies as they were
partly reversed in 4QFY16. (were exempt from subsidies in 3QFY16).
RIL’s KG-D6
volume averaged 9.7mmscmd (10.6 in 3QFY16), while Cairn’s Rajasthan
production averaged 168kbpd (170kbpd in 3QFY16).
Upstream – Rajasthan at 168kbpd, KG-D6 declines:
Ras-Gas contract renegotiation increased Gas’s competitiveness:
Ras-Gas contract renegotiation aligned India’s LNG prices to spot prices
and consequently long-term volume offtake increased to 100%. While
volume uptick was contained by low liquid fuel prices, revival in crude
prices should impact liquid fuel’s competitiveness. Expect volume uptick
with govt’s policy to revive power projects. KG basin pipelines’ tariff
increase boosted GAIL. Expect similar tariff increase in other pipelines.
Refining – Benchmark GRM down QoQ, forex and surprise
(USD0.4-3.0/bbl) impacted by inventory and forex losses. While HPCL
reported modest crude inventory gains, IOC’s GRM was impacted by
USD3/bbl due to inventory losses. RIL GRM stood at USD10.8/bbl, above
benchmark Singapore GRM (USD 7.7/bbl) by USD3.1/bbl.
inventory losses impacted OMC:
GRM for OMCs was down QoQ
Singapore GRM at USD7.7/bbl; -10% YoY, -4% QoQ
Polymer and polyester margins up QoQ:
increased QoQ however PP margins were flat.
PE and polysters margins
Valuation and view:
Prefer OMC’s with likely higher marketing margins. Valuations are
attractive. ONGC/OINL are directly co-related with crude prices and any
dip will offer good entry point. Dividend yields are attractive.
RIL’s near term future will be contingent on telecom disclosures. Neutral
on Gail/GSPL/PLNG as current valuations factor in volumes uptick.
REVIEW | June 2016
59
 Motilal Oswal Financial Services
OIL & GAS:
LNG imports decline; model nil subsidy for OMCs
Headwinds for gas volume continues, LNG volumes rise
YoY (mmscmd)
ONGC: D,D&A high led by higher dry wells,
but remain ad-hoc (INRb)
CAIRN: Rajasthan production down YoY and QoQ
OMC’s: 3QFY16 subsidy burden reversed in 4QFY16
(INR b)
OMC’s debt now stabilizing at lower levels (INR b)
Model nil subsidy sharing fro downstream in FY17
REVIEW | June 2016
60
 Motilal Oswal Financial Services
REAL ESTATE:
Torpidity continues
Summary
No major recovery sign:
Some seasonal uptick was visible
amidst broader weakness. Sales momentum remained muted.
NCR continued to hold tag of weakest region barring some
resilience of DLF phase V. Improvement was visible in Mumbai
with successful launches of OBER (Borivali) and GPL (Vikhroli).
Presales (INR b): Pan India disappointment
Presales (INR b)
FY12
NCR Centric developers
90.9
DLF
52.9
Unitech
38.1
Mumbai Centric developers 39.6
IBREL
19.5
HDIL
10.6
OBER
9.5
Bangalore Centric
46.8
developers
Sobha
17.4
PEPL
20.6
Purva
8.8
Brigade
Diversified
18.9
MAHLIFE
6.0
GPL (own stake)
12.8
FY13
66.3
38.2
28.1
38.7
30.0
-
8.7
76.0
22.2
31.1
14.9
7.9
18.8
4.4
14.4
FY14
55.8
40.7
15.1
39.7
30.7
5.6
3.4
89.1
23.4
36.3
16.0
13.4
16.3
3.7
12.6
FY15
46.9
38.6
8.3
52.1
20.3
14.1
17.7
93.2
21.0
43.7
14.2
14.3
17.7
7.0
10.7
FY16
1QFY16 2QFY16 3QFY16 4QFY16
12.2
9.3
7.2
12.6
10.4
5.8
4.1
11.3
1.8
3.5
3.1
1.3
13.2
12.4
28.9
12.4
8.0
7.6
7.3
6.3
3.5
3.4
3.9
3.5
1.7
1.4
17.7
2.6
15.3
5.0
5.3
1.7
3.3
7.2
1.9
5.3
17.4
4.9
6.1
2.4
4.0
11.5
2.2
9.3
13.8
4.8
5.1
1.5
2.4
7.4
1.3
6.1
19.5
5.3
9.9
1.5
2.8
9.1
2.9
6.2
Commercial leasing improved, rental uptick visible:
Improved
commercial monetization were visible with better leasing run-
rate for DLF and PEPL. Demand improvement is met with scarce
supply aiding rental growth headroom (as being witnessed in
markets of ORR, Whitefield, etc.).
Debt levels rise further, collections delayed:
Customer
collections moderated in line with declining presales and lower
launches. Management focus on completing existing projects
led to increased spending overall; coupled with higher outgo
towards capex and purchasing stakes in matured assets (PEPL,
BRGD, PHNX) resulted into negative FCFE and rise in gearing.
Management commentaries:
Management shared concerns of
weak near-term outlook across markets. Credible names with
good track records achieved success in their launches. There
could be delays in launches due to both strategic and regulatory
reason (Real Estate regulator).
Preferred pick – PEPL and Brigade, (Bangalore), and Oberoi
(Mumbai). We like business model of GPL as the best long term
play in real estate.
Trend in EBITDA margins – improve QoQ
36%
31%
24%
33%
32%
32%
36%
31.20%
33%
28%
REVIEW | June 2016
61
 Motilal Oswal Financial Services
RETAIL:
No material pick-up in demand QoQ
Summary
4QFY16 performance snapshot
INR Million
Jubilant Foodworks
Shopper's Stop
Titan Company
Retail
Sales
Mar-16 YoY Chg (%)
6,181
14.0
8,959
9.7
24,372
-1.5
39,511
3.1
EBIDTA
Mar-16 YoY Chg (%)
750
7.1
523
6.5
2,119
-14.7
3,392
-7.7
PAT
Mar-16 YoY Chg (%)
295
-6.6
102
-1.2
2,051
-4.6
2,447
-4.7
Headline numbers were below our estimates:
Our coverage
universe sales were grew 3.1% YoY (est. 18.9% growth), EBITDA
declined 7.7% YoY (est. 20.7% growth) and Adj. PAT posted
declined 4.7% YoY (est. 8.2% growth). Titan’s performance was
impacted by due to the strike and PAN disclosure norms
introduced effective January 1, 2016. While JUBI sales were below
estimates due to lower SSSG which stood at 2.9% (est. 5%).
(est. 5%), Shoppers Stop posted 5.9% LTL growth while
Tanishq
posted 5% decline in SSS impacted by jeweler’s association strike
for most part of the quarter and PAN disclosure norms. Overall
there is no material pick-up in demand sequentially.
Still no signs of demand pick-up:
JUBI posted 2.9% SSS growth
SSSG for coverage companies
Margins contracted during the quarter for retail companies:
Operating margin performance contracted with JUBI, SHOP and
Titan margins contracting by 50bp, 20bp and 130bp respectively.
Margin expansion was mixed across our Retail universe
Expansion plans :
Expansion plans still on track– Titan added 40k
sq.ft. of space during 4Q. JUBI opened 36 stores and changed its
FY17 guidance to 130-140 new dominos stores.
Store network for Retail universe
JUBI - our preferred pick:
Despite the delayed recovery in SSS
growth, we believe that JUBI will be the key beneficiary of the
revival in urban consumption. Dunkin Donuts will achieve break-
even in 2-3 years, thereby driving margin improvement even
without a sharp improvement in SSSG.
REVIEW | June 2016
62
 Motilal Oswal Financial Services
TECHNOLOGY:
Expected seasonal weakness; margin pressures building
Summary
4QFY16 Performance Snapshot
USD revenue - m
Act.
TCS
Infosys
Wipro
HCL Tech
TECHM
4,207
2,466
1,882
1,587
1,023
Est.
4,214
2,454
1,910
1,607
1,021
% beat
-0.2
-0.3
-1.5
-1.3
0.1
EBIT margin (%)
Act.
26.1
25.5
17.4
20.8
13.7
Est.
26.9
25.3
18.4
21.2
13.7
bp beat
-83
19
-99
-43
-20
Act.
35,970
22,350
19,250
8,971
PAT - INR b
Est.
34,844
22,152
18,728
7,327
% beat
2.3
3.2
0.9
2.8
22.4
63,412 61,963
Seasonal weakness and no more:
Marginal decline at CTSH and
0.5-2% QoQ CC growth across its top tier Indian counterparts was
in line with the seasonal weakness of 4Q, when clients are
finalizing their budgets. Revenue growth across the board, though
seasonally soft, was largely in line
revenues from Telecom may have bottomed out, with one large
deal signed, pipeline building and post-consolidation integration
work likely in small tranches. Quarters of revenue decline in top
accounts may be behind post 1QFY17.
4Q boded well for TECHM the most:
TECHM cited that the
INFO continued to lead growth in tier-I IT
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
Margin performance mixed:
While the INR depreciation during
the quarter, margin performance was mixed, with TCS’ margins the
lowest in 27 quarters. Going forward, margins are the key concern
across the board, amid wage hikes, pricing pressure, INR stability
(marginal appreciation in 1Q) and higher visa costs.
Tier-II – revenue surprise at MTCL:
MTCL’s 4QFY16 constant
currency organic growth of 3.6% QoQ was significantly above our
estimate of ~1%, and followed citation of marginal growth by the
management earlier during the quarter. However, the strong
showing was dampened by cautious FY17 outlook. EBITDA margin
surprised negatively at CYL and PSYS.
lines, and growth may exceed industry in FY17. HCLT has strong
growth visibility for FY17, and the uncertainly around margins
seems to be baked in. The duality of revenue growth and margins
remains crucial for the company. We are neutral on Tier-II IT
(except CYL), but prefer MTCL’s business model among others.
TCS
INFO
WPRO
HCLT
Sharp cut in HCLT profit estimates on margin downgrade
Change in
Estimates
TCS
Infosys
Wipro
HCL Tech
TECHM
USD revenue (%)
FY17
FY18
0.7
1.4
0.2
0.0
-0.2
-1.3
-0.4
-2.5
1.2
1.2
EBIT margin (bp)
FY17
FY18
-62
-46
-50
8
-47
-42
-194
-187
-52
0
EPS (%)
FY17
FY18
-1.3
0.1
-3.1
-0.5
-3.1
-3.6
-8.3
-9.9
-0.1
3.0
Prefer INFO, HCLT :
Turnaround at INFO is playing out on expected
REVIEW | June 2016
63
 Motilal Oswal Financial Services
TELECOM:
Performance improves QoQ; major regulatory/competitive moves awaited
Summary
Muted EBITDA performance for telcos:
Bharti/Idea/RCOM’s
consol EBITDA grew 8%/15%/9% QoQ respectively. Wireless traffic
for Bharti outpaced peers led by a step up in subscriber
acquisitions. Wireless traffic for Vodafone/Idea/Rcom grew 1-3%.
While site additions declined this quarter for BHIN due to select
operator exits in select circles; adjusting for the one-off exits site
additions would have been significantly higher.. Higher than
expected energy spreads led to a 220bp margin expansion QoQ.
(in-line). Ex-energy margins came in at 66% (in-line).
growth moderated this quarter to 5% QoQ for Bharti; voice RPM
remained under pressure for all telcos (ex-Idea). Idea’s Voice RPM
improved 5% QoQ led by a clamp down on promotional discounts.
Blende RPM declined 1.5% for BHARTI and grew 4%/5% QoQ for
Idea/RCOM. Data traffic up 10%/1%/1.5% QoQ for
Bharti/Idea/Rcom.
4% QoQ to USD210m.Revenue remained flat QoQ, The
revenue-weighted currency depreciation versus the USD in Africa
over the last year has been ~6%.
Voice RPM declines QoQ; data growth moderated:
Data revenue
QoQ wireless traffic and blended RPM growth (%)
14
8
4
Bharti Africa performance surprises positively:
Africa EBIDTA grew
Bharti (India & SA)
Vodafone-India
8
5
2
4
Idea
Avg. RPM QoQ (%)
9
8
4
0
RCOM
5
0
3
1
3
5
Regulatory developments, Reliance JIO launch in focus:
Operators
are expected to bring in efficiency gains from the recently cleared
spectrum sharing/trading policy. Industry continues to await key
regulations on M&A, and Net Neutrality. With Reliance JIO launch
expected over next few months, the focus is likely to shift towards
potential disruption for incumbents and their data strategy.
Top-pick: Bharti Infratel
2
-4
-10
-2
2 2
3
3
1
1
5
4
1
0
2
4
5
2
3
1
2
5
1
1 12
4 43 4
6
4
5
3
2
-2 -3
-3
0
0
3
1
2
-3
-1
1
1
3
-1
1
-2
-4
-3 -3
-5
-1
-2
-3 -2
-1
1
-2
-3 -3 -2
-3
-6
REVIEW | June 2016
64
 Motilal Oswal Financial Services
UTILITIES:
PGCIL benefits from healthy capitalization
Summary
4QFY16 Performance snapshot
INR Million
Coal India
NTPC
Power Grid Corp.
Tata Power
Utilities
Sales
Mar-16 YoY Chg (%)
207,595
-0.1
179,901
-6.4
57,536
23.4
93,335
14.3
538,367
1.9
EBIDTA
PAT
Mar-16 YoY Chg (%) Mar-16 YoY Chg (%)
48,905
-9.4
42,424
0.4
53,355
16.5
25,603
-6.3
50,874
26.6
15,991
13.2
18,718
-0.9
3,603
72.6
171,852
8.2
87,620
2.1
4QFY16 performance
PGCIL performance was strong backed by
strong capitalization. NTPC continues to suffer on back of lower
other income and increasing investments into projects. Coal India
suffered on account of decline in ACQ realization and lower
e-auction prices, although partly offset by higher e-auction
volumes.
NTPC
NTPC’s operating performance was better than expected on
higher incentives and other income. Adj. PAT of INR89b was
however broadly flat YoY for FY16. For 4QFY16, adj. PAT was down
6% YoY to INR25b. NTPC is guiding for 3.7gw of capacity
commercialization in FY17 up from ~1.9gw in FY16.
PGCIL
reported PAT for 4QFY16 grew by 13.2% YoY to INR15.9b.
After adjusting for a revenue reversal of INR890m on account of an
unfavorable court verdict regarding the Barh-Balia transmission
line, the PAT would have been up 19.5% YoY to INR16.9b. Reported
PAT for FY16 increased by 22% YoY to INR60.8b, driven by an
increase of ~39% YoY in capitalization to INR303b. Capitalization for
the quarter stood at INR35b. Standalone RoE improved by 120bps
YoY to ~15% in FY16.
Coal India
ACQ realization declined 5% QoQ to INR1350/t which
surprised negatively. Blended realization of INR1,430/t was down
8% YoY. Cash cost declined 3% YoY to INR1,002/t. EBITDA (ex-OBR)
per ton was down 18% YoY to INR428/t.
REVIEW | June 2016
65
 Motilal Oswal Financial Services
MOSL Universe: Annual Performance (INR b)
SECTOR
FY16
Auto (12)
Capital Goods (15)
Cement (13)
Consumer (16)
Financials (35)
Private Banks (10)
PSU Banks (12)
NBFC (13)
Healthcare (16)
Media (11)
Metals (9)
Oil & Gas (12)
Excl. OMCs (9)
Real Estate (10)
Retail (3)
Technology (12)
Telecom (4)
Utilities (4)
Others (30)
MOSL (202)
MOSL Excl. OMCs (199)
Sensex (30)
Nifty (50)
5,387
2,037
1,193
1,551
3,074
891
1,660
523
1,334
254
4,100
5,034
303
171
3,036
1,669
1,845
1,106
Sales (INR B)
FY17E
6,109
2,235
1,324
1,731
3,446
1,027
1,826
593
1,529
297
4,546
5,410
319
201
3,641
1,837
1,972
1,300
FY18E
6,900
2,533
1,532
1,962
3,970
1,215
2,069
686
1,768
353
4,599
6,357
363
232
4,191
2,018
2,238
1,521
Change YoY (%)
FY16
8.3
0.0
8.2
3.6
9.5
17.8
3.2
18.5
11.6
14.7
-13.2
-21.9
-25.1
15.6
0.1
10.4
6.1
3.1
6.5
-6.0
-2.3
-9.1
-2.1
FY17E FY18E
13.4
9.7
11.0
11.6
12.1
15.2
10.0
13.5
14.6
16.9
10.9
-1.0
7.5
5.2
17.9
20.0
10.1
6.9
17.6
8.4
11.9
11.5
10.1
13.0
13.3
15.7
13.3
15.2
18.3
13.3
15.6
15.6
18.9
1.2
18.2
17.5
14.0
15.5
15.1
9.8
13.5
16.9
13.8
12.9
11.6
12.5
EBIDTA (INR B)
FY16
787
185
194
348
2,428
783
1,176
469
331
71
506
1,457
1,022
101
14
735
600
568
173
8,499
8,064
2,434
3,076
FY17E
904
260
251
395
2,693
872
1,291
531
388
87
688
1,630
1,116
110
18
854
651
607
211
9,747
9,234
2,742
3,419
FY18E
1,037
316
344
449
3,099
1,029
1,457
612
475
114
792
1,949
1,358
132
22
990
724
750
252
11,445
10,854
3,226
4,036
Change YoY (%)
FY16
7.6
-10.1
18.0
11.6
10.6
19.2
3.0
18.2
20.5
23.8
-37.2
12.5
-2.8
13.6
-12.7
6.8
9.9
14.3
14.2
5.8
3.5
3.2
7.4
FY17E FY18E
14.9
40.5
28.9
13.3
10.9
11.3
9.7
13.3
17.2
21.9
36.2
11.9
9.3
9.2
28.0
16.2
8.4
6.9
22.3
14.7
14.5
12.7
11.2
14.7
21.6
37.1
13.8
15.1
18.1
12.9
15.3
22.5
31.3
15.0
19.6
21.6
19.6
21.0
15.9
11.3
23.5
19.4
17.4
17.5
17.6
18.0
330
92
76
242
646
403
-41
283
196
35
134
763
546
28
9
582
104
312
93
3,643
3,426
1,200
1,414
PAT (INR B)
FY16
FY17E FY18E
410
132
113
276
1,105
468
325
312
250
40
100
836
569
37
11
650
98
301
120
4,478
4,211
1,343
1,670
507
161
171
319
1,352
562
425
364
320
58
173
1,021
709
50
13
745
132
357
147
5,526
5,215
1,655
2,059
Change YoY (%)
FY16
8.3
-13.7
2.8
11.1
-33.7
5.6
PL
11.0
12.7
63.9
-53.9
19.0
2.4
3.2
-9.7
5.7
-5.0
8.7
12.0
-5.9
-9.0
3.0
-1.2
FY17E FY18E
24.1
44.1
47.5
14.1
71.1
16.1
LP
9.9
27.2
14.0
-25.2
9.6
4.1
33.3
23.5
11.6
-6.3
-3.6
28.7
22.9
22.9
11.9
18.1
23.6
22.1
51.6
15.5
22.3
20.0
30.7
17.0
28.3
45.5
73.3
22.0
24.7
34.1
21.9
14.7
35.2
18.9
22.4
23.4
23.9
23.2
23.3
12,255 12,132 14,335
39,315 42,619 48,513
32,094 35,898 40,535
9,862
10,998 12,278
12,778 14,068 15,825
Note: For Banks : Sales = Net Interest Income, EBIDTA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.
REVIEW | June 2016
66
 Motilal Oswal Financial Services
MOSL Universe: Valuations
PE (x)
Sector
Auto (12)
Capital Goods (15)
Cement (13)
Consumer (16)
Financials (35)
Private Banks (10)
PSU Banks (12)
NBFC (13)
Healthcare (16)
Media (11)
Metals (9)
Oil & Gas (12)
Excl. OMCs (9)
Real Estate (10)
Retail (3)
Technology (12)
Telecom (4)
Utilities (4)
Others (30)
MOSL (202)
MOSL Excl. OMCs (199)
Sensex (30)
Nifty (50)
FY16
21.6
39.2
36.8
39.3
22.2
20.5
-63.6
12.3
29.8
27.1
19.6
11.0
11.6
22.3
47.2
19.5
25.3
12.9
23.6
21.0
21.7
20.1
20.7
FY17E
17.4
27.2
24.9
34.4
13.0
17.7
8.0
11.2
23.4
23.8
26.1
10.0
11.2
16.7
38.3
17.5
27.1
13.3
18.3
17.1
17.7
17.6
17.5
FY18E
14.1
22.3
16.5
29.8
10.6
14.7
6.1
9.6
18.3
16.3
15.1
8.2
8.9
12.5
31.4
15.2
20.0
11.2
15.0
13.8
14.3
14.2
14.2
18.0
12.2
10.2
6.5
6.5
10.8
29.7
14.0
7.1
9.8
12.1
N.M
N.M
N.M
N.M
14.8
10.6
7.9
5.9
5.8
10.4
23.0
12.0
6.7
10.0
10.7
N.M
N.M
N.M
N.M
11.7
7.8
6.7
4.8
4.7
8.6
18.9
10.1
5.8
8.3
8.8
N.M
N.M
N.M
N.M
7.6
21.4
14.5
25.2
EV / EBIDTA (x)
FY16
FY17E
7.2
16.6
11.6
23.3
FY18E
6.1
13.5
8.1
20.3
FY16
4.0
3.1
3.2
13.6
1.8
2.8
0.7
2.8
5.5
5.2
0.9
1.3
1.2
1.0
8.1
4.7
1.9
2.2
4.4
2.6
2.6
2.9
2.8
P/BV (x)
FY17E
3.4
2.8
2.9
11.9
1.6
2.5
0.7
2.4
4.7
4.5
1.0
1.1
1.1
1.0
7.0
4.2
1.8
2.1
3.9
2.3
2.4
2.6
2.6
FY18E
2.9
2.6
2.6
10.3
1.5
2.2
0.6
2.0
3.9
3.7
0.9
1.0
1.0
0.9
6.1
3.6
1.7
2.0
3.4
2.1
2.1
2.3
2.3
FY16
18.5
7.9
8.7
34.6
8.2
13.8
-1.1
22.6
18.4
19.0
4.8
11.4
10.0
4.5
17.2
24.3
7.4
17.4
18.7
12.2
11.9
14.6
13.4
ROE (%)
FY17E
19.6
10.5
11.7
34.4
12.7
14.3
8.2
21.3
20.1
18.9
3.7
11.5
9.7
5.8
18.4
24.2
6.7
15.8
21.2
13.7
13.5
14.8
14.8
FY18E
20.5
11.7
15.7
34.5
13.9
15.2
9.9
21.3
21.3
22.8
6.2
12.7
11.0
7.4
19.5
23.9
8.6
17.5
22.5
15.2
15.0
16.3
16.2
Div Yield (%)
FY16
1.1
0.9
0.6
1.6
1.7
1.1
1.1
3.4
0.6
1.2
7.8
2.2
1.8
1.4
0.6
1.8
0.6
6.2
1.6
1.9
1.9
1.6
1.6
EARN. CAGR
(FY16-FY18)
23.9
32.6
49.5
14.8
44.6
18.1
LP
13.4
27.7
28.8
13.9
15.6
13.9
33.7
22.7
13.2
12.6
7.0
25.5
23.2
23.4
17.5
20.7
N.M. - Not Meaningful
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