17 February 2017

Market snapshot

Equities - India

Sensex

Nifty-50

Nifty-M 100

Equities-Global

S&P 500

Nasdaq

FTSE 100

DAX

Hang Seng

Nikkei 225

Commodities

Brent (US$/Bbl)

Gold ($/OZ)

Cu (US$/MT)

Almn (US$/MT)

Currency

USD/INR

USD/EUR

USD/JPY

YIELD (%)

10 Yrs G-Sec

10 Yrs AAA Corp

Flows (USD b)

FIIs

DIIs

Close

Chg .%

28,301

0.5

8,778

0.6

16,096

1.7

Close

Chg .%

2,347

-0.1

9,771

-0.3

7,278

-0.3

11,757

-0.3

10,455

0.2

19,348

-0.5

Close

Chg .%

55

0.0

1,239

0.4

5,983

-1.1

1,884

-0.8

Close

Chg .%

67.1

0.2

1.1

0.7

113.2

-0.8

Close 1MChg

6.8

0.0

7.8

0.1

16-Feb

MTD

0.0

0.4

0.1

0.6

16-

Volumes (INRb)

Feb

MTD*

Cash

244

276

F&O

7,111

4,810

Note: YTD is calendar year, *Avg

YTD.%

6.3

7.2

12.2

YTD.%

4.8

5.6

1.9

2.4

11.3

1.2

YTD.%

-0.6

7.5

8.3

10.5

YTD.%

-1.3

1.5

-3.2

YTDchg

0.3

0.2

YTD

0.4

1.3

YTD*

243

4,266

Today’s top research ideas

CEAT (Initiating Coverage): Well balanced



CEAT will continue focusing on the consumer-facing passenger segment –

two wheeler (2W)/passenger vehicles (PV), evident from its plan to double

capacity over FY16-18. This is likely to help expand its market share in

2W/PV from 27%/9%.



Its foray into high-margin, export-focused off-highway tyres is likely to drive

the dwindling exports business.



The product mix should improve further in favor of 2W/PV from 38% to 49%

over FY16-19E, partly insulating the company against rubber price volatility

and improving margins.



Over FY17-19E, we expect revenue/PAT CAGR of 11%/ 25%, with a 150bp

margin expansion and a 260bp RoE improvement to 19%. We value the

stock at 10x FY19E EPS, and initiate coverage on CEAT with a Buy rating and

a target price of INR1,406 (implying ~29% upside).

Expanding capacity in PV/2W to bolster growth

Research covered

Cos/Sector

Telecom

Capital Goods

Cadila

Voltas

Key Highlights

Consolidation to change industry dynamics for the better

Bangalore Aero Show; ‘Make in India’ focus visible

Moraiya re-inspection over with no 483s

Operational results above estimates; maintain Neutral

CEAT (Initiating Coverage)

Well balanced; Expanding capacity in PV/2W to bolster growth

Piping hot news

TCS announces buyback; Infosys, Wipro may follow



Barely a week after the US-based software services player Cognizant

Quote of the day

Money, if it does not bring you

happiness, will at least help you be

miserable in comfort

Technology Solutions, which has several delivery centres in India, announced

plans to return $3.4 billion to its shareholders through buyback of shares and

dividends…

Chart of the Day:

Ceat -

Strategic capital allocation in profitable segments

Industry product mix relied on T&B

Shift in product mix to 2W/PV

Source: Company, MOSL

Source: MOSL

Research Team (Gautam.Duggad@MotilalOswal.com)

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

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

In the news today

Kindly click on numbers for the detailed news link

1

BMB-SBI merger might get

nod in some months

The Union Cabinet could take a

decision on merging Bharatiya

Mahila Bank (BMB) into State

Bank of India (SBI) in the coming

months. “It will happen soon.

Over the coming few months, you

can expect an approval,” a senior

official in the know told Business

Standard. On Wednesday…

2

Havells India is in advance negotiations with Lloyd Electric and Engineering

to acquire its consumer durables business and get a toehold in the

fastgrowing Indian air conditioners market that is dominated by global

brands, multiple people involved in the talks said. Havells may do the deal

for Rs1,200-1,500 crore, they added. In a market crammed with about two

dozen brands, Lloyd is the third-largest player in the room AC segment

after Voltas and LG. Ever since Havells sold its 80% stake in its

international arm Havells Sylvania Malta BV-one of the top four lighting

brands in Europe and Latin America -for Rs1,070 crore to Shanghai Feilo

Acoustics of China in December 2015…

Havells in Talks to Buy Lloyd Electric's Consumer Business

3

JSPL to set up fertiliser plants

for gas supply

Jindal Steel and Power Ltd (JSPL)

is exploring options to boost the

prospects of the company’s coal

gasification (coal to gas) plant in

Angul, Odisha. JSPL’s Managing

Director and Group CEO, Ravi

Uppal, said: “We are looking

forward to setting up of an

ammonia plant and other gas-

based ancillary industries where

we can supply...

4

India Ratings sees no uptick in

corporate performance next

fiscal

ndia Ratings and Research (Ind-

Ra) does not expect the

performance of Indian companies

to improve substantially in FY18.

Pick-up in capital expenditure by

the private sector is at least

another two fiscal years away…

5

The Reserve Bank of India (RBI)

has proposed that the merchant

discount rate (MDR or charge) on

debit card transactions be

rationalised on the basis of

turnover. Transactions up to Rs

2,000 do not attract a charge but

this is to end on March 31. The

central bank issued draft

guidelines on its website that

propose the MDR be “on the basis

of merchant turnover, rather than

the present slab-rate based on

transaction value”. Besides, there

should be differentiated MDR for

the government and QR-code

related transactions…

RBI proposes lower MDR from

April 1 to keep digi-pay

momentum

6

India’s largest paints company

Asian Paints Ltd on Thursday said

it has agreed to acquire Sri

Lanka’s Causeway Paints Lanka

(Pvt.) Ltd in an all-cash deal. In a

stock exchange filing, Asian Paints

said its Singapore subsidiary

Berger International Pvt. Ltd will

make the acquisition.…

7

Reliance Industries arm

Reliance Retail shuts 60 stores

as losses mount

Reliance Retail, the retail arm of

Reliance Industries, has shut more

than 60 loss-making Reliance

Fresh stores in the country in the

last one year mainly in the value

(food and grocery) retailing as it is

focusing on reducing losses by

shutting unprofitable stores,

sources close to the development

told FE…

Asian Paints to acquire Sri

Lanka’s Causeway Paints

17 February 2017

2

Initiating Coverage | Sector: Automobile

CEAT

Buy

BSE Sensex

28,156

S&P CNX

8,725

CMP: INR1,086

TP: INR1,406 (+29%)

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

M.Cap. (INR b)

M.Cap. (USD b)

1, 6, 12 Rel. Per (%)

Avg Val, (INR m)

Free float (%)

CEAT IN

40.5

1422 / 731

48.4

0.7

-13/25/-6

779

49.2

CEAT, a flagship company of the RPG Group, is the fourth largest tyre manufacturer in

India in terms of revenue (~12% market share). With manufacturing facilities at

Bhandup (bias tyres), Nashik (bias and radial), Halol (radial) and Nagpur (2W/3Ws),

the company’s capacity stands at >900MT/day (95,000 tyres/day). It operates in India

via a robust distribution network of 4,500+ dealers, 33 regional offices, 400+

franchisees, 6 manufacturing facilities and 250+ distributors.

Well balanced

Expanding capacity in PV/2W to bolster growth



Financial Snapshot (INR b)

Y/E Mar

FY17E FY18E FY19E

Sales

64.5 71.1 79.1

EBITDA

6.7

7.8

9.5

NP

3.6

4.4

5.7

EPS (Rs)

89.9 107.6 140.6

EPS Growth (%)

13.2

-4.2 56.5

BV/Share (Rs)

588.6 682.0 804.0

P/E (x)

12.1 10.1

7.7

P/BV (x)

1.8

1.6

1.4

RoE (%)

16.4 16.9 18.9

RoCE (%)

13.3 14.2 16.8

Shareholding pattern (%)

As On

Sep-16 Jun-16 Sep-15

Promoter

50.8

50.8

50.8

DII

FII

Others

7.9

25.5

15.8

5.2

26.1

17.9

7.3

19.3

22.6









We expect CEAT to continue with its strategy of focusing on the consumer-facing

passenger segment – two-wheeler (2W)/passenger vehicles (PV) – which should

reflect in its resource allocation. As a result, we expect its market share to

improve in 2W/PV (where the threat of Chinese competition is relatively low)

from 27%/9% currently.

CEAT plans to double its capacity in its currently capacity-constrained passenger

segment over FY16-18. Its foray into the high-margin, export-focused off-highway

tyres (OHT) business is likely to help drive the dwindling exports business (which

was impacted due to radialisation in the market).

The product mix should improve further, with revenue contribution of 2W/PV

expected to increase from 38% to 48% over FY16-19E. This will partly insulate

CEAT against rubber price volatility and help improve margins.

As a result, we expect revenue CAGR of 11% and PAT CAGR of 25% with a 150bp

margin improvement over FY17-19E. In our view, RoE is likely to improve by

260bp to 19% over FY17-19E, despite a decline in gearing.

We value the stock at 10x FY19E EPS, and initiate coverage on CEAT with a Buy

rating and a target price of INR1,406 (implying ~29% upside from current levels).

Strategic capital allocation in profitable segments

Until FY11, CEAT derived 60% of its revenues from the low-margin truck & bus

(T&B) segment, while the higher-margin segments of 2W and PV contributed

just 14%, leading to multiple years of low margins and profitability. However,

over the past five years, CEAT has been focusing on and allocating resources to

categories like 2W and UV (which is part of the PV segment), where brand

equity leads to better margins and makes it easier to pass on the cost push

(relative to T&B segment). With a view to increase contribution from 2W/PV,

management took a four-pronged approach of: (1) increasing reach (3x increase

in district penetration), (2) expanding capacity for higher-margin segments, (3)

extending presence across OEMs and (4) spending more on marketing &

branding of 2W/PV. These measures resulted in an improvement in the market

share of the 2W segment from 8% in FY11 to 27% in FY16 (second largest after

MRF which commands a 35% market share) and of the PV segment from 4% to

9%. Revenue contribution of 2W/PV increased from 15% in FY11 to 38% in FY16,

leading to an improvement in overall margin from 4% to 13%. We believe CEAT’s

strategy to allocate capital to the profitable categories like 2W, PV and off-

highway tyres is commendable. It is likely to help gain market share, insulate

against volatility in raw material prices and provide high earnings visibility.

3

Well Balanced

CEAT

Niket Shah

+

91 22 3982 5426

Niket.Shah@motilaloswal.com

Please click here for Video Link

17 February 2017

Doubling of capacity in focused segments to drive market share gains

CEAT plans to increase its capacity from 900MTPD to 1,245MTPD over FY17-18.

Around 70% of this new capacity addition (230MTPD of total 345MTPD) will be in

the 2W (170MTPD in FY16 to 290MTPD in FY18) and PV (84MTPD in FY16 to

194MTPD in FY18) segments, which should allow CEAT to maximize

growth/profitability and resolve supply constraints in these segments. The

company’s plan to venture into the OHT segment with capacity of 100MTPD is a

testimony of the fact that it plans to chase high-margin businesses to achieve

profitable growth. With CEAT’s recently announced capex of INR28b by FY22, it

envisages to increase annual capacity in TBR from 110MTPD in FY18 to 310MTPD in

FY22, in 2W from 290MTPD in FY18 to 430MTPD in FY22, and in passenger cars from

190MTPD in FY18 to 340MTPD in FY22. In our view, this will address supply issues

until FY22, boost the 2W/PV businesses further and help improve the market share

of radial within the T&B segment.

International business to get boost from OHT segment

The influx of Chinese tyres and the higher level of radialisation in the markets where

CEAT exports its products have impacted its performance. Thus, the company has

forayed into high-margin export-focused off-highway tyres with capacity of

100MTPD at an outlay of INR6b, which should come on stream in FY18 in a phased

manner. We believe the foray into OHT should be margin-accretive for the

company. ACHL, the company’s Sri Lanka arm, is a market leader in that country

with ~50% share and ~25% EBITDA margin, which are expected to continue growing

at a stable pace.

Product mix improvement to continue, boosting margins

CEAT has improved its product mix in favor of the passenger segment (2W/PV) in

Indian operations from 15% to 38% over FY11-16. With market share gains and

doubling of capacities in both segments over FY16-19E, we expect revenue CAGR of

20%/13% for 2W/PV over FY17-19E. With the first phase of capacity expansion

(INR14b) likely to be completed by 1HFY18, the product mix is expected to improve

further (revenue share of 2W/PV likely to increase from 38% to 48% over FY16-19E),

partly insulating CEAT against rubber price volatility and improving margins.

Valuation and view

After witnessing three years of muted revenue growth, CEAT is expected to come

back on the growth path, driven by new capacity, product mix improvement, unique

ad campaigns for every segment and increasing distribution reach. Improvement in

the product mix in favor of the passenger segment is likely to partly insulate CEAT

against rubber price volatility. We expect sales and PAT CAGR of 11% and 25%,

respectively, and margins to improve by 150bp over FY17-19E. The first phase of

capex of INR14b (to be completed by FY18) is being met entirely by internal

accruals, while the recently announced capex of INR28b (to be incurred over FY18-

22) is expected to be funded via a mix of debt and equity. Despite ongoing capex,

we expect RoE to improve by 260bp to 19%, with strong FCFF generation of INR6.7b

over FY17-19E. Based on superior EPS CAGR v/s peers over FY17-19E and an

improving product mix, we value the stock at a P/E of 10x FY19E EPS (20% premium

to 10-year median P/E). Thus, we initiate coverage on CEAT with a

Buy

rating and a

target price of INR1,406 (~29% upside).

17 February 2017

4

Sector Update | 16 February 2017

Telecom

Consolidation to change industry dynamics for the better

We attended the “Convergence India 2017” telecom conference last week, where

we had an opportunity to meet various industry experts. Based on our discussion

with strategy heads/senior management of telecom companies, network vendors

and regulatory officials, we noted that:



Vodafone-Idea deal:

It can prove to be a big positive for the involved

companies and the sector, but there is a high risk of the merger getting

delayed beyond 12 months. Post-merger, synergies from SG&A/employee cost

(17% of Idea revenue) could come sooner (12 months), but those from

network (30% of revenues) are likely to come much later (over 24 months),

given the high technological complexities and the issue of Vodafone/Idea

having common vendors across various functions (e.g. towers, IT/technology).



Bharti Infratel:

The Vodafone-Idea merger could lead to an overlap at ~40-60%

sites. However, there may be a limited impact from a 2-3 years perspective,

given that it is a long-drawn process and that there are multiple defenses like

termination clause, low impact on Indus Towers (given Vodafone and Idea’s

holding in this JV) and long gestation for network efficiencies.



Bharti Africa:

Recent management changes, restructuring of group holdings

and the chairman’s recent quote on possible sale of the business in a few

African nations hint that we could see some action over the near term in a few

countries like Nigeria. This can substantially reduce our current ~INR100/share

negative value in the target price of INR410.



The regulatory risk on interconnect cost reduction is eminent, as hinted by

most senior bureaucrats.

Key takeaways from “Convergence India 2017” telecom

conference

Vodafone-Idea merger: Could take over 12 months to complete; cost

synergies to come gradually







Regulatory hindrance:

The spectrum and revenue caps of 50% in each circle are

hardly seen as hindrances in the regulatory circles. However, the various

penalties on each company and the Vodafone tax issue could be a hurdle.

Timelines:

Looking at the SSTL-Reliance merger, the Vodafone tax issue and the

multiple penalties, the merger runs the risk of getting delayed beyond 3-4

quarters, even after the valuation decision is made.

Cost synergies:

Cost synergy through SG&A/employee cost (17% of Idea’s

revenues) could be the first target due to its relative ease. In networks, we

understand that site overlaps could be as much as 40-60%. Typically, in a circle,

top cities account for 60-70% of total sites, which may see high overlaps and

limited reduction, given the coverage and capacity requirements. Also, it could

take ~2-3 years to drive network cost synergies given the stickiness and gradual

nature of network rejig.

17 February 2017

5

Bharti Infratel: No knee-jerk impact





Impact of Vodafone-Idea merger:

As per the MSA, all the overlapping sites of

Vodafone and Idea would be converted from tenancy to loading, hurting

revenues. However, there could be some limited near-term impact, as: 1) Indus

Towers (55% of Bharti Infratel’s revenues) could see least tenancy reduction as

Vodafone and Idea hold a 53% combined stake in this joint venture. 2.) The

termination clause will mitigate the impact for at least next 3-5 years. 3)

Reducing tenancies should increase rates as lower tenancies usually have higher

tariffs.

Impact of Single RAN technology:

We understand that Single RAN (which is

assumed to be the biggest risk to loading revenues) does not impact loading

revenues as they are generated when multiple technologies are deployed

irrespective of the space requirement. Therefore, lesser space due to Single RAN

equipment does not impact loading rates.

Bharti Airtel Africa: Sale on the cards?





Sale opportunities:

In our view, Bharti’s focus on country-wise FCF in Africa

implies a sale in a few African countries, possibly in Nigeria and Kenya. The

recent restructuring of Africa holding companies, management change (Africa

MD and Kenya CEO) and the chairman’s recent quote on possible sale of

business in a few African countries also indicate similar possibilities.

Increase in SOTP:

Our SOTP valuation of Bharti factors in ~INR100/share of

negative value, providing a strong trigger point if there are any sale possibilities.

Regulatory impact: IUC reduction likely





Interconnect usage charge (IUC):

There is a strong indication in the regulatory

circles that IUC will be gradually reduced to zero. The current consultation

process on IUC should be over in 2-3 months.

No issues with RJio tariffs:

The TRAI does not find RJio’s tariff and pricing as

predatory. Thus, there are limited obstruction possibilities.

Our view

We remain positive on Bharti given its strong foothold in the industry and the likely

reduction in competitive intensity post the Vodafone-Idea merger. The merger also

makes Idea a good investment proposition. However, given the multiple moving

levers in the transaction, we have put the stock under review.

17 February 2017

6

Sector Update | 16 February 2017

Capital Goods

Refer to our report

on India Defense, Jul-15

Bangalore Aero Show

‘Make in India’ focus visible; Strategic Partnership Model likely to be

approved soon

We met and interacted with global OEMs and officials from the Ministry of Defense

at the recent Bangalore Aero Show. Key highlights:











Various global OEMs (Boeing, Airbus, Lockheed Martin and Rolls Royce) have set

up joint ventures (JVs) in India to strengthen their global supply chain. The

investments are expected to continue growing as these JVs/subsidiaries become

an integral part of the supply chain.

The Ministry of Defense needs to place orders for the important platforms like

aircraft, submarines and helicopters before the global OEMs commit large

investments in the country. This would provide the OEMs with some visibility on

revenues and return on investment.

The new Defense Procurement Procedure (DPP 2016) has some crucial

procedural changes, which are expected to accelerate and simplify the

procurement process. However, await clarity on the Strategic Partnership Model

aimed at encouraging private sector participation in the manufacture of defense

equipment as part of the ‘Make in India’ initiative.

Following the introduction of DPP 2016, 104 Acceptance of Necessity (AON)

were issued, of which 90 were to Indian vendors. Around INR3t of Request for

Proposal (RFP) is expected to be issued, with participation only by Indian

vendors.

The Strategic Partnership Model is expected to be finalized soon and announced

over next 2-3 months. It would have only three segments (aircraft, helicopters

and submarines), as against the earlier proposal that had 10-11 categories. Also,

to ensure frivolous players are eliminated, the qualification of vendors would

depend on their a) capacity, b) capability and c) financial net worth. Any

category with more than two credible players would not be part of the Strategic

Partnership Model.

The company has won orders worth INR78b YTD (INR62b as of Q3FY17). Orders

for LR SAM (4 ships) are expected to be concluded shortly, which, along with

orders for handheld devices (INR5.5b), would take orders to INR150b in FY17.

FY18 orders are estimated at INR150b, with key orders of LR SAM (INR80b; 7

ships) and Aakash Phase 2 (INR60b; Air force, 7 squadrons)

Base orders for radars, communication devices, optronics and spares (currently

at INR30-40b) are expected to continue growing. The orders are supplemented

by large missile system orders.

No constraints on orders for next 2-3 years. However, post that, there is a need

to have large missile system programs.

Sales growth is expected to be 10-12% (likely at the higher end) in FY17. As the

order book continues to strengthen, it expects 12%+ growth in FY18/FY19.

Takeaways from our interaction with BEL’s senior management









17 February 2017

7





It expects to sustain EBITDA margin at 18%+. The impact of pay revision would

be ~200bp initially, but it will be absorbed with higher sales.

The company has lost a few small orders to private sector players. While the

Indian government's intent remains to engage more private players in the

defense sector, BEL does not yet see a threat from any private sector player. Of

the INR150b of orders targeted to be won in FY17, 20% would be on competitive

basis, where margins would be lower than those on nomination basis.

17 February 2017

8

Cadila Health

BSE SENSEX

28,156

S&P CNX

8,725

16 February 2017

Update

| Sector:

Healthcare

CMP: INR429

TP: INR510(+19%)

Buy

Moraiya re-inspection over with no 483s



Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

Avg Val, INRm

Free float (%)

CDH IN

1,023.7

440 / 305

19/14/16

439.2

6.6

341

25.2







Following the re-inspection from 6-15 February 2017, the Moraiya facility received

zero 483s.

There are ~60-70 pending ANDAs from the Moraiya facility, including key products

like Asacol HD, Prevacid ODT, Lialda, Toprol XL and Transdermals.

We expect US sales to increase to ~USD950m in FY19 from ~USD550m in FY17, led by

70+ approvals from Moraiya/other facilities and contribution from the acquisition of

Steynl (USD58m of annual sales).

We raise FY18E/19E EPS by ~5%, factoring in faster product approvals and better

margins. We thus derive a new target price of INR510, at 22x FY19E PER (v/s INR425,

at 22x 1HFY19E PER).

Financials Snapshot (INR b)

Y/E March

2017E 2018E 2019E

Sales

94.6 117.4 141.7

EBITDA

19.5 28.2

35.4

Net Profit

12.3 18.1

23.6

Adj. EPS (INR)

12.0 17.7

23.0

EPS Gr. (%)

-22.2 47.2

30.4

BV/Sh. (INR)

59.9 73.2

91.9

RoE (%)

21.4 26.5

27.9

RoCE (%)

14.9 18.3

20.6

P/E (x)

35.8 24.3

18.6

P/BV (x)

7.2

5.9

4.7

Shareholding pattern (%)

Dec-16 Sep-16 Dec-15

As On

Promoter

74.8

74.8

74.8

DII

7.2

7.1

7.3

FII

10.0

10.1

7.0

Others

8.0

8.0

10.9

FII Includes depository receipts

Stock Performance (1-year)

Cadila Health.

Sensex - Rebased

455

405

355

305









Moraiya re-inspection concludes successfully:

Cadila Healthcare (CDH)

announced today that its Moraiya facility was re-inspection by the USFDA from

6-15 February 2017. At the end of the inspection, no 483 observations were

issued. Notably, this plant is under warning letter status since December 2015.

Post successful inspection (with zero 483s), we expect product approvals from

this facility to start immediately.

Key facility now out of woods:

Moraiya (50% of current sales) holds the key for

CDH’s business, given that ~70 pending ANDAs (out of ~200 total pending

ANDAs) are filed from this facility. We believe that the successful resolution

would pave the way for approval of key products (such as Asacol HD, Prevacid

ODT, Lialda, Toprol XL and Transdermals) over coming months. Post Moraiya

resolution, all the facilities of CDH are USFDA-compliant.

Big boost to US business; roadblock cleared for key approvals:

Post successful

resolution of the Moraiya facility, we expect ~80 ANDA approvals until FY19 for

CDH. Around ~50% of these are expected to come from the Moraiya facility

and the rest from Baddi and SEZ facilities. Driven by these approvals and the

contribution from the acquisition of Steynl, we expect US sales to grow to

USD950m by FY19 from ~USD550m at end-FY17. Strong launch momentum,

coupled with limited competition launches (like Asacol HD & Lialda), should

drive significant margin improvement (expect FY19 EBITDA margins to be

>24%), in our view. Also, CDH will save remediation cost of USD5-10m post

Moraiya resolution.

Premium multiple backed by strong growth outlook:

With the re-inspection of

Sun Pharma’s Halol plant resulting in some new observations (and eventually a

delay in resolution by 6-9 months), the street was concerned about the fate of

CDH’s Moraiya facility. We thus believe that Moraiya resolution is a significant

positive for CDH as all the key oral, injectable and transdermal fillings are from

this facility. We maintain our

Buy

rating with a target price of INR510 @22x

FY19E PER (v/s INR425 @22x 1HFY19E). We increase FY18E/19E EPS by ~5%,

factoring in faster product approvals and better margins.

17 February 2017

9

16 February 2017

3QFY17 Results Update | Sector: Capital Goods

Voltas

Neutral

BSE SENSEX

28,301

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

S&P CNX

8,778

VOLT IN

Operational results above estimates; maintain Neutral

331



Results above expectations:

3QFY17 revenue declined 7% YoY to INR11.8b

89.3 / 1.4

(est. of INR11.7b). EBIDTA increased 58% YoY to INR890m (est. of INR575m),

406 / 218

-4/-10/27

with margin expanding 310bp to 7.5% (est. of 4.9%). Adj. net profit rose 48%

552

YoY to INR815m (est. of INR505m).

69.7

CMP: INR345

TP: INR365(+6%)



Financials & Valuations (INR b)

2016 2017E

Y/E Mar

Net Sales

58.6

58.5

EBITDA

4.4

5.3

PAT

3.9

4.3

EPS (INR)

11.7

13.1

Gr. (%)

14.0

12.8

BV/Sh (INR)

72.4

81.8

RoE (%)

15.3

17.1

RoCE (%)

14.8

16.5

P/E (x)

32.6

25.9

P/BV (x)

4.7

4.2

2018E

66.3



5.8

5.3

15.9

20.9

93.1



18.2

17.5

21.4

3.7

Estimate change

TP change

Rating change



Quarterly Performance (Consolidated)

FY15

Y/E March

Sales

Change (%)

EBITDA

Change (%)

As of % Sales

Depreciation

Interest

Other Income

Extra-ordinary Items

PBT

Tax

Effective Tax Rate (%)

Reported PAT

Change (%)

Adj PAT

Change (%)

2Q

9,847

-8.9

777

79.8

7.9

69

44

188

0

853

351

UCP sales fell 4.6% YoY to INR4.1b

due to the demonetization impact. VOLT

remained the market leader with a share of 21.7%. EBIT margin contracted

120bp YoY to 10.6% due to negative operating leverage.

EMP revenue declined 3% YoY to INR7.0b,

led by weak progress in certain

new orders and prevailing sluggish pace of execution. EBIT margin for the

segment expanded 440bp YoY to 3.9%, led by positive closure of a few

international projects and execution of better-margin new orders.

Order inflow driven by domestic business; book-to-bill ratio at 1.4x:

VOLT’s

order inflow – albeit down 9% YoY to INR4.5b in 3QFY17 – continues to be

supported by orders wins from the domestic market. The company

continues to selectively book projects above the threshold margins of 4-5%.

Order book stands at INR42b (+19% YoY) and book-to-bill at 1.4x.

Management expects legacy orders to be completed by end-FY17 and

margins to revert back to 5% levels in FY18.

Maintain Neutral.

We marginally raise estimates for FY17/18 by 4/3% to

factor in above-estimated performance in EMP segment. At CMP of INR345,

VOLT trades at 26x/21x/18x FY17/FY18/FY19E EPS of INR13.1/15.9/18.8.

Maintain

Neutral (given

limited upside of 6%) and SOTP-based TP of INR365.

(INR Million)

FY17

Var.

FY16

FY17

FY16

FY17

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

3QE Vs Est

9,511 14,900 15,585 10,401 12,659 18,888 18,500 9,672 11,805 18,538 58,574 58,515 11,688

1%

-15.0

1.9 -11.3

5.6 33.1

26.8

18.7 -7.0

-6.7

-1.9

13.0

-0.1 -10.6

574 1,430 1,313

645

563 1,853 1,995 687

890 1,700 4,369 5,272

575 55%

-16.0

35.7

-0.4 -17.0

-1.9

29.5

52.0

6.4

58.0

-8.2

6.6 20.7

-1.4

6.0

9.6

8.4

6.2

4.4

9.8

10.8

7.1

7.5

9.2

7.5

9.0

4.9

70

81

59

64

65

80

66

63

60

79

278

268

85

44

58

34

33

37

59

48

33

22

51

153

154

45

304

303

248

477

249

478

357 658

597

339 1,176 1,951

300

-445

-12

0

0

-22 -279

-9

0

0

0

106

0

-

1,210 1,606 1,468 1,025

732 2,471 2,248 1,249 1,405 1,909 5,220 6,802

745 89%

147

413

452

378

195

664

651 505

437

719 1,599 2,313

220

36.9

647

28.9

647

29.5

26.7

573

-46.6

551

-12.3

26.9

28.9

1,764 1,576

47.9

53.7

1,485 1,567

27.1

52.8

40.4

697

7.8

697

7.8

31.1

815

42.2

815

47.9

37.7

30.6 34.0

1,270 3,620 4,349

-28.0

-7.4 20.1

1,270 3,515 4,349

-14.5

3.9 23.8

29.5

505

-6.8

505

-2.9

61%

61%

41.2 12.1

25.7 30.8

502 1,074 1,193 1,025

18.1 73.7

17.0

-7.0

499 629 1,168 1,025

18.1

9.2

39.9

-7.9

17 February 2017

10

In conversation

1. HPCL: Oil market over-supplied, prices may not rise

significantly; MK Surana, CMD











There is a surplus overhang of petrol and diesel in the world market as far as the

inventories are concerned. Believe that crude prices will not go substantially

higher.

The production in US has increased and there are additions from Libya and

Nigeria. There is surplus inventory which hasn’t been soaked up completely.

The market is still oversupplied. Believe that the crude prices will continue to

hover between in USD 55-60 per barrel in near future.

Product prices are not only the function of crude prices but also of relative

demand and supply. Gross refining margins (GRMs) have been disappointing in

the last three to four 3-4 quarters.

Expect the GRMs of HPCL to be in the range of USD 5.5-6 per barrel.

2. PNB Housing: See NIMS at 3%; cash crunch effect to subside

from Feb; Sanjaya Gupta, MD











Net Interest margin will remain around the same level of 3% going forward.

The company has always targeted spreads in the range of 200-208 basis points,

and that will also remain unchanged going forward.

Demonetisation affected the company negatively, however, we expect the

effects will subside from the month of February and things will crawl back to

normalcy.

Loan against portfolio (LAP) remained 18% of the entire portfolio, however,

gross non-performing asset (NPAs) on LAP were lower than the housing

portfolio.

The demands were lower than the previous quarter by about 13-14% but the

portfolio qualities stood firmly.

3. Future Consumer: Eyeing over 80% growth in FY18; Kishore

Biyani, CEO











Looking at adding another 30 stores, Big Bazaar, to the existing 2,000 stores.

The company is looking at geographical expansion, with various joint ventures

which are happening to go along with a lot of new product launches.

Much of sales growth will also come out of new stores which are expanding.

Hoping that some of the brands will start reaching 2,00,000 outlets by next year.

Had a growth of 20%+ in the previous quarter, growth to be higher going

forward into the next year.

17 February 2017

11

From the think tank

1. The defence needs more firepower. by PK Vasudeva



India’s defence budget has been hiked by a measly 6 per cent to ₹2,74,114 crore

for 2017-18, dashing hopes for any major jump in military modernisation this

year despite heightened tensions with Pakistan and China. The defence outlay

works out to just 1.63 per cent of the GDP, the lowest such figure since the 1962

war with China. Though this figure has been steadily declining in percentage

terms as the economy expands, military experts contend it should be about 3

per cent of the GDP to ensure the armed forces are capable of tackling the

“collusive threat” from Pakistan and China.

2. Oil companies merger to create giant PSU could lead to mega-

employee union threat. by Bhamy V Shenoy



Since oil prices are extremely volatile, it is claimed that integrated operations

give better earnings stability. This again is disproved when we look at the recent

period when oil prices dropped from above $100/barrel to below $30/barrel.

Earnings stability: While operating income of the super majors has declined

from $109.1 billion to a loss of $4.9 between 2010 and 2015, downstream

operating income has not been able to compensate for such a massive loss

despite a significant increase. It is true that better downstream results have

softened the shock of the oil-price drop. But it is not enough to give what is

generally understood as earnings stability.

3. Digital Payments: Slowdown expected, here’s why we must

push harder to stay relatively cashless. by the financial express



Though it was always clear people would go back to making cash payments once

the central bank was able to print enough to replace the demonetised currency,

the switch away from digital payments has been a lot slower than expected—

that is, a large portion of those who switched to digital out of compulsion have

decided to stay on thanks to the convenience. Based on representative data

from four banks put out by RBI on a weekly basis, the use of debit/credit cards

at outlets has fallen from Rs 16.8 crore a day in December to Rs 14 crore in the

first 12 days of this month, but that is much higher than the Rs 11.7 crore in

November.

4. Using municipal bonds to bolster city finances. by Livemint



The ambitious plans for urban renewal in India are currently built on the

quicksand of weak city finances. The news that Pune is getting ready to launch

the biggest Indian municipal bond issue thus needs to be welcomed—but with

caution. This newspaper has always stuck to the Ambedkarite argument that

cities rather than villages are the future. They will drive economic growth,

innovation, social mobility and individual freedom. But it is no secret that our

cities are becoming increasingly unlivable.

17 February 2017

12

5. Transforming cities of din. by Arvind Subramanian



Economic Survey 2017-18 pre sents four striking findings about urbanisation in

the country and the challenges being faced by Indian cities. Magnitude of India's

urbanisation is not unusual but the pattern is: Contrary to perception, the level

and evolution of the country's urbanisation are similar to those of other countries.

Broadly , urbanisation has increased with per-capita GDP , so that the difference

in the level of urbanisation between, say , India and China can be attributed

mainly to the different levels of development (see RsPerCapita GDP and

Urbanisation').

International

6. Donald Trump, Vladimir putin and a fatal attraction. by Philip

Stephens



Donald Trump imagined he could do as he pleased in the White House. It fell to

the ninth federal circuit court in Seattle to draw the limits of the president’s

authority at home by overturning an executive order barring migrants from

seven Muslim-majority nations. Now the enforced departure of national security

adviser Michael Flynn has mapped some of the constraints on the conduct of

foreign policy. You could say the president has been humbled, except that

humility and Mr Trump will never sit comfortably in the same sentence.

17 February 2017

13

Click excel icon

for detailed

valuation guide

CMP

(INR)

850

94

2,789

1,078

21,858

25,263

660

410

211

3,126

1,316

200

6,027

446

422

TP

% Upside

EPS (INR)

(INR) Downside FY16 FY17E FY18E

1,087

114

3,432

1,110

22,049

29,172

732

469

205

3,190

1,506

-

6,808

653

462

28

22

23

3

1

15

11

14

-3

2

14

13

46

9

28.7

3.9

131.8

28.1

483.3

492.9

20.7

11.1

7.4

158.3

53.6

4.2

177.6

36.9

9.1

29.2

4.8

136.2

25.7

489.0

625.6

24.2

21.8

8.2

175.2

60.7

6.2

247.5

12.8

11.9

37.7

6.4

160.6

37.5

639.6

870.8

30.2

32.8

9.7

190.7

75.0

9.7

307.5

35.5

15.4

Valuation snapshot

P/E (x)

FY17E FY18E

29.1

19.5

20.5

42.0

44.7

40.4

27.3

18.8

25.6

17.8

21.7

32.3

24.4

35.0

35.5

27.4

35.1

19.5

29.2

18.0

23.3

16.2

20.3

27.3

Loss

30.2

33.2

7.2

18.1

23.8

22.1

Loss

12.4

52.8

9.5

18.3

21.0

31.4

16.8

21.1

32.0

18.5

9.9

48.9

38.6

12.0

14.7

26.4

34.4

11.6

22.5

14.6

17.4

28.7

34.2

29.0

21.9

12.5

21.7

16.4

17.6

20.6

19.6

12.6

27.4

19.0

19.7

16.0

25.4

15.1

19.4

15.6

15.7

22.5

5.3

24.5

23.5

6.4

14.8

18.7

9.1

7.4

8.1

12.5

9.0

6.1

11.1

12.5

4.6

11.6

24.5

19.4

8.6

39.1

36.3

9.7

12.3

23.5

26.2

10.0

P/B (x)

FY17E FY18E

5.8

4.2

5.8

6.4

8.8

14.3

5.3

2.1

3.6

6.6

1.6

2.2

5.5

1.8

8.6

4.0

2.1

2.0

2.6

1.6

4.0

1.3

1.5

4.0

0.6

3.8

3.6

0.7

3.7

2.8

1.1

0.5

0.6

0.7

1.0

0.3

0.8

1.2

0.5

0.8

6.6

4.2

1.5

13.9

5.6

3.0

2.6

2.9

2.6

2.2

4.8

3.6

5.0

5.5

7.4

10.3

4.4

1.8

3.2

5.6

1.5

2.0

4.6

1.6

6.9

3.5

2.0

1.8

2.4

1.5

3.5

1.2

1.4

3.4

0.6

3.3

3.2

0.6

3.1

2.5

1.0

0.5

0.6

0.7

0.9

0.3

0.7

1.1

0.4

0.8

5.4

3.4

1.3

11.4

5.0

2.6

2.2

2.8

2.5

1.9

ROE (%)

FY16 FY17E FY18E

25.8

20.9

33.2

18.7

19.4

35.8

22.4

6.1

14.1

43.6

15.4

4.5

19.9

18.3

24.1

18.8

17.1

11.8

13.3

6.0

18.3

11.3

16.6

6.6

10.9

11.2

9.3

19.9

13.7

Loss

Loss

Loss

Loss

5.5

1.2

Loss

7.6

7.0

-2.7

21.1

24.9

15.1

31.5

20.9

27.1

19.6

10.8

11.4

15.1

21.6

23.1

30.0

15.9

18.8

41.2

21.2

11.4

14.2

40.1

14.3

7.7

22.8

5.2

26.4

14.7

6.3

10.9

11.3

9.4

18.6

10.4

7.4

15.5

Loss

13.5

12.6

9.7

22.1

12.0

5.0

Loss

4.9

1.4

10.4

1.7

3.9

7.0

2.8

4.0

22.5

30.0

16.6

31.0

19.6

26.0

19.1

11.4

7.7

19.8

23.1

26.3

31.0

20.6

23.4

41.3

21.8

15.6

14.9

36.8

13.6

10.3

23.2

13.3

27.9

18.3

10.3

11.8

9.9

10.4

19.3

9.9

8.9

16.4

11.6

14.5

14.4

10.0

22.6

13.6

11.5

7.0

7.2

5.8

10.2

4.8

6.8

9.0

9.7

6.9

24.1

19.4

16.6

32.1

19.6

28.9

19.5

12.2

9.7

20.3

Company

Automobiles

Amara Raja

Ashok Ley.

Bajaj Auto

Bharat Forge

Bosch

Eicher Mot.

Endurance

Tech.

Escorts

Exide Ind

Hero Moto

M&M

Mahindra CIE

Maruti Suzuki

Tata Motors

TVS Motor

Aggregate

Banks - Private

Axis Bank

DCB Bank

Equitas Hold.

Federal Bank

HDFC Bank

ICICI Bank

IDFC Bank

IndusInd

J&K Bank

Kotak Mah. Bk

RBL Bank

South Indian

Yes Bank

Aggregate

Banks - PSU

BOB

BOI

Canara

IDBI Bk

Indian Bk

OBC

PNB

SBI

Union Bk

Aggregate

NBFCs

Bajaj Fin.

Bharat Fin.

Dewan Hsg.

GRUH Fin.

HDFC

Indiabulls Hsg

LIC Hsg Fin

Manappuram

M&M Fin.

Muthoot Fin

Reco

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Buy

Neutral

Buy

Not Rated

Buy

Buy

Buy

Neutral

Neutral

Buy

Buy

Buy

Buy

Neutral

Buy

Neutral

Buy

Buy

Neutral

Buy

493

138

177

83

1,327

279

62

1,320

69

792

413

20

1,436

535

134

240

105

1,510

345

68

1,535

75

940

450

21

1,575

9

-3

36

27

14

24

10

16

9

19

9

6

10

34.5

6.8

6.2

2.8

48.6

16.7

38.4

8.6

18.9

9.0

2.5

60.4

14.1

7.1

6.1

4.6

56.9

17.2

3.1

48.4

Loss

26.3

12.4

2.8

79.3

25.0

8.6

6.9

5.5

68.3

17.9

3.9

58.7

13.0

32.3

17.5

3.1

97.0

Buy

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Buy

Neutral

166

125

296

81

289

121

141

270

142

221

123

300

49

330

114

185

350

172

33

-2

1

-39

14

-6

31

29

21

Loss

Loss

Loss

Loss

14.8

4.9

Loss

15.7

19.7

7.5

Loss

23.9

1.5

30.4

6.6

6.7

8.6

8.5

18.3

17.1

36.7

6.4

32.2

19.6

12.7

21.6

30.5

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Not Rated

Buy

Buy

1,092

837

305

384

1,393

832

551

101

290

347

1,276

883

405

348

1,580

1,015

693

-

323

409

17

6

33

-9

13

22

26

11

18

23.9

23.8

25.0

6.7

32.6

55.7

32.9

3.5

11.9

20.3

34.1

45.2

30.7

7.9

36.1

69.5

37.6

3.8

8.4

29.7

44.6

43.2

35.6

9.8

38.4

86.2

44.7

4.3

11.1

34.7

17 February 2017

14

Click excel icon

for detailed

valuation guide

CMP

(INR)

131

633

143

1,902

944

TP

% Upside

EPS (INR)

(INR) Downside FY16 FY17E

117

-11

23.8

24.0

752

19

24.0

25.7

134

-6

28.5

29.4

2,500

1,225

31

30

80.4

53.3

91.2

58.1

Valuation snapshot

P/E (x)

FY17E FY18E

5.5

5.1

24.6

16.8

4.9

4.1

20.8

16.3

16.0

66.7

24.6

27.7

41.6

245.2

33.5

49.3

48.3

9.0

15.6

27.7

12.1

71.1

38.4

Loss

34.6

18.7

29.2

31.6

41.6

43.1

32.7

58.8

14.6

22.4

25.9

65.5

23.5

Loss

-150.7

39.6

39.8

32.2

47.9

44.9

41.9

36.5

44.2

43.6

32.3

44.0

31.8

47.6

44.1

55.5

14.6

12.1

13.8

47.1

20.8

26.8

34.8

39.7

29.2

26.9

36.1

10.6

13.4

23.1

10.3

47.0

32.7

30.5

30.4

14.3

24.5

25.8

34.1

31.2

17.1

37.4

11.9

15.4

22.7

31.7

21.3

42.1

34.9

26.3

28.7

23.7

42.3

38.9

35.2

32.1

36.3

37.5

28.5

39.4

28.0

40.2

37.9

44.5

P/B (x)

FY17E FY18E

0.9

0.8

3.6

3.0

0.9

0.7

2.5

1.9

2.8

7.9

4.5

1.1

31.5

0.9

7.1

5.9

9.4

1.7

2.4

2.9

1.8

6.5

6.6

Loss

4.0

2.5

4.3

3.4

1.7

3.2

2.0

4.1

1.7

1.3

3.3

3.4

4.4

2.9

4.8

7.2

4.4

3.6

14.6

17.2

21.9

9.5

13.1

9.1

7.6

30.3

8.4

7.2

13.3

18.8

2.2

1.7

2.4

6.8

3.9

1.1

21.4

0.9

6.5

5.3

8.5

1.5

2.1

2.6

1.5

5.6

5.7

Loss

3.7

2.3

3.8

3.1

1.7

3.3

1.8

3.7

1.5

1.2

2.9

3.3

3.7

2.7

4.3

5.8

3.9

3.0

12.8

13.6

20.5

8.1

11.1

7.7

6.6

31.5

7.4

6.6

11.4

16.2

FY16

18.3

17.0

21.0

12.3

12.2

17.7

11.1

15.6

Loss

52.1

3.1

24.9

5.9

19.0

27.9

13.5

9.9

14.2

11.8

20.2

Loss

12.5

9.7

15.3

7.6

8.3

8.5

5.9

5.5

9.2

3.9

6.3

0.3

19.5

6.2

0.7

14.5

11.0

9.6

34.7

55.9

68.9

33.3

43.4

23.4

30.8

82.4

29.3

9.1

36.9

40.9

ROE (%)

FY17E

16.8

15.7

18.8

12.7

12.3

17.3

11.9

19.7

4.0

94.3

3.9

22.6

11.7

19.5

21.2

16.6

10.8

14.5

9.2

18.4

Loss

12.1

8.9

15.4

10.8

5.9

7.5

6.0

7.2

12.0

5.8

13.3

5.2

20.3

Loss

-3.1

19.9

11.7

11.1

32.5

42.9

54.9

28.3

33.8

22.4

25.1

67.6

28.4

15.7

33.3

35.9

FY18E

16.2

19.6

19.5

16.1

14.7

17.8

14.4

19.0

4.0

73.3

5.9

23.2

20.7

23.6

15.3

16.8

12.0

14.6

11.9

18.6

Loss

12.6

16.7

16.4

12.2

7.1

10.4

10.9

10.4

13.1

7.6

13.6

10.5

18.9

6.6

13.1

24.4

14.5

12.8

32.3

39.1

60.1

27.3

33.0

22.2

24.7

78.4

28.1

17.2

32.4

39.2

Company

PFC

Repco Home

REC

Shriram City

Union

STF

Aggregate

Capital Goods

ABB

Bharat Elec.

BHEL

CG Cons. Elec.

Crompton Grv.

Cummins

GE T&D

Havells

Inox Wind

K E C Intl

L&T

Pennar Eng.

Siemens

Solar Ind

Suzlon Energy

Thermax

Va Tech Wab.

Voltas

Aggregate

Cement

Ambuja Cem.

ACC

Birla Corp.

Dalmia Bharat

Grasim Inds.

India Cem

J K Cements

JK Lakshmi Ce

Ramco Cem

Orient Cem

Prism Cem

Shree Cem

Ultratech

Aggregate

Consumer

Asian Paints

Britannia

Colgate

Dabur

Emami

Godrej Cons.

GSK Cons.

HUL

ITC

Jyothy Lab

Marico

Nestle

Reco

Neutral

Buy

Neutral

Buy

Buy

FY18E

25.5

37.7

35.3

130.5

77.9

Neutral

Buy

Sell

Buy

Sell

Neutral

Neutral

Buy

Neutral

Buy

Buy

Not Rated

Neutral

Neutral

Not Rated

Sell

Buy

Neutral

1,229

1,525

154

190

66

891

297

432

174

164

1,470

127

1,208

730

17

846

495

345

1,190

1,800

115

205

45

990

340

440

175

175

1,620

-

1,340

800

-

781

645

370

-3

18

-25

8

-32

11

15

2

1

7

10

11

10

-8

30

7

15.8

56.9

Loss

1.9

2.1

27.2

3.0

7.8

20.7

7.4

44.7

8.8

16.9

18.4

Loss

23.5

16.3

11.7

18.4

61.9

5.5

4.6

0.3

26.6

6.0

8.9

19.4

10.5

53.1

10.5

17.0

19.0

Loss

24.4

26.5

11.8

26.1

73.3

5.7

5.5

1.7

30.5

11.0

12.0

16.5

12.3

63.7

12.4

25.7

22.3

0.6

27.9

34.5

14.0

Buy

Neutral

Buy

Buy

Neutral

Neutral

Buy

Buy

Buy

Buy

Buy

Buy

Buy

236

1,456

705

1,899

1,027

164

844

388

682

133

92

15,325

3,718

246

1,339

869

2,246

1,067

138

938

455

815

167

112

19,006

4,058

4

-8

23

18

4

-16

11

17

20

25

22

24

9

5.5

37.6

20.4

21.5

48.3

4.4

14.5

0.4

23.4

3.0

0.1

238.5

79.3

5.7

33.7

21.5

32.3

70.2

7.3

32.6

5.9

29.0

Loss

-0.6

387.1

93.5

6.9

46.7

41.2

50.7

86.5

10.7

37.2

12.2

31.9

3.2

2.6

582.8

129.6

Neutral

Buy

Buy

Neutral

Buy

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Neutral

970

3,231

907

266

1,082

1,607

5,088

847

267

361

268

6,194

1,035

3,775

1,115

300

1,260

1,655

5,300

865

295

365

300

6,840

7

17

23

13

16

3

4

2

11

1

12

10

18.7

70.1

22.7

7.1

25.2

33.2

167.1

19.0

7.7

4.1

5.6

119.9

20.2

71.9

21.7

7.3

24.5

36.8

157.7

19.3

8.4

7.6

6.1

111.5

22.9

83.0

25.8

8.3

29.8

42.8

178.8

21.5

9.5

9.0

7.1

139.2

17 February 2017

15

Click excel icon

for detailed

valuation guide

CMP

(INR)

14,318

214

671

7,017

130

783

2,310

TP

% Upside

(INR) Downside

16,910

18

215

1

720

7

8,250

18

-

1,044

33

2,885

25

EPS (INR)

FY17E

235.6

7.0

16.6

145.7

6.4

10.7

28.6

Valuation snapshot

P/E (x)

FY17E FY18E

60.8

46.9

30.4

22.1

40.4

36.7

48.1

41.9

20.2

19.7

73.4

50.9

80.7

49.2

40.3

34.8

23.7

25.3

16.2

33.0

35.8

32.2

16.2

37.7

Loss

22.4

18.3

77.2

33.1

23.3

28.7

23.7

38.0

22.1

25.9

17.1

40.8

34.3

29.5

13.0

10.9

29.1

52.0

17.9

Loss

Loss

10.2

10.2

17.5

61.1

Loss

28.8

42.5

34.1

10.9

15.3

Loss

Loss

19.7

23.4

13.6

30.8

25.4

24.2

14.4

22.6

62.5

19.0

15.9

48.0

18.7

18.2

23.6

18.5

30.7

16.5

20.2

14.6

32.2

27.0

16.5

6.9

8.8

22.1

27.8

15.9

44.0

-46.1

9.2

10.1

15.4

35.6

14.1

24.4

29.5

24.6

8.2

10.7

Loss

9.9

P/B (x)

FY17E FY18E

25.1

19.8

2.4

2.2

10.4

8.5

13.0

11.2

1.7

1.6

8.8

7.6

15.2

11.8

11.8

10.3

5.4

5.6

4.1

4.8

7.2

3.6

4.1

3.6

2.2

4.6

3.1

17.3

2.7

4.9

5.1

4.5

7.7

5.3

6.1

2.3

18.1

2.9

2.2

2.0

1.7

3.2

Loss

4.6

0.9

2.7

1.8

0.7

3.4

6.2

4.0

7.2

10.0

5.9

1.7

3.0

0.5

2.1

4.4

4.7

3.2

4.4

5.9

3.2

3.6

3.2

1.9

3.6

2.2

20.6

2.4

4.0

4.6

3.8

6.3

4.4

5.0

2.1

13.8

2.7

2.1

1.8

1.4

2.9

10.4

4.0

0.9

2.9

1.5

0.7

3.0

5.4

2.7

6.6

8.1

5.1

1.4

2.5

0.6

1.8

FY16

46.0

19.5

29.9

30.8

10.3

15.1

19.8

31.9

38.8

23.8

32.5

11.5

32.8

12.8

28.6

18.8

Loss

16.4

21.6

22.1

5.9

22.9

14.2

16.5

23.3

34.4

25.8

12.8

55.5

10.1

10.1

5.1

15.4

11.4

NM

22.6

Loss

Loss

21.9

7.7

24.7

18.7

0.1

23.4

27.0

18.2

11.6

20.7

Loss

Loss

ROE (%)

FY17E

41.3

10.8

28.0

29.0

8.9

12.6

20.8

29.3

24.8

24.4

29.0

14.7

21.4

11.2

26.7

10.0

Loss

20.5

19.9

22.4

8.4

22.9

17.8

20.0

22.2

26.0

23.6

12.0

50.5

8.6

7.6

12.4

16.7

11.0

38.2

27.0

Loss

Loss

19.3

7.7

20.7

10.6

Loss

25.1

31.3

17.3

16.1

20.9

Loss

16.4

FY18E

42.2

10.5

25.4

28.8

8.5

16.0

24.0

29.6

24.7

22.0

26.5

14.1

25.5

13.2

26.5

14.9

3.3

18.9

16.6

43.0

13.5

23.9

19.4

22.3

22.5

29.2

24.9

14.9

48.6

10.3

12.9

19.4

17.8

13.3

46.1

27.1

2.1

-6.1

17.8

7.1

20.6

16.3

23.5

27.3

30.3

20.6

18.8

25.2

Loss

19.6

Company

Reco

Page Inds

Buy

Parag Milk

Neutral

Pidilite Ind.

Neutral

P&G Hygiene Buy

Radico Khaitan Not Rated

United Brew

Buy

United Spirits Buy

Aggregate

Healthcare

Alembic Phar Neutral

Alkem Lab

Neutral

Aurobindo

Buy

Biocon

Sell

Cadila

Buy

Cipla

Neutral

Divis Lab

Neutral

Dr Reddy’s

Neutral

Fortis Health Buy

Glenmark

Neutral

Granules

Buy

GSK Pharma

Neutral

IPCA Labs

Neutral

Lupin

Buy

Sanofi India

Buy

Sun Pharma

Buy

Syngene Intl

Not Rated

Torrent Pharma Buy

Aggregate

Logistics

Allcargo

Buy

Logistics

Blue Dart

Not Rated

Concor

Neutral

Gateway

Buy

Distriparks

Gati

Not Rated

Transport Corp. Not Rated

Aggregate

Media

Dish TV

Buy

D B Corp

Buy

Den Net.

Neutral

Hathway Cab. Buy

Hind. Media

Buy

HT Media

Neutral

Jagran Prak.

Buy

PVR

Buy

Siti Net.

Neutral

Sun TV

Neutral

Zee Ent.

Buy

Aggregate

Metals

Hindalco

Buy

Hind. Zinc

Neutral

JSPL

Neutral

JSW Steel

Buy

FY16

208.6

6.7

14.8

129.9

6.9

11.3

16.7

FY18E

305.1

9.7

18.3

167.7

6.6

15.4

47.0

550

2,006

657

1,095

429

583

734

2,927

199

934

128

2,666

524

1,440

4,081

649

495

1,256

630

1,850

1,050

750

425

550

815

3,050

240

990

160

2,700

540

1,850

5,200

850

-

1,700

15

-8

60

-31

-1

-6

11

4

21

6

25

1

3

28

27

31

35

38.2

64.7

33.9

23.2

15.4

18.8

41.9

132.3

Loss

24.9

5.5

44.2

10.5

50.4

103.2

19.6

11.1

59.7

23.2

79.3

40.5

33.2

12.0

18.1

45.4

77.7

Loss

41.6

7.0

34.5

15.8

61.8

142.2

27.4

13.0

56.8

27.9

85.7

48.1

35.6

16.9

24.1

51.0

129.4

3.2

49.2

8.0

55.5

27.9

79.0

172.8

35.1

16.1

76.3

162

4,182

1,234

258

121

185

191

-

1,309

314

-

-

18

6

22

10.5

84.4

40.1

11.4

3.2

13.5

9.5

102.5

36.0

8.8

9.3

16.9

11.1

129.9

45.8

15.7

17.6

21.0

88

378

82

36

269

82

188

1,270

38

724

519

115

450

75

47

355

85

215

1,533

40

735

600

31

19

-8

31

32

4

14

21

6

1

15

6.5

16.2

Loss

Loss

24.6

7.3

10.5

25.5

Loss

21.1

10.6

1.7

21.1

Loss

Loss

26.5

8.0

10.8

20.8

Loss

25.1

12.2

3.2

23.9

1.9

-0.8

29.4

8.2

12.2

35.7

2.7

29.7

17.6

188

302

93

187

240

307

88

226

28

2

-5

21

12.0

19.8

Loss

Loss

17.2

19.8

Loss

Loss

22.9

28.2

Loss

19.0

17 February 2017

16

Click excel icon

for detailed

valuation guide

CMP

(INR)

65

137

60

263

470

TP

% Upside

EPS (INR)

(INR) Downside FY16 FY17E

83

28

2.7

3.6

179

31

8.4

12.2

28

-54

Loss

Loss

279

6

10.8

18.9

401

-15

7.7

17.4

Valuation snapshot

P/E (x)

FY17E FY18E

18.1

12.1

11.2

11.1

Loss

Loss

13.9

8.4

27.1

10.7

19.6

12.6

11.8

20.6

15.8

18.6

9.9

8.6

24.6

8.2

12.2

15.4

16.9

10.7

11.3

76.2

77.3

45.9

49.7

14.3

14.5

15.8

16.1

11.2

12.7

18.6

13.5

11.1

16.2

24.7

18.1

15.5

14.4

13.8

16.5

32.4

20.6

Loss

87.2

40.9

18.5

17.0

14.9

14.1

14.1

12.1

23.0

13.2

14.9

11.8

9.4

24.8

8.4

8.6

9.2

14.3

9.9

10.0

43.6

39.5

43.8

43.5

12.0

13.0

14.1

14.9

9.5

11.9

13.9

13.9

8.6

13.6

20.3

16.8

13.8

12.9

11.1

15.1

46.4

19.1

Loss

23.6

100.5

15.9

11.5

18.8

11.9

11.8

P/B (x)

FY17E FY18E

1.2

1.1

1.8

1.7

0.7

0.8

1.4

1.3

3.8

3.0

1.6

1.4

3.1

1.1

1.9

2.1

2.6

2.1

5.1

2.3

1.1

1.3

3.8

1.2

1.5

7.9

3.1

9.1

8.0

2.2

3.7

3.8

3.4

1.6

4.8

3.1

2.1

1.5

2.6

9.5

5.7

2.9

2.3

2.6

3.9

2.1

3.3

1.6

-93.9

2.4

6.5

1.9

1.1

1.5

2.1

2.6

1.0

1.7

1.9

2.3

1.8

4.5

1.9

1.1

1.2

3.2

1.1

1.3

8.7

2.9

8.0

7.3

2.0

3.2

3.3

3.0

1.4

4.0

2.7

2.0

1.3

2.4

7.5

4.8

2.5

2.1

2.2

3.4

2.0

2.9

1.9

31.5

2.4

6.5

1.7

1.1

1.4

1.9

ROE (%)

FY16 FY17E

5.4

6.9

15.9

13.5

Loss

Loss

7.9

11.7

4.6

12.6

4.9

7.9

31.6

4.0

7.6

11.7

22.4

13.6

18.4

22.6

10.4

9.6

14.0

12.0

11.4

13.4

6.3

21.3

16.8

16.5

21.5

28.9

24.7

21.0

45.3

27.4

12.3

19.0

19.5

46.3

37.1

23.4

20.3

24.0

24.4

7.4

12.7

12.6

-91.6

9.3

42.2

3.1

15.5

11.9

14.6

27.5

5.3

14.1

12.0

27.9

25.9

22.1

31.0

9.5

8.6

24.4

11.6

13.0

10.4

4.2

21.2

16.2

15.7

27.3

26.5

23.2

14.0

41.8

17.1

14.1

14.2

17.5

42.5

33.8

20.1

17.0

20.0

23.7

6.7

15.7

Loss

-75.4

5.8

35.2

4.8

7.7

10.8

16.0

FY18E

9.7

15.6

Loss

17.1

31.3

11.4

23.4

4.6

13.7

13.5

20.7

20.7

19.3

24.7

12.7

13.8

24.2

11.4

13.4

19.9

7.7

19.3

16.8

16.5

26.7

25.0

22.5

15.9

36.2

21.0

14.4

16.5

18.9

41.3

31.1

20.0

17.0

21.1

22.7

4.5

15.9

Loss

402.2

2.3

41.0

6.5

6.0

11.9

16.8

Company

Nalco

NMDC

SAIL

Vedanta

Tata Steel

Aggregate

Oil & Gas

BPCL

Cairn India

GAIL

Gujarat St. Pet.

HPCL

IOC

IGL

MRPL

Oil India

ONGC

PLNG

Reliance Ind.

Aggregate

Retail

Jubilant Food

Shopper's Stop

Titan Co.

Aggregate

Technology

Cyient

HCL Tech.

Hexaware

Infosys

KPIT Tech

L&T Infotech

Mindtree

Mphasis

NIIT Tech

Persistent Sys

Tata Elxsi

TCS

Tech Mah

Wipro

Zensar Tech

Aggregate

Telecom

Bharti Airtel

Bharti Infratel

Idea Cellular

Tata Comm

Aggregate

Utiltites

Coal India

CESC

JSW Energy

NTPC

Power Grid

Reco

Buy

Buy

Sell

Neutral

Sell

FY18E

5.3

12.3

Loss

31.1

43.8

Buy

Neutral

Neutral

Neutral

Buy

Buy

Neutral

Neutral

Buy

Neutral

Buy

Neutral

670

287

503

164

532

376

1,056

106

335

194

386

1,065

778

-

446

163

620

458

1,032

114

382

204

460

1,057

16

-11

-1

17

22

-2

8

14

5

19

-1

55.2

11.4

18.0

7.9

38.0

20.3

29.7

7.6

28.7

13.6

11.2

93.0

56.6

14.0

31.8

8.8

53.8

43.5

43.0

12.9

27.5

12.6

22.8

99.2

55.5

12.5

38.1

11.0

45.0

39.9

42.6

12.7

39.0

21.1

26.9

107.9

Neutral

Neutral

Neutral

977

317

424

1,008

300

420

3

-5

-1

15.0

5.8

8.0

12.8

4.1

9.2

22.4

8.0

9.7

Buy

Buy

Neutral

Buy

Neutral

Buy

Neutral

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Neutral

Buy

469

843

216

1,012

132

687

468

576

423

629

1,466

2,447

504

481

944

600

980

220

1,250

150

800

530

550

470

730

1,780

2,500

550

560

1,250

28

16

2

24

14

16

13

-4

11

16

21

2

9

17

32

30.7

40.1

12.9

59.0

14.1

52.4

35.9

34.5

45.7

37.2

49.7

123.2

35.1

36.1

68.2

32.8

58.1

13.7

62.8

11.7

54.2

25.1

42.6

38.2

38.9

59.3

135.2

32.5

33.4

68.6

39.1

64.7

15.3

67.8

13.8

57.5

33.7

41.4

49.3

46.2

72.1

145.3

36.6

37.2

85.0

Buy

Buy

Under

Review

Buy

366

320

108

741

410

435

-

811

12

36

11.9

11.8

8.6

11.3

15.6

Loss

8.5

7.9

16.7

Loss

31.4

9

1.6

Neutral

Buy

Buy

Buy

Buy

318

855

61

170

201

315

970

83

199

238

-1

13

36

17

19

22.6

27.8

7.6

12.3

11.5

17.2

50.2

4.1

12.0

14.3

20.0

74.5

3.3

14.3

17.1

17 February 2017

17