20 June 2017

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Today’s top research idea

Prabhat Dairy: Solid institutional player; Moving toward

consumer business

Prabhat Dairy is a fully integrated dairy products company. The company sells

specialty and co-manufactured products to its institutional customers, as well as

branded dairy products.

v

The consumer branded business (B2C) is expected to account for ~50% of its

revenues by 2020 (30% as on FY17), led by Hotels, Restaurants and Caterers

(HoReCa), and Retail.

v

Prabhat targets 80% direct sourcing of milk by FY20 (~70% currently), which

should help it source higher volumes of good-quality raw milk.

v

Utilization at its cheese manufacturing facility is expected to increase from

~20% currently to 80% by FY20.

v

Over the past 4 years, the company has delivered revenue, EBITDA and PAT

CAGR of 22%, 15% and 25%, respectively. The stock trades at 19x FY19E EPS.

Research covered

Cos/Sector

Prabhat Dairy (Spotlight)

Tata Steel

Voltas

Ecoscope

Metals Weekly

Key Highlights

Solid institutional player; Moving toward consumer business

Selling Tata Motors’ shares will boost equity value by

INR31/share; stake in Tata Sons is worth at least INR135/share

Room AC segment to feel the heat of GST in 1QFY18

Has demonetization led to higher digital payments? Doubtful;

ATM cash withdrawals back to pre-demonetization levels

China local steel prices increase, inventories continue to decline

Piping hot news

Punjab farm loan waiver: CM Amarinder Singh says will waive loans of

8.75 lakh farmers

v

Punjab farm loan waiver: In a significant move today, Punjab Chief Minister

Quote of the day

Learning to trust is one of life's most

difficult tasks

Amarinder Singh announced his government’s decision to waive off the loans

of as many as 8.75 lakh farmers.

Chart of the Day: Has demonetization led to higher digital payments?

Aggregate value of all digital payment transactions didn’t

witness any increase post demonetization…

… however, total volume of digital payments has

stabilized at higher level

Research Team (Gautam.Duggad@MotilalOswal.com)

# Implied savings; Does not include ‘errors & omissions’

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

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

In the news today

Kindly click on textbox for the detailed news link

1

Tata Advanced Systems Ltd and US

plane maker Lockheed Martin

Corp. have signed an agreement

to produce F-16 fighters in India

ahead of the government’s plan to

buy more fighter jets. India is

likely to need 200 more fighter

planes and has sought proposals

for single-engine craft…

2

IHH Healthcare set to seal deal for Fortis, SRL stake

IHH Healthcare Bhd, Asia’s largest private hospital operator, is set to buy a

controlling stake in Fortis Healthcare Ltd and SRL Diagnostics from

billionaire brothers Malvinder and Shivinder Mohan Singh in a deal that

values the two companies at close to $2.9 billion, two people directly

aware of the development said. “The final valuation has been agreed upon

and an announcement in this regard is expected in the next few weeks,”

said one of the two people…

Tata, Lockheed Martin partner

to make F-16s in India

3

Lanco Infratech, the power and

roads builder, became the first

company to face bankruptcy

proceedings among the dozen

identified by the regulator as IDBI

BankBSE -3.06 % has decided to

recover its dues by taking the

resolution to insolvency courts as

per media sources…

Lanco Infratech first from

'Blacklist' to face bankruptcy

action

4

Qatar says it will not negotiate

unless neighbours lift

"blockade"

Qatar will not negotiate with its

neighbours to resolve the Gulf

diplomatic dispute unless they

first lift the trade and travel

boycott they imposed two weeks

ago, its foreign minister said.…

5

Niti Aayog urges government

to link financial grant to states'

agriculture reforms

Official think tank Niti Aayog has

urged the government to link part

of the financial grant given to

states under Rashtriya Krishi Vikas

Yojana to agriculture reforms

implemented by the states, an

official said. Such a move will

compel states to bring about

significant changes in the

agriculture marketing and other

reforms …

6

US aircraft manufacturer Boeing

has received a three-year contract

for continuing its support for

maintenance of the Indian Navy’s

fleet of P-8I maritime patrol

aircraft, the company said today…

7

Chinese companies eye

infrastructure investments in

India

Attracted by India’s infrastructure

development programme, state-

run Chinese firms, including China

Harbour Engineering Co. Ltd and

China Datang Corp. (CDC), are

looking to buy Indian companies in

the engineering, procurement,

construction (EPC) and power

generation space...

Boeing gets 3-year Navy deal

for maintenance of P-8I fleet

20 June 2017

2

Prabhat Dairy

BSE Sensex

31,312

S&P CNX

9,658

Spotlight | Sector: Dairy

CMP: INR122

Solid institutional player

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

PRABHAT IN

97.7

150 / 77

-1/11/1

11.8

0.2

Moving toward consumer business

Incorporated in 1998 by the Nirmal family, Prabhat Dairy (Prabhat) is a fully

integrated milk & dairy products company engaged in the sale of products to

institutional and retail customers. The company sells specialty and co-

manufactured products to its institutional customers, as well as branded dairy

products under the brand names of

Prabhat, Prabhat Flava, Prabhat Milk

Magic

and

Volup (a

recently launched brand for ice-cream). It aims to become

a larger and stronger regional player with a good mix of liquid milk, fresh

value-added products and longer-shelf-life products.

n

Financial Snapshot (INR Million)

Y/E Mar

2017 2018E 2019E

Net Sales

14.1 17.0 19.6

EBITDA

Adj PAT

EPS (INR)

Growth (%)

BV/Share (INR)

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

1.3

0.3

3.5

48.9

70.5

5.2

4.6

34.3

1.7

1.4

0.3

3.5

-1.5

72.5

4.9

5.7

34.8

1.7

1.8

0.6

6.4

83.8

77.7

8.5

8.2

18.9

1.6

n

n

Shareholding pattern (%)

As On

Mar'17 Dec'16 Sep'16

Promoter

48.9

44.4

44.2

DII

3.9

3.0

26.5

FII

2.6

2.8

4.6

Others

44.6

49.9

24.7

FII Includes depository receipts

Stock Performance (1-year)

n

n

The consumer branded business (B2C) is expected to account for ~50% of its

overall revenues by 2020 (30% as on FY17), led by Hotels, Restaurants and

Caterers (HoReCa), and Retail.

The B2B business already has a solid foundation with a healthy list of clients,

which can be leveraged to develop new products and add new clients to drive

steady growth over FY17-20.

Prabhat targets 80% direct sourcing of milk by FY20 (~70% currently), which

should help it source higher volumes of good-quality raw milk on a consistent

basis.

Utilization at its cheese manufacturing facility (third largest in India after Parag

Milk Foods and Amul, with capacity of 30 MT/day) is expected to increase from

~20% currently to 40% in FY18 and 80% by FY20.

The company has delivered a strong operating performance over past four years,

with revenue, EBITDA and PAT CAGR of 22%, 15% and 25%, respectively. At CMP,

the stock trades at 19x FY19E EPS.

Branded business to be revenue and margin driver

Prabhat is one of the emerging names in the value-added dairy products space,

launching a range of products under the

Prabhat

brand over past two years. The

focus on the B2C business will not only help grow revenues, but also aid margins

as it commands higher gross margins. The company sells pouched milk & fresh

dairy products in and around Maharashtra, while it sells long-shelf-life products

(like ghee and UHT milk) across the country. Management aims to increase the

contribution of the B2C segment to 50% of overall revenues, mainly led by

growth in value-added products like cheese, ghee, dahi and paneer. In terms of

distribution, the company now has presence across 26 states (was present in

just Maharashtra in 2012), with around 1,200 distributors and 0.1m retail

outlets. It plans to expand its reach to ~0.2m outlets by FY19.

Our coverage universe is a wide representation of investment opportunities in India. However, there are many

emerging midcap names that are not under our coverage. Spotlight is our attempt to feature such stocks based

on fundamental analysis and site visits, without initiating formal coverage on them. Spotlight adopts a descriptive

rating system, which uses terms like Interesting, Cautious and In Transition (see definitions alongside). We do not

assign Buy, Sell or Neutral recommendations to the stocks under Spotlight. Investors should carefully read Motilal

Oswal Research in its entirety, and not draw inferences from the ratings alone. Ratings should not be used or

relied upon as investment advice.

20 June 2017

3

Stable institutional business

The institutional business contributes ~70% of revenues (as of FY17). State-of-art

manufacturing facilities, strict quality control & food standards and a marquee list

of clients have helped the business grow impressively in the past. Apart from

developing products for its existing clients, the company has also struck deals with

many new customers in India and globally. As majority of its clients operate on a

cost-plus model, the business is somewhat immune to fluctuations in milk prices.

Expansion of direct milk procurement network

Prabhat currently procures ~9llpd of milk, which management expects to increase

to 14llpd by FY20. Around 60% of milk is sourced from milk-rich Ahmednagar, while

the rest is sourced from Pune, Nashik and adjoining districts in Maharashtra. Five

years back, it procured >90% of its milk requirement directly from agents.

However, it now sources 70% of milk directly from ~85,000 farmers across ~1,700

villages twice a day (i.e. >700 procurement cycles a year). The company is targeting

to increase the proportion of direct sourcing to 80% by FY20, which will help it get

higher volumes of milk for use in value-added products. We believe that it is logical

for Prabhat to have some portion of procurement from agents, given the sizable

portion of its B2B business.

Improving capacity utilization and operational efficiencies

We believe capacity utilization will improve but only gradually over next few years,

aided by demand growth and distribution expansion. Prabhat expects to increase

utilization at its recently set-up cheese manufacturing facility (capacity of

30MT/day) from 20% currently to around 40% by FY18, led by higher sales to the

HoReCa and QSR segments, as well as exports. Gradual improvement in utilization,

coupled with operational efficiencies from the cogeneration plant, will aid margins

in the near term, in our view.

Expect RoCE to improve with no major capex over next 2-3 years

The company has delivered a strong operating performance over past four years,

with revenue, EBITDA and PAT CAGR of 22%, 15% and 25%, respectively.

Management aims to exceed revenue of INR20b by FY20, led by growth in fresh

and long-shelf-life value-added products. This would only be possible with an

increase in milk procurement, distribution expansion and brand-building initiatives.

Increased contribution of higher-margin B2C products to the portfolio, operating

leverage and operational efficiencies are expected to lead to EBITDA margin

expansion to 10% by FY20, from 9% in FY17. We, however, believe that EBITDA

margin expansion could be somewhat restricted due to higher spending toward the

B2C business. Management has guided for lower capex and a further reduction in

debt over next 2-3 years. We believe that these initiatives will help to gradually

improve RoE and RoCE over FY17-FY20 to 11.9% and 10.8%, respectively. Net

working capital days are expected to remain in the range of 80-85, as (1) inventory

days will increase with better cheese salience (cheese needs ageing before being

sold), (2) debtor days will decline with improved B2C salience (has lower receivable

days compared to B2B) and (2) creditor days are unlikely to see any major change

from current levels.

20 June 2017

4

Tata Steel

BSE SENSEX

31,056

S&P CNX

9,588

20 June 2017

Update

| Sector:

Metals

CMP: INR502

TP: INR451 (-10%)

Sell

Selling Tata Motors’ shares will boost equity value by

INR31/share; stake in Tata Sons is worth at least INR135/share

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 (%)

TATA IN

971.4

520 / 297

8/4/35

444

6.9

2863

68.7

n

n

Financials Snapshot (INR b)

Y/E Mar

2017 2018E

Sales

1,135 1,220

EBITDA

168

185

Adj. PAT

36

49

Adj. EPS (INR)

37.0

50.2

EPS Gr(%)

382.0

35.7

BV/Sh. (INR)

330

362

RoE (%)

15.4

14.5

RoCE (%)

9.2

9.7

P/E (x)

12.4

9.1

P/BV

1.4

1.3

2019E

1,232

203

65

66.5

32.5

418

17.1

10.4

6.9

1.1

n

n

Shareholding pattern (%)

As On

Mar-17 Dec-16 Mar-16

31.4

31.4

31.4

Promoter

30.6

30.8

26.7

DII

14.1

13.1

13.2

FII

23.9

24.8

28.8

Others

FII Includes depository receipts

Stock Performance (1-year)

550

500

450

400

350

300

Tata Steel

Sensex - Rebased

n

Tata Steel will be selling 83.64m shares in Tata Motors, a group company, to

Tata Sons in a related party transaction at prevailing market price on or after

23 June 2017. This will unlock value of INR38b @INR455/share and help in

reduction of debt and/or fund GBP550m expected payout toward de-risking of

British Pension Scheme.

This will unlock the equity value for Tata Steel equivalent to INR7.6b, a 20%

holding company discount, and boost recurring free cash flow by INR2.3b,

assuming marginal interest cost of 8% and marginal cash tax rate of 25%. At

10x FCF, value accretion will be INR23b from savings in interest cost. Thus, a

total of INR30b or about INR31 will eventually get added to the market cap of

Tata Steel.

Although this is the last major investment in listed group companies, Tata Steel

holds 12,375 shares, i.e.3.1% stake of Tata Sons. Each share of Tata Sons is

worth at least INR11m. This implies a value of INR135/share for Tata Steel. If

Tata Sons were to buyback these shares, it will trigger major re-rating for the

stock. We have been ignoring this in the valuations because of circular

reference.

Tata Steel had recently reported very strong 4QFY17 results, benefiting from a

number of non-sustainable events (e.g. forex gains, very strong ferro-chrome

prices, strong steel market driven by monetary expansion in China, delay in

coking coal cost at TSE, liquidation of low-cost inventories while market of

strong etc.). Since then, steel prices have corrected by USD50-70/t, while raw

material costs will be higher at TSE.

Tata Steel’s business is structurally improving with (1) exit from weak

businesses of long products and specialty businesses in Europe, (2) persistence

to de-risk British Pension Scheme and (3) growth at highly profitable Indian

business. However, volatility in the steel market will hurt its earnings. We have

been valuing Tata Steel at INR451 and INR528 based on FY18E and FY19E SOTP,

respectively. Value unlocking will boost the target price by INR31/share.

20 June 2017

5

19 June 2017

Update

| Sector:

Capital Goods

Voltas

BSE SENSEX

31,312

S&P CNX

9,658

CMP: INR474

TP: INR400(-16%)

Sell

Room AC segment to feel the heat of GST in 1QFY18

Market shift toward inverter ACs to be gradual

We met management of Voltas (VOLT). Key takeaways:

.

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 (%)

VOLT IN

331

515 / 287

11/35/31

156.8

2.4

570

69.7

Financials Snapshot (INR b)

Y/E Mar

2017 2018E 2019E

Net Sales

60.3

67.4

75.5

EBITDA

5.8

5.9

6.7

PAT

5.1

5.3

6.0

EPS (INR)

15.5

16.0

18.1

Gr. (%)

30.1

3.6

13.2

BV/Sh (INR)

100.0 111.8 125.2

RoE (%)

18.0

15.1

15.3

RoCE (%)

16.5

15.0

15.1

P/E (x)

30.7

29.6

26.2

P/BV (x)

4.7

4.2

3.8

Shareholding pattern (%)

As On

Mar-17 Dec-16 Mar-16

Promoter

30.3

30.3

30.3

DII

26.5

27.1

29.2

FII

20.7

22.4

19.5

Others

22.5

20.2

21.1

FII Includes depository receipts

Stock Performance (1-year)

Voltas

Sensex - Rebased

550

500

450

400

350

300

250

GST to impact room AC growth led by dealer destocking/inventory liquidation

n

Growth in the room air conditioning (AC) segment is expected to be flat YoY in

1QFY18 as dealers avoid fresh buying and resort to destocking/inventory

clearance due to the likely implementation of GST in July 2017.

n

The key concern for dealers has been claiming excise duty refund post the

implementation of GST. There has been a clear preference for cash flows

among dealers.

n

The month of July is expected to see muted demand due to the onset of

monsoon, and a revival is likely during the festive season later this year.

Pricing to remain stable in room ACs; expect margins to sustain at 11-12%

n

VOLT expects pricing for room ACs to remain stable, with the rise in commodity

prices likely to be offset by INR appreciation.

n

Post sharp price cuts to promote sales of inverter ACs, LG has reverted back to

normal pricing.

n

The company expects margins to stabilize at 11-12% over the long term, as

against 14.5% in FY17. Rationalization of margins would be driven by a) high

competitive intensity in the industry and b) focus on maintaining market share

with an 11-12% margin profile.

n

VOLT would prefer to lose market share rather than compromising on margins

(11-12%).

n

VOLT expects market shift toward inverter ACs to be gradual.

Enters white goods space through JV (Voltas Beko) with Arcelik

n

VOLT has entered into a joint venture (JV) with Arcelik to foray into the

consumer durables segment. The JV will focus on four product categories:

washing machine, refrigerator, dish washer and microwave oven.

n

The JV will leverage the marketing, branding and distribution strength of VOLT,

whereas Arcelik will bring in its R&D/manufacturing prowess, in addition to a

wide product range and global sourcing capabilities.

n

Voltas Beko will set up a manufacturing facility in India over the next two years

with capex of USD100m.

n

Arcelik has signed a non-compete clause of five years.

Qatar forms 50% of international MEP order book (INR18b)

n

In the MEP segment, Qatar accounts for 50% of the international order book

(INR18b). Execution of orders remains on track despite instability in the region.

n

Most of the legacy orders are executed, and new orders are bagged at 4-5%

EBIT margins.

n

Expect ordering for Expo 2020 to begin in FY18; Voltas would participate in

orders with maximum ticket size of INR8b.

20 June 2017

6

n

n

n

Domestic ordering activity seems to be improving, as evident from order pick-up

in rural electrification and waste water treatment (where it has order backlog of

INR15b).

Ordering in the domestic MEP segment seems to be picking up in the

educational, hospitals and metro sectors. VOLT will participate in the Mumbai

metro order.

With legacy orders now completed, the focus would be on improving order

inflow in MEP.

Other key highlights

n

In the air cooler business, VOLT is now the fourth largest player. It has set a

target to be among the top three players in three years.

n

Air cooler is a 5m unit annual market, with 60-65% of the market dominated by

unorganized players. Implementation of GST will expedite the transition from

unorganized to organized trade.

n

Agency business remains stable, forming 4-5% of the company’s overall sales.

Margins are expected to remain stable at 27-28%.

n

Excise benefit for the room AC factory will expire in March 2018.

n

Window AC market would not be impacted by the unified rating change in FY18.

n

The company did not participate in the EESL tender for room ACs, as the terms

of the contract were adverse, according to the company.

Valuation and view

Maintain Sell with TP of INR400:

We maintain our

Sell

rating with a target price of

INR400. Our cautious view is driven by: a) threat to margins from intensifying

competition in the room AC segment, b) industry convergence toward inverter ACs,

where VOLT has a weak share and c) inventory destocking prior to likely GST

implementation in July 2017 and rating change in January 2018.

20 June 2017

7

E

CO

S

COPE

Has demonetization led to higher digital payments?

Doubtful; ATM cash withdrawals back to pre-demonetization levels

n

19 June 2017

The Economy Observer

One of the key structural benefits expected from the historic demonetization announced in November 2016 was a shift

towards digital payments. However, the aggregate value of all transactions under electronic payment systems (EPS)

has failed to witness significant increase even six months post demonetization.

n

Further, while the value of transactions in retail digital modes (PoS, PPIs, IMPS and UPI) increased sharply in December

2016, it has stabilized at higher levels since then (up to May 2017). Similarly, while the volume of retail digital

transactions doubled by December 2016, there are no new net additions since then.

n

Finally, after falling by more than 60% in the last months of 2016, cash withdrawals from ATMs have moved back to

pre-demonetization levels. All these data points raise doubts over the desired structural shift towards digital payments

post demonetization.

Demonetization was seen as a boost to digital payments, since ~90% of transactions

were believed to be taking place in ‘cash’. Eventually, digitalization was expected to

help reduce tax evasion and corruption. However, available/estimated data up to

May 2017 raises doubts over the increased digitalization in the economy.

The total value of all

transactions under EPS

(electronic payment

system) has been broadly

unchanged since

demonetization, barring a

seasonal spike in March

2017

What do the aggregate numbers tell us?

One of the crudest ways to find out if digitalization has increased is to analyze the

aggregate value of transactions under electronic payments system (EPS) released on

weekly/monthly basis by the Reserve Bank of India (RBI). The total value of

transactions under EPS [consisting of eight (8) modes: Real Time Gross Settlement

(RTGS), National Electronic Funds Transfer (NEFT), Cheque Truncation System (CTS),

Immediate Payment Service (IMPS), National Automated Clearing House (NACH),

Unified Payments Interface (UPI), Debit/Credit Cards at Points of Sale (POS), and

Prepaid Payment Instruments (PPIs)) has been broadly unchanged since

demonetization

(Exhibit 1).

The spike in March 2017 could be explained as seasonal.

However, the volume of transactions has witnessed a durable increase

(Exhibit 2),

implying a significant fall in the value per transaction.

Exhibit 2:

… however, total volume of digital payments has

stabilized at higher level

1,600

1,200

800

400

Total volume of electronic payment systems (EPS)

(Unit m)

Exhibit 1:

Aggregate value of all digital payment transactions

didn’t witness any increase post demonetization…

200

150

100

50

(INR t)

0

May-11 May-12 May-13 May-14 May-15 May-16 May-17

Combined value of POS, PPIs, IMPS, RTGS, NEFT, UPI, CTS and NACH

Total value of electronic payment systems (EPS)

0

Jan-16

May-16

Sep-16

Jan-17

May-17

Source: Reserve Bank of India (RBI), CEIC, MoSL

20 June 2017

8

19 June 2017

Metals Weekly

China local steel prices increase, inventories continue to decline

n

n

n

n

n

Indian steel: Long product (TMT Mumbai) prices were unchanged WoW. Sponge iron prices were up ~1%

WoW, while domestic scrap prices were up ~2% WoW. Domestic iron ore prices were unchanged. Pellet prices

were unchanged. Domestic HRC prices were unchanged WoW.

Raw materials: Iron ore prices (China cfr) were up ~2% WoW. Thermal coal prices were up ~3% WoW. Coking

coal prices were down ~4% WoW. China pellet import prices were up ~2% WoW, driving by higher pellet

premiums.

Europe: HRC prices were unchanged after declining consecutively for last few weeks. EU steel spreads remain

supportive on lower coking coal prices. CIS export HRC prices were up ~1% WoW. Rotterdam scrap prices

were up ~2% WoW.

China: Local HRC prices were up ~4% WoW, while rebar prices were up ~1% WoW. Steel inventories are

declining. Export HRC/rebar prices were up ~1% WoW.

Base metals: Aluminum (cash LME) was down ~2% WoW. Alumina prices were higher. Zinc (cash LME) was up

~1% WoW. Lead was down ~1% WoW. Copper was down ~1% WoW. Crude oil (Brent) prices were down ~2%

WoW.

20 June 2017

9

In conversation

1. VA Tech Wabag: Ambitious plan for Africa & Latin America

BIZ; Rajneesh Chopra, global head-business development

n

n

n

n

n

Successful in bagging first project in Latin America. Domestic market has been

sluggish over last 2 years but exports contributed to 35-40% revenue currently

and that is expected to go up to 50% of total revenue

Overall revenue to grow by over 20% over next 2-3 years. Expect margin to

improve, given higher contribution from exports

Company will decide on fundraising plans in next 2 Q’s

Awaiting for Namami Gange project to take off meaningfully & expect robust

business due to Namami Gange project over next 12-18 months."

VA Tech has received 2 bids for Haridwar & Varanasi in this month, and also has

bid for the initial two projects under Namami Gange project.

2. Removing permit cap for taxis, autos good move from

Maharashtra Govt: Bajaj Auto; RC Maheshwari, President CV

business

n

n

Good move by Maharashtra government as it will remove a lot of corruption

which will be there in transfer of permits etc

If the permits open up in the next one month's time, they should be able to do

at least about 15,000-20,000 units more in this year

3. Expect revenue to grow by 15% in FY18: BEL; MV Gowtama,

CMD

n

n

n

n

Received an order for 8 lakh electronic voting machine (EVM) worth Rs 1,300

crore from the election commission.

Have manufactured Reliance Defence and Engineering orders and confident that

Reliance Defence will take delivery. Delayed shipment will certainly cause some

pressure on margins.

See lower returns on the equipments, which are supplied to the Reliance

Defence.

Company is negotiating with air force for supply of 7 squadrons of Akash and

expects negotiations to be completed in next two-three months.

4. Price cut will impact 2-3% revenues in non-cotton business:

Kaveri Seed; G Vijay Kumar, CFO

n

n

Price cut of 10% in Hybrid seeds (except cotton) will impact 2-3% revenues in

the non-cotton seed business. The price cut is also a part of CSR responsibility

towards the farmers

Industry is agreed to go for 10% price cut on non-cotton hybrid seed. 75% of the

business for Kaveri comes from cotton seed & 25% from non-cotton seed

business out of which 50% business is over Sales from vegetable business are

expected to be around Rs 25 crore in FY18, which is a relatively new business.

Maize is a big portion of revenues which will be around 23 percent of revenues

this year

20 June 2017

10

From the think tank

1. Farm loan leakages: Aadhaar linkages critical to stop huge

theft

n

The recent eruptions of farmers’ protests in Madhya Pradesh (MP) and

Maharashtra indicate that all is not well on the economic front, especially in

agriculture. If this could happen in MP, which claims to have registered the

fastest growth in agri-GDP at 9.7% per year during the decade-long period of

2005-06 to 2014-15, then it can happen in any state, any time. MP has been a

showcase of BJP’s performance in agriculture. But now it appears that

agriculture is going to be the Achilles heel of prime minister Narendra Modi. Its

poor performance at an all-India level, at less than 2% per annum, during the

Modi period (2014-15 to 2016-17) also exposes chinks in the PM’s armour.

Unless addressed quickly, and in a sustained manner, this neglect of agriculture

may cost him heavily in 2019. It may turn out to be like the ‘India Shining’ days

of NDA-I, while Bharat was whining!

2. Government limitations in job creation

n

The issue of employment is a subterranean rumble underlying the daily rhetoric

of Indian politics. Frequently, it grows in volume to dominate the discourse. This

is such a moment. The Congress reacted to the Narendra Modi government’s

completion of three years in office with an attack revolving around its alleged

failure to create enough jobs. Bharatiya Janata Party (BJP) president Amit Shah

responded with practised whataboutism, noting that if the Congress had paid

similar attention to the issue during its time in power, it would not have

suffered such electoral reverses over the past few years. This may be true; it is

certainly irrelevant. It is an apt time, however, to consider an important

question: What effect can the government actually have on job creation? One of

Modi’s core campaign promises in the run-up to the 2014 election was creating

jobs for the youth. His government has failed to deliver. Comprehensive

employment data in India is sadly lacking.

3. A FUNDAMENTAL DISTORTION IN FARM POLICY

n

Looking at the way the agrarian crisis has built up in different pockets, it does

appear that the overall approach to agriculture is marked by reactive, rather

than clear-sighted, proactive thinking. Almost all policies are geared towards

‘price’. It is assumed that getting this right is the panacea for all the problems. It

is not surprising that the focus has deflected from enhancing productivity, which

is the right answer to most problems in agriculture. First, the concept of

minimum support price (MSP) has distorted the market. While MSP is effective

for rice and wheat, where there is physical procurement by the FCI, it is only

indicative for other crops. Increasing the MSP more to suit the interests of

farmers rather than linking it with market dynamics has distorted the pricing

system. Hence, when the MSP of soyabean is increased, market prices would

increase even if the crop is good, as the MSP sets a benchmark. The MSP hence

becomes an income-setter rather than a fair market price. Its contribution to

inflation has also been distinct.

20 June 2017

11

4. Employment in India: Why skilling, reskilling the labour force

has to be pushed forward

n

A comment often made is that while growth has taken place in the economy,

there has not been commensurate growth in the jobs created. If this were so, it

is a worry because growth without employment is not desirable as it cannot be

sustained and the fabled demographic dividend that we speak of can become a

demographic liability. Data on employment is sparse and hence it is hard to

arrive at absolute numbers, though there are some disparate pockets where

such information is available. The concept is nebulous because while it is

possible to get information from the organised sector, it is not easy for the

unorganised segment where different concepts exist such as usual status,

weekly status and so on.

5. Treat local production as deemed exports

n

Ahead of the rollout of the goods and services tax, the government plans to levy

an import duty of 10% on 4G telecom gear. This is not a good idea. On telecom

and information technology goods, Indian policymaking does not happen on a

clean slate: it has to abide by or scrap its commitments under the World Trade

Organisation’s Information Technology Agreement (ITA) of December 1996. It is

true that 4G equipment did not exist in 1996 and is technically outside the ITA-1.

India has kept out of ITA-2 of 2015, and there are no legal objections to

subjecting 4G gear to customs duties. But there are practical and economic

difficulties. It is best to continue with zero import duties on all telecom and IT

products while granting deemed export status to all domestic production of

such gear. Obsession with customs revenues could scuttle Digital India and its

promise of innovation, jobs and prosperity. IT products and components should

be as cheap as possible.

International

6. Release big tech’s grip on power

n

Silicon Valley has dominated recent news, from disgraced Uber chief executive

Travis Kalanick’s leave of absence to work on “Self 2.0”, to the threat of massive

antitrust fines against Google in Europe, to Amazon devouring the upmarket

grocer Whole Foods.It will this week too, as the leaders of Big Tech gather at the

White House for a summit on how private sector technology companies can

help government tackle its largest digital dilemmas. The CEOs will give President

Donald Trump ideas for how to use Big Data, adopt cloud computing and make

procurement more efficient. But our biggest technology conundrum — what to

do about the fact that Silicon Valley holds too much economic and political

power — isn’t on the agenda.

20 June 2017

12

Click excel icon

for detailed

valuation guide

Rs

Valuation snapshot

P/E (x)

P/B (x)

FY17 FY18E FY17 FY18E

24.3

17.1

18.8

31.4

38.4

17.7

31.9

30.2

19.7

23.9

19.3

19.9

24.4

24.2

14.7

33.0

21.7

22.2

23.8

32.0

20.7

25.2

19.0

17.3

25.4

21.4

30.7

28.9

10.3

15.8

22.8

8.8

10.1

10.8

8.9

9.2

8.8

14.4

14.6

6.2

12.0

29.8

21.8

19.2

11.9

42.8

32.6

13.7

17.4

8.5

27.0

5.5

4.5

4.8

6.7

8.7

3.1

16.1

7.6

3.6

3.9

7.6

3.2

2.8

6.1

2.6

10.9

4.9

2.3

3.1

2.3

2.3

5.1

2.2

1.3

4.5

0.9

4.8

4.5

1.1

3.7

3.2

1.1

0.6

0.8

0.5

1.0

0.4

0.8

1.3

0.5

0.9

8.0

4.0

4.0

1.8

14.4

6.5

3.9

3.6

2.6

3.1

4.7

3.9

4.3

5.8

7.6

2.7

11.5

6.2

3.1

3.5

6.4

2.9

2.5

5.2

2.2

8.6

4.2

2.1

2.8

2.2

2.2

4.4

2.0

1.3

3.9

0.8

4.2

4.0

1.1

3.1

2.9

1.0

0.6

0.7

0.5

0.9

0.4

0.8

1.2

0.5

0.9

6.5

3.4

3.4

1.6

12.0

5.9

3.5

3.1

2.3

2.9

ROE (%)

FY17 FY18E FY19E

20.3

23.3

25.3

16.2

15.8

16.9

40.3

20.8

12.3

14.0

35.7

14.2

6.4

20.3

9.8

25.6

17.1

6.9

10.9

8.9

9.9

17.9

10.1

7.2

16.0

-27.0

13.8

12.3

9.4

18.9

11.4

4.1

-6.7

4.2

1.4

10.1

-8.4

3.6

-0.2

2.7

0.9

21.7

15.1

18.1

14.4

30.4

19.3

25.5

19.4

23.9

6.4

20.8

24.4

24.1

19.9

21.2

16.3

41.9

22.6

16.8

14.5

35.9

14.2

10.8

21.2

16.5

29.2

19.3

9.9

12.4

7.1

10.9

18.2

9.1

7.4

16.5

4.0

14.5

14.6

10.6

17.9

12.9

12.3

6.1

6.8

5.8

10.6

4.6

5.6

8.9

8.1

7.4

24.0

16.7

19.0

14.5

30.6

18.3

27.0

19.3

29.0

10.9

21.2

26.9

25.6

22.5

22.2

17.9

38.5

23.1

17.9

15.8

31.3

14.4

11.5

22.3

27.8

35.9

22.8

15.7

14.0

10.1

12.5

19.0

9.8

9.0

17.3

7.0

15.7

17.3

12.2

19.4

14.5

14.5

9.0

9.4

7.3

11.1

5.4

7.5

10.7

10.5

9.3

26.2

19.5

19.9

15.2

30.9

17.4

29.6

19.0

32.2

12.9

Company

Reco

Automobiles

Amara Raja

Buy

Ashok Ley.

Buy

Bajaj Auto

Buy

Bharat Forge

Buy

Bosch

Neutral

CEAT

Buy

Eicher Mot.

Buy

Endurance Tech. Buy

Escorts

Neutral

Exide Ind

Buy

Hero Moto

Neutral

M&M

Buy

Mahindra CIE

Not Rated

Maruti Suzuki

Buy

Tata Motors

Buy

TVS Motor

Buy

Aggregate

Banks - Private

Axis Bank

Neutral

DCB Bank

Neutral

Equitas Hold.

Buy

Federal Bank

Buy

HDFC Bank

Buy

ICICI Bank

Buy

IDFC Bank

Neutral

IndusInd

Buy

J&K Bank

Neutral

Kotak Mah. Bk Buy

RBL Bank

Under Review

South Indian

Buy

Yes Bank

Buy

Aggregate

Banks - PSU

BOB

Buy

BOI

Neutral

Canara

Neutral

IDBI Bk

Neutral

Indian Bk

Buy

OBC

Neutral

PNB

Buy

SBI

Buy

Union Bk

Neutral

Aggregate

NBFCs

Bajaj Fin.

Buy

Bharat Fin.

Neutral

Cholaman.Inv.&FnBuy

Dewan Hsg.

Buy

GRUH Fin.

Neutral

HDFC

Buy

Indiabulls Hsg

Buy

LIC Hsg Fin

Neutral

Manappuram

Not Rated

M&M Fin.

Buy

CMP

(INR)

TP % Upside

EPS (INR)

(INR) Downside FY17 FY18E FY19E

25

24

21

5

-7

-6

7

2

0

21

-5

16

11

40

5

28.0

4.6

132.3

26.2

473.1

93.3

613.8

23.5

23.2

8.2

169.1

54.3

5.4

248.6

19.8

11.7

837

1,044

94

117

2,835 3,422

1,182 1,242

24,994 23,287

1,851 1,741

28,465 30,402

931

948

708

711

226

274

3,826 3,622

1,386 1,603

240

-

7,253 8,060

452

635

551

581

34.5

41.8

29.9

5.5

7.1

20.5

150.4 178.2 21.4

37.7

49.7

45.2

650.7 776.2 52.8

104.9 133.9 19.8

892.0 1,135.1 46.4

30.8

37.9

39.6

35.9

44.4

30.5

9.5

11.8

27.7

198.1 201.2 22.6

69.6

81.7

25.5

9.9

11.8

44.9

300.0 370.9 29.2

30.8

65.8

22.8

16.7

26.7

46.9

28.4

23.4

8.8

4.8

5.8

67.1

16.8

3.3

59.4

4.4

32.3

17.6

2.9

90.5

41.2

11.2

7.5

7.3

79.4

19.2

4.3

72.0

8.0

40.5

23.8

3.6

114.0

33.8

29.9

32.9

24.8

29.8

19.1

19.1

30.2

NM

36.9

42.8

13.6

19.7

28.3

28.1

NM

18.9

37.3

10.5

NM

23.7

953.6

19.9

100.6

41.7

33.7

23.7

15.5

54.0

35.3

16.4

20.2

11.5

49.4

520

209

155

119

1,691

321

57

1,511

94

990

509

30

1,434

525

170

210

125

1,790

365

62

1,700

89

1,050

-

31

2,110

1

-19

35

5

6

14

8

12

-5

6

5

47

15.4

7.0

4.7

4.8

56.8

16.8

3.0

50.1

-31.3

26.8

11.9

2.2

73.0

168

139

356

57

308

150

147

289

152

217

147

380

49

360

150

184

375

174

29

6

7

-13

17

0

25

30

15

6.0

-14.8

18.8

1.5

29.3

-31.6

6.2

0.3

7.6

19.0

13.7

33.0

6.4

33.3

17.1

10.3

19.7

24.6

24.9

22.0

48.9

8.6

38.1

21.4

14.5

25.9

34.5

1,399

708

1,089

458

439

1,654

1,130

774

94

350

1,550

769

1,250

559

421

1,797

1,227

723

-

400

11

9

15

22

-4

9

9

-7

14

33.6

21.0

46.0

29.6

8.1

46.8

69.0

38.2

8.2

7.1

47.0

32.4

56.7

38.6

10.3

50.7

82.2

44.6

11.1

12.9

63.6

45.3

70.6

45.5

12.5

55.9

101.6

51.2

14.0

16.4

20 June 2017

13

Click excel icon

for detailed

valuation guide

CMP

(INR)

459

133

889

189

2,432

996

TP % Upside

(INR) Downside

465

1

117

-12

900

1

134

-29

2,689

1,269

11

27

EPS (INR)

FY18E

34.5

27.2

36.0

35.0

130.4

77.4

Valuation snapshot

FY19E

40.0

30.2

43.3

40.4

164.7

98.6

P/E (x)

P/B (x)

FY17 FY18E FY17 FY18E

15.5 13.3

2.9

2.5

5.2

4.9

0.9

0.8

30.5 24.7

4.9

4.1

6.0

5.4

1.1

1.0

28.8

17.9

19.1

76.5

24.3

68.2

51.7

47.0

20.7

35.1

60.1

50.5

11.2

21.3

27.7

23.7

73.8

40.0

29.3

31.0

25.2

30.6

34.5

48.6

48.6

31.0

65.7

16.4

39.3

29.6

71.1

25.6

NM

330.9

46.0

42.6

36.3

54.9

48.8

51.8

39.7

42.1

49.8

34.3

55.8

37.0

33.5

18.6

12.9

16.4

60.1

23.5

31.6

37.1

39.5

37.1

32.3

38.6

39.9

NM

18.5

25.8

18.4

54.2

37.5

21.0

29.7

20.9

29.6

30.8

35.8

33.3

22.3

38.2

12.8

23.7

21.5

43.4

22.5

33.2

31.0

36.8

33.7

27.2

49.9

43.8

42.9

37.2

38.2

43.2

31.5

48.1

32.4

42.1

3.2

2.0

3.3

9.7

5.0

1.0

8.4

25.6

1.3

6.9

8.5

9.2

1.5

4.1

3.3

2.0

6.9

7.3

-1.7

4.2

4.0

4.7

3.9

2.4

3.6

2.1

4.6

1.8

1.3

4.0

4.1

4.5

3.1

5.8

8.7

4.9

3.5

14.6

16.0

23.5

10.4

14.4

12.1

7.2

35.6

8.4

6.3

2.8

1.8

2.9

8.4

3.9

1.0

7.9

18.4

1.2

6.4

7.5

8.1

1.5

3.5

3.2

1.8

5.9

6.3

-1.8

3.8

3.5

4.2

3.6

2.4

3.7

2.0

4.1

1.6

1.3

3.4

3.8

3.9

2.9

5.0

7.2

4.3

3.2

13.9

14.8

22.2

9.0

11.6

9.4

7.1

34.5

8.2

6.4

FY17

19.7

17.9

17.4

19.9

11.8

11.7

17.2

12.7

20.6

1.5

18.0

76.4

6.2

21.2

12.4

18.2

14.9

21.2

12.6

8.6

9.3

19.8

NM

14.3

16.3

18.0

11.2

5.0

7.5

7.5

7.2

11.5

3.4

14.4

6.0

19.2

-3.2

1.8

20.2

12.0

9.7

28.5

36.9

50.4

28.4

35.8

24.6

22.2

65.6

23.5

21.1

ROE (%)

FY18E

20.2

17.0

18.2

19.1

16.2

14.5

17.7

13.9

16.5

3.3

21.9

54.2

3.4

20.5

20.7

20.4

-3.3

20.3

12.5

10.0

11.0

18.1

-8.8

13.6

17.7

15.1

11.7

6.7

11.0

9.2

11.3

13.1

5.5

17.0

9.2

18.6

9.0

17.2

21.5

13.6

11.8

28.6

35.2

53.2

26.0

33.8

24.5

22.6

72.8

25.6

15.1

FY19E

20.6

16.8

18.5

19.1

17.8

16.3

17.9

15.8

16.8

3.6

30.1

50.3

4.2

23.2

21.5

21.4

15.1

21.2

13.6

11.8

13.7

19.5

-11.0

12.9

17.5

15.3

12.9

7.1

14.2

12.2

13.1

15.1

7.2

18.6

14.7

19.1

12.3

22.6

22.6

15.7

13.7

30.6

37.2

60.3

26.3

32.2

23.0

23.0

82.5

28.9

18.4

Company

Reco

Muthoot Fin

Buy

PFC

Neutral

Repco Home

Buy

REC

Neutral

Shriram City

Buy

Union

STF

Buy

Aggregate

Capital Goods

ABB

Sell

Bharat Elec.

Buy

BHEL

Sell

Blue Star

Neutral

CG Cons. Elec.

Buy

CG Power & Indu. Sell

Cummins

Neutral

GE T&D

Neutral

Havells

Neutral

Inox Wind

Under Review

K E C Intl

Neutral

L&T

Buy

Pennar Eng.

Not Rated

Siemens

Neutral

Solar Ind

Neutral

Suzlon Energy

Not Rated

Thermax

Sell

Va Tech Wab.

Buy

Voltas

Sell

Aggregate

Cement

Ambuja Cem.

Buy

ACC

Neutral

Birla Corp.

Buy

Dalmia Bharat

Buy

Grasim Inds.

Neutral

India Cem

Neutral

J K Cements

Buy

JK Lakshmi Ce

Buy

Ramco Cem

Buy

Orient Cem

Buy

Prism Cem

Buy

Shree Cem

Buy

Ultratech

Buy

Aggregate

Consumer

Asian Paints

Neutral

Britannia

Buy

Colgate

Buy

Dabur

Neutral

Emami

Buy

Godrej Cons.

Neutral

GSK Cons.

Sell

HUL

Buy

ITC

Buy

Jyothy Lab

Neutral

FY17

29.7

25.7

29.1

31.4

84.3

55.6

1,507

169

138

665

220

85

930

345

482

143

252

1,754

138

1,315

825

19

958

729

474

1,200

200

100

610

240

65

950

320

480

-

250

2,000

-

1,355

825

-

850

800

400

-20

19

-28

-8

9

-23

2

-7

0

-1

14

3

0

-11

10

-16

19.7

6.9

2.0

12.9

4.7

4.1

26.5

5.7

9.6

12.8

11.9

63.3

5.8

17.8

20.6

0.6

30.8

28.9

15.5

25.1

7.2

4.4

17.9

5.6

2.3

28.8

8.9

12.1

-3.2

13.6

68.0

7.5

24.3

22.0

0.9

32.3

34.9

16.0

32.2

8.1

5.0

26.6

6.7

4.5

35.5

10.6

14.5

15.5

16.8

78.3

10.0

33.3

27.5

1.0

34.0

39.8

18.1

237

283

1,641 1,521

911

998

2,548 3,162

1,116 1,234

221

210

999

1,322

495

550

698

823

150

185

115

138

17,690 23,316

4,096 4,928

19

-7

10

24

11

-5

32

11

18

23

20

32

20

4.9

33.7

29.4

38.8

67.9

5.6

33.7

7.0

27.3

-1.6

0.3

384.4

96.1

6.6

49.2

40.9

66.7

86.9

9.3

46.4

11.4

31.1

4.5

3.7

480.7

121.4

7.2

63.6

58.9

87.1

114.5

12.9

59.5

20.5

37.5

6.8

5.8

621.0

159.1

1,154

3,593

1,099

288

1,116

1,883

5,354

1,095

310

377

1,210

4,050

1,180

295

1,250

1,950

4,380

1,215

355

390

5

13

7

3

12

4

-18

11

14

4

21.0

73.7

21.2

7.2

26.5

37.8

156.1

19.6

8.4

11.2

23.1

82.1

25.7

7.7

29.2

43.6

169.7

22.8

9.6

8.9

27.4

101.3

31.1

9.1

34.7

50.0

185.5

27.0

11.5

11.0

20 June 2017

14

Click excel icon

for detailed

valuation guide

CMP

TP % Upside

(INR)

(INR) Downside

310

335

8

6,744 5,715

-15

16,747 18,000

7

218

245

12

822

762

-7

7,879 8,760

11

787

830

5

2,300 2,415

5

EPS (INR)

FY18E

6.9

118.6

313.9

7.4

18.4

155.8

9.7

37.4

Valuation snapshot

FY19E

8.4

139.5

400.0

12.3

21.2

181.6

14.7

51.8

P/E (x)

P/B (x)

FY17 FY18E FY17 FY18E

49.3 44.6 17.2 14.7

57.2 56.8 21.6 19.9

70.1 53.4 28.1 22.2

60.5 29.3

2.8

2.5

49.1 44.5 12.7 10.3

54.4 50.6 44.9 35.8

90.5 81.1

9.0

8.3

86.0 61.6 17.2 11.9

46.2 40.8 12.8 11.9

24.3

24.5

26.4

16.7

16.2

37.4

33.9

16.3

36.6

18.4

16.2

19.2

70.9

29.3

19.1

32.1

20.1

34.9

21.8

23.6

17.7

41.5

29.9

38.9

15.0

18.2

28.5

79.6

18.4

NM

10.5

11.1

17.1

76.4

NM

34.6

22.0

41.1

12.4

12.5

NM

20.1

23.2

23.3

14.8

15.0

29.3

27.0

18.0

24.8

90.1

14.1

17.1

46.9

21.0

18.8

31.6

20.7

28.2

20.1

21.8

14.3

32.8

27.6

22.8

7.9

14.7

23.5

38.3

15.5

NM

10.2

10.4

15.1

43.5

NM

29.1

31.1

29.2

8.9

11.4

NM

5.2

5.3

8.7

4.2

2.2

8.5

3.5

3.7

3.6

2.0

4.0

3.2

15.3

2.4

3.9

5.5

3.4

7.1

5.1

4.1

2.6

18.4

3.1

2.3

2.0

2.8

3.5

17.1

4.3

1.5

1.8

0.7

2.5

7.6

4.0

8.6

8.1

5.9

1.5

3.4

0.4

4.4

4.5

6.6

3.3

2.0

7.0

3.1

3.3

3.0

1.7

3.2

2.3

18.6

2.2

3.3

5.2

3.3

5.8

4.4

3.6

2.3

14.0

3.0

2.2

1.8

2.4

3.2

11.8

3.8

1.7

1.6

0.7

2.5

6.5

4.4

7.9

6.8

5.3

1.3

2.9

0.4

FY17

36.7

39.0

40.0

5.9

28.2

45.3

10.4

21.3

27.7

23.1

23.4

37.7

28.3

13.6

24.8

10.2

23.5

9.6

11.3

24.7

20.0

21.5

8.6

22.0

17.1

18.5

22.2

25.3

17.5

12.6

50.5

10.8

5.9

12.4

16.7

12.2

24.1

25.5

-12.0

19.3

7.1

17.6

10.4

-23.5

25.0

23.7

14.3

14.0

24.4

-7.9

ROE (%)

FY18E

35.5

36.4

41.6

9.1

25.6

78.9

10.7

19.3

29.2

23.6

20.8

32.3

24.8

13.3

26.1

11.5

19.2

13.3

2.0

22.4

16.4

39.7

11.0

18.9

16.3

16.3

22.5

23.5

16.6

17.2

48.6

11.1

9.9

19.4

17.8

13.7

36.5

26.2

-5.3

16.6

6.9

16.3

16.1

-7.8

27.3

23.8

18.1

15.6

27.2

-5.0

FY19E

38.1

39.0

42.8

13.4

24.0

74.0

14.6

19.7

30.7

24.1

21.0

30.0

22.5

16.1

27.1

12.8

19.2

15.1

5.3

21.3

17.6

54.4

13.2

19.7

19.3

17.9

20.7

24.6

17.6

17.8

46.8

11.7

11.7

25.4

18.6

15.0

44.1

27.6

0.7

15.6

6.6

17.3

20.5

1.5

31.9

23.8

20.6

15.1

25.4

-0.8

Company

Marico

Nestle

Page Inds

Parag Milk

Pidilite Ind.

P&G Hygiene

United Brew

United Spirits

Aggregate

Healthcare

Alembic Phar

Alkem Lab

Ajanta Pharma

Aurobindo

Biocon

Cadila

Cipla

Divis Lab

Dr Reddy’s

Fortis Health

Glenmark

Granules

GSK Pharma

IPCA Labs

Lupin

Sanofi India

Sun Pharma

Syngene Intl

Torrent Pharma

Aggregate

Logistics

Allcargo Logistics

Blue Dart

Concor

Gateway

Distriparks

Gati

Transport Corp.

Aggregate

Media

Dish TV

D B Corp

Den Net.

Hind. Media

HT Media

Jagran Prak.

PVR

Siti Net.

Sun TV

Zee Ent.

Aggregate

Metals

Hindalco

Hind. Zinc

JSPL

Reco

Neutral

Sell

Buy

Neutral

Neutral

Buy

Neutral

Neutral

FY17

6.3

118.0

238.7

3.6

16.7

144.9

8.7

26.7

Neutral

Neutral

Buy

Buy

Sell

Buy

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Neutral

Neutral

Buy

Buy

Buy

Not Rated

Buy

524

1,855

1,544

655

330

531

539

645

2,657

190

637

139

2,437

471

1,131

4,143

525

455

1,203

640

1,900

2,028

750

300

510

500

600

2,625

240

800

200

2,700

480

1,475

4,850

650

-

1,450

22

2

31

14

-9

-4

-7

-7

-1

26

26

44

11

2

30

17

24

21

21.6

75.7

58.4

39.3

20.4

14.2

15.9

39.7

72.6

10.3

39.3

7.3

34.4

16.1

59.2

129.1

26.1

13.0

55.2

26.0

80.0

66.4

44.1

22.0

18.1

20.0

35.8

107.1

2.1

45.0

8.1

51.9

22.4

60.2

131.0

25.4

16.1

59.8

32.1

94.9

79.9

50.2

29.9

23.2

25.0

39.8

144.5

6.1

53.5

11.4

60.1

29.9

73.7

173.4

30.8

18.0

73.2

Buy

Not Rated

Neutral

Buy

Not Rated

Not Rated

174

4,259

1,135

264

125

309

228

-

1,162

310

-

-

31

2

17

9.8

102.5

38.0

6.8

8.4

16.9

12.2

129.9

41.2

11.6

15.9

21.0

14.3

163.2

45.8

14.3

23.9

25.9

Buy

Buy

Neutral

Buy

Neutral

Buy

Buy

Neutral

Neutral

Buy

79

374

82

277

82

184

1,568

29

859

509

106

460

90

360

85

225

1,666

36

860

600

35

23

9

30

4

22

6

23

0

18

1.0

20.4

-8.6

26.4

7.4

10.8

20.5

-1.8

24.9

23.1

2.1

24.1

-2.7

27.1

7.9

12.2

36.1

-0.5

29.5

16.4

3.8

28.7

0.3

29.9

8.3

14.0

54.7

0.1

38.4

19.5

Buy

Sell

Buy

201

246

127

250

235

184

25

-4

45

16.2

19.7

-20.9

22.6

21.5

-16.0

25.9

23.7

-2.5

20 June 2017

15

Click excel icon

for detailed

valuation guide

CMP

Reco

(INR)

Buy

199

Neutral

64

Under Review 113

Sell

58

Neutral

242

Sell

519

TP % Upside

(INR) Downside

241

21

65

1

-

30

-48

225

-7

451

-13

EPS (INR)

FY18E

20.1

3.6

12.0

-12.6

24.5

39.5

Valuation snapshot

FY19E

22.6

4.0

12.7

0.4

27.4

45.7

P/E (x)

P/B (x)

FY17 FY18E FY17 FY18E

13.5

9.9

2.1

1.8

17.5 18.0

1.2

1.2

11.4

9.4

1.6

1.5

NM

NM

0.6

0.8

16.0

9.9

1.5

1.4

14.0 13.2

1.6

1.4

17.0 13.7

1.4

1.3

9.2

16.9

39.3

18.7

8.7

9.9

24.9

10.9

15.1

10.1

19.2

13.2

11.8

92.7

56.8

59.9

16.6

14.1

18.2

14.8

10.4

14.7

20.7

15.2

13.3

18.0

28.7

18.2

12.6

15.0

15.9

16.1

33.0

25.3

NM

28.3

35.3

17.0

17.3

16.3

12.4

14.9

15.1

10.3

13.9

20.9

14.7

11.6

9.7

23.0

10.0

8.4

8.1

16.6

11.6

10.8

76.3

50.0

52.3

13.3

13.6

16.2

14.4

9.2

13.7

16.9

14.2

13.4

15.5

23.8

17.4

12.0

14.7

13.3

15.7

58.4

21.5

NM

40.6

165.0

13.9

12.2

29.7

12.0

12.0

11.6

2.8

1.7

6.7

2.1

2.7

1.9

5.1

2.2

0.8

1.0

4.0

1.4

1.6

7.6

10.8

10.3

2.7

3.5

4.4

3.1

1.6

5.1

3.4

2.0

2.1

2.8

9.0

5.7

2.1

2.4

2.4

3.7

2.2

4.5

1.2

13.2

2.4

6.4

2.0

1.0

1.4

2.3

1.8

2.4

1.6

5.3

1.9

2.3

2.0

4.4

1.9

0.8

0.9

3.4

1.3

1.5

7.1

9.5

9.2

2.4

3.5

3.9

2.8

1.3

4.0

3.1

2.3

1.9

2.7

7.2

5.9

1.9

2.2

2.1

3.6

2.1

3.9

1.4

9.9

2.4

6.4

1.8

1.0

1.3

2.0

1.6

FY17

17.3

7.2

12.4

-6.7

9.7

15.4

8.0

32.4

10.2

17.8

11.9

32.4

22.3

21.0

24.8

5.7

10.4

23.2

11.9

13.2

8.2

20.6

17.2

16.2

27.5

26.5

23.3

14.3

40.4

16.8

13.2

16.1

17.0

37.1

33.5

18.4

16.9

16.3

23.2

6.7

16.2

-1.6

126.2

6.9

37.8

11.4

6.7

11.5

16.2

11.2

ROE (%)

FY18E

19.7

6.7

14.9

-15.2

14.8

11.4

9.4

25.1

11.7

28.5

13.7

21.2

20.2

20.6

20.5

9.3

11.7

22.4

11.8

13.4

9.3

20.2

17.6

17.8

25.4

25.3

21.4

15.6

32.8

18.9

14.0

14.8

18.1

33.7

32.4

16.7

15.5

17.2

22.6

3.7

19.4

-20.8

27.9

1.5

46.2

15.5

3.3

10.9

17.5

14.6

FY19E

18.8

7.3

15.7

0.5

15.3

12.1

11.8

23.3

12.5

27.5

14.6

18.7

19.9

19.5

18.4

9.6

13.0

25.7

11.2

13.4

12.6

20.9

18.5

17.9

26.0

23.5

21.2

15.2

28.3

20.5

15.7

14.7

20.3

32.3

32.3

17.0

15.7

17.4

22.0

6.4

19.1

-27.4

39.1

3.9

52.1

15.0

2.8

12.3

17.8

13.6

Company

JSW Steel

Nalco

NMDC

SAIL

Vedanta

Tata Steel

Aggregate

Oil & Gas

BPCL

GAIL

Gujarat Gas

Gujarat St. Pet.

HPCL

IOC

IGL

MRPL

Oil India

ONGC

PLNG

Reliance Ind.

Aggregate

Retail

Jubilant Food

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

Tata Power

FY17

14.8

3.7

10.0

-6.2

15.1

37.0

Neutral

Sell

Sell

Neutral

Buy

Neutral

Neutral

Neutral

Buy

Buy

Buy

Neutral

667

381

804

165

530

407

1,072

128

293

166

437

1,409

779

357

699

171

632

457

1,067

124

363

229

546

1,264

17

-6

-13

4

19

12

0

-3

24

38

25

-10

72.5

22.6

20.4

8.8

61.0

41.0

43.1

11.7

19.3

16.4

22.7

106.6

64.5

27.4

38.5

11.2

45.6

41.9

46.7

12.8

34.7

20.6

26.3

121.7

70.3

31.6

46.6

13.4

45.8

43.3

51.8

13.3

37.4

23.9

35.9

127.8

Sell

Neutral

928

513

680

505

-27

-2

10.0

9.0

12.2

10.3

17.9

12.1

Buy

Buy

Neutral

Buy

Neutral

Buy

Neutral

Neutral

Neutral

Buy

Buy

Neutral

Buy

Neutral

Buy

509

842

249

929

124

817

516

591

571

680

1,617

2,432

389

254

872

620

960

235

1,200

150

850

475

600

470

700

1,607

2,400

500

250

1,020

22

14

-5

29

21

4

-8

2

-18

3

-1

-1

29

-2

17

30.6

59.8

13.7

62.9

11.9

55.5

24.9

38.9

42.8

37.7

56.3

133.4

30.9

16.9

54.9

38.3

61.9

15.4

64.7

13.4

59.7

30.5

41.7

42.5

43.9

68.0

139.7

32.3

17.3

65.5

44.2

67.6

16.7

71.1

15.2

65.0

36.5

45.0

46.1

51.4

80.4

149.6

36.9

19.1

76.0

Buy

Buy

Buy

Buy

367

376

80

735

430

440

110

811

17

17

38

10

11.1

14.9

-1.1

26.0

6.3

17.5

-12.9

18.1

11.5

19.9

-13.6

36.0

Buy

Buy

Buy

Buy

Buy

Sell

254

899

63

161

212

78

316

1,040

88

198

242

67

24

16

40

23

14

-14

14.9

51.9

3.9

13.0

14.2

5.2

18.3

73.4

2.1

13.4

17.6

6.7

20.7

80.6

1.8

16.2

20.5

7.0

20 June 2017

16