8 August 2017

Motilal Oswal values your support in the

Asiamoney Brokers Poll 2017 for India

Research, Sales and Trading team.

We

request your ballot.

Today’s top research idea

Strides Shasun - Initiating Coverage: Making great strides

v

Strides (STR) is set to deliver 42% earnings CAGR over FY17-20 on the back of

significant investments the company has made in the last 2-3 years.

v

Through Solara, which will house its API business, it is well-placed to capitalize

on the good opportunity in the API space. Its niche portfolio, consistent

compliance, and sizable manufacturing capacity stand it in good stead.

v

US revenue should multiply ~3x over FY17-20, driven by existing ANDAs

pending for approval and aggressive filing.

v

By expanding its product offerings, tying up with the largest distributor, and

enhancing reach by catering to standalone pharmacies, we expect STR to be

on a strong growth trajectory in Australia as well.

v

We initiate coverage with a

BUY

rating and an SOTP-based target price of

INR1,300.

Market snapshot

Equities - India

Close

Chg .%

Sensex

32,274

-0.2

Nifty-50

10,057

-0.1

Nifty-M 100

18,570

1.1

Equities-Global

Close

Chg .%

S&P 500

2,481

0.2

Nasdaq

6,384

0.5

FTSE 100

7,532

0.3

DAX

12,257

-0.3

Hang Seng

11,054

0.5

Nikkei 225

20,056

0.5

Commodities

Close

Chg .%

Brent (US$/Bbl)

52

-0.1

Gold ($/OZ)

1,258

-0.1

Cu (US$/MT)

6,384

0.6

Almn (US$/MT)

1,946

3.0

Currency

Close

Chg .%

USD/INR

63.8

0.4

USD/EUR

1.2

0.1

USD/JPY

110.7

0.0

YIELD (%)

Close

1MChg

10 Yrs G-Sec

6.5

0.0

10 Yrs AAA Corp

7.5

0.0

Flows (USD b)

7-Aug

MTD

FIIs

0.0

-0.2

DIIs

0.0

0.4

Volumes (INRb)

7-Aug

MTD*

Cash

283

295

F&O

2,981

5,492

Note: YTD is calendar year, *Avg

YTD.%

21.2

22.9

29.4

YTD.%

10.8

18.6

5.4

6.8

17.7

4.9

YTD.%

-6.5

9.2

15.6

14.2

YTD.%

-6.1

12.1

-5.3

YTDchg

-0.1

-0.1

YTD

8.6

4.4

YTD*

288

5,056

Research covered

Cos/Sector

Strides Shasun

Tata Steel

Hindalco (Novelis)

Britannia Inds.

Amara Raja Batt.

Eveready Inds.

Metals Weekly

Key Highlights

Initiating Coverage (Making great strides)

Strong operating performance; Strong markets have given flip to FY18

outlook

Novelis delivers strong operating performance

Broadly in-line performance; base business volume growth at ~1%

Below estimate; Adverse mix, competitive pressure dents profitability

LED segment robust; Flashlight segment to recover from GST setbacks

Domestic steel prices gain, sponge prices rise sharply

Results Expectation BOI | ENDU | GLXO | JAGP | JSPL | KSCL | MUTH | SRF | TMX

Hike in GST cess on luxury cars will dent Make in India, say carmakers

Piping hot news

v

Makers of sports utility vehicles (SUVs) and luxury cars are protesting the GST

Council’s plan to raise the cess on such products from 15% to as much as 25%,

warning that the move will lead to production cuts and job losses and dent the

“Make in India” initiative.

Chart of the Day: Strides Shasun - Initiating Coverage: Making great strides

Structure of Australian generic pharma market

Apotex | Mylan |

Arrow | Sandoz

Amneal

Sigma

Symbion

API

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 textbox for the detailed news link

1

Sebi asks NSE, BSE to act

against 331 suspected shell

companies

Sebi on Monday directed bourses

to initiate action against 331

suspected shell companies that

are listed and these scrips will not

be available for trading this

month, according to a

communication…

2

Industry worried about ramifications from Supreme Court's Odisha

mining order

The Supreme Court’s landmark order imposing an estimated Rs 25,000

crore penalty on iron ore and manganese miners in Odisha continues to

rattle the sector, with serious implications for mining operations across the

country and clearances obtained in the past…

3

The Insurance Regulatory and

Development Authority of India

(IRDA) said its order directing the

shotgun marriage of Sahara India

Life Insurance Co. Ltd and ICICI

Prudential Life Insurance Co. Ltd

was the culmination of a two-year

process…

IRDA defends order on merger

of Sahara Life, ICICI Prudential

4

PSU banks have written off Rs

2.49 lakh crore of loans in last

5 years: Finance Ministry

Public sector banks have “written

off” nearly Rs 2.5 lakh crore loans

in the last five financial years, the

finance ministry said quoting RBI

data. As many as 27 public sector

banks, including SBI and its five

associates, in 2016-17 have

written off Rs 81,683 crore, the

highest in the last five fiscals…

5

Britannia to set up Rs1,000

crore plant in Maharashtra’s

Ranjangaon food park

Biscuit-maker Britannia Industries

Ltd will set up its biggest

manufacturing facility at

Ranjangaon in Maharashtra at an

investment of Rs1,000 crore,

managing director Varun Berry

said on Monday…

6

Banks to shut out builders

without RERA listing

Builders who have been thinking

of ways to beat the new Real

Estate Regulation Act are fast

running out of time as banks, in

consultation with the Reserve

Bank of India, have decided not to

extend loans to those projects

which have not been registered

under RERA…

7

GIC of India files for IPO to

raise Rs10,000 crore

State-owned reinsurance

company General Insurance Corp.

of India (GIC) on Monday filed the

draft red herring prospectus

(DRHP) for its initial public offering

(IPO).The IPO will see a total stake

dilution of 14.22%, according to

the DRHP available on the website

of one of the investment banks

managing the share sale...

8 August 2017

2

Initiating Coverage | Sector: Healthcare

Strides Shasun

BSE Sensex

32,325

S&P CNX

10,066

CMP: INR1000

TP: INR1,300 (+30%)

Buy

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 (%)

STR IN

89.4

1259/849

-1/-30/-27

94.7

1.5

433

68.9

Strides Shasun (STR) is a first generation, vertically integrated global pharmaceuticals

company, with business interests in differentiated pharma and branded generics. It

sells formulations in regulated markets (51% of FY17 sales), emerging markets (18% of

FY17 sales), and to global institutions (16% of FY17 sales). The API business, which

would soon largely be a part of Solara, constituted 15% of FY17 sales.

Making great strides

Robust outlook led by higher sales growth and improved asset utilization

n

Financial Snapshot (INR b)

Y/E Mar

FY17 FY18E FY19E

Sales

34.8 43.9 54.5

EBITDA

6.4

8.3 11.0

NP

2.9

4.2

6.7

EPS (Rs)

32.3 47.4 74.8

EPS Gr (%)

108.2 46.9 57.9

BV/Sh (INR)

303.3 341.6 401.9

P/E (x)

31.0 21.1 13.4

P/BV (x)

3.3

2.9

2.5

RoE (%)

10.7 14.7 20.1

RoCE (%)

7.8

9.2 12.2

Shareholding pattern (%)

As On

Jun'17 Mar'17 Dec'16

Promoter

31.1

31.1

31.1

DII

14.3

12.9

11.4

FII

34.5

34.5

36.2

Others

20.1

21.6

21.3

FII Includes depository receipts

n

n

n

n

Strides Shasun

Making great strides

STR has rebuilt its R&D infrastructure, instituted a strong compliance culture

across the organization, backed by suitable IT investments, and integrated its

manufacturing operations to reduce external dependence. We believe it is now in

a position to begin reaping the benefits of the ~USD550m investments it has made

in focus geographies in the last three years.

Given the consistent compliance history of its API facilities and low cost

manufacturing, we expect the API business (through Solara) to deliver 23%

revenue CAGR over FY17-20 and 18-20% EBITDA margin.

Excluding the API business, we expect revenue to grow at a CAGR of 20% over

FY17-20 to INR52b, driven by 43% CAGR in the US business, 16% CAGR in the

Australia business, 15% CAGR in emerging markets and 15% CAGR in the

institutional business. Adjusted earnings of Strides Pharma are likely to grow at a

CAGR of 44%.

In the US, STR has 26 pending ANDAs and has guided 15-20 ANDA filings per year –

largely niche products – in the next 2-3 years. In Australia, dominated by a few

manufacturers and distributors, it is among the top-3 generic players. Its exclusive

agreement with the largest distributor and ongoing tie-ups with standalone

pharmacies stand it in good stead. In the institutional business, its backward

integration, local manufacturing for ARV/anti-malaria, and awareness drives on

Hep-C in conjunction with governments of developing nations give it an edge.

We value the STR’s pharma business at 18x FY19E earnings (industry average P/E

multiple for midcap pharma) and Solara at an EV of 13x FY19E EBITDA to arrive at

a price target of INR1,300. In addition to robust performance expected in the

pharma business, we believe there is significant value accretion potential in the

API business. We initiate coverage with a Buy rating.

Regulated market business – key growth driver

n

n

tushar.manudhane@motilaloswal.com

Tushar Manudhane

+

91 22 3010 2498

n

STR has 26 ANDAs pending for approval. The target approval dates are

within the next 6-10 months, providing visibility of higher approvals.

STR has guided 15-20 ANDA filings per year over next 2-3 years. With

reduced timeline for approval, we expect the strong pace of approvals to

continue over the next 2-3 years. STR made USD100m (annualized) from 18

products (commercialized). Based on product development capability, we

expect STR to have additional run rate of USD55m-60m per year over the

next 2-3 years.

STR has re-entered the Australia generic pharma market through the

acquisition of Aspen’s portfolio under Arrow Pharma. It has been working on

ree fronts to aid increase in sales growth and profitability

3

8 August 2017

Stock Performance (1-year)

three fronts to aid increase in sales growth and profitability. It is expanding its

generic product basket, securing supplies via tie-up with largest distributor, and

expanding reach by catering to standalone pharmacies also.

n

Overall, we expect STR to deliver 26% CAGR in regulated markets over FY17-20.

Backward integration, newer products to drive institutional business

n

n

Over the last couple of years, STR added anti-malaria products to its existing

ARV segment. Also, it is developing niche ARVs for medium-term growth. It also

added Sofosbuvir-based Hep-C products to its institutional portfolio.

In addition, STR has integrated manufacturing operations, which have not only

increased capacity but also helped secure supply of APIs for its formulations,

providing increased scope of business.

Largely inorganically, STR has expanded its reach from South India to Pan India;

in the Africa market, STR got access to East Africa, adding to its existing

presence in West and French Africa. We expect 14.8% CAGR in emerging market

sales to INR8b over FY17-20.

STR has proactively raised the bar of compliance at its facilities to reduce

regulatory risk. It has fully-integrated, compliant laboratories, with paperless

operations. It also has fully-integrated manufacturing equipment, with complete

control on operations and data management.

STR has improved compliance culture through open communication and

employee empowerment, thus reducing regulatory risk, considerably. Notably, it

has had four USFDA inspections in the recent past, with zero 483s.

With significant investments in R&D, reduced outsourcing of APIs, strong

compliance culture, increased automation, and presence in diversified markets,

we believe STR is poised to deliver strong return ratios through improved asset

turnover and higher share of better margin regulated market business.

We expect 20% CAGR in sales, 25% CAGR in EBITDA, and 44% CAGR in PAT of

Strides Pharma over FY17-20. Solara’s API business has niche portfolio and

superior margin compared to commodity business, hence, we ascribe 40%

premium multiple to 13x EV/EBITDA. We value STR on sum-of-the-parts (SOTP),

valuing the pharma business at 18x FY19E earnings (average midcap pharma P/E

multiple) and Solara at an EV of 13x FY19E EBITDA to arrive at price target of

INR1,300.

Branded generics the name of the game in emerging markets

n

Extensive efforts towards consistent compliance to reduce regulatory risk

n

n

Valuation and view

n

n

8 August 2017

4

7 August 2017

1QFY18 Results Update | Sector: Metals

Tata Steel

BSE SENSEX

32,274

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm/ Vol m

Free float (%)

S&P CNX

10,057

TATA IN

971.4

583.0 / 8.7

602 / 355

5/13/43

2936

68.7

CMP: INR600

TP: INR591(-1%)

Strong operating performance

Strong markets have given flip to FY18 outlook

Neutral

Tata Steel (TATA) reported strong 1QFY18 consolidated EBITDA of INR49.7b (est.

INR38b). Operating EBITDA of India (TSI) was in-line at INR29.7b. TSE (Europe) and

forex gains in raw material SPVs surprised positively.

Financials & Valuations (INR b)

Y/E Mar

2017 2018E 2019E

Sales

1,123 1,241 1,257

EBITDA

170

208

203

Adj. PAT

37

63

62

Adj. EPS (INR)

37.9

65.1

64.3

EPS Gr(%)

394.2

71.6

-1.3

BV/Sh. (INR)

330

371

425

RoE (%)

15.7

18.6

16.2

RoCE (%)

9.4

11.4

10.4

P/E (x)

15.8

9.2

9.3

P/BV

1.8

1.6

1.4

1QFY18 highlights:

n

n

n

TSI sales increased 28% YoY to 2.75mt. EBITDA per ton declined 21% QoQ to

INR10,786/t on lower margins in FAMD & steel business.

TSE reported strong EBITDA of INR12.5b and EBITDA/t of USD81/t (est. USD48)

Other Subsidiaries contribution was strong at INR7.5b aided by forex gains.

Upgrading FY18E EBITDA on strong markets; Maintain Neutral

n

Estimate change

TP change

Rating change

n

n

n

TSE margin outlook has improved significantly on exit from all of non-strip

businesses, depreciation of GBP, de-risking of pension and anti-dumping action

against Chinese imports. Margins in 2Q and 3QFY18E are likely to lower due to

seasonal factors.

TSE is in final stages of de-risking pension scheme.

Strong international market is helping balance domestic supply and pricing

power to offset cost increase. We expect margins to be stronger during 2Q &

3QFY18E. Therefore, we are raising FY18E est. by 6% to INR144b EBITDA. We

are also raising TSE& other subs. estimate by 18% to INR64b EBITDA. Thus,

consolidated EBITDA is increased by 12% to INR208b for FY18E.

Global steel market has been trending strong on easing pressure from Chinese

exports, which has boosted margins in FY18E. But, we are not sure about its

sustainability in FY19E. Therefore, we keeping FY19 estimates unchanged.

Target price is increased marginally to INR591/share. Maintain Neutral.

FY18E

2Q

3Q

311,365 305,592

18.1

9.3

50,450 53,996

70

53

16.2

17.7

125

131

13,106 13,350

14,735 14,955

1,213 1,343

23,822 27,033

FY17

FY18E

vs Est

(%)

-1

-5

31

212

32

36

3

4

18

94

40

58

-19

29

116

Quarterly Performance (Consolidated) INR million

Y/E March

Net Sales

Change (YoY %)

EBITDA

Change (YoY %)

(% of Net Sales)

EBITDA(USD/tss)

Interest

Depreciation

Other Income

PBT (before EO Inc.)

EO Income(exp)

PBT (after EO Inc.)

Total Tax

% Tax

Reported PAT

Adj. PAT (after MI & asso)

Change (YoY %)

1Q

252,298

-16.7

32,420

16.9

12.8

90

10,707

12,417

1,367

10,662

-35,231

-24,568

7,405

69.4

-31,973

3,400

FY17

2Q

3Q

263,710 279,565

-10.0

-0.3

29,700 35,393

62.3 356.3

11.3

12.7

79

86

13,511 13,874

14,677 13,797

1,084 1,301

2,597 9,022

634

284

3,230 9,306

3,634 6,984

139.9

77.4

-403 2,322

-1,127 2,035

4Q

338,960

14.9

70,252

218.6

20.7

154

12,631

15,892

1,522

43,250

-45,199

-1,948

9,760

22.6

-11,708

33,435

1Q

4Q

1Q

295,568

328,912 1,134,532 1,241,436 297,626

17.2

-3.0

-3.2

9.4

18.0

49,740

53,769 167,764 207,955 37,964

53.4

-23

121.2

24.0

17.1

16.8

16.3

14.8

16.8

12.8

132

119

104

127

98

13,437

13,380

50,723

53,274 13,094

15,011

15,118

56,784

59,819 14,399

1,555

1,315

5,274

5,426

1,315

22,846

26,586

65,531 100,287 11,787

-6,289

-79,512

-6,289

16,557 23,822 27,033 26,586 -13,981

93,998 11,787

7,405 8,320 9,437 9,251

27,782

34,414

4,696

32.4

34.9

34.9

34.8

42.4

34.3

39.8

9,152 15,502 17,596 17,335 -41,762

59,584

7,091

15,352 15,551 17,641 17,363

37,742

65,908

7,103

307.8

74.6

8 August 2017

5

7 August 2017

Q1FY18 Results Update | Sector: Metals

Hindalco

BSE SENSEX

32,274

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

10,057

HNDL IN

2,243

510.7 / 8.0

229 / 139

14/9/43

2281

65.3

CMP: INR228

TP: INR310(+36%)

Buy

Novelis delivers strong operating performance

Evaluating growth options as it will soon fully sweat assets

Novelis reported another strong quarter, with adj. EBITDA growing 8% YoY to

USD289m (7% beat) in 1QFY18, driven by higher volumes and benefit of lower-cost

scrap. Interest cost declined 23% YoY to USD62m on refinancing debt at lower cost.

Adj. PAT was up~4x YoY at USD101m. FCF stood at negative USD77m (increase of

USD69m YoY) on seasonal working capital increase and higher LME.

Volumes rebound; strong performance in N. America drives margins

Shipments grew 4% YoY to 785kt, driven by a rebound in cans. Can volumes were

secured under long-term contracts, which has improved visibility. Adj. EBITDA per

ton increased by USD13 YoY to USD368 on higher margins in N. America, partly

offset by unwinding of FX gains in S. America.

EBITDA guidance of USD1.1-1.15b; FCF guidance raised

EBITDA was guided at USD1.1-1.15b for FY18 on improved visibility in cans and

higher auto mix. Pricing risk in cans is now behind with the long-term contracts.

FCF guidance is USD400-450m on higher operating profit and lower interest cost,

partly offset by likely working capital rise. Volume is expected to increase ~3% in

FY18E. Auto will drive further growth in FY19E.

Evaluating growth opportunities; Maintain Buy

Novelis is now evaluating both organic and inorganic growth opportunities, as it

has now contracted can volumes, and auto capacity will be fully utilized soon. It is

seeking opportunity in auto, leveraging on its first-mover advantage, customer

relationship and strong demand. Light-weighting and electric vehicles would

continue driving aluminum demand in auto. It expects auto FRP demand to grow at

a CAGR of 13-15% in N. America and 10-12% in Europe over 2017-21 – its target

markets. Amid Novelis’ strong market positioning and HNDL’s low-cost Indian

operations, we remain positive on the stock. TP is INR310.

Buy.

USD million

FY17

2Q

3Q

773

750

-1.9

-3.7

2,361 2,313

-4.9

-1.7

270

255

14.4

7.1

11.4

11.0

349

340

79

65

90

88

101

102

(163)

9

-62

111

27

47

-43.5

42.3

-89

64

4Q

789

0.1

2,621

9.1

292

5.4

11.1

370

59

93

140

(52)

88

41

46.6

47

1Q

785

4.0

2,669

16.2

289

7.8

10.8

368

62

90

137

7

144

43

29.9

101

FY18

2QE

3QE

788

765

2.0

2.0

2,571 2,494

8.9

7.8

282

279

4.6

9.3

11.0

11.2

358

364

58

58

94

96

130

125

-

-

130

125

39

38

30.0

30.0

91

88

FY17

4QE

805

2.0

2,624

0.1

296

1.3

11.3

368

57

97

141

-

141

42

30.0

99

3,067

-1.8

9,591

-2.8

1,085

12.6

11.3

354

283

360

442

(245)

197

151

76.6

46

FY18E

3,143

2.5

10,358

8.0

1,146

5.6

11.1

365

235

377

534

7

541

162

30.0

379

1QE

770

2.0

2,576

12.2

271

1.1

10.5

352

59

92

120

-

120

36

30.0

84

vs Est

(%)

2

4

7

5

5

-2

14

20

19

20

Financials & Valuations (INR b)

Y/E Mar

2017E 2018E

Net Sales

1,001.8 1,046

EBITDA

140.8 143.6

PAT

36.0

49.3

EPS (INR)

16.2

22.1

Gr. (%)

35.1

36.8

BV/Sh (INR)

129.9 158.3

RoE (%)

14.0

15.4

RoCE (%)

8.8

8.7

P/E (x)

14.1

10.3

P/BV (x)

1.8

1.4

2019E

1,077

150.2

58.6

26.3

18.9

183.1

15.4

9.0

8.7

1.2

Estimate change

TP change

Rating change

Quarterly Performance (Novelis)

Y/E March

Sales (000 tons)

Change (YoY %)

Net Sales

Change (YoY %)

EBITDA (adjusted)

Change (YoY %)

As % of Net Sales

EBITDA per ton (USD)

Interest

Depreciation

PBT (before EO item)

Extra-ordinary Income

PBT (after EO item)

Total Tax

% Tax

PAT before minority

1Q

755

-1.7

2,296

-12.8

268

25.8

11.7

355

80

89

99

(39)

60

36

60.0

24

8 August 2017

6

RESULTS

FLASH

Britannia Ind.

BSE SENSEX

32,274

S&P CNX

10,057

7 August 2017

Results Flash | Sector: Consumer

CMP: INR4,107

TP: INR4,450

Buy

We will revisit our estimates

post earnings call/management

interaction.

Broadly in-line performance; base business volume growth at ~1%

Consolidated performance

n

Consolidated sales growth came in at 6% YoY (est. of +4%) in 1QFY18.

Standalone (S/A) sales increased 6.6% YoY, but subsidiary sales were down by

5.9% YoY, likely due to a weak performance in the Middle East and Africa.

n

We expect base business volume growth to be ~1% (not mentioned in press

release), as against our expectation of flat volumes. This is on a base 10%

volume growth in 1QFY17.

n

Consol. gross margin contracted 120bp YoY (est. of -100bp) to 37.6% due to

commodity cost inflation (at 6% in 1QFY18).

n

Operating margin performance exceeded our expectation. Other expenses

declined 90bp YoY to 20.5% of sales (the company has not been disclosing

adspend details for the past five quarters; clubs it with other expenses).

Consol. EBITDA margin contracted 40bp YoY to 13% (est. of 12.4%) in 1QFY18.

EBITDA grew 2.8% YoY (est. of -3.8%) to INR2.9b.

n

Higher tax rate at 34.4% (est. 32%) led to adj. PAT decline of 1.5% YoY (est. of -

2.4%) to INR2.2b.

n

Standalone

sales and EBITDA increased 6.6% and 2.9%, respectively, while adj.

PAT fell 0.8% YoY. Gross margin (37.4%) contracted by 130bp YoY and

operating margin (13%) by 50bp YoY.

n

Subsidiary

sales, EBITDA and PAT posted 6% decline, 1% growth and 16%

decline, respectively.

View

n

We currently have a

Buy

rating on the stock. We will review our numbers post

the conference call.

Conference Call Details

Date:

9 August 2017

Time:

03:00pm IST

Dial-in details:

+91-22-3960 0715

th

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

89.6

101.5

Net Sales

11.9

13.8

EBITDA

8.8

10.3

NP

73.7

85.4

EPS (INR)

7.3

16.0

EPS Gr. (%)

224.7

272.4

BV/Sh. (INR)

36.9

34.4

RoE (%)

31.1

28.7

RoCE (%)

55.7

48.1

P/E

41.1

35.0

EV/EBITDA

2019E

118.7

17.2

12.7

105.5

23.5

335.0

34.7

29.5

38.9

27.8

Quarterly Performance

Y/E March

Base business volume growth (%)

Net Sales

YoY Cha nge (%)

COGS

Gross Profit

Ma rgi ns (%)

Other Opera ti ng Exp

% of Sa l es

EBITDA

Ma rgi ns (%)

YoY Growth (%)

Depreci a ti on

Interes t

Other Income

PBT

Ta x

Ra te (%)

Adjusted PAT

YoY Cha nge (%)

1Q

10.0

21,063

8.5

12,879

8,184

38.9

5,367

25.5

2,817

13.4

3.5

279

15

739

3,263

1,071

32.8

2,192

13.2

E: MOSL Estimates

FY17

2Q

3Q

10.0

2.0

23,612 22,648

11.0

5.6

14,902 14,190

8,709

8,458

36.9

37.3

5,578

5,504

23.6

24.3

3,131

2,954

13.3

13.0

2.0

0.3

289

303

15

11

670

561

3,496

3,201

1,156

997

33.1

31.1

2,340

2,204

5.8

4.6

4Q

2.0

22,444

5.2

13,915

8,528

38.0

5,448

24.3

3,081

13.7

6.1

322

13

335

3,081

973

31.6

2,108

5.9

1Q

1.0

22,248

5.6

13,873

8,375

37.6

5,479

24.6

2,896

13.0

2.8

332

13

741

3,293

1,133

34.4

2,160

-1.5

FY18

2QE

3QE

10.0

9.0

27,389 26,045

16.0

15.0

17,013 16,058

10,376

9,987

37.9

38.3

6,608

6,460

24.1

24.8

3,769

3,527

13.8

13.5

20.4

19.4

376

394

15

11

737

617

4,114

3,739

1,316

1,197

32.0

32.0

2,798

2,543

19.5

15.4

4QE

9.0

25,840

15.1

15,810

10,030

38.8

6,456

25.0

3,574

13.8

16.0

488

16

863

3,934

1,180

30.0

2,754

30.7

FY17

FY18E

6.0

7.1

89,623 101,522

7.4

13.3

55,887 62,754

33,736 38,768

37.6

38.2

21,872 25,003

24.4

24.6

11,864 13,766

13.2

13.6

-5.1

16.0

1,193

1,589

55

55

2,424

2,958

13,040 15,079

4,197

4,825

32.2

32.0

8,843 10,254

7.3

16.0

FY18 Variance

1QE

(%)

0.0

21,906

1.6

4.0

13,613

8,293

1.0

37.9

5,582

25.5

2,711

6.8

12.4

-3.8

362

15

813

3,147

4.6

1,007

32.0

2,140

0.9

-2.4

(INR Million)

8 August 2017

7

Amara Raja Batteries

BSE SENSEX

32,274

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

10,057

AMRJ IN

171

140.5 / 2.2

1077 / 788

-7/-21/-24

348

47.9

7 August 2017

1QFY18 Results Update | Sector: Automobiles

CMP: INR228

n

TP: INR310(+36%)

Buy

Below estimate; adverse mix, competitive pressure dent profitability

Revenues in-line led by healthy growth in Automotive and Inverters:

Net sales

grew 14.5% YoY (+11.4% QoQ) to INR14.9b (in-line), driven by growth in Auto

and Inverters, while Industrial segment remained subdued. Auto segment

growth could have been better if not for the GST impact (on inventory).

Telecom segment declined ~10%, while UPS also witnessed marginal de-

growth. Inverters segment, however, grew 150% on a lower base.

Multi-quarter-low EBITDA margin at 12.9%:

EBITDA margin contracted 450bp

YoY (-250bp QoQ) to 12.9% (est. of 15%), primarily due to adverse mix (decline

in Telecom), sub-optimal utilization in inverter batteries, and the lack of lead

price pass-through in Telecom and UPS. Higher tax further restricted PAT,

resulting in a decline of 24% YoY to ~INR1b (est. of ~INR1.3b).

Takeaways from management interaction:

a) Registered volume growth in

Automotive segment, and continues to gain market share with OEMs. In

Replacement segment, volumes could have been higher, but due to GST

implementation, dealers restricted purchases. b) Took price hike in

Automotive segment, while intense competition in Telecom and UPS led to no

price pass-through. c) Lead cost for 1QFY18 was USD2,270; expects it remain

stable for next six months. d) Capex of INR5b in FY18. AMRJ is adding 2W

battery capacity of 4m (taking total 2W capacity to 15m by Mar-18) and 4W

battery capacity of 2.5m by 2QFY18 (taking total capacity to 10.5m).

Valuation view:

We cut our EPS estimates by 20%/10% for FY18/FY19 to factor

in higher RM cost, depreciation and tax rate. Significant FCF generation

(~INR9.6b over FY18-20E) and stable RoE of ~19%, coupled with potential shift

from unorganized to organized players due to GST, would continue to drive

stock re-rating. The stock trades at 29.1x/21.7x FY18/19E EPS. Maintain Buy

with a TP of INR986 (25x June 2019 EPS).

FY18

FY17 FY18E

2QE

3QE

4QE

15,877 15,538 15,687 53,172 62,076

18.0

17.0

16.7

15.1

16.7

68.0

68.0

68.1

65.6

68.5

4.8

5.0

4.8

4.7

4.2

12.8

12.9

14.3

13.9

11.6

2,278 2,188 2,010 8,499 8,405

14.4

14.1

12.8

16.0

13.5

520

550

521 1,912 2,136

14

12

12

58

51

175

220

118

492

650

1,919 1,846 1,596 7,022 6,868

31.0

31.0

28.4

31.9

31.0

1,324 1,274 1,142 4,785 4,739

-2.8

13.4

15.2

-2.7

-1.0

(INR Million)

FY18

1QE VAR (%)

14,793

1.2

12.0

67.0 300bp

4.9

50bp

13.0 -130bp

2,234

-13.7

15.1 -220bp

505

7.8

12

14.2

150

-8.8

1,867

-19.2

31.0

1,288

-22.4

-1.4

Financials & Valuations (INR b)

2018E 2019E 2020E

Y/E Mar

Net Sales

62.1

73.6

86.9

EBITDA

8.7

11.4

13.5

PAT

4.8

6.5

7.9

28.0

28.2

37.9

EPS (INR)

0.8

34.4

22.6

Gr. (%)

175

206

244

BV/Sh (INR)

17.3

19.9

20.7

RoE (%)

16.5

19.0

19.8

RoCE (%)

29.4

29.1

21.7

P/E (x)

5.4

4.7

4.0

P/BV (x)

n

n

Estimate change

TP change

Rating change

n

Quarterly Performance

Y/E March (INR m)

Net Sales

YoY Change (%)

RM Cost (% of sales)

Staff Cost (% of sales)

Other Exp (% of sales)

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT

Rate (%)

Adj PAT

YoY Change (%)

E: MOSL Estimates

1Q

13,081

15.0

65.7

5.0

11.9

2,273

17.4

441

14

90

1,908

31.5

1,307

8.0

FY17

2Q

3Q

4Q

13,455 13,280 13,445

16.9

9.5

17.4

64.3

65.0

68.0

5.2

5.4

5.2

13.5

14.1

13.0

2,297 2,051 1,844

17.1

15.4

13.7

457

480

499

15

14

15

120

133

151

1,945 1,689 1,480

29.9

33.5

33.0

1,363 1,123

992

10.4

-17.9

-9.1

1Q

14,975

14.5

70.0

5.4

11.7

1,929

12.9

544

14

137

1,508

33.7

999

-23.6

8 August 2017

8

Eveready Industries

BSE SENSEX

32,274

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

10,057

7 August 2017

1QFY18 Results Update | Sector: Others

CMP: INR310

TP: INR358(+15%)

Buy

EVRIN IN

73

n

22.5 / 0.4

359 / 190

-15/10/13

49

56.0

LED segment robust; Flashlight segment to recover from GST setbacks

Revenue in-line, EBITDA and PAT below estimates:

EVRIN reported overall

revenue of INR3,577m (est. of INR3,457m) in 1QFY18 v/s INR3,718m in

1QFY17, marking de-growth of 3.8%, mainly due to a significant drop of 10%

YoY in battery volumes and 8% in flashlight turnover. Growth in the lighting

segment remained flattish, but LED products witnessed robust turnover growth

of 179% YoY. EBITDA declined 26% YoY to INR279m (est. of INR315m), with the

margin contracting 230bp to 7.8% (est. of 9.1%) on account of a significant rise

of 200bp in employee cost (11.3% of net sales v/s est. of 10%). Adj. PAT thus

fell 39.4% YoY to INR136m (est. INR169m).

Growth to accelerate backed by LED and appliances:

Appliances segment’s

revenues grew strongly by 257% YoY to ~INR180m in 1QFY18. The company’s

expectation of turnover of INR1b in FY18 from the segment would allow it to

capture ~1% of the market share, and thus, capitalize on the significant

opportunity to grow. LED products too witnessed robust turnover growth of

179% YoY to INR503m, keeping growth in lighting flattish (in spite of de-growth

in CFL), with EBITDA margin of ~7%. On account of higher margin in LED

products and changing product mix, the overall margin in the lighting segment

is expected to inch higher. Moreover, with the GST transitional phase almost

over, demand is expected to pick up, also helped by early festive season and

good monsoon.

Valuation and view:

EVRIN is expected to reap the benefits of robust growth in

LED and appliances, along with the batteries and flashlight segments

recovering from GST turbulence. We thus maintain our earnings estimates,

with revenue/PAT CAGR of 10%/13% over FY17-19E. We value the stock at 22x

FY19E EPS, and maintain

Buy

with a target price of INR358.

Financials & Valuations (INR b)

Y/E Mar

2017 2018E 2019E

Net Sales

13.6

14.9

16.6

EBITDA

1.3

1.5

1.7

n

PAT

0.9

1.0

1.2

EPS (INR)

12.9

13.6

16.3

Gr. (%)

35.5

6.0

19.3

BV/Sh (INR)

39.8

48.8

59.2

RoE (%)

37.7

30.8

30.1

RoCE (%)

27.5

24.1

25.5

P/E (x)

24.1

22.7

19.1

P/BV (x)

7.8

6.4

5.2

Estimate change

TP change

Rating change

n

8 August 2017

9

Metals Weekly

Domestic steel prices gain, sponge prices rise sharply

n

7 August 2017

Update

n

n

n

n

Indian steel: Long product (TMT Mumbai) prices were up ~2% WoW. Sponge iron prices were up ~5% WoW,

following ~4% increase last week. Domestic scrap prices were up ~3% WoW. Domestic iron ore and pellet

prices were unchanged. Domestic HRC prices were up ~4% WoW, while import HRC price offers were up ~2%

WoW.

Raw materials: Iron ore prices (China cfr) were up ~8% WoW. Chinese iron ore port inventories were

unchanged. Thermal coal prices were unchanged. Coking coal prices were up ~6% WoW on strong buying

activity in China. China’s pellet import prices were down ~4% WoW, as premium over iron ore remains strong.

Europe: HRC prices were up ~4% WoW. EU steel spreads improved on higher steel prices, partly offset by

increase in iron ore and coking coal. CIS export HRC prices were down ~2% WoW. Rotterdam scrap prices were

up ~2% WoW.

China: Local HRC prices were up ~3% WoW, while rebar prices were up ~4% WoW. Export HRC/rebar prices

were up ~2 WoW.

Base metals: Aluminum (cash LME) was unchanged. Zinc (cash LME) was up ~1% WoW, while lead was up ~3%

WoW. Copper was up ~1% WoW. Crude oil (Brent) prices were unchanged.

8 August 2017

10

July 2017 Results Preview | Sector: Financials - Banks

Bank of India

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

BOI IN

1055.4

144 / 2

197 / 100

-6 / 10 / 11

n

CMP: INR137

n

TP: INR147 (+7%)

Neutral

Financial Snapshot (INR b)

Y/E March

2017 2018E 2019E 2020E

NII

118.3 130.1 142.4 156.7

OP

97.3 88.4 95.0 103.0

NP

-15.6 14.5 23.2 32.0

NIM (%)

2.1

2.3

2.3

2.2

EPS (INR)

-14.8 13.7 22.0 30.3

EPS Gr. (%)

NM

NM 60.5 37.8

ROE (%)

-6.7

6.1

9.0 11.2

ROA (%)

-0.3

0.2

0.3

0.4

BV/Sh. (INR)

219

233

255

285

ABV/Sh. (INR)

63

111

153

187

Div. Payout (%)

0.0

0.0

0.0

0.0

Valuations

P/E(X)

-9.3 10.0

6.2

4.5

P/BV (X)

0.63 0.59 0.54 0.48

P/ABV (X)

2.17 1.24 0.89 0.73

n

n

n

Continued asset quality strain and capital conservation efforts

have led to multiple quarters of muted loan growth. We expect

1QFY18 loan growth to be 2% QoQ (+3% YoY). Deposit growth is

expected to come in strong at 9.5% YoY (+1% QoQ) owing to

strong CASA inflows over the last two quarters.

We expect NIM to improve ~22bp YoY to ~2.3%, given that

1QFY17 was impacted by interest income reversals; however,

NIMs will contract ~18bp QoQ as 4QFY17 had a large one-off

component (IT refund). Overall NII is expected to grow 16% YoY.

Contribution of non-interest income is likely to fall sharply from

previous quarters, given lower trading gains. Fee income is

expected to remain muted.

We expect stress additions to moderate, but remain high during

the quarter (slippage ratio ~4%), leading to elevated provisioning.

We expect operating profit to increase sharply to 13% YoY, led by

strong NII growth and controlled opex performance. BOI trades at

0.5x FY19E BV and 6.2x FY19E EPS.

Neutral.

Key issues to watch for

Ø

Stress addition trends and outlook for FY18.

Ø

Upgrade/recovery trends.

Ø

Outlook on balance sheet growth and further capital infusion.

Quarterly Performance

Net Interest Income

% Change (Y-o-Y)

Other Income

Net Income

Operating Expenses

Operating Profit

% Change (Y-o-Y)

Other Provisions

Profit before Tax

Tax Provisions

Net Profit

% Change (Y-o-Y)

Operating Parameters

NIM (Cal, %)

Deposit Growth (%)

Loan Growth (%)

Tax Rate (%)

Asset Quality

Gross NPA (INR b)

Gross NPA (%)

E: MOSL Estimates

1Q

27,752

-4.7

12,384

40,136

23,597

16,539

-3.0

27,702

-11,163

-3,750

-7,414

NM

2.0

-2.0

-5.2

33.6

518.7

13.4

FY17

2Q

3Q

27,197 28,626

-9.9

5.7

20,106 17,693

47,304 46,319

22,375 21,734

24,928 24,584

70.9

74.5

22,962 23,026

1,966

1,559

698

542

1,268

1,017

NM

NM

2.0

-3.8

-4.8

35.5

522.6

13.5

2.0

2.6

-5.4

34.7

517.8

13.4

4Q

34,686

8.8

17,540

52,226

20,951

31,275

113.6

47,362

-16,087

-5,632

-10,455

NM

2.5

5.3

2.0

35.0

520.4

13.2

1QE

32,181

16.0

13,065

45,246

24,052

21,194

28.1

16,500

4,694

1,619

3,075

NM

2.3

9.5

2.7

34.5

509.1

12.7

FY18E

2QE

3QE

32,185 32,551

18.3

13.7

13,614 12,815

45,799 45,366

24,342 24,242

21,457 21,124

-13.9

-14.1

16,500 16,500

4,957

4,624

1,710

1,595

3,247

3,029

156.0

197.8

2.2

9.0

4.4

34.5

489.6

12.1

2.2

2.5

6.9

34.5

471.1

11.5

4QE

33,163

-4.4

15,054

48,217

23,571

24,647

-21.2

16,833

7,814

2,696

5,118

NM

2.3

5.0

7.5

34.5

451.3

10.8

(INR Million)

FY17

118,261

0.9

67,723

185,984

88,658

97,326

61.3

121,052

-23,726

-8,142

-15,584

NM

2.1

5.3

2.0

34.3

520.4

13.2

FY18E

130,081

10.0

54,548

184,628

96,206

88,422

-9.1

66,333

22,089

7,621

14,468

NM

2.2

5.0

7.5

34.5

451.3

10.8

8 August 2017

11

June 2017 Results Preview | Sector: Automobiles

Endurance Technologies

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

ENDU IN

140.7

66 / 1

549 / 138

6 / 27 / 258

n

n

n

n

CMP: INR875

n

TP: INR1,025(+17%)

Buy

Financial Snapshot (INR Billion)

Y/E Mar

2017 2018E 2019E 2020E

Sales

EBITDA

NP

Adj EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

EV/Sales (x)

37.3

7.1

17.0

2.3

28.7

5.9

13.9

1.9

22.5

4.9

11.6

1.7

18.4

4.1

9.7

1.4

55.7

7.4

3.3

23.5

9.9

20.8

15.6

64.3

8.9

4.3

30.5

29.9

22.4

18.8

73.3

10.5

5.5

38.8

27.2

23.6

21.0

84.7

12.2

6.7

47.5

22.4

24.2

22.6

We expect 10% YoY (and 16% QoQ) growth in consolidated

revenue to INR15.8b, led by strong performance in domestic as

well as export segments.

Consolidated EBITDA would grow 17% YoY (and 23% QoQ), led by

healthy growth in operating performance of European subsidiary.

EBITDA margin is likely to improve 83bp YoY (and 83bp QoQ) to

13.7%.

We expect PAT to grow 21.6% YoY (and 21% QoQ) to INR1.01b.

The stock trades at 28.7x FY18E and 22.5x FY19E EPS. Maintain

Buy.

122.9 149.0 179.4 212.7

Key issues to watch for

Ø

Update on capacity expansion plan at Chennai plant and

investment thereof.

Ø

Update on new suspension products and ABS (recent tie-up with

BWI).

Ø

EU business: level of ramp-up at new plant in Germany.

Consolidated - Quarterly

Y/E March (INR m)

Net Sales

YoY Change (%)

RM Cost (% of sales)

Staff Cost (% of sales)

Other Expenses (% of sales)

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT

Tax

Eff. Tax Rate (%)

Reported PAT

YoY Change (%)

E: MOSL Estimates

1Q

14,381

13.1

58.1

9.8

19.3

1,844

12.8

684

104

110

1,166

334

28.7

832

8.9

FY17

2Q

3Q

14,482 13,203

7.5

2.4

57.8

57.8

8.9

10.5

19.4

18.3

2,008

1,769

13.9

13.4

699

741

81

88

54

73

1,281

1,014

388

271

30.3

26.7

893

743

14.8

13.6

4Q

13,661

3.7

58.0

10.0

19.1

1,751

12.8

781

49

265

1,186

351

29.6

835

3.3

1QE

15,819

10.0

57.4

9.8

19.0

2,159

13.7

775

55

100

1,429

418

29.3

1,011

21.6

FY18E

2QE

3QE

16,518 15,808

14.1

19.7

58.3

57.8

8.8

9.7

18.7

18.4

2,309

2,207

14.0

14.0

790

790

57

57

105

110

1,567

1,470

445

425

28.4

28.9

1,121

1,046

25.6

40.7

FY17

4QE

16,130

18.1

58.1

9.9

17.9

2,268

14.1

845

57

200

1,566

452

28.8

1,114

33.4

55,739

6.6

57.9

9.8

19.0

7,393

13.3

2,905

322

481

4,646

1,343

28.9

3,303

9.9

FY18E

64,275

15.3

57.9

9.5

18.6

8,943

13.9

3,200

226

515

6,032

1,740

28.8

4,292

29.9

8 August 2017

12

June 2017 Results Preview | Sector: Healthcare

GSK Pharma

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

GLXO IN

84.7

214 / 3

3540 / 2309

3 / -25 / -42

CMP: INR2,527 TP:INR2,700(7%)

Neutral

Financial Snapshot (INR Billion)

Y/E MARCH

2017 2018E 2019E 2020E

Sales

EBITDA

NP

EPS (INR)

EPS Gro. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA

(x)

D. Yield (%)

73.5

15.8

60.0

2.9

48.6

19.3

41.2

2.9

42.1

22.9

33.9

2.9

38.9

22.9

30.5

2.9

29.3

3.5

2.9

34.4

-22.2

159.5

21.5

19.1

32.8

5.1

4.4

51.9

51.2

131.0

39.7

35.7

36.7

6.2

5.1

60.1

15.6

110.5

54.4

49.7

41.1

6.9

5.5

64.9

8.0

110.5

58.7

58.6

n

In 1QFY18, we expect GlaxoSmithKline Pharmaceuticals (GLXO) to

report modest 12% YoY increase in revenues to INR7.7b.

n

EBITDA is expected to increase ~73% YoY to INR1.2b due to

expansion in margin by 560bp to 15.8%.

n

Decline in EBITDA margin will impact adj. PAT, which is expected to

decline ~2% YoY to INR881m. Growth and profitability are expected

to gradually improve with volume ramp-up in key NLEM products.

n

We believe GLXO has strong parent support, superior brand

portfolio (competitive advantage), high payout ratio (>100%) and

industry-leading return ratios (RoCE of ~50%). We maintain our

Neutral rating with a target price of INR2,700 @ 45x FY19E PER.

Key issues to watch out

Ø

New product introductions in FY18E.

Ø

Market performance of products impacted by DPCO 2013.

Quarterly performance

Y/E March

(Standalone)

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Other Income

PBT before EO Expense

Tax

Rate (%)

Adjusted PAT

YoY Change (%)

Margins (%)

Extra-Ord Expense

Reported PAT

1Q

6,852

10.2

6,150

702

10.2

54

441

1,090

386

35.4

705

-26.4

10.3

-18

723

FY17

2Q

7,829

11.8

6,584

1,245

15.9

66

343

1,522

536

35.2

987

-4.5

12.6

-2

988

3Q

6,893

-5.4

6,543

350

5.1

66

319

603

252

41.8

351

-57.8

5.1

-179

530

4Q

7,634

11.3

6,469

1,165

15.3

78

351

1,438

570

39.6

869

-3.3

11.4

-259

1,127

1QE

7,674

12.0

6,462

1,213

15.8

74

506

1,645

584

35.5

1,061

50.6

13.8

0

1,061

FY18E

2QE

8,768

12.0

7,383

1,385

15.8

74

506

1,817

645

35.5

1,172

18.8

13.4

0

1,172

3QE

7,720

12.0

6,500

1,220

15.8

74

506

1,652

586

35.5

1,065

203.8

13.8

0

1,065

4QE

8,606

12.7

7,331

1,276

14.8

74

506

1,708

606

35.5

1,102

26.8

12.8

0

1,102

(INR million)

FY17

29,265

6.8

25,810

3,455

11.8

264

1,463

4,655

1,744

37.5

2,911

-22.2

9.9

-457

3,368

FY18E

32,769

12.0

27,675

5,094

15.5

296

2,024

6,822

2,422

35.5

4,400

51.2

13.4

0

4,400

8 August 2017

13

June 2017 Results Preview | Sector: Media

Jagran Prakashan

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

JAGP IN

326.9

61 / 1

213 / 163

4 / -15 / -10

CMP: INR186

n

n

n

n

n

n

TP: INR225 (+21%)

Buy

Financial Snapshot (INR Billion)

Y/E March

2017 2018E 2019E 2020E

Net Sales

EBITDA

Adj. NP

Adj. EPS (INR)

Adj.EPS Gr (%)

BV/Sh (INR)

RoE (%)

RoCE (%)

Div. Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

Div. Yield (%)

17.3

2.5

8.3

1.6

15.1

2.5

7.2

1.6

13.3

2.1

6.2

1.6

12.0

1.9

5.2

1.6

22.8

6.4

3.5

10.8

2.7

73.7

17.6

15.2

33.6

24.6

7.0

3.9

12.3

14.1

74.5

16.4

14.7

28.7

26.6

7.6

4.4

14.0

14.1

86.4

17.2

15.6

25.7

28.8

8.4

4.8

15.5

10.7

98.3

16.8

15.3

23.2

We expect Print advertising revenue to grow 4% YoY to INR3.63b.

We expect circulation revenue to grow 4% YoY to INR1.11b.

We estimate Radio revenue at INR0.69b and EBITDA at INR0.21b.

Aggregate revenue is expected to grow 5% YoY to INR5.85b.

We estimate EBITDA at INR1.6b and EBITDA margin at 27.4%.

Adjusted earnings are expected at INR0.9b, up 8% YoY.

We revise our TP to INR225 (16x FY19E EPS). The stock trades at

15.1x FY18E and 13.3x FY19E EPS. Buy.

Key things to watch for

Ø

YoY Print ad growth (we expect 4%).

Ø

YoY ad growth (Print+Radio) (we expect 6.6%).

Ø

EBITDA margin (we expect 27.4%).

Quarterly Performance (Consolidated)

Y/E March

Sales

YoY (%)

Operating expenses

EBITDA

YoY (%)

EBITDA margin (%)

Depreciation

Interest

Other Income

Exceptional item

PBT

Tax

Effective Tax Rate (%)

Share of Profit/(loss) of assoc./MI

Adjusted net profit

YoY (%)

1Q

5,580

17.5

4,034

1,546

15.3

27.7

244

139

89

0

1,252

407

32.5

840

8.9

FY17

2Q

4,590

-9.4

3,377

1,213

-14.3

26.4

209

91

164

0

1,077

351

32.6

726

1.7

3Q

6,041

4.8

4,162

1,878

9.1

31.1

276

100

88

0

1,591

549

34.5

1,041

11.6

4Q

5,620

6.7

4,188

1,432

7.6

25.5

297

100

145

0

1,180

342

29.0

832

7.3

1QE

5,847

4.8

4,247

1,600

3.5

27.4

320

40

116

0

1,355

447

33.0

902

7.4

FY18

2QE

5,964

29.9

4,293

1,671

37.8

28.0

330

40

93

0

1,394

460

33.0

928

27.8

(INR Million)

FY17

FY18E

3QE

6,561

8.6

4,549

2,013

7.1

30.7

340

35

78

0

1,716

566

33.0

1,144

9.8

4QE

6,203

10.4

4,488

1,715

19.7

27.6

348

32

65

0

1,399

462

33.0

932

12.0

22,829

16,435

6,395

8.5

28.0

1,289

350

412

0

5,167

1,675

32.4

-17

3,476

5.9

24,575

17,616

6,959

8.8

28.3

1,338

147

351

0

5,825

1,922

33.0

-17

3,886

11.8

Note: Only 1QFY17 & 1QFY18 numbers comparable as both are on a consolidated basis

8 August 2017

14

June 2017 Results Preview | Sector: Metals

Jindal Steel & Power

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

JSP IN

914.9

114 / 2

132 / 58

-5 / 43 / 86

n

CMP: INR129

n

TP: 190 (+40%)

Buy

Financial Snapshot (INR Billion)

Y/E March

2017 2018E 2019E 2020E

Sales

EBITDA

Adj. PAT

Adj. EPS (INR)

EPS Gr (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV

EV/EBITDA (x)

Div. Yield (%)

-6.3

0.4

12.3

0.0

-7.6

0.4

9.7

0.0

54.0

0.4

6.7

0.0

21.6

0.4

6.0

0.0

216.2 254.7 313.4 336.8

46.6

-19.1

-20.9

14.8

-7.9

1.0

0.0

60.6

-15.7

-17.2

78.4

2.2

2.4

82.8

5.6

6.1

n

-17.8 -114.1 149.7

-5.4

1.8

0.0

0.8

3.9

0.0

1.9

4.5

0.0

Standalone:

We expect standalone EBITDA to increase 22% YoY (-

12% QoQ) to INR8b on higher steel volumes and spreads.

Standalone steel sales volumes are up 10% YoY (-7% QoQ) to

858kt.

Jindal Power:

We expect Jindal Power EBITDA to increase 42%

YoY to INR3.3b, driven by higher generation (+51% YoY) and

margins. Lower coal prices and higher seasonal merchant prices

are driving margins.

Oman:

We estimate EBITDA to be marginally lower QoQ at

INR1.9b on lower steel prices.

328.5 310.8 312.8 318.5

Key issues to watch for:

Ø

Ramp-up of Angul.

Ø

Power demand growth.

Quarterly Performance (Consolidated)

Y/E March

Net Sales

Change (YoY %)

Total Expenditure

EBITDA

Change (YoY %)

As % of Net Sales

Interest

Depreciation

Other Income

PBT (before EO item)

Extra-ordinary Income

PBT (after EO item)

Total Tax

% Tax

Reported PAT

MI - Loss/(Profit)

Associate

Adjusted PAT

Change (YoY %)

E: MOSL Estimates

1Q

46,962

-1.2

37,121

9,841

-3.3

21.0

8,529

9,171

312

-7,548

-6,257

-13,805

-1,410

10.2

-12,395

-1,560

14

-4,564

34.5

FY17

2Q

48,609

-3.6

40,125

8,484

-13.1

17.5

8,716

9,986

7

-10,211

0

-10,211

-2,739

26.8

-7,473

-2

11

-7,460

317.8

3Q

55,812

21.5

43,045

12,767

132.0

22.9

8,353

10,274

3

-5,856

0

-5,856

-1,306

22.3

-4,551

-458

18

-4,074

-38.7

4Q

64,861

27.7

49,340

15,521

73.1

23.9

8,642

10,059

90

-3,090

2,534

-556

428

-76.9

-984

-505

-16

-3,029

-37.4

1QE

56,759

20.9

43,176

13,582

38.0

23.9

7,670

11,117

1

-5,204

0

-5,204

15

-0.3

-5,219

-23

100

-5,096

11.6

FY18

2QE

57,782

18.9

43,909

13,874

63.5

24.0

7,698

11,173

1

-4,996

0

-4,996

16

-0.3

-5,012

-23

100

-4,889

-34.5

3QE

66,882

19.8

50,817

16,066

25.8

24.0

7,622

11,873

1

-3,428

0

-3,428

17

-0.5

-3,445

-23

100

-3,322

-18.5

4QE

73,271

13.0

56,153

17,118

10.3

23.4

7,700

11,935

1

-2,516

0

-2,516

18

-0.7

-2,534

-23

100

-2,411

-20.4

(INR Million)

FY17

216,243

11.1

169,631

46,613

35.5

21.6

34,240

39,490

411

-26,706

-3,723

-30,429

-5,027

16.5

-25,402

-2,524

27

-19,128

14.8

FY18E

254,694

17.8

194,055

60,639

30.1

23.8

30,690

46,098

5

-16,143

0

-16,143

66

-0.4

-16,209

-91

400

-15,718

-17.8

8 August 2017

15

June 2017 Results Preview | Sector: Agri

Kaveri Seed

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

KSCL IN

69.1

44 / 1

682 / 325

2 / 38 / 30

n

CMP: INR644

n

TP: INR755 (+17%)

Buy

We expect revenue to grow 18% YoY to INR5,829m in 1QFY18.

Cotton revenue is expected to be strong in FY18 due to increase

in cotton prices.

We expect EBITDA margin to expand 90bp to 32.9% and EBITDA

to grow 21% to INR1,918m in 1QFY18.

We expect adjusted PAT of INR1,864m in 1QFY18, as against

INR1,544m in the year-ago period.

Buy.

Financial Snapshot (INR Billion)

Y/E March

2017 2018E 2019E 2020E

Sales

EBITDA

NP

EPS (INR)

EPS Gr. (%)

BV/Sh (INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

Div Yield (%)

33.8

4.4

31.8

0.5

20.6

4.7

21.1

2.2

17.1

4.2

17.3

2.5

15.1

3.7

15.1

2.5

7.0

1.4

0.8

19.1

-21.4

13.6

16.0

32.2

8.1

2.1

2.1

31.3

64.4

21.6

23.4

57.4

9.3

2.5

2.5

37.7

20.4

26.0

28.1

54.1

10.5

2.8

2.8

42.8

13.3

25.9

28.0

47.7

n

146.8 136.5 153.8 176.2

Key things to watch for

Ø

Inventory and write-off in FY18.

Ø

Ø

Rise in cotton acreages with rise in prices.

Cotton yields.

Quarterly Performance

Y/E March

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before EO expense

PBT

Tax

Rate (%)

Minority Interest & P&L of Asso. Cos.

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOSL Estimates

1Q

4,940

-8.4

3,357

1,583

32.0

78

0

54

1,559

1,559

15

1.0

0

1,544

1,544

-29.6

31.3

FY17

2Q

678

2.2

644

34

5.0

72

0

170

132

132

54

41.1

0

77

77

NM

11.4

3Q

679

-2.7

644

34

5.0

69

0

101

66

-527

30

-5.7

0

-557

69

-40.9

10.2

4Q

403

-1.9

675

-272

-67.4

66

0

18

-320

-912

-40

4.4

0

-872

-306

NM

-75.9

1QE

5,829

18.0

3,911

1,918

32.9

82

0

49

1,885

1,885

21

1.1

0

1,864

1,864

20.7

32.0

FY18

2QE

3QE

813

814

20.0

20.0

694

661

119

153

14.6

18.8

89

76

2

2

182

117

210

192

210

192

44

38

21.0

20.0

0

0

166

153

166

153

113.7

120.9

20.4

18.8

4QE

484

20.0

554

-71

-14.6

80

0

48

-103

-103

-4

4.2

0

-99

-99

-67.7

-20.4

(INR Million)

FY17

FY18E

7,050

-1.6

5,654

1,395

19.8

302

2

344

1,435

843

70

8.3

773

1,316

-55.1

18.7

8,052

14.2

5,959

2,094

26.0

327

5

396

2,157

2,157

86

4.0

2,071

2,071

57.3

25.7

8 August 2017

16

June 2017 Results Preview | Sector: Financials

Muthoot Finance

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

MUTH IN

399.5

180 / 3

481 / 261

6 / 40 / 42

CMP: INR450

n

n

n

n

TP: INR550 (+22%)

Buy

Financial Snapshot (INR b)

Y/E March

NII

PPP

PAT

EPS (INR)

BV/Sh.(INR)

RoA - AUM (%)

RoE (%)

Div. Yld. (%)

P/E (x)

P/BV (x)

2017 2018E 2019E 2020E

33.6

22.0

11.8

29.5

4.6

19.4

1.3

15.2

2.8

39.5

26.6

16.4

41.0

5.6

23.2

2.7

11.0

2.4

44.6

30.0

18.8

47.1

5.5

23.0

3.1

9.6

2.1

51.2

34.8

21.8

54.5

5.6

23.0

3.6

8.3

1.8

n

n

n

AUM is expected to grow 10% YoY and 4.4% QoQ to INR285b.

Calculated margins are likely to improve YoY to 13% led by decline

in funding costs.

As a result, NII is expected to grow 22% YoY to INR9b.

Asset quality is likely to remain largely stable. GNPL ratio in the

prior quarter was 2.06%.

We estimate provisions of INR300m as against INR176m in 1QFY17.

PAT is expected to grow 29% YoY to INR3.5b

The stock trades at 2.4x FY18E and 2.1x FY19E BV. Maintain Buy.

163.1 189.2 219.2 253.9

Key issues to watch for

Ø

Management commentary on business growth and steps taken to

sustain AUM growth.

Ø

Plan of branch expansion.

Ø

Movement in yields and margins, with declining cost of funds.

Ø

Progress in gold auctions.

Quarterly Performance

Y/E March

Income from operations

Other operating income

Total Operating income

YoY Growth (%)

Other income

Total Income

YoY Growth (%)

Interest Expenses

Net Income

Operating Expenses

Operating Profit

YoY Growth (%)

Provisions

Profit before Tax

Tax Provisions

Net Profit

YoY Growth (%)

E: MOSL Estimates

1Q

12,712

252

12,964

13.7

44

13,008

13.8

5,571

7,437

3,025

4,413

50.1

176

4,237

1,534

2,703

47.6

FY17

2Q

3Q

13,497 13,225

320

184

13,817 13,409

21.6

17.8

45

56

13,862 13,464

21.6

18.0

5,937

5,970

7,925

7,494

3,130

3,000

4,795

4,495

69.5

51.2

171

39

4,624

4,456

1,657

1,545

2,967

2,911

70.0

55.9

4Q

16,962

135

17,096

18.2

36

17,132

18.0

5,460

11,672

3,449

8,223

35.9

2,330

5,893

2,675

3,218

21.3

1QE

14,417

200

14,617

12.8

45

14,662

12.7

5,624

9,038

3,380

5,658

28.2

300

5,358

1,875

3,483

28.9

FY18E

2QE

3QE

14,850 15,592

225

200

15,075 15,792

9.1

17.8

50

55

15,125 15,847

9.1

17.7

5,905

6,260

9,220

9,588

3,482

3,482

5,738

6,106

19.7

35.9

200

600

5,538

5,506

1,938

1,927

3,600

3,579

21.3

23.0

(INR Million)

FY17

FY18E

4QE

18,368

275

18,643

9.0

71

18,714

9.2

5,938

12,776

3,652

9,124

11.0

355

8,769

3,069

5,700

77.1

56,395

891

57,286

17.8

181

57,467

17.9

22,938

34,529

12,603

21,926

48.2

2,716

19,211

7,411

11,799

45.7

63,228

900

64,128

11.9

221

64,348

12.0

23,726

40,622

13,996

26,627

21.4

1,455

25,172

8,810

16,362

38.7

8 August 2017

17

June 2017 Results Preview | Sector: Diversified

SRF

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

SRF IN

57.4

89 / 1

1970 / 1296

-5 / -17 / 4

n

CMP: INR1,556

n

TP: INR1,816 (+17%)

Buy

Flouro-chemicals (refrigerants) exports business is expected to

benefit on account of anti-dumping duty levied on Chinese R-

134a in the US.

Weak global agri-chem environment is expected to continue to

impact Specialty Chemicals business in 1HFY18.

We expect SRF’s revenue to decline 6% YoY to INR11.4b, and

EBITDA to decrease 14% YoY to INR2.4b. We expect EBITDA

margin to decline 200bp YoY to 21.3%, and adjusted PAT to de-

grow 24% YoY to INR1.06b.

Buy.

Financial Snapshot (INR Billion)

Y/E March

2017 2018E 2019E 2020E

Sales

EBITDA

NP

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

EV/Sales (x)

18.1

2.9

11.2

2.2

18.0

2.5

10.0

1.9

14.2

2.2

8.0

1.6

11.2

1.9

6.6

1.4

48.2

9.7

4.9

85.9

12.8

16.6

17.7

55.5

10.6

5.0

0.4

14.7

18.7

64.3

12.9

6.4

26.6

16.7

23.3

72.6

14.9

8.1

27.4

18.4

26.5

n

86.3 109.2 139.1

544.6 610.8 696.9 812.8

Key things to watch for

Ø

Growth in Chemicals segment (particularly Specialty Chemicals).

Ø

Client additions and capex plans in Specialty Chemicals.

Ø

Margins in Technical Textiles and Packaging segments.

Consolidated Quarterly Performance

Y/E March

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before EO expense

Extra-Ord expense

PBT

Tax

Rate (%)

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOSL Estimates

1Q

12,192

0

9,352

2,841

23.3

734

282

55

1,880

-63

1,943

501

25.8

1,442

1,395

24.1

11.4

FY17

2Q

3Q

11,438

11,330

-2

3.4

9,112

9,018

2,326

2,313

20.3

20.4

735

709

242

269

70

64

1,419

1,400

-72

45

1,491

1,355

298

271

20.0

20.0

1,193

1,084

1,135

1,120

3.5

10.1

9.9

9.9

4Q

13,258

19.1

11,101

2,157

16.3

730

228

259

1,459

-185

1,644

352

21.4

1,292

1,147

7.0

8.6

1QE

11,461

-6

9,019

2,441

21.3

817

254

61

1,431

0

1,431

368

25.7

1,063

1,063

-23.8

9.3

FY18

2QE

3QE

14,069

13,936

23

23.0

11,072

10,926

2,997

3,010

21.3

21.6

814

782

217

231

68

66

2,034

2,063

0

0

2,034

2,063

555

559

27.3

27.1

1,478

1,504

1,478

1,504

30.2

34.3

10.5

10.8

4QE

15,910

20.0

13,555

2,355

14.8

733

237

80

1,465

0

1,465

349

23.8

1,116

1,116

-2.7

7.0

(INR Million)

FY17E

FY18E

48,218

5.0

38,524

9,694

20.1

2,834

1,018

455

6,296

-276

6,572

1,422

21.6

5,150

4,934

14.4

10.2

55,483

15.1

44,886

10,597

19.1

3,146

939

275

6,788

0

6,788

1,833

27.0

4,955

4,955

0.4

8.9

8 August 2017

18