5 September 2017

Market snapshot

Equities - India

Sensex

Nifty-50

Nifty-M 100

Equities-Global

S&P 500

Nasdaq

FTSE 100

DAX

Hang Seng

Nikkei 225

Commodities

Brent (US$/Bbl)

Gold ($/OZ)

Cu (US$/MT)

Almn (US$/MT)

Currency

USD/INR

USD/EUR

USD/JPY

YIELD (%)

10 Yrs G-Sec

10 Yrs AAA Corp

Flows (USD b)

FIIs

DIIs

Volumes (INRb)

Cash

F&O

Close

31,702

9,913

18,368

Close

2,477

6,435

7,411

12,102

11,183

19,508

Close

52

1,332

6,887

2,098

Close

64.0

1.2

110.3

Close

6.5

7.5

4-Sep

-0.1

0.1

4-Sep

307

3,264

Chg .%

-0.6

-0.6

-0.7

Chg .%

0.0

0.0

-0.4

-0.3

-0.9

-0.9

Chg .%

-1.0

0.6

1.2

-0.9

Chg .%

0.2

-0.2

0.1

1MChg

0.0

0.0

MTD

-2.1

2.6

MTD*

302

6,846

YTD.%

19.1

21.1

28.0

YTD.%

10.6

19.5

3.8

5.4

19.0

2.1

YTD.%

-6.4

15.6

24.7

23.1

YTD.%

-5.7

12.8

-5.7

YTDchg

0.0

-0.1

YTD

6.7

6.7

YTD*

290

5,280

Today’s top research idea

Committed to 4x4 matrix for sustainable growth

We hosted Ms Chanda Kochhar, MD and CEO of ICICI Bank, as part of ‘CEO Track’

at our annual conference. Key takeaways:



ICICIBC, along with its subsidiaries, is well positioned to capitalize on the

expanding pie for financial services in India.



Immediate targets on the asset side (4*4) are: a) monitoring existing portfolio,

b) improving product mix, c) reducing the concentration and d) focusing on

resolution.



The bank is focusing on enhancing franchise (4*4) via: a) improving funding

profile toward retail, b) moving toward digitalization, c) generating cost

synergies and d) focusing on capital efficiency.



We like ICICIBC for its strong retail business and healthy capitalization. ICICIBC

continues to be our top pick, with an SOTP of INR366 (1.6x June 2019+value of

other ventures).

Research covered

Cos/Sector

AGIC: CEO Track

Takeaways

AGIC: Management Says

Bulls & Bears

Automobile

Key Highlights

ICICI Bank | CRISIL | LUPIN | Shree Cements | HPCL

Auto | Capital Goods | Consumer | Financials | Healthcare|

Media | Metals | Utilities

India Valuations Handbook — Nifty takes breather in August

Scooterization wave to intensify

Piping hot news

Demonetisation will cost more than slow growth



The Union ministry of finance (MoF) has put out a note defending the

Demonetisation Initiative of November 2016. It provided much information to

show that it has indeed delivered the results they had expected…

Chart of the Day: Over the last 12 months, world market cap has increased 21.3%

(USD14t), while India’s market cap is up 25%

Market cap Change in last 12 months (%)

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

RBI includes HDFC Bank in ‘too

big to fail’ lenders list

Private sector lender HDFC Bank

Ltd has been declared a domestic-

systemically important bank (D-

SIB), the Reserve Bank of India

(RBI) said on Monday. With this,

the bank has joined State Bank of

India (SBI) and ICICI Bank Ltd,…

2

Thomas Cook in race to acquire IFCI’s 26.09% stake in Tourism

Finance Corp

Travel services firm Thomas Cook (India) Ltd is among several companies

interested in buying state-owned lender IFCI Ltd’s 26.09% stake in Tourism

Finance Corp. of India Ltd (TFCI),…

3

Rs 500 crore Matrimony.com

IPO to open at price band of Rs

983-985 on 11 September

Matrimony.com, which runs the

online matchmaking website

BharatMatrimony.com, has fixed a

price band of Rs 983-985 for its

IPO which launches on 11

September. The Rs 500 crore IPO

will close on 13 September…

4

Ashok Leyland launches Dost+

Ashok Leyland, a Hinduja Group

company, today launched 'Dost+',

an upgraded version of its light

commercial vehicle Dost here.

Nitin Seth, President (LCV) Ashok

Leyland, in a press conference said

the new variant will address the

needs of the upper end of small

commercial vehicle (SCV) segment

in the 2 to 3.5 tonne gross.…

5

Shell firms: BSE imposes trade

curbs on 2 more firms

eading stock exchange BSE today

imposed trading restrictions on

two more firms -- Sancia Global

InfraprojectsBSE 0.00 % and Koa

Tools IndiaBSE 0.00 % -- on

regulator Sebi's directives

regarding a clampdown on

suspected shell companies…

6

LIC sells over 2% stake in Bank

of Baroda in open market sale

Life Insurance Corporation of India

(LIC) has sold over 2 per cent

shares in public sector Bank of

Baroda in a open market sale in

past two months…

7

ONGC to borrow Rs 25,000

crore to fund HPCL buy

Cash rich Oil and Natural will raise

its first debt ever, of Rs 25,000

crore, to part fund the Rs 37,000

crore acquisition of government's

stake in Hindustan Petroleum

Corp Ltd…

5 September 2017

2

CEO Track

ICICI Bank

Ms. Chanda Kochhar

MD and CEO

Committed to 4x4 matrix for sustainable growth

Takeaways from CEO track; improving resolutions – a key positive

We hosted Ms Chanda Kochhar, MD and CEO of ICICI Bank, as part of ‘CEO Track’ at our

annual conference. Key takeaways:



ICICIBC, along with its subsidiaries, is well positioned to capitalize on the expanding

pie for financial services in India.



Immediate targets on the asset side (4*4) are: a) monitoring existing portfolio, b)

improving product mix (higher retail share, improving share of high-rated corporate

loans), c) reducing the concentration and d) focusing on resolution. Steps taken over

the last few quarters have started showing results, with the pace of resolutions picking

up and the portfolio becoming less risky.



To improve profitability and move toward a sustainable, high return ratio, the bank is

focusing on enhancing franchise (4*4) via: a) improving the funding profile toward

retail (now 78% of deposits v/s 50% in FY09, CASA ratio at 45%+), b) moving toward

digitalization, c) generating cost synergies (cost growth in line/lower than income

growth) and d) focusing on capital efficiency (including value unlocking).



We like ICICIBC for its strong retail business and healthy capitalization. Faster-than-

expected resolution will be the key positive. ICICIBC continues to be our top pick, with

an SOTP of INR366 (1.6x June 2019+value of other ventures).

5 September 2017

3

CRISIL

Ms. Ashu Suyash

MD & CEO

Double-digit corporate earnings growth appears difficult

Takeaways from CEO track

We hosted Ms Ashu Suyash, MD and CEO of CRISIL, as part of ‘CEO Track’ at our annual

conference. Key takeaways:



Unless private investments pick up, double-digit growth in corporate earnings appears

difficult. She expects 8-9% corporate earnings growth in FY18 – the highest in five

years.



Banks are expected to be the dominant source of total credit, accounting for ~72% in

2019, lower than 79% in 2011. The share of NBFCs is expected to move up from 12% to

18% over this period.



CRISIL expects gross non-performing assets (GNPAs) to inch up to INR9.5t (or 10.5% of

total advances) in March 2018. It also believes that significant hair-cuts are necessary

for NPA resolution. Sectors such as Power need hair-cut of 25%-50%, while other

sectors like Metals and Construction need hair-cut of above 50%.



Goods & services tax (GST) is a structural change, which would have short-term pain in

the form of destocking (affecting consumer durables), but certainly prove beneficial

over the longer period (as logistics costs come down significantly).

Lupin

Mr. Nilesh Gupta

MD

Challenges to persist in near term; Preparing for next leg of growth

Takeaways from CEO track

We hosted Mr Nilesh Gupta, MD of Lupin, as part of ‘CEO Track’ at our annual conference.

Key takeaways:



Old model of pure generics not working…:

Lupin believes that pricing pressure due to

channel consolidation and higher ANDA approvals will continue posing challenges for

the industry over the next 1-2 years.

…and thus sees need to change business structure to drive growth, with a focus on:



Complex generics:

Indian companies have just 19% share in complex generics v/s 34%

in vanilla generics. Lupin believes that companies focusing on products that are

difficult to manufacture will continue driving growth. In complex generics, LPC’s focus

would be on inhalation and complex injectables.

5 September 2017

4





Biosimilars:

The current size of the global biologics market is USD240b. However,

biosimilars accounts for just USD4-6b. This market has the potential to reach USD20-

25b over the next few years. LPC believes that capabilities required here are different

– these either have to be acquired or built, which will take time. LPC is filing for

Etanercept in Japan and EU in FY18. The company is also actively looking to partner for

key products (financial investors for developed markets).

Specialty/branded business:

LPC believes that this is a must in the current scenario.

Companies that will focus on areas with unmet needs and requirement of clinical trials

will succeed. LPC believes that companies need to 'own a therapy area' to succeed in

the specialty business. Focus areas in specialty business for LPC are ADHD, movement

disorders and hormones.

Shree Cement

Mr. H M Bangur

MD

Lower supply addition to drive utilization improvement

Takeaways from CEO track

We hosted Mr H M Bangur, MD of Shree Cement, as part of ‘CEO Track’ at our annual

conference. Key takeaways:



Supply addition is likely to come down to ~50mt from ~85-90mt five years ago.



Present limestone reserve is expected to be sufficient for the next 6-7 years, post

which the industry is likely to start witnessing constraints.



Import of cement is not likely to be a threat in India.



Shree Cement is not likely to diversify into any other line of business.



The company is likely to report volume growth of 1.5-2x of industry average.



SRCM over the next few years is likely to return surplus cash to shareholders by paying

out dividend.

5 September 2017

5

Thematic

Presentation

Sri K T Rama Rao

Minister for IT, Commerce & Industry

Telangana

Focus on “profitable growth”

We hosted Mr K T Rama Rao, Minister of IT, Commerce, Industry and Urban Development,

State of Telangana, as part of ‘CEO Track’ at our annual conference. Key takeaways:



The youngest state in the country (formed on 2 June 2014), Telengana follows a policy

of not ‘re-inventing the wheel’ – picking up the best available policies is the key to

succeed, according to the minister.



Three salient features of Telangana’s industrial policy:

1.) Allow for self-certification: No permission needed to start construction.

2.) A true single-window clearance: Mega investors (defined as an entity bringing in

more than INR200 crores, or planning to create more than 1,000 jobs or involved

in projects of strategic importance to the country or state) will receive clearances

in 15 days. If not received, the project will be considered approved automatically

on the 16th day.

3.) Accountability: Senior IAS officers will be fined INR1,000 per day if they are

found guilty of holding the project.



The Minister was very clear that the state is hungry for more investments in

healthcare, aerospace, defense, logistics, transportation, mining, etc. The concept of T-

Hub and TASK (Telangana Academy for Skill & Knowledge) are examples to be

followed by the rest of the world.

HPCL

Mr. M K Surana

CMD

High consumption potential fuels growth prospects

Takeaways from CEO track











India has low per capital energy consumption of 533kgoe v/s 1,794kgoe globally.

Residential, transportation, industries and petrochem to drive demand for oil & gas.

HPCL recorded highest market growth in petroleum product sales in the last decade.

Vizag will lead to USD3/bbl increase in GRM post expansion in 2020.

Growth in long term will also come from petrochem and gas sector.

5 September 2017

6

‘Management Says’

Key takeaways from Motilal Oswal Annual Global Investor Conference 2017

Company

Automobiles

Ashok Leyland

Bajaj

Auto

Bharat Forge

Tata Motors

Takeaways



Within CVs, M&HCV volume growth guidance stands at 0-5% for FY18.



For motorcycles, growth guidance of 5-7% for FY18 is weaker than our

estimate of 8-10%.



For 2Ws, continued higher cost of customer acquisition, despite demand

recovery, is a negative.

a. AL expects at least 5% M&HCV industry growth in FY18, with the company

to grow faster, driven by continued product launches in ICVs and Tippers.

b. Maintain strategic goals of: a) aftermarket contribution of 12% of revenues

(v/s 6-7% currently), b) exports contribution of 25-30% (v/s <10%

currently), c) defence revenues of USD1b (v/s ~INR10b currently) and d)

LCV ramp-up.

c. EGR is 6-7% more fuel efficient than SCR, but pricing is lower by 3-4%.

a. Guides for domestic motorcycle industry growth at 5-7% for FY18. For

exports, it maintains guidance of 1.6m units for BJAUT.

b. Cost of customer acquisition remains very high, despite demand recovery.

c. 2W industry margins on a structural decline due to cost inflation on account

of regulations. BS-6 would increase MC price by INR7k at least.

d. Bajaj Auto is now doing well in all segments (incl. 3Ws), except mid-

segment (125cc). It will need to address mid-segment weakness with

product actions.

a. BHFC is witnessing good momentum in all segments, except India CV

business. Guides for revenue growth of 15-20% and stable-to-positive

EBITDA margins.

b. India PV business is gaining traction with addition of three new customers.

c. Aerospace ramp-up has been slower than expected, and target of

USD100m might get stretched beyond FY20.

a. JLR to outperform most of the markets on the back of its strong product

lifecycle. Expect retails growth of 10% in FY18.

b. Guides for JLR EBIT margins of 6% for FY18. Guidance of 8-10% EBIT margin

is based on operational drivers and without considering FX benefits.

c. Fx hedge policy modified to up to 65% hedge for first year. Fx hedging

policy to reduce substantially from 4QFY18, and expects it to be negligible

for FY19 (assuming constant currency).

d. Pension calculation change to drive annual savings of GBP55m.

e. Maintains guidance for flat domestic M&HCV volumes, and 10% growth for

LCVs and buses.

Impact

- ve

- ve

- ve

+ ve

+ ve

+ ve

- ve

- ve

+ ve

+ ve

+ ve

+ ve

- ve

+ ve

+ ve

+ ve

+ ve

+ ve

5 September 2017

7

Company

Capital Goods

Blue Star

Havells

Takeaways



Blue Star



Havells

a. Room AC segment has started to see traction post July. Expect business to

normalize from 3QFY18.

b. Focus remains on margins in Room AC segment; will let go of market share

rather than compromising on margins.

c. Project business contracts need to be renegotiated post GST; execution is

thus expected to remain sluggish

d. New manufacturing facilities planned at Sri City and Jammu currently put on

hold; awaiting clarity on the tax benefits

e. Continues to invest in the Water purifier business, and the focus is on

getting the product portfolio and distribution/service network right

a. Lloyds to also focus on Washing Machine and Television apart from Room

ACs

b. Focus is to improve brand perception of Lloyd products; has inculcated the

culture of growth along with margins in the Lloyd team

c. 3-4% of Lloyd revenue is being spent on advertising, which going ahead will

continue to remain in the same range

d. Core business was muted in July post GST implementation; Lighting business

has seen price correction due to lower GST rates

Takeaways

a. How will RoCE improve in the overseas business?

1) Higher gross margins from new products and targeted cost savings.

2) Targeted working capital reduction by 20% annually in the Africa

business from 120 days currently, mainly led by inventory day reduction.

3) Better capex management, ensuring better throughput.

4) May not have big-ticket M&As for next 1-2 years, unlike earlier years.

b. The Indonesia business has got a new head Mr Akhil Chandra (previously

worked with GSK and Reckitt Benckiser). He has extensive experience in the

ASEAN region.

c. Wet hair business in Africa will have a manufacturing facility in Kenya in the

next 2-3 months and in Southern Africa (Mozambique) by the end of the

year, aiding cost efficiency. The business currently has a facility in Nigeria.

d. Household insecticides business is struggling in the current year in Indonesia

due to weak macro environment, heavy rainfall and the fact that the

company was not as nimble as SC Johnson and the Japanese competitor in

its promotion schemes.

Impact

+ ve

+ ve

+ ve

+ ve

+ ve

+ ve

- ve

+ ve

+ ve

+ ve

- ve

Company

Consumer

+ ve

Godrej Consumer

+ ve

+ve

- ve

5 September 2017

8

Company

Financials

Takeaways

a. July disbursements were in line with management expectations; GST

might show a lagged impact.

b. Home loan product will be launched by 1QFY19. Actively looking for a

product head.

c. Total CASA = INR815cr (post conversion into bank – on 19th April), 49K

CASA accounts, and 61% CASA ratio as of 1QFY18.

d. New products: 2-wheelers, consumer durables, gold loans to existing

customers.

e. Target CI Ratio of 50-55%; no. of employees: 20% increase from June 17

nos.

f. Have applied for SCB license.

a. No regional concentration of portfolio.

b. Main issue with consumer durable loan is that approx. 40% of the first-

time buyers are still not registered with CIBIL.

c. Lot of efforts are taken while disbursing the loans like visiting customer

places, assessing cash flows, physical verification, generating internal

credit scores. etc.

a. SA rate cuts will add 8-9bp to NIM.

b. Provisioning norms under IFRS will require standard asset provisioning to

be in line with expected losses.

c. Decline in overseas book to taper down from here; growth will be

opportunity-based. There is no specific goal for running down the

overseas book.

a. Notable renewables exposures include INR30-40b to a GIC and Temasek-

backed project, and another project backed by GS and secured by

corporate guarantees.

b. Construction finance exposure is mostly non-fund based. On an industry

level, the riskiest construction exposures are heavily leveraged BOT

projects with no non-EPC businesses.

c. Their total telecom exposure of INR80b is to five companies, of which

INR50b is to RJio and Vodafone, and the remaining to Idea, Tata and

Bharti.

a. Competitive environment is largely stable, except that one PSU bank is

getting more aggressive.

b. Expect 1-2 corporate accounts to get upgraded in the coming months.

c. Disbursement growth remains healthy at 16-17% with stable loan mix.

d. Yield on back book in retail home loans ~9%, while incremental yields are

~8.7%.

a. July and 1st half of August were bad due to GST impact. Management

expects the next two months to remain subdued.

b. However, with growth picking up in the 2nd half, management expects

FY18 AUM growth to be 12-15%.

c. Management has guided for further reduction in cost of funds of 20-30bp

in the next 2-3 quarters.

Impact

+ ve

+ ve

+ ve

+ ve

- ve

+ ve

+ ve

+ ve

+ ve

- ve

Neutral

AU SFB

Capital First

ICICI Bank

YES Bank

LIC Housing

Shriram Transport

5 September 2017

9

MMFS

Ujjivan Financial

a. Farm sentiment has turned positive. There is a visible pick-up in used

vehicles and passenger vehicles in rural areas.

b. MMFS has started financing other OEM tractors a few years back and the

share has grown to 10%.

c. Management expects 7% GNPA (at 120dpd) by end of FY18 compared to

9% in FY17. Hence, despite migration to 90dpd this year, credit costs for

FY18 should decline from 3.2% in FY17 to 2.7%-2.8% in FY18.

a. Growth in the second half would be around 12% and next year would be

approx. 20 to 25%.

b. Credit cost would be in the range of 4 to 4.25%.

c. Portfolio mix to be shifted toward housing as this area is seeing a lot of

traction.

d. Cost to income ratio: Expect 70% by March, and in the range of 60 to 65%

in March 2019.

e. Recovery in UP and Karnataka much better than Maharashtra.

f. Next capital raise in the next 2 to 3 years.

Takeaways

a. India formulation sales is recovering with lower inventories with stockiest;

Company guided for 10-11% YoY growth, as against industry’s 6-7% YoY

growth.

b. 13 out of 19 approved products launched in US market till date; Awaiting

approval for 14 products; Company guided for another 8-10 filings in FY18.

c. Company guided for 12-15% three-year CAGR in Asia sales, outperforming

industry on new product launches and improving field-force productivity.

d. Company guided for 8-10% YoY decline in Africa sales, largely on lower

allocation of anti-malaria business from Global Fund.

a. 29 ANDAs awaiting approval for US market; with current low base and a

differentiated product pipeline, company remains confident of superior

growth in US business.

b. Company on track in building levers for growth in Australia business

through higher product offering and enhanced reach.

c. With niche product portfolio and consistent compliance, the company is

well placed to deliver mid-teens EBITDA margin in API business.

+ ve

+ ve

+ ve

- ve

Company

Impact

Healthcare

+ ve

+ ve

+ ve

- ve

+ ve

+ ve

+ ve

Ajanta Pharma

Strides Shasun

5 September 2017

10

Company

Media

Takeaways

a. GST impact



Expect 2QFY18 to be weak. After recording a weak revenue exit run-

rate in June, the month of July was even worse. Company has seen a

recovery in August, but still significantly below the pre-GST levels.

Revenues should stabilize from 3QFY18.



Advertisers have been postponing product launches as supply chain

has been unprepared.

b. Subscription revenue



Expect mid-to-low teen revenue growth over 3-4 years. This is after

factoring in the TRAI tariff recommendation, which could keep

subscription revenue volatile in the year of implementation.

However, expect normalization over 3-4 years.

c. Digital



Will refresh the OTT offering with a revised product launch in 2HFY18.

Will have a consolidated freemium digital offering, combining free

(OZEE) and paid (DITTO) offering. It will also include original digital

content. Thus, subscribers will be able to use free, paid and sachet-

based offerings.

d. EBITDA margin



Will be targeting north of 30% EBITDA margin. This is after factoring

in a) content cost increase from Hindi GEC, from currently 27hr

weekly original content to 30hrs, b) high weekly original content for

&TV and c) content cost toward digital foray.

e. Capex and working capital to remain high until FY19



Movie rights acquisition will remain high for another 18-24 months on

the lines of FY17 level toward Hindi GEC movies, regional movies and

rights of future releases.



Will also invest INR1.5b in working capital toward production of 10-12

movies annually.

Takeaways

a. Margins are higher on increase in realization and fall in cost.

b. Volumes were weak in July due to impact of GST, but have improved from

August.

Impact

Zee Entertainment

Enterprises

Company

Metals

JSW Steel

c. Capex target remains unchanged at INR80b for FY18.

d. Two of the five iron ore mines are ready for production, but pending

mining cap relaxation by the Supreme Court. The remaining three mines

are pending certain approvals, which are likely in the next six months.

5 September 2017

11

Company

Real Estate

Takeaways

a. 360 West Worli project: Expecting height restrictions to be removed,

providing additional developable area of 0.7msf. This will increase total

developable area to 3msf. The additional area will provide higher

margins.

b. ORL has an undeveloped land parcel in Worli, which it acquired in a JV

with I-ventures from Glaxo. The total area here is 4 acres, which is

expected to fetch FSI of 6.5. The company has planned to do a mixed

development of the land, with a mall, a hotel and a premium residential

complex. It has the added benefit of the underground metro station in

Worli being developed directly under it.

c. Mulund projects: The company has incurred ~15% of costs in total, and

expects the projects to hit revenue recognition threshold sometime in

4QFY18 or 1QFY19.

d. 70% of the initial RERA amount collection will not include income tax and

marketing costs. It will include only construction and land costs.

e. Land owners have become softer as a result of the RERA ruling that they

shall be co-promoters in joint-development agreements, which shall

make them party to any defaults by developer and thus resulting into levy

of penalties.

Oberoi Realty

Company

Utilities

Takeaways

a. Discussions are ongoing for ~130MW group captive PPA for Ratnagiri.

JSW Energy

b. Karnataka has called for 1,000MW PPA on DEEP platform for nine

months. 500MW is for south-based plants and remaining 500MW was all-

India. Bids are likely in the next few weeks.

c. JPVL loan is getting serviced on time. The loan is partially secured against

the amount pending to be paid to JPVL on the acquisition of hydro assets.

a. There are various options being discussed with CERC for upcoming

revision in regulation for next five year command period starting 2019

e.g. a) Regulate RoCE rather than RoE. This will allow flexibility in capital

structure of projects b) higher debt to equity ratio (75%:25%) will help in

reducing tariff without impacting RoE.

b.

Regulated equity is likely to grow by at least INR65b in FY18, representing

growth of ~15% YoY.

NTPC

c. Eighteen states have already agreed for pooling of fixed cost. This is likely

to derisk new projects that have higher fixed cost.

d. The impact of change in GCV measurement to ‘as-received on wagon-top’

basis is being studied by CEA for normative losses. Any relaxation can lead

to upside in earnings.

e. Efficiency-based income has become insignificant with the change in

measurement of GCV. Core RoE and interest on working capital are the

key drivers of earnings.

5 September 2017

12

Database Periodical | 4 September 2017

India Valuations Handbook

Strategy: Breather in August; micro-macro divergence continues…



Bulls & Bears









Nifty takes breather in August:

The Nifty corrected 1.6% in August after crossing the 10k mark. Fluid global

backdrop, USD2b of FII selling, and disappointing earnings triggered the correction. Midcaps (-1.3% in August)

trailed the Nifty, but valuation premium v/s large caps expanded to 22% (14% in July). FII outflow of USD2b was

compensated by USD2.4b inflow from domestic MFs. In YTDCY17, India has received MF inflows of USD10.7b,

exceeding the full-year inflows of USD7.1b in CY16. FII inflows for YTDCY17 stand at USD6.9b, more than the

cumulative inflows of USD6.3b in CY15 and CY16. While the earnings season was muted, even the macro print was

subdued, with 1QFY18 GDP growth at 5.7%, the lowest in three years. The performance, marred by GST transition,

was well below street expectations. We have cut our GDP growth forecast for FY18 from 7.1% to 6.7%.

1QFY18 earnings disappointing; Nifty EPS cut 2.7%:

The 1QFY18 earnings season marked another quarter of

weak performance and a subdued start to FY18, impacted by GST-related destocking. Aggregate sales of MOSL

Universe grew 9.8% YoY (our estimate: +6.6%), EBITDA was up 1.1% YoY (our estimate: +3.7%), and PAT declined

9.3% YoY (our estimate: -2.8%). In our Universe, we downgraded ratings for nine stocks and upgraded for five

stocks in 1QFY18. We have cut our Nifty EPS estimate for FY18 by 2.6% to INR484, and maintain our FY19E Nifty

EPS at INR602. We are now building in 14% EPS growth for the Nifty for FY18E.

India among the best-performing markets in YTDCY17:

For CY17 YTD, MSCI EM (+26%), India-Sensex (+19%),

Brazil (+18%), Korea (+17%) and Taiwan (+14%) were the best performers among the key global markets in local

currency terms. Russia (-12%) has underperformed significantly. Over the last 12 months, MSCI EM (+22%) has

outperformed MSCI India (+11%). However, in the last five years, MSCI India has outperformed MSCI EM by 91%.

Sectoral performance trends; PSU Banks underperform; Metals continue to outperform:

Oil & Gas (+7%),

Metals (+7%), Cement (+4%), Consumer (+1%) and Telecom (+1%) were the only sectors to deliver positive

returns for August. Ten sectors delivered negative returns in August. PSU Banks (-11%), Healthcare (-7%), Media

(-6%) and Technology (-4%) were the laggards. In this edition of ‘Bulls & Bears’, we take a deep dive into

valuation metrics of the Telecom sector (we also highlighted Telecom as a sector ripe for contrarian investment

in our recent

follow up note

on the theme of Contrarian Investing). Despite strong performance of the Metals

sector, valuations at 6.9x EV/EBITDA remain reasonable and are at a discount of 6% to the long period average.

Consumer, Autos, Private Banks and NBFCs continue to trade at significant premium to LPAs.

Micro-macro divergence continues:

The Nifty has delivered 21% returns in YTDCY17 and is among the best

performers. Strong macro fundamentals, and continued buoyant domestic liquidity coupled with falling cost of

capital has aided market performance. However, we continue to find the contrast between the macros and

micros untenable. Another quarter of weak earnings performance has pushed the earnings recovery narrative

further, even as valuations remain rich at 22.5x trailing and 19.2x forward P/E. For valuations to sustain/re-rate

from here, earnings growth delivery is important in our view, as incremental support from falling cost of capital

for a valuation uplift appears to be limited. We continue to prefer stocks with earnings visibility, structural

positive triggers and reasonable valuations. ICICI Bank, Tata Motors, Sun Pharma, Amara Raja, Britannia,

Petronet LNG, Hindalco, Bharti Airtel, MMFS, RBL, Yes Bank, Birla Corp are some of our preferred bets.

Nifty MoM Change (%)

Exhibit 1:

Nifty MoM change (%) — Just two months of negative return in CY17 so far

10.8

1.4

4.0

1.6

4.2

1.7

2.0

7.6

4.6

0.2

0.5

4.7

3.7 3.3

1.4

3.4

1.0

5.8

1.5

0.3

6.6

1.6

0.1

4.8

1.6

5 September 2017

13

Sector valuations: Global Cyclicals outperform; PSU Banks underperform



Oil & Gas trades near its historical average P/B of 1.6x and P/E of 12.4x (v/s 10-year average of 11.9x). The sector

was best-performing in August (+7% return MoM). OMCs (HPCL, BPCL and IOCL) outperformed the index on

account of strong refining margins, as hurricane Harvey hit US refiners. MRPL too outperformed the index.



Metals trade at historical average P/B of 1.6x; EV/EBITDA is at 6.9x, 6% discount to historical average. The sector

was second best outperformer in August (+7% return MoM). Chinese steel prices increased ~USD50/t MoM on

supply measures, supportive demand and falling inventories. Domestic steel prices increased INR1,000-2,500/t,

led by flat products, due to rising import prices. Demand, however, remains weak.



PSU Banks trade at 18% discount to historical average P/B. The sector was worst-performer in August (-11%

return MoM). Stress additions are expected to decline significantly in the ensuing quarters, while recoveries in

large accounts could be significant trigger points. Trading gains are expected to moderate significantly in FY18

v/s FY17.



Technology sector had a stagy month, led by Infosys. The sector trades at a P/E of 15.8x, in line with its historical

average of 15.9x. While Infosys and Tech Mahindra trade at discount to their 10-year historical average P/E, all

other Tier-I companies are trading at par or at a premium to their averages.

Sector valuations: Defensives lag Cyclicals

Sector

Auto

Banks - Private

Banks - PSU

NBFC

Capital Goods

Cement

Consumer

Healthcare

Media

Metals

Oil & Gas

Retail

Technology

Telecom

Utilities

Current

19.4

21.7

13.4

24.3

29.6

29.5

39.9

21.8

25.9

12.9

12.4

56.7

15.8

Loss

11.8

Relative to Sensex

P/E (%)

10 Yr Avg Prem/Disc (%) Current 10 Yr Avg

15.2

28.0

1

-14

16.7

30.2

13

-5

3.5

285.0

-30

-73

17.6

38.4

27

1

26.7

10.9

54

49

18.2

61.6

53

4

29.8

33.6

107

73

22.5

-3.3

13

29

22.9

13.1

35

30

12.2

5.6

-33

-30

11.9

4.4

-36

-31

33.8

67.6

195

93

15.9

-0.5

-18

-8

-

-

-

-

15.2

-22.4

-38

-10

PE (x)

PB (x)

Current

3.8

3.0

0.8

4.2

3.1

3.3

11.5

3.2

5.0

1.6

1.6

10.9

3.5

2.4

1.6

10 Yr Avg Prem/Disc (%)

3.1

23.7

2.2

32.8

1.0

-17.7

3.0

41.1

3.9

-21.8

2.3

42.6

9.4

22.1

3.9

-17.8

4.3

18.6

1.6

1.0

1.6

-2.8

9.2

18.4

4.2

-14.8

2.6

-6.3

2.0

-22.0

Relative to Sensex

P/B (%)

Current 10 Yr Avg

40

18

8

-16

-69

-62

53

13

12

45

19

-13

319

265

18

51

83

61

-43

-42

-44

-40

295

250

29

57

-11

-1

-43

-24

Global equities: MSCI EM outperforms MSCI India in last 12 months



Over the last 12 months, MSCI EM (+22%) has outperformed MSCI India (+11%). However, over the last five

years, MSCI India has outperformed MSCI EM by 91%.



MSCI India P/E is at a premium of 41% to MSCI EM P/E, marginally below its historical average premium.

MSCI EM performance at par with MSCI India over 12 months

125

115

105

95

85

MSCI India Rebased

MSCI EM Rebased

122

111

MSCI India outperformed MSCI EM by 91% in last five years

MSCI India Rebased

MSCI EM Rebased

230

10 Year CAGR:

5 Year CAGR:

MSCI India: 11.8%

191

185

MSCI India: 6.7%

MSCI EM:

0% MSCI EM: 6.7%

140

95

50

100

5 September 2017

14

Sector Update | 4 September 2017

Automobiles

Scooterization wave to intensify

Penetration of scooters to improve gradually in the rural markets

We met Mr Yadvinder Singh Guleria, Senior Vice President (Sales & Marketing), of

Honda Motorcycle & Scooter India (HMSI). He expects scooterization in the Indian

2W space to continue, going forward – the share of scooters is likely to increase to

~40% of the overall 2W market in the next 2-3 years (from 33.7% in YTD FY18),

overtaking entry-level motorcycles to become the single-largest segment. He

mentioned that the pace of scooter penetration in the rural markets has been

slower than expected at the moment, but should increase gradually, led by an

improvement in road infrastructure. Deeper rural penetration is the next focus

area, with HMSI aiming to take scooterization beyond urban areas with the launch

of the rural-focused ‘Cliq’. The company is expected to be the biggest beneficiary

of the upcoming CBS norms (up to 125cc) due to its technological edge and tried-

and-tested models.

Scooterization to continue, more scope for further penetration

HMSI sounded optimistic on scooter demand, expecting the share of scooters in

2Ws to continue increasing to ~40% over the next 2-3 years. Increasing acceptance

of scooters as a family product, easy ride/comfort, improving road infrastructure

and e-commerce continue driving sales in the urban/semi urban areas. There is a

gradual increase in the acceptance of scooters in the rural markets with an

improvement in road conditions. India is likely to follow trends of ASEAN markets,

where the share of scooters in the sales mix is as high as 75%. Markets like

Indonesia/Vietnam/Thailand almost run on scooter, and India could see similar

penetration over the long term.

YS Guleria,

Sr. VP, Sales and Marketing

HMSI, at a launch of Cliq in

Tamil Nadu

“With

better road infrastructure,

co-usage in a family and more

women entering the work-force,

the primary requirement of riders

in Tamil Nadu has evolved from the

mileage and price conscious 110cc

motorcycles to the more

convenient and unisex automatic

scooters.

Now nearly every 2nd customer

chooses to ride home on a scooter

with mopeds witnessing a sharp

decline. CLIQ is developed for the

up-country customers with a

progressive mindset, and is a true

disruptor in the 100-110cc

segment. CLIQ challenges the

traditional preferences with its

perfect blend of Practicality,

Versatility and Value for money.

”

Scooters to be single-largest segment, overtaking entry-level motorcycles

HMSI expect scooters to grow to become the single-largest segment in domestic

2Ws, overtaking entry-level 100cc motorcycles over the next 2-3 years. HMSI

believes that there is still enough room for scooters to grow even in markets where

penetration is ~50%. Improving road infrastructure in rural areas and the declining

price gap with the launch of

Cliq

are expected to drive scooter demand in the rural

markets. This, along with the launch of suitable products (with aesthetics and

utilities like motorcycles), should help HMSI lead scooterization in the rural markets.

Cliq scooter targeted to compete against entry-level motorcycles/mopeds

With the launch of 110cc scooter – Cliq – priced at INR44.5k (ex-showroom Chennai

v/s Activa 4G variant priced at INR53.7k), HMSI aims to compete against 100cc

entry-level motorcycles (Hero HF Delux priced at ~INR45.5k ex-showroom Chennai)

and mopeds (XL100 priced at INR31.6k ex-showroom Chennai). It is targeted at the

rural market, with utility and ease of use in mind. It has motorcycle-like features

such as block pattern, off-road, on-road tyres, and optional luggage

carrier/footboard mounted luggage box for load. It shares the same platform as

Activa.

5 September 2017

15

Cliq – good response in Rajasthan, expect pan-India launch by Sep-17

HMSI first launched Cliq in Rajasthan, followed by Maharashtra and recently in Tamil

Nadu. The initial response to the product from Rajasthan has been encouraging.

HMSI is targeting thematic-style marketing strategies to attract customers. The

product is expected to be available on pan-India basis by September 2017.

Premiumization of scooters to evolve gradually

According to HMSI, the market for higher-CC scooters should evolve gradually. The

buyers of Activa 125 are largely upgraders from the 110cc scooters segment or from

entry-level motorcycles. However, management believes that the 110cc segment

should continue to be the single-largest segment over the medium term.

No intention of electric scooter launch in near future

HMSI believes that the trend of electric scooters (demand for which is quite high in

other scooter-dominated matured markets) is a distant dream for the Indian

markets. Price, load carrying capacity of battery operated vehicles and charging

infrastructure are the biggest hindrance in the adoption of electric scooters.

Expect slowdown in 2W industry post BS-VI; probable disruptions seen

According to management, due to a meaningful increase in product prices due to

BS-VI emission norms and transitory issues, 2W industry volume should decline in

FY21. It also expects disruption within segments (as buyers of 150cc may opt for

125cc vehicle due to cost difference) and manufacturers, as technology and price

competitiveness will be the sole deciding factors of success.

HMSI to be largest beneficiary of regulatory changes in motorcycles

According to management, HMSI is expected to be the single largest beneficiary of

the upcoming mandatory CBS norms for 2Ws with engine capacity up to 125cc

(likely to be effective from April 2018), as ~20% of motorcycles sold by HMSI are

fitted with CBS. HMSI has a market share of 16.4% in YTD FY18 (v/s 14.6% in the

year-ago period) in the motorcycle segment. BS-VI norms from 2020 will open up

global markets for HMSI, as 93% of the world’s 2W market (including India) will be

following similar emission standards by then.

Other highlights













Expects to sell 6m units in FY18 v/s 4.7m units sold in FY17.

Contribution of government employees in total sales remains at ~2%.

Sri Lanka, Nepal, Columbia, Bangladesh and Mexico are HMSI’s biggest exports

markets.

Navi

selling well in the Guatemala, Honduras, Ecuador, Sri Lankan

markets.

Dio

is the largest selling scooter brand in Sri Lanka.

See no cannibalization of

Cliq

with existing set of scooters.

CLIQ comes

equipped with Combi Brake System (CBS) and Equalizer

technology

(as per government regulations, CBS will be mandatory on all 2Ws up to 125cc

engine capacity from 1 April 2018).

Least delinquency of loans is by HMSI customers, leading to better negotiation

on the finance rate.

5 September 2017

16









Not expecting to launch motorcycle in the leisure segment in near future. Focus

would largely remain on scooters and motorcycles up to 250cc.

HMSI enjoys better margins on scooters v/s other segments.

Have network of 5,440 touch points as on date; plans to add another 360 touch

points in remaining FY18, largely in rural areas.

Current production capacity of 6.4m units per annum.

Valuation and view

While we expect 2W volumes to benefit from a rural recovery in the near term,

competitive intensity remains high in the segment due to changing customer

preferences. In the 2W space, we like EIM and BJAUT.

Our top picks in the auto

segment are Tata Motors, MSIL and Amara Raja.

We also consider MM as the best

bet on a rural market recovery.

5 September 2017

17

In conversation

1. This decade is for India. World’s looking to invest here:

Vedanta Group; Anil Agarwal Chairman,



The economy may have slowed down, but it won’t last long, says Anil Agarwal,

chairman of Vedanta group. The London–based metals-to-oil maven, who

addressed IIM-Calcutta students on entrepreneurship on Saturday, says he is

not worried about the decline in latest GDP figures. “The way of doing business

in India is changing. Money is now accountable. You cannot juggle with taxes.

Black money has received a severe hammering. It is because of these reasons

that in the very short term, the economy has slowed down,” he tells.

2. See lower interest rate trajectory for India going forward:

Capital First; V Vaidyanathan - Founder & Chairman





Capital First while in conversation with CNBC-TV18’s Abhishek Kothari is of the

view that one-two year forward outlook the trajectory for interest rates in India

is definitely lower.

According to him, housing loans coming below 8 percent would be a seminal

movement and one is eagerly looking forward to the time when housing loan

rates come down to 7-7.25 percent, like was seen in 2006 or 2007.

3. 20% topline growth achievable per year, says Tejas Networks









In an interview to CNBC-TV18, Sanjay Nayak, MD & CEO of Tejas Networks spoke

about the latest happenings in the company.

We are in an industry where there is a lot of data demand which is growing both

in India and abroad, said Nayak.

As we have higher data consumption, we need higher capacity optical

transmission network for which we provide the equipments, he added.

"Topline growth is something that is achievable at 20 percent per year level," he

said.

5 September 2017

18

From the think tank

1. After GDP jolt, this is what is critical for Narendra Modi

government



Given the economy has been losing pace for several quarters now, and that the

trend was noticeable even before demonetisation, the June quarter was never

really expected to see a big bounce-back. However, the very sharp deceleration

in GDP, at 5.7% y-o-y, and in GVA, at 5.6% y-o-y, are below even the most

conservative forecasts. In fact, even during a very difficult time in Q4F17, GDP

had clocked a reasonably good 6.1% y-o-y while GVA had grown at 5.6% y-o-y.

This time around, the GDP has decelerated more than the GVA partly because of

a big jump in subsidies during the quarter, up 40%-plus.

2. Outsourcing business will decline further; it will do more with

less people; see what this means



I have been trying to fix lunch with Chandra, as R Chandrasekaran, the executive

vice-chairman of Cognizant India is known, for many weeks. With his travel

schedule, it has been near impossible. As one of his trips gets postponed, he

agrees for a quick lunch at the Mahamudra, Isha Foundation’s spacious and

bright vegetarian restaurant in Mylapore, Chennai. As it is a favourite of us both,

we don’t waste much time ordering. We ask for their tiny crisp banana flower

vadas and iced lemon tea.

3. Knight in Shining Armour : When gross domestic product

numbers turn so gross, it is time for the government to act



August was a cruel month for the government, both on the sociopolitical and

economic fronts. First came the horri fic deaths of 61 infants in 72 hours in a

hospital in Gorakhpur, in BJP-ruled Uttar Pradesh. Then came three rail

accidents in quick succession, followed by mayhem in Haryana, another BJP-

ruled state, after the conviction of godman Gurmeet Ram Rahim Singh. And

then we saw civic infrastructure collapse after torrential rains in Mumbai, again

in a BJP-ruled state.

5 September 2017

19

Click excel icon

for detailed

valuation guide

Rs

Valuation snapshot

P/E (x)

P/B (x)

FY17 FY18E FY17 FY18E

28.1

24.9

22.0

43.0

47.4

18.3

51.7

41.9

32.3

25.0

23.5

24.5

44.3

31.4

19.4

52.3

28.6

32.7

26.5

33.6

23.2

30.9

19.4

24.5

34.8

NM

36.5

44.9

13.2

24.1

29.9

22.8

NM

17.9

35.9

9.7

NM

22.9

933.9

16.9

100.9

53.6

43.1

29.4

24.6

17.6

63.3

37.5

17.9

37.3

17.7

27.9

21.9

21.2

30.8

41.0

18.1

37.1

33.6

17.4

22.1

21.0

19.4

24.1

27.7

17.1

42.6

24.7

23.0

22.1

97.9

20.8

25.7

20.0

20.6

26.9

20.6

30.2

29.6

10.0

19.1

24.1

14.3

NM

11.2

8.5

8.3

7.3

24.4

19.0

15.0

17.9

37.8

28.5

21.8

20.2

13.8

51.8

33.2

14.3

26.7

16.3

5.2

5.4

4.9

6.4

7.8

2.9

16.1

8.0

3.3

3.5

7.8

3.1

2.7

6.5

2.2

12.1

4.9

2.2

2.7

2.6

2.2

5.2

2.2

1.3

5.0

0.7

4.7

4.7

1.1

3.8

3.4

0.9

0.6

0.7

0.5

0.9

0.3

0.8

1.3

0.4

0.9

10.2

5.1

3.1

4.1

2.1

19.0

6.9

4.3

4.4

3.2

4.5

4.8

4.5

5.5

7.0

2.5

12.0

6.7

2.8

3.1

6.8

2.8

2.5

5.7

2.0

10.0

4.3

2.1

2.2

2.5

1.8

4.5

2.0

1.3

4.4

0.7

4.2

3.3

1.0

3.2

3.0

0.9

0.7

0.7

0.5

0.9

0.3

0.8

1.2

0.4

0.8

8.3

4.1

2.7

3.5

1.8

15.5

6.3

3.8

3.8

2.8

ROE (%)

FY17 FY18E FY19E

20.3

23.1

25.3

16.2

15.8

16.9

37.1

20.8

10.6

13.9

35.7

14.2

6.4

20.3

9.8

25.6

17.1

6.9

10.8

9.5

9.9

18.3

10.2

5.6

15.4

-27.0

13.8

12.3

9.5

18.9

11.5

4.0

-6.7

4.2

1.4

10.1

-8.4

3.6

-0.2

2.7

0.9

21.7

15.1

12.0

18.0

14.4

32.5

18.9

25.5

12.4

19.4

17.3

23.2

22.2

19.2

18.0

14.8

37.0

21.6

17.3

14.1

34.6

13.9

10.8

20.1

12.3

25.7

17.4

9.3

11.4

2.6

10.0

18.8

8.9

6.3

17.3

3.5

15.0

13.6

10.8

18.3

12.5

6.1

-5.2

6.2

5.8

10.9

4.6

3.2

7.0

3.0

4.6

24.3

16.1

13.3

18.6

14.1

33.0

19.3

28.2

15.6

18.2

19.9

27.0

24.0

22.8

20.7

17.3

35.4

23.3

18.3

15.0

31.5

14.9

11.5

22.8

26.6

33.6

22.3

14.7

11.8

8.7

10.5

19.6

9.5

6.9

18.5

7.2

16.3

13.9

12.7

19.5

14.2

12.4

3.0

9.1

7.3

11.2

5.4

5.9

11.4

6.1

8.3

25.9

28.0

15.6

19.0

15.6

32.8

18.4

31.3

19.1

18.5

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

Capital First

Buy

Cholaman.Inv.&Fn Buy

Dewan Hsg.

Buy

GRUH Fin.

Neutral

HDFC

Buy

Indiabulls Hsg

Buy

L&T Fin Holdings Buy

LIC Hsg Fin

Neutral

CMP

(INR)

TP

% Upside

EPS (INR)

(INR) Downside FY17 FY18E FY19E

25

4

13

20

-2

19

13

8

13

33

-4

22

13

41

0

28.0

4.6

132.3

26.2

473.1

93.3

612.7

23.5

20.0

8.1

169.1

54.3

5.4

248.6

19.8

11.7

28.2

37.9

5.2

7.0

137.2 163.6

36.5

50.5

547.2 705.7

94.2

126.8

852.9 1,092.8

29.3

37.9

37.1

45.8

9.2

11.0

189.3 199.1

68.5

82.4

9.9

11.8

281.7 374.5

22.4

59.8

14.4

23.7

786

986

113

118

2,913 3,281

1,124 1,353

22,441 21,994

1,706 2,029

31,685 35,854

985

1,059

646

732

203

269

3,974 3,818

1,328 1,625

237

-

7,804 8,819

384

542

614

612

502

185

170

112

1,752

297

57

1,668

79

979

534

29

1,761

545

192

201

139

2,000

366

62

1,800

91

1,153

-

34

2,133

8

4

19

24

14

23

8

8

15

18

18

21

15.4

7.0

5.0

4.8

56.8

15.3

2.3

47.9

-31.3

26.8

11.9

2.2

73.0

21.8

8.4

1.7

5.4

68.2

14.9

2.8

61.9

3.8

32.4

18.0

2.9

92.3

38.1

10.4

6.1

6.8

82.1

17.0

3.2

76.8

8.2

41.0

23.7

3.7

114.5

137

142

336

55

285

125

143

278

136

198

149

360

49

382

150

184

341

140

45

5

7

-10

34

20

29

23

3

6.0

-14.8

18.8

1.5

29.3

-31.6

6.2

0.3

8.1

9.5

-11.2

30.1

6.4

34.4

17.1

5.8

14.6

9.0

20.8

6.6

47.0

8.6

38.3

21.4

11.0

26.8

19.1

1,799

905

725

1,133

521

515

1,756

1,236

195

677

1,800

820

925

1,400

630

450

1,900

1,350

200

708

0

-9

28

24

21

-13

8

9

2

5

33.6

21.0

24.6

46.0

29.6

8.1

46.8

69.0

5.2

38.2

47.6

31.8

33.3

56.0

37.7

9.9

52.9

86.3

7.3

41.6

62.9

68.7

44.3

67.3

47.1

12.1

59.0

108.4

10.6

48.9

5 September 2017

20

Company

Reco

Manappuram

Not Rated

M&M Fin.

Buy

Muthoot Fin

Buy

PFC

Neutral

Repco Home

Buy

REC

Neutral

Shriram City Union Buy

STF

Buy

Aggregate

Capital Goods

ABB

Sell

Bharat Elec.

Buy

BHEL

Sell

Blue Star

Neutral

CG Cons. Elec.

Buy

CG Power & Indu. Neutral

Cummins

Buy

GE T&D

Neutral

Havells

Neutral

K E C Intl

Neutral

L&T

Buy

Pennar Eng.

Not Rated

Siemens

Neutral

Solar Ind

Neutral

Suzlon Energy

Not Rated

Thermax

Neutral

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

Neutral

Jyothy Lab

Neutral

CMP

(INR)

101

427

463

122

647

164

2,088

1,074

TP

% Upside

EPS (INR)

(INR) Downside FY17 FY18E FY19E

-

8.6

10.8

12.5

459

7

7.1

13.9

17.8

550

19

29.5 38.2

44.2

117

-4

25.7 27.2

30.2

800

24

29.1 34.5

39.3

134

-18

31.4 35.0

40.4

2,800

34

84.3 121.7 164.1

1,330

24

55.6 80.0

102.4

P/E (x)

P/B (x)

FY17 FY18E FY17 FY18E

11.7

9.4

2.6

2.3

60.3 30.8

3.8

3.6

15.7 12.1

2.8

2.4

4.8

4.5

0.8

0.7

22.2 18.8

3.6

3.0

5.2

4.7

1.0

0.8

24.8 17.2

2.7

2.4

19.3 13.4

2.2

1.9

21.0 17.7

3.5

3.1

66.8

27.6

60.9

58.6

46.5

19.7

34.3

69.9

51.5

25.8

26.7

14.7

71.8

42.8

25.5

28.6

20.5

33.6

34.9

56.6

49.1

33.0

69.7

17.2

31.5

29.7

61.9

25.5

NM

397.5

46.4

41.5

37.3

56.9

57.2

52.3

42.8

41.2

48.7

34.1

61.0

33.7

34.7

58.7

25.7

28.7

43.0

43.2

39.8

32.8

43.1

45.0

23.4

24.1

11.5

56.4

36.4

18.3

29.4

17.7

30.9

30.3

39.8

35.6

23.7

39.3

16.4

22.1

25.2

44.3

25.4

35.4

31.1

38.7

43.6

31.9

53.9

49.4

45.4

40.1

40.6

42.7

33.7

52.2

30.5

39.7

8.5

5.7

1.0

9.5

25.3

1.2

6.7

9.9

9.4

5.0

3.1

1.5

6.7

7.9

-1.5

3.9

3.4

5.2

3.9

2.9

3.8

2.3

4.8

1.9

1.1

4.0

3.6

4.4

3.2

5.7

8.1

4.6

3.6

15.1

18.8

23.7

11.3

14.1

11.8

7.2

38.9

7.6

6.5

7.4

4.4

1.0

8.9

18.7

1.2

6.2

8.7

8.4

4.2

3.5

1.3

5.8

6.7

-1.6

3.6

2.9

4.6

3.8

2.7

3.7

2.1

4.3

1.7

1.0

3.5

3.4

3.8

3.0

5.0

6.8

4.2

3.3

13.7

15.5

22.5

9.7

12.1

9.2

7.0

37.5

7.5

6.6

FY17

24.0

6.5

19.4

17.9

17.4

19.9

11.7

11.7

16.8

12.7

20.6

1.6

18.0

76.4

6.2

21.2

12.4

18.2

21.2

12.5

10.2

9.3

19.8

NM

14.3

16.8

18.0

11.2

5.1

7.9

7.3

7.2

11.5

3.4

14.4

6.0

19.0

-3.2

1.4

18.4

11.6

9.6

28.5

36.9

50.4

28.4

35.8

24.6

22.2

65.6

23.5

21.1

ROE (%)

FY18E

25.9

12.0

21.5

17.0

17.5

19.1

15.0

15.0

17.6

12.6

17.0

3.4

21.4

49.7

3.0

19.7

21.5

18.6

19.5

13.7

11.6

10.3

19.8

-8.8

12.7

17.6

15.8

12.7

7.0

10.6

9.2

11.6

10.9

4.7

14.8

7.9

16.1

8.8

17.0

19.1

10.1

10.3

26.7

34.3

50.8

26.0

32.0

24.2

21.1

73.1

24.8

16.5

FY19E

26.9

14.2

21.2

16.8

17.0

19.1

17.6

16.9

18.1

15.8

16.9

3.5

29.6

49.7

3.7

22.8

22.7

20.7

20.9

15.6

12.6

13.7

20.9

-11.0

12.8

17.4

16.0

13.6

7.9

13.1

12.2

13.4

13.9

6.6

17.5

12.1

17.5

12.8

22.9

19.1

14.0

12.7

28.1

34.5

58.2

26.3

33.9

22.8

22.6

82.8

26.3

18.4

1,316

191

131

754

217

81

908

401

492

306

1,130

104

1,280

882

16

881

612

519

1,200

210

100

650

250

80

1,170

395

455

295

1,340

-

1,355

900

-

830

800

430

-9

10

-24

-14

15

-1

29

-1

-8

-4

19

6

2

-6

31

-17

19.7

6.9

2.1

12.9

4.7

4.1

26.5

5.7

9.6

11.9

42.3

7.1

17.8

20.6

0.6

30.8

29.8

15.5

22.4

7.4

4.6

17.5

5.0

2.0

27.7

9.3

10.9

13.1

46.8

9.1

22.7

24.2

0.9

30.0

34.6

16.8

31.6

8.3

4.9

26.1

6.4

2.5

35.0

11.3

13.8

16.4

53.2

11.2

33.0

30.0

1.0

33.2

39.8

19.1

276

308

1,774 1,622

969

1,150

2,702 3,282

1,169 1,079

177

201

1,003 1,277

431

519

697

806

156

185

109

140

17,823 22,360

3,988 4,936

11

-9

19

21

-8

14

27

20

16

18

29

25

24

4.9

7.0

36.1 49.8

29.4 40.9

38.8 68.7

67.9 71.3

5.6

8.0

33.7 39.7

7.0

9.7

27.3 27.4

-1.6

4.4

0.3

3.5

384.4 460.4

96.1 91.5

8.2

65.0

58.9

89.9

102.7

11.8

54.4

16.4

34.4

7.1

5.6

547.8

138.8

1,197

4,216

1,110

310

1,094

920

5,320

1,197

283

390

1,200

4,660

1,285

315

1,310

995

4,500

1,360

280

395

0

11

16

2

20

8

-15

14

-1

1

21.0 22.2

73.7 85.3

21.2 24.4

7.2

7.7

26.5 26.9

18.9 21.5

156.1 158.1

19.6 22.9

8.4

9.3

11.2

9.8

26.5

104.6

29.8

9.1

33.1

24.7

182.1

27.3

10.3

11.1

5 September 2017

21

Company

Marico

Nestle

Page Inds

Parag Milk

Pidilite Ind.

P&G Hygiene

Prabhat Dairy

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

Jubilant Life

Lupin

Sanofi India

Shilpa Medicare

Strides Shasun

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.

Ent.Network

Hind. Media

HT Media

Jagran Prak.

Music Broadcast

PVR

Siti Net.

Sun TV

Reco

Neutral

Neutral

Buy

Neutral

Neutral

Neutral

Not Rated

Neutral

Neutral

CMP

TP

% Upside

(INR)

(INR) Downside

315

355

13

6,859 6,160

-10

18,062 19,600

9

249

245

-2

836

810

-3

8,413 8,800

5

134

-

802

875

9

2,572 2,525

-2

FY17

6.3

118.0

238.7

3.6

16.7

132.9

3.5

8.7

26.7

EPS (INR)

FY18E FY19E

6.8

8.2

115.1 133.6

294.7 398.4

9.1

12.5

18.1

20.6

151.6 176.0

3.5

6.4

10.1

15.0

34.5

51.5

P/E (x)

FY17 FY18E

50.1 46.2

58.1 59.6

75.7 61.3

69.1 27.4

50.0 46.3

63.3 55.5

37.9 38.5

92.2 79.6

96.2 74.5

47.4 42.8

23.8

23.8

20.4

19.1

32.5

35.7

35.3

17.9

30.1

14.2

15.4

17.5

70.5

25.9

18.8

17.8

31.2

42.6

28.4

19.1

34.4

22.0

23.2

17.1

42.4

34.7

32.6

14.0

16.7

30.8

81.2

18.4

NM

74.5

10.5

13.0

16.7

57.3

64.1

NM

32.5

25.1

24.5

22.6

16.7

34.2

28.3

26.6

21.1

25.7

67.4

14.1

15.5

51.8

25.1

14.7

24.1

30.1

28.3

19.3

33.2

27.8

22.8

25.3

15.0

33.5

31.3

24.7

7.4

13.4

25.8

61.3

15.8

NM

63.7

9.6

12.2

14.5

39.5

42.6

NM

28.3

P/B (x)

FY17 FY18E

17.5 15.0

21.9 20.4

30.3 24.3

3.2

2.9

13.0 10.6

39.6 32.9

1.9

1.8

9.2

8.4

19.3 13.4

13.0 12.1

5.1

5.1

6.7

4.7

4.1

7.4

3.6

4.0

3.0

1.5

3.8

3.2

10.2

2.1

3.1

3.3

5.3

5.2

3.0

3.3

6.9

4.7

3.9

2.5

18.8

3.6

2.4

1.9

2.6

3.8

17.4

4.3

1.6

4.7

1.8

0.9

2.4

3.8

6.4

3.5

7.7

4.4

4.4

5.4

3.7

3.8

6.2

3.2

3.6

2.8

1.3

3.0

2.2

11.9

2.0

2.6

3.0

5.0

4.4

2.7

3.3

5.7

4.2

3.6

2.3

14.3

3.5

2.3

1.7

2.2

3.6

13.6

3.9

1.8

4.4

1.5

0.8

2.4

3.5

5.6

3.6

7.1

FY17

36.7

39.0

40.0

6.0

28.2

39.3

5.2

10.4

21.3

27.5

23.0

23.4

37.7

27.6

12.3

23.0

10.2

23.5

9.7

11.3

24.7

21.1

14.5

8.6

18.1

20.6

17.1

14.4

10.7

18.5

22.2

23.8

16.9

12.6

50.5

10.8

7.3

12.4

16.7

12.4

24.1

25.5

-12.0

6.7

19.0

7.1

17.6

11.2

10.4

-23.5

23.6

ROE (%)

FY18E

34.9

35.5

39.6

11.0

25.2

64.9

4.9

11.0

18.0

28.2

19.0

19.2

26.5

24.8

11.1

23.9

12.1

18.1

11.3

2.1

21.6

17.7

23.0

8.2

19.5

13.2

16.6

17.0

14.7

10.0

22.5

19.5

14.1

16.0

48.6

11.3

9.4

19.4

17.8

13.8

24.9

25.8

-5.3

7.2

17.3

6.9

16.5

9.3

14.0

-4.1

25.0

FY19E

37.7

38.1

43.1

13.3

23.5

62.8

8.5

14.7

20.3

29.3

20.4

20.5

25.9

22.1

14.5

26.3

13.2

19.4

14.8

4.9

20.9

18.8

30.9

12.2

19.6

16.0

18.1

20.4

20.2

14.7

20.7

21.5

16.3

16.8

46.8

12.4

12.4

25.4

18.6

15.4

99.2

26.6

0.7

10.7

17.3

6.4

17.4

12.4

18.2

6.2

28.8

Neutral

Neutral

Buy

Buy

Sell

Buy

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Neutral

Neutral

Buy

Buy

Buy

Buy

Buy

Buy

Not Rated

Neutral

513

1,799

1,194

749

332

506

562

709

2,189

147

604

127

2,423

417

694

996

4,029

597

916

501

448

1,216

510

1,830

1,606

850

330

555

520

680

2,500

220

775

200

2,500

430

905

1,125

4,820

805

1,300

515

-

1,350

-1

2

35

13

-1

10

-7

-4

14

49

28

58

3

3

30

13

20

35

42

3

11

21.6 20.5

75.7 73.5

58.4 52.8

39.3 44.9

10.2

9.7

14.2 17.9

15.9 21.1

39.7 33.6

72.6 85.1

10.3

2.2

39.3 42.9

7.2

8.2

34.4 46.8

16.1 16.6

37.0 47.1

55.8 41.4

129.1 133.6

14.0 21.1

32.3 47.4

26.1 15.1

13.0 16.1

55.2 53.4

25.5

91.6

64.2

50.0

14.2

24.1

26.0

40.0

125.2

5.6

51.7

11.5

54.9

26.8

56.7

56.3

160.6

30.4

74.8

23.3

18.0

67.3

Buy

Not Rated

Neutral

Buy

Not Rated

Not Rated

168

4,349

1,318

222

117

282

212

-

1,214

272

-

-

26

-8

23

9.8

11.2

102.5 129.9

38.0 42.1

6.8

8.4

16.9

9.0

15.9

21.0

13.3

163.2

48.6

12.4

23.9

25.9

Buy

Buy

Neutral

Neutral

Buy

Neutral

Buy

Buy

Buy

Neutral

Neutral

80

376

88

851

271

97

179

368

1,316

25

807

106

450

90

928

350

90

225

469

1,628

32

860

32

20

2

9

29

-7

26

27

24

28

7

1.0

20.4

-8.6

11.4

25.9

7.4

10.8

6.4

20.5

-1.8

24.9

1.3

23.7

-2.7

13.4

28.3

7.9

12.4

9.3

30.9

-0.3

28.5

4.3

27.6

0.3

21.7

33.6

8.1

14.1

14.0

46.9

0.4

35.9

5 September 2017

22

Company

Zee Ent.

Aggregate

Metals

Hindalco

Hind. Zinc

JSPL

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

Reco

Buy

CMP

(INR)

520

TP

% Upside

EPS (INR)

(INR) Downside FY17 FY18E FY19E

630

21

23.1 14.7

18.9

P/E (x)

P/B (x)

FY17 FY18E FY17 FY18E

22.5 35.3

8.6

7.4

39.9 30.6

5.6

5.1

15.0

15.2

NM

17.2

20.0

13.5

NM

20.9

17.0

21.4

11.0

16.8

39.3

21.3

11.7

10.0

28.7

9.2

16.0

9.8

19.6

16.7

13.0

137.8

67.9

73.4

17.3

14.3

19.7

14.3

9.8

13.6

18.3

15.6

13.4

16.2

30.7

18.4

13.5

17.6

15.2

16.7

37.4

25.4

NM

24.0

38.6

11.1

13.5

NM

11.6

21.2

10.8

NM

13.2

9.9

15.0

15.5

14.3

21.5

16.8

14.0

11.7

25.3

14.3

11.1

9.8

15.9

14.0

13.1

93.1

57.7

61.2

15.0

13.9

17.1

14.5

11.1

12.6

15.8

15.0

12.0

14.1

25.6

18.4

12.2

16.4

15.2

16.5

95.8

21.0

NM

75.0

213.8

1.9

4.1

0.4

2.7

1.4

1.9

0.7

1.9

2.0

1.8

3.4

1.7

6.7

2.4

3.6

2.0

6.0

2.4

0.8

0.9

4.1

1.7

1.7

11.3

12.9

12.6

2.8

3.6

4.8

3.0

1.5

4.7

3.0

2.1

1.8

2.5

9.6

5.5

2.2

2.8

2.4

3.8

2.5

4.5

1.3

11.7

2.7

1.5

4.4

0.4

2.3

1.4

1.8

0.8

1.8

1.7

1.7

3.0

1.6

5.3

2.1

3.1

1.8

5.1

2.1

0.8

0.9

3.5

1.5

1.6

10.4

11.7

11.5

2.5

3.2

4.1

2.7

1.4

3.7

2.9

2.2

1.7

2.4

7.7

5.9

2.0

2.7

2.2

3.8

2.4

3.9

1.5

10.1

2.7

ROE (%)

FY17 FY18E FY19E

24.7 22.6

24.5

14.0 16.7

21.3

14.0

24.4

-7.9

17.3

7.2

12.8

-6.7

9.7

15.7

8.2

32.4

9.6

17.8

11.6

32.4

21.2

21.0

31.4

5.7

10.1

23.2

11.6

13.3

8.2

20.6

17.2

16.2

27.5

26.5

22.0

14.3

40.4

16.8

13.2

13.7

17.0

37.1

32.6

18.4

16.9

17.2

22.9

6.7

16.2

-1.6

132.2

6.9

15.3

31.5

-4.9

21.3

6.5

15.2

-9.1

14.2

18.6

11.2

20.4

11.3

27.6

13.2

23.6

16.0

21.9

15.5

7.5

9.4

23.7

12.3

12.2

11.1

21.3

18.9

16.6

24.9

25.7

19.6

13.0

33.0

17.3

14.5

14.4

17.9

33.5

31.1

17.4

16.1

15.0

22.8

2.5

19.8

-17.3

14.5

1.2

15.4

38.0

0.6

20.8

7.7

15.6

-5.3

20.4

16.2

14.0

21.4

12.4

27.4

14.2

21.7

15.8

20.9

17.0

8.0

10.9

25.5

12.3

12.7

14.0

22.2

19.6

17.3

23.8

23.1

19.3

14.2

29.4

20.1

16.2

15.4

20.7

32.2

33.5

16.9

16.1

17.9

22.0

3.8

19.4

-21.7

33.6

2.8

Buy

Neutral

Buy

Buy

Neutral

Buy

Sell

Buy

Neutral

243

299

140

255

74

135

62

316

646

309

301

194

297

63

180

30

361

591

27

1

39

17

-14

34

-52

14

-9

16.2

19.7

-20.9

14.8

3.7

10.0

-6.2

15.1

37.9

22.0

22.2

-15.8

21.9

3.5

12.4

-7.7

23.9

65.1

26.3

29.3

2.0

25.7

4.2

12.1

-4.2

37.4

64.3

Neutral

Sell

Sell

Neutral

Buy

Buy

Neutral

Sell

Buy

Buy

Buy

Neutral

530

380

800

188

476

430

1,262

135

308

162

223

1,611

515

346

691

171

510

458

1,152

113

316

195

274

1,499

-3

-9

-14

-9

7

7

-9

-16

2

21

23

-7

48.3

22.6

20.4

8.8

40.7

43.0

44.0

14.8

19.3

16.4

11.4

96.7

34.3

26.5

37.2

11.1

34.1

36.7

49.9

9.4

27.9

16.5

14.0

115.5

41.3

31.3

46.1

13.3

36.3

40.4

56.3

11.7

31.1

19.7

17.9

128.1

Sell

Neutral

1,379

613

850

565

-38

-8

10.0

9.0

14.8

10.6

20.7

12.6

Buy

Neutral

Neutral

Buy

Neutral

Buy

Neutral

Neutral

Neutral

Buy

Buy

Neutral

Buy

Neutral

Buy

531

858

269

901

117

756

455

605

509

610

1,727

2,458

416

297

791

600

950

250

1,050

140

880

450

610

540

750

1,992

2,350

490

270

950

13

11

-7

16

19

16

-1

1

6

23

15

-4

18

-9

20

30.6 35.4

59.8 61.8

13.7 15.7

62.9 62.2

11.9 10.6

55.5 60.2

24.9 28.7

38.9 40.3

38.0 42.3

37.7 43.3

56.3 67.4

133.4 133.6

30.9 34.0

16.9 18.1

52.1 51.9

41.9

65.9

16.5

67.2

13.1

68.0

32.9

43.0

48.7

52.0

79.7

147.7

36.8

19.1

70.0

Buy

Buy

Buy

Buy

416

377

87

654

490

480

110

775

18

27

26

19

11.1

14.9

-1.1

27.2

4.3

17.9

-10.9

8.7

6.6

20.4

-11.3

26.1

5 September 2017

23