17 October 2017

Market snapshot

Equities - India

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32,634

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10,231

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YIELD (%)

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1MChg

10 Yrs G-Sec

6.7

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10 Yrs AAA Corp

7.6

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Flows (USD b)

13-Oct

MTD

FIIs

0.0

-0.7

DIIs

0.0

1.2

Volumes (INRb)

13-Oct

MTD*

Cash

334

308

F&O

6,836

6,096

Note: YTD is calendar year, *Avg

YTD.%

22.6

25.0

30.9

YTD.%

14.2

23.1

5.4

13.3

23.5

11.2

YTD.%

4.5

12.4

29.0

23.8

YTD.%

-4.7

12.3

-4.4

YTDchg

0.2

0.0

YTD

4.5

11.0

YTD*

294

5,458

Today’s top research idea

Prime Focus (Initiating Coverage): Set to run the show

Forte in global media services to drive profitable growth

v

PFL has turned into a strong media service player globally, offering visual

effects, 3D animation and media-focused ERP solutions in India and abroad.

v

The company turned profitable in FY17 post completion of M&A integration in

FY15-16. In our view, the four M&A transactions in the last five years have

allowed PFL to become a strong media service player globally. The company’s

position as one of the top-4 Hollywood VFX service providers and a steady order

book should drive 15%/18% revenue/EBITDA CAGR over FY17-20E.

v

We note that the demons of ~2.8x jump in net debt to INR13.9b and 50% equity

dilution over the last five years are now behind. Improving EBITDA and lower

capex requirement are expected to help generate healthy FCF, improve RoIC to

19%, and reduce net debt by ~68% to INR4.5b by FY20.

v

We initiate coverage with a

Buy

rating and TP of INR130 (+46%), based on SOTP

valuation (10x FY19E EBITDA).

Research covered

Cos/Sector

Prime Focus (IC)

India Strategy

Expert Speak

Fund Folio

Bajaj Finance

Colgate-Palmolive

Federal Bank

Dewan Hsg. Fin.

Delta Corp

DCB Bank

Persistent System

Hindustan Media

Metals Weekly

Results Expectation

Key Highlights

Set to run the show

Contrarian Investing – Quarterly update

GST: A change for the better

AUM rises for the 16th consecutive quarter

Strong growth continues

Volumes miss, but high rural salience to drive performance

Strong operating performance

Growth surprises positively; re-rating to continue

Results in-line (GST adjusted)

Strong Operating Profit, Lower Provisions Aid YoY PAT Growth

Marching upward on profitability

GST and RERA prune ad growth

Alumina continues to rise due to bauxite supply disruption

ACC | Axis Bank | Bajaj Auto | H T Media | Wipro

Chart of the Day: India Strategy – A review of our contrarian investment strategies

Out-of-favor stocks have beaten the benchmark convincingly (Indexed Returns)

Source: Bloomberg

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

Jio sets stage for another fight

over IUC, this time over

international calls

Reliance Jio Infocomm has called

upon the telecom regulator to

slash international call termination

rates to 6 paise a minute, and

then to zero, changing its stance

and breaking ranks with larger

rivals who want the fee to be

increased to Re 1 from 53 paise…

2

Indian e-commerce businesses may not be breaking even just yet but big-

ticket transactions by private equity (PE) and venture capital (VC) players

drove up investments in these ventures to $2.1 billion in the three months

to September. That’s an increase of 17% sequentially, data put together by

research firm Jefferies show. Indeed, 2017 has seen a resurgence in

inflows into e-retailing as investors believe consolidation and a focus on

costs will make ventures more viable…

Ecommerce still lures big bucks in India, investors push in $2 bn in

just 3 months

3

Maruti Suzuki vehicles

dominate top 10 selling list

Maruti Suzuki, the pioneer in

India’s personal transport

industry, strengthened its

leadership credentials this

financial year, with five of its top-

selling models monopolizing the

domestic leader-board for the first

time in a decade…

4

J&K set to bring petrol,

electricity, liquor under GST

Jammu and Kashmir (J&K) is

poised to be the first state to bring

petrol, electricity, liquor and real

estate under the state goods and

services tax (GST). A formal

decision is likely to be part of the

state’s budget for 2017-18,

scheduled for presentation in the

first week of January…

5

The Centre is considering an

incentive package of over ₹16,000

crore to boost exports in view of

“sluggish domestic demand and

competition in export markets’’.

Commerce Minister Suresh

Prabhu, in a letter to Finance

Minister Arun Jaitley, has made a

case for early decisions on key

issues affecting exports — such as

inadequate incentives and lack of

credit — to formulate a

meaningful mid-term review of

the foreign trade policy (FTP). A

number of critical export

promotion measures,…

Centre looking at ₹16,000-cr

export package

6

Five suitors put in bids for

stake in JP Power

Five investors have put in their

bids to buy at least a 30 per cent

stake in debt-ridden Jaiprakash

Power Ventures (JPVL), according

to sources close to the

development. While 11 players

had initially evinced interest in

picking up a stake in JPVL, that

number has now shrunk to five…

7

RIL, BP submit revised

investment plan for KG-D6 gas

finds

Reliance Industries and its partner

BP Plc. of UK on Monday

submitted a revised investment

plan for bringing to production the

satellite gas discoveries in the

flagging KG-D6 block. RIL and BP

plan to develop four deep sea

satellite gas finds,…

17 October 2017

2

Prime Focus

BSE Sensex

32,634

S&P CNX

10,231

Initiating Coverage | Sector: Media

CMP: INR89

TP: INR130 (+46%)

Buy

Set to run the show

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 (%)

Forte in global media services to drive profitable growth

PRIF IN

298.9

124 / 63

-13/-25/5

27.4

0.42

11

65.0

n

n

n

Financial Snapshot (INR b)

Y/E MARCH

FY17 FY18E FY19E

n

Net Sales

21.5

24.7

28.4

EBITDA

4.8

5.5

6.5

Adj. NP

0.4

0.9

1.8

Adj.EPS (INR)

1.2

3.0

5.9

n

EPS Gr.%

LP 147.7

94.3

BV/Share

18.6

21.6

27.5

Adj. P/E (x)

73.0

29.5

15.2

P/BV (x)

4.8

4.1

3.2

Full-service media player set to run the show

EV/EBITDA (x)

8.5

7.0

5.4

RoE (x)

7.6

15.0

23.9

PFL, a full-service media player, has grown its revenue by 10x and EBITDA by 5x

RoCE (x)

8.3

9.7

14.1

over the past ten years. Post five years of strategic M&As (integration completed in

Shareholding pattern (%)

As On

Jun-17 Mar-17 Jun-16

Promoter

35.0

35.0

35.0

DII

0.0

0.0

0.0

FII

9.9

10.1

10.7

Others

55.1

54.9

54.3

FII Includes depository receipts

Prime Focus Ltd (PFL) is a full-service media player offering creative solutions,

including visual effects (VFX), animation, 3D conversion and media-focused ERP

solutions, in India and abroad.

The company turned profitable in FY17 post completion of the M&A integration in

FY15-16. In our view, the four M&A transactions in the last five years have allowed

PFL to become a strong media service player globally, which should drive 15%/18%

revenue/EBITDA CAGR over FY17-20E.

One of the top-4 Hollywood VFX service providers, PFL is well placed to benefit from

the steady rise in VFX budgets of the top Hollywood movie grossers.

We note that the demons of ~2.8x jump in net debt to INR13.9b and 50% equity

dilution over the last five years are now behind. Furthermore, improving EBITDA and

lower capex requirement are expected to help generate healthy FCF, improve RoIC to

19% and reduce net debt by ~68% to INR4.5b by FY20.

We thus initiate coverage on PFL with a Buy rating and a target price of INR130 (46%

upside), based on SOTP-based valuation, ascribing 10x (industry average) on FY19E

EBITDA.

FY15-16), the company turned profitable in FY17. We believe M&A has allowed PFL

to become a strong player in the media service industry globally, which should

drive steady 15% revenue CAGR over FY17-20E to reach INR32.8b. Besides this, the

scale benefits and cost synergies, particularly in the Creative segment, should drive

18% EBITDA CAGR to reach INR 7.8b over the same period.

Creative segment – Animating growth

Creative segment, which operates through its 80%-held subsidiary, Prime Focus

World (PFW), has significantly enhanced its competitive position post the merger

with Double Negative (DNeg), one of the top-4 Hollywood VFX service providers.

Enjoying a healthy USD250m order pipeline (v/s USD100m in FY14), Creative

segment (77% of revenues in FY17) is expected to exhibit revenue CAGR of 16%

over FY17-20E to reach INR26.2b. We note that 90% of the top 25 movie grossers

are VFX-heavy (in the last three years), and the budgets for the same continue

expanding (from 10% to 25-30% of top 25 movie grossers in last ten years). Thus,

Creative segment’s target market – Hollywood VFX industry – continues to grow in

high-single-digits. The segment’s cost synergies (as incremental projects relocate to

low-cost centers) should also drive steady margin improvement. We expect EBITDA

CAGR of 22% over FY17-20E to reach INR6.4b.

Prime Focus

Set to run the show

Aliasgar Shakir

+

91 22 3982 5423

aliasgar.shakir@motilaloswal.com

Please click here for Video Link

17 October 2017

3

Tech and India FMS to remain steady

Tech business (16% revenue in FY17), which operates through its 74%-held

subsidiary, Prime Focus Technology (PFT), offers cloud-based media ERP solutions to

global media houses. Notably, the company does not face direct competition from

peers in this business. PFT’s content digitization endeavor has allowed it to become

a dominant player in India, and it has partnered with anchor broadcasters like Star

TV. Operating with an order book of ~USD200m, the company is expected to exhibit

revenue/EBITDA CAGR of 15%/16% over FY17-20 to reach INR5.3b/INR1.5b. PFT’s

recent investments in developed markets, breakthrough in Latin America and

inherent lumpy revenue growth profile have the potential to drive significantly

better-than-expected performance. Its other business, the India Film Management

Services (FMS) (7% revenue contribution in FY17), is a dominant pre- and post-

production equipment/service provider to the film industry. This business is

expected to grow its revenue and EBITDA at 8% and 3%, respectively, over FY17-20E

as large production houses turn to captive resources.

M&A phase behind; expect steady RoCE, FCF improvement

The company underwent 50% equity dilution, and grew gross debt from INR5.4b to

INR15.2b over FY12-17. This can be ascribed to the FCCB repayment woes, the four

M&A transactions over FY14-16 and also reclassification of INR2.4b preference

capital as debt (based on Ind-AS). However, with no further need for M&A,

incremental cash flow should be utilized toward debt repayment. Additionally,

provisioning of the long-pending INR2b debtors has lowered debtor days (from 130

in FY14 to ~40 in FY17). We expect moderate capex of INR1.75b (7% capex to sales),

and improving profitability on a leaner balance sheet should drive RoIC to 19% by

FY20. FCF generation (after deducting net interest cost) should increase to INR4.6b

in FY20 from INR0.7b in FY17. With cumulative FCF generation of INR12.0b over

FY17-20E, the current INR15.2b gross debt is expected to reduce significantly.

Valuation and view

The stock is trading at adj. P/E of 15.2x and EV/EBITDA of 5.4x on FY19E basis. Using

SOTP, we value Creative segment at 10x EV/EBITDA, Tech/Tech-enabled services at

10x EV/EBITDA

(industry average)

and Indian FMS at 6x EV/EBITDA, arriving at a TP of

INR130. The higher valuation multiple for Creative and Tech/Tech-enabled business

is attributed to its healthy profit growth and sturdy competitive position in both the

businesses. India FMS business also offers steady profitability, but limited growth

opportunities – and thus low valuations. We believe its improving return ratios and

FCF generation offer strong re-rating potential. We initiate coverage with a

Buy

rating and a target price of INR130, offering 46% upside.

17 October 2017

4

Contrarian investing

Please refer our report dated

23 June 2017

17 October 2017

Thematic: Contrarian investing

Contrarian Investing – Quarterly update

A review of our contrarian investment strategies

Our thematic strategy note on

Contrarian investing,

published in June’17 gives a

detailed account of the subject matter. In this note we have reviewed the

performance of our strategies. Also, since we have used quarterly rebalancing to

test our hypothesis, we run the updated quintiles as on 30

th

September and present

key findings along with our top contrarian bets.

The key takeaways from 2QFY18 quintiles

n

n

Please refer our report dated

23 August 2017

n

n

Our analysis suggested that neutral to moderately popular stocks deliver

significant outperformance, even bettering the performance of the most

popular stocks.

In this quarter, neutral to moderately popular stocks

outperformed the benchmark BSE-100 as well as the most popular stocks. The

most popular stocks delivered the worst return in this quarter.

Our findings proved that out-of-favor low P/E stocks deliver disproportionate

returns, significantly beating the benchmark. In contrast, the performance of

high P/E stocks is dismal.

In this quarter, low P/E stocks delivered the best

returns, whereas the high P/E quintile delivered the worst returns, validating our

thesis.

Similarly, out-of-favor low P/CF stocks deliver disproportionate returns,

significantly beating the benchmark. In contrast, the performance of high P/CF

stocks is dismal.

We also note that in some sub-themes, the returns from a quintile deviate from

the long term pattern highlighted in our initial detailed note. However, this is in

line with the trends observed even in the long term study – where returns can

deviate for a quarter here and there but over a long period, the hypothesis is

proven right. For example, in the Popularity theme, instead of Quintile -4,

Quintile-3 has delivered best returns in 2QFY18.

Our findings suggested that a simple strategy of investing in stocks for which

analyst consensus has changed from “net sell to net buy” with a holding period

of one year has delivered 24.0% annual returns over the last 10 years.

Net Sell to Net Buy stocks for 2QFY18: Stocks which satisfies this criterion for

2QFY18 are – ACC, Havells, BEML, CG Power, Divis, Nestle, NMDC

Best delta: Consensus change from net sell to net buy

n

n

As a part of our analysis, we

have divided BSE100 in 5

groups of 20 – Quintile-1

(Q1), Quintile-2 (Q2),

Quintile-3 (Q3), Quintile-4

(Q4) and Quintile-5 (Q5),

respectively, with Q1 being

composed of the most

popular stocks and so on

Top Contrarian Picks

We highlight our top contrarian Buy and Sell picks based on the various themes we

have covered in this note as well as in the past –

Popularity, Relative Valuations,

Net Sell to Net Buy, Consensus SELLs.

Contrarian BUYs:

Axis Bank, Sun Pharma, HPCL, Dabur, RECL.

Contrarian SELLs:

Eicher Motors, Wipro, LIC Housing Finance, Bajaj Finance, GAIL.

17 October 2017

5

Reliance Industries

Expert Speak

GST: A change for the better

Economy to benefit as the new tax mechanism stabilizes

We hosted a conference call with Mr Pratik Jain (partner and leader indirect tax at PWC

India) to understand his views on how Goods & Services Tax (GST) transition has been

absorbed by the economy post its implementation in July this year. He believes that GST –

one of the most important structural reforms of India – should contribute significantly

toward the economy by way of promoting more investment and manufacturing in India over

the long term. However, Mr Jain agreed that the first 100 days of implementation have not

been as s

14 October 2017

GST

Q2FY18 Results Update | Sector: Oil & Gas

16 October 2017

Mr. Pratik Jain

Partner, National leader –

Indirect tax, PwC India

Mr. Pratik Jain is a national

leader – Indirect tax in PwC

India. He is a member of the

Institute of Chartered

Accountants of India and a

law graduate. Pratik has been

involved with several India

and MNCs & advises them on

tax planning, management,

dispute resolution and policy

related issues. He also plays

an active role in formulation

of the GST policy and is

actively involved/ consulted

by industry and industry

associations. Pratik regularly

contributes in public

debates/discussions on tax

policy related issues and is

member of tax committees of

leading trade bodies. He

chairs the GST committee of

CII (Northern region). Pratik

has been a member of Tax

Advisory Group of

Organization of Economic Co-

operation & Development

(OCED).

First 100 days of GST implementation – some hits and misses

n

n

n

n

n

GST transition in the initial months of rollout has been smoother than expected

from the government’s perspective, with no significant protests in the industry,

barring textiles, which was completely outside the tax purview in the pre-GST era.

The real issues surfaced during the August filing, largely with respect to the

infrastructure and technology of the GST-filing portal GSTN. With last-minute law

modifications and finalization continuing until 30 June, GSTN was never seamlessly

tested and will take time to stabilize. Against this backdrop, the government had to

extend the deadline for filing of August returns to October.

Of ~6.5m businesses that were expected to file returns for July, only ~4.5m have

actually done the filing, indicating a low level of compliance.

Corporates are realizing that GST is structurally good for the economy, but not so

simple in terms of compliance.

The GST Council has approved a white paper on the GST rates with a view to review

and reduce the rates, especially the 28% slab, under which 14% of the commodity

and services are covered.

Some relief granted on initial provisions to facilitate smooth

transitioning

n

n

To facilitate smooth transitioning to GST, the government has (a) extended

deadline for the implementation of e-way bills and the reverse charge mechanism

for unregistered dealers until April 2018 and (b) provided relief to exporters to

address their concerns related to rising working capital requirements by reducing duties for certain categories

of exporters and introducing E-wallets by April 2018.

Mr Jain believes that the system of e-way bill is much ahead of time and the reverse charge mechanism is not

required.

17 October 2017

6

Backward/hilly area exemptions unlikely to be restored in full under GST

n

n

n

n

In the erstwhile regime, companies establishing manufacturing units in backward areas were granted certain

tax incentives in the form of excise/ VAT exemptions. Under the GST regime, these exemptions have been

restricted to 58% of CGST (net of input tax benefits). These benefits are likely to be lower than what were

availed in the earlier regime.

Certain units in the backward areas were operating as contract manufacturers for large brand owners. For

some of the products (which were earlier subject to excise levy on a MRP-based mechanism with abatements)

manufactured in these entities, the excise duty exemption was availed based on the MRP of the goods sold.

However, under GST, the exemptions will be restricted only to the extent of value-add (job work charges).

State-based VAT refunds granted previously are not continued in the GST regime. Hence, there is a need for

state-specific schemes for such businesses.

Several industry bodies have made representations to the government for the disadvantaged situation with

these changes. Unresolved issues may invite various litigations in future.

Other issues

n

n

Input tax credit of ~650b claimed:

Input tax credit (ITC) of INR650b has been claimed from the erstwhile

regime, which far exceeds the government expectations. This includes (i) tax credit carried forward, (ii) traders

claiming excise credit under one-time opportunity, who were subjected only to VAT in the earlier regime and

(iii) deemed credit of 40-60% excise duty depending on the slab of GST. Mr Jain believes that businesses have

claimed certain duties which were not eligible and large amount of this ITC will be disputed.

Anti-profiteering:

Government is rigorously implementing these rules to ensure passage of benefit to

consumers in the form of lower prices. This may be possible by addressing consumer complaints and audit of

books by investigating officers.

17 October 2017

7

Fund Folio

Reliance Industries

Indian Mutual Fund Tracker

AUM rises for the 16th consecutive quarter

n

Database Periodical |14 October 2017

16 October 2017

Q2FY18 Results Update | Sector: Oil & Gas

n

n

Domestic MFs maintained their positive momentum in September – industry average AUM increased for the

16th consecutive quarter in 3QCY17 (+7.3% QoQ) to touch a new high of INR21t. On a YoY basis, average AUM

increased 29.9% (INR4.8t) in September 2017, primarily on account of inflows in growth (equity), income and

liquid funds, backed by increased participation of domestic investors in equity schemes.

Equity AUM rose for the 10th consecutive month in September to scale a new high of INR6.6t (+2.4% MoM

and +40.8% YoY), led by an increase in equity scheme sales (INR343b, +5.7% MoM). Redemptions rose 27%

MoM to INR154b and market indices were down (Nifty -1.3% MoM), leading to a fall in net inflows (INR189b, -

7% MoM).

Equity AUM, as % of total AUM, rose 100bp MoM to 32.3% in September. Equity AUM now accounts for 5% of

India’s market capitalization.

The month saw a notable change in sector and stock allocation of funds. On an MoM basis, the weights of

NBFCs, Healthcare and Technology increased, while those of Banks (PSU and Private), Cements, Metals,

Capital Goods, Consumer and Telecom showed signs of moderation.

NBFC sector’s weight reached a new high of 8.4% (+30bp MoM and +190bp YoY). As a result, the sector

overtook Capital Goods to take the third position in sector allocation of mutual funds – it was at the sixth

position 12 months ago.

After increasing for 15 consecutive months, the weight of Metals declined in September to 3.7% (-10bp MoM).

Healthcare’s weight increased (+20bp MoM) to 6.5% in September after two consecutive months of decline.

Of the top 10 stocks in terms of value increase MoM, three were from Healthcare.

Bajaj Finance, which entered the Nifty-50, was one of the preferred stocks among MFs in September, with net

buying by 12 funds. Value increased by INR12.1b, with the stock up 2.9% for the month.

Interglobe Aviation was also one of the preferred stocks among MFs in September, with net buying by 11

funds. Value increased by INR12.3b, despite the stock delivering negative return of 10.5% during the month.

Vedanta, one of the least preferred stocks among MFs in September, saw net selling by 12 funds. Value

decreased by INR2.8b, despite the stock gaining 1.9% in the month.

Some interesting facts

n

n

n

n

n

n

n

Exhibit 1:

Equity AUM, as % of India’s market cap, is at all-

time high of 5% (80bp YoY)

Exhibit 2:

AUM touched a new high of INR21t

AUM rises by 2.8x

against Nifty rise of

1.7x in last 5 years

7,965

5,703

5,735

Average AUM (INR t)

Nifty Index

7,949

8,611

Equity incl. ELSS AUM % to Mktcap

Indian Mkt Cap (INR t)

112

111 114 108

106

117

126 126

122 125

133 132

132

9,789

4.2 4.3

4.4

4.4 4.4 4.4 4.5

4.6

4.6

4.7 4.7

4.9

Flows: Net inflows in September down 7% MoM to INR189b

n

Mutual funds’ gross inflows remained higher (INR343b, +5.7% MoM) in September. However, there was a

massive rise in redemptions (INR154b, +27% YoY). Consequently, net inflows fell to INR189b (-7% MoM) in the

month

17 October 2017

8

Exhibit 3: Monthly trend of sales, redemptions and net amount raised by mutual funds (toward equity)

375

250

125

0

-125

-250

Inflows in Equity Incl. ELSS (INR b)

Net Inflow/Outflow in Equity Incl. ELSS (INR b)

Redemptions in Equity Incl. ELSS (INR b)

343

189

-154

Exhibit 4:

Yearly trend of net inflows by mutual funds

(toward equity)

Exhibit 5:

Yearly trend of sales and redemptions by mutual

funds (toward equity)

999

Net Inflow/Outflow in Equity Incl. ELSS (INR b)

906

266 311

14

-158

495

77

-156 -104

549

Sale in Equity Incl. ELSS (INR b)

Redemptions in Equity Incl. ELSS (INR b)

1,082

720

1,206

494

690 574

414 447

1,728 1,866

2,337

-816

-409 -481

-848

-1,317

-498 -571 -551

-712 -822

CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17

YTD

CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17

YTD

-1,338

Sector-wise weight: MoM increase seen in NBFCs, Healthcare and Technology

n

n

n

In September, MFs showed interest in NBFCs, Healthcare and Technology—these sectors saw an MoM increase

in weight. Banks (PSU and Private), Cements, Metals, Capital Goods, Consumer and Telecom saw an MoM

decrease in weight.

Private Banks (17.4%) had the top sector holding in September, followed by Auto (9.7%), NBFCs (8.4%) and

Capital Goods (8.0%).

PSU Banks, Cement and Telecom were the sectors witnessing a highest decline in value on an MoM basis.

Exhibit 6: MFs weight in Nifty (%)

OW/UW to Nifty(pp)

4.6

1.8

3.0

1.4

1.3

1.1

0.3

29.0

10.0

9.7

9.3

6.0

5.8

5.5

5.2

5.1

5.0

4.6

1.6

MFs Weight in Nifty (%)

1.1

1.0

0.6

0.6

17 October 2017

9

16 October 2017

Q2FY18 Results Update | Sector: Financials - NBFC

Bajaj Finance

Buy

BSE SENSEX

32,634

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, (INR m)

Free float (%)

S&P CNX

10,231

BAF IN

546.9

843.8/13.1

1578 / 762

7/50/63

1518

42.1

CMP: INR1,889

n

n

TP: INR2,300(+22%)

Strong growth continues; RoE of 20%+ despite large capital raise

n

Financials & Valuations (INR b)

Y/E March

2017 2018E 2019E

NII

54.7 77.4 104.8

PPP

36.4 51.7 73.1

PAT

18.4 26.2 36.5

EPS (INR)

32.0 45.7 63.7

EPS Gr. (%)

43.6 42.8 39.3

BV/Sh. (INR)

167

285

339

RoA on AUM (%)

3.3

3.5

3.6

RoE (%)

21.6 20.2 20.4

Payout (%)

14.0 12.5 12.5

Valuations

P/E (x)

59.0 41.3 29.7

P/BV (x)

11.3

6.6

5.6

Div. Yield (%)

0.2

0.3

0.4

n

n

Bajaj Finance’s (BAF) 2QFY18 PAT increased 37% YoY to INR5.57b (2% miss).

Performance across parameters was largely in line with the trend.

AUM continued its robust growth trajectory (+38% YoY, +5% QoQ) to reach

INR721b, led by impressive growth in consumer finance (+42% YoY) and

commercial business (+57% YoY).

Cross-sell personal loans grew 54% YoY to INR76b (11

th

consecutive quarter of

50%+ AUM growth).

The size of this book is now within sniffing distance of

the CD financing book (INR80b).

This validates the cross-sell expertise of

BAF’s business model – on-board the customer through CD loans, and then

cross-sell personal and other loans.

Our estimate is that BAF has tapped just

~15% of its CD financing customer base for personal loans, implying huge

opportunity ahead.

Asset quality and margins were stable QoQ. Management remains cautious on

LAP and SME growth ahead, due to hyper competition and the lagged impact

of demon and GST.

Valuation and view:

BAF, a dominant player in the consumer durables

financing segment, continues to reap the benefits of healthy consumer

demand, increasing its market share in consumer and also other businesses.

Within the consumer financing business, it has demonstrated its ability to

cross-sell, as evident from strong growth in the personal loans portfolio over

the past three years. Its focus on the SME and commercial lending segments

may depress margins and RoE, but will keep growth strong. At the same time,

it is proactive in detecting early warning signals with regard to asset quality.

We maintain our estimates for FY18/20 and reiterate

Buy

with a target price

of INR2,300 (30x September 2019 EPS, implied 6x PBV).

17 October 2017

10

16 October 2017

Q2FY18 Results Update | Sector: Consumer

Colgate

Buy

BSE SENSEX

32,634

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

S&P CNX

10,231

CLGT IN

272.0

297.0 / 4.6

1176/862

-7/-4/-2

372.0

49.0

CMP: INR1,064

TP: INR1,325(+25%)

Volumes miss, but high rural salience to drive performance

n

Financials & Valuations (INR b)

Y/E Mar

2017 2018E 2019E

39.8

42.0

48.5

Net Sales

9.4

10.6

12.5

EBITDA

5.8

6.4

7.8

PAT

21.2

23.4

28.6

EPS (INR)

-5.7

10.2

22.1

Gr. (%)

46.8

49.2

52.5

BV/Sh (INR)

50.4

48.7

56.2

RoE (%)

49.3

47.7

55.1

RoCE (%)

P/E (x)

P/BV (x)

50.1

22.7

45.5

21.6

37.2

20.3

n

n

n

n

Estimate change

TP change

Rating change

Colgate’s (CLGT) volumes declined 0.9% YoY (est. of +7%) in 2QFY18.

Realization was slightly lower than expected, and thus, sales grew only 2.7%

YoY to INR10.8b. EBITDA was up 9.4% YoY (est. of +17.1%) to INR3b. Adj. PAT

declined 2.1% YoY to INR1.8b (est. of +10.7%). Market share in toothpaste

shrunk 170bp YoY (-30bp QoQ) to 54%, while that in toothbrush contracted

110bp YoY (+50bp QoQ) to 45.5%.

Gross margin continued its upward trajectory,

expanding 50bp YoY to 63.2%.

The sharp decrease in ad spends (-370bp YoY to 11% of sales) and other

expenses (-90bp YoY to 17.1%) was slightly offset by a 60bp increase in staff

cost to 7.6%. Thus, EBITDA margin expanded 170bp YoY to 27.7%.

Management commentary highlights:

1) Demand has been picking up post

GST implementation. 2) Wholesale channel saw a gradual recovery in 2QFY18.

Balance sheet comments:

1) Negative net working capital improved further by

INR620m YoY and by INR671m over March 2017, led by a reduction in absolute

inventory and an increase in other payables, more than offsetting higher

debtors. 2) Other assets increased, particularly in current loans and advances

and other current assets, which meant that there was only marginal accretion

in cash YoY at the end of September 2017.

Valuation and view:

We cut our estimates by 4% to factor in the earnings miss.

CLGT has strong moats in the form of distribution, category development

efforts, brand strength, R&D and its concentrated focus on oral care. New

campaigns focusing on the twice-a-day brushing habit and the likely enhanced

herbal focus are expected to boost prospects. CLGT will also be a significant

beneficiary of a rural market recovery, as its rural market share is

disproportionately higher than its urban market share. We maintain

Buy,

with

a revised target price of INR1,325 (INR1,385 earlier), based on 42x Sep’18 EPS,

in line with average multiple for the past three years.

FY18

2Q

-0.9

10,849

2.7

3,970

6,879

63.4

3,873

35.7

3,006

27.7

9.4

392

89

2,703

927

34.3

1,776

-2.1

3QE

10.0

9,839

12.5

3,524

6,315

64.2

3,779

38.4

2,536

25.8

18.5

403

120

2,253

755

33.5

1,498

17.2

4QE

8.0

11,567

11.5

4,302

7,265

62.8

4,419

38.2

2,846

24.6

16.5

414

137

2,569

845

32.9

1,724

20.9

FY17

-1.5

39,818

2.9

14,768

25,050

62.9

15,606

9,444

FY18E

3.0

42,036

5.6

15,379

26,656

63.4

16,050

10,607

FY18

2QE

7.0

10,903

4.0

FY17

1Q

2Q

3Q

4Q

1Q

Toothpaste Volume Gr %

5.0

4.0

-12.0

-3.0

-5.0

Net Sales

10,131 10,566

8,746 10,375

9,781

YoY Change (%)

8.8

9.5

-8.6

2.2

-3.5

COGS

3,822

3,910

3,159

3,877

3,584

Gross Profit

6,309

6,656

5,587

6,498

6,197

Gross Margin (%)

62.3

63.0

63.9

62.6

63.4

Other opera ti ng Expens es

4,197

3,909

3,446

4,055

3,979

% to sales

41.4

37.0

39.4

39.1

40.7

EBITDA

2,113

2,748

2,141

2,443

2,218

Margins (%)

20.9

26.0

24.5

23.5

22.7

YoY Growth (%)

3.7

8.1

-10.3

1.2

5.0

Depreci a ti on

316

333

342

341

373

Fi na nci a l other Income

101

113

109

80

125

PBT

1,897

2,527

1,908

2,182

1,970

Ta x

640

714

630

756

606

Rate (%)

33.7

28.3

33.0

34.6

30.8

Adj PAT

1,257

1,813

1,278

1,426

1,364

YoY Change (%)

1.3

15.6

-12.8

-0.5

8.5

Note: We had factored in 7.5% GST related accounting impact in our numbers.

Quarterly Performance

Y/E March

(INR Million)

Var.

(%)

-0.5%

39.2

38.2

1,332

403

8,514

2,740

32.2

5,774

23.7

0.7

1.2

1,581

470

9,495

3,133

33.0

6,362

25.2

12.3

10.2

3,217

-6.6%

29.2

17.1

333

135

3,019

-10.5%

1,011

33.5

2,008

-11.6%

10.7

E: MOSL Estimates

17 October 2017

11

16 October 2017

2QFY18 Results Update | Sector: Financials

Federal Bank

Buy

BSE SENSEX

32,634

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

Federal Bank (FB) recorded robust PPoP growth of 5%/23% QoQ/YoY (INR5.8b,

8% beat), led by 12%/24% QoQ/YoY NII growth, and controlled opex growth

(+5%/+18% QoQ/YoY; 7% beat) on curbed employee expenses (+7% YoY).

n

NII growth came in at 12%/24% QoQ/YoY (3% beat), aided by 25% YoY loan

growth and an increase in the CD ratio to 83% (75%/80% in 2QFY18/1QFY18).

NIM expanded 18bp QoQ to 3.31%, as 1QFY18 was impacted by interest

Financials & Valuations (INR b)

reversal of INR160m. Other income fell 13% QoQ as the base quarter had a

Y/E Mar

2018E 2019E 2020E

lumpy INR2b treasury income component. CI ratio rose 20bp QoQ to 50.8%.

NII

36.5

43.6

51.8

n

Loan growth of 6%/25% QoQ/YoY was broad-based, with strong growth across

OP

23.6

28.6

34.2

segments. Corporate growth was the strongest at 7%/43% QoQ/YoY, with

NP

10.2

12.9

16.0

retail/agri loans also showing strong traction (+17%/+24% YoY).

NIM (%)

3.2

3.2

3.2

n

Asset quality was stable, as total slippages declined ~11% QoQ to INR2.8b

EPS (INR)

5.5

6.6

8.2

(adjusted for lumpy slippage of INR1.05b in 1Q); GNPA/NNPA declined to

EPS Gr. (%)

15.1

19.9

23.9

2.39%/1.32% (-3bp/-7bp QoQ), with the slippage ratio down to 1.8% v/s 2.9%

BV/Sh. (INR)

63.4

69.2

76.6

in 1QFY18. Recoveries and upgrades increased 66% QoQ to INR1.6b, while

ABV/Sh. (INR) 57.3

62.6

68.6

write-offs came in at INR502m.

ROE (%)

9.6

10.0

11.3

n

Other highlights: a) FB witnessed 45% growth in new account opening, b)

ROA (%)

0.8

0.9

0.9

business growth is picking up outside Kerala, with 31% YoY growth in each of

Payout (%)

20.3

19.7

19.7

Valuations

retail/SME loans and 26% SA growth, c) Fed-fina contributing INR1.5b of loans

P/E(X)

22.5

18.8

15.2

each month.

P/BV (X)

2.0

1.8

1.6

Valuation and view:

We believe FB’s asset quality concerns, which are largely

legacy issues, are now largely behind. The bank is ahead of its corporate lending

peer banks on the asset quality curve, especially with its opportunistic entry into

the mid-commercial segment. Considering asset quality distractions in the PSU

space, we believe FB is well positioned to gain market share in highly rated

corporates. Post QIP, the bank is comfortably positioned with respect to capital

(Tier 1 ratio of 14.1%). We largely maintain estimates for FY18/19 and reiterate

Buy

with a target price of INR146 (2x Sept 2019 BV) based on the RI model.

n

S&P CNX

10,231

FB IN

1,719.0

139.2/2.1

125 / 62

7/25/58

1002

100.0

CMP: INR125

TP:INR146 (+17%)

Strong operating performance; Growth continues with asset quality stable

17 October 2017

12

RESULTS

FLASH

Dewan Housing

TP: INR690 (+24%)

Buy

16 October 2017

Results Flash | Sector: Financials-Banks

BSE SENSEX

32,634

S&P CNX

10,231

CMP: INR559

n

We will revisit our estimates

post earnings call/management

interaction.

Growth surprises positively; re-rating to continue

Conference Call Details

Date:

October 17, 2017

Time:

3PM IST

Dial-in details: 022 3938

1079

Financials & Valuations (INR b)

Y/E March

2018E 2019E

NII

18.3

22.8

PPP

21.0

25.8

Adj. PAT

11.8

14.4

EPS (INR)

37.6

46.0

EPS Gr. (%)

27.1

22.1

BV (INR)

282

320

RoAA (%)

1.2

1.3

RoE (%)

14.1

15.3

Payout (%)

17.4

17.4

Valuations

P/E (x)

14.4

11.8

P/BV (x)

1.9

1.7

P/ABV (x)

1.9

1.7

Div. Yield (%)

1.0

1.3

n

n

2020E

27.9

31.4

17.5

56.0

21.8

366

1.3

16.3

17.4

9.7

1.5

1.5

1.5

n

n

n

n

Dewan Housing Finance’s (DEWH) 2QFY18 PAT grew 26% YoY to INR2.9b. The

quarter was characterized by sturdy AUM growth, a healthy decline in the C/I

ratio, continued decline in cost funds, and mild expansion in the return ratios.

AUM grew 25% YoY to INR940b, largely driven by disbursement growth of 50%

YoY. DEWH reported disbursements of INR100b, the highest in the last 14

quarters. Even Sanctions grew 68% YoY to INR142b. We believe strong growth

during the quarter is driven by lumpy disbursements towards non retail loans.

We await clarification.

Loan mix is now more skewed toward LAP (+120bp QoQ) and builder finance

(+40bp QoQ). The contribution of home loans reduced by 180bp QoQ to 63.7%

of the loan mix. On a YoY and QoQ basis, non retail loans contributed 60%+ of

the incremental growth.

NIM remained largely unchanged at 3.04%, although we note of a secular

decline in cost of funds (-10bp QoQ to 8.63%). Funding mix remained largely

stable, with banks and NCDs contributing 43% and 40%, respectively.

Opex grew 21% YoY to INR1.7b, manifesting PPoP of INR5.4b (+36% YoY) and a cost-

to-income ratio of 23.9% (-140bp QoQ). The continued focus on cost rationalization

is likely to translate into higher PAT in the medium term, in our view.

Asset quality was stable, with a GNPA ratio at 0.96%.

Valuation and view:

DEWH is a focused play on low-ticket housing. This, along

with the new-found opportunities in LAP and builder finance, is likely to keep

its AUM on a high-growth trajectory. We believe the continued focus on cost

rationalization and a secular decline in CoF are likely to result in higher return

ratios and further re-rating in the medium term.

Buy

with a TP of INR690 (2x

September 2019E BVPS; Implied 14x EPS).

FY17

2Q

3Q

21,227

23,151

16,307

18,001

4,920

5,150

21.0

20.8

451

514

5,371

5,664

18.3

21.6

1,398

1,497

6.1

9.1

3,972

4,167

23.2

26.9

450

450

3,522

3,717

1,196

1,269

2,326

2,448

29.0

31.7

16.0

16.9

38.5

28.0

26.0

26.4

34.0

34.2

4Q

22,835

17,475

5,360

22.6

943

6,303

29.1

1,717

10.8

4,586

37.7

830

3,756

1,273

2,483

30.9

16.7

33.1

27.2

33.9

1Q

23,529

17,869

5,660

24.0

549

6,209

28.3

1,570

15.4

4,640

33.4

830

3,810

1,205

2,605

29.3

19.8

34.4

25.3

31.6

FY18

2Q

3Q

25,034

25,785

19,034

19,320

6,000

6,466

22.0

25.5

1,108

700

7,108

7,166

32.4

26.5

1,698

1,748

21.4

16.7

5,411

5,418

36.2

30.0

1,070

900

4,341

4,518

1,408

1,446

2,933

3,072

26.1

25.5

24.6

23.0

10.8

16.0

23.9

24.4

32.4

32.0

(INR Million)

FY17

FY18

4Q

27,220

20,498

6,723

25.4

620

7,343

16.5

1,777

3.5

5,566

21.4

906

4,660

1,487

3,173

27.8

23.0

14.5

24.2

31.9

86,531

66,536

19,995

19.8

2,182

22,177

21.4

5,973

8.7

16,204

26.9

2,180

14,024

4,754

9,270

27.1

18.5

45.7

26.9

33.9

101,569

76,720

24,848

24.3

2,978

27,826

25.5

6,792

13.7

21,034

29.8

3,706

17,328

5,545

11,783

27.1

20.1

23.9

24.4

32.0

DEWH: Quarterly performance

Y/E March

Interes t Income

Interes t Expens es

Net Interest Income

YoY Growth (%)

Fees a nd other i ncome

Net Income

YoY Growth (%)

Opera ti ng Expens es

YoY Growth (%)

Operating Profits

YoY Growth (%)

Provi s i ons

Profit before Tax

Ta x Provi s i ons

Profit after tax

YoY Growth (%)

Loa n growth (%)

Borrowi ngs growth (%)

Cos t to Income Ra ti o (%)

Ta x Ra te (%)

E: MOSL Es ti ma tes

1Q

19,319

14,754

4,565

14.5

275

4,840

15.5

1,361

8.4

3,479

18.6

450

3,029

1,015

2,014

16.2

18.3

20.4

28.1

33.5

17 October 2017

13

RESULTS

FLASH

16 October 2017

Results Flash | Sector: Others

Delta Corp

Buy

BSE SENSEX

32,634

S&P CNX

10,231

CMP: INR227

n

TP: INR232 (+2%)

We will revisit our estimates

post earnings call/management

interaction.

Results in-line (GST adjusted)

DELTA reported overall revenue of INR1,453m (est. of INR1,800m), as against

INR1,343m in 2QFY17, marking growth of 8.2%.

n

EBITDA margin expanded 290bp to 45.1% (est. of 38%) in 2QFY18. EBITDA grew

15.6% YoY to INR655m (est. of INR684m).

n

Consequently, adjusted PAT stood at INR433m (est. of INR413m) in 2QFY18, as

against INR323m in 2QFY17, implying growth of 34%.

n

Casino gaming revenues grew 17% to INR1,450m, while hospitality revenue

rose 19% to INR188m. Online gaming revenues stood at INR241m.

n

GST of INR351m was netted off from gross revenue in the reported result. As a

result, top-line growth seems subdued and EBITDA margin expansion appears

significant. Removing its impact, EBITDA margin contracted 590bp YoY on

account of amalgamation of online gaming.

Key questions for management

n

Whether any merger is on radar for online gaming business

n

Expected commencement of Sikkim airport

n

Plans to ramp-up Rummy, and introduction of new online games/fantasy

leagues

Valuation and view:

We will revisit our estimates post interaction with

management. We have a

Buy

rating, valuing the stock at 30x FY19E EPS with a TP

of INR232. Based on current estimates, the stock trades at 41x/29x FY18E/19E EPS

Conference Call Details

Date:

October 17, 2017

Time:

5PM IST

Dial-in details: 022 3960

0734

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

Net Sales

4.5

6.8

EBITDA

1.6

2.5

NP

0.7

1.5

EPS (INR)

3.1

5.6

EPS Gr. (%)

125.5

82.8

BV/Sh. (INR)

39.7

59.2

RoE (%)

8.1

11.9

RoCE (%)

8.7

11.4

P/E (x)

74.3

40.7

P/BV (x)

5.7

3.8

2019E

8.7

3.3

2.1

7.7

38.8

65.4

12.4

12.5

29.3

3.5

Consol. - Quarterly Earning Model

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 (%)

MI & P/L of Asso. Cos.

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOSL Estimates

1Q

1,087

34.6

671

415

38.2

91

87

9

246

-46

292

85

29.2

4

202

170

2,539.9

15.6

FY17

2Q

3Q

1,343 1,036

43.8

3.4

776

723

567

313

42.2

30.2

93

89

87

82

11

11

399

152

2

5

397

91

22.9

-16

322

323

494.1

24.1

147

40

27.2

6

101

105

-9.4

10.1

4Q

1,081

5.3

737

344

31.8

87

94

19

182

0

181

64

35.4

3

114

114

-29.3

10.5

1Q

1,286

18.4

833

453

35.2

89

70

37

332

-18

350

127

36.1

1

223

211

24.4

16.4

FY18

2Q

3QE

1,453 1,864

8.2

80.0

798 1,230

655

634

45.1

34.0

94

112

22

0

86

70

624

592

0

0

624

194

31.1

-2

433

433

33.8

29.8

592

178

30.0

0

414

414

296.2

22.2

FY17

4QE

1,892

75.0

1,230

662

35.0

112

0

70

620

0

620

186

30.0

0

434

434

281.3

23.0

4,547

21.2

2,907

1,640

36.1

361

350

49

978

42

936

280

29.9

2

654

683

118.8

15.0

FY18E

6,827

50.1

4,369

2,458

36.0

423

80

210

2,165

0

2,165

671

31.0

3

1,491

1,491

118.2

21.8

FY18

2QE

1,800

34.0

1,116

684

38.0

105

33

70

616

0

616

203

33.0

0

413

413

27.6

22.9

(INR M)

Var

%

-19

-4

1

1

5

5

17 October 2017

14

RESULTS

FLASH

16 October 2017

Results Flash | Sector: Financials - Banks

DCB Bank

Neutral

BSE SENSEX

32,634

S&P CNX

10,231

CMP: INR189

n

TP: INR198 (+4%)

We will revisit our estimates

post earnings call/management

interaction.

Strong Operating Profit, Lower Provisions Aid YoY PAT Growth

DCB Bank reported PPoP growth of -9%/+23% QoQ/YoY (1% above estimate),

driven by NII beat of 5% (NII included INR72m of interest on IT refund). Other

income grew 6% YoY but declined 24% QoQ to INR3.1b (10% miss) as 1QFY18

Conference Call Details

had a lumpy treasury income component of INR214m, leading to total income

Date:

October 17, 2017

growth of 24% YoY (1.7% QoQ decline).

Time:

4PM IST

n

Opex growth of 25% YoY was higher than total income growth, leading to CI

Dial-in details: 022 3938

ratio of 60.3% (+300bp QoQ), reversing the declining trend of the past few

1003

quarters. Provisions at INR302m (+14% YoY) were 4% above estimates, leading

to PAT growth of 21% YoY (-10%/21% QoQ/YoY growth, 7% miss)

n

Loan book grew 7%/21% QoQ/YoY to INR173b, led by strong growth in AIB

(+21%), MSME (+31%) and corporate book (+28%) while other smaller

Financials & Valuations (INR b)

categories such as CV/CE (+51%), gold (+21%) and construction finance (+81%)

Y/E MARCH 2018E 2019E 2020E

NII

9.6

11.7

13.9

also showed strong growth. Corporate book inched up to 17% of the book.

OP

5.1

6.6

8.2

n

Absolute GNPA/NNPA grew 5%/11% QoQ to INR 3.2b/1.6b driven by 16%/10%

NP

2.5

3.3

4.1

sequential growth in mortgage/AIB GNPA (INR1.16b/INR561m). Overall

EPS (INR)

8.1

10.6

13.3

slippages moderated to 2.2% as compared to 2.7% in 1Q. In percentage terms,

EPS Gr. (%)

15.6

31.2

25.1

GNPA/NNPA came in at (1.8%/0.9%, +6bp/-2bp QoQ).

BV/Sh. (INR)

91.7 101.9 114.7

RoE (%)

11.0

12.0

13.3

n

Other highlights:

a) CASA ratio declined by 100bp to 26% v/s 27% in 1Q, b) CAR

RoA (%)

0.9

1.0

1.0

stood at 14.65%, with Tier 1 ratio of 12.9% c) Number of branches reached 306

P/E (x)

23.5

17.9

14.3

(vs 290 in 1QFY18).

P/BV (x)

2.1

1.9

1.7

Valuation and view:

While we expect loan growth to stay ahead of system loan

growth, operating leverage is likely to take time to play out, weighing down on

return ratios in the near term. We will revisit our estimates post earnings call.

17 October 2017

15

Persistent Systems

BSE SENSEX

32,634

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

10,231

PSYS IN

80

53.0 / 0.8

703 / 558

4/6/-21

90

69.3

16 October 2017

Q2FY18 Results Update | Sector: Technology

CMP: INR663

n

TP: INR780(+18%)

Buy

Marching upward on profitability

Top client weakness offset by Parx:

PSYS’ 2QFY18 revenue of USD118m (+4.5%

QoQ, in-line) was a function of weakness in the top client (-3% QoQ) being

offset by incremental revenue from the integration of Parx (USD1.9m; 1.7pp)

and strength in Europe (22% QoQ organic growth). While weakness in the top

customer was attributed to seasonality in IP (taking away any worries beyond

this quarter), a return to double-digit organic growth in Digital (12% QoQ) was

an encouraging sign.

In-line profitability despite onsite centricity:

Incremental growth contribution

from onsite (11.5% QoQ) and lower-margin Parx was detrimental to

profitability during the quarter. However, 140bp improvement in utilization

and 120bp optimization of G&A expenses drove EBITDA margin expansion of

90bp to 15.2%, ultimately meeting expectations of 15.4%. Higher-than-

expected PAT growth of 12.4%, despite in-line operational performance, was

led by higher other income.

Addition of new opportunities:

Barring the impact of seasonality, PSYS’ growth

drivers of Digital and IP associated with IBM continue to be significant

contributors. Additionally, new avenues of growth like (i) geographies of

Europe and Australia, (ii) products in the areas of IoT, Cloud, Analytics and

Security and (iii) partnerships with the likes of USAA and Partners HealthCare

provide new opportunities to capitalize on, driving expectations of 10.4% USD

revenue growth over FY17-20.

Valuation and view:

Our underlying thesis of margins bottoming out at the

beginning of FY18 post three consecutive years of decline seems to be on track,

as the dent created in 1Q has started seeing a sequential path upward. Despite

wage hikes spread across 2H, seasonal strength is likely to mitigate any

pressures as the company pulls on its operational levers, apart from being

supported by seasonal strength in flow-through IP revenue. We expect FY17-20

USD revenue/earnings CAGR of 10/16%. Our price target of INR780 discounts

forward earnings by 14x. Maintain

Buy.

Financials & Valuations (INR b)

2017 2018E 2019E

Y/E Mar

28.8

31.0

35.2

Net Sales

4.7

4.9

6.0

EBITDA

3.1

3.5

4.2

PAT

37.7

43.3

52.4

EPS (INR)

1.4

14.8

21.2

Gr. (%)

244.5 254.1 264.8

BV/Sh (INR)

17.0

17.9

20.8

RoE (%)

16.7

16.0

17.0

RoCE (%)

17.6

15.3

12.6

P/E (x)

2.7

2.6

2.5

P/BV (x)

n

n

Estimate change

TP change

Rating change

n

17 October 2017

16

Hindustan Media Ventures

BSE SENSEX

32,634

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USD

52-Week

Range

1, 6, 12 Rel. Per (%)

Avg Val, INR m

Free float (%)

S&P CNX

10,231

HMVL IN

GST and RERA prune ad growth

73.4

19.6 / 0.3

n

A quarter of weak earnings:

Revenue fell 8% YoY (-11% QoQ) to INR2.1b

(below est. of INR2.3b) owing to subdued ad and circulation revenue. EBITDA

314 / 245

-6/-26/-33

dropped 10% YoY (-11% QoQ) to INR454m (est. of INR492m), largely led by a

8

decline in revenues and a rise of ~290bp in raw material cost. EBITDA margin

25.7

16 October 2017

2QFY18 Results Update | Sector: Media

CMP: INR250

TP: INR302(+21%)

Buy

Financials & Valuations (INR b)

Y/E Mar

2017 2018E 2019E

Net Sales

EBITDA

Adj. PAT

Adj. EPS (INR)

Gr. (%)

BV/Sh (INR)

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

9.3

2.1

1.9

25.8

6.0

159.0

18.2

17.4

9.7

1.6

9.5

2.1

1.9

25.6

-0.8

183.2

15.0

15.1

9.8

1.4

10.3

2.4

2.2

30.2

18.1

212.0

15.3

15.7

8.3

1.2

n

n

n

Estimate change

TP change

Rating change

Consolidated - Quarterly Earning Model

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 (%)

Minority Interest & P/L of Asso. Cos.

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOSL Estimates

shrunk 50bp YoY (flat QoQ) to 21.5% (50bp above est. of 21%). PAT plunged

25% YoY (-9% QoQ) to INR409m (est. of INR445m).

High base, GST pull down ad business:

Ad revenue declined 8% YoY to INR1.6b

(est. of INR1.7b), mainly led by ~12% YoY volume decline due to GST, RERA and

a high base (UP elections last year). The strategy to boost yield saw the largest

impact on FMCG, health and fitness segment, partly offset by a 5% yield

improvement led by resurgence in Auto, BFSI and other sectors.

Circulation revenue growth on a freefall:

Circulation revenue continued to

decline (-7% YoY to INR500m v/s est. of INR581m) in 2QFY18, largely led by

lower realization/copy on intensified competition in Bihar.

Cut TP to INR302; maintain Buy:

We cut revenue/EPS estimates by 6%/10% for

FY18-19E on a weak 1HFY18 and moderate circulation/ad revenue.

Management indicated that the outlook has improved with the onset of the

festive season. We expect flat EPS in FY18 and 18% growth in FY19, led by a

recovery in ad/circular revenue of 9%/6%. We thus cut our TP to INR302 (prior:

INR 350), based on 10x P/E on FY19E EPS of INR30. Maintain

Buy.

1Q

2,392

6.8

1,823

569

23.8

50

47

201

673

0

673

186

27.6

0

487

487

16.9

20.4

FY17

2Q

2,295

1.4

1,791

504

22.0

52

41

338

749

0

749

202

27.0

0

547

547

20.9

23.8

3Q

2,303

-4.2

1,894

409

17.8

50

39

215

536

0

536

98

18.2

0

438

438

-7.5

19.0

4Q

2,343

3.1

1,770

573

24.4

50

34

167

655

0

655

191

29.1

41

424

424

-4.8

18.1

1Q

2,368

-1.0

1,858

510

21.5

53

25

251

683

0

683

203

29.7

32

448

448

-8.0

18.9

FY18

2Q

2,109

-8.1

1,655

454

21.5

49

29

204

580

0

580

141

24.4

29

409

409

-25.2

19.4

FY17

3QE

2,486

8.0

1,912

574

23.1

55

26

215

708

0

708

170

24.0

30

508

508

16.0

20.4

4QE

2,526

7.8

1,933

593

23.5

55

26

215

727

0

727

188

25.9

30

508

508

20.1

20.1

9,333

1.7

7,277

2,055

22.0

202

161

921

2,612

0

2,612

676

25.9

41

1,895

1,895

6.0

20.3

(INR m)

FY18E

9,489

1.7

7,359

2,130

22.4

212

105

885

2,698

0

2,698

703

26.0

121

1,874

1,874

-1.1

19.7

17 October 2017

17

Metals Weekly

Reliance Industries

Alumina continues to rise due to bauxite supply disruption

n

16 October 2017

14 October 2017

Q2FY18 Results Update | Sector: Oil Update

& Gas

n

n

n

n

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

WoW, while domestic scrap prices were unchanged. NMDC cut iron ore fines/lump prices by INR100/t. Pellet

prices were unchanged. Domestic HRC prices were unchanged.

Raw materials: Iron ore prices (China cfr) were unchanged as the market is quiet due to Chinese holidays.

Chinese iron ore port inventories were marginally higher. Thermal coal prices were up ~2% WoW. Coking coal

prices were down ~3% WoW. China's pellet import prices were unchanged.

Europe: HRC prices were unchanged. HRC product spreads were marginally higher. CIS HRC export prices were

up ~1% WoW. Rotterdam scrap prices remain weak, down ~1% WoW.

China: Local HRC and rebar prices were unchanged. Exports HRC were also unchanged amid holidays in China.

Base metals: Aluminum (cash LME) prices were up ~1% WoW. Alumina prices were marginally higher. Zinc

(cash LME) was up 4% WoW. Lead was up ~1% WoW. Copper was up ~2% WoW. Crude oil (Brent) prices were

down ~3% WoW.

17 October 2017

18

September 2017 Results Preview | Sector: Cement

ACC

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

ACC IN

188.0

320 / 5

1869 / 1257

-5 / 11 / -8

CMP: INR1,702 TP: INR1,706 (0%)

Neutral

Financial Snapshot (INR Billion)

Y/E Dec

2016 2017E 2018E 2019E

Sales

EBITDA

NP

Adj. EPS (INR)

EPS Gr. (%)

BV/Sh (INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

EV/Ton (x)

47

4

24

134

33

4

19

132

25

3

15

124

22

3

12

117

108

13

7

36

-4

461

8

8

88

124

15

10

51

41

482

11

11

59

139

19

13

67

31

513

13

13

54

156

23

15

78

17

507

15

15

108

n

Dispatches in 3QCY17 are estimated at 5.88mt (+16% YoY), led by

capacity ramp-up at Jamul and Sindri, and a favorable base from

the previous year. Average realizations are expected to fall 2.7%

QoQ (flat YoY) to INR4,389/ton due to weak pricing in most

regions.

n

Revenues are expected to increase 15.8% YoY to INR28.6b. EBITDA

margin is expected to be 10%, down 4.9pp QoQ (+0.9pp YoY).

n

EBITDA/ton is estimated at INR487 (+INR43 YoY, -INR248 QoQ) due

to weak realization. PAT is likely to increase 129% YoY to INR1.9b.

n

The stock trades at P/E of 25x /22x on CY18E/CY19E earnings,

15x/12x CY18E/CY19E EV/EBITDA and CY18E/CY19E EV/ton of

USD124/USD117. Maintain Neutral.

Key issues to watch out for:

Ø

Cement pricing recovery.

Ø

Volume growth and demand revival.

Ø

Ramp-up of new plant in east.

Quarterly Performance (Standalone)

Y/E December

Cement Sales (m ton)

YoY Change (%)

Cement Realization

YoY Change (%)

QoQ Change (%)

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before EO Item

EO Income/(Expense)

PBT after EO Item

Tax

Rate (%)

Reported PAT

Adjusted PAT

Margins (%)

YoY Change (%)

E: MOSL Estimates

1Q

6.36

9.3

4,109

-9.4

-5.3

28,727

-0.4

24,953

3,774

13.1

1,434

188

1,131

3,283

0

3,283

937

28.5

2,346

2,346

8.2

-6.0

CY16

2Q

3Q

6.12

5.07

-1.3

-9.6

4,206

4,371

-4.1

-1.5

2.4

3.9

28,326

24,706

-4.3

-9.8

24,190

22,458

4,136

2,247

14.6

9.1

1,410

1,529

208

197

730

744

3,248

1,265

0

0

3,248

1,265

824

424

25.4

33.5

2,424

841

2,424

841

8.6

3.4

84.5

-28.1

4Q

5.45

-9.0

4,353

0.3

-0.4

26,346

-7.4

24,116

2,231

8.5

1,679

209

934

1,277

-428

849

44

5.2

805

1,233

4.7

-49.4

1Q

6.60

3.8

4,265

3.8

-2.0

30,997

7.9

27,579

3,418

11.0

1,650

252

1,101

2,617

0

2,617

502

19.2

2,115

2,115

6.8

-9.9

CY17

2Q

3QE

6.74

5.88

10.1

16.0

4,509

4,389

7.2

0.4

5.7

-2.7

33,125

28,613

16.9

15.8

28,175

25,751

4,951

2,862

14.9

10.0

1,621

1,660

225

200

1,663

1,500

4,768

2,502

0

0

4,768

2,502

1,550

575

32.5

23.0

3,218

1,926

3,218

1,926

9.7

6.7

32.7

129.1

(INR m)

CY16

CY17E

4QE

6.30

15.6

4,427

1.7

0.9

31,549

19.7

27,621

3,927

12.4

1,672

223

1,036

3,068

0

3,068

741

24.1

2,327

2,327

7.4

88.8

22.99

-2.7

4,218

-4.6

107,676

-5.8

95,159

12,518

11.6

6,052

826

3,503

9,143

-428

8,715

2,244

25.8

6,470

6,898

6.4

-7.4

25.52

11.0

4,398

4.3

124,284

15.4

109,126

15,158

12.2

6,603

900

5,300

12,954

0

12,954

3,368

26.0

9,586

9,586

7.7

39.0

17 October 2017

19

September 2017 Results Preview | Sector: Financials

Axis Bank

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

Financial Snapshot (INR b)

Y/E March

2017 2018E

NII

180.9 192.4

OP

175.8 172.1

NP

36.8 52.3

NIM (%)

3.6

3.4

EPS (INR)

15.4 21.8

EPS Gr. (%)

-55.5 42.2

BV/Sh. (INR)

226.5 242.9

ABV/Sh. (INR)

203.1 214.9

RoE (%)

6.9

9.3

RoA (%)

0.6

0.8

Payout (%)

32.5 25.2

Valuations

P/E(X)

P/BV (X)

P/ABV (X)

Div. Yield (%)

32.9

2.2

2.5

1.0

23.1

2.1

2.3

0.9

AXSB IN

2395.0

1200 / 18

553 / 425

0 / -6 / -18

n

2019E

225.5

197.7

91.2

3.4

38.1

74.4

274.3

241.9

14.7

1.2

17.6

13.3

1.8

2.1

1.1

2020E

271.2

236.5

120.7

3.4

50.4

32.3

315.8

288.7

17.1

1.3

17.6

10.0

1.6

1.7

1.5

CMP: INR501

n

TP: INR524 (+5%)

Neutral

n

n

n

We expect AXSB to report ~14% loan growth, driven by continued

strong growth in the retail and SME segments. Overall deposit

growth is likely to be ~10%, bringing down the CD ratio, which is

elevated at ~96%.

Yield on loans would remain under pressure following MCLR

cuts/aggressive competition in the refinance market. Margins are

expected to stay flat QoQ at ~3.5%, weighed down further by

interest reversals.

Current watch-list stands at INR95b (~2.3% of customer assets) and

is expected to be done away with completely by FY19. While

slippages should moderate in 2Q, we expect them to remain at

elevated levels (4% annualized slippage ratio), leading to high credit

costs.

We estimate PAT at INR13.1b (flat QoQ) vs INR3.2b in a muted

2QFY17, weighed down by provisions.

AXSB trades at 1.8x FY19E BV and 13.3x FY19E EPS. Neutral.

Key issues to watch for

Ø

Quantum of corporate slippages from watch list and any revision in the

size of the same.

Ø

Quantum of loans rescheduled under 5:25, SDR and S4A.

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 (%)

CD Ratio (%)

Core CASA ratio (%)

Asset Quality

OSRL (INR b)

OSRL (%)

Gross NPA (INR b)

Gross NPA (on cust. assets, %)

E: MOSL Estimates

1Q

45,169

11.4

27,383

72,552

27,858

44,694

9.2

21,172

23,522

7,967

15,555

-21.4

3.7

16.3

21.2

96.4

40.0

73.6

2.1

95.5

2.5

FY17

2Q

45,139

11.1

25,397

70,535

29,534

41,002

13.0

36,227

4,774

1,584

3,191

-83.3

3.7

17.3

18.5

92.9

41.0

67.0

1.9

163.8

4.2

3Q

43,337

4.1

34,002

77,339

30,937

46,402

16.4

37,958

8,444

2,649

5,796

-73.4

3.5

9.6

10.1

93.6

42.0

63.4

1.8

204.7

5.2

4Q

47,286

3.9

30,132

77,418

33,670

43,747

-0.5

25,813

17,935

5,684

12,251

-43.1

3.7

15.8

10.1

90.0

45.0

53.8

1.4

212.8

5.0

1Q

46,161

2.2

29,998

76,160

33,248

42,912

-4.0

23,419

19,492

6,436

13,056

-16.1

3.5

10.0

11.8

97.9

0.0

FY18

2QE

47,308

4.8

29,700

77,008

34,874

42,134

2.8

22,500

19,634

6,577

13,057

309.2

3.5

9.8

13.5

96.1

FY17

3QE

48,737

12.5

30,450

79,187

37,011

42,176

-9.1

22,500

19,676

6,592

13,085

125.8

3.4

20.4

20.7

93.8

4QE

50,147

6.1

34,738

84,886

40,008

44,878

2.6

25,027

19,850

6,743

13,107

7.0

3.4

16.0

18.0

91.6

1,80,931

7.5

1,16,913

2,97,844

1,21,999

1,75,845

9.2

1,21,170

54,676

17,883

36,793

-55.3

3.6

15.8

10.1

90.0

45.0

53.8

1.4

212.8

5.0

(INR m)

FY18E

1,92,355

6.3

1,24,886

3,17,241

1,45,142

1,72,099

-2.1

93,447

78,653

26,349

52,304

42.2

3.4

16.0

18.0

91.6

220.3

5.0

237.1

5.7

249.7

5.8

250.2

5.5

0.0

0.0

250.2

5.5

17 October 2017

20

September 2017 Results Preview | Sector: Automobiles

Bajaj Auto

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

BJAUT IN

289.4

906 / 14

3208 / 2510

7 / 8 / -2

CMP: INR3,164 TP:INR3,589 (+13%)

Buy

Financial Snapshot (INR b)

Y/E MAR

2017 2018E 2019E 2020E

Sales

EBITDA

NP

Adj. EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

Div. Yield (%)

23.9

5.4

17.7

1.7

218

21.9

4.8

16.2

2.1

247

18.2

4.4

13.0

2.5

280

15.6

4.1

11.1

4.1

321

218

44.2

38.3

132

-2.6

589

25.3

24.6

247

46.8

41.8

144

9.1

655

23.2

22.5

280

56.9

50.4

174

20.7

725

25.3

24.5

321

66.3

58.7

203

16.4

775

27.1

36.0

Key issues to watch

Ø

Update on demand of new launches, channel inventory and outlook

for FY18.

n

Overall volume increased ~3.8% YoY (+20.6% QoQ) to 1,072k units

due to ~6.5% YoY increase in export volume, while domestic

volumes increased by ~2.3% YoY. Volume growth was led by 3W,

as domestic 3W sales increased by 14.2% YoY, while 3W exports

grew by 13% YoY.

n

We expect realization to grow by 4.7% YoY (0.3% QoQ) led by

improvement in product mix. Consequently, net revenues are

expected to increase by ~8.7% YoY (+20.9% QoQ).

n

We expect EBITDA margin to contract by ~240bp YoY (+180bp

QoQ) to 19.1%, primarily due to higher commodity prices.

n

We expect PAT to remain flat YoY (+18.2% QoQ) at INR11.2b.

n

We have revised upward our total volume estimates by 1.2% in

FY18 and 2.2% in FY19, resulting in EPS increase of 5.2%/6.6% for

FY18E/FY19E.

n

The stock trades at 21.7x FY18E and 18x FY19E EPS; maintain

Buy.

Ø

Ø

Ø

Ø

Export demand outlook and pricing in key currency market.

Comments on 3W demand drivers in domestic market.

Comments on entry into electric 3Ws.

Strategy for KTM, Husqvarna; further details on partnership with

Triumph.

Quarterly Performance

Y/E March

Volumes ('000 units)

Growth YoY (%)

Realization (INR/unit)

Growth YoY (%)

Net Sales

Change (%)

RM/Sales %

Staff cost/Sales %

Oth. Exp./Sales %

EBITDA

EBITDA Margins (%)

Other Income

Interest

Depreciation

PBT

Tax

Effective Tax Rate (%)

Adj. PAT

Change (%)

E: MOSL Estimates

1Q

995

-1.8

57,784

4.5

57,480

2.7

67.2

4.7

7.7

11,763

20.5

2,671

2

775

13,657

3,873

28.4

9,784

2.2

FY17

2Q

1,032

-2.3

58,676

2.0

60,545

-0.4

67.0

4.3

7.4

12,961

21.4

3,420

7

770

15,605

4,378

28.1

11,228

6.7

3Q

852

-10.5

59,495

2.0

50,669

-8.7

66.8

4.8

7.9

10,439

20.6

3,193

3

772

12,858

3,612

28.1

9,246

(4.7)

4Q

788

-9.7

62,171

1.2

48,973

-8.6

67.8

4.6

9.2

9,060

18.5

2,936

2

757

11,236

3,218

28.6

8,018

(15.5)

1Q

888

-10.7

61,258

6.0

54,424

-5.3

70.0

5.0

7.8

9,384

17.2

4,573

2

753

12,881

3,642

28.3

9,469

(3.2)

FY18

2QE

1,072

3.8

61,411

4.7

65,803

8.7

69.7

4.3

7.0

12,537

19.1

4,000

3

775

15,760

4,570

29.0

11,189

(0.3)

FY17

3QE

1,035

21.5

62,025

4.3

64,165

26.6

68.8

4.4

7.3

12,670

19.7

3,200

3

785

15,082

4,449

29.5

10,633

15.0

4QE

962

22.1

64,794

4.2

62,314

27.2

67.7

4.5

8.4

12,225

19.6

3,394

3

823

14,794

4,401

29.8

10,393

29.6

3,666

(5.8)

59,419

2.4

217,827

(3.6)

67.1

4.6

8.0

44,384

20.4

12,220

14

3,073

53,516

15,081

28.2

38,436

(2.2)

(INR m)

FY18E

3,956

7.9

62,360

4.9

246,705

13.3

69.2

4.5

7.6

46,271

18.8

15,167

10

3,135

58,293

17,063

29.3

41,774

8.7

17 October 2017

21

September 2017 Results Preview | Sector: Media

HT Media

Bloomberg

Equity Shares (m)

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

52-Week Range (INR)

1,6,12 Rel Perf. (%)

HTML IN

230.5

22 / 0

109 / 70

0 / 8 / -1

CMP: INR97

n

n

n

n

n

n

n

n

TP: INR90 (-7%)

Neutral

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 (%)

13.1

1.0

10.8

0.4

13.2

0.9

9.0

0.4

12.4

0.9

8.2

0.4

11.4

0.8

6.7

0.4

24.5

3.0

1.7

7.4

-1.8

7.9

9.7

6.9

25.0

3.2

1.7

7.3

-0.8

7.3

8.7

6.9

26.3

3.1

1.8

7.8

6.9

7.3

8.6

6.5

27.5

3.3

2.0

8.5

8.6

7.4

8.9

5.9

96.8 103.6 111.0 119.0

We expect revenue to decline 3% YoY to INR5.8b.

Ad revenue is likely to decline 6% YoY to INR4.0b, as July and

August were impacted due to GST-led pressure on ad spends.

English print ad revenue decline ~10% YoY to INR2.34b impacted by

digital medium.

Hindi ad revenue is expected to remain flat at INR1.7b.

Radio ad revenue growth is expected to grow 5% to INR0.38b.

We expect circulation revenue to increase 6% YoY to INR0.8b.

EBITDA margin is expected to expand 160bp YoY to 10%.

Adjusted net profit is likely to come in at INR0.24b. The stock

trades at 13.2x FY18E and 12.4x FY19E EPS. Neutral.

Key things to watch for

Ø

YoY English ad growth (we expect ~10% YoY ad de-growth).

Ø

Ø

Hindi ad growth (we expect to remain flat).

EBITDA margin (we expect 10%).

Consolidated - Quarterly Earning Model

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 (%)

Minority Interest & P/L of Asso. Cos.

Reported PAT

Adj PAT

YoY Change (%)

1Q

6,147

4.5

5,504

643

10.5

295

247

478

579

0

579

186

32.2

168

224

224

-9.5

FY17

2Q

6,022

0.2

5,518

505

8.4

304

245

780

736

0

736

224

30.5

202

309

309

-16.1

3Q

6,499

-4.6

5,394

1,105

17.0

312

241

549

1,100

0

1,100

36

3.3

150

914

914

32.9

4Q

5,853

-7.3

5,122

731

12.5

337

218

488

665

0

665

225

33.8

184

256

256

-40.7

1Q

5,990

-2.5

5,191

799

13.3

320

194

531

817

0

817

239

29.2

162

415

415

85.5

FY18

2QE

5,822

-3.3

5,238

585

10.0

363

236

552

538

0

538

129

24.0

168

240

240

-22.2

FY17

3QE

6,968

7.2

6,003

965

13.9

363

236

552

918

0

918

211

23.0

168

539

539

-41.0

4QE

6,275

7.2

5,406

868

13.8

363

236

552

821

0

821

195

23.7

168

459

459

79.4

24,521

-2.0

21,538

2,983

12.2

1,248

951

2,295

3,079

0

3,079

671

21.8

705

1,703

1,703

-1.9

(INR m)

FY18E

25,055

2.2

21,837

3,218

12.8

1,410

901

2,187

3,094

0

3,094

774

25.0

667

1,653

1,653

-2.9

17 October 2017

22