4 April 2018

Market snapshot

Equities - India

Close

Chg .%

Sensex

33,371

0.3

Nifty-50

10,245

0.3

Nifty-M 100

19,266

0.9

Equities-Global

Close

Chg .%

S&P 500

2,614

1.3

Nasdaq

6,941

1.0

FTSE 100

7,030

-0.2

DAX

12,002

0.5

Hang Seng

12,137

1.1

Nikkei 225

21,292

-0.5

Commodities

Close

Chg .%

Brent (US$/Bbl)

68

1.2

Gold ($/OZ)

1,333

-0.6

Cu (US$/MT)

6,762

1.9

Almn (US$/MT)

1,960

-2.4

Currency

Close

Chg .%

USD/INR

65.0

-0.3

USD/EUR

1.2

-0.3

USD/JPY

106.6

0.7

YIELD (%)

Close

1MChg

10 Yrs G-Sec

7.3

-0.07

10 Yrs AAA Corp

7.9

-0.06

Flows (USD b)

3-Apr

MTD

FIIs

-0.1

2.0

DIIs

0.1

1.1

Volumes (INRb)

3-Apr

MTD*

Cash

330

312

F&O

4,333

4,062

Note: YTD is calendar year, *Avg

YTD.%

-2.0

-2.7

-8.8

YTD.%

-2.2

0.5

-8.6

-7.1

3.6

-6.5

YTD.%

1.7

2.3

-6.2

-13.1

YTD.%

1.8

2.2

-5.4

YTDchg

0.0

0.0

YTD

2.1

3.9

YTD*

386

8,114

Today’s top research idea

HDFC: Superior execution; consistent performance

Core RoE ~18% I Value of subsidiaries increasing



HDFC is not just a play on rising mortgage penetration, but also on increasing

financial literacy and financialization of savings in India. Having incubated

several subsidiaries over the past two decades, HDFC derives almost 50% of its

value from its subsidiaries, up from ~30% in FY13. In addition, there are still

some segments, like health insurance, where HDFC is to yet to enter.



The core mortgage business is on a stable growth trajectory, despite intensifying

competition. The corporate lending business, on the other hand, has witnessed a

revival over the past few quarters, after 3-4 years of modest growth.



HDFC is well equipped to take care of its own growth and growth capital

requirement of subsidiaries, with (a) large capital issuance of INR130b, (b)

expected warrant conversion of INR53.9b, and (c) capital gains from HDFCMF

(INR15b+). Of this, we expect INR85b to be utilized for HDFCB stake (already

announced) and INR45b for other ventures (new segments like health insurance,

stressed asset acquisition, investments in affordable housing projects, etc). As

there are no firm announcements for INR45b, we have valued it at 1x cash.



Despite the huge capital raising, HDFC will still maintain core RoE of ~18% over

the medium term. We use SOTP to value the company (core business at 20x

EPS and 3.2x BV) and arrive at a TP of INR2,225. Buy.

Research covered

Cos/Sector

HDFC

Bulls & Bears

M&M

BSE

Capital Goods

Key Highlights

Superior execution; consistent performance

India Valuations Handbook

: It’s a tale of caution and opportunity now

At the forefront of sustainability

Going anti-tide, pro-value; Upgrading to Buy

PGCIL ordering down 68% YoY in FY18

Chart of the Day:

HDFC – Superior execution; consistent performance

Growth for non-individual loans has been soft for bulk of the past three years (%)

Research Team (Gautam.Duggad@MotilalOswal.com)

Source: MOSL, Company

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

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

In the news today

Kindly click on textbox for the detailed news link

1

Manufacturing PMI at five-

month low of 51 in March

Manufacturing activity remained

in the positive for the eighth

consecutive month in March but

fell to a five-month low, a private

survey showed on Tuesday. The

Nikkei India Manufacturing

Purchasing Managers’ Index (PMI)

fell from 52.1 in February to a five-

month low of 51.0 in March. …

2

Indian IT companies reduce H-1B visa filings drastically

India’s largest information technology (IT) outsourcing companies,

including Tata Consultancy Services Ltd (TCS), Infosys Ltd and Wipro Ltd,

have reduced their dependence on H-1B visas over the last three years, a

US daily reported, reflecting these companies’ preparations to tackle the

protectionist approach followed by the current US administration of

President Donald Trump. According to data analysed from 2015 to 2017 by

San Francisco Chronicle, Wipro saw a 52.4% drop in number of visa

applications filed by the company over the three-year period while TCS

reported a 18.3% decline and Infosys saw 38.1% reduction.

3

Amazon may make rival bid for

Flipkart

Amazon may submit a rival offer

to buy India’s largest e-commerce

firm Flipkart, which is in advanced

talks with Walmart Inc. for selling

a majority stake, said two people

with direct knowledge of the

matter. Amazon has held early

exploratory talks to buy Flipkart

even as the latter closes in on a

sale to Walmart, the people cited

above said, requesting ...

4

Decline in global prices triggers

worry for Indian shrimp

exporters

The drop in global shrimp prices

seems to be a cause of worry for

the Indian aquaculture sector,

even as the country’s seafood

exports witnessing a 20 per cent

growth in the first three months of

the calendar year. The price fall by

₹100-150 a kg was mainly

attributed to the sluggish demand

in the US market. ...

5

Royal Enfield to invest Rs 800

crore in capex in FY19

Mid-size motorcycle maker Royal

Enfield on Tuesday announced

its planned capital expenditure

of Rs 800 crore for the current

financial year. The capex

announced will include

investment for commencement

of construction of Phase-2 of the

Vallam Vadagal plant in Tamil

Nadu this year. In 2018-19, with

the first phase of the Vallam

Vadagal factory enjoying its first

full year of operations, and with

productivity optimization at its

Oragadam plant, Royal Enfield

will have an annual production…

6

Profiteering notice to Jubilant

FoodWorks on Dominos pizza

pricing

The Directorate General of

Safeguards (DGS) has slapped a

profiteering notice on Jubilant

FoodWorks for allegedly not

passing on GST rate cut benefit

to consumers at its Dominos

Pizza outlets. A standing

committee had referred the

matter to DGS which in turn

issued notice to Jubilant…

4 April 2018

7

Govt aiming for 40km of

highway construction every

day: Nitin Gadkari

National highway construction in

the country hit an all-time high

of 9,829km in 2017-18,

indicating average road

construction rose to 27km/day

from 11km/day in the last five

years.

Road transport and highways

minister Nitin Gadkari on

Tuesday said his ministry had …

2

3 April 2018

Update | Sector: Financials - NBFC

HDFC

Buy

BSE SENSEX

32,969

S&P CNX

10,114

CMP: INR1,830

TP: INR2,225 (+22%)

Superior execution; consistent performance

Core RoE ~18% I Value of subsidiaries increasing

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 (%)

HDFC IN

1,663

1982 / 1461

3/-2/8

3,034.0

46.5

5224.0

100.0





Financials Snapshot (INR b)

Y/E Mar

2018E 2019E 2020E

NII

113.7 131.8 153.4

PAT

116.6

96.3 112.5

Adj. EPS (INR)

39.9

47.7

56.3

EPS Gr. (%)

12.0

19.5

18.0

BV/Sh. (INR)

372.4 429.1 470.4

ABV/Sh. (INR)

244.9 304.3 345.5

RoAA (%)

1.9

1.9

1.9

Core RoE (%)

18.3

17.5

17.3

Payout (%)

34.5

42.9

38.9

Valuation

AP/E (x)

25.8

18.7

12.7

P/BV (x)

4.9

4.3

3.9

AP/ABV (Rs)

4.2

2.9

2.1

Div. Yield (%)

0.7

1.0

1.0

Shareholding pattern (%)

As On

Sep-17 Jun-17

Promoter

0.0

0.0

DII

13.0

11.5

FII

76.0

77.6

Others

11.0

11.0

FII Includes depository receipts

Stock Performance (1-year)

HDFC

Sensex - Rebased

2,000

1,850

1,700

1,550

1,400





HDFC is not just a play on rising mortgage penetration, but also on increasing financial

literacy and financialization of savings in India. Having incubated several subsidiaries

over the past two decades, HDFC derives almost 50% of its value from its subsidiaries,

up from ~30% in FY13. In addition, there are still some segments, like health insurance,

where HDFC is to yet to enter.

The core mortgage business is on a stable growth trajectory, despite intensifying

competition. The corporate lending business, on the other hand, has witnessed a

revival over the past few quarters, after 3-4 years of modest growth.

HDFC is well equipped to take care of its own growth and growth capital requirement

of subsidiaries, with (a) large capital issuance of INR130b, (b) expected warrant

conversion of INR53.9b, and (c) capital gains from HDFCMF (INR15b+). Of this, we

expect INR85b to be utilized for HDFCB stake (already announced) and INR45b for

other ventures (new segments like health insurance, stressed asset acquisition,

investments in affordable housing projects, etc). As there are no firm announcements

for INR45b, we have valued it at 1x cash.

Despite the huge capital raising, HDFC will still maintain core RoE of ~18% over the

medium term. We use SOTP to value the company (core business at 20x EPS and 3.2x

BV) and arrive at a TP of INR2,225. Buy.

Value unlocking playing out

Over the past two decades, HDFC has incubated several subsidiaries, most of

which have been early entrants in their domains. The subsidiaries have gained

significant scale and contributed ~40% to consolidated PAT (ex-dividend from

HDFCB) in FY17 compared to 32% in FY12. While its subsidiaries are capitalizing on

the ‘financialization of savings’ opportunity and increasing market share with

better profitability, HDFC is also effectively unlocking value of each subsidiary. The

life insurance subsidiary is listed now and we expect the listing of AMC business

shortly.

HDFC’s subsidiaries account for ~50% its SOTP, up from 32% in FY13.

Sep-16

0.0

11.3

77.3

11.4

Strong and consistent margin performance across cycles

There are concerns on the sustainability of retail loan spreads on account of

hardening of G-Sec yields as well as the impact of competition post capital infusion

in state-owned banks. However, historically, HDFC has effectively managed both

volatility in interest rates as well as competition, with largely stable

spreads/margins. A diversified liability profile (public deposits, whose cost is sticky,

account of ~30% of total borrowings) coupled with expected rise in the share of

non-retail business would help keep margins stable over FY18-20. Considering the

rise in cost of funds, we have conservatively factored in 20bp decline in spreads.

4 April 2018

3

Core profitability outlook positive

We expect HDFC to deliver 18% AUM CAGR over FY18-20, driven by 17% CAGR in

retail business and 21% CAGR in non-retail business. Growth over the last two years

was driven by volumes rather than value, which is positive. We expect this trend to

continue, especially given the strong macro tailwinds in the lower ticket size

segment. Largely stable margins coupled with rising share of corporate business

should drive core PBT CAGR of ~16% over FY18-20. Core RoA/RoE (adjusted for

interest routed through reserves and income/profit from subsidiaries) is expected to

remain stable at ~1.9%/~18% over FY18-20.

One of our top picks among HFCs; Buy

HDFC’s retail loan growth is impressive, despite intense competition and a high

base. Over the past four quarters, corporate loan growth has also picked up smartly.

With efficient treasury operations, HDFC has managed to maintain overall spreads,

which is commendable in this environment. The subsidiaries have been growing

faster than the parent and are more meaningful contributors today. We incorporate

a revised value for HDFC Standard Life (benchmarking to our target price) and

benchmark the valuations of HDFC AMC and HDFC ERGO (general insurance

business) to those of the listed competitors. We believe the AMC, if listed, could

trade at a premium due to better profitability and brand value. We factor in the

recent capital raising of ~INR130b in our estimates.

At the current market price, the

value ascribed to the core mortgage business is only 2.1x FY20E BV – a meaningful

discount to its history. We use SOTP to arrive at a TP of INR2,225. Buy.

4 April 2018

4

Bulls & Bears

India Valuations Handbook

Strategy: It’s a tale of caution and opportunity now; apt stock picking to be more rewarding



Database Periodical | 3 April 2018









Last two months take the sheen off Nifty:

After sliding 4.9% in February, Nifty continued weakening further in

March (-3.6%). Notably, ending FY18 at 10,114 (+10.2%), the index wiped out majority of yearly gains (until

January 2018, the Nifty was up 20.2% YTD FY18), led by escalating volatility on the back of unsupportive global

and domestic events (concerns around global interest rate tightening, potential trade conflict, and domestic

political uncertainty after the BJP’s muted show in the recent by-polls). Nevertheless, investors found some

comfort from the RBI’s 1HFY19 borrowing calendar (which soothed nerves in the bond markets) and G-sec yields

coming off from the high of 7.8% to 7.35% now. In March, FII and DII flows stood at USD2.1b and USD1b,

respectively. For FY18, DII bought USD 17.7b, almost ~4x of FY17, while FII flows stood at USD3.2b, less than 50%

of FY17 flows. Midcaps (-4.6% in March) underperformed the Nifty in March and FY18 (9% returns v/s 10%

returns by Nifty). Note that midcaps still command a rich premium of 73% v/s large caps.

Expect volatility to remain high; macro data point toward gradual demand uptick:

After a relatively calm CY17,

we believe volatility will remain elevated in CY18 – especially given the market concerns about a potential global

trade war after the US initiated tariff actions on imports from certain countries. Moreover, the BJP’s dismal

performance in the recent by-polls has introduced an element of uncertainty, especially with the General

Elections around the corner next year. In our view, markets will continue to closely monitor the outcome of the

elections in a few key states in CY18. Nevertheless, the markets have something to cheer about with evidence of

demand revival in selected pockets (IIP data, core sector growth, monthly vehicle sales data, fuel consumption

data and GDP print, which all point toward bottoming out of macros). Encouragingly, our recently released

thematic report

on capex talks about green shoots of capex recovery in sectors such as steel, cement and

refinery. Our economist, Nikhil Gupta, in a

note

released yesterday, revised up the FY19 GDP/GVA growth

expectations by 10/30bp to 6.9%/6.7% and lowered the FY19 CPI inflation forecast by 70bp to 4.4%.

India among laggards in Mar’18:

For March 2018, Taiwan (+1%), Korea (+1%) and Brazil (+0%) were the only key

global markets to close higher in local currency terms. On the other hand, Indonesia (-6%), India (-4%) and Japan

(-3%) were among the worst performers in the month. Over the last 12 months, MSCI EM (+22%) has

outperformed MSCI India (+9%). MSCI India P/E is at a premium of 41% to MSCI EM P/E, below its historical

average premium of 43%.

Sectoral performance trends for FY18:

Real Estate (+39%), Private Banks (+24%), Technology (+17%), NBFC

(+14%) and Metals (+13%) were the top outperformers for FY18. Healthcare (-14%), PSU Banks (-7%) and

Utilities (-7%) were the laggards in FY18. Titan (+104%), Bajaj Finance (+51%), Maruti (+47%), HUL (+47%) and

Tech Mah (+39%) were the top performers. Lupin (-49%), Tata Motors (-30%), Sun Pharma (-28%), Dr Reddy’s (-

21%) and SBI (-15%) were the top laggards. In this edition of ‘Bulls & Bears,’ we take a deep dive into the

valuation metrics of the Cement sector.

Correction offers interesting buying opportunities; bottom-up stock selection is the mantra in CY18:

Given our

expectations of elevated volatility and earnings recovery, we believe proper stock-picking will be more

rewarding in CY18, unlike the previous year which was characterized by a broad-based market rally. The recent

correction does offer a good buying opportunity, but we prefer names that provide

“quality with earnings

visibility.”

Cooling off of bond yields post the announcement of the 1H government borrowing calendar is

incrementally positive from valuations viewpoint, in our view. At 17.7x FY19E, the Nifty is now trading closer to

its long-term averages and is not expensive, in our view, given the context of earnings bottoming out. We

continue to prefer large-caps over mid-caps, given the sharp valuation premium of mid-caps. Moreover, our

CY18 theme of

‘Consumption Recovery’

is playing out well, with strong performances across consumer and auto

companies. We believe the government will look to drive consumption demand in an election year. However, a

spike in crude oil price remains a key risk as it can distort the improving macro narrative.

Our top ideas – Large

cap bets:

HDFC, M&M, Motherson Sumi, Titan, ICICI Bank, L&T and HPCL.

Mid-cap bets:

RBL, Exide, Teamlease,

Repco, SHTF and Emami.

5

4 April 2018

Valuation deep-dive for the month: Cement











The cement sector has re-rated significantly since FY13 due to the expected improvement in industry dynamics,

led by better demand and slowing capacity addition. Interestingly, the re-rating has been uniform across mid-

caps and large-caps, with some preference for companies exhibiting better cost control and gaining market

shares. Average one-year forward EV/EBIDTA multiple is 10.6x, at a 14% premium to the long-period average.

Current valuations of ~10.6x EV/EBITDA are down from the peak levels of ~15x EV/EBITDA about 12 months ago

due to a lower-than-estimated improvement in earnings.

Earnings in the sector have been disappointing over the past 3-4 years. While some improvement is expected

over the next 24 months, it may not be as sharp as earlier estimated due to cost push and higher supply

addition.

Sector valuations, after being supported by commodity deflation in FY15-FY16 (~35% of overall cost exposed to

commodity prices), have moderated significantly over the past six months, with an increase in the underlying

fuel prices. We expect the full impact of cost push in 2HFY18 to come through in FY19. Hence, price increases

will be critical for margin improvement and to offset the impact of cost push.

Over the last 3-4 years, while demand has been subdued due to weakening macro factors, better-managed

companies have consistently invested in cost efficiencies. In the process, the balance sheets of companies –

particularly of large-caps – have also improved meaningfully.

Sector valuations have moderated over the last 12 months due to weaker-than-estimated earnings, cost push,

and capacity addition announcements across most regions. While multiples are expected to remain elevated,

they should moderate from the previous highs, in our view.

Trend in oil and gas P/B – one-year forward

18.0

14.0

22.8

10.0

6.0

2.0

10.6

9.3

Cement P/E (x)

10 Yr Avg (x)

5 Yr Avg (x)

15 Yr Avg (x)

Trend in oil and gas P/E – one-year forward

43.0

33.0

23.0

13.0

3.0

Cement EV/EBDITA (x)

10 Yr Avg (x)

27.8

19.9

17.8

Sector valuations: Global Cyclical top underperformer; NBFC outperforms









Metals trades near its historical average P/B of 1.4x. EV/EBITDA is at 5.0x, a 13% discount to historical average.

Concerns about a trade war – as US aims to protect its domestic market and impose tariff restrictions – drove

the de-rating of the metals sector. Global steel prices have weakened amid concerns about weakening demand

in China. Aluminum was also weak owing to oversupply concerns.

Oil & Gas trades in line with its historical average – P/B of 1.5x (v/s 10-year average of 1.6x P/B) and P/E of 11.5x (v/s

10-year average of 11.5x). Brent crude oil price was highly volatile in March; prices rose sharply from USD65/bbl to

+USD70/bbl. Volatility, combined with the upcoming elections, has kept OMCs’ stock performance under stress.

NBFCs trade at a P/B of 3.5x, above their historical average (20% premium). G-Sec yields still remain elevated

even though they have come off the recent highs post the announcement of 1HFY19 borrowing calendar. While

this would impact all NBFCs, those with a higher share of market borrowings will be impacted more. On the

other hand, players with a higher share of bank borrowings will be relatively insulated, since banks are not

expected to increase MCLR drastically, going forward. HFCs are likely to see higher traction in both

disbursements and collections.

Infrastructure trades at a 9% premium to its historical P/B average and an 18% premium to its historical P/E

average. Post subdued ordering until December 2017, awarding as well as construction activity has picked up

significantly in the roads sector. Construction activity is progressing at 25km per day in FY18 and awarding has

also picked up and reached 23km per day. 80% of the awarding until March 2018 has been on the HAM mode.

6

4 April 2018

Snapshot: Sector valuations

Sector

Auto

Banks - Private

Banks - PSU

NBFC

Capital Goods

Cement

Consumer

Healthcare

Infrastructure

Media

Metals

Oil & Gas

Retail

Technology

Telecom

Utilities

Current

16.7

19.7

12.5

24.2

26.8

22.8

38.3

20.5

15.8

25.6

9.8

11.5

45.7

17.2

Loss

10.4

PE (x)

10 Yr Avg Prem/Disc (%)

15.2

10.1

16.5

19.7

12.1

3.5

17.9

34.8

26.2

2.2

19.9

14.6

30.9

24.0

23.0

-10.8

13.4

18.3

22.8

11.9

12.0

-18.2

11.5

0.3

26.4

73.0

15.8

8.8

-

-

14.2

-26.4

Relative to Sensex

P/E (%)

Current 10 Yr Avg

-6

-14

12

-6

-29

-30

37

3

51

48

29

12

117

79

16

32

-10

-24

45

31

-44

-31

-35

-33

158

51

-3

-8

-

-

-41

-16

PB (x)

Current

3.6

2.6

0.7

3.5

3.1

2.8

11.1

3.0

1.9

4.8

1.4

1.5

10.1

4.0

2.3

1.4

10 Yr Avg Prem/Disc (%)

3.2

13.6

2.2

19.8

0.9

-24.4

2.9

20.3

3.6

-14.0

2.2

23.8

9.5

16.8

3.9

-23.1

1.7

8.9

4.0

19.3

1.4

-0.7

1.6

-2.1

6.6

52.6

4.1

-3.2

2.5

-6.1

1.7

-19.2

Relative to Sensex

P/B (%)

Current 10 Yr Avg

37

22

1

-15

-73

-64

35

13

18

37

6

-13

325

272

15

51

-27

-33

85

56

-45

-45

-42

-40

288

157

52

58

-12

-4

-48

-34

Nifty: Auto sees continued demand momentum across segments



Auto sector is trading at a P/E of 16.7x, at a 10% premium to its historical average of 15.2x. PV and 2W retails

remain healthy, supported by festive demand in the key northern, central and western markets. Within PVs,

MSIL continues to see better retails than competitors, led by new launches. Retails of 100-125cc motorcycles

are growing by more than 15%.

Global equities: India among worst-performing markets for March





For March 2018, Taiwan (+1%), Korea (+1%) and Brazil (+0%) were the only key global markets to close higher in

local currency terms. On the other hand, Indonesia (-6%), India (-4%) and Japan (-3%) were among the worst

performers.

Indian equities are trading at 22.6x FY18E earnings. All key markets continue trading at a discount to India.

However, India’s RoE remains superior to most EMs, an important differentiator for valuation premium.

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





Over the last 12 months, MSCI EM (+22%) has outperformed MSCI India (+9%). However, over the last five years,

MSCI India has outperformed MSCI EM by 83%.

MSCI India P/E is at a premium of 41% to MSCI EM P/E, below its historical average premium of 43%.

MSCI India outperforms MSCI EM by 83% in last five years

230

122

109

MSCI India Rebased

MSCI EM Rebased

10 Year CAGR:

5 Year CAGR:

180

MSCI India: 6.6% MSCI India: 10.2%

MSCI EM: 0.6% MSCI EM: 2.5%

130

80

30

MSCI EM outperforms MSCI India over 12 months

MSCI India Rebased

135

125

115

105

95

MSCI EM Rebased

189

106

4 April 2018

7

Mahindra & Mahindra

BSE SENSEX

33,371

S&P CNX

10,245

3 April 2018

Update

| Sector:

Automobiles

CMP: INR769

TP: INR889 (+16%)

Buy

At the forefront of sustainability

Focus on environment and stakeholders across businesses

Mahindra & Mahindra (MM) hosted its annual Environment, Social & Governance

(ESG) conference call (click

here for detailed presentation).

Key highlights:



Defence:

It is a very small business currently, with presence in armored

vehicles, sub-systems for naval equipment, radars and simulation-based

training. MM group is not involved in the development, production or

distribution of anti-person mine, cluster munitions and nuclear weapons. All

defence businesses are in subsidiary company. They would only do ‘Defence’

and never do ‘Offence’.



ESG compliance by vendors:

MM has in place a robust suppliers’ program

(particularly for the smaller suppliers), which focuses on ESG. For example, 300

suppliers have agreed to improve energy efficiencies by adopting LED lighting.

MM has enabled 11 of its suppliers to publish their sustainability report with

the help of KPMG. One of them represented the Indian automotive supply

chain at the GRI Conference in Amsterdam. It has created a platform (M-Setu)

through which considerable interactions happen with suppliers and best

practices (including ESG) are transmitted.



Compliance with tenure norms of independent directors:

Clear succession

plans are in place for independent directors, including criteria of tenure

(complying with statutory requirement). They had several imminent business

leaders as its independent directors like Mr Deepak Parekh, Mr Narayan Vaghu

etc,l who stepped down as independent Directors due to tenure criteria.



Preparing human capital for the future:

Mahindra Leadership Academy (at

group level) would address various aspects of future needs of businesses (e.g.

skill-sets for new technologies like EVs). This is focused on Future Leaders

Program, which benchmarks cutting-edge technologies globally (across

sectors). Apart from this, there are business-level academies.



For EVs, MM has just hired an expat and doing huge work at Pininfarina.



Valuation and view:

MM is a best proxy on a rural recovery in the auto

segment. We expect continued growth in tractors, a strong recovery in the

pick-up segment, and stabilization in the market share in passenger UVs. We

estimate 14% CAGR in the core business over FY18-20. The stock trades at

19.1x FY19E and 16.6x FY20E consol. EPS, and core business (adj. for value in

subs after 20% hold-co discount) trades at ~13.9x/12x FY19/20E. Maintain

Buy

with an SOTP-based TP of INR889 (Mar-20 SOTP-based).

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 (%)

MM IN

1,243

803 / 613

7/14/8

956.5

14.7

1871.0

79.5

Financials Snapshot (INR b)

Y/E Mar

2018E 2019E 2020E

Net Sales

488.9 553.1 613.6

EBITDA

60.2

70.3

79.5

PAT

42.1

47.9

54.9

EPS (INR)

35.5

40.3

46.2

Gr. (%)

12.6

13.6

14.7

BV/Sh (INR)

39.7

46.9

51.2

RoE (%)

242.0 269.9 303.3

RoCE (%)

14.6

14.8

15.2

P/E (x)

21.7

19.1

16.6

P/BV (x)

3.2

2.9

2.5

Shareholding pattern (%)

Dec-17 Sep-17 Dec-16

As On

Promoter

20.5

25.2

25.3

DII

19.2

20

19.1

FII

41.7

39.6

41

Others

18.6

15.2

14.6

FII Includes depository receipts

Stock Performance (1-year)

M&M

Sensex - Rebased

800

750

700

650

600

4 April 2018

8

3 April 2018

Update | Sector: Exchanges

BSE

BSE SENSEX

33,371

S&P CNX

10,245

CMP: INR788

Upgrading to Buy

TP: INR1,070(+36%)

Upgrade to Buy

Going anti-tide, pro-value

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 (%)

BSE IN

54.8

1178 / 726

-1/-27/-33

57.2

0.9

167.0

100.0





Financials Snapshot (INR b)

Y/E Mar

FY18E FY19E FY20E

Net Sales

4.7

5.1

5.5

EBITDA

1.1

1.2

1.4

PAT

2.3

2.6

2.8

EPS (INR)

41.9

46.8

52.0

EPS Gr (%)

2.2

11.7

11.2

BV / Sh (INR)

492

617

628

P/E (x)

6.1

16.9

15.2

P / BV (x)

1.6

1.3

1.3

RoE (%)

8.5

7.6

8.3

RoCE (%)

11.1

9.9

10.5

Stock Performance (1-year)

BSE

Sensex - Rebased

1,300

1,150

1,000

850

700







BSE has started charging 32 of the 37 asset management companies (AMCs) for

services through its mutual fund (MF) platform. This could be an INR150m-200m

revenue opportunity in the next fiscal; however, being the first year, we are

currently modeling INR100m revenues from the segment.

With ~50% of equity transaction revenues from exclusive segments, dependence on

equity transactions where BSE is a distant second to NSE, is <15%. BSE cited that

volumes in the exclusively-listed segment are inelastic to transaction charges, and

hence, it does not feel the need to reduce the current fee.

We note that BSE should be paying out 85%+ of its non-exceptional profits as

dividends. And any buybacks like the one currently underway will be over and above

the dividends. The combination will keep yields attractive (currently ~5%).

Apart from the boost of Star MF monetization, and lowering risk from bridging

equities gap to NSE, we see option value in BSE from multiple potential triggers: [1]

monetization of INX, where volume ramp-up continues, [2] interoperability of

clearing corporations – while this brings down overall margin requirements for

traders, it could still benefit the challenging exchanges and hurt exchanges with

monopolistic market share, and [3] new / smaller segments such as commodity

derivatives, currency derivatives, bond issuance platform, interest rate derivatives,

SME platform.

We value BSE on a SOTP basis, ascribing value to [1] core operations ex-cash income

(INR369/share), [2] implied value from CDSL’s market price @20% holding company

discount (INR110/share), [3] owned unencumbered cash (INR293/share), and [4]

float income from encumbered / margin money (INR300/share). Our target price of

INR1,070 implies 36% upside. Upgrade to Buy.

4 April 2018

9

Sector Update | 3 April 2018

Capital Goods

Refer to our report

on India Transmission, Dec-15

PGCIL ordering down 68% YoY in FY18

At lowest levels since FY09

Power Grid Corporation of India (PGCIL) accounts for 45-50% of annual transmission capex

in India. It is one of the largest customers for the Indian transmission equipment suppliers

and contractors. In this note, we will analyze the ordering trends by PGCIL in FY18 and

their implications for the Indian transmission equipment suppliers.



Orders placed by PGCIL declined 68% YoY to INR90b in FY18 owing to the absence of

large-ticket orders. Notably, orders declined across key categories.



In FY18, substation ordering fell 91% YoY (note that FY17 included two large orders:

(1) INR58b order for Raigarh-Pugalur HVDC line and (2) INR35b order for the Pugalur-

Trichur HVDC line), transmission line ordering declined 39% YoY, and transformers

ordering plunged 78% YoY.



We expect PGCIL’s ordering activity to stabilize in the INR150-200b range, as majority

of the planned capex for inter-state transmission infrastructure development is

already incurred. In our view, state transmission companies are likely to drive growth

th

in transmission orders/capex in the 13 plan (2018-22E).

Power Grid orders decline 68% YoY in FY18





Orders placed by PGCIL stood at INR90b (-68% YoY) in FY18 – the lowest since

FY09 – primarily due to the absence of large-ticket orders. Of the total orders,

transmission line orders constituted 39%, followed by substation (17%), railway

electrification (9%) and transformers (5%). Note that PGCIL has begun incurring

capex for rail electrification projects from FY18, placing orders worth INR8.6b.

In the previous fiscal (FY17), investment approvals by PGCIL stood at INR362b

(+161% YoY), driving strong order growth (+68% YoY). However, in FY18,

approvals declined by 89% to INR39.8b, leading to a fall in orders. We expect

PGCIL’s annual ordering to stabilize in the INR100-150b range, given that

majority of the planned capex for inter-state infrastructure development has

already been incurred. The bigger opportunity lies with the states, where

spending in the 13

th

plan is projected to jump to INR1.6t (INR0.6t in 12

th

plan).

Substation orders down sharply; base effect in play





Substation orders stood at INR15.3b (-91% YoY), impacted by a high base effect.

Substation ordering was at a record high in FY17, led by the finalization of two

large HVDC orders – the INR58b Raigarh-Pugalur won by ABB and the INR35b

Pugalur-Trichur line won by Siemens. Even after excluding the large-size orders

of INR93b, substation ordering fell 79% YoY in FY18.

Of the total orders of INR15.3b, 50% are for the low-kv substation (132kv and

below), where Sterling And Wilson has been the market leader with an 18%

share. Around 33% of the substation orders were for gas-insulated substations

(GIS).

4 April 2018

10

Transmission line orders at INR35b (-39% YoY); competitive intensity

moderate, with top-five players accounting for 60% of total orders





Transmission line orders declined 39% YoY to INR35b.

We note that the top-5 players (KEC International, Kalpataru, L&T, EMC and

EMCO) accounted for 60% of the total orders placed (68% in FY17), indicating

moderate competitive intensity in this segment, which had seen the entry of a

large number of new players over FY12-13.

Transformer orders at INR4.3b (-78% YoY); 765kv transformers account for

73% of total





Transformer orders stood at INR4.3b (-78% YoY), with 765kv transformers

constituting 73% of the total orders.

Within 765kv transformers, GE T&D had a share of 42%, followed by Toshiba

(29%) and TBEA (28%).

Valuation view

PGCIL’s capex is expected to stabilize in the INR150-200b range, as major capex on

the inter-state transmission infrastructure has already been incurred. We expect

T&D capex to be driven by state transcos, which will be incurring capex on

developing the intra-state infrastructure. In our view, GE T&D (Neutral), ABB India

(Sell), Siemens (Neutral) and KEC (Neutral) are best positioned to capture the

upcoming opportunity.

4 April 2018

11

In conversation

1. ASHOK LEYLAND: Likely to see another 10% growth in coming

year; Gopal Mahadevan, CFO













Have posted about 14% growth in volumes. This has been driven by three

reasons – infrastructure spend, GST and regulatory changes. Should see another

10% growth in the forthcoming year.

If the load regulations were to spread across the country it would be very

positive for the industry and also for general freight operations.

LCV is a very important business for company. Will be coming out with five to six

new product launches over next 12 to 14 months. Huge demand for LCV will

continue into the New Year.

One positive in the industry, very clearly, is moving towards multi axle vehicles,

especially 37 tonners. Would not be surprised if the industry moves from 37

tonners to 41-42 tonners. The 49 tonner demand is also going up.

Have been posting double digit EBITDA margins for quite a bit of quarters now,

save for last year’s July result. Will continue with that policy.

Will be a change in the overall business mix over the next three to five years.

Have been investing into international business. Have invested quite heavily into

the defence business also.

2. MOTHERSON SUMI: Acquires Reydel automotive













Laksh Vaaman Sehgal, Vice Chairman

Will fund Reydel deal through internal accruals.

Deal includes cash on books of Reydel which is at $65m.

Reydel is a profit-making company. Deal to be EPS accretive from Day 1.

Reydel has footprints in some of the South East Asian markets where company

is not present.

Looking to be on the path to achieve 40% ROCE.

3. WESTLIFE DEVELOPMENT: Plan to nearly double count of Mc

Donald's outlets to 500 by 2022; Amit Jatia, Vice-Chairman













Whole slew of things coming up for the company. Quite bullish about FY19

growth.

Have been able to absorb the costs related to healthy burgers.

Expect 400-500 stores by 2022.

Looking at additional 800 – 1000 cr investment over the next 3-4 years.

Expect strong SSG in mid to high single digits.

Will see the company make bold moves in the future.

4 April 2018

12

From the think tank

1. RBI will hold on to repo rate this week, after 2 months, and

maybe till next year



One doesn’t need to be a soothsayer to predict that the Reserve Bank of India

(RBI) will keep the repo rate unchanged at the meeting of its monetary policy

committee (MPC) on 4-5 April, the first such meeting in the new fiscal year. Any

change in the stance of the monetary policy is also highly unlikely. In its last

review in February, the MPC left the policy rate unchanged at 6% and the stance

remained neutral but the tone of the policy was cautious. It took the decision in

favour of no-change in the repo rate with a 5-1 vote, with Michael D. Patra

reiterating his call for a quarter percentage rate hike and others—Chetan Ghate,

Pami Dua, Ravindra H. Dholakia, Viral V. Acharya and Urjit R. Patel—voting for

status quo. I will not be surprised if it turns out to be a unanimous decision this

time.

2. India is a union of states, it’s time to act like one



The possibility of the 15th Finance Commission (FC) using the 2011 census for

revenue allocation has the political class and policy experts riled. The reason is

simple; since the 1971 census (used by the 13th and 14th FCs), there has been a

significant demographic divergence. Using 2011 census data will give states with

the greatest increase in population an advantage in their share of revenue,

relative to prior revenue allocations. And political decisions are already tilted in

favour of the demographically rich because of the voting system. Population,

however, is not the only divergence between states. States that have gained the

greatest numbers, like Bihar and Uttar Pradesh (UP), are also among the

poorest. And states like Kerala and Tamil Nadu, that have gained tremendously

in gross domestic product and welfare indicators, are experiencing reduced

fertility rates, and have gained a lot less in population. The FC considers multiple

factors at different weights, including demographics, in its allocations. And if the

15th FC uses the currently estimated 27.5% as the weight for the 2011 census

(instead of 10% used in the 14th FC), the consequences would be dire for Tamil

Nadu and Kerala.

3. Why judicial discipline is necessary for international trade to

blossom in India



Judicial discipline is mandatory if international trade and commerce has to be

nurtured in India, as many international ventures and companies prefer to resolve

their disputes by arbitration and not through adjudication by courts. This is

becoming more important as the world braces for global trade wars. It is

unfortunate that the will of Parliament, which was for encouraging international

trade, has been whittled down recently by the Bombay High Court. Such cases are

initiated in civil courts only to choke arbitration proceedings and they should be

shot down at the inception stage itself.

4 April 2018

13

4. Adding heft to weak corporate boards



The ongoing spectacle starring battered banks and overleveraged companies in

parallel roles is as much a result of weak corporate governance as it is of the

vagaries of the business cycle. In this context, the Securities and Exchange Board

of India (Sebi) has done well to accept about 40 recommendations made by the

Uday Kotak committee on corporate governance, which submitted its report in

October 2017. Several listed companies have already been referred to the

National Company Law Tribunal under the Insolvency and Bankruptcy Code. It is

reasonable to assume that if the boards of these companies had asked tougher

questions at the time of the borrowing binge, at least some of them would have

avoided destroying shareholder wealth. The government and regulators need to

work at multiple levels to strengthen the overall governance framework. This is

necessary not only to protect faith in the system but also to make the allocation

of capital more efficient.

International

5. No Brexit for a Eurozone Britain?



“You can check out any time you like, but you can never leave.” Prior to the

2016 Brexit referendum, I borrowed this line from the Eagles’ 1976 hit “Hotel

California” as an argument against Britain exiting the European Union. I told

audiences up and down Britain that if they voted to leave the EU, they would

end up more entangled with the EU Commission than ever before. As British

Prime Minister Theresa May is finding out, disentangling a member state from

the EU is an arduous and complex undertaking. But how much harder would

Brexit have been had the United Kingdom adopted the euro back in 2000? For

starters, the people of Britain would never have been consulted on whether

they wanted to check out of the EU. In a hypothetical eurozone Britain, the very

announcement of a referendum on membership would have triggered a bank

run.

4 April 2018

14

Click excel icon

for detailed

valuation guide

CMP

(INR)

811

148

2792

717

19116

1599

28052

1263

884

233

3640

769

221

9024

333

343

649

Valuation snapshot

Company

Automobiles

Amara Raja

Ashok Ley.

Bajaj Auto

Bharat Forge

Bosch

CEAT

Eicher Mot.

Endurance Tech.

Escorts

Exide Ind

Hero Moto

M&M

Mahindra CIE

Maruti Suzuki

Motherson Sumi

Tata Motors

TVS Motor

Aggregate

Banks - Private

AU Small Finance

Axis Bank

DCB Bank

Equitas Hold.

Federal Bank

HDFC Bank

ICICI Bank

IDFC Bank

IndusInd

J&K Bank

Kotak Mah. Bk

RBL Bank

South Indian

Yes Bank

Aggregate

Banks - PSU

BOB

BOI

Canara

Indian Bk

PNB

SBI

Union Bk

Aggregate

NBFCs

Aditya Birla Cap

Bajaj Fin.

Capital First

Cholaman.Inv.&F

n

Dewan Hsg.

GRUH Fin.

HDFC

HDFC Stand. Life

Indiabulls Hsg

Reco

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Sell

Buy

Neutral

Buy

Buy

Buy

Buy

Buy

Neutral

TP % Upside

EPS (INR)

EPS Gr. YoY (%)

P/E (x)

P/B (x)

ROE (%)

(INR) Downside FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY18E FY19E FY18E FY19E

1000

179

3550

880

21951

1899

34485

1540

714

286

4027

943

303

10972

437

515

723

23

21

27

23

15

19

23

22

-19

23

11

23

37

22

31

50

11

28.3

5.4

147.9

20.0

459.1

61.1

824.0

27.9

39.1

8.0

186.1

39.7

9.6

275.1

8.1

25.5

14.1

34.0 40.0

7.2

9.2

167.8 197.2

26.4 34.8

582.9 694.4

84.7 111.7

1,049.3 1,341.1

38.2 51.0

49.5 59.0

9.9

12.1

202.0 221.3

46.9 51.2

12.1 15.1

349.0 457.0

12.5 17.5

56.6 58.7

22.4 32.4

0.9

28.8

4.8

52.8

-3.0

-34.6

33.6

18.8

103.5

-1.3

10.0

45.1

107.8

10.6

5.0

28.8

20.4

18.8

-42.7

-17.0

2.1

-79.9

15.3

17.7

-27.2

0.3

25.7

LP

21.9

29.3

-22.9

25.0

10.8

20.3

33.1

13.5

32.1

27.0

38.6

27.3

37.0

26.5

23.3

8.5

18.0

26.3

26.9

54.7

121.8

58.8

45.1

43.5

139.5

25.2

526.1

22.0

22.5

84.6

7.2

29.0

13.5

26.8

41.5

115.7

28.4

45.0

17.6

27.1

17.5

31.7

19.1

31.9

27.8

33.5

19.3

22.6

9.6

9.3

24.8

30.9

39.6

3.7

44.1

17.1

28.7

27.2

18.9

35.9

41.6

26.2

34.0

45.3

22.6

29.0

19.6

19.4

23.0

32.8

41.1

13.4

45.9

25.0

23.9

20.4

16.6

27.2

32.8

18.9

26.7

33.0

17.9

23.6

18.0

16.4

18.2

25.9

26.6

6.1

28.9

17.2

41.1

16.5

18.8

21.1

13.5

23.4

13.1

15.1

23.5

5.8

26.6

22.2

5.8

13.4

19.4

4.6

6.2

4.3

6.9

6.1

2.5

11.1

8.7

3.6

3.7

6.2

3.2

2.2

6.6

7.4

1.7

10.6

4.4

7.8

1.9

2.0

2.2

1.4

4.0

1.7

1.1

4.6

0.6

4.4

3.1

0.9

2.8

3.0

4.0

5.2

3.9

5.8

5.5

2.2

8.3

7.2

3.1

3.3

5.4

2.9

2.0

5.7

6.2

1.3

8.2

3.7

6.5

1.7

1.9

2.0

1.3

3.6

1.6

1.0

3.9

0.6

3.8

2.8

0.8

2.4

2.6

0.9

0.6

0.6

0.9

0.6

0.9

0.4

0.8

3.1

5.4

2.1

3.9

1.7

14.8

4.3

2.7

3.5

17.3

24.3

23.9

20.9

15.2

9.8

36.6

20.8

18.3

12.6

34.1

14.6

10.4

19.7

19.2

13.5

25.3

17.7

14.1

5.1

9.8

1.7

9.6

16.2

7.2

6.8

16.6

9.1

11.3

11.9

6.9

17.4

10.5

18.0

27.6

24.6

23.3

17.5

12.4

35.5

23.8

18.7

14.0

32.2

14.8

11.6

21.8

25.4

24.0

32.0

21.6

17.2

11.0

10.3

10.0

10.2

16.2

12.5

6.9

18.4

9.9

13.5

13.2

13.7

19.1

13.6

Buy

Buy

Neutral

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Buy

Buy

Buy

629

503

168

148

92

1916

270

49

1830

58

1103

483

24

313

705

710

188

205

149

2400

405

65

2076

100

1220

680

38

410

12

41

12

38

63

25

50

34

13

73

11

41

57

31

10.7

12.8

7.1

1.1

5.6

66.8

11.1

3.0

60.4

8.8

32.7

15.4

1.9

18.2

15.3

30.5

8.9

7.0

6.8

81.8

20.5

3.2

78.0

10.0

41.5

21.8

4.1

23.4

21.6

44.0

10.9

10.7

8.5

102.3

25.5

3.8

100.2

14.4

54.1

29.3

5.3

30.2

41.1 59.0

44.1 39.5

21.4 23.6

51.2 131.8

25.9 16.5

25.0 28.7

24.3 24.2

19.2 16.2

28.4 30.3

43.6 6.6

30.5 33.7

34.7 31.4

28.9 12.6

28.9 17.1

28.9 28.1

Buy

Neutral

Neutral

Buy

Buy

Buy

Neutral

145

108

269

307

96

250

97

185

150

415

430

215

375

145

27

39

54

40

125

50

49

3.4

-18.8

-2.4

30.3

-5.7

2.9

-38.8

8.9

8.8

28.9

41.6

0.0

23.1

7.6

15.7

12.1

61.3

47.7

14.3

34.0

17.1

-43.1 161.5 75.6

Loss

LP

36.8

PL

LP 112.2

3.7 37.2 14.5

PL

LP #####

861.1 706.8 47.2

PL

LP 125.6

PL

LP

68.0

NA

42.3

38.9

33.3

25.9

21.3

7.3

2.2

32.6

45.2

35.4

30.2

17.0

28.7

17.7

14.7

14.2

15.0

42.4

34.2

27.5

20.2

42.6 16.3

0.9

NM 12.2

0.6

NM

9.3

0.6

10.1

7.4

0.9

NM 2,826.4 0.6

87.6 10.9

1.0

NM 12.8

0.5

0.0

11.7

0.8

41.4

40.2

18.8

24.8

28.5

29.7

14.4

21.2

11.1

51.2

37.3

94.7

12.4

4.0

6.4

2.4

4.6

1.9

18.0

4.9

3.3

4.0

2.0

5.0

-7.7 4.1

-0.4 5.4

9.7 12.3

-3.0 0.0

-0.3 7.8

-16.0 3.4

-0.8 6.5

12.6

20.1

13.7

20.2

14.0

32.7

18.3

21.7

29.8

12.4

19.8

15.6

19.8

15.9

31.7

17.5

21.1

30.3

Buy

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

152

1832

643

1517

534

595

1830

494

1293

225

2330

960

1520

720

540

2260

485

1630

48

27

49

0

35

-9

23

-2

26

3.7

45.6

34.2

61.3

37.3

9.9

42.7

4.6

90.9

5.3

61.7

44.6

71.7

7.6

82.8

56.8

86.2

48.0 60.5

11.6 14.4

49.0 57.3

5.2

6.6

104.6 127.4

26.0 14.3

23.8 60.2

16.9 42.8

25.8 108.1

21.8 14.2

4 April 2018

15

Click excel icon

for detailed

valuation guide

CMP

(INR)

162

552

607

473

417

1273

573

2222

1477

TP % Upside

(INR) Downside

240

48

608

10

750

24

575

22

475

14

1750

38

740

29

2500

1750

13

19

EPS (INR)

FY18E FY19E FY20E

7.4

11.0 13.5

38.9 44.3 52.6

18.6 24.2 30.0

13.9 19.2 23.0

43.8 44.8 49.3

50.9 67.5 88.1

32.9 39.0 46.0

114.2 140.0 166.8

78.7

104.8 125.9

EPS Gr. YoY (%)

FY18E FY19E FY20E

42.2 47.1 23.2

1.8 13.8 18.7

24.0 29.6 24.1

95.8 38.7 19.4

48.1 2.3 10.2

61.0 32.7 30.4

13.0 18.5 18.1

35.4

42.1

28.1

12.1

12.1

135.9

36.0

8.9

-72.2

-13.2

48.1

79.8

16.5

36.6

14.9

10.9

18.4

3.1

76.0

16.4

17.8

22.6

33.1

22.8

52.0

10.0

14.2

48.2

27.1

63.3

34.7

9.2

9.7

22.8

16.7

18.9

53.8

21.5

25.3

5.7

18.4

21.1

34.2

34.5

376.7

43.4

235.5

114.3

28.9

97.2

26.1

66.8

113.1

101.0

86.0

29.4

61.6

83.4

19.2

20.2

22.5

16.2

6.8

19.4

26.9

18.4

58.8

18.6

19.8

14.2

24.1

28.3

20.4

13.8

23.7

23.9

9.7

13.9

18.6

56.8

14.2

19.2

40.1

21.4

39.4

38.1

35.2

27.7

88.7

33.4

39.7

32.5

43.8

33.5

31.6

Valuation snapshot

ROE (%)

FY18E FY19E

15.9 19.7

16.6 16.5

20.2 17.0

10.9 12.5

24.3 21.0

14.6 17.0

16.7 16.9

14.1

14.9

14.8

11.6

17.8

3.6

20.4

50.2

1.7

16.5

13.9

23.5

18.9

21.7

13.0

9.1

20.0

11.9

17.1

16.9

11.0

6.1

10.1

2.1

8.7

5.2

2.0

15.1

7.7

13.9

6.6

11.2

6.5

9.7

15.2

8.4

7.5

26.8

33.9

49.9

25.4

28.6

-1.8

23.3

15.2

17.5

15.6

15.4

17.6

4.0

28.3

49.9

2.7

20.7

14.1

22.3

20.5

21.1

14.1

12.9

20.6

13.6

15.9

17.6

12.3

7.8

12.9

9.6

11.4

15.7

4.1

16.8

13.8

15.5

10.3

20.9

12.0

15.6

17.0

12.5

12.3

29.4

35.8

55.5

26.7

33.1

4.9

22.4

Company

Reco

L&T Fin Holdings Buy

LIC Hsg Fin

Neutral

MAS Financial

Buy

M&M Fin.

Buy

Muthoot Fin

Neutral

PNB Housing

Buy

Repco Home

Buy

Shriram City

Buy

Union

Shriram Trans. Buy

Aggregate

Capital Goods

ABB

Sell

Bharat Elec.

Buy

BHEL

Sell

Blue Star

Neutral

CG Cons. Elec.

Buy

CG Power & Indu. Neutral

Cummins

Buy

Engineers India Buy

GE T&D

Neutral

Havells

Buy

K E C Intl

Neutral

L&T

Buy

Siemens

Neutral

Solar Ind

Neutral

Thermax

Buy

Va Tech Wab.

Buy

Voltas

Neutral

Aggregate

Cement

Ambuja Cem.

Neutral

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

Sagar Cements Not Rated

Sanghi Inds.

Buy

Shree Cem

Buy

Ultratech

Buy

Aggregate

Consumer

Asian Paints

Neutral

Britannia

Buy

Colgate

Buy

Dabur

Buy

Emami

Buy

Future Consumer Buy

Godrej Cons.

Neutral

P/E (x)

P/B (x)

FY18E FY19E FY18E FY19E

21.8 14.8

3.2

2.7

14.2 12.5

2.2

1.9

32.6 25.1

4.6

4.0

34.1 24.6

3.2

3.0

9.5

9.3

2.1

1.8

25.0 18.8

3.4

3.0

17.4 14.7

2.7

2.3

19.5

18.8

30.2

64.7

20.8

27.1

47.9

45.4

70.3

32.1

26.0

38.8

45.7

25.1

27.4

56.9

43.9

40.5

14.9

36.0

31.5

39.9

32.7

86.1

56.4

30.5

46.4

24.6

47.0

32.3

43.6

52.6

37.8

26.7

46.4

51.8

43.7

15.9

14.1

24.6

42.6

18.9

23.7

32.3

35.7

43.0

23.9

23.8

35.4

37.2

21.5

23.0

37.0

36.2

32.3

14.1

30.4

26.0

29.8

24.3

18.1

39.3

9.1

21.7

19.1

23.8

25.7

26.2

24.7

18.8

14.3

35.8

32.0

23.8

45.4

48.5

38.4

37.3

35.5

182.0

46.5

2.6

2.7

4.5

7.5

3.7

1.0

9.5

19.8

1.2

5.1

3.7

8.5

8.7

5.4

3.4

5.2

8.1

4.6

2.4

5.7

3.5

2.4

3.2

1.8

4.7

1.5

0.9

3.5

3.5

4.3

2.8

5.7

2.4

2.1

6.6

4.2

3.3

14.2

18.7

22.0

10.5

12.5

9.2

11.1

2.3

2.3

3.8

6.6

3.3

0.9

8.8

16.2

1.2

4.7

3.4

7.4

7.6

4.5

3.1

4.8

6.9

4.2

2.1

5.0

3.2

2.3

3.1

1.7

4.2

1.3

0.9

3.0

3.1

3.7

2.6

4.7

2.1

1.8

5.7

3.8

2.9

12.6

16.1

20.6

9.4

11.0

8.7

9.8

1283

147

85

795

231

80

740

164

400

509

406

1330

1124

1072

1136

494

648

1240

210

80

780

305

90

1040

200

435

640

385

1670

1285

1100

1350

700

630

-3

43

-6

-2

32

12

41

22

9

26

-5

26

14

3

19

42

-3

19.8

7.1

3.2

16.6

5.1

1.1

23.0

6.3

10.3

11.1

16.2

48.6

19.8

24.4

28.0

33.2

18.0

30.1

7.8

3.6

24.6

6.5

1.9

31.0

6.9

11.3

13.7

18.9

57.8

30.4

29.6

35.1

35.1

21.3

35.0

8.3

4.3

31.2

7.7

3.0

36.8

8.2

12.9

17.0

24.3

69.6

34.6

36.7

43.5

38.5

24.3

241

1551

764

2867

1086

153

1000

440

756

143

117

950

122

16623

3949

290

1781

1234

3328

1242

148

1343

470

847

179

159

-

157

18867

5131

20

15

61

16

14

-4

34

7

12

25

36

29

14

30

6.0

8.1

12.7 29.5

47.4 63.8 72.9 31.3

8.9

42.3 50.5 -68.9

50.9 72.9 102.2 31.2

35.6 119.4 145.0 -47.5

3.3

7.1

9.9 -41.3

40.6 52.4 72.3 20.5

9.4

18.5 25.0 34.7

23.4 29.5 37.6 -14.3

3.3

5.5

10.3

LP

2.2

4.7

6.3 713.3

25.2 50.6 70.6

LP

4.6

8.5

11.3 59.3

358.6 464.2 667.7 -6.7

76.3 123.3 164.5 -20.6

-14.2

21.5

84.2

24.0

7.6

23.6

-0.1

20.7

1153

5093

1084

337

1099

55

1106

1270

5995

1365

415

1505

76

1065

10

18

26

23

37

39

-4

25.4 30.5

2.1 18.2 20.2 53.7

105.1 131.5 14.3 24.8 25.1 60.5

28.3 33.8 12.9 17.9 19.7 45.2

9.0

10.5

4.5 19.2 16.2 44.5

31.0 36.9 -11.1 31.4 19.1 46.6

0.3

1.1

Loss

LP 276.5 NM

23.8 27.1

9.3 15.1 14.1 53.5

4 April 2018

16

Click excel icon

for detailed

valuation guide

CMP

Reco

(INR)

Neutral

6000

Buy

1348

Neutral

258

Neutral

389

Neutral

325

Neutral

8361

Buy

22288

Neutral

255

Buy

963

Neutral

9465

Not Rated 161

Buy

977

Neutral

3250

TP % Upside

(INR) Downside

6350

6

1515

12

278

8

380

-2

345

6

7882

-6

27490

23

314

23

1065

11

9303

-2

-

1380

41

3515

8

EPS (INR)

FY18E FY19E FY20E

161.0 183.8 215.7

22.9 27.9 33.0

9.0

10.2 11.4

8.5

10.9 13.6

6.3

7.4

8.9

140.0 159.1 192.3

297.1 415.7 549.8

8.9

12.4 16.8

17.6 20.6 23.7

142.1 171.3 200.8

3.5

6.4

9.7

14.1 17.4 22.9

32.6 56.9 78.5

EPS Gr. YoY (%)

FY18E FY19E FY20E

3.1 14.1 17.4

16.8 21.8 18.2

6.6 13.7 12.4

-24.8 29.3 24.0

0.2 18.3 18.8

13.2 13.6 20.8

24.5 39.9 32.2

147.7 38.7 35.6

5.4 17.0 14.9

6.9 20.5 17.3

-2.0 83.8 52.1

62.0 23.9 31.2

22.1 74.3 38.1

8.9 18.9 17.6

19.1

23.6

23.6

10.1

81.5

15.9

22.3

19.7

28.0

164.5

24.7

38.7

13.7

27.7

15.8

22.8

34.6

15.5

25.9

36.7

28.8

28.0

25.5

P/E (x)

FY18E FY19E

37.3 32.7

58.8 48.3

28.9 25.4

46.0 35.6

51.6 43.6

59.7 52.6

75.0 53.6

28.5 20.6

54.6 46.7

66.6 55.3

46.3 25.2

69.4 56.1

99.6 57.1

46.0 38.7

21.9

29.2

26.0

13.3

79.7

25.2

26.4

33.7

31.7

88.5

18.0

17.1

56.2

31.6

17.7

27.0

25.4

36.3

35.4

49.9

38.7

26.8

28.7

21.2

21.3

21.3

12.2

55.7

19.6

21.8

25.2

18.7

47.1

16.7

13.6

50.5

23.1

13.5

17.7

19.6

31.8

19.4

17.3

23.7

21.0

21.3

37.9

9.8

20.4

24.8

16.0

13.4

24.6

17.5

21.9

45.0

13.6

Valuation snapshot

P/B (x)

FY18E FY19E

7.4

6.7

44.6 44.2

6.3

5.8

6.7

6.5

15.9 15.2

25.1 23.5

29.9 23.9

2.9

2.6

12.3 10.7

37.4 31.3

2.2

2.1

9.7

8.5

17.1 12.8

12.2 11.1

4.5

4.5

6.3

2.9

7.1

5.0

3.3

5.3

2.8

1.0

3.0

2.0

11.1

3.2

3.2

3.6

2.5

5.8

3.7

2.2

3.3

4.5

3.5

2.7

1.4

3.6

3.6

2.2

1.9

3.3

1.9

2.9

17.9

3.1

3.9

3.9

5.0

2.4

6.5

4.1

2.9

4.8

2.4

1.0

2.6

1.8

13.7

2.8

2.6

3.0

2.3

5.3

3.1

2.0

3.0

3.9

3.1

2.5

1.3

3.1

3.2

1.9

1.7

3.1

1.8

2.7

ROE (%)

FY18E FY19E

20.7 21.6

76.1 92.0

22.8 23.8

14.3 18.5

32.7 35.6

43.4 46.2

39.9 44.6

10.8 13.3

24.2 24.5

61.2 61.8

4.9

8.5

14.9 16.2

17.2 22.3

26.6 28.7

22.5

16.4

27.0

24.6

8.9

21.2

12.4

16.0

9.0

1.2

16.4

13.2

19.7

10.5

19.7

14.1

10.1

16.1

11.0

4.6

8.5

17.6

12.3

2.2

15.5

23.6

13.5

12.9

10.9

11.8

6.6

10.9

19.8

19.5

26.2

21.6

11.6

23.1

13.3

20.0

13.9

2.2

15.3

13.9

27.2

13.0

21.4

18.3

12.1

16.8

17.4

12.1

13.2

19.9

14.7

6.9

13.4

16.2

13.7

12.0

13.7

12.8

10.7

12.3

Company

GSK Cons.

HUL

ITC

Jyothy Lab

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

Laurus Labs

Lupin

Sanofi India

Shilpa Medicare

Strides Shasun

Sun Pharma

Torrent Pharma

Aggregate

Infrastructure

Ashoka Buildcon

IRB Infra

KNR

Constructions

Sadbhav

Engineering

Aggregate

Logistics

Allcargo Logistics

Concor

Gateway

Distriparks

Aggregate

Media

Dish TV

D B Corp

Neutral

Buy

Buy

Buy

Neutral

Buy

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Neutral

Buy

Buy

Buy

Buy

Buy

Buy

Buy

Buy

Neutral

542

1910

1402

593

607

394

571

1107

2129

130

550

108

2152

677

847

514

789

5147

471

704

510

1288

555

2500

1840

820

600

500

600

1100

2575

185

550

175

2500

750

1110

613

940

5600

686

989

675

1400

2

31

31

38

-1

27

5

-1

21

42

0

62

16

11

31

19

19

9

46

40

32

9

24.8 25.6 30.5 15.0 3.1

65.4 89.5 110.6 -12.4 36.9

54.0 65.8 81.4 -5.8 21.9

44.5 48.7 53.6 13.2 9.4

7.6

10.9 19.8 -25.3 43.1

15.6 20.1 23.3 10.1 28.7

21.6 26.2 32.0 35.7 21.3

32.9 44.0 52.7 -17.7 33.9

67.1 114.1 146.1 -7.6 70.0

1.5

2.8

7.3 -85.8 87.8

30.6 32.9 41.1 -22.2 7.7

6.3

7.9

11.0 -12.4 25.2

38.3 42.6 48.5 11.5 11.2

21.4 29.2 37.3 33.2 36.6

47.8 62.6 72.5 29.5 30.9

19.0 29.1 35.7

7.0 52.7

31.0 40.2 54.1 -45.2 29.5

141.7 161.8 186.9 9.8 14.2

13.3 24.3 30.6 -5.0 82.4

14.1 40.8 55.7 -56.2 188.8

13.2 21.5 27.7 -49.6 63.3

48.0 61.3 78.5 -12.9 27.6

-19.3 34.4

2.1

25.4

16.9

13.9

7.0

24.6

14.0

16.0

8.3

21.3

18.2

17.4

Buy

Neutral

Buy

Buy

265

242

285

396

290

250

375

460

10

3

32

16

LP 238.0 18.1 128.0

24.8 -3.0 -13.6 9.5

41.2 -17.3 30.2

27.1

14.9

8.6

16.9

28.4

16.7

Buy

Neutral

Buy

152

1260

185

223

1330

237

47

6

28

8.3

44.2

6.2

11.4

51.2

10.6

13.2

58.2

12.9

-15.6 37.1

16.3 15.9

-8.3

8.7

69.8

21.8

16.3

13.5

21.8

14.6

18.3

28.5

29.7

26.7

Buy

Buy

72

313

101

420

40

34

-0.5

18.3

1.6

23.0

3.4

27.6

PL

LP 109.9 NM

-10.4 25.8 20.1 17.1

12.8 -11.9 33.2

2.6 19.6 21.0

4 April 2018

17

Click excel icon

for detailed

valuation guide

CMP

(INR)

104

699

37

232

86

172

397

1248

90

16

894

582

TP % Upside

(INR) Downside

90

-13

820

17

47

26

305

32

117

35

215

25

469

18

1760

41

130

45

27

70

1225

37

705

21

EPS (INR)

FY18E FY19E FY20E

-2.9

0.1

4.0

7.2

15.3 28.7

-0.2

0.8

2.0

25.9 28.8 32.4

11.8 12.1 12.7

10.1 13.1 16.0

8.3

13.5 17.8

22.1 37.3 51.5

2.5

5.8

7.9

-0.9

0.1

0.6

27.7 35.8 42.5

13.0 17.6 21.0

EPS Gr. YoY (%)

FY18E FY19E FY20E

Loss

LP 5,545

-37.2 113.8 86.9

Loss

LP 161.9

0.2 11.3 12.6

59.3 2.6

4.9

-5.3 30.5 21.5

29.9 62.3 31.4

7.8 68.7 37.9

100.6 137.5 36.4

Loss

LP 411.6

11.6 29.1 18.7

-2.9 35.4 19.3

9.3 47.4 28.2

123.8

7.5

Loss

45.3

PL

37.0

Loss

165.9

50.7

53.4

64.7

74.2

-17.3

23.9

34.3

43.8

-2.9

-1.2

6.9

27.0

-20.7

-18.3

5.4

23.0

19.6

5.8

186.2

44.4

38.8

48.6

18.1

3.1

21.2

2.6

0.8

16.5

31.5

12.9

P/E (x)

FY18E FY19E

NM 1,458.3

97.5 45.6

NM 49.1

9.0

8.0

7.3

7.2

17.1 13.1

47.5 29.3

56.4 33.4

36.7 15.5

NM 125.9

32.2 25.0

44.8 33.1

37.8 25.7

8.0

11.1

29.9

12.6

13.3

8.5

17.3

9.5

8.5

8.4

10.0

27.6

10.3

14.4

24.3

13.9

10.9

9.9

25.2

18.8

9.8

8.1

8.2

14.5

13.5

11.3

59.3

16.0

58.6

45.7

16.7

15.1

22.6

16.1

16.8

20.2

19.6

17.0

Valuation snapshot

P/B (x)

FY18E FY19E

2.3

2.3

3.8

3.5

2.7

2.5

1.3

1.1

0.8

0.7

2.7

2.4

3.8

3.4

5.5

4.8

3.8

2.4

3.1

3.0

8.1

7.3

7.3

6.2

5.2

4.5

1.4

3.7

0.7

2.7

1.3

1.5

0.9

3.3

1.8

1.5

1.6

11.5

2.4

1.8

6.2

2.1

2.4

1.5

5.7

4.8

1.7

0.9

1.0

3.6

1.8

1.6

17.3

3.2

15.8

11.2

3.3

3.8

6.3

4.1

2.5

6.2

5.1

3.3

1.2

3.0

0.7

2.2

1.3

1.4

0.8

2.5

1.6

1.3

1.5

8.7

2.1

1.7

5.1

1.8

2.1

1.4

4.8

4.4

1.5

0.8

1.0

3.1

1.6

1.5

17.6

2.7

14.6

10.1

3.0

3.5

5.5

3.5

2.2

5.0

4.4

3.0

ROE (%)

FY18E FY19E

-6.3 0.2

3.9

7.9

-1.2 5.2

15.1 14.6

11.5 10.6

14.9 18.5

8.3 12.2

10.2 15.3

11.6 18.9

-15.8 2.4

26.1 30.9

17.4 20.2

13.7 17.5

13.8

26.9

-4.0

20.9

-0.3

18.2

-1.0

24.7

14.1

16.0

11.5

30.7

24.1

11.9

16.8

15.0

28.2

18.5

20.7

28.0

18.9

7.4

9.9

23.7

12.8

13.2

22.5

16.9

23.4

19.2

17.4

25.1

26.9

24.3

14.3

31.7

19.9

15.3

16.2

29.8

2.4

19.4

9.8

17.2

4.8

29.8

19.8

16.2

14.6

35.9

21.6

12.0

23.0

14.0

20.6

14.4

20.8

24.4

16.1

10.5

11.9

22.9

12.7

12.9

29.8

18.4

25.9

22.2

17.8

23.9

25.8

23.1

13.8

27.5

24.0

18.7

Company

Den Net.

Ent.Network

Hathway Cable

Hind. Media

HT Media

Jagran Prak.

Music Broadcast

PVR

Prime Focus

Siti Net.

Sun TV

Zee Ent.

Aggregate

Metals

Hindalco

Hind. Zinc

JSPL

JSW Steel

Nalco

NMDC

SAIL

Rain Industries

Vedanta

Tata Steel

Aggregate

Oil & Gas

Aegis Logistics

BPCL

GAIL

Gujarat Gas

Gujarat St. Pet.

HPCL

IOC

IGL

Mahanagar Gas

MRPL

Oil India

ONGC

PLNG

Reliance Ind.

Aggregate

Retail

Jubilant Food

PC Jeweller

Titan Co.

Aggregate

Technology

Cyient

HCL Tech.

Hexaware

Infosys

KPIT Tech

L&T Infotech

Mindtree

Mphasis

Reco

Neutral

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Neutral

Buy

Buy

Neutral

Buy

Sell

Buy

Buy

Neutral

208

310

230

302

68

119

75

384

284

580

344

342

361

339

79

215

71

480

416

778

66

10

57

12

16

81

-5

25

46

34

19.2

21.2

-12.7

21.5

-0.2

13.6

-0.9

25.6

22.8

58.2

25.9

27.9

7.7

24.0

5.1

14.0

4.3

40.6

33.4

69.4

26.9

30.3

12.2

23.7

5.3

14.7

6.5

44.6

38.9

61.4

35.1 3.8 10.8

31.7 8.9 14.6

LP

58.8 NM

11.5 -1.0 14.1

LP

2.6

NM

2.9

4.7

8.7

LP

50.2 NM

58.6 9.8 15.0

46.4 16.4 12.5

19.1 -11.5 9.9

42.3 7.4 14.3

52.1

2.9

8.8

61.1

4.9

-17.8

-15.0

17.7

-3.6

-2.5

48.1

25.3

14.3

10.3

7.3

29.6

26.6

27.0

27.2

12.1

3.8

10.9

9.7

10.5

8.8

24.6

14.8

28.5

13.0

7.7

27.5

4.5

16.5

23.1

13.2

1.2

8.3

3.3

8.2

17.9

11.6

12.5

31.3

27.6

24.1

26.0

13.2

7.5

13.4

11.2

29.1

16.7

17.2

8.3

41.9

10.7

15.7

39.1

14.6

8.9

8.4

29.6

18.1

9.5

12.1

10.3

16.6

14.9

12.1

76.8

20.3

74.4

58.1

18.8

15.7

25.1

17.7

18.5

21.9

24.5

19.5

Buy

Buy

Sell

Buy

Neutral

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Buy

263

426

329

844

185

353

174

278

1012

112

221

178

232

899

303

549

388

999

191

530

257

416

1228

114

283

230

318

1111

15

29

18

18

3

50

47

49

21

2

28

29

37

24

6.3

40.0

21.0

21.6

12.7

39.5

20.7

9.4

55.9

11.7

18.3

17.3

14.0

60.4

9.5

41.2

22.9

34.7

13.3

32.5

17.6

11.1

53.9

11.4

27.2

21.7

16.0

66.6

12.3

46.5

24.6

44.3

13.9

37.8

21.7

12.5

54.6

12.4

28.1

23.5

18.8

74.3

Neutral

Buy

Buy

2330

313

933

2185

685

990

-6

119

6

30.3

15.4

12.5

39.3

19.5

15.9

51.6

24.9

19.8

Buy

Neutral

Neutral

Buy

Neutral

Buy

Buy

Neutral

680

968

416

1140

223

1418

801

855

675

950

340

1250

219

1400

725

800

-1

-2

-18

10

-2

-1

-10

-6

36.2

61.7

16.6

64.4

12.0

64.7

32.7

43.9

40.6

64.1

18.4

70.7

13.3

70.3

40.8

50.4

45.9

68.9

20.9

78.6

17.2

82.0

47.8

54.6

4 April 2018

18