3 May 2018

Market snapshot

Equities - India

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66.7

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1MChg

10 Yrs G-Sec

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Note: YTD is calendar year, *Avg

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2.9

-1.9

-0.9

4.1

-1.3

YTD.%

9.4

0.1

-5.9

3.1

YTD.%

4.4

-0.4

-2.5

YTDchg

0.4

0.5

YTD

1.2

5.1

YTD*

376

8,024

Today’s top research idea

Indusind Bank: BHAFIN’s performance on track; earnings to

accelerate post-merger

Expect RoA/RoE to recover to 2.2%/20.3% by FY20



IndusInd Bank has now entered the fourth planning cycle (FY18-20). Besides

delivering healthy profitability and gaining market share in the existing

businesses, it intends to further develop its long-cherished livelihood financing

theme in this cycle.



IIB has already taken a first step toward this by announcing a merger with its

business correspondent (BC) partner, BHAFIN. It will be able to leverage

BHAFIN’s rural network, and thus, provide last-mile financing to villages

without incurring additional cost.



We expect IIB to report healthy acceleration in earnings over FY18-20 and

project RoA/RoE of 2.2%/20.3% in FY20. Our forecasts are premised on

expectations of steady expansion in margins (FY20E: 4.7%), an improvement in

the C/I ratio (by 190bp) and controlled credit cost.

Research covered

Cos/Sector

IndusInd Bank

HCL Technologies

Hero Motocorp

Dabur India

Interglobe Aviation

Marico

Siemens

Tata Power

Gujarat Gas

Other Results

Automobiles

Results Expectation

Key Highlights

BHAFIN’s performance on track; earnings to accelerate post-merger

Guidance dampens expectations from organic momentum

In-line results; higher other expenses dent EBITDA margin

Domestic FMCG volumes up 7.7%; EBITDA margin at historical highs

Aggressive capacity addition in a lean quarter weighs on profitability

Domestic volumes and operating margins below expectations

Results below expectations due to weak execution and margins

Higher loss at Mundra and lower coal production lead to PAT miss

Ujjwala Scheme in PNG residential

DEWH | AJP | CEAT | TELX | HTML

APR-18 VOLUMES: 1. Bajaj Auto; 2. Ashok Leyland

CSTRL | HMN | HEXW | IRB | JSW | LTFH | PNBHOUSI | VEDL

Chart of the Day: Indusind Bank – BHAFIN’s performance on track; earnings to accelerate post-merger

BHAFIN’s AUM has grown at 40% CAGR over

FY12-18…

…while disbursement has grown at 41% CAGR over

FY12-18

Source: Company, MOSL

Source: Company, MOSL

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

It’s Dalmia vs UltraTech again

for Binani Cement

The Kolkata bench of the

bankruptcy court on Wednesday

ruled that the lenders of debt-

ridden Binani Cement Ltd should

consider the revised offer of

UltraTech Cement Ltd even as it

allowed Dalmia Bharat Ltd…

2

Federal Reserve officials left interest rates unchanged, acknowledging

inflation is close to target without indicating any intention to veer from

their gradual path of interest-rate increases. “Inflation on a 12-month

basis is expected to run near the committee’s symmetric 2 percent

objective over the medium term,” the policy-setting Federal Open Market

Committee said in a statement Wednesday in Washington…

Fed keeps interest rate unchanged at 1.50-1.75%, says inflation

close to target

3

ONGC sets $2.64 billion capex

for drilling oil, gas wells in

2018/19

Oil and Natural Gas Corp plans to

spend Rs 17,600 crore on drilling a

record 535 wells in 2018-19, the

company said in a statement. The

company has significantly

increased its drilling activity in the

past few years in pursuit of finding

and producing more oil and gas in

the country…

4

For engineering conglomerate

Larsen & Toubro (L&T), the deal

signed on Tuesday with Schneider

may mark the end of non-core

divestments for some time,

according to company officials.

However, analysts remain hopeful

that there is scope for more...

Schneider deal done, L&T says

no more non-core divestment

on the cards

5

The lenders of Essar Steel Ltd on

Wednesday asked ArcelorMittal

Netherlands NV and Numetal

Mauritius to clear their

outstanding dues in order to be

considered as eligible resolution

applicants for the beleaguered

steel company…

Essar Steel lenders ask

ArcelorMittal, Numetal to

clear outstanding dues

6

Sebi probes plunge in IndiGo

shares

The Securities and Exchange

Board of India (Sebi) is looking

into a plunge in shares of

InterGlobe Aviation Ltd just

before the company announced

the departure of its top

executive Aditya Ghosh, two

people aware of the matter

said…

7

Mining moghul Anil Agarwal’s

Vedanta Ltd and state-owned

ONGC were top bidders on

Wednesday for 55 oil and gas

blocks offered in India’s maiden

open acreage auction that was

shunned by domestic private and

international energy majors…

Vedanta, ONGC top bidders in

oil block auction

3 May 2018

2

IndusInd Bank

BSE SENSEX

35,160

S&P CNX

10,739

2 May 2018

Update

| Sector:

Financials

CMP: INR1,872

TP: INR2,150 (+15%)

Buy

BHAFIN’s performance on track; earnings to accelerate post-merger

Expect RoA/RoE to recover to 2.2%/20.3% by FY20

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 (%)

Financials Snapshot (INR b)

2018 2019E

Y/E Mar

NII

OP

NP

NIM (%)

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoA (%)

P/E (X)

P/BV (X)

P/ABV (X)

75.0

66.6

36.1

4.2

60.2

25.2

394.1

16.5

1.8

31.1

4.8

4.8

111.1

98.2

53.5

4.7

83.0

37.9

452.9

19.6

2.1

22.6

4.1

4.2



IIB IN

600.2

1898 / 1375

2/11/13

1125

17.5

1986.0

85.0





2020E

145.2

131.4

72.8

4.7

104.4

25.8

577.9

20.3

2.2

17.9

3.2

3.3



After successfully completing three planning cycles, IndusInd Bank (IIB) has now

entered the fourth planning cycle (FY18-20). Besides delivering healthy profitability

and gaining market share in the existing businesses, it intends to further develop its

long-cherished livelihood financing theme in this cycle.

IIB has already taken a first step toward this by announcing a merger with its business

correspondent (BC) partner, Bharat Financial Inclusion (BHAFIN). It will be able to

leverage BHAFIN’s rural network, and thus, provide last-mile financing to villages

without incurring additional cost.

We expect IIB to report healthy acceleration in earnings over FY18-20 (as the

impending merger with BHAFIN gets concluded) and project RoA/RoE of 2.2%/20.3%

in FY20. Our forecasts are premised on expectations of steady expansion in margins

(FY20E: 4.7%), an improvement in the C/I ratio (by 190bp) and controlled credit cost.

We reiterate our Buy rating on IIB, with a target price of INR2,150 (3.3x FY20E ABV).

BHAFIN’s performance on track; demonetization impact waning

BHAFIN has orchestrated an impressive turnaround, led by strong performance

across operating parameters. It delivered AUM/PAT growth of 38% /57% in FY18,

while the GNPL/NNPL ratios declined to 2.4%/0.1% from 6%/2.7% in FY17.

Cumulative collection efficiency for loans disbursed post 1st January 2017 stands at

99.8%, indicating normalization of on-the-ground operations. Margins have been

largely stable, while a reduction in funding cost and an improvement in operating

leverage (cost-income ratio is down to 50% from 74% in FY14) could provide a

booster to earnings growth. BHAFIN has guided for AUM/earnings growth of

43%/36% in FY19.

Merger with BHAFIN to help attain last-mile rural connectivity

IIB intends to leverage BHAFIN’s rural presence to establish an extensive rural

distribution network in ~100,000 villages, with at least one customer touch point

within a 0.5km radius of these villages. The bank also plans to capitalize on the

cross-sell opportunities by mining BHAFIN’s customer base. The focus areas here

would be savings accounts, recurring deposits, partnerships for two-wheeler and

home improvement loans, and PSLC fee income opportunities from an enhanced

loan base qualifying for PSL. We also note that IIB is in the process of running a few

pilot projects to assess the viability of these initiatives (refer Exhibit 16 for more

details).

Shareholding pattern (%)

As On

Mar-18 Dec-17 Mar-17

Promoter

DII

FII

Others

15.0

10.0

57.2

17.8

15.0

11.7

55.3

18.0

15.0

12.3

54.2

18.6

FII Includes depository receipts

Stock Performance (1-year)

Enough levers to achieve ‘Planning Cycle IV’ targets

IIB is aiming to achieve 25-30% loan growth in its Planning Cycle IV (FY17-20). After

achieving 26%+ loan book CAGR over FY12-18, the bank continues witnessing strong

traction across product lines. IIB sees significant headroom for growth to meet its

target from the partnership with BHAFIN. Besides the core business (wherein the

trends are strong in both corporate and vehicle financing segments), IIB anticipates

growth kicker from two areas: (1) microfinance business is re-entering the growth

phase after tiding over asset quality issues post demonetization, and

3 May 2018

3

(2) cross-sell opportunities in this space are significant, as the bank looks to expand

the scope of its partnership with BHAFIN by extending two-wheeler and home

improvement loans to the latter’s existing MFI customer base.

Consumer loan mix to reach ~52% post-merger

The merger with BHAFIN will add ~6% to IIB’s existing loans and ~5% to its balance

sheet. The share of the consumer finance segment, thus, is expected to increase to

~52% (including business banking group). This takes IIB one step closer toward

achieving its desired business mix between the retail and wholesale segments.

Already achieved CASA targets; expect momentum to continue

IIB surpassed its ‘Planning Cycle IV’ CASA targets in FY18 itself, as it reported ~715bp

improvement in CASA ratio. This was led by ~70% YoY growth in SA deposits. The

bank sees significant room for savings deposits growth from two levers: (1) business

from government departments in charge of budgetary allocations and shifting them

from cash basis to its own cashless platforms, and (2) cross-sell of SA accounts to

BHAFIN’s 7.3m customer base.

MFI business via bank can earn better returns; also removes political and

other overhangs

The MFI business can generate relatively high and sustainable RoEs under a banking

set-up due to (a) lower cost of funds (difference of ~400bp between IIB and

BHAFIN), (b) no cap on spreads, (c) higher leverage (10x v/s 5x currently), (d)

elimination of the need to carry excess liquidity, which is required in day-to-day

operations and first loss margins for off-balance sheet, and (e) removal of political

and regulatory overhang. We estimate RoA/RoE for the merged entity to increase to

2.2%/20.3% by FY20, driven by an improvement in margins and cost-ratios, as well

as better fee income opportunities.

Earnings set to accelerate post-merger; maintain Buy with TP of INR2,150

We find IIB attractive for its strong earnings/business growth potential and ability to

deliver industry-leading margins and RoA. With the merger, the bank is set to

establish its presence in niche segments and continue gaining market share with

improving profitability. It is targeting 25-30% loan growth, driven by continued

branch expansion (aiming at 2,000 branches by FY20 v/s 1,400 currently) and

customer acquisition (+2x to 20m). We have built in the BHAFIN merger and

proposed warrant issuance to promoters in our projections. Maintain

Buy

with a

target price of INR2,150 (3.3x FY20E ABV).

3 May 2018

4

HCL Technologies

BSE SENSEX

35,176

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

10,718

HCLT IN

1,392

Guidance dampens expectations from organic momentum

1,449.7 / 21.7



Marginal revenue miss:

HCLT’s 4QFY18 revenue grew 8.2% YoY CC (est. of

1107 / 811

+9.1%), EBITDA rose 14.6% YoY (in-line), and PAT increased 10% YoY to

-3/12/4

INR22.3b (est. of INR23.5b). The company delivered QoQ CC revenue growth

1559.0

of 1.2% versus our estimate of +2%. EBIT margin for the quarter was flat

39.8

2 May 2018

4QFY18 Results Update | Sector: Technology

CMP: INR1,001

TP: INR1,050(+5%)

Neutral

Financials & Valuations (INR b)

2018 2019E

Y/E Mar

505.7

564.1

Net Sales

114.4

129.7

EBITDA

87.8

93.3

PAT

62.6

66.9

EPS (INR)

4.5

6.9

Gr. (%)

262.5

290.5

BV/Sh (INR)

25.0

24.0

RoE (%)

22.6

22.2

RoCE (%)

16.6

15.6

P/E (x)

4.0

3.6

P/BV (x)

2020E

617.2

139.5

101.0

72.2

8.0

319.3

23.6

22.1

14.4

3.3





Estimate change

TP change

Rating change



QoQ at 19.6%, in line with our estimate of 19.8%. Full-year FY18 revenue

grew 10.5% YoY CC, EBITDA rose 11% YoY and PAT grew 3.8% YoY.

FY18 revenue growth guidance below expectations:

For FY19, HCLT guided

for CC revenue growth of 9.5-11.5%. From the mid-point, 5.25pp of

contribution would come from inorganic investments (including ~USD200m

from C3i solutions), pegging the organic growth guidance at 5.25%, which is

disappointing, considering expectations of a revival in IMS and Application

Services. Implied CQGR is 2.55-3.3%, but is expected to be lower organically

(our estimate is 1.25-2.2%) since C3i is yet to get integrated.

Implied drag from IMS appears material:

HCLT is pivoting to Mode-2 and

Mode-3 services, which contributed 23.4% to FY18 revenues, growing at

41% YoY (including inorganic investments). This is in sync with the rest of the

industry, where 20-30% of revenues are being contributed by Digital, which

is growing at upwards of 30%. HCLT’s guidance would imply acute pressure

in the remaining ~77%, where the base of large legacy IMS deals will drag

overall growth.

Valuation view:

We have marginally revised down our revenue estimates for

FY19/20 owing to the slight 4Q miss and the tepid FY19 guidance, which was

partly offset by cross-currency tailwinds. Our price target of INR1,050

discounts forward earnings by 14x. We maintain

Neutral,

and would

reconsider the same subject to: [1] greater confidence in IRRs from IBM

deals and/or [2] turnaround in core areas of Application Services and IMS.

4Q

1,817

4.1

120,530

12.7

33.7

11.8

26,490

22.0

20.0

2,150

11.5

20,250

-2.2

5.2

16.5

115,973

85.7

16.9

61.6

1Q

1,884

3.7

121,490

7.2

33.7

11.6

26,810

22.1

20.1

2,690

20.0

21,710

7.2

6.3

15.1

117,781

85.7

16.2

59.8

FY18

2Q

3Q

1,928

1,988

2.3

3.1

124,340 128,080

7.9

8.4

34.0

34.3

11.8

11.2

27,590

29,640

22.2

23.1

19.7

19.6

2,980

2,640

20.4

20.9

21,880

21,940

0.8

0.3

8.6

5.9

15.7

15.7

119,040 119,291

86.0

85.8

15.7

15.2

60.4

60.8

FY17

4Q

2,038

2.5

131,790

9.3

35.0

12.0

30,360

23.0

19.6

2,800

22.1

22,290

1.6

10.1

16.0

120,081

85.7

6,975

11.9

467,220

14.2

33.9

11.8

103,090

22.1

20.3

9,340

18.8

84,570

13.5

59.8

115,973

83.1

FY18

7,838

12.4

505,700

8.2

34.3

11.7

114,400

22.6

19.8

11,110

20.9

87,820

3.8

62.6

120,081

83.7

Est.

4QFY18

2,028

2.0

130,781

8.5

35.6

12.6

30,059

23.0

19.3

1,361

20.5

21,105

-3.8

4.2

15.1

121,091

85.7

(

/ bp)

0.5

52bp

0.8

84bp

-56bp

-61bp

1.0

0.2

34bp

105.8

164bp

5.6

540bp

585bp

-0.8

0bp

Quarterly Performance (Consolidated)

Y/E June

Revenue (USD m)

QoQ (%)

Revenue (INR m)

YoY (%)

GPM (%)

SGA (%)

EBITDA (INRm)

EBITDA Margin (%)

EBIT Ma rgi n (%)

Other i ncome

ETR (%)

Adjusted PAT

QoQ (%)

YoY (%)

EPS

Headcount

Uti l excl . tra i nees (%)

Attri ti on (%)

Fi xed Pri ce (%)

1Q

1,691

6.5

113,360

15.9

34.4

12.1

25,210

22.2

20.6

2,530

21.0

20,430

6.1

14.6

14.5

107,968

85.8

17.8

60.9

FY17

2Q

3Q

1,722

1,745

1.9

1.4

115,190 118,140

14.1

14.2

33.6

33.9

11.8

11.7

25,110

26,280

21.8

22.2

20.1

20.4

2,350

2,310

21.1

21.5

20,150

20,710

-1.4

2.8

10.5

7.9

14.3

14.7

109,795 111,092

85.3

84.6

18.6

17.9

61.3

63.2

3 May 2018

5

2 May 2018

4QFY18 Results Update | Sector: Automobiles

Hero MotoCorp

Neutral

BSE SENSEX

35,176

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

10,718

HMCL IN

In-line results; higher other expenses dent EBITDA margin

200



Higher other expenses impact margins:

Revenue rose 23.7% YoY to

731.4 / 11.0

INR85.6b (in-line) in 4QFY18. Realizations were flat YoY/QoQ at INR42.8k (in-

4200 / 3272

line) due to price hikes. While the gross margin was in line at 32.4%, higher

-3/-7/-8

1352.0

other expenses (due to higher marketing spends) led to a miss on the

65.4

EBITDA margin (16% v/s estimate of 16.7%). PAT grew 35% YoY to INR9.7b

CMP: INR3,662

TP: INR4,052(+13%)

Financials & Valuations (INR b)

2018 2019E

Y/E Mar

Net Sales

322.3

365.9

EBITDA

52.8

58.8

PAT

37.0

40.2

EPS (INR)

185.1

201.2

Gr. (%)

9.5

8.6

BV/Sh (INR)

589.3

664.0

RoE (%)

33.8

32.1

RoCE (%)

32.5

30.9

P/E (x)

19.8

18.2

P/BV (x)

6.2

5.5

2020E

402.9

65.7

45.9



229.1

13.9

752.9

32.4

31.3

16.0

4.9

Estimate change

TP change

Rating change



(est. of INR9.8), led by higher other income. For FY18, revenue grew 13.1%

to INR322b (with volume growth of 13.9% and realization decline of 0.7%),

EBITDA margin was flat at 16.4% and PAT increased 9.5% to INR36.9b. HMCL

announced a dividend of INR95/share for FY18 (v/s INR85 for FY17).

Earning call highlights:

a) HMCL indicated double-digit growth for 2W

industry in FY19, driven by continued momentum in rural markets. b) Its

initiatives in the executive 125cc and scooter segments have helped to

partly recover the lost market share. c) Average price hike of INR300 taken

from Jan-18 to Apr-18. d) Haridwar plant incentive expiry to impact margin

by ~60bp from 1QFY19; ramp-up at Halol (100% increase in production in

FY19 to 600k) and commissioning of AP plant (2HFY20) to dilute this impact

in FY20. e) Expect RM inflation impact from 1QFY19 (~100bp impact in

FY18). f) Spare revenue grew 12.9% to INR26.4b in FY18.

Valuation view:

We increase FY20E EPS by 3.5% to factor in Halol ramp-up

and AP plant commissioning. Valuations at 18.2x/16x FY19/20E EPS fairly

capture the medium-term growth prospects. Maintain

Neutral

with a TP of

INR4,052 (17x Mar-20 EPS + INR157/sh of Hero FinCorp).

FY17

4Q

2,002

6,664

23.4

0.5

42,786 42,768

0.2

-0.3

85,640 285,005

67.6

66.8

4.4

4.9

11.9

12.0

13,706 46,348

16.0

16.3

1,665

5,224

15

61

1,483

4,927

13,872 46,585

30.3

27.5

9,674 33,771

34.8

6.9

FY18

7,587

13.9

42,480

-0.7

322,305

67.7

4.8

11.1

52,802

16.4

5,258

63

5,556

52,442

29.5

36,974

9.5

4QE

2,002

23.4

42,834

0.5

85,736

67.7

4.7

10.9

14,336

16.7

1,032

16

1,397

13,954

29.3

9,860

37.4

Var.

(%)

0.0

-0.1

-0.1

0bp

-30bp

100bp

-4.4

-70bp

Quarterly Performance

Y/E March

(INR Million)

Total Volumes ('000 nos)

Growth YoY (%)

Net Realization

Growth YoY (%)

Net Op Revenues

RM Cost (% sales)

Staff Cost (% sales)

Other Exp (% sales)

EBITDA

EBITDA Margins (%)

Other Income

Interest

Depreciation

PBT

Effective Tax Rate (%)

Adj. PAT

Growth (%)

E: MOSL Estimates

1Q

1,745

6.1

42,391

1.0

73,989

67.1

4.5

11.7

12,301

16.6

1,204

15

1,152

12,337

28.4

8,831

18.1

FY17

FY18

2Q

3Q

4Q

1Q

2Q

3Q

1,823 1,473 1,622 1,854 2,023

1,709

15.8

-12.8

-5.8

6.2

10.9

16.0

42,755 43,202 42,682 43,004 41,339 42,796

-1.1

1.1

-2.1

1.4

-3.3

-0.9

77,963 63,646 69,228 79,716 83,620 73,142

66.5

64.9

68.5

67.7

68.1

67.4

4.6

5.9

4.7

4.7

4.6

5.5

11.4

12.3

12.9

11.4

9.9

11.3

13,689 10,797 9,576 12,959 14,557 11,580

17.6

17.0

13.8

16.3

17.4

15.8

1,524 1,319 1,182 1,317 1,176

1,100

16

15

15

16

16

16

1,193 1,249 1,353 1,330 1,360

1,383

14,004 10,853 9,390 12,931 14,357 11,282

28.3

28.9

23.6

29.3

29.6

28.6

10,042 7,720 7,178 9,140 10,105

8,054

27.7

-2.7

-13.9

3.5

0.6

4.3

-0.6

90bp

-1.9

3 May 2018

6

2 May 2018

4QFY18 Results Update | Sector: Consumer

Dabur

Buy

BSE SENSEX

35,176

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

10,718

DABUR IN

1761.5

652.3 / 9.8

382 / 265

7/4/13

496.0

31.9

CMP: INR371



TP: INR435 (+17%)

Domestic FMCG volumes up 7.7%; EBITDA margin at historical highs

DABUR’s 4QFY18 consol. sales grew 6.2% YoY

to INR20.3b (est. of INR20.6b).

EBITDA rose 16.2% YoY to INR4.9b (est. of INR4.4b). Adj. PAT increased 18.9%

YoY to INR4b (est. of INR3.6b).

Comparable domestic FMCG business (70% of revenues) sales grew 10% YoY,

led by underlying volume growth of 7.7% (est. of +8.5%).

Consol. EBITDA margin expanded 210bp YoY to 23.9%

(est. of 21.5%), led by

gross margin expansion (+170bp YoY to 50.7%), as well as lower ad spends (-

20bp YoY) and staff costs (-10bp YoY). Note that this is the highest-ever EBITDA

margin reported by DABUR on both quarterly and full-year basis. Adj. PAT grew

18.9% YoY to INR3.9b (est. of INR3.6b).

FY18 consolidated

sales, EBITDA and adj. PAT grew 0.6%, 7.2% and 7.2%,

respectively. EBITDA margin expanded 120bp YoY to 20.9%.

Comments on balance sheet:

Inventory on finished goods increased in FY18 on

account of higher forecast of sales and a change in the packaging norms.

Concall highlights:

1) Slight tailwinds from macros. Category growth has been

subdued, according to Nielsen. 2) Will be able to maintain gross margins in the

domestic business due to price hikes. 3) Capex at INR2.5-3b for FY19 (toward

capacity expansion).

Valuation view:

Changes to the model have not altered our FY19/20 estimates.

The much-vaunted earnings revival in the sector appears poised to come

through, and rural dependent plays are likely to be at the vanguard in FY19.

DABUR has addressed the market share loss issue in its two key categories of

Juices and Honey, while Oral Care continues to do very well. With an expected

EPS CAGR of ~16% going forward (v/s less than 12% CAGR over FY14-17), we

value the stock at 42x March 2020E (10% premium to three-year average) and

derive a target price of INR435. Maintain

Buy.

FY17

2Q

3Q

4.5

-5.2

19,816 18,529

1.3

-5.8

15,730 15,190

4,087

3,339

20.6

18.0

2.1

-10.6

357

333

166

139

893

831

4,456

3,697

873

753

19.6

20.4

3,573

2,938

6.3

-7.5

FY18

2Q

3Q

7.2

13.0

19,589 19,664

-1.1

6.1

15,390 15,630

4,035

4,199

21.4

20.5

20.8

2.7

401

405

133

132

843

663

4,508

4,162

880

833

19.5

20.0

3,619

3,321

1.3

13.1

FY17

4Q

7.7

20,329

6.2

15,477

4,852

23.9

16.2

426

132

732

5,026

1,053

20.9

3,962

18.9

2.0

77,014

-2.1

61,925

15,089

19.6

-0.6

1,429

540

2,984

16,104

3,303

20.5

12,771

2.1

FY18

6.0

77,483

0.6

61,309

16,174

20.9

7.2

1,622

531

3,052

17,074

3,354

19.6

13,689

7.2

(INR Million)

FY18

Var.

4QE

(%)

8.5

20,591

-1.3%

7.5

16,165

9.6%

4,426

21.5

6.0

343

128

664

4,619

8.8%

999

21.6

3,611

9.7%

8.2





Financials & Valuations (INR b)

2018 2019E 2020E

Y/E Mar

Net Sales

77.5

88.3 100.8

EBITDA

16.2

18.7

21.5

NP

13.7

15.9

18.3

EPS (INR)

7.8

9.0

10.4

EPS Gr. (%)

7.2

16.0

15.5

BV/Sh. (INR)

32.4

35.6

38.9

RoE (%)

25.9

26.5

28.0

RoCE (%)

22.9

23.8

25.4

P/E (x)

47.8

41.2

35.7

P/BV (x)

11.5

10.4

9.6







Estimate change

TP change

Rating change



Quarterly Performance (Consolidated)

Y/E March

Domestic Vol Growth (%)

Net Sales

YoY Change (%)

Total Exp

EBITDA

Margins (%)

YoY Growth (%)

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Adjusted PAT

YoY Change (%)

E: MOSL Estimates

1Q

4.1

19,522

2.7

16,034

3,488

17.9

10.5

343

118

610

3,637

701

19.3

2,928

12.0

4Q

2.4

19,147

-4.7

14,971

4,176

21.8

0.6

395

117

650

4,314

977

22.6

3,333

0.5

1Q

-4.4

17,901

-8.3

14,812

3,089

17.3

-11.4

391

133

813

3,378

589

17.4

2,787

-4.8

3 May 2018

7

InterGlobe Aviation

BSE SENSEX

35,176

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

10,718

INDIGO IN

383.9

475.2 / 7.5

1520 / 1005

-2/4/2

852.0

25.1

2 May 2018

4QFY18 Results Update | Sector: Aviation

CMP: INR1,355

TP: INR1,318(-3%)

Neutral

Aggressive capacity addition in a lean quarter weighs on profitability

INDIGO’s revenue increased 20% YoY (-6% QoQ) to INR58b (our estimate:

INR60b). EBITDAR of INR11.2b (-16% YoY, -42% QoQ) came in significantly

below our estimate of INR14.8b due to a lower yield of INR3.82 (est. of

INR4.08; -4% YoY, -11% QoQ) and higher fuel cost of INR1.39 (est. of INR1.36;

+10% YoY, +10% QoQ). Passenger ticket yield stood at INR3.31 (est. of INR3.51;

-5.6% YoY, -10.6% QoQ). PAT of INR1.2b (est. of INR3.7b; -73% YoY, -85% QoQ)

was further impacted by higher lease rentals of INR9.9b (est. of INR9.6b;

+20.5% YoY, +5.2% QoQ). Higher other income of INR2.6b (est. of INR2.1b; -

12.3% YoY, -5.2% QoQ) largely offset the impact of higher depreciation of

INR1.3b (est. of INR1.15b; +22% YoY, +19.8% QoQ) and higher interest expense

of INR927m (est. of INR837m; +19.4% YoY, +9.8% QoQ).



Ticket yield down ~6% YoY:

INDIGO’s ticket yield declined 6% YoY (-10.6%

QoQ) to INR3.31 (est. of INR3.51), led by aggressive capacity addition in a

lean quarter. Intense competition also took its toll. Total yield declined 4%

YoY (-11% QoQ), led by (a) ancillary revenue (INR6.7b; +21.5% YoY, -5%

QoQ) and (b) other operating income (INR1.4b; +249% YoY, flat QoQ). Other

operating income was likely higher due to credits received from

manufacturers.



For full-year FY18,

revenue stood at INR230b (+24% YoY), EBITDAR at

INR65.7b (+25% YoY) and PAT at INR22.4b (+35% YoY), implying an EPS of

INR58.3/share.



Aggressive ASK guidance for FY19:

Management guided for ASK growth of

25% YoY in FY19 and 18% YoY in 1QFY19. We believe aggressive capacity

addition in a highly competitive market, along with rising crude oil prices,

would hurt margins. We raise our FY19/20 Brent price assumption to

USD65/bbl from USD60/bbl, resulting in ~6% cut in our earnings estimate for

those years.



Rising crude oil price – a major threat:

While crude oil prices are hovering at

~USD72/bbl, we are modeling USD65/bbl for FY19/20. Further increase or

even sustenance of current high price levels would pose a downside risk to

our earnings estimates.



Dividend:

Management has recommended a dividend of INR6/share.



Valuation view:

The stock trades at 14.4x FY20E EPS of INR94.1 and 8.4x

FY20E adj. EV/EBITDAR. Peak valuations leave little room for upside, in our

view. We value INDIGO at 14x FY20 EPS to arrive at a TP of INR1,318.

Maintain

Neutral.

Financials & Valuations (INR b)

Y/E Mar

2018 2019E 2020E

Net Sales

230.2 301.1 361.6

EBITDA

29.6

32.3 43.3

PAT

22.4

27.0 36.2

EPS (INR)

58.3

70.2 94.1

Gr. (%)

35.1

20.4 34.1

BV/Sh (INR)

184.1 195.8 211.6

RoE (%)

41.3

37.0 46.2

RoCE (%)

31.0

37.5 47.2

P/E (x)

23.2

19.3 14.4

P/BV (x)

7.4

6.9

6.4

Adj. EV/EBITDAR

11.1

10.0

8.4

Estimate change

TP change

Rating change

3 May 2018

8

Quarterly performance

Y/E March

Net Sales

YoY Change (%)

Fuel cost

Employee cost

Other expenses

Total Expenditure

EBITDAR

Margins (%)

Net Rentals

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Reported PAT

EPS

YoY Change (%)

E: MOSL Estimates

1Q

45,789

8.7

13,674

4,789

12,046

30,509

15,279

33.4

7,127

8,152

17.8

1,148

1,163

1,626

7,467

1,549

20.7

5,918

15.4

-8.8

FY17

2Q

3Q

41,669 49,865

17.7

16.0

15,524 16,712

5,080 5,273

11,388 13,471

31,992 35,457

9,677 14,409

23.2

28.9

7,721 8,164

1,956 6,245

4.7

12.5

1,189 1,184

610

759

1,608 1,719

1,765 6,022

367 1,149

20.8

19.1

1,398 4,873

3.6

12.7

24.1

-25.9

4Q

48,482

18.5

17,734

5,339

12,087

35,160

13,322

27.5

8,242

5,080

10.5

1,052

777

2,938

6,190

1,786

28.9

4,403

11.5

-24.0

1Q

57,529

25.6

17,929

5,843

14,250

38,022

19,507

33.9

8,537

10,970

19.1

983

770

2,026

11,243

3,132

27.9

8,111

21.1

37.1

FY18

2Q

3Q

52,910 61,779

27.0

23.9

16,781 20,465

6,004 6,137

14,550 15,820

37,335 42,422

15,574 19,357

29.4

31.3

8,193 9,442

7,382 9,915

14.0

16.0

1,025 1,074

857

844

2,146 2,719

7,645 10,716

2,130 3,096

27.9

28.9

5,516 7,620

14.3

19.8

294.5

56.4

4Q

57,991 185,805 230,209

19.6

15.1

23.9

23,677 63,644 78,853

6,566 20,482 78,853

16,519 48,992 61,139

46,762 133,118 164,542

11,229

52,687 65,667

19.4

28.4

28.5

9,931 31,254 36,102

1,298

21,433 29,565

2.2

11.5

12.8

1,286

4,573

4,369

927

3,308

3,398

2,577

7,891

9,469

1,662 21,443 31,267

486

4,852

8,843

29.2

22.6

28.3

1,176 16,592 22,424

3.1

43.2

58.3

-73.3

-17.0

35.1

FY17

FY18

(INR Million)

FY18

Var.

4QE

vs est

59,938

-3%

23.6

22,532

5%

6,600

-1%

16,047

3%

45,179

4%

14,759

-24%

24.6

9,624

3%

5,135

-75%

8.6

-74%

1,153

12%

837

11%

2,051

26%

5,196

-68%

1,507

-68%

29.0

3,689

-68%

9.6

-68%

-16.2

3 May 2018

9

RESULTS

FLASH

BSE SENSEX

35,176

S&P CNX

10,718

2 May 2018

Results Flash | Sector: Consumer

Marico

Neutral

CMP: INR 317



TP: INR350

Domestic volumes and operating margins below expectations

Marico’s 4QFY18 sales grew 12.6% YoY to INR14.8b (est. of INR14.6b).

Domestic volume growth stood at 1% YoY (est. of +5%), while overall volume

growth was 2% YoY. Domestic revenues grew 12% YoY, while reported

international revenues rose 13% YoY (16% growth on a CC basis).

Segmental growth:

Parachute sales grew 24% YoY, with a 5% YoY volumes

decline due to concentrated price increases in 2HFY18 (aggregating to ~22%)

and 15% spikes in volumes in both the base (4QFY17) and preceding quarters

(3QFY18). Saffola sales declined 3% YoY, with a 1% YoY volumes decline. Value

Added Hair Oils (VAHO) sales grew 9%, with 11% volume growth.

Consol. gross margin contracted 550bp YoY to 46.6%,

mainly as copra costs

were up 61% YoY. Consol. A&P expenses declined 50bp YoY. There was a

decrease of 190bp YoY in other expenditure and 50bp YoY in staff costs.

EBITDA margin shrunk 260bp YoY (est. of -20bp) to 17%.

EBITDA declined 2.5% YoY

(est. 9.8% YoY increase) to INR2.5b. EBITDA was 9%

below expectations. Adj. PAT increased 7.2% YoY (est. 5.8% increase) to

INR1.8b. Tax rate at 26% was lower than expectations of 30.7%.

FY18 performance:

Consolidated sales grew 6.8% to INR63.2b. EBITDA margin

shrunk 160bp to 18%. EBITDA was down 1.8% YoY to INR11.4b, while adj. PAT

was up 2% YoY to INR8.3b.

We have a

Neutral

rating on the stock.

Conference Call Details

Date:

3 May 2018

Time:

2:00pm IST

Dial-in details:

+91-22-7115 8050

rd



Financials & Valuations (INR b)

2018E 2019E 2020E

Y/E Mar

Net Sales

63.0

74.0

85.4

EBITDA

11.6

13.7

16.2

NP

8.2

9.7

11.6

EPS (INR)

6.4

7.5

9.0

EPS Gr. (%)

1.7

18.0

18.8

BV/Sh. (INR)

20.6

21.6

24.0

RoE (%)

33.1

35.8

39.3

RoCE (%)

28.3

30.7

33.6

P/E (x)

49.6

42.0

35.4

P/BV (x)

15.4

14.7

13.2









Quarterly Performance

1Q

Domes tic volume growth (%)

8.0

Net Sales

17,523

YoY Change (%)

0.2

COGS

8,400

Gross Profit

9,123

Gros s margin (%)

52.1

Other Expenditure

5,384

% to Sales

30.7

EBITDA

3,740

Margins (%)

21.3

YoY Change (%)

18.2

Depreciation

208

Interes t

54

Other Income

275

PBT

3,753

Tax

1,072

Rate (%)

28.6

Adjusted PAT

2,679

YoY Change (%)

17.2

E: MOSL Estimates

Y/E March

FY17

2Q

3Q

3.4

-4.0

14,395 14,114

-0.8

-7.7

6,785

6,815

7,581

7,328

52.7

51.9

5,050

4,600

35.1

32.6

2,530

2,729

17.6

19.3

11.4

-5.3

218

209

44

21

233

247

2,548

2,700

781

740

29.1

28.9

1,806

1,916

18.0

-6.8

4Q

10.0

13,146

2.2

6,289

6,857

52.2

4,271

32.5

2,586

19.7

23.0

265

47

223

2,497

784

31.4

1,709

25.5

1Q

-9.0

16,815

-4.0

8,782

8,033

47.8

4,790

28.5

3,243

19.3

-13.3

211

35

229

3,226

866

26.8

2,359

-11.9

FY18

2Q

3Q

8.0

9.4

15,363 16,243

6.7

15.1

8,688

8,144

7,219

7,556

46.5

47.0

4,628

4,535

30.1

27.9

2,591

3,021

16.9

18.6

2.4

10.7

235

213

35

39

214

174

2,535

2,943

679

709

26.8

24.1

1,850

2,233

2.5

16.5

4Q

1.0

14,801

12.6

7,896

6,905

46.6

4,382

29.6

2,523

17.0

-2.5

231

53

229

2,468

642

26.0

1,832

7.2

FY17

3.6

59,178

-3.3

28,288

30,890

52.2

19,305

32.6

11,585

19.6

9.7

900

166

978

11,497

3,377

29.4

8,110

14.4

FY18

3.5

63,222

6.8

33,510

29,712

47.0

18,334

29.0

11,377

18.0

-1.8

891

162

846

11,171

2,896

25.9

8,274

2.0

(INR Million)

FY18

Var.

4QE

(%)

5.0

1.3%

14,612

11.1

7,580

7,033

-1.8%

48.1

4,261

29.2

2,772

-9.0%

19.0

9.8

277

83

199

2,611

-5.5%

802

30.7

1,807

1.4%

5.8

3 May 2018

10

RESULTS

FLASH

BSE SENSEX

35,176

S&P CNX

10,718

2 May 2018

Results Flash | Sector: Capital goods

Siemens

Neutral

CMP: INR1128

TP: INR1285(+14%)

Results below expectations due to weak execution and margins

4QFY18 sales rose 12% YoY to INR33b, below our estimate of INR37.4b

(consensus: INR33b). Energy Management (+20% YoY) and Digital Factory

(+19% YoY) reported strong sales growth, which was partly offset by weakness

in Mobility (-43% YoY), Power & Gas (-8% YoY) and Process Industries (-2%

YoY).

Gross margin contracted 50bp YoY (-270bp QoQ) to 31.3%, in line with our

estimate of 31%.

EBITDA rose 16% YoY to INR3.2b, with the margin at 9.8% (+30bp YoY) v/s our

estimate of 10.8% (consensus: 12%). Employee costs rose 10% YoY to INR3.7b.

Other income stood at INR639m (+21% YoY) and the tax rate at 34.7% (-110bp

YoY).

PAT of INR2.2b (+23% YoY) missed our estimate of INR2.9b (consensus:

INR2.24b).

Orders stood at INR29.2b (-38% YoY; 22% growth in base orders of <NR1b size),

with the order book at INR124b (+5% YoY).



Financials & Valuations (INR b)

2018E 2019E 2020E

Y/E Mar

Sales

136.6 140.8 156.7

EBITDA

14.9

16.8

18.5

NP

10.7

12.1

13.6

Adj EPS (INR)

30.0

34.1

38.3



EPS Gr. (%)

51.9

13.6

12.2

BV/Sh (INR)

235.6 257.4 281.8

RoE (%)

12.7

13.2

13.6



RoCE (%)

18.8

19.6

14.2

Payout (%)

44.0

30.0

30.0



Valuations

P/E (x)

37.3

32.9

29.3



P/BV (x)

4.8

4.4

4.0

EV/EBITDA (x)

23.7

20.6

18.3

Div. Yield (%)

0.8

0.9

1.0



Valuation view

The stock trades at 33/30x FY19/20E EPS of 34.1/38.3. We have a

Neutral

rating on

the stock with a target price of INR1,285.

Quarterly Performance

(Standalone)

Y/E September

Total Revenues

Change (%)

EBITDA

As % of Revenues

Depreciation

interest

Other Income

Extra-ordinary Items

PBT

Tax

Effective Tax Rate (%)

Reported PAT

Adjusted PAT

Change (%)

1Q

22,933

-0.9

2,336

10.2

483

20

623

0

2,456

849

34.6

1,607

1,607

44.4

(INR m)

FY17

FY18

MOSLe

FY17

FY18

2Q

3Q

4Q

1Q

2Q

3Q

4Q

2Q

29,288 26,508 31,418 24,295 32,834 34,764 44,684 110,148 136,578 37,378

5.2

1.2

1.7

5.9

12.1

31.1

42.2

4.8

26.4

27.6

2,786 2,255 3,172 2,724 3,228 3,574 5,372 10,512 14,901 4,045

9.5

8.5

10.1

11.2

9.8

10.3

12.0

9.5

10.9

10.8

502

480

502

470

490

500

464

1,967

1,924

500

21

14

22

17

11

19

30

77

77

19

529

731

630

705

639

790 1,157

2,547

3,291

889

72

0 4,230

0

0

0

0

0

0

0

2,864 2,492 7,507 2,942 3,366 3,845 6,036 11,170 16,345 4,414

1,001

863 1,269 1,037 1,169 1,269 2,030

3,982

5,505 1,545

34.9

34.6

16.9

35.2

34.7

33.0

33.6

35.6

33.7

35.0

1,863 1,629 6,238 1,905 2,197 2,576 4,006

7,188 10,840 2,869

1,792 1,629 2,008 1,905 2,197 2,576 4,006

7,034 10,686 2,869

-4.8

27.1

-8.6

18.6

22.6

58.2

99.5

16.6

68.4

60.2

Var %

-12.2%

-20.2%

-23.7%

-23.4%

-23.4%

3 May 2018

11

2 May 2018

4QFY18 Results Update | Sector: Utilities

Tata Power

BSE SENSEX

35,176

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm/ Vol m

Free float (%)

S&P CNX

10,718

TPWR IN

2,705

236.9 / 3.5

102 / 76

3/-2/-13

564.0

67.0

CMP: INR87

TP: INR77(-11%)

Sell

Higher loss at Mundra and lower coal production lead to PAT miss

Cutting estimate by 12%/1% for FY19/20; Maintain Sell

Tata Power’s 4QFY18 consol. adj. PAT declined 8% QoQ/30% YoY to INR2.7b (below

our estimate of INR4.5b) due to higher losses at Mundra, lower coal production,

and losses at some of the overseas JV companies. PAT is adjusted for (a)

impairment reversal of INR18.8b, (b) impairment at Georgia Hydro of INR5.2b and

(c) INR2.3b of other one-off items. Net debt (incl. perpetual securities) was

unchanged YoY at INR501b. Consol. PAT increased ~3% YoY to INR14.4b for FY18.



Coal+Mundra:

PAT at its coal and logistics companies declined ~8% QoQ to

INR4.2b. EBITDA at Mundra declined INR1.8b QoQ (recorded a loss of INR1b)

due to higher coal prices and higher PLF. Under-recovery increased

INR0.14/kWh QoQ to INR0.93/kWh at Mundra.



Maithon:

Availability improved from 61% in the previous quarter to 95% in

4QFY18, driving an INR1b QoQ increase in PAT to INR760m.



RE (ex-standalone):

EBITDA increased 32% QoQ to INR4.1b, led by higher

generation. Installed capacity stood at 1.7GW (excluding 0.4GW in standalone).

Cut estimates by 12%/1% for FY19E/20E; Maintain Sell

TPWR has entered into an agreement to sell its investment in Tata

Communications and also in the strategic defence business unit (SBU). We expect

the sale to be executed in FY19, generating after-tax cash inflow of INR30b. We

also increase our coal price estimate from USD70/t to USD80/t. Accounting for

higher losses at Mundra, excluding earnings from Tata Communications and SBU,

and making other adjustments, the PAT estimate is cut by ~12%/1% to

INR17.2b/INR21.1b for FY19E/20E, respectively. The revised TP is INR77/share

based on SOTP (for FY20E). Sale of non-core assets will aid in faster deleveraging.

However, TWPR continues lacking RoE-accretive growth opportunities. Renewable

energy has potential, but is extremely competitive. Maintain

Sell.

FY18

2Q

3Q

76,573 69,499

6.2

4.0

18,498 12,087

24.2

17.4

5,900 5,972

9,814 8,455

1,331

911

-2,641 1,459

1,474

30

-1,488 3,151

-15 3,181

1,553 1,263

3,909 4,197

2,342 6,115

3,830 2,965

FY17

4Q

78,952

10.2

14,878

18.8

6,454

8,975

641

-425

-335

11,323

10,988

-965

2,085

14,037

2,714

FY18

FY18

4QE

97,131

35.5

15,752

16.2

5,964

7,921

-232

0

1,635

0

1,636

935

3,783

4,483

4,483

vs Est

(%)

-19

-6

8

13

-376

-120

572

Financials & Valuations (INR b)

Y/E Mar

2018E 2019E 2020E

Net Sales

293.3 305.3 320.1

EBITDA

63.6

62.1

65.8

PAT

14.5

17.2

21.1

EPS (INR)

5.3

6.3

7.8

Gr. (%)

3.5

18.7

22.7

BV/Sh (INR)

56.4

74.1

78.8

RoE (%)

10.7

9.7

10.2

RoCE (%)

6.3

5.4

5.6

P/E (x)

16.4

13.8

11.2

P/BV (x)

1.6

1.2

1.1

Estimate change

TP change

Rating change

Quarterly Performance (Consolidated) – INR million

Y/E March

Net Sales

YoY Change (%)

EBITDA

Margins (%)

Depreciation

Interest

Other Income

Rate regulated activity

PBT before EO expense

Extra-Ord expense

PBT

Tax

MI & P/L of Asso. Cos.

Reported PAT

Adj PAT

1Q

68,383

-24.9

16,355

23.9

4,393

7,915

-477

-2,721

849

0

849

1,449

1,324

725

725

FY17

2Q

3Q

72,089 66,837

-23.8 -27.6

14,616 14,029

20.3

21.0

4,476 5,318

7,243 7,010

1,029

-792

-3,064 1,523

862 2,432

0

0

862 2,432

-1,117

706

1,383 4,356

3,362 6,082

3,362 6,082

4Q

71,668

-23.2

13,467

18.8

5,698

8,973

2,262

-1,832

-775

-6,515

-7,289

-1,496

3,169

-2,625

3,890

1Q

69,686

1.9

18,311

26.3

5,857

9,286

313

-2,438

1,044

0

1,044

2,630

3,224

1,638

1,638

278,977 293,312

-5.4

5.1

58,467 63,570

21.0

21.7

19,886 23,981

31,140 37,230

2,022

4,327

-6,095

-4,099

3,369

2,587

-6,515 10,308

-3,145 12,895

-458

1,643

10,142 13,514

7,455 24,766

13,969 14,458

213

-39

3 May 2018

12

2 May 2018

4QFY18 Results Update | Sector: Financials

Dewan Housing

BUY

BSE SENSEX

35,176

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

Financials & Valuations (INR b)

Y/E March

2018 2019E

NII

24.4

30.6

PPP

26.2

32.0

Adj. PAT

11.7

16.2

EPS (INR)

37.4

51.7

EPS Gr. (%)

26.2

38.4

BV (INR)

277

317

RoAA (%)

1.2

1.4

RoE (%)

14.1

17.4

Payout (%)

17.1

16.8

Valuations

P/E (x)

16.8

12.1

P/BV (x)

2.3

2.0

P/ABV (x)

2.3

2.0

Div. Yield (%)

0.9

1.2

S&P CNX

10,718

DEWH IN

Growth trajectory robust; loan yields under pressure

313.2



Dewan Housing Finance’s (DEWH) 4QFY18 PAT (adjusted for stake sale in

196 / 3.0

insurance JV in 4QFY17) grew 26% YoY to INR3.1b (2% above estimate).

680 / 387

21/-5/27



Disbursements in the quarter were up 81% YoY to INR158b,

resulting in

33% YoY AUM growth (fastest growth in the past 18 quarters).

This was

2325.0

driven by 23% YoY AUM growth in the core home loan segment and 52%

60.8

CMP: INR649

TP: INR765 (+18%)

2020E

38.8

39.8

19.9

63.5

22.8

367

1.4

18.6

16.8

9.9

1.7

1.7

1.5

YoY growth in the non-core segment.

The share of non-core loans now

stands at 39% v/s 37% in 3QFY18 and 34% in 4QFY17.

Management has

guided for 22% AUM growth in FY19.



Calculated yield on AUM declined 35bp QoQ (-130bp YoY) to 10.0%, while

cost of funds was largely stable QoQ/YoY at 8.84%. Borrowing mix was

largely unchanged sequentially, with banks accounting for 42% of total

borrowings, followed by capital markets (40%) and others (18%).



C/I ratio (calc.) declined 90bp YoY to 26.3%. DHFL’s focus on reducing

opex is bearing fruit – C/I ratio declined 450bp to 25% over FY16-18.



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



For the full-year FY18, PAT (excl. one-offs) was up 26%, resulting in calc.

RoA/RoE of 1.2%/14%.

Valuation 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 pressure on margins is

temporary, and margins should revert to normal soon. The continued focus on

cost rationalization is likely to result in higher return ratios and further re-

rating in the medium term. We upgrade FY19/20 EPS estimates by 8/5%.

Maintain

Buy

with a target price of INR765 (2.1x FY20E BVPS).

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

FY18

2Q

3Q

25,034

25,204

19,034

18,944

6,000

6,260

22.0

21.6

1,108

1,138

7,398

7,108

32.4

30.6

1,698

1,781

21.4

19.0

5,411

5,617

36.2

34.8

1,070

1,000

4,341

4,617

1,408

1,558

2,933

3,060

26.1

25.0

24.6

21.7

10.8

12.7

23.9

24.1

32.4

33.7

(INR Million)

FY17

FY18

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

33.1

26.9

33.9

100,239

75,649

24,590

23.0

4,405

28,995

30.7

7,229

21.0

21,766

34.3

4,200

17,566

5,845

11,721

26.4

29.2

23.9

24.9

33.3

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

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

4Q

26,472

19,802

6,670

24.4

1,610

8,280

31.4

2,181

27.0

6,099

33.0

1,300

4,799

1,675

3,124

25.8

27.5

14.0

26.3

34.9

3 May 2018

13

2 May 2018

4QFY18 Results Update | Sector: Healthcare

Ajanta Pharma

Buy

BSE SENSEX

35,176

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

10,718

AJP IN

88.5

118.7 / 1.9

1700 / 1106

-11/3/-36

328.0

29.3

CMP: INR1,340



TP: INR1,560(+16%)

Higher costs dampen FY18 performance; FY19 outlook muted too

Higher fixed overheads drag operating margins:

Revenue grew 11.2% YoY to

INR5.3b (our estimate: INR5b), mainly led by growth in the branded generics

business in Africa. Although the gross margin improved 166bp YoY to 82.3%,

EBITDA margin shrunk 923bp YoY to 26.3% (our estimate: 28.2%) due to higher

fixed overheads related to the newly commissioned facilities. As a result, adj.

PAT declined 23% YoY to INR945m (our estimate: INR1b) in 4QFY18.

Lower EBITDA margin impacts FY18 PAT:

For full-year FY18, revenue grew

6.5% YoY to INR21.3b, EBITDA margin shrunk to 30.9% (from 34.4% in FY17)

and PAT declined 7.5% YoY to INR4.7b.

Muted anti-malaria sales and higher fixed cost to hurt FY19 performance:

AJP

expects to outperform the industry in the domestic formulations, Africa and

Asia branded generics businesses in FY19. The company also guided for better

US sales, led by recent launches and a healthy product pipeline pending for

approval. However, AJP has guided for significantly lower institutional anti-

malaria business, considering steep price erosion and lower off-take from

Global Fund. In addition, increased fixed overheads related to the

commissioning of facilities are expected to affect the EBITDA margin in FY19.

Valuation view:

We have reduced our sales growth estimate by 13.5%/11.9%

for FY19/20 and PAT growth estimate by 21.6%/20.2% for FY19/20 to factor in

lower institutional anti-malaria business and higher operating expenses. We

have also reduced our P/E multiple from 25x to 24x to factor in muted sales

and profit growth in FY19. We continue to value AJP at a premium relative to

peers due to its strong branded generics business, wherein it continues to

outperform industry and enjoy superior margins. Accordingly, we revise our

price target to INR1,560 from INR1,840. Maintain

Buy.

FY17

2Q

3Q

5,158 5,331

16.8

11.8

3,426 3,551

1,732 1,780

33.6

33.4

140

153

8

8

67

192

1,651 1,811

0

0

1,651 1,811

345

385

20.9

21.2

0

0

1,307 1,426

1,307 1,426

26.3

25.2

25.3

26.7

FY18

2Q

3Q

5,404 5,870

4.8

10.1

3,567 3,896

1,837 1,975

34.0

33.6

146

150

1

1

92

152

1,783 1,975

0

0

1,783 1,975

464

501

26.0

25.3

0

0

1,319 1,475

1,319 1,475

0.9

3.4

24.4

25.1

FY17

FY18

FY18 vs Est

4QE (%)

4,992 6.2

3,580 9.2

1,412 -1.2

144 15.6

1

62 -15.5

1,329 -3.6

1329 -3.6

318 5.5



Financials & Valuations (INR b)

2018 2019E 2020E

Y/E Mar

Net Sales

21.3

21.5

26.2

EBITDA

6.6

6.0

7.5



PAT

4.7

4.6

5.7

EPS (INR)

53.0

51.6

65.0

Gr. (%)

-7.5

-2.6

25.9

BV/Sh (INR)

230.8 274.8 329.9

RoE (%)

26.0

20.4

21.5

RoCE (%)

26.0

20.4

21.5

P/E (x)

25.3

26.0

20.6

P/BV (x)

5.8

4.9

4.1

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

1Q

4,759

21.6

3,093

1,666

35.0

130

10

55

1,580

0

1,580

385

24.3

0

1,196

1,196

39.0

25.1

4Q

4,768

12.0

3,054

1,714

35.9

189

9

24

1,540

98

1,442

300

20.8

0

1,142

1,220

11.8

25.6

1Q

4,731

-0.6

3,424

1,307

27.6

134

1

48

1,219

32

1,187

239

20.1

0

948

980

-18.0

20.7

4Q

5,303 20,016 21,308

11.2

15.3

6.5

3,908 13,127 14,794

1,395 6,890 6,514

26.3

34.4

30.6

166

612

596

1

35

4

52

337

343

1,280 6,580 6,258

0

98

32

1,280 6,482 6,226

335 1,413 1,541

26.2

21.8

24.7

0

0

0

945 5,068 4,686

945 5,145 4,775

-22.5

24.8

-7.2

17.8

25.7

22.4

1,011 -6.5

1,011 -6.5

3 May 2018

14

Gujarat Gas

BSE SENSEX

35,160

S&P CNX

10,739

2 May 2018

Update

| Sector:

Oil & Gas

CMP: INR883

TP: INR1,195 (+35%)

Buy

Ujjwala Scheme in PNG residential

See little negative impact on financials; positive on volume growth

Government starts Ujjwala Scheme for residential PNG consumers



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 (%)

GUJGA IN

137.7

974 / 722

0/-9/-13

121.6

1.9

185.0

39.1



In 2016, the central government had launched the Ujjwala Scheme to increase

access to subsidized LPG for below poverty line (BPL) consumers.

The Gujarat state government has launched a similar scheme for piped natural

gas (PNG) to BPL consumers.

Do not see much impact currently



Financials Snapshot (INR b)

2018 2019E

Y/E Mar

62.4

78.3

Net Sales

8.9

11.0

EBITDA

3.0

4.8

PAT

21.6

34.7

EPS (INR)

34.3

61.1

Gr. (%)

137.0 165.2

BV/Sh (INR)

16.8

23.0

RoE (%)

15.9

20.4

RoCE (%)

41.0

25.4

P/E (x)

6.4

5.3

P/BV (x)



2020E

88.8

12.8

6.1

44.3

27.5

201.2

24.2

23.8

19.9

4.4







Shareholding pattern (%)

Mar-18 Dec-17 Mar-17

As On

Promoter

50.4

60.9

60.9

DII

2.7

2.6

2.3

FII

14.2

14.3

15.4

Others

32.7

22.2

21.4

FII Includes depository receipts

Stock Performance (1-year)

The management of Gujarat Gas (GUJGA) suggests that for each PNG

residential connection, it incurs ~INR1,600 on installation charges. It collects a

refundable amount of ~INR5,000 as security deposit from consumers.

Under the Ujjwala Scheme, the state government is expected to subsidize the

first-time installation charge of ~INR1,600. The amount would first be borne by

the CGD companies and then refunded by the government.

The security deposit of ~INR5,000 would be recovered by the CGDs in 100

installments of INR50/month.

There could be some increase in working capital due to possible delays in

reimbursement from the state government. Additionally, since the security

deposit would be recovered in installments, the CGDs would not be able to

generate as much interest income as on their usual security deposits.

There is also a likelihood that other state governments /central government

may implement such a scheme which would have a bearing on other CGDs as

well.

Remain bullish on volume pickup





We expect strong volume growth of ~14% in FY19/20 due to increased volumes

from the newly commissioned areas as well as pickup from industries in the

existing geographical areas.

There is increased activism against pollution. Stricter enforcement of emission

norms in industries may result in exponential rise in gas consumption.

Replacement of fuel oil in Bharuch-Ankleshwar-Surat-Vapi region could

generate incremental 1-1.5mmscmd demand primarily from chemical and

pharma companies.

Valuation and view





The stock is currently trading at 19.9x FY20E EPS. We assume sales volume of

7.05/8.01mmscmd and EBITDA/scm of INR4.3/4.4 in FY19/20.

Valuing the company at 27x FY20E EPS of INR44.3, we reiterate our

Buy

recommendation on the stock with a target price of INR1,195.

3 May 2018

15

2 May 2018

4QFY18 Results Update | Sector: Automobiles

CEAT

Buy

BSE SENSEX

35,176

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

10,718

CEAT IN

Strong volume growth, but adverse mix/cost inflation restrict margins

40



Operating leverage dilutes impact of RM cost inflation:

4QFY18 consol.

69.4 / 1.1

revenue grew ~14% YoY (+6% QoQ) to INR16.7b (est. of INR16.5b), driven by

2030 / 1408

11% YoY volume growth. Gross margin shrunk 210bp QoQ (+250bp YoY) to

0/-10/-17

39.7% (est. of 38.5%), led by crude-related RM cost inflation (100bp impact)

1295.0

and an adverse mix (100bp impact) due to higher OEM sales. However, the

49.2

CMP: INR1,596

TP: INR1,845(+16%)

Financials & Valuations (INR b)

2018 2019E

Y/E Mar

Net Sales

62,308 70,445

EBITDA

9.9

10.5

PAT

2,587

3,435

EPS (INR)

64.0

84.9

Gr. (%)

-31.5

32.8

BV/Sh (INR)

644.3

717.9

RoE (%)

10.3

12.5

RoCE (%)

8.5

9.2

P/E (x)

25.0

18.8

P/BV (x)

2.5

2.2

2020E

84,131

12.2

4,600

113.7

33.9

816.6

14.8

10.6

14.0

2.0







Estimate change

TP change

Rating change



impact was diluted by operating leverage, resulting in a stable EBITDA

margin on a QoQ basis at 11.8% (+280bp YoY). Adj. PAT grew 16% YoY to

INR929m, below our estimate of INR964m, due to a higher tax rate.

For FY18,

CEAT’s revenue grew ~8% to INR62.3b, driven by ~3% volume

growth. EBITDA declined ~7% to INR6.1b, with the margin contracting 150bp

to 9.9%. Adj. PAT declined ~31% YoY to INR2.5b.

Other highlights:

Revenue contribution from the strategic focus areas rose

to 48% in FY18 (46% in FY17). Net debt reduced by INR846m to INR7.4b as

on 31

st

March 2018, with the net D/E ratio marginally down to 0.3x.

Earnings call highlights:

a) Witnessed robust growth in the OEM segment in

4Q, with OEM and exports outpacing replacement demand. b) Expect

further RM cost inflation of 1.2-1.5% QoQ in 1Q/2QFY19 at the current level

of crude prices. c) Took a price increase of ~0.5% in Apr-18; company is

confident about passing on cost inflation, given the conducive demand

environment. d) De-bottlenecking of PCR capacity in the next 1-2 months;

new capacities to come up in TBR by 3QFY19, in PCR by 2HFY20 and in OTR

by 1HFY20. e) Phasing out capex – INR15b-17b for FY19 and INR8b for FY20.

Valuation and view:

We maintain our earnings estimates for FY19E/20. The

stock trades at 18.8x/13.8x FY19/20E consol. EPS. Maintain

Buy

with a target

price of INR1,845 (16x FY20 consol. EPS).

FY18

62,308

8.1

61.1

7.0

22.0

6,139

9.9

1,686

974

303

3,783

340

3,443

38.9

-238

2,341

2,548

-31.1

(INR Million)

FY18

Var

4QE

%

16,484

2

12.0

61.5

-116

7.0

-13

20.5

48

1,813

9

11.0

80

462

267

66

1,150

18

0

1,150

-3

24.0

-90

964

-20

964

-4

20.9

Consolidated

Y/E March

Net Sales

YoY Change (%)

RM cost (%)

Employee cost (%)

Other expenses (%)

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before exceptional exp.

Exceptional expense

PBT

Tax Rate (%)

Minority Interest & P/L of Asso. Cos.

Reported PAT

Adj PAT

YoY Change (%)

E: MOSL Estimates

1Q

14,702

3.9

56.9

6.5

24.0

1,854

12.6

302

252

57

1,356

9

1,347

30.9

-102

1,033

1,039

-14.7

FY17

FY18

FY17

2Q

3Q

4Q

1Q

2Q

3Q

4Q

14,269 13,976 14,718 14,597 15,230 15,742 16,739 57,665

5.6

1.3

5.5

-0.7

6.7

12.6

13.7

-7.0

57.4

58.7

62.9

65.8

60.6

58.2

60.3

59.0

7.0

7.6

7.1

6.9

7.3

7.1

6.9

7.0

22.6

22.8

21.0

23.6

20.6

22.8

21.0

22.6

1,854 1,535 1,325

547 1,747 1,870 1,976 6,568

13.0

11.0

9.0

3.7

11.5

11.9

11.8

11.4

317

351

460

396

409

433

448 1,431

162

191

212

226

237

273

238

817

37

57

36

103

65

66

69

186

1,411 1,050

689

28 1,166 1,230 1,359 4,506

0

0

125

4

80

10

246

133

1,411 1,050

564

25 1,086 1,220 1,113 4,373

30.5

25.0

-7.9 192.3

38.7

38.9

35.7

24.3

-84

-50

-55

-37

-65

-82

-55

-290

1,065

838

663

14

730

826

771 3,599

1,065

838

798

11

779

833

929 3,700

0.5 -26.1 -24.8 -99.0 -26.8

-0.7

16.5 -17.1

3 May 2018

16

2 May 2018

4QFY18 Results Update | Sector: Technology

Tata Elxsi

Buy

BSE SENSEX

35,176

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

10,718

TELX IN

62

74.6 / 1.1

1257 / 644

17/35/41

696.0

55.4

CMP: INR1,215

TP: INR1,400 (+15%)

Ending the year on a positive note…

…setting the stage for continued traction

Financials & Valuations (INR b)

2018 2019E

Y/E Mar

Net Sales

13.9

15.8

EBITDA

3.5

4.0

PAT

2.4

2.7

EPS (INR)

38.7

43.6

Gr. (%)

37.7

12.6

BV/Sh (INR)

116.2

144.8

RoE (%)

37.6

33.4

RoCE (%)

37.6

33.4

44.5

29.6

P/E (x)

16.2

11.9

P/BV (x)

2020E

18.4

4.7

3.2

51.5

18.2

218.0

28.4

43.1

24.8

9.5

Estimate change

TP change

Rating change



Industry leading growth rates:

TELX’s revenue grew 15% YoY (our estimate:

+14%) to INR3.8b. EBITDA margin expanded 210bp YoY to 25.3% (largely in-

line). PAT growth of 58% YoY to INR703m was above our estimate because

of higher other income. For FY18, TELX clocked 15% CC growth, 120bp

margin expansion and 38% PAT growth.



Outlook positive

:

TELX’s achieved 15% growth in FY18, despite challenges in

some major engagements and setbacks in the vertical of Broadcast.

However, with these issues now behind, visibility of growth from new

customers and an encouraging pick-up in new technologies and IP, the

outlook for FY19 appears optimistic.



Profits maintained despite investments:

To stay ahead of the curve, TELX

has been early at developing competencies in new technologies. Over the

last few quarters, it has been making significant progress in the areas of

augmented reality, artificial intelligence and analytics. Despite investments,

it was able to expand margins over the year. However, this isn’t likely to be

the case going forward, and the target would be to maintain margins. Part of

the expansion was also driven by 100% growth in IP revenue, which now

constitutes 5% of total revenue. With strong growth expectations, IP

revenue would enable TELX to expand clientele, introduce non-linearity in

the business and also improve positioning.



Valuation view:

TELX’s efforts to reduce dependency on selected few

accounts (top account now 22% of revenue), significant available

opportunities (especially in budding segments like Medical) and continued

traction in Automotive (60% of revenue) augur well. We raise our earnings

estimate by ~3% for FY19/20, and expect 17% revenue and PAT CAGR over

FY18E-20. We value the stock at 26x FY20E EPS, and maintain Buy with a TP

of INR1,400.

FY17

2Q

3Q

3,042 3,102

15.4

13.2

2,267 2,389

775

713

25.5

23.0

64

69

-26

24

685

668

685

668

231

226

33.6

33.9

455

441

455

441

19.3

8.4

14.9

14.2

FY18

2Q

3Q

3,422 3,455

12.5

11.4

2,581 2,520

840

935

24.6

27.1

64

63

89

68

864

940

864

940

292

313

33.8

33.2

572

628

572

628

25.9

42.2

16.7

18.2

FY17

FY18

FY18

4QE

3,717

14.0

2,788

929

25.0

82

58

905

905

299

33.0

607

607

36.3

16.3

Var

(%)

1

2

Quarterly Performance (Consolidated)

Y/E March

Net Sales

YoY Cha nge (%)

Tota l Expendi ture

EBITDA

Ma rgi ns (%)

Depreci a ti on

Other Income

PBT before EO expense

PBT

Ta x

Ra te (%)

Reported PAT

Adj PAT

YoY Cha nge (%)

Ma rgi ns (%)

1Q

2,959

21.5

2,268

691

23.3

67

8

632

632

215

34.0

417

417

16.7

14.1

4Q

3,260

10.9

2,503

758

23.2

68

-21

669

669

224

33.4

445

445

8.3

13.6

1Q

3,232

9.3

2,498

734

22.7

65

79

749

749

251

33.6

497

497

19.3

15.4

4Q

3,754 12,330 13,863

15.1

14.7

12.4

2,803 9,398 10,403

951 2,932 3,460

25.3

23.8

25.0

61

269

254

196

-48

432

1,086 2,615 3,639

1,086

2,615 3,639

383

862 1,227

35.3

33.0

33.7

703 1,753 2,412

703 1,753 2,412

58.0

12.6

37.7

18.7

14.2

17.4

20

20

16

16

3 May 2018

17