India Strategy | Get on track please !
June 2018
India Strategy
IT
Metals
MACROS
Market
Consumer
Auto
PSU
Banks
Telecom
Private
Finanicals
Cement
'Recovery'
ball starts rolling
Research Team (Gautam.Duggad@MotilalOswal.com)
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.
 Motilal Oswal Financial Services
Contents
India Strategy – ‘Recovery’ ball starts rolling
1QFY19 Highlights & Ready Reckoner
Sectors & Companies
Automobiles .......................................... 64-83
Amara Raja Batt. ............................................. 68
Ashok Leyland ................................................. 69
Bajaj Auto ..................................................... 70
Bharat Forge ................................................... 71
Bosch .............................................................. 72
CEAT ................................................................ 73
Eicher Motors ................................................. 74
Endurance Tech. ............................................. 75
Escorts ............................................................ 76
Exide Inds. ....................................................... 77
Hero Motocorp ............................................... 78
Mahindra & Mahindra .................................. 79
Maruti Suzuki .................................................. 80
Motherson Sumi ............................................. 81
Tata Motors .................................................. 82
TVS Motor ....................................................... 83
Capital Goods.........................................84-100
ABB ............................................................... 87
Bharat Electronics ........................................... 88
BHEL ............................................................. 89
Blue Star.......................................................... 90
CG Consumer Elect.......................................... 91
CG Power & Indl. ............................................. 92
Cummins India .............................................. 93
Engineers India................................................ 94
GE T&D India ................................................... 95
Havells India .................................................... 96
Larsen & Toubro ........................................... 97
Siemens........................................................... 98
Thermax ....................................................... 99
Voltas ............................................................ 100
Cement ................................................ 101-114
ACC ............................................................. 105
Ambuja Cements........................................... 106
Birla Corporation........................................... 107
Dalmia Bharat ............................................... 108
Grasim Industries ....................................... 109
India Cements ............................................... 110
Ramco Cements ............................................ 111
Sanghi Inds. ................................................... 112
Shree Cement ............................................... 113
Ultratech Cement.......................................... 114
Consumer ............................................ 115-135
Asian Paints ............................................... 119
Britannia ....................................................... 120
Colgate .......................................................... 121
Dabur ............................................................ 122
Emami ........................................................... 123
Future Consumer .......................................... 124
Godrej Consumer .......................................... 125
GSK Consumer .............................................. 126
Hind. Unilever ............................................... 127
ITC ................................................................. 128
Jyothy Labs .................................................... 129
Marico ........................................................... 130
Nestle ............................................................ 131
P&G Hygiene ................................................. 132
Page Industries.............................................. 133
Pidilite Inds. .................................................. 134
United Breweries .......................................... 135
United Spirits ................................................ 136
Financials-Banks .................................. 137-155
Axis Bank ....................................................... 142
Bank of Baroda ........................................... 143
DCB Bank....................................................... 144
Equitas Holdings............................................ 145
Federal Bank ................................................. 146
ICICI Bank ................................................... 147
Indian Bank ................................................... 148
IndusInd Bank ............................................... 149
Kotak Mahindra Bank.................................... 150
Punjab National Bank ................................. 151
RBL Bank ....................................................... 152
State Bank ................................................... 153
Yes Bank ........................................................ 154
Life Insurance ......................................................
HDFC Stand. Life ............................................ 155
ICICI Pru Life .................................................. 156
Financials-NBFC ................................... 156-172
Bajaj Finance.................................................. 159
Chola. Inv & Fin.............................................. 160
Dewan Housing.............................................. 161
GRUH Finance ................................................ 162
HDFC ........................................................... 163
Indiabulls Housing ......................................... 164
L&T Fin.Holdings ............................................ 165
LIC Housing Fin .............................................. 166
M & M Financial ............................................ 167
MAS Financial ................................................ 168
Muthoot Finance ........................................... 169
PNB Housing .................................................. 170
Repco Home Fin ............................................ 171
Shriram City Union......................................... 172
Shriram Transport Fin. ................................... 173
Healthcare........................................... 174-196
Alembic Pharma ............................................ 176
Alkem Lab ...................................................... 177
Ajanta Pharma ............................................... 178
Aurobindo Pharma ........................................ 179
Biocon............................................................ 180
Cadila Health ................................................. 181
Cipla ........................................................... 182
Divis Labs ....................................................... 183
Dr Reddy’ s Labs ......................................... 184
Fortis Health .................................................. 185
Glenmark Pharma.......................................... 186
Granules India ............................................... 187
GSK Pharma ............................................... 188
IPCA Labs. ...................................................... 189
Jubilant Life ................................................... 190
Laurus Labs .................................................... 191
Lupin .............................................................. 192
Sanofi India .................................................... 193
Shilpa Medicare ............................................. 194
Strides Shasun ............................................... 195
Sun Pharma ................................................... 196
Torrent Pharma ............................................. 197
Infrastructure ...................................... 198-203
Ashoka Buildcon ............................................ 201
IRB Infra ......................................................... 202
KNR Constructions ......................................... 203
Sadbhav Engineering ..................................... 204
Logistics .............................................. 204-207
Allcargo Logistics ........................................... 207
Concor ........................................................... 208
Media.................................................. 208-221
D B Corp......................................................... 214
Dish TV........................................................... 215
Ent.Network .................................................. 216
HT Media ....................................................... 217
Jagran Prakashan ........................................... 218
Music Broadcast ............................................ 219
PVR ................................................................ 220
Sun TV............................................................ 221
Zee Entertainment......................................... 222
Metals ................................................. 222-238
Hindalco ...................................................... 230
Hindustan Zinc ............................................... 231
JSPL ................................................................ 232
JSW Steel ....................................................... 233
Nalco ............................................................. 234
NMDC ............................................................ 235
Rain Industries ............................................... 236
SAIL ................................................................ 237
Tata Steel ....................................................... 238
3-48
50-62
63-326
Vedanta ......................................................... 239
Oil & Gas ..............................................239-258
Aegis Logistics ............................................... 246
BPCL ........................................................... 247
GAIL ........................................................... 248
Gujarat Gas ................................................... 249
Gujarat State Petronet .................................. 250
HPCL .......................................................... 251
IOC ............................................................. 252
Indraprastha Gas ........................................... 253
Mahanagar Gas ............................................. 254
MRPL ............................................................. 255
Oil India ......................................................... 256
ONGC ......................................................... 257
Petronet LNG ................................................ 258
Reliance Inds. ................................................ 259
Retail ...................................................259-263
Jubilant Foodworks ....................................... 263
Titan Company .............................................. 264
Technology ..........................................264-284
Cyient ............................................................ 270
HCL Technologies .......................................... 271
Hexaware Tech.............................................. 272
Infosys ........................................................ 273
KPIT Tech....................................................... 274
L&T Infotech.................................................. 275
Mindtree ....................................................... 276
MphasiS ........................................................ 277
NIIT Tech. ...................................................... 278
Persistent Systems ........................................ 279
Tata Elxsi ....................................................... 280
TCS ................................................................ 281
Tech Mahindra .............................................. 282
Wipro .......................................................... 283
Zensar Tech ................................................... 284
Telecom ...............................................285-294
Bharti Airtel ................................................... 291
Bharti Infratel ................................................ 292
Idea Cellular .................................................. 293
Tata Comm .................................................... 294
Utilities ................................................295-303
CESC .............................................................. 297
Coal India ...................................................... 298
JSW Energy.................................................... 299
NHPC ............................................................. 300
NTPC ............................................................. 301
Power Grid Corp. ........................................... 302
Tata Power ................................................ 303
Others..................................................304-325
Arvind............................................................ 304
Avenue Supermarts....................................... 305
BSE ................................................................ 306
Castrol India .................................................. 307
Coromandel International ............................. 308
Delta Corp ..................................................... 309
Indo Count Inds. ............................................ 310
Info Edge ....................................................... 311
Interglobe Aviation........................................ 312
Kaveri Seed.................................................... 313
MCX............................................................... 314
Navneet Education ........................................ 315
Oberoi Realty ................................................ 316
P I Industries.................................................. 317
Phoenix Mills ................................................. 318
Quess Corp .................................................... 319
S H Kelkar ...................................................... 320
SRF ................................................................ 321
Tata Chemicals .............................................. 322
Team Lease Serv............................................ 323
Trident .......................................................... 324
UPL ................................................................ 325
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
India Strategy
BSE Sensex: 33,371
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The ‘Recovery’ ball starts rolling
Confidence on earnings recovery improving; it’s a story of improving micros
and challenging macros
Earnings rebound aided by a low base and Global Cyclicals; Technology to
stage a strong comeback
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As we commence the earnings journey of FY19, the overall picture is looking
brighter, even as macros have deteriorated amid a volatile global trade
environment. The confidence on earnings recovery is higher today than any time
in the recent past. The story continues to be a case of improving micros and
challenging macros (crude oil price inflation, currency, rising bond yields). From
an earnings viewpoint, we believe that FY19 will be characterized by [a]
bottoming out of asset quality pressures for PSU Banks and Private Corporate
lenders, and normalization of provisioning costs toward the latter half of FY19,
[b] strengthening consumption trends in an election year, with forecast of a
normal monsoon and multi-year-high MSP hikes announced by the government.
Consumption, both rural and urban, will be an engine of growth this year, [c]
earnings rebound from hitherto laggard sectors like Information Technology and
Healthcare, [d] continued lackluster trend in broader private capex as yet, even
though some segments of industrial capex have shown a pick-up (Steel, Cement,
Refining).
Overall, we continue expecting FY19 to herald the earnings recovery for India,
although the market will remain distracted by several global and local macro
events such as the ongoing global trade war, US Fed rate increase cycle,
potential moderation in domestic equity flows, and political developments
around CY19 general elections.
As far as the 1QFY19 earnings season is concerned, it will benefit from the
favorable base of 1QFY18, when pre-GST destocking by trade had impacted the
performance of several sectors like Auto, FMCG, Retail, Healthcare and Cement.
Global cyclicals like Metals and Oil & Gas will continue leading from the front
and contribute more than half of the incremental profits for MOSL universe.
The Consumption Recovery story continues gaining ground, with discretionary
sectors like Autos, Retail and particularly Staples (FMCG) expected to post a
solid performance, aided by a low base and a healthy underlying demand
scenario. PSU Lenders and Corporate private lenders will continue dragging the
performance, even as retail-oriented Private Banks post another quarter of solid
growth. NBFCs’ reported numbers could be impacted by the Ind-AS-related
accounting changes. IT and Pharma will post strong double-digit earnings
growth after many quarters.
We expect MOSL Universe PAT to grow 26% YoY on a low base (6% earnings
decline in 1QFY18). Global cyclicals will drive the performance for the second
consecutive quarter (with 54% YoY profit growth) and account for 65% of
incremental profits. Defensives are expected to post 15-quarter-high profit
growth at 14%, aided by IT and Consumer. Profit growth for MOSL Universe
July 2018
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India Strategy | ‘Recovery’ ball starts rolling
excluding PSU Banks and private corporate lenders is expected at 32%. Telecom,
PSU Banks and Cement are expected to report muted numbers.
We expect Nifty sales, EBITDA and PAT to grow 23%, 23% and 26% on a base of
11%, 4% and (6%), respectively. PAT growth of 26%, if delivered, will be the
highest in 16 quarters.
Our Nifty EPS estimates are largely stable for FY19 and FY20 at INR580 and
INR694 v/s INR579 and INR693 earlier, respectively. We are building in Nifty EPS
growth of 26%/20% for FY19/20.
Key sectoral trends/highlights
Autos
universe is expected to report 34% YoY PAT growth (two-year PAT CAGR
of ~7.4%), aided by a weak base (14% YoY decline in base quarter). Maruti
Suzuki will account for roughly quarter (24%) of the profit pool. Excluding Tata
Motors, Auto universe is expected to post 41% PAT growth, the highest in nine
quarters. We expect EBITDA margin to expand for the fourth straight quarter.
Private Banks
are expected to report 9% PAT growth (YoY), dragged by
corporate-focused banks like ICICI Bank (-7% YoY) and Axis Bank (-39% YoY).
Excluding ICICI Bank and Axis Bank, private banks profit growth is expected to
come in at 23.3%, in line with the trend of the last eight quarters.
NBFCs
are expected to continue their strong run and post another quarter of
strong and broad-based growth (38% YoY), with a strong two-year PAT CAGR of
30%. All NBFCs, barring Shriram City Union (2.8% PAT growth), are expected to
report a healthy PAT performance. PAT growth is so solid and uniform that
LICF’s double-digit PAT growth of 17.6% is second lowest among our coverage.
PSU Banks
will report a loss of INR3b (base quarter 1QFY18 reported profit of
INR29b), with PNB loss dwarfing the profit posted by the remaining three (SBI,
BOB and Indian Bank) of our PSU Banks universe.
Consumer
universe is expected to post 24% YoY growth in profits (two-year PAT
growth CAGR of 11%) – the fourth consecutive quarter of double-digit PAT
growth. Entire Universe is expected to report a strong set of numbers, with
double-digit PAT growth, barring Marico (7.7% PAT growth). Britannia, Page,
Asian Paints, Colgate and Nestle are expected to report 30%+ profit growth,
while HUL and ITC are estimated to post 24% and 14% growth, respectively.
Metals
will post another quarter of strong performance, with 47% and 75% YoY
growth in EBITDA and PAT (two-year PAT CAGR of 87.7%). Tata Steel (74.7%),
Rain Industries (88.9%), JSW Steel (168.1%) and Nalco (237%) are expected to
post strong earnings growth, while JSPL is expected to post a marginal loss.
Earnings growth is expected to moderate further in FY19 due to a strong base
(triple-digit growth) in following quarters.
Oil & Gas
is expected to report 44% YoY PAT growth, aided by a weak base (base
quarter posted PAT de-growth of 26.5%, two-year PAT CAGR of 3%), driven by
BPCL, ONGC and IOC (contributing 35% to PAT delta). Among our MOSL
Universe, only Gujarat Gas (-41%) and Indraprastha Gas (-14%) are expected to
post YoY PAT decline.
Utilities
is expected to report 35% PAT growth (two-year PAT CAGR of 13%), led
by a strong performance from Coal India (100% YoY PAT growth). Coal India
July 2018
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 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
alone will contribute roughly 82% to the PAT delta of Utilities universe. Utilities
ex Coal India are still expected to post 9% PAT growth in 1QFY19.
Technology
is expected to report its first-double digit PAT growth (13.8%) after
eight quarters, with Wipro (-1.7%) being the only IT company expected to report
PAT de-growth. The trend of revenue growth acceleration of the past two
quarters across our coverage universe on a YoY constant currency basis should
continue into 1QFY19 as well, with Tier II IT universe outperforming once again.
Telecom
universe will report a loss. Idea’s loss is expected to remain elevated.
Three key trends to watch out for
1.0 Macros bottom out but exhibit mixed trends; Demand pick-
up visible in the economy, but a few concerns emerge too
As we step into FY19, one can’t help but notice the change in the narrative
around macros. After being very strong and stable, the macros seem to have
developed some cracks.
Although real GDP growth is expected to stay strong in 1QFY19, we
expect
weak
private consumption, along with limited support from fiscal spending, to keep
real GDP growth at sub-7% for the second consecutive year in FY19.
Our in-house measure of economic activity – called economic activity index (EAI)
– also confirms strong growth of 7.5-8% in 1QFY19
(Exhibit 14).
A favorable base
– due to one-off event demonetization – has contributed to higher growth in
1HCY18. However, with the base normalizing July onward, real GDP growth is
likely to ease toward 6.5% in 2HFY19, implying 6.9% growth for full-year FY19.
1a) GDP to grow sub-7% in FY19
1b) Global risks and political uncertainty to keep INR under pressure
One of the key highlights of 2018 has been the surge in crude oil prices, which
has risen from less than USD50/bbl in Jul’17 to USD60/bbl in Nov’17 and further
to about USD75-80/bbl now
(Exhibit 18).
The unusual combination of higher
crude oil and a stronger US Dollar (USD) has led to significant depreciation of
almost all emerging market (EM) currencies
(Exhibit 19)
in the first six months of
2018. The Indian Rupee (INR) has been no exception and weakened ~7% in
2018.
With crude oil prices rising ~60% YoY in Jun’18, India’s merchandise trade deficit
has worsened. Current account deficit (CAD), consequently, widened from 0.6%
of GDP in FY17 to 1.9% in FY18 and is expected to rise further to 2.6% of GDP in
FY19
(Exhibit 20).
As argued in our
detailed note,
a wider CAD doesn’t
necessarily imply a weaker INR, unless it is accompanied by capital outflows (or
less inflows). During 1QFY19, foreign institutional investors (FIIs) have
withdrawn ~USD9b out of India, implying that India’s balance of payments (BoP)
could move from a surplus of USD43b in FY18 to a deficit of USD5-10b in FY19.
This, along with the likely political uncertainty during 2018-end, could push the
INR toward 70 against the USD in early CY19
(Exhibit 24),
implying depreciation
of ~5.5% versus appreciation of ~4% in FY18.
July 2018
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1C) Expect another rate hike in August 2018
Assuming full pass-through of MSP hikes to market prices, there is an upside risk
of about 60bp to headline CPI inflation, implying inflation of 4.9% in Mar’19.
Nevertheless, our base case (average of no impact and full-pass through)
indicates that year-end inflation could be ~4.6%
(Exhibit 24).
Overall, with higher growth in MSPs, and the peaking of headline and core
inflation at 5.4% and 6.4%, respectively, in Jun’18, we believe that RBI will hike
policy rates again by 25bp on 1st August 2018
.
Further hikes in the future will
depend on the inflation trajectory, possible fiscal slippages and the global
environment. As of now, we believe the RBI will pause after Aug’18.
2.0 Consumption recovery gaining strength; MSP hikes add to
the cheer
The after-effects of GST and demonetization are behind. Third consecutive year
of normal monsoon and six-year-high MSP hikes announced by the government
add to the overall cheer on the consumption front. We have been bullish on the
Consumption Recovery theme since Juny’17 and reaffirm our positive stance on
this. Corporate commentary around rural consumption turned in the Sep’17
quarter, and since then, has progressively improved in every subsequent
quarter.
We expect consumption recovery to continue and strengthen further, given the
background of multiple elections ahead. We expect the government to remain
supportive of consumption demand. Increased government infrastructure
spending also augurs well for consumption, in our view.
The buoyancy in rural consumption is also reflected in the sequential pick-up in
PAT growth for some of the consumption-oriented sectors with a rural bias.
We expect sectors like Auto, FMCG, Retail and NBFC to benefit, going forward.
3.0 Are laggards making a comeback?
While broader earnings growth for our MOSL Universe over the last five years
has been lackluster, what is particularly noteworthy is the earnings
underperformance of defensives like IT and Healthcare.
The traditional defensives like Information Technology and Healthcare had
become earnings laggards over the last three years (FY15-FY18).
The earnings blow has been particularly severe for Healthcare, where we have
seen incessant earnings downgrades over the last eight quarters. Channel
consolidation in mainstay US markets exerted pressure on pricing, impacting
operating leverage for most of the Indian pharmaceutical companies. This,
coupled with persistent USFDA-related challenges and consequent loss of
revenue/earnings, further impacted profitability. As a consequence, MOSL
Pharma Universe has posted four consecutive quarters of double-digit earnings
decline from Mar’17 to Dec’17, before bouncing off on a low base in Mar’18. For
1QFY19E, we are estimating profit growth of 44% for our Healthcare Universe,
albeit on an extremely favorable base, wherein 1QFY18 earnings for Healthcare
universe had collapsed 47%, exacerbated by the pre-GST inventory downsizing
in domestic trade.
Going forward, we are building in 11%, 26% and 13% earnings growth for
2QFY19, 3QFY19 and 4QFY19, respectively, effectively culminating into 22%
6
July 2018
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
earnings growth for FY19. While a lot of this expected earnings recovery hinges
on bottoming out of pricing pressure in the US markets, we believe that the
worst, as far as earnings is concerned, is over for the Healthcare sector.
A somewhat similar trend, though of lesser magnitude, was observed in the
Information Technology sector. After growing at a solid 27%, 32% and 16% in
FY13, FY14 and FY15, respectively, the MOSL IT Universe profits have
decelerated significantly and posted 2%, 8% and 5% growth in FY16, FY17 and
FY18, respectively. The deceleration was persistent and we saw last double-digit
profit growth of our IT universe in Mar’16 quarter. Slowdown in IT spending,
absence of meaningful presence of Indian IT vendors in Digital and new
generation portfolios (Cloud, AI etc.), the lack of pricing power and management
transitions in some of the top tier IT firms impacted the performance of the IT
pack.
However, over the past two quarters, we have seen bottoming out of growth
trajectory (revenue growth acceleration across our coverage universe on YoY
constant currency), coupled with an improvement in management
commentaries for IT companies. This cyclical uplift, along with currency
depreciation, is expected to result in double-digit profit growth for our IT
universe after eight quarters. This is expected to sustain in rest of the FY19.
Therefore, the laggards of FY17 and FY18 are making a healthy comeback, albeit
aided by a low base of the last few years.
Model portfolio
Our approach to model portfolio construction remains unchanged. The market
context remains the same – volatility has increased due to a variety of global
and local concerns pertaining to macros, trade war, and monetary policy
changes, among others. Meanwhile the mid-caps have seen good correction and
their premium v/s large-caps has moderated. Our model portfolio reflects our
bias for earnings visibility (growth recovery), a consumption recovery in CY18
(especially Rural) and overarching preference for private financials. Overall, we
like Private Financials, Consumer Discretionary (Auto, Speciality Retail and
Media), FMCG, IT and select quality Mid-caps. We are incrementally more
positive on Pharma, given the improvement in news flow and bottoming out of
pricing pressure in the US. We continue remaining underweight in Metals and
Cement. We continue to have zero exposure to Telecom, given the lack of
earnings visibility and persistent competitive headwinds. Correction in mid-caps
has led us to add a few names in our mid-cap portfolio.
BFSI:
Given the sharp outperformance of Bajaj Finance, we replace it with ICICI
Prudential Life Insurance. At 5.7x FY20 BVPS, Bajaj Finance leaves little room for
error. ICICI Prudential Life Insurance (IPRU) is amongst the market leader in the
private sector life insurance space, with a market share in retail weighted
premium of ~12% in FY18 (~6% in FY12). IPRU has reported a strong
improvement in operating metrics (persistency, cost, margins). This, coupled
with a change in the product mix in favor of protection business, has enabled
healthy margin expansion (16.5% VNB margin in FY18 v/s 10.1% in FY17). We
expect margins to improve further to 18.2% by FY20, boosting average
operating RoEV to ~20% over FY18-20. IPRU is trading at attractive valuations of
2.1x FY20E EV (significant discount to peers).
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July 2018
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Information Technology:
In IT, we have increased the weight of Infosys by
100bp, as we find its valuations attractive, given the relative valuation gap with
TCS, and attractive dividend yield from its payout for FY19. We also add
Persistent in the mid-caps.
Energy:
We are replacing ONGC with HPCL. Oil marketing companies have been
taking price hikes even at high levels of crude oil. HPCL would be the biggest
beneficiary to normalization in marketing margins. Valuations are attractive
after the sharp ~40% correction since Sep’17.
Autos:
We continue with our positive stance on Maruti, M&M and Motherson
Sumi. We are adding Bajaj Auto in our model portfolio. After a long time, all the
three engines (exports, domestic 3W & motorcycles) are firing simultaneously
for BJAUT. While an export recovery is partly led by a revival in oil-based African
economies, BJAUT has seeded new markets supporting growth in exports. We
see sustainable 13-15% CAGR in export volumes over the next five years. The
biggest surprise has been in the domestic motorcycle business – the area of
grave concern for investors. Driven by deft product actions and price
corrections, BJAUT is on a recovery path. Lastly, BJAUT offers a clean proxy on
exports and a weaker INR, without any headwinds on demand or impact of
trade wars.
Healthcare:
We are adding Lupin back to our model portfolio, as we believe that
warning letter concerns of Indore and Goa plants are already factored in the
current price. Approvals might be slower over the next 3-6 months; however,
we expect a resolution in FY19. LPC has made significant investments in complex
and biosimilar products, approvals from which will come through in the next 12-
18 months, which will help drive earnings growth FY20 onward. In the medium
term, an approval like Etanercept for the EU and Japan markets will drive
earnings growth.
Mid-Caps:
In Mid-caps we have added
Infoedge, Persistent and Birla Corp
in
our portfolio.
Persistent
is one of the few Tier-II companies with the potential
to grow revenues above the industry, given the focus on Enterprise Digital
Transformation, unlikelihood of obsolescence in its chosen segments over the
medium-to-long term, and multi-year relationships with marquee clientele in
the ISV space. We believe that the margins have bottomed out and should start
showing improvement hereon, ending the four years of contraction from 26% in
FY14 to 15.5% in FY18. We like
Info Edge
as India’s e-commerce industry is
expected to grow from its current size of USD16b to USD70b by 2020. Recent
valuations at which Zomato (USD1.1b) and Policybazaar.com (~USD1b) raised
funds are exciting validations of the scalability and leadership positioning of
their business models.
Birla Corp
is one of the best placed cement stocks to play
the expected demand recovery in central markets due to strong demand from
states of UP/MP and Bihar. It trades at 7.5x/6.1 x FY19/FY20 estimated earnings,
which are at 20-25% discount to peers. Birla Corp is likely to see strong
operating cash flow, led by growth in earnings, which would be utilized to repay
debt, and thus, will bring down net debt EBITDA levels to less than 2x from
current levels of 5x.
July 2018
8
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
1QFY19 PREVIEW
Global Cyclicals will drive 1QFY19 earnings
Share of Defensives improving; IT making a solid comeback
The 2HFY18 earnings growth showed signs of recovery after a disruptive 2HFY17
and 1HFY18 post demonetization and GST. Earnings picked up in Autos, FMCG
and IT, whereas Private Financials, Metals and Oil & Gas continued to deliver a
strong performance. Only sour point was continued stress in PSU Banks and
private corporate lenders, and muted trends in Telecom, Cement, Capital Goods
and Healthcare. That said, Nifty posted 8% EPS growth to INR458 in FY18.
As we commence the first quarter earnings of the new financial year, the
macros seem a bit challenging, even as GDP growth has bottomed out. High
frequency data like IIP growth, auto monthly numbers, fuel consumption,
cement volumes and PMI are pointing toward an underlying demand
improvement in the economy. Meanwhile, rising crude prices and a depreciating
currency have added to the macro concerns. The RBI has changed the direction
of monetary policy with the first hike in June’18, and our economist expects
another hike in August policy meeting. Bond yields remain elevated at around
7.8-8% and are posing a headwind to equity valuations. Government announced
a multi-year-high MSP hike in an election year, providing a sentimental cheer to
rural consumption. So, in summary, the micros (earnings growth picture) are
improving even as macros have deteriorated in the last three months.
We continue to expect a strong earnings recovery in FY19 led by Financials as
provisioning bottoms out in PSU lenders along with resolution of a few NCLT
cases. Consumption recovery, as highlighted by us in multiple reports, is panning
out well, especially in discretionary and rural segments, with commentaries
from corporates as well as monthly auto numbers reaffirming the thesis. We
expect this to strengthen further with a third consecutive year of normal
monsoon, strong MSP hikes for Kharif crop, farm loan waivers by state
governments (Karnataka latest to join with an INR340b farm loan waiver) and
government’s supportive stance toward consumption in an election year.
Overall, we expect the 1QFY19 earnings season to reaffirm the underlying
improvement in India’s earnings story amid a volatile global market
environment.
Broad-based earnings recovery in 1QFY19
Expected earnings growth of 26% for MOSL Universe in 1QFY19 will be led by
global cyclicals, even as defensives post highest earnings growth in 15 quarters.
Earnings breadth is expected to improve, with only 21% of MOSL Universe
expected to post a YoY decline in PAT, best ever in decade. However, we note
that 1QFY19 numbers are aided by a weak base (1QFY18 was impacted by GST
disruption). All sectors are expected to post double-digit growth, barring
Telecom, Cement and PSU Banks, with contribution of Global Cyclicals, Domestic
Cyclicals and Defensives to profits roughly equal in 1QFY19.
For 1QFY19, we expect MOSL Universe revenue to grow 22% YoY (revenue grew
11% YoY in the base quarter) – a multi-quarter high number.
MOSL Universe EBITDA growth is estimated at 23% YoY, with operating margin
for MOSL Universe (ex-Financials and OMCs) expanding by 110 bp to 20.4%.
July 2018
9
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
MOSL Universe PAT is likely to grow 26% YoY (6% PAT decline in 1QFY18), driven
by Global Cyclicals like Metals, Oil & Gas & Coal India.
Global Cyclicals are expected to post strong earnings growth of 54% YoY (15%
decline in base quarter), led by Metals, Oil & Gas and Coal India, and account for
65% of YoY delta in MOSL Universe PAT. Coal India alone contributes 10% of YoY
delta in MOSL Universe PAT.
Defensives are expected to post 14% YoY PAT growth(15 quarter high), buoyed
by IT (posting its first double-digit growth in nine quarters), Utilities (9% growth
ex Coal India), Healthcare (44% growth) and Consumer universe (22% growth).
Telecom (competitive intensity to stay elevated) is expected to continue draging
defensives’ performance.
For 1QFY19, Domestic Cyclicals will report 23% and 12% YoY growth in EBITDA
and PAT, respectively, driven by Autos and NBFC, whereas PSU Banks and
corporate-focused private banks would drag.
Earnings breadth healthy in 1QFY19; more sectors contributing, aided by a
weak base
Earnings breadth is expected to improve, with only 21% of MOSL Universe expected
to post a YoY decline in PAT, best ever in decade. However, we note that 1QFY19
numbers are aided by a weak base (1QFY18 quarter was impacted by GST
disruption). Global Cyclicals like Metals & Oil & Gas are expected to continue the
good run and are estimated to account for 56% of MOSL universe earnings delta for
1QFY19. Nonetheless, other sectors (IT, Auto, FMCG, NBFC, Capital Goods, Pharma
& Utilities) are also contributing to incremental earnings in 1QFY19.
Snapshot of sector performance
Autos are expected to post a solid broad-based 34% PAT growth, aided by a low
base. Volume growth has been strong in 1QFY19 across the board.
Technology is expected to post strongest quarter since Sep-14, with PAT/sales
expected to grow at 13.8% (16-quarter high)/12.4 %( 8-quarter high).
Metals will have another strong quarter (75% YoY PAT growth) on a high base.
However, growth is expected to moderate going forward in FY19 (next two
quarters have triple-digit growth in their base quarters).
Cement (-3.9%) is the only sector expected to report PAT decline, despite a
favorable base effect as cost pressures offset volume uptick (Jun-17 quarter was
impacted by GST with a YoY PAT decline of 5.2% in 1QFY18 for Cement sector).
PSU banks are expected to report a loss for the third consecutive quarter,
whereas Telecom is expected to report a loss for the fourth consecutive quarter.
NBFCs should report another strong quarter with broad-based 38% profit
growth.
Private Banks are expected to post muted 9% profit growth, dragged by
corporate lenders like ICICI Bank and Axis Bank. We expect PSU Banks universe
to post losses of INR3b v/s profit of INR29b in the base quarter.
Healthcare is expected to report 44.3% PAT growth (10 quarter high), but this
should be viewed in light of GST-related destocking, which impacted Healthcare
sector in the base (PAT declined by 46.7% in 1QFY18).
Autos (34%), Capital Goods (39%), Consumer (24%), NBFC (38%), Healthcare
(44%), Metals (75%), Oil & Gas (44%) and Utilities (35%) are expected to post
10
July 2018
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
robust PAT growth, led by a favorable base effect as well as continued strong
operational trends in Cyclicals (PAT declined 6.2%/6.3% for Nifty/MOSL Universe
in the base quarter).
Defensives, Domestic Cyclicals and Global Cyclicals share in MOSL Universe
earnings would be roughly equal at 32%, 35% and 33%. The share of Domestic
Cyclicals reduced to 14% in 4QFY18, driven by a huge loss reported by PSU
Banks, and is now expected to return back to normalcy.
Nifty sales are estimated to grow 22.7% YoY – a multi-quarter high. PAT is
estimated to grow 25.7%, the highest since June 2014. EBITDA is likely to post
23% YoY growth.
Nifty EPS unchanged for FY19/20:
Our Nifty EPS estimates for FY19 and FY20
are stable at INR580 and INR694 v/s INR579 and INR693 earlier, respectively.
We are now building in earnings growth of 26%/20% for the Nifty for FY19/20.
For FY19, major earnings upgrades are in Dr. Reddy's (22%),Axis Bank (12%),
GAIL (+9%), Grasim (7%) and Kotak Mahindra Bank (7%), while the major
earnings downgrades are in Vedanta (-17%), Power Grid (-9%), ICICI Bank (8%),
Hindalco (8%) and Tata Motors (7%). For FY20, the major earnings upgrades are
in GAIL (21%), Dr. Reddy's (+21%), TCS (13%), ONGC (11%) and Kotak Mahindra
Bank (10%), while the major downgrades are Vedanta (18%), Tata Motors (-15%)
and SBI (-13%).
Exhibit 1:
Profit growth led by Metals and Oil & Gas, but breadth better v/s past few quarters
Sector
Sales
Var % Var %
(No of companies)
Jun-18
YoY QoQ
High growth sectors
10,611 25
-1
Metals (10)
1,462 23
-7
Healthcare (22)
433
17
4
Oil & Gas (14)
4,737 34
10
Media (9)
71
25
9
Capital Goods (14)
524
11
-28
NBFC (15)
170
23
2
Utilities (7)
671
11
-5
Auto (16)
1,643 22
-11
Retail (2)
51
9
4
Consumer (18)
495
17
8
Others (22)
354
20
8
Med/Low growth sectors 1,490 13
-1
Technology (15)
1,006 12
5
Private Banks (10)
304
13
1
Life Insurance (2)
102
21
-42
Logistics (2)
33
11
5
Infrastructure (4)
45
14
18
PAT de-growth sectors
937
6
2
Cement (10)
301
24
0
PSU Banks (4)
298
13
4
Telecom (4)
338 -11
1
MOSL (200)
13,038 22.1 -0.4
MOSL Excl. OMCs,
8,506 20.4 -3.3
Metals & PSU Banks (183)
Sensex (30)
5,784 20.4 -5.7
Nifty (50)
9,796 22.7 -0.1
Jun-
18
1,783
322
87
528
22
50
133
242
209
6
118
68
522
231
267
7
5
13
388
55
237
96
2,693
EBITDA
Var % Var %
YoY QoQ
30
-2
47
-7
37
11
24
8
29
17
38
-46
26
2
23
-5
39
-15
27
0
22
4
21
28
16
1
18
3
16
-2
-3
1
11
13
13
27
7
10
1
0
25
23
-18
-8
23.4 -0.1
Net Profit
PAT Delta EBITDA Margins PAT Margins
Jun- Var % Var % PAT Share Share
Chg bp YoY Chg bp YoY
18 YoY QoQ Delta
%
%
901 41
-7
262
74
106
61
96
120
75
-18
51
10
21
362
243
48
44
-11
15
4
6
289
209
289
44
1
88
24
36
-94
42
11
41
25
3
1
1
99
181
30
39
-46
8
2
3
191
116
77
38
0
21
6
9
130
488
112
35
-5
29
9
12
340
289
95
34
-19
24
8
10
155
52
4
29
-7
1
0
0
153
108
80
24
2
15
7
6
101
87
35
20
37
6
3
2
10
1
305 12
17
32
25
13
104
-24
177
14
2
21
14
9
102
22
114
9
56
10
9
4
281
-106
8
6
11
0
1
0
-161
-103
3
4
30
0
0
0
-6
-66
4
3
-12
0
0
0
-21
-98
14
-77 -106
-46
1
-19
58
-529
27
-4
4
-1
2
0
-411
-256
-3
PL
Loss
-33
0
-13
744
-1,224
-10
PL
Loss
-12
-1
-5
-250
-359
1,220 25.5 20.7
248
100 100
22
26
0.3
12.6
8.4
57
167
8
14
7
23
2,002 23.3
1,636 28.0
2,070 23.1
-0.9 1,012 21.8
-3.4
-2.8
726
949
21.1
25.7
July 2018
11
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
MOSL Universe: Sales and PAT growth at multi-quarter-high, aided by a weak base, defensives PAT to
grow at 14% - the highest since Sep-14
Exhibit 2:
Sixth consecutive quarter of double-digit sales
growth for MOSL Universe
19
16
10
8 7
1312 14
11
5
0
3
-2
4
2222
19
1515
15
14
1112
Exhibit 3:
Sales growth of Defensives at eight quarter high
17
11 10
10
8
8 9
12
9
9 10
4
1
-1
1
3
5
12 13
8
7
-4 -5 -5
-11
Source: MOSL
Source: MOSL
Exhibit 4:
Earnings growth to come in at 26% aided by weak
base
67
93
56
33
4
-3
-37
-10
6
0
5
-7
-10
9 3 5
-7
1
26 25
17 15 1416
16
7
-6
-6
Exhibit 5:
Earnings to grow at 14% for defensives , highest
since Sep-14
21
15
14
14
6
0
-4
-14
-5
-1
5
8
16
10 11
13 10 10
14
-7
Source: MOSL
Source: MOSL
Exhibit 6:
1QFY19 EBITDA margins to expand by 110bp
MOSL Universe EBITDA Margin
LPA: 19.1%
Exhibit 7:
1QFY19 PAT margin to expand by 50bp
MOSL Universe PAT Margin LPA: 9.8%
Source: MOSL
Source: MOSL
Share of Defensives, Domestic and Global cyclicals in MOSL universe
earnings roughly equal in 1QFY19
Earnings growth in 1QFY19 is broad-based, with the share of Defensives,
Domestic Cyclicals and Global Cyclicals roughly equal at 32%, 35% and 33%,
respectively.
Technology universe PAT for the quarter at INR173b will be at an all-time high.
July 2018
12
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 8:
Sectoral quarterly PAT trend (INR b)
Sector
Auto
Capital Goods
Cement
Consumer
Financials
Private Banks
PSU Banks
NBFC
Healthcare
Infrastructure
Logistics
Media
Metals
Oil & Gas
Oil & Gas Ex OMCs
Retail
Technology
Telecom
Utilities
Others
MOSL Universe
Jun
95
19
18
53
189
82
70
37
47
2
3
6
88
160
122
2
132
23
85
15
937
FY15
Sep Dec Mar Jun
80 80
64
102
20 21
47
14
14 10
16
14
56 59
56
57
179 183 206 196
85 95 100
91
57 50
60
65
37 38
46
38
51 35
39
56
2
2
3
3
3
4
3
3
6
8
6
7
91 78
41
48
131 58 242 233
126 82 129 136
3
2
2
2
137 144 141 141
27 28
29
23
66 76
98
89
14 14
5
16
877 802 1,000 1,003
FY16
Sep Dec Mar
72 88 123
16 7 46
16 16 24
58 64 60
200 129 63
98 106 83
59
-23 -72
43 44 50
57 54 54
3 3 2
3 3 4
8 9 11
57
-13
30
119 185 204
120 132 149
2 3 2
152 153 158
26 26 28
87 88 93
13 15 16
885 826 917
Jun
82
16
27
65
156
94
14
46
60
3
2
8
34
271
140
2
153
28
87
20
1,012
FY17
Sep Dec
88 57
25 25
22 16
65 65
159 177
94 97
9 27
53 52
62 60
3 3
2 2
8 8
38 54
200 226
148 146
2 3
157 164
24 8
72 81
18 17
942 964
Mar
109
55
22
67
134
102
-27
57
47
4
3
8
99
236
163
2
155
12
83
22
1,054
Jun
71
21
28
65
190
102
29
55
32
4
3
8
69
198
155
3
152
3
83
19
944
FY18
Sep Dec
110 82
32
31
20
18
72
75
195 158
98 104
29
-18
64
69
49
47
3
4
3
2
10
8
79 113
245 303
167 183
3
3
163 162
0
-2
73
92
19
23
1,073 1,118
Mar
116
54
26
78
-90
71
-241
76
52
5
2
9
146
283
187
4
170
-3
118
22
988
Jun
94
29
27
80
189
111
-3
77
45
4
3
11
120
287
195
4
173
-10
112
24
1,188
FY19E
Sep Dec
119 125
35
38
19
36
84
85
219 288
122 146
18
55
76
85
55
59
3
5
3
3
11
13
114 133
286 297
216 225
4
5
176 186
-7
-4
106 109
22
22
1,246 1,396
Mar
167
58
42
91
330
166
67
93
58
5
5
12
145
306
234
4
195
-1
110
24
1,547
Exhibit 9:
Sectoral quarterly PAT growth trend (%)
Sector
Auto
Capital Goods
Cement
Consumer
Financials
Private Banks
PSU Banks
NBFC
Health Care
Infrastructure
Logistics
Media
Metals
Oil & Gas
Oil & Gas Ex OMCs
Retail
Technology
Telecom
Utilities
Others
MOSL Universe
FY15
Jun Sep Dec
70
4
-7
19 -10 -12
-6
28 -11
12 14 10
11 16 13
18 19 19
3
20
5
12
7
12
45 20 -59
19
5
10
12 -7
28
-3
3
30
30 26
2
154 -23 -47
14 -10 -44
-5
22
7
25 13 11
48 105 86
1 -15 -14
17 10 14
33
5
-7
Mar
-23
-14
-12
13
8
17
-5
10
-12
-6
20
19
-51
-23
-4
1
6
17
6
-54
-11
Jun
8
-28
-21
9
4
10
-7
4
20
16
-8
33
-45
46
11
-13
7
2
5
7
7
FY16
Sep Dec
-10 10
-20 -69
13 68
4
7
12 -30
14 12
2
PL
16 16
11 53
60 27
12 -31
42
6
-38 PL
-9 218
-5
61
-37 13
11
7
-5
-9
31 16
-6
11
1
3
Mar
92
0
49
6
-69
-16
PL
8
38
-14
6
71
-28
-16
15
-13
12
-2
-5
191
-8
Jun
-20
20
93
13
-21
3
-78
19
7
10
-17
3
-29
16
3
33
9
20
-2
21
1
FY17
Sep Dec
22 -36
53 274
39
1
13
2
-21 38
-3
-9
-84 LP
24 19
9
11
-8
27
-24 -11
2
-4
-32 LP
68 22
24 10
13
-1
4
7
-6 -68
-17 -8
41 11
6
17
Mar
-12
17
-5
11
112
22
Loss
14
-13
70
-28
-24
235
16
9
-9
-2
-59
-11
35
15
Jun
-14
26
3
0
22
9
107
21
-46
45
27
2
102
-27
10
15
0
-90
-5
-5
-7
FY18
FY19E
Sep Dec Mar Jun Sep Dec Mar
25 46
7
34
8
52 44
28 24 -1
40
9
24
7
-9
11 16
-4
-4
97 63
10 16 17 24 17 13 16
22 -11 PL
-1
12 83 LP
4
8 -30
9
24 40 134
211 PL Loss PL -40 LP LP
22 33 34 38 18 23 22
-21 -21 11 41 12 25 12
10 33 26
3
6
8
-2
28 -25 -9
4
20 99 93
22
-9
9
41 12 61 41
106 109 48 75 45 17
-1
22 34 20 45 17
-2
8
12 26 15 26 30 23 25
71 38 94 29 35 43 12
3
-1
9
14
8
15 15
PL PL PL
PL Loss Loss Loss
2
14 42 35 45 18
-7
7
37
1
27 16
-4
10
14 16 -6
26 16 25 57
Source: MOSL
Note: Comparable Universe, excludes Alkem Lab, Avenue Supermarts, CG Consumer Elect, Endurance Tech, Equitas Holdings, Gujarat Gas,
HDFC Stand. Life, ICICI Pru Life, Interglobe Aviation, L&T Infotech, Laurus Labs, Mahanagar Gas, MAS Financial, Music Broadcast, Quess Corp,
RBL Bank, S H Kelkar and Team Lease.
July 2018
13
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 10:
Key assumptions
Macro
GDP Growth (%)
IIP Growth (%)
Inflation CPI-RU (%)
Currency: USD/INR
Repo Rate (%)
Interest Rate (%):
1Year CP Rate (Avg)
10Year G Sec (Avg)
Sectoral
Auto:
CV Volume growth (%)
Car Volume growth (%)
Banking: Loan Growth (%)
Cement: Volume growth (%)
Capital Goods: L&T order Intake (INRb)
Capital Goods: L&T order Intake (% YoY)
Metal:
Steel (USD/Tonne)
Aluminium (USD/Tonne)
Zinc (USD/Tonne)
Oil: Brent (US$/bbl)
Oil & Gas:
Under Recoveries (INRb)
Singapore GRM (USD/bbl)
Technology: $Revenue growth (%)
FY18
1QFY19E
2QFY19E
3QFY19E
4QFY19E
FY19E
FY20E
6.7
7.7
7.0
6.4
6.6
6.9
7.1
4.4
5.8
5.2
4.0
3.5
4.6
5.0
3.6
4.9
4.5
4.0
4.8
4.6
4.9
64.5
66.8
68.0
68.7
69.2
68.2
70.9
6.00
6.25
6.50
6.50
6.50
6.50
6.50
7.34
8.30
8.48
8.62
8.66
8.52
8.26
6.99
7.86
8.05
8.15
8.26
8.08
7.87
FY18
1QFY19E
2QFY19E
3QFY19E
4QFY19E
FY19E
FY20E
17.7
59.2
14.8
5.5
0.2
16.0
17.2
14.5
24.2
4.5
12.3
11.3
14.1
14.2
9.8
12.7
12.1
13.2
12.3
12.3
13.8
6.3
6.0
7.0
8.0
7.0
7.0
7.0
1,689
430
350
420
489
1,869
2,022
10.5
62.9
21.5
-12.7
-1.4
10.7
8.2
631
700
700
680
680
689
662
2,045
2,250
2,250
2,250
2,250
2,250
2,250
3,048
3,400
3,400
3,400
3,400
3,400
3,200
57.6
75.0
70.0
70.0
70.0
71.3
70.0
236
173
154
154
154
636
671
7.2
6.5
6.0
6.0
6.0
6.1
6.0
8.1
2.5
2.9
0.9
1.8
9.2
7.9
'* CV volume for Tata Motors and Ashok Leyland; PV Volume for Maruti suzuki (total volume growth)
Interesting sectoral trends
Sectoral nuances
Autos
universe is expected to report 34% YoY PAT growth (two-year PAT CAGR
of ~7.4%), aided by a weak base (14% YoY decline in base quarter). Maruti
Suzuki will account for roughly quarter (24%) of the profit pool. Excluding Tata
Motors, Auto universe is expected to post 41% PAT growth, the highest in nine
quarters. We expect EBITDA margin to expand for the fourth straight quarter.
Private Banks
are expected to report 9% PAT growth (YoY), dragged by
corporate-focused banks like ICICI Bank (-7% YoY) and Axis Bank (-39% YoY).
Excluding ICICI Bank and Axis Bank, private banks profit growth is expected to
come in at 23.3%, in line with the trend of the last eight quarters.
NBFCs
are expected to continue their strong run and post another quarter of
strong and broad-based growth (38% YoY), with a strong two-year PAT CAGR of
30%. All NBFCs, barring Shriram City Union (2.8% PAT growth), are expected to
report a healthy PAT performance. PAT growth is so solid and uniform that
LICF’s double-digit PAT growth of 17.6% is second lowest among our coverage.
PSU Banks
will report a loss of INR3b (base quarter 1QFY18 reported profit of
INR29b), with PNB loss dwarfing the profit posted by the remaining three (SBI,
BOB and Indian Bank) of our PSU Banks universe.
Consumer
universe is expected to post 24% YoY growth in profits (two-year PAT
growth CAGR of 11%) – the fourth consecutive quarter of double-digit PAT
growth. Entire Universe is expected to report a strong set of numbers, with
double-digit PAT growth, barring Marico (7.7% PAT growth). Britannia, Page,
Asian Paints, Colgate and Nestle are expected to report 30%+ profit growth,
while HUL and ITC are estimated to post 24% and 14% growth, respectively.
Metals
will post another quarter of strong performance, with 47% and 75% YoY
growth in EBITDA and PAT (two-year PAT CAGR of 87.7%). Tata Steel (74.7%),
Rain Industries (88.9%), JSW Steel (168.1%) and Nalco (237%) are expected to
July 2018
14
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
post strong earnings growth, while JSPL is expected to post a marginal loss.
Earnings growth is expected to moderate further in FY19 due to a strong base
(triple-digit growth) in following quarters.
Oil & Gas
is expected to report 44% YoY PAT growth, aided by a weak base (base
quarter posted PAT de-growth of 26.5%, two-year PAT CAGR of 3%), driven by
BPCL, ONGC and IOC (contributing 35% to PAT delta). Among our MOSL
Universe, only Gujarat Gas (-41%) and Indraprastha Gas (-14%) are expected to
post YoY PAT decline.
Utilities
is expected to report 35% PAT growth (two-year PAT CAGR of 13%), led
by a strong performance from Coal India (100% YoY PAT growth). Coal India
alone will contribute roughly 82% to the PAT delta of Utilities universe. Utilities
ex Coal India are still expected to post 9% PAT growth in 1QFY19.
Technology
is expected to report its first-double digit PAT growth (13.8%) after
eight quarters, with Wipro (-1.7%) being the only IT company expected to report
PAT de-growth. The trend of revenue growth acceleration of the past two
quarters across our coverage universe on a YoY constant currency basis should
continue into 1QFY19 as well, with Tier II IT universe outperforming once again.
Telecom
universe will report a loss. Idea’s loss is expected to remain elevated.
Exhibit 12:
1QFY19 sectoral PAT growth QoQ (%)
56
30 25 21
13 11 4
2 2 1 0
-4 PL PL
-5 -7 -11-12
-18-19
Exhibit 11:
1QFY19 sectoral PAT growth YoY (%)
75
44 44 41 39 38
35 34 29
26 24 21
14 9
6 4 3
-46
Loss
Loss
Exhibit 13:
Sequential improvement in earnings breadth; only 21% of the companies likely to report PAT decline
(favorable base effect)
Earnings Growth
26
20
23 26
-8
-15
-15
-11
23
42
>30%
26
22
24
9
13
11
>15-30%
4
18
11
9
6
0
>0-15%
-3
8
12
9
17
7
<0%
-7
-9
-3
-3
-11
-13
Ex OMCs (%)
-5
0
18
20
3
11
8
22
-20
27
21
32 35
25 24 31
26 35
31 27 30
34 42 40 31 38 39 42 40 37 38
36
38 47 36 39 37 35 32 35 45 47 33 29 30
41
42
45
17
9 10
24 26
15 16
20 18 18
14 14 9 13
27
16 20 22
24 19
27 17 16
23
17
19 24
22
25 25
20
17
22 18
18
16 13
22
17 22
18 23
22
16
10
20 19
18
24 17
18
22
21
19
18
20
18 14
26 13 19 20 19 14
24 25 18 22 17 17 19 16
22
10 14
23
20
13
18
12 18
51
16
42
41 43
38 32 39 35
35 30
32 36
32
26 27
21 21 24 25 25 28 26 24 19 26 24 19 20 26 18 21 22 21 26 26 29 29 29 23 17 25
PAT Growth Ex OMCs (%)
62% of the companies would grow at >15% YoY, and 42% of the Universe would report >30% PAT growth. 21% of the Universe would report
PAT de-growth.
July 2018
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 Motilal Oswal Financial Services
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Three key trends as we step into FY19 earning seasons
THREE KEY TRENDS
1. Macros bottom out but exhibit mixed trends; Demand pick-up
visible in the economy, but a few concerns emerge too!
As we step into FY19, one can’t help but notice the change in the narrative
around macros. After being very strong and stable, the macros seem to have
developed some cracks. This partly removes the frosting on the cake, especially
as the worst is likely behind as far as GDP growth is concerned and the micros
are exhibiting an improvement, particularly on the consumption and investment
front.
The overall buoyancy in the economy – as reflected in strong high frequency
data pertaining to Auto monthly numbers, Cement consumption, PMI prints,
rising GST collections and bullish corporate commentaries around consumption
– is somewhat impacted by a few macro concerns. We highlight some of these
concerns in this section.
With the beginning of the new financial year, almost every market participant is
working with a growth forecast of ~7.4% for FY19, in line with the RBI’s
estimate. We, however, are not so optimistic. Although real GDP growth is
expected to stay strong in 1QFY19, we
expect
weak private consumption, along
with limited support from fiscal spending, to keep real GDP growth at sub-7%
for the second consecutive year in FY19
(Exhibit 14).
Our in-house measure of
economic activity – called economic activity index (EAI) – also confirms strong
growth of 7.5-8% in 1QFY19
(Exhibit 15).
A favorable base – due to one-off event
demonetization – has contributed to higher growth in 1HCY18. However, with
the base normalizing July onward, real GDP growth is likely to ease toward 6.5%
in 2HFY19, implying 6.9% growth for full-year FY19.
Exhibit 15:
Our in-house measure of economic activity (EAI)
indicates strong growth in 1QFY19
12
7.7 7.7
9
7.0
6.4 6.6
6
3
0
May-17
Aug-17
Nov-17
Feb-18
May-18
Source: Central Statistics Office (CSO), CEIC, MOSL
% YoY
3-mma
Economic Activity Index
A. GDP growth to stay strong in 1QFY19 but weaken thereafter
Exhibit 14:
Real GDP growth to stay strong in 1QFY19 before
weakening
(% YoY)
7.7
8.2
9.3
8.1
7.6
6.8
7.1
7.3
6.1
5.6
FORECAST
Q4 FY15
Q4 FY16
Q4 FY17
Q4 FY18
Q4 FY19F
6.3
Real GDP
7.0
Further, while manufacturing PMI has been in expansion mode (above 50) since
Aug’17, services PMI has been volatile – the former, however, was the highest in
six months in Jun’18, and the latter was at 12-month high in Jun’18
(Exhibit 16).
Further, the index of industrial production (IIP) has also grown decently over the
past six months
(Exhibit 17).
July 2018
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Exhibit 16:
India’s PMI indices moved in expansion zone…
60
55
50
45
40
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Manufacturing PMI
Expansion
Service PMI
Exhibit 17:
…and IIP also continues growing at decent pace
(% YoY)
8.0
6.0
5.1
4.5 5.0
4.1
1.0
1.8
IIP
7.3 7.0
3.5
1.2
3.2
4.6 4.9
Contraction
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Source: Markit PMI, Office of Economic Adviser (OEA), CEIC, MOSL
B. Global risks and political uncertainty to keep INR under pressure
One of the key highlights of 2018 has been the surge in crude oil prices, which
has risen from less than USD50/bbl in Jul’17 to USD60/bbl in Nov’17 and further
to about USD75-80/bbl now
(Exhibit 18).
The unusual combination of higher
crude oil and a stronger US Dollar (US$) has led to significant depreciation of
almost all emerging market (EM) currencies
(Exhibit 19)
in the first six months of
2018. The India Rupee (INR) has been no exception and weakened ~7% in 2018.
Exhibit 19:
…has led to a broad-based depreciation in EM
currencies in 2018
110
100
90
80
70
(14.2)
BR
CN
* End-Jun’18
IN
ID
KR
MY
PH
(1.2)
(6.8) (5.9)
(4.5)
(8.9)
RU
(10.5)
SA
TH
(%)
Local currency versus USD in 2018*
0.6
(2.1)
(1.5)
Exhibit 18:
Unusual combination of higher crude oil and
stronger USD…
90
80
70
60
50
40
Crude oil (US$/bbl)
US$ index (RHS)
Source: Bloomberg, CEIC, MOSL
With crude oil prices rising ~60% YoY in Jun’18, India’s merchandise trade deficit
has worsened. Current account deficit (CAD), consequently, widened from 0.6%
of GDP in FY17 to 1.9% in FY18 and is expected to rise further to 2.6% of GDP in
FY19
(Exhibit 20).
As argued in our
detailed note,
a wider CAD doesn’t
necessarily imply a weaker INR, unless it is accompanied by capital outflows (or
less inflows). During 1QFY19, foreign institutional investors (FIIs) have
withdrawn ~USD9b out of India, implying that India’s balance of payments (BoP)
could move from a surplus of USD43b in FY18 to a deficit of USD5-10b in FY19.
This, along with the likely political uncertainty during 2018-end, could push the
INR toward 70 against the USD in early CY19
(Exhibit 21),
implying depreciation
of ~5.5% versus appreciation of ~4% in FY18.
July 2018
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 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 20:
BoP expected to move into deficit in FY19E…
Current account balance
(% of GDP)
Exhibit 21:
…implying INR could touch 70/USD in early 2019
72
64
INR/USD
% YoY (RHS)
18
12
6
0
-6
FY13
FY14
FY15
FY16
FY17
FY18
FY19F
Source: RBI, CEIC, MOSL
Capital account flows
3.7
4.9
2.6
(1.7)
4.5
(1.3)
2.0
(1.1)
1.6
(0.6)
3.5
(1.9)
2.5
(2.6)
56
48
40
(4.3)
(4.6)
FY13
FY14
FY15
FY16
FY17
FY18
FY12
FY19F
C. Expect another rate hike in August 2018
The Reserve Bank of India (RBI) hiked policy rates in its recent monetary policy
meeting in early Jun’18, citing higher crude oil prices, rising core inflation and
potential inflationary risk due to higher growth in minimum support prices
(MSPs) of Kharif crops. We
opined
that the RBI would do good to wait for the
MSP announcement before acting on risks. However, considering that the
government has hiked Kharif MSPs by ~16% in FY19
(Exhibit 22),
more than
double the 7% growth in FY18, the RBI decision seems appropriate in hindsight.
Assuming full pass-through of MSP hikes to market prices, there is an upside risk
of about 60bp to headline CPI inflation, implying inflation of 4.9% in Mar’19.
Nevertheless, our base case (average of no impact and full-pass through)
indicates that year-end inflation could be ~4.6%
(Exhibit 23).
Exhibit 23:
…likely to push inflation higher by ~30bp
No impact
Base case#
Full pass-through*
6.0
5.3
Exhibit 22:
MSPs hiked by ~16% in FY19…
40
32
24
16
8
0
FY99
FY03
FY07
FY11
FY15
FY19
(% YoY)
31.9
19.8
15.8
4.5
3.8
3.0
Assuming pass-through spread over 6 months (Jul-Dec’18)
Source: Central Statistics Office (CSO), RBI, CEIC, MOSL
Overall, with higher growth in MSPs, and the peaking of headline and core
inflation at 5.4% and 6.4%, respectively, in Jun’18, we believe that RBI will hike
policy rates again by 25bp on 1st August 2018.
Further hikes in the future will depend on the inflation trajectory, possible fiscal
slippages and the global environment. As of now, we believe the RBI will pause
after Aug’18.
July 2018
18
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 24:
Expect CPI headline inflation to peak at ~5.4% YoY
in June 2018…
8
6
5
3
2
0
FORECASTS
Headline CPI
(% YoY)
Core CPI*
Exhibit 25:
…which would allow RBI to hike rates again in
August 2018
7.5
7.0
6.5
6.0
5.5
5.0
Repo
Reverse repo
MSF
Source: CSO, RBI, CEIC, MOSL
2. Consumption recovery gaining strength; MSP hikes add to the
cheer
The after-effects of GST and demonetization are behind. Third consecutive year
of normal monsoon and six-year high MSP hikes announced by government add
to the overall cheer on the consumption front. We have been bullish on the
Consumption Recovery theme since Juny’17 and reaffirm our positive stance on
this. Corporate commentary around rural consumption turned in the Sep’17
quarter, and since then, has progressively improved in every subsequent
quarter.
We expect consumption recovery to continue and strengthen further, given the
background of multiple elections ahead. We expect the government to remain
supportive of consumption demand. Increased government infrastructure
spending also augurs well for consumption, in our view.
Exhibit 27:
India’s Economic Activity Index (EAI) grows
robustly at 8.3% in May 2018
12
% YoY
3-mma
Economic Activity Index
Exhibit 26:
MSPs hiked by ~16% in FY19
35
30
25
20
15
10
5
0
FY99
FY03
FY07
FY11
FY15
FY19
Production-weighted average growth
Source: Department of Agriculture, CSO, CEIC, MOSL
(% YoY)
31.8
19.8
15.8
9
6
3
0
May-17
Aug-17
Nov-17
Feb-18
May-18
Please refer to our earlier
report
for details
July 2018
19
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 28:
Pick-up in consumption activity
Consumption
(percentage pointp)
0.3
8.9
3.2
0.2
3.3
5.7
(1.7)
3.3
1.0
3.1
4.5
Investment
Net exports
EAI
Exhibit 29:
Consumption growth improved to 6% in May
16
12
8
4
0
May-17
Aug-17
Nov-17
Feb-18
May-18
% YoY
3mma
MOLI: Consumption
(3.6)
May-17
Mar-18
Apr-18
May-18
Contribution of different components to EAI’s growth
Auto volumes by and large on an uptrend
Two wheelers Gr. YoY (%)
Three wheelers Gr. YoY (%)
Passenger cars Gr. YoY (%)
UVs & MPVs Gr. YoY (%)
M&HCV Gr. YoY (%)
LCV Gr. YoY (%)
The buoyancy in rural consumption is also reflected in the sequential pick-up in
PAT growth for some of the consumption-oriented sectors with a rural bias.
We expect sectors like Auto, FMCG, Retail and NBFC to benefit, going forward.
July 2018
20
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 30:
Quarterly Auto Ex TTMT PAT growth YoY (%)
Exhibit 31:
Quarterly Consumer PAT growth YoY (%)
41
30
15
7
-1
-4
7
2
0
11
10
16
17
24
Source: MOSL
Exhibit 32:
Auto PAT growth YoY (%)
PAT (INR b)
PAT Growth YoY (%)
16
13
36
20
Exhibit 33:
Consumer PAT growth YoY (%)
PAT (INR b)
PAT Growth YoY (%)
10
19
18
9
7
(9)
374
FY16
342
FY17
386
FY18
524
FY19E
631
FY20E
243
FY16
260
FY17
288
FY18
341
FY19E
401
FY20E
Source: MOSL
3] Are laggards making a comeback?
Earnings of IT and Pharma bouncing back!!
While broader earnings growth for our MOSL Universe over the last five years
has been lackluster, what is particularly noteworthy is the earnings
underperformance of defensives like IT and Healthcare.
The traditional defensives like Information Technology and Healthcare had
become earnings laggards over the last three years (FY15-FY18).
The earnings blow has been particularly severe for Healthcare, where we have
seen incessant earnings downgrades over the last eight quarters. Channel
consolidation in mainstay US markets exerted pressure on pricing, impacting
operating leverage for most of the Indian pharmaceutical companies. This,
coupled with persistent USFDA-related challenges and consequent loss of
revenue/earnings, further impacted profitability. As a consequence, MOSL
Pharma Universe has posted four consecutive quarters of double-digit earnings
decline from Mar’17 to Dec’17, before bouncing off on a low base in Mar’18. For
1QFY19E, we are estimating profit growth of 44% for our Healthcare Universe,
albeit on an extremely favorable base, wherein 1QFY18 earnings for Healthcare
universe had collapsed 47%, exacerbated by the pre-GST inventory downsizing
in domestic trade.
Going forward, we are building in 11%, 26% and 13% earnings growth for
2QFY19, 3QFY19 and 4QFY19, respectively, effectively culminating into 22%
July 2018
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 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
earnings growth for FY19. While a lot of this expected earnings recovery hinges
on bottoming out of pricing pressure in the US markets, we believe that the
worst, as far as earnings is concerned, is over for the Healthcare sector.
Exhibit 34:
Healthcare – quarterly PAT growth YoY (%)
44
8
10
11
9
11
25
Exhibit 35:
Healthcare full year PAT growth YoY (%)
PAT (INR b)
PAT Growth YoY (%)
22
25
13
18
10
-13
-47
-19 -21
210
231
(19)
188
230
287
Source: MOSL
A somewhat similar trend, though of lesser magnitude, was observed in the
Information Technology sector. After growing at a solid 27%, 32% and 16% in
FY13, FY14 and FY15, respectively, the MOSL IT Universe profits have
decelerated significantly and posted 2%, 8% and 5% growth in FY16, FY17 and
FY18, respectively. The deceleration was persistent and we saw last double-digit
profit growth of our IT universe in Mar’16 quarter. Slowdown in IT spending,
absence of meaningful presence of Indian IT vendors in Digital and new
generation portfolios (Cloud, AI etc.), the lack of pricing power and management
transitions in some of the top tier IT firms impacted the performance of the IT
pack.
However, over the past two quarters, we have seen bottoming out of growth
trajectory (revenue growth acceleration across our coverage universe on YoY
constant currency), coupled with an improvement in management
commentaries for IT companies. This cyclical uplift, along with currency
depreciation, is expected to result in double-digit profit growth for our IT
universe after eight quarters. This is expected to sustain in rest of the FY19.
Exhibit 37:
Technology full year PAT growth YoY (%)
Exhibit 36:
Technology – quarterly PAT growth YoY (%)
15
9
4
10
7
0
-2
-1
4
14
8
14
PAT (INR b)
27
32
16
2
384
505
583
597
PAT Growth YoY (%)
8
5
678
9
14
644
742
849
Source: MOSL
Therefore, the laggards of FY17 and FY18 are making a healthy comeback, albeit aided by a
low base of the last few years.
July 2018
22
 Motilal Oswal Financial Services
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Global Cyclicals to account for 65% of 1QFY19 earnings delta
Global Cyclicals are expected to post strong earnings growth of 54% YoY (15%
decline in base quarter), led by Metals, Oil & Gas and Coal India, and account for
65% of YoY delta in MOSL Universe PAT. Coal India alone contributes 10% of YoY
delta in MOSL Universe PAT.
Defensives are expected to post 14% YoY PAT growth(15 quarter high), buoyed
by IT (posting its first double-digit growth in nine quarters), Utilities (9% growth
ex Coal India), Healthcare (44% growth) and Consumer universe (24% growth).
For 1QFY19, Domestic Cyclicals will report 23% and 12% YoY growth in EBITDA
and PAT, respectively, driven by Autos and NBFC, whereas PSU Banks and
corporate-focused private banks would remain a drag.
Exhibit 38:
Cyclicals will continue driving earnings in FY19
31
20
Contribution to 1HFY19 PAT growth (%)
15
8 8 8 8 7 5
3 2 1 0 0 0 0
0
-5
45
Contribution to 2HFY19 PAT growth (%)
16
12
6 4 4 3
2 2 2 1 1 1 1 0 0 0 0
0
-10
Source: MOSL
Source: MOSL
Exhibit 39:
Cyclicals growth expected to significantly exceed MOSL Universe in 1HFY19, with Defensives leading the pack in
2HFY19
1HFY19 PAT growth (%)
102
96 32 29 27
25 24 21 20 20 18 17 13
12 12 11 4
-4
-76
LP
LP 77
2HFY19 PAT growth (%)
52 50 39
30 27 22 19 15
14 13 9 7 5 4 3 2
PL
PL
Source: MOSL
Source: MOSL
July 2018
23
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Defensives to post highest PAT growth in 15 quarters
Defensives solely drove MOSL Universe PAT growth over FY14-16. Cyclicals
(both domestic and global), on the other hand, were under pressure, resulting in
the share of Defensives in aggregate PAT rising to 37% in FY16 from 23% of
FY12.
Domestic Cyclicals appear to be the key drivers of PAT growth in FY19, with their
share rising to 40% of aggregate PAT by FY19, a significant jump v/s FY18.
As a result, we expect the share of Cyclicals to increase to 73% by FY19 from
61% in FY18.
For 1QFY19, Defensives would report EBITDA growth of 10.7% YoY and PAT
growth of 14.1% YoY.
Exhibit 40:
Oil & Gas and Metals contribute 56% of the earnings delta
51
29
24
21
21
15
15
10
8
6
3
1
0
0
0
-1
-12 -33
88
Source: MOSL
Share of Defensives, Domestic Cyclicals and Global Cyclicals almost equal in 1QFY19
Exhibit 41:
PAT share of Domestic Cyclicals will be at 35% from 14% in 4QFY18, which was impacted by PSBs’ losses
100%
34
27 25
29
Defensives
36
40
4142 39 34
25 33
25 22
35 36 3633
38
37
39
34 35 34
32
33
75%
50%
26
33
41
42
38
34
Global cyclicals
34
26
23
28 27 33 47
25%
40
Domestic cyclicals
35
32
32
35
36
33
38 38 33
35
14
0%
Defensives
includes Consumer, Healthcare, Technology, Telecom and Utilities
Global cyclicals
includes Metals, Oil & Gas and JLR
Domestic cyclicals
includes Automobiles, Banks, Capital Goods, Infrastructure, Cement, Media, NBFCs, Real Estate and Retail
July 2018
24
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Nifty earnings to grow at multi-quarter high of 26% YoY led by weak base
Nifty PAT is likely to grow 26% YoY, the highest since 4QFY12, aided by a weak
base (base quarter PAT declined 6%). Looking beyond the base effect, Nifty
profits CAGR over June’16-June’18 will stand at 9%.
Excluding OMCs, PSU Banks and Metals, Nifty PAT growth stays healthy at 20%.
Sales are expected to grow 23% YoY (10% YoY growth in base quarter), again
aided by Cyclicals. Excluding Oil & Gas, Metals and PSU Banks, sales growth
remains healthy at 15% YoY.
Nifty EBITDA is expected to grow 23%. Excluding Oil & Gas, PSU Banks and
Metals, Nifty EBITDA is expected to post 21% YoY growth.
Nine Nifty companies (three from Banks) are expected to post YoY PAT decline.
Bharti Airtel is the only Nifty company expected to post a loss in 1QFY19.
Exhibit 42:
Nifty sales to grow 23% in 1QFY19
25
30
23
15
8
37 35 33
28 26
26
26
21
21
16 14
14 14 14 15
8
4 4
4
-1
-12
-8
-8
23 24
22
18
22
LPA: 13%
4
0
4 5
14
10
12
14 16
20
14
-4
-4 -5 -3
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19E
Exhibit 43:
1QFY19 Nifty PAT to post 26% growth, led by Oil and Gas, Metals, Autos and Coal India
36
19
21
1312
11
19
27
16
4
-8 -5
34
24
10
0
12
29
6
24
5
-2
11
2
8 9
19
5
-1
-6
-12
26
LPA: 8%
0
-7
1
-4 -4
-6
7 7
1514
6
17
24
38
-15
-20
FY10
FY11
FY12
FY13
FY14
FY08
FY09
FY15
FY16
FY17
FY18
FY19E
July 2018
25
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 44:
1QFY19 Nifty EBITDA to grow at 23% YoY
25
26
20
15
18
13
29
37
21
31
20
10
13
6
10
3
23
18
12
4 5
13111413
17
6
LPA: 11%
2
-5
5 1
5
15
7
11
16
8 8
2
1113
16
22
16
-5
-2
-8-10
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19E
Exhibit 45:
Nifty sectoral 1QFY19 PAT change YoY (%)
63
50
46
43
41
40
38
29
26
26
20
19
Metals, Auto, NBFC and
Oil & Gas to outperform;
Telecom, PSU Banks, and
Cement to
underperform
16
12
9
-5
-16
Loss
July 2018
26
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 46:
Nifty companies’ 1QFY19 performance (INR b)
Company
Sales
EBITDA
PAT
Var % Var %
Var % Var %
Var % Var %
Jun-18
Jun-18
Jun-18
YoY
QoQ
YoY
QoQ
YoY
QoQ
High PAT Gr. (33)
6,213
24
3
1,137
26
-2
613
47
-5
Dr Reddy’ s Labs
36
9
2
6
112
18
3
357
-11
BPCL
756
32
16
27
2
-18
19
151
-30
IOC
1,331
26
13
80
-13
6
58
116
11
Coal India
244
28
-9
70
104
-31
47
100
-24
Sun Pharma
71
15
5
16
48
10
10
84
5
Tata Steel
340
15
-6
68
37
5
27
75
-18
Grasim Industries
45
65
-2
8
52
0
6
65
7
HPCL
685
28
13
25
-21
-8
15
64
-13
Larsen & Toubro
263
10
-35
28
35
-48
15
63
-54
ONGC
260
36
8
147
48
29
63
61
6
Mahindra & Mahindra
131
18
-1
21
43
4
12
59
9
Zee Entertainment
18
16
3
6
17
12
4
50
63
HDFC
30
16
-7
28
19
-7
23
48
-13
Maruti Suzuki
225
28
6
34
47
13
23
48
11
Bajaj Finance
28
38
19
17
40
23
9
45
21
Eicher Motors
25
26
0
8
29
0
6
35
-4
Asian Paints
47
22
4
9
32
5
6
33
17
Bajaj Auto
78
43
15
15
62
15
13
33
16
Yes Bank
23
29
8
24
39
11
13
30
7
Indiabulls Housing
16
34
-1
14
27
9
10
29
-1
IndusInd Bank
22
25
11
20
23
11
11
27
12
Adani Ports
28
0
-13
17
5
-2
10
26
4
Kotak Mahindra Bank
25
11
-3
19
21
-5
11
24
1
Hind. Unilever
98
15
8
23
23
12
16
24
14
Hindalco
319
18
2
37
14
3
12
23
7
GAIL
161
42
5
21
8
22
13
23
26
HDFC Bank
106
13
0
89
18
0
47
20
-3
Titan Company
43
7
4
4
19
-1
3
20
-4
TCS
339
15
6
89
20
3
71
20
3
Bajaj Finserv
79
20
-11
79
20
-11
8
18
12
Tech Mahindra
81
11
1
13
41
-6
9
17
-24
UPL
42
13
-26
9
15
-29
6
16
-24
Vedanta
219
20
-21
68
40
-13
18
15
-23
Med/Low PAT Gr. (7)
2,031
29
2
454
25
1
244
8
1
ITC
113
14
7
42
12
2
29
14
-1
Power Grid Corp.
81
13
4
72
15
8
24
13
15
Infosys
190
11
5
50
10
1
38
8
3
Hero MotoCorp
90
13
6
15
4
6
10
8
2
HCL Technologies
139
15
6
32
21
7
24
8
5
NTPC
211
5
-10
61
16
-1
25
7
-9
Reliance Inds.
1,206
44
3
182
45
-1
94
4
0
Negative PAT Gr. (10)
1,552
11
-12
478
16
-8
92
-17
-814
Bharti Infratel
36
3
-1
15
-3
-4
7
-1
4
Wipro
140
2
1
27
3
3
20
-2
9
Lupin
43
10
6
8
0
8
3
-4
-67
Cipla
40
15
9
7
16
34
4
-4
18
ICICI Bank
58
5
-3
63
21
-17
19
-7
86
Tata Motors
691
18
-24
69
39
-36
9
-12
-73
State Bank
205
16
3
165
39
4
17
-16
LP
Ultratech Cement
89
34
-1
17
7
-2
6
-32
-4
Axis Bank
49
6
3
40
-6
10
8
-39
LP
Bharti Airtel
201
-8
2
67
-14
-4
-1
PL
Loss
Nifty (50)
9,796
23
0
2,070
23
-3
949
26
8
Note: For Financials, Sales represents Net Interest Income, and EBITDA represents Operating Profit;
Consensus estimates are used for Adani Ports, Bajaj Finserv and HDFC Bank
PAT Contbn
(%)
65
0
2
6
5
1
3
1
2
2
7
1
0
2
2
1
1
1
1
1
1
1
1
1
2
1
1
5
0
7
1
1
1
2
26
3
3
4
1
2
3
10
10
1
2
0
0
2
1
2
1
1
0
100
Gr. (%)
101
1
6
16
12
2
6
1
3
3
12
2
1
4
4
1
1
1
2
2
1
1
1
1
2
1
1
4
0
6
1
1
0
1
9
2
1
2
0
1
1
2
-10
0
0
0
0
-1
-1
-2
-1
-3
-2
100
EBITDA margin
Jun-18
18
18
4
6
29
22
20
19
4
11
56
16
32
94
15
60
32
19
19
102
85
88
61
77
23
12
13
84
10
26
100
16
21
31
22
37
88
26
16
23
29
15
31
42
20
18
19
107
10
80
19
82
33
21
Var (bp)
28
878
-104
-272
1068
492
321
-161
-228
195
459
276
35
269
189
85
70
150
223
768
-413
-123
278
618
150
-46
-389
327
100
125
0
351
45
450
-73
-50
117
-45
-153
120
285
6
120
-268
8
-186
16
1448
154
1297
-468
-1047
-226
8
July 2018
27
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 47:
Intra-sector 1QFY19 earnings
divergence
(%)
Sector
gr.
HIGH GROWTH SECTORS
Sectors
Metals
75
+30%
growth
SAIL: LP,NACL: 237,JSTL:
168,RINDL: 89,TATA: 75
IPCA: LP,GLXO: 473,DRRD:
357,CDH: 268,ALKEM:
228,STR: 227,BIOS: 88,SUNP:
84,ALPM: 68,SLPA: 64,DIVI:
62,JUBILANT: 37
BPCL: 151,OINL: 136,MRPL:
131,IOCL: 116,HPCL:
64,ONGC: 61,AGIS: 34
DITV: LP,ENIL: 263,
Z: 50, RADIOCIT: 42,
SUNTV: 39
CRG: 242,HAVL: 73,LT:
63,TMX: 56,ABB: 47,SIEM: 36
MMFS: 435,HDFC: 48,BAF:
45,MUTH: 36,SHTF:
35,MASFIN: 34,LTFH:
33,GRHF: 33,PNBHOUSI: 32
TPWR: 165,
COAL: 100
CEAT: 7877,AL: 176,ESC:
78,MM: 59,MSIL: 48,BOS:
47,BHFC: 38,EIM: 35,TVSL &
BJAUT: 33,AMRJ & ENDU: 31
JUBI: 127
MSS: 27
15-30%
growth
HZ: 27,HNDL:
23,VEDL: 15
SANL: 25
LAURUS: 15,ARBP: 8
0-15%
growth
-Ve earnings
growth
NMDC: -13,
JSP: Loss
GRAN: -1,LPC: -4,
CIPLA: -4,AJP: -8,
TRP: -18,GNP: -46,
FORH: -52
MAHGL: -14,
GUJGA: -41
Earnings
momentum
Healthcare
44
Oil & Gas (Ex
OMCs)
Media
37
41
PLNG: 28,
GAIL: 23
IGL: 13,
GUJS: 9,
RIL: 4
DBCL: 4,HTML: 3,
JAGP: 3,PVRL: 2
CROMPTON: 14,
ENGR: 12,
KKC: 11,VOLT: 5
SCUF: 3
PWGR: 13,
NTPC: 7, CESC: 3
EXID: 14,
HMCL: 8
Capital Goods
39
BHEL: 30
IHFL: 29,REPCO:
26,DEWH: 26,CIFC:
19,LICHF: 18
BLSTR: -1,
BHE: -20,
GETD: -29
NBFC
38
Utilities
35
NHPC: -15,
JSW: -33
TTMT: -12
Auto
34
Retail
29
TTAN: 20
DABUR: 29,
GCPL: 28,HUVR: 24,
SKB: 24,PIDI: 22,
UBBL: 18
CYL: 27,LTI:
26,PSYS: 24,HEXW:
22,TCS: 20,TELX:
19,TECHM: 17
YES: 30,IIB:
27,KMB: 24,
HDFCB: 20,FB: 19
PG: 14,
ITC: 14,
MRCO: 8
FCON: LP,UNSP: 153,
JYL: 78,HMN: 75,NEST: 54,
Consumer
24
BRIT: 35,APNT: 33,
CLGT: 32,PAG: 30
MEDIUM/LOW GROWTH SECTORS
Technology
Banks -
Private
Logistics
14
ZENT: 77,
MTCL: 77, KPIT: 55,
NITEC: 52, MPHL: 49
EQUITAS: 167,
RBK: 36
INFO: 8,
HCLT: 8
DCBB: 9
WPRO: -2
ICICIBC: -7,
AXSB: -39
AGLL: -19
9
4
CCRI: 10
PAT DE-GROWTH SECTORS
BCORP: 106,
GRASIM: 65
DBEL: 7,
SRCM: 2
ICEM: -6,
ACEM: -10,
TRCL: -11,ACC: -15,
SNGI: -16,
UTCEM: -32
PNB: PL,SBIN: -16,
BOB: -32,INBK: -44
BHARTI: PL,
BHIN: -1,
IDEA: Loss,
TCOM: -95
Cement
-4
Banks - PSU
PL
Telecom
PL
July 2018
28
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
EARNINGS FY19-20
FY19 to herald long-awaited earnings recovery
Normalization of earnings in Financials holds the key
FY19 earnings growth to come in at 35%, aided by low base of Financials:
We
expect FY19 revenue growth for our MOSL Universe to come in at 20% (v/s 5.4%
CAGR in FY15-18). This will be the third consecutive year of double-digit revenue
growth. The top-line performance is driven by broad growth across sectors, with
Telecom being the only sector expected to post a sales decline. Overall, we expect
EBITDA margin for MOSL Universe (ex-OMCs, Financials) to expand 70bp to 19.6%
in FY19. For MOSL Universe, we expect profits to grow 35% YoY, aided by a low
base (flat earnings in FY18 due to losses in PSU Banks). Financials alone account
for 50% of incremental profits (33% is contributed by PSU Banks, 12% by Private
Banks and 5% by NBFC), and as such MOSL Universe Ex PSU banks earnings
growth drops to 21%, still significantly higher than FY14-18 CAGR of 8.1%.
Nifty profits to grow 27% in FY19E; Five companies to contribute 50% of
growth:
Nifty sales are expected to continue the momentum and deliver healthy
19% YoY growth in FY19. Nifty EBITDA and PAT are expected to grow 19% and
27% in FY19 and record 16% and 23% CAGR over FY18-20, respectively. In FY19,
one third of incremental profit growth in the Nifty is expected to be contributed
by corporate lenders like ICICI Bank, Axis Bank and SBI. Excluding these three
banks, Nifty profit growth is expected to be 18%, still significantly higher than
7% CAGR over FY14-18. These banks, coupled with Tata Motors and ONGC,
together contribute ~50% of the PAT delta for FY19 and hold the key for the
anticipated earnings recovery. Rest of the 45 Nifty companies put together is
expected to deliver 15% profit growth in FY19.
EBIDTA
FY19E
30.3
30.6
71.9
79.5
86.8
4.4
82.7
20.1
14.4
11.4
14.5
32.1
21.5
19.0
22.8
11.2
24.5
35.6
21.2
13.1
11.0
14.0
30.0
23.7
20.7
23.1
26.6
22.1
EBIDTA
(FY18-20)
18
8
18
12
22
12
22
24
22
25
19
20
23
19
15
15
18
19
11
14
14
18
14
16
16.3
17.2
16.5
16.1
EBITDA margin
FY18-20
232
187
84
210
192
-74
-8
329
190
82
175
306
299
12
313
70
99
627
345
-106
-124
-37
-542
111
66.8
146.2
212.1
113.8
PAT Gr. / CAGR (%)
FY19E
FY20E (FY18-20)
83
36
58
LP
PL
199
208
46
112
LP
136
LP
46
34
40
21
17
19
26
25
25
57
31
44
49
22
35
31
27
29
36
20
28
33
22
27
22
25
24
17
25
21
24
11
17
17
21
19
19
18
18
22
13
17
32
2
16
11
14
12
12
13
13
21
14
18
14
13
13
9
14
12
35
22
28
39
22
30
31
20
26
27
20
23
PAT delta
FY18-20
66
0
46
26
14
0
5
4
0
0
9
1
4
2
16
2
4
5
5
17
11
12
0
6
100
NA
NA
NA
Exhibit 48:
Nifty expected to post 23% PAT CAGR (FY18-20E)
Sector
(No of Companies)
High PAT CAGR (>20%)
Telecom (4)
Financials (37)
PSU Banks (7)
Private Banks (11)
Life Insurance (2)
NBFC (17)
Cement (13)
Logistics (2)
Retail (2)
Auto (16)
Media (10)
Healthcare (22)
Others (23)
Med. PAT CAGR (15-20%)
Capital Goods (17)
Consumer (18)
Utilities (7)
Metals (10)
Low PAT CAGR (up to 15%)
Oil & Gas (14)
Excl. OMCs (11)
Infrastructure (4)
Technology (15)
MOSL (214)
MOSL Excl. OMCs (211)
Sensex (30)
Nifty (50)
Sales Gr. /
(FY18-20)
14
5
17
11
21
21
22
14
14
21
12
14
14
19
7
11
15
8
2
19
20
20
25
13
15
14
12
13
FY18
-23
PL
-47
PL
-1
6
28
-1
5
51
13
3
-19
17
28
15
10
13
75
6
6
6
43
5
0
-1
7
8
July 2018
29
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 49:
Nifty PAT growth ex corporate lenders
PAT Growth (%)
Nifty Ex Corporate Lenders
Nifty
26.0
17.7
9.3
9.6
5.8
19.3
16.0
16.0
13.4
16.3
11.1
7.8
1.4
3.2
FY16
FY17
3.8
5.7
FY13
FY14
FY15
FY18
FY19E
FY20E
MOSL Universe to post 35% earnings growth in FY19E led by low base
For MOSL Universe, we estimate FY19 PAT growth at 35% (after flattish earnings
in FY18), led by a strong performance across the sectors, with Telecom being the
only laggard. Profit growth for MOSL Universe ex OMC, Metals and PSU Banks
stands at robust 24%, significantly higher than FY14-18 CAGR of 7%.
All the sectors barring Telecom are expected to post double-digit PAT growth.
FY18-20E:
23% CAGR
FY08-18:
5% CAGR
26%
8%
407
413
423
458
580
Exhibit 50:
Nifty EPS – expect 23% EPS CAGR over FY18-20, significantly higher than 5% EPS CAGR over FY08-18
20%
694
FY01-08:
21% CAGR
236
281
251
247
315
348
369
394
73
78
92
131
169
184
Nifty EPS estimates remain unchanged for FY19/20
Our Nifty EPS estimates for FY19 and FY20 are stable at INR580 and INR694 v/s
INR579 and INR693 earlier, respectively.
We are now building in earnings growth of 26%/20% for the Nifty for FY19/20.
For FY19, major earnings upgrades are in Dr. Reddy’s (22%),Axis Bank (12%),
GAIL (+9%), Grasim (7%) and Kotak Mahindra Bank (7%), while the major
earnings downgrades are in Vedanta (-17%), Power Grid (-9%), ICICI Bank (8%),
Hindalco (8%) and Tata Motors (7%).
For FY20, the major earnings upgrades are in GAIL (21%), Dr. Reddy’s (+21%),
TCS (13%), ONGC (11%) and Kotak Mahindra Bank (10%), while the major
downgrades are Vedanta (18%), Tata Motors (-15%) and SBI (-13%).
July 2018
30
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 51:
Top Nifty companies’ EPS upgrades/downgrades since 4QFY18 review (%)
Companies
FY19
Companies
FY20
Dr Reddy’ s Labs
Axis Bank
GAIL
Grasim Industries
Kotak Mahindra Bank
Tata Motors
Hindalco
ICICI Bank
Power Grid Corp.
Vedanta
22.1
11.7
9.3
7.4
7.2
-7.0
-7.6
-7.8
-9.1
-16.6
GAIL
Dr Reddy’ s Labs
TCS
ONGC
Kotak Mahindra Bank
Power Grid Corp.
Hindalco
State Bank
Tata Motors
Vedanta
21.0
20.9
13.0
10.8
10.0
-6.1
-6.9
-13.1
-14.9
-18.5
July 2018
31
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 52:
Nifty performance - Expect FY18-20 PAT CAGR of 23%
Sales
(INR b)
FY18 FY19E FY20E
Company
High PAT Gr. (20%+)
State Bank
Axis Bank
Grasim Industries
Eicher Motors
ICICI Bank
IndusInd Bank
Ultratech Cement
Dr Reddy’ s Labs
Tata Motors
Sun Pharma
Bajaj Finance
Kotak Mahindra Bank
Yes Bank
Titan Company
Bajaj Finserv
Maruti Suzuki
ONGC
Coal India
GAIL
Cipla
HDFC Bank
Indiabulls Housing
Hindalco
Asian Paints
Hind. Unilever
Med. PAT Gr. (10-20%)
HDFC
Mahindra & Mahindra
Zee Entertainment
Vedanta
TCS
Larsen & Toubro
Reliance Inds.
Bajaj Auto
Bharti Airtel
ITC
Adani Ports
UPL
Hero MotoCorp
Power Grid Corp.
HCL Technologies
Tech Mahindra
NTPC
Low PAT Gr. (<10%)
Infosys
Wipro
Bharti Infratel
Lupin
HPCL
Tata Steel
BPCL
IOC
Nifty (PAT free float)
14,126
749
186
562
89
230
75
298
142
2,946
261
78
95
77
161
87
798
3,622
859
537
152
401
54
1,152
168
345
12,491
113
945
67
919
1,231
1,197
3,917
252
837
406
113
174
322
299
506
308
886
11,637
705
545
145
158
2,195
1,316
2,358
4,215
38,254
16,714
837
226
571
105
260
110
366
166
3,256
303
106
112
101
197
98
933
4,767
942
641
173
478
66
1,304
201
395
14,976
132
1,058
77
883
1,426
1,326
5,576
292
858
458
111
194
367
343
588
344
943
14,454
803
578
144
175
2,818
1,345
3,028
5,563
46,144
18,487
948
269
656
126
298
150
461
190
3,636
352
138
135
128
239
111
1,094
4,988
1,003
748
195
571
82
1,284
236
450
16,291
156
940
88
958
1,607
1,425
6,095
327
965
516
126
221
405
385
654
396
1,027
15,349
904
635
152
201
2,982
890
3,181
6,404
50,128
Sales
CAGR
% 18-
20
14
13
20
8
19
14
41
24
16
11
16
33
19
29
22
12
17
17
8
18
13
19
23
6
19
14
14
17
0
15
2
14
9
25
14
7
13
5
13
12
13
14
13
8
15
13
8
2
13
17
-18
16
23
14
EBIDTA
Margin (%)
FY18 FY19
26
80
84
18
24
107
89
20
16
13
20
66
75
100
10
84
15
18
20
14
19
81
113
12
19
21
23
93
14
31
22
26
11
16
19
36
38
62
20
16
88
23
15
26
11
27
20
44
20
5
17
6
10
20
27
80
83
23
32
103
88
20
22
14
23
67
77
102
11
89
16
19
25
15
21
84
109
12
19
22
23
94
15
32
26
28
12
15
19
35
38
63
21
16
89
23
17
31
9
27
21
42
20
4
20
5
7
20
PAT
CAGR
CAGR %
FY20
FY18 FY19E FY20E FY18 FY19 FY20 % 18- Delta %
18-20
20
29
21 1,266 2,004 2,575 -1
58
28
43
74
79
12
-46
160 273 PL
LP
70
LP
18
83
20
3
56
96
-93 1,938 71 491
5
23
24
27
57
68
-15 114 20
60
2
34
41
15
27
35
-12 78
31
53
1
106
13
68
106 149 -31 56
41
48
5
91
43
36
53
75
26
46
43
45
2
22
31
23
33
48
-12 42
47
44
1
23
37
11
18
22
-11 68
22
43
1
14
17
78
136 153 16
75
12
40
4
25
31
32
46
60
-49 41
32
37
2
68
35
27
36
48
46
34
33
34
1
79
22
62
83
105 26
34
27
30
2
103
31
42
55
71
27
30
29
29
2
11
26
11
14
18
40
29
26
27
0
93
18
27
35
44
21
29
25
27
1
17
23
81
102 130
7
27
27
27
3
20
24
259 348 414 -10 34
19
26
9
28
28
119 163 190 28
37
17
26
4
13
14
46
59
71
20
27
21
24
1
21
21
16
20
24
29
25
20
23
0
86
23
175 210 258 20
20
23
21
5
107
20
38
46
56
32
21
21
21
1
13
8
42
54
61 121 28
13
20
1
19
19
20
25
29
2
21
19
20
1
24
21
53
63
76
25
18
22
20
1
23
15 1,491 1,705 1,951 10
14
14
14
26
95
19
71
83
99
12
18
19
18
2
17
9
48
60
66
47
25
9
17
1
33
18
14
16
19
8
14
19
17
0
28
16
79
88
107 41
11
22
16
2
28
17
258 304 345
-2
18
14
16
5
12
11
72
80
97
22
10
21
16
1
14
17
361 434 481 21
20
11
16
7
20
16
44
49
57
7
13
16
14
1
37
9
16
5
21
-63 -67 288 14
0
39
13
108 122 138
6
13
13
13
2
64
6
38
41
48
-3
8
17
12
1
21
16
22
24
28
6
6
19
12
0
16
12
37
40
46
9
9
14
12
1
89
14
87
98
108 16
14
9
12
1
23
16
88
97
109
4
11
13
12
1
17
21
38
40
47
38
5
19
12
1
32
20
110 123 134
8
12
9
10
1
9
4
771 738 778 10
-4
5
0
0
27
13
161 159 180 12
-1
13
6
1
21
11
85
83
95
2
-2
14
6
1
41
-1
25
26
27
-8
3
3
3
0
21
17
21
16
22
-17 -23 32
1
0
4
4
72
65
71
-12 -10 10
-1
0
24
-2
82
112
81 108 36 -27
-1
0
5
6
98
87
96
3
-11 10
-1
0
6
-2
226 188 205 11 -17
9
-5
-1
21
16 1,793 2,283 2,735 8
27
20
23
100
EBITDA
PAT
(INR b)
PAT
YoY (%)
Contbn
to
July 2018
32
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 53:
Nifty stock absolute FY19E PAT change (INR b)
Exhibit 54:
Nifty stock absolute FY20E PAT change (INR b)
July 2018
33
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Key Sectoral Highlights: 1QFY19
SECTOR
Auto
Key highlights
Sales
21.8
1QFY19E YoY (%)
EBITDA
PAT
38.7
33.6
Healthy momentum in rural
areas and a pick-up in
construction/mining activities
drove a sustained recovery in
volumes. Our channel checks
indicate continued above-
average volume growth in the
rural markets.
During the quarter, 2W volumes
grew ~15% YoY and PV volumes
increased ~16% YoY (with
growth of ~14% in cars and
~21% in UVs). CV volumes
(driven by a revival in
construction/ mining and the
cyclical recovery in LCVs) grew
~50% YoY (LCV up 38% YoY,
M&HCV up 73% YoY).
EBITDA margin for our auto
OEM (ex-JLR) universe is likely to
expand (+200bp YoY and +60bp
QoQ to 13.8%) for the fourth
consecutive quarter, despite RM
cost inflation.
Auto aggregate PAT is likely to
grow 33.6% YoY, led by MSIL,
MM, AL and EIM.
We expect order intake for the
sector to improve in 1QFY19,
given a pick-up in finalization of
orders. L&T is expected to book
orders worth INR430b (+63%
YoY), supported by order
finalization in the water and
infrastructure segments.
Revenue for our coverage
universe is expected to grow
11% this quarter, as domestic
execution for projects picks up.
Margin is expected to improve
200bp YoY to 10%, supported by
operating leverage and cost-
rationalization measures taken
by companies.
Capital Goods
10.8
38.4
39.2
Margin
Key stocks to watch
Chg YoY (pp)
1.6
MSIL: An improvement in mix and
healthy volume growth would
lead to revenue growth of 28.5%
YoY. EBITDA margin is likely to
expand 190bp YoY to 15.2%, while
PAT is expected to rise 47.5% YoY.
AL: Ashok Leyland’s volume
growth of ~48% YoY and
realization growth of 0.8% YoY
would translate to revenue
growth of ~49% YoY. EBITDA
margin is expected to expand
210bp YoY to 9.3%, led by
operating leverage, while PAT
should increase 176.5% YoY.
MM’s volume growth of 19.2%
YoY was led by healthy tractor
(+18.6%) and UV (+17.3%) sales.
Revenue is expected to grow
~18% YoY. EBITDA margin is
expected to expand 280bp YoY to
15.9%. PAT is expected to rise
59% YoY.
EIM: Consol. revenue growth of
~26% YoY is mainly led by healthy
volume growth across RE (+22.5%
YoY) and VECV (+40% YoY). PAT is
expected to grow ~35% YoY.
1.9
Execution from LT is likely to grow
10.3% in 1QFY19; operating profit
is likely to grow 35% YoY.
Operating margin is expected to
improve 200bp YoY to 10.6%. PAT
is expected to grow 63% YoY.
1QFY19 includes revenue and
profit booking of INR3.7b from the
Katupalli port transaction
Bharat Electronics is likely to
report a weak operating
performance; revenue is expected
to grow 8% YoY owing to an
adverse revenue mix. EBIDTA is
expected to remain flat, given
60bp contraction in operating
margin on account of an adverse
revenue mix. PAT is expected to
decline 20% YoY, given lower
other income.
Havells is expected to report
revenue growth of 32% YoY, given
contribution from the newly
acquired Lloyd. We expect
operating margin to improve
370bp YoY to 13%, driven by an
improvement in the contribution
margin from the LLyod business.
Net profit is expected to grow
73% YoY.
July 2018
34
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
SECTOR
Key highlights
We expect road companies to
register healthy revenue growth
of 15%, driven by a pick-up in
execution of orders in hand.
Execution is expected to pick up
given all clearances are in place.
Operating margin for our
universe coverage is expected to
remain stable at 27.7%, given
that revenue mix is expected to
remain stable.
Net profitability for the
companies is expected to
improve at a muted 6% YoY,
given a higher tax rate in the
quarter, as most of the
companies enjoyed tax benefit
under sec 80IA.
Sales
1QFY19E YoY (%)
EBITDA
PAT
Infrastructure
Cement
Consumer
We expect the MOSL Cement
universe to record volume
growth of ~10% YoY in 1QFY19,
adjusted for the acquisition
impact on UltraTech. We expect
(a) pan-India players to report
volume growth of 6-10% YoY, (b)
SRCM to report 20% YoY growth,
driven by an increase in volumes
in east and (c) south-based
(DBEL, TRCL and ICEM)
companies to post 15-20%
volume growth.
We estimate volume growth at
7-8% YoY for FY19, as demand
has started picking up post sand
mining issues in parts states of
in Rajasthan, Tamil Nadu, UP
and Bihar.
ASP should increase 2%QoQ in
1QFY19, as we estimate a price
change of (a) -2.5% QoQ in
North India, (b) +2% QoQ in
Central India, (c)+ 5% QoQ in
West India, (d) +3% QoQ in East
India, and (e) +2% QoQ in South
India.
We expect aggregate revenue to
grow 17.1% YoY and aggregate
PAT to grow 23.8% YoY in
1QFY19. While overall sales and
earnings growth in the sector
remains on a recovery path,
growth in 1QFY19 would appear
23.8
1.0
-3.9
Margin
Key stocks to watch
Chg YoY (pp)
Ashoka is expected to deliver a
strong operating performance,
given healthy revenue growth of
28% YoY. Operating profit is likely
to increase 18% YoY. Net profit is
expected to grow 15% YoY. With a
strong order book available for
execution, the operating
performance is expected to
remain robust.
Sadbhav is expected to deliver a
healthy operating performance,
given improved execution (+17%
YoY) and a better revenue mix,
driven by operating margin
improvement. Expect operating
profit growth of 24% YoY. PAT is
expected to grow 35% YoY, given
higher other income.
KNR is expected to deliver a weak
operating performance, given
lower order book available for
execution. Revenue is expected to
grow 1% YoY and operating profit
is expected to decline 13% YoY,
given margin compression of
240bp to 15.2%. Net profit is
expected to decline 38% YoY.
-4.1
Shree Cement’s superior
execution capabilities would
enable it to achieve RoIC in excess
of 30% (FY19E), while its gross
block to capacity has been
structurally trending downward.
Birla Corp is likely to be profitable
due to the strong performance of
the acquired subsidiary, Reliance
Cement. With a 23% market share
in the Satna cluster and Reliance
Cement’s mineral concession, it
has the potential to expand to
multiple states.
Dalmia Cement’s earnings growth
will be superior to industry
growth, led by acquisitions and
positive operating leverage.
17.1
22.3
23.8
1.0
Apart from HUVR, strong
performance in PAT in 1QFY19 is
likely to come from BRIT, CLGT,
DABUR, GCPL and PAG despite
these companies not being
adversely affected in the base. It is
likely to be another subdued
July 2018
35
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
SECTOR
Key highlights
to be exceptionally strong
because of disruptions caused in
the sector in 1QFY18 ahead of
st
GST implementation on 1 July
2017.
For 1QFY19, we expect ITC’s
sales to grow 14% YoY (with flat
cigarette volumes), EBITDA to
grow 12.5% YoY, and PAT to
grow 13.6% YoY, mainly due to a
weak base (sales decline and
mid-single digit EBITDA and PAT
growth in 1QFY18). We expect a
10% YoY increase in cigarette
net sales. For 1QFY19, HUVR has
a weak base due to flat volumes;
and with continued strong
momentum ahead of peers, we
expect 15% YoY volume & value
growth and 20%+ YoY growth in
EBITDA and PAT.
PFAD/palm oil prices declined
13.6%/13.5% YoY in 1QFY19.
Ti02 price increase has stabilized
(down 5.3% YoY), while VAM
prices have shown an uptrend.
Some other commodities
reported a sharp uptrend:
mentha prices were up 35% YoY
in 1QFY19, but down 13%
sequentially, while copra and
LLP prices rose 43% YoY and 12%
YoY, respectively, in two months
ended May 2018. HDPE prices
increased 21% YoY.
Aggregate EBITDA growth would
also be healthy at 22.3% YoY,
with sales growth revival leading
to better absorption of costs.
EBITDA margin is likely to be
100bp higher YoY.
Sales
1QFY19E YoY (%)
EBITDA
PAT
Margin
Key stocks to watch
Chg YoY (pp)
quarter for MRCO, despite a weak
base. PAT for HMN and JYL in
1QFY19 would appear to be
exceptionally high because of their
very weak 1QFY18 results, when
PAT for both declined by over 45%.
Financials
15.6
20.9
-0.5
3.2
Private Banks
We remain upbeat on the value
PSU Banks
migration from state-owned banks
to private sector banks. We expect
incremental slippages to start
moderating, though credit cost
would remain elevated on higher
ageing provisions. We expect
private banks to record 3.1% YoY
PAT growth (27%.4 YoY ex AXSB
and ICICIBC), while mid-sized
private banks are expected to
report 24%-36% PAT growth.
After a muted FY18, PSU banks are
expected to gradually pick-up on
growth. We expect all PSU banks
to return to profitability with the
exception of PNB, though return
12.5
16.2
9.4
2.8
ICICIBC, YES and RBL amongst
private banks.
13.0
24.7
PL
7.4
We prefer SBIN and BOB among PSU
banks.
July 2018
36
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
SECTOR
Key highlights
ratios should remain subdued.
While the pressure on cost of
funds may result in flattish NIM,
some PSU banks may report
higher NIMs due to moderation in
interest reversals. Further
hardening of bond yields may
result in higher MTM losses.
1QFY19 will be the first quarter
where NBFCs would report
earnings under Ind-AS. While
NHB has come out with circular
related transition, no specific
circular from the RBI has
increased confusion related to
transition. Our interactions with
companies suggest that they
would be reporting earnings
under Ind-AS norms, but
regulatory reporting would
continue as per the old format.
Core housing growth has
stabilized post RERA
implementation, and tier II and
III locations are the key growth
drivers. For housing finance
corporations (HFCs), we expect
the share of non-retail loans in
the overall portfolio to inch
higher. Growth rates will remain
healthy for segments like
consumer durables, two-
wheelers and vehicle finance.
The focus on collections has
helped companies ensure strong
recoveries. Vehicle financiers are
expected to report healthy asset
quality and growth. We expect a
gradual improvement for
microfinance institutions and
gold financiers.
Yields have hardened 100bp+
from their lows nine months
ago. If they sustain at these
levels, HFCs would be most
impacted. Vehicle financiers
have pricing power to maintain
margins in core business.
After four quarters of decline,
1QFY19 is expected to be first
quarter to show healthy growth
in PAT on a YoY basis.
EBITDA is expected to be on
upward trajectory, which started
in 4QFY18.
Strong growth is expected on
the back of muted performance
in 1QFY18, largely led by
demonetization.
In addition, companies focused
on domestic formulation are
expected to continue recovering
Sales
1QFY19E YoY (%)
EBITDA
PAT
Margin
Key stocks to watch
Chg YoY (pp)
NBFC
23.5
25.6
38.4
1.3
LICHF and PNBHF are key stocks to
look out for with regards margins,
given the sharp rise in GSec yields
over the past nine months.
Vehicle financiers, especially CV
financiers, are likely to witness a
very strong quarter on the growth
front.
Repco may disappoint on growth
as state-specific issues in Tamil
Nadu have not yet been
completely resolved.
Healthcare
17.2
37.0
44.3
2.9
IPCA (+ve; increased revenue from
domestic formulation and
reduced remediation cost to
improve operating leverage,
thereby resulting in PAT v/s loss in
1QFY18).
Cadila (+ve; expect strong
momentum in US and DF business
to drive profitability).
Jubilant (+ve; expect healthy
growth in PAT on increased
profitability from Life Science
segment).
Ajanta (-ve; slowdown in anti-
July 2018
37
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
SECTOR
Key highlights
Sales
1QFY19E YoY (%)
EBITDA
PAT
Logistics
Media
from GST-led disruption.
The intensity of price erosion in
US generics is expected to
reduce from high-double-digit to
high-single-digit.
The increased API prices on
account of slowdown in supply
from China are expected to
moderately affect margins of
companies under coverage.
EXIM originating rail volumes
are likely to grow in mid-teens in
1QFY19. During April-May 2018,
EXIM container volumes were
up 14% YoY and domestic
volumes were flat YoY.
CCRI is likely to report EXIM
handling volume growth of 15%
YoY for 1QFY19, led by strong
EXIM rail volumes.
Lead distance for EXIM declined
4% YoY, while that for domestic
traffic declined 11% YoY, as a
higher proportion of containers
meant that the northern
hinterlands are getting handled
by minor ports like Mundra and
Pipavav.
Broadcasters should see the
momentum of 4QFY18
continuing into 1QFY19. We
expect robust growth during the
quarter, primarily driven by low
base (impacted by GST) and
revival in national ad spends.
However, print and radio
companies are expected to post
modest results, despite some
revival in 4QFY18, partly due to
subdued local ad spends.
Margin
Key stocks to watch
Chg YoY (pp)
malaria business to impact overall
performance for the quarter).
11.0
10.5
3.9
-0.1
CCRI is likely to report margin
improvement on a QoQ basis, led
by strong volume growth and
recent hikes initiated by the
company.
AGLL’s margins are expected to
improve QoQ, led by the
improvement in the MTO segment
and the expiry of the Mundra CFS
lease.
24.8
28.9
41.1
1.0
Metals
Domestic steel prices increased
sharply during the quarter,
despite seasonally weak
22.9
47.0
74.6
3.6
ZEE’s consolidated revenue should
grow at a strong 16% YoY. Yet,
increase in content cost to higher
original hours of content and
recent ZEE5 launch should limit
EBITDA margin expansion (+40bp
YoY) to 31.8%.
Revision of subscription contracts
with ARASU and fast pick-up in
digitization in Tamil Nadu should
propel 17% YoY subscription
growth. This, coupled with healthy
16% YoY ad growth, should lead to
robust 24% YoY standalone
revenue growth. We expect
440bp margin expansion to 61.4%.
MBL should report 10%/16%
revenue/EBITDA growth, while
ENIL is expected to outperform
with 14%/47% growth on the back
of higher contribution from new
(Batch 1-Phase III) stations.
Dish TV’s ARPU and subscribers
should grow post completion of
merger with Videocon, albeit at a
modest pace. We expect
subscription revenue to grow at
modest 3% QoQ. Merger
synergies should aid 220bp QoQ
margin expansion to 28.4%.
Tata Steel and SAIL will report
QoQ increase in EBITDA.
VEDL earnings will be impacted by
July 2018
38
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
SECTOR
Key highlights
Sales
1QFY19E YoY (%)
EBITDA
PAT
Oil & Gas
Excl. OMCs
demand.
Base metal prices were also
marginally higher on improving
global demand and Chinese
supply measures.
Ferrous companies will
outperform on the back of
strong price increases.
Singapore complex GRM was
USD6.0/bbl in 1QFY19 v/s
USD7.0/bbl in 4QFY18 and
USD6.4/bbl in 1QFY18. We
expect inventory gains during
the quarter for OMCs.
Average Brent crude price was
up 48% YoY and 11% QoQ to
USD74.5/bbl. We expect higher
realizations to benefit the
upstream companies. ONGC and
Oil India should see a YoY
increase in EBITDA.
RIL is expected to clock GRM of
USD10.3/bbl due to slightly
weak benchmark (premium of
USD4.3/bbl). Petchem segment
is expected to do better, led by
healthy petchem deltas and
strong volume growth.
Crude oil price continued to
trend upward in 1QFY19.
Average Brent crude price was
up 48% YoY (+11% QoQ) at
USD74.5/bbl. OMCs are likely to
witness inventory gains for the
quarter.
Domestic oil & gas production
has improved, which would be
beneficial for the upstream
companies. Rise in crude oil
price and revived production
volume growth for oil and gas
would benefit ONGC/OINL.
We expect volume growth to
continue for CGD players. We
might see margin compression
(YoY/QoQ) in the industrial
segment due to competition
from alternative fuels.
Margin
Key stocks to watch
Chg YoY (pp)
shutdown at copper, lower zinc
prices and volumes, and stronger
base in aluminum.
34.1
23.7
44.0
-0.9
IOCL is expected to report
adjusted EBITDA of INR80.4b (-
13% YoY; +6% QoQ) in 1QFY19.
Expect GRM of USD5.5/bbl and
refinery throughput at 17.9mmt
for 1QFY19.
HPCL is expected to report
adjusted EBITDA of INR25.4b (-
21% YoY; -8% QoQ) in 1QFY19.
Expect GRM of USD5.5/bbl and
refinery throughput at 4.6mmt for
1QFY19.
BPCL is expected to report
adjusted EBITDA of INR27b (+2%
YoY; -18% QoQ) in 1QFY19. Expect
GRM of USD4.97/bbl and refinery
throughput at 7.9mmt for
1QFY19.
43.2
43.0
25.5
0.0
PLNG – a long-term buy:
Visibility
on PLNG’s medium/long-term
earnings is high, given (a) the huge
gas demand-supply gap in India,
(b) volume growth, driven by
gradual capacity addition, and (c)
earnings growth boosted by
annual re-gas charge escalation.
Poor competition from existing
and upcoming terminals and
lower LNG prices add to the buy
case for PLNG. Recent stock price
correction offers an excellent
opportunity to add, in our view.
Prefer IGL among CGDs:
We
expect volume growth to continue
for CGD players. Spot as well as
crude-linked LNG prices are up
YoY in 1QFY19. However, IGL,
MGL and GUJGA have already
taken price hikes 1QFY19, which
would take care of the increased
cost. We prefer IGL among CGD
players due to (a) higher longevity
of volume growth compared to
MGL, and (b) higher share of CNG
v/s PNG, supporting stable
EBITDA/SCM. Recent stock price
correction offers an excellent
opportunity to add, in our view.
Continue to like OMCs:
Sequential weakness in
benchmark GRMs and marketing
margins would impact OMCs’
July 2018
39
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
SECTOR
Key highlights
Sales
1QFY19E YoY (%)
EBITDA
PAT
Retail
We expect revenue growth of
9.1% YoY for our Retail Universe
in 1QFY19. EBITDA is expected
to increase by 26.6% YoY and
adj. PAT by 29.3% YoY.
9.1
26.6
29.3
Technology
Telecom
The usual 1Q seasonal strength,
coupled with benefits from
currency, is expected to result in
a continued recovery for the
sector.
Growth trends, however, are
likely to be polarized with USD
revenue growth for Tier-I
expected at 8% YoY and that for
Tier-II at 16% YoY.
INR depreciation and improved
performance provide margin
tailwinds and drive our
expectations of 18% YoY EBITDA
growth for the sector.
However, lower foreign
exchange gains would result in
14% PAT growth.
Spillover of the fresh round of
undercutting by operators from
4QFY18 to 1QFY19 continued to
take a toll on telcos’ revenue.
Further, consolidation in the
telecom sector had fuelled the
exit of tenancies, leading to
higher tenancy cost per
12.4
17.6
13.8
Margin
Key stocks to watch
Chg YoY (pp)
(IOCL/BPCL/HPCL) profitability
during the quarter. We expect
OMCs to benefit due to inventory
gains during the quarter. We
expect OMCs’ core earnings to dip
sequentially in 1QFY19. Among
the OMCs, we have a higher
preference for IOCL due to its (a)
highest diversification, (b) strong
free cash flow generation, and (c)
inexpensive valuations.
1.5
For Titan (TTAN), Jewelry segment
sales growth is likely to be in high
single digits due to a very high
base (54% sales growth in
1QFY18, primarily because of
preponement of sales from
2QFY18 to 1QFY18 ahead of GST
implementation from 1st July
2017). However, we remain
confident of TTAN achieving the
targeted ~25% growth in the
Jewelry segment for full-year
FY19, particularly as the base is
not as challenging in the
subsequent quarters.
For Jubilant Foodworks (JUBI), we
expect sales to increase 21.5%
YoY, with same-store-sales (SSS)
up 18% YoY in 1QFY19. Base
quarter 1QFY18 had witnessed
6.5% growth in SSS. Thus, a
favourable base and initiatives
undertaken by the company
should result in high SSS growth.
1.0
Compared to the weak exit for
FY18 (0.6% QoQ CC), we expect
acceleration in growth, led by
seasonal strength, resulting in
2.3% QoQ CC growth in 1QFY19.
In the backdrop of recent INR
depreciation, commentary on
INFO’s EBIT margin guidance of
22-24% would be keenly watched.
TECHM is expected to start the
year on a soft note. However,
outlook on Telecom (especially in
the backdrop of 5G) and
commentary on continued
recovery on profitability would
grab attention.
-11.0
-18.1
PL
-2.5
Bharti’s India wireless revenue
should remain flat QoQ; yet India
wireless EBITDA is expected to
witness 13% QoQ decline,
dragging down consol. EBITDA by
4% QoQ.
Idea’s consol. revenue is expected
to decline 2% QoQ. Consol.
July 2018
40
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
SECTOR
Key highlights
operator. This, coupled with
installation of cell sites on fresh
towers (non-loading) and
soaring diesel prices, is expected
to increase the QoQ network
cost for all operators.
Sales
1QFY19E YoY (%)
EBITDA
PAT
Utilities
Power Grid will report earnings
growth on continuing strong
capitalization momentum.
Coal India EBITDA (ex-OBR) will
increase by ~100% YoY on price
hike and higher volumes.
NTPC will report muted growth
due to drag on account of under
recovery in fixed charge.
11.4
23.1
34.9
Margin
Key stocks to watch
Chg YoY (pp)
EBITDA is expected to decline 39%
QoQ to INR8.9b, primarily due to
(a) high 4QFY18 EBITDA base
(including INR4.4b one-off), (b) 2%
QoQ revenue decline and (c) 16%
QoQ rise in network cost.
BHIN’s rental margins are
expected to contract 210bp due
to 5,100 net tenancy deletions.
This, along with 430bp contraction
in energy margins, should lead to
a 220bp drop in consol. EBITDA
margin to 39.9%; consol. EBITDA
should decline 9% QoQ.
TCOM’s consol. revenue should
grow marginally by 1% QoQ, while
EBITDA is expected to grow 2%
QoQ. This is on the back of 5%
data EBITDA growth, partly offset
by a 15% decline in voice EBITDA.
3.4
Coal India e-auction and ASQ
realization.
Power Grid – capitalization
momentum.
NTPC – commercialization
guidance.
July 2018
41
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India Strategy | ‘Recovery’ ball starts rolling
MARKETS & FLOWS
Market stages a recovery in June quarter
Domestic MF flows remain robust, FII flows weakest in a decade
After an impressive show in CY17 (Nifty up 29% YoY), the Nifty has delivered muted
returns of 2% in CY18 YTD. Heightened fears of a bitter global trade war, coupled with
rising crude prices and a depreciating currency, have kept the markets on tenterhooks,
with mid-caps bearing a disproportionate brunt.
India has outperformed developed markets in CY18YTD. Among the key global
markets, Russia (+9%), India (+2%), the US (+1%) and Taiwan (+1%) are trading higher
in CY18YTD. On the other hand, MSCI EM (-9%), China (-9%), Korea (-8%), Japan (-5%),
Brazil (-2%) and the UK (-1%) are trading lower in local currency terms.
India’s share in world market cap is at 2.7%, above its long-term average of 2.5%. Over
the last 12 months, the world market cap has increased by 7.1% (USD5.2t), while
India’s market cap is up 8.6%.
In sectoral space, Technology (+25%), Private Banks (+9%), Consumer (+5%) and NBFCs
(+3%) are the only positive performers in CY18YTD. Telecom (-33%), Real Estate (-
21%), Utilities (-20%), PSU Banks (-19%), Cement (-18%), Oil & Gas (-16%) and Metal (-
14%) are the key laggards.
Midcaps have struggled over the last six months, resulting in their underperformance
versus large-caps. In CY18YTD, midcaps delivered -14% returns, as against +2% returns
by the Nifty.
Market breadth remains balanced in CY18YTD, with 22 Nifty stocks trading higher. TCS
(+38%), Kotak Mahindra Bank (+35%), Bajaj Finance (+33%), Tech Mahindra (+30%)
and Infosys (+29%) are the top performers. HPCL (-39%), Tata Motors (-38%), Vedanta
(-31%), Bharti Airtel (-31%) and BPCL (-29%) are the worst performers.
In CY18YTD, domestic MF flows have remained strong at USD10.4b; FII flows are the
weakest in a decade at USD-0.6b. Notably, during the June quarter, DIIs (ex-MFs) saw
inflow of USD0.6b after five successive quarters of outflows.
While markets remain volatile, the Nifty P/E is attractively valued at 17.4x, marginally
above the historical average of 17.0x. At 2.7x, Nifty P/B is near its historical average.
Market-cap-to-GDP at 80% (FY19E GDP) is above its long-term average.
Despite the sharp underperformance of mid-caps, their valuation premium versus
large-caps is still at 26%.
Exhibit 56:
Nifty QoQ change (%) — June quarter return
second best in last five quarters
QoQ Return (%)
14
10
6
3
5 4
7
3
0
-5
4
4 3
12
8
6
Exhibit 55:
CY18YTD returns positive so far. Over CY08-18,
Indian markets recorded CAGR of 14.6%
-52
-61
76
84
18
23
-25
-37
28
24
7
-5
31
29
-4
-8
3
0
29
37
2
-5
Trend in Nifty
CAGR in INR: 14.6%
CAGR in USD: 10.4%
-2
-1
-3
-5
-4
CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18
Annual Return in USD (%) YTD
Annual Return in INR (%)
July 2018
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 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Global equities: India outperformed developed markets in CY18YTD
In CY18YTD, among the key global markets, Russia (+9%), India (+2%), the US
(+1%) and Taiwan (+1%) are trading higher. On the other hand, MSCI EM (-9%),
China (-9%), Korea (-8%), Japan (-5%), Brazil (-2%) and the UK (-1%) are trading
lower in local currency terms.
Exhibit 58:
World equity indices (CY18YTD) – USD (%)
S&P 500
Russia MICEX
Taiwan
Japan
UK
India - Nifty
MSCI EM
China (HSCEI)
South Korea
Brazil
-17
-12
-9
-9
-1
-2
-3
-4
1
Exhibit 57:
World equity indices (CY18YTD) – local currency
Russia MICEX
India - Nifty
S&P 500
Taiwan
UK
Brazil
Japan
South Korea
-8
-5
-1
-2
1
1
9
2
-5
China (HSCEI)
-9
MSCI EM
-9
India’s share in world market cap above historical average
India’s share in the world market cap is at 2.7%, above its long-term average of
2.5%.
Over the last 12 months, the world market cap has increased by 7.1% (USD5.2t),
while India’s market cap is up 8.6%.
Exhibit 60:
Market cap change over last 12 months (%)
0.6
14
30.2
12
6.2
2.1
3.7
1.6
1.2
0.7
0.4
6.6
Exhibit 59:
Trend in India's contribution to world market cap
3.5
3.0
2.5
2.0
1.5
1.6
India's Contribution to World Mcap (%)
3.3
Average of
2.5%
Mkt cap chg 12M (%)
9
Curr Mcap (USD Tr)
5
1
9
8
2.7
6
-6
-6
July 2018
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Sector performance:
Technology makes a comeback, Cyclicals down
Only four sectors outperformed the benchmark
In sectoral space, Technology (+25%), Private Banks (+9%), Consumer (+5%) and
NBFCs (+3%) are the only positive performers in CY18YTD.
Telecom (-33%), Real Estate (-21%), Utilities (-20%), PSU Banks (-19%), Cement (-
18%), Oil & Gas (-16%) and Metal (-14%) are the key laggards.
Exhibit 61:
Trend in sector performance YoY (%) — Only four sectors outperformed the benchmark
Sector
Technology
Pvt - Banks
Consumer
NBFC
Nifty 50
Healthcare
Capital Goods
Auto
Media
Nifty Midcap100
Metal
Oil
Cement
PSU - Banks
Utilities
Real Estate
Telecom
CY08
-51
-56
-14
-52
-52
-33
-65
-57
-59
-59
-74
-55
-60
-33
-60
-82
-48
CY09
133
98
40
109
76
69
104
204
94
99
234
73
84
73
74
70
-10
CY10
32
36
32
38
18
34
9
38
32
19
1
1
37
33
-6
-26
6
CY11
-16
-26
10
-27
-25
-13
-48
-20
-34
-31
-47
-29
5
-39
-40
-52
-9
CY12
-1
63
47
48
28
39
35
40
55
39
19
13
41
46
11
53
-1
Return YoY (%)
CY13
CY14
60
17
1
61
11
18
-8
49
7
31
23
47
-6
50
7
52
6
27
-5
56
-10
8
4
12
-14
37
-26
79
-15
23
-32
8
26
1
CY15
5
2
1
-8
-4
15
-9
-1
12
6
-31
-3
1
-30
-6
-14
-3
CY16
-8
5
3
4
3
-13
-3
9
6
7
37
27
17
9
2
-6
-25
CY17
11
47
32
33
29
0
40
32
46
47
48
34
46
38
20
106
66
CY18YTD
25
9
5
3
2
-3
-9
-9
-13
-14
-14
-16
-18
-19
-20
-21
-33
Market breadth balanced in CY18YTD; 22 Nifty stocks trading higher
TCS (+38%), Kotak Mahindra Bank (+35%), Bajaj Finance (+33%), Tech Mahindra
(+30%) and Infosys (+29%) are the top performers.
HPCL (-39%), Tata Motors (-38%), Vedanta (-31%), Bharti Airtel (-31%) and BPCL
(-29%) are the worst performers.
Exhibit 62:
Best and worst Nifty performers for CY18YTD (%)—~36% companies outperformed the benchmark
38 35
33 30 29
23 20 20
15 12 12 12
7 6 6 4 4 4
2
1 1 0 0
-4 -5 -5 -6 -7 -7
-8 -9 -9 -10 -12
-11 -13
-14 -17
-16 -17 -18 -20
-18 -18 -20
-20
-31
-29 -31
-38
-39
July 2018
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India Strategy | ‘Recovery’ ball starts rolling
Institutional flows: Domestic MFs flows remain strong, FIIs
weakest in decade
DIIs (ex-MFs) turn buyers in June quarter after five quarter of outflows
In CY18YTD, domestic MFs flows have remained strong at USD10.4b; FII flows
are the weakest in a decade at USD-0.6b.
Notably, DIIs (ex-MFs) saw inflow of USD0.6b in the June quarter, after five
successive quarters of outflows.
Exhibit 64:
Quarterly domestic MF flows in equities (USD b)
7.3
10.4
7.1
4.7
4.6
5.3
4.7 5.0
18.4
11.2
Exhibit 63:
Yearly domestic MF flows in equities (USD b)
3.3
1.3
-1.2
-6.1
3.9
2.72.4
1.5
0.1
3.73.9
2.1
1.01.0
0.4
1.7
-3.9 -3.7
-0.6
-1.0 -0.8
-1.3
Exhibit 65:
Yearly FII flows in equities (USD b)
29.3
24.5
17.6
20.0
16.2
3.3
-0.5
-12.2
7.7
2.9
-0.6
Exhibit 66:
Quarterly FII flows in equities (USD b)
6.6
3.2
4.1
6.2
3.5
2.3
0.2
-0.1
6.0
1.21.7
-0.3
-2.6
-4.6
-3.2
-2.7
6.6
4.6
1.8
2.5
2.1
Exhibit 67:
Yearly DII ex-MF flows in equity (USD b)
13.6
6.5
1.4
-1.0
-7.0
-9.3 -8.8
-1.9
-0.8
Exhibit 68:
Quarterly DII ex-MF flows in equity (USD b)
1.3
0.3
0.5
0.5
0.6
4.7
-0.3
-0.2
-0.1
-0.9
-2.0
-2.4
-2.8
-3.0
-0.6
-2.2
-0.5
-0.8
-1.5
-1.5
-1.5
-4.3
-3.9
July 2018
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 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Valuations moderate; now at long-period averages
While the markets remain volatile, the Nifty P/E trades at attractive valuations
of 17.4x, marginally above the historical average of 17.0x.
At 2.7x, the Nifty P/B is near its historical average. RoE stands at 15.8%, above
its long-term average.
Market-cap-to-GDP at 80% (FY19E GDP) is above its long-term average.
Exhibit 70:
12-month forward Nifty P/B (x)
3.5
Exhibit 69:
12-month forward Nifty P/E (x)
25
21
17
13
9
10 Year
Avg: 17.0x
3.0
17.4
2.5
2.0
1.5
10 Year
Avg: 2.5x
2.7
Exhibit 71:
12-month forward Nifty RoE (%)
18.1
16.7
15.3
13.9
12.5
10 Year Avg:
15.2%
Exhibit 72:
India’s market cap to GDP (%)
103
95
Average of 78% for the period
88
71
55
64
66
81
69
80
85
80
15.8
Mid-caps underperform large-caps; still command premium v/s large-caps
Mid-caps have struggled over the last six months, resulting in their
underperformance versus large-caps. In CY18YTD, mid-caps have delivered -14%
returns, as against +2% returns by the Nifty.
Despite the sharp underperformance of mid-caps, their valuation premium
versus large-caps is still at 26%
.
Exhibit 73:
Mid-caps underperformed large-caps in last 12 months
126
117
108
99
90
Nifty Rebased
Nifty Midcap 100 Rebased
114
102
July 2018
46
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Exhibit 74:
Midcaps v/s Nifty P/E (x) – 12-month forward
34.0
28.0
22.0
16.0
10.0
Midcap PE (x)
Nifty PE (x)
Exhibit 75:
Midcaps trading at 26% premium to Nifty
Midcap Vs Nifty PE Prem/(Disc) (%)
85
55
Nifty Avg: 18.8x
Midcap Avg: 19.9x
21.9
17.4
Average: 6%
25
-5
-35
26
Sector valuations: ‘Quality + Earnings Visibility’ to continue attracting
premium in an uncertain and volatile market
Elevated valuations, coupled with challenging macros and a busy political
calendar, will keep the market range-bound in CY18, in our view.
Technology sector trades at a P/E of 17.9x, a 14% premium to its historical
average of 15.8x. A gradual recovery in the growth rates has reversed the
downward trajectory on valuations seen throughout FY16 and FY17. Seasonal
strength of the first half, coupled with improved deal wins/commentary, would
continue supporting valuations. The recent depreciation in the INR against the
USD provides further uptick on earnings.
NBFCs trade at a P/B of 3.5x, above their historical average (22% premium). G-
Sec yields have increased to ~7.9%. While this is impacting all NBFCs, those with
a higher share of market borrowings would be impacted more.
Relative to
Sensex P/E (%)
10 Yr
Current
Avg
-2
-16
16
-18
32
38
8
122
28
-22
38
-51
-43
121
-1
-45
-4
-50
3
46
11
79
32
-22
29
-32
-34
54
-9
-17
PB (x)
Current
3.2
2.8
0.8
3.5
2.8
2.5
11.8
3.2
1.8
4.7
1.3
1.5
8.7
4.4
2.1
1.2
10 Yr
Avg
3.0
2.2
0.9
2.9
3.5
2.3
9.6
3.9
1.8
4.1
1.4
1.5
6.7
4.1
2.4
1.6
Prem/
Disc (%)
6.3
26.8
-12.3
21.8
-18.2
10.1
22.2
-17.1
0.8
14.7
-6.3
-0.7
30.9
9.0
-13.4
-23.5
Relative to
Sensex P/B (%)
10 Yr
Current
Avg
21
18
6
-69
32
7
-7
342
21
-31
75
-51
-43
227
66
-22
-56
-14
-64
13
35
-12
279
52
-30
58
-46
-40
160
58
-5
-39
Exhibit 76:
Sector valuations - Snapshot
PE (x)
Sector
Current
Auto
Banks - PVT
Banks - PSU
NBFC
Capital Goods
Cement
Consumer
Healthcare
Infrastructure
Media
Metals
Oil & Gas
Retail
Technology
Telecom
Utilities
17.7
20.9
14.8
23.8
24.9
19.6
40.1
23.2
14.1
25.0
8.8
10.3
39.8
17.9
Loss
9.9
10 Yr
Avg
14.8
16.8
8.6
18.0
26.0
19.7
31.0
23.2
13.8
22.5
11.8
11.2
27.1
15.8
-
14.0
Prem/
Disc (%)
19.4
24.5
71.5
32.6
-4.0
-0.9
29.3
0.0
2.1
11.0
-25.5
-7.7
46.7
13.6
-
-29.2
July 2018
47
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
MOSL model
portfolio
Sector weight / Portfolio picks
Financials
Private
HDFC Bank
ICICI Bank
Yes Bank
IndusInd Bank
RBL
PSU
SBI
NBFCs
HDFC
ICICI Prudential Life
Shriram Transport Finance
Auto
Maruti
M&M
Motherson Sumi
Bajaj Auto
Consumption / Retail
Titan
Pidilite Inds.
Emami
United Spirits
Energy
Reliance Inds
HPCL
IOC
Petronet LNG
Cap Goods, Infra & Cement
Larsen & Toubro
Shree Cement
Thermax
Technology / Media
Infosys
Sun TV
Healthcare
Sun Pharma
Lupin
Utilities / Metals
Hindalco
Power Grid Corp.
Midcaps
Info Edge
Future Consumer
Persistent
Birla Corp
Oberoi Realty
Aegis Logistics
UPL
Exide Inds.
Tata Chemicals
Repco Home Fin
Cash
TOTAL
BSE 100
34.0
21.0
8.7
3.6
1.2
2.0
0.0
2.4
2.0
10.6
6.5
0.0
0.3
10.2
2.5
1.7
0.5
0.8
13.1
0.8
0.3
0.0
0.0
9.9
6.5
0.4
0.6
0.3
7.4
3.1
0.3
0.0
13.0
5.2
0.0
4.9
1.3
0.5
6.0
0.7
0.8
1.6
0.0
0.0
0.0
0.0
0.0
0.0
0.5
0.2
0.2
0.0
0.0
100.0
Most Weight
34.7
20.7
8.7
4.0
3.0
3.0
2.0
3.0
3.0
11.0
5.0
3.0
3.0
11.0
4.0
3.0
2.0
2.0
11.0
4.0
3.0
2.0
2.0
10.0
4.0
2.0
2.0
2.0
8.0
4.0
2.0
2.0
7.3
5.0
2.3
4.0
2.0
2.0
4.0
2.0
2.0
10.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
0.0
100.0
Weight relative to
BSE100
0.7
-0.3
0.0
0.4
1.8
1.0
2.0
0.6
1.0
0.4
-1.5
3.0
2.7
0.8
1.5
1.3
1.5
1.2
-2.1
3.2
2.7
2.0
2.0
0.1
-2.5
1.6
1.4
1.7
0.6
0.9
1.7
2.0
-5.7
-0.2
2.3
-0.9
0.7
1.5
-2.0
1.3
1.2
8.4
1.0
1.0
1.0
1.0
1.0
1.0
0.5
0.8
0.8
1.0
0.00
July 2018
48
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
THIS PAGE INTENTIONALLY LEFT BLANK
July 2018
49
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Sectors & Companies
BSE Sensex: 35,645
S&P CNX: 10,770
July 2018
MOSL Universe:
1QFY19 Highlights
&
Ready Reckoner
Note:
In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year
numbers. This is because of differences in classification of account heads in the company’s quarterly and annual
results or because of differences in the way we classify account heads as opposed to the company.
All stock prices and indices as on 4 July 2018, unless otherwise stated.
July 2018
50
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
MOSL Universe: 1QFY19 aggregate performance highlights
Exhibit 77:
Quarterly Performance - MOSL Universe (INR b)
Sector
(Nos of Companies)
Auto (16)
Capital Goods (14)
Cement (10)
Consumer (18)
Financials (31)
Private Banks (10)
PSU Banks (4)
Life Insurance (2)
NBFC (15)
Healthcare (22)
Infrastructure (4)
Logistics (2)
Media (9)
Metals (10)
Oil & Gas (14)
Excl. OMCs (11)
Retail (2)
Technology (15)
Telecom (4)
Utilities (7)
Others (22)
MOSL (200)
MOSL Excl. OMCs (197)
Sensex (30)
Nifty (50)
Jun-18
1,643
524
301
495
874
304
298
102
170
433
45
33
71
1,462
4,737
1,965
51
1,006
338
671
354
13,038
10,266
5,784
9,796
Sales
Var % YoY
21.8
10.8
23.8
17.1
15.6
12.5
13.0
20.7
23.5
17.2
13.8
11.0
24.8
22.9
34.1
43.2
9.1
12.4
-11.0
11.4
20.2
22.1
20.5
20.4
22.7
Var % QoQ
-11.3
-28.1
0.1
7.7
-6.1
1.1
3.8
-41.7
1.6
3.5
18.3
5.4
9.2
-7.3
9.8
4.5
4.1
4.6
1.1
-5.2
8.0
-0.4
-3.7
-5.7
-0.1
Jun-18
209
50
55
118
643
267
237
7
133
87
13
5
22
322
528
395
6
231
96
242
68
2,693
2,560
1,636
2,070
EBITDA
Var % YoY
38.7
38.4
1.0
22.3
20.9
16.2
24.7
-2.9
25.6
37.0
13.0
10.5
28.9
47.0
23.7
43.0
26.6
17.6
-18.1
23.1
20.9
23.4
26.0
28.0
23.1
Var % QoQ
-14.7
-46.1
0.2
3.9
7.1
-1.6
22.9
1.0
2.3
11.0
27.0
13.0
17.1
-6.8
8.0
12.1
-0.1
2.8
-8.5
-5.1
28.5
-0.1
0.1
-3.4
-2.8
Jun-18
95
30
27
80
195
114
-3
8
77
48
4
3
11
120
289
197
4
177
-10
112
35
1,220
1,128
726
949
PAT
Var % YoY Var % QoQ
33.6
-18.5
39.2
-45.6
-3.9
3.5
23.8
2.2
-0.5
LP
9.4
55.6
PL
Loss
6.1
11.4
38.4
0.4
44.3
-10.5
3.4
-11.7
3.9
30.1
41.1
25.1
74.6
-18.0
44.0
1.3
25.5
4.5
29.3
-7.1
13.8
2.0
PL
Loss
34.9
-5.2
20.4
36.5
25.5
20.7
21.5
23.4
21.1
12.6
25.7
8.4
Exhibit 78:
Quarter-wise sales growth (% YoY)
22.1%
15.2%
11.8%
15.4%
Exhibit 79:
Quarter-wise net profit growth (% YoY)
25.5%
14.3%
16.2%
-6.1%
Sep-17
Dec-17
Mar-18
June-18E
Sep-17
Dec-17
Mar-18
June-18E
Exhibit 80:
Sectoral sales growth - quarter ended Jun-18
(%)
34
25 24 23
Exhibit 81:
Sectoral net profit growth - quarter ended Jun-
18 (%)
75
22
22
17 17 16
14 12 11 11 11
9
44 44 41 39
35 34 29
26
24
14
4
3
-1 -4
PL
-11
For Banks: Sales = Net Interest Income, EBITDA = Operating Profits
For Life Insurance: Sales = Net Premium, EBITDA = Operating Profits
July 2018
51
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Annual performance - MOSL universe (INR Billion)
Sector
Sales (INR B)
FY18 FY19E FY20E
Auto (16)
6,860 7,783 8,622
Cap. Goods (17) 2,385 2,683 2,947
Cement (13)
1,555 1,723 2,014
Consumer (18) 1,764 2,037 2,346
Financials (37) 3,708 4,327 5,106
Pvt Bks (11) 1,157 1,399 1,690
PSU Bks (7) 1,435 1,573 1,765
Life Ins. (2) 502 604
737
NBFC (17)
613 751
914
Healthcare (22) 1,626 1,847 2,121
Infr. (4)
147 174
232
Logistics (2)
119 137
156
Media (10)
252 294
327
Metals (10)
5,488 6,022 5,719
Oil & Gas (14) 17,932 23,767 25,879
Excl.OMCs (11) 11,474 15,325 16,412
Retail (2)
191 232
280
Tech. (15)
3,708 4,230 4,767
Telecom (4)
1,431 1,419 1,583
Utilities (7)
2,657 2,890 3,119
Others (23)
1,341 1,606 1,886
MOSL (214)
51,165 61,173 67,105
Mosl OMCs-211 44,707 52,731 57,637
Chg. YoY (%)
FY18 FY19E FY20E
14.6 13.5 10.8
8.8 12.5 9.8
29.3 10.8 16.9
6.5 15.5 15.2
12.3 16.7 18.0
15.1 20.9 20.8
2.9
9.6 12.2
21.1 20.3 22.1
26.2 22.5 21.6
0.8 13.6 14.8
7.7 18.3 32.9
8.8 14.9 13.8
10.2 16.8 11.2
22.1 9.7 -5.0
18.3 32.5 8.9
18.3 33.6 7.1
20.8 21.3 20.5
4.3 14.1 12.7
-11.7 -0.9 11.6
8.8
8.8
7.9
14.0 19.8 17.4
13.6 19.6 9.7
13.0
17.9
9.3
EBIDTA (INR B)
FY18 FY19E FY20E
919 1,132 1,307
257 301 339
279 346 428
420 499 582
2,647 3,112 3,688
1,004 1,214 1,498
1,110 1,250 1,402
25
27
31
508 621 757
319 398 480
46
52
60
16
20
24
77
95
110
1,049 1,279 1,291
2,193 2,624 2,844
1,668 2,140 2,324
21
26
33
849 1,002 1,144
448 435 525
826 1,030 1,165
255 306 362
10,624 12,657 14,381
Chg. YoY (%)
FY18 FY19E FY20E
10.3 23.1 15.4
21.5 17.0 12.4
18.1 23.9 23.7
9.9 18.7 16.7
6.3 17.5 18.5
9.2 21.0 23.4
-3.5 12.5 12.2
46.1 9.0 14.5
25.8 22.2 21.8
-11.2 24.7 20.5
0.8 13.2 15.0
8.5 21.4 22.8
10.7 22.9 16.2
29.8 21.9 0.9
19.9 19.6 8.4
21.0 28.3 8.6
49.1 27.3 23.6
3.3 18.0 14.2
-16.9 -2.9 20.8
12.7 24.7 13.1
14.6 19.6 18.3
10.5 19.1 13.6
20.5
PAT (INR B)
Chg. YoY (%)
FY18 FY19E FY20E FY18 FY19E FY20E
386 524 631 12.9 35.7 20.4
148 173 209 15.2 17.0 20.8
101 159 208 -0.9 57.3 31.0
288 341 401 10.4 18.6 17.6
364 1,123 1,638 -47.2 208.2 45.9
407 593 796 -1.2 45.6 34.4
-335
163 386 -849.4 -149 136.3
27
33
39
6.0 20.8 17.0
265 334 417 27.6 25.9 25.0
188 230 287 -18.5 22.1 25.1
12
14
16 43.5 13.5 13.3
10
15
18
4.7 48.8 22.0
37
49
60
2.9 32.6 22.0
401 530 540 74.8 32.2 1.8
1,156 1,295 1,464 5.6 12.1 13.1
855 1,038 1,183 6.0 21.4 13.9
13
17
22 50.9 30.5 26.9
678 742 849 5.3 9.5 14.3
1
-22
7
PL Loss LP
370 451 507 13.3 21.7 12.6
129 151 188 17.0 16.9 25.0
4,282 5,792 7,046 -0.2 35.3 21.7
39.0
22.2
10,098 12,173 13,861 10.2
13.9 3,982 5,535 6,765 -0.6
Sensex (30)
12,386 14,520 15,542 12.4 17.2 7.0 3,224 3,862 4,375 10.1 19.8 13.3 1,397 1,836 2,209 7.1 31.5 20.3
Nifty (50)
17,919 21,285 22,967 13.7 18.8 7.9 3,957 4,700 5,333 10.8 18.8 13.5 1,793 2,283 2,735 7.8 27.3 19.8
For Banks: Sales = Net Interest Income, EBIDTA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float; MOSL Excl. OMCs (211)*
Valuations - MOSL universe
Sector
Auto (16)
Capital Goods (17)
Cement (13)
Consumer (18)
Financials (37)
Private Banks (11)
PSU Banks (7)
Life Insurance (2)
NBFC (17)
Healthcare (22)
Infrastructure (4)
Logistics (2)
Media (10)
Metals (10)
Oil & Gas (14)
Excl. OMCs (11)
Retail (2)
Technology (15)
Telecom (4)
Utilities (7)
Others (23)
MOSL (214)
MOSL Excl. OMCs (211)
Sensex (30)
Nifty (50)
N.M.: Not Meaningful.
FY18
25.7
29.0
34.4
51.2
71.8
33.5
-10.1
53.3
28.9
30.5
16.1
34.2
30.8
12.5
10.8
12.3
74.2
21.8
2898
12.2
29.5
25.7
27.1
25.7
23.5
PE (x)
FY19E
18.9
24.8
21.9
43.2
23.3
23.0
20.8
44.1
23.0
25.0
14.2
23.0
23.3
9.5
9.6
10.2
56.9
20.0
-110
10.0
25.2
19.0
19.5
19.2
18.6
EV / EBIDTA (x)
FY20E FY18 FY19E FY20E
15.7
9.9
8.1
6.7
20.5 20.4 16.2 13.8
16.7 13.9 10.0 8.0
36.7 30.1 28.8 24.5
16.0 N.M N.M N.M
17.1 N.M N.M N.M
8.8
N.M N.M N.M
37.7 N.M N.M N.M
18.4 N.M N.M N.M
20.0 17.2 14.7 11.9
12.5
8.0
6.7
6.2
18.8 19.1 15.7 12.5
19.1 16.0 11.3 9.3
9.3
7.7
6.1
6.1
8.5
7.1
5.5
4.8
8.9
7.8
5.7
4.9
44.8 47.0 36.2 29.4
17.5 13.0 13.6 11.7
324.1 9.2
8.9
7.3
8.9
9.6
7.5
6.7
20.1 15.3 12.2 10.1
15.6 N.M N.M N.M
16.0 N.M N.M N.M
16.0 N.M N.M N.M
15.5 N.M N.M N.M
FY18
3.9
3.2
3.0
13.7
2.6
3.5
0.8
12.5
4.2
3.8
2.1
3.0
3.9
1.5
1.6
1.7
16.1
5.3
2.1
1.8
3.9
3.0
3.1
3.2
3.1
P/BV (x)
FY19E FY20E
3.4
2.9
3.0
2.5
2.7
2.3
12.2 11.3
2.4
2.1
2.9
2.6
0.8
0.8
10.4 8.7
3.6
3.1
3.5
3.0
1.8
1.6
2.8
2.6
3.5
3.1
1.3
1.2
1.4
1.3
1.5
1.3
14.2 13.2
4.9
4.4
2.2
2.3
1.7
1.6
3.4
3.1
2.7
2.4
2.8
2.5
2.8
2.5
2.8
2.5
FY18
15.2
11.0
8.6
26.7
3.6
10.4
-8.0
23.5
14.4
12.6
12.8
8.9
12.7
11.8
14.9
13.5
21.7
24.2
0.1
15.0
13.1
11.6
11.2
12.3
13.1
RoE (%)
Div Yld (%) EARN. CAGR
FY19E FY20E
FY17
(FY18-FY20)
17.9 18.7
1.0
27.8
11.9 12.4
1.2
18.9
12.2 13.9
0.6
43.6
28.3 30.7
1.5
18.1
10.3 13.4
1.0
112.1
12.8 15.1
0.9
39.9
4.1
9.0
0.9
LP
23.6 23.1
0.0
18.9
15.5 16.9
1.3
25.4
13.8 15.2
0.5
23.6
12.8 12.6
1.0
13.4
12.3 13.9
1.6
34.8
15.2 16.4
0.7
27.2
14.0 13.0
4.0
16.0
14.9 15.1
2.9
12.6
14.5 14.7
2.2
17.6
25.0 29.4
0.7
28.7
24.4 25.0
2.0
11.9
-2.0
0.7
1.4
199.0
16.8 17.5
4.1
17.1
13.6 15.2
1.2
20.9
14.3 15.6
1.7
28.3
14.2 15.6
1.6
30.4
14.5 15.6
1.5
19.2
14.9 15.9
1.5
18.0
July 2018
52
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Quarterly performance
CMP
(INR)
Automobiles
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
CEAT
Eicher Motors
Endurance Tech.
Escorts
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Motherson Sumi
Tata Motors
TVS Motor
Sector Aggregate
Capital Goods
ABB
Bharat Electronics
BHEL
Blue Star
CG Consumer Elect.
CG Power & Indl.
Cummins India
Engineers India
GE T&D India
Havells India
Larsen & Toubro
Siemens
Thermax
Voltas
Sector Aggregate
Cement
ACC
Ambuja Cements
Birla Corporation
Dalmia Bharat
Grasim Industries
India Cements
Ramco Cements
Sanghi Inds.
Shree Cement
Ultratech Cement
Sector Aggregate
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Future Consumer
777
128
2,978
636
17,545
1,271
28,257
1,251
879
262
3,468
899
9,221
295
267
581
Rating
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
Sales (INR m)
Var
Var
Jun-18
% YoY
% QoQ
16,771
63,193
77,888
14,776
34,429
16,933
25,173
18,667
14,213
25,865
90,441
130,761
225,376
155,667
690,866
41,894
1,642913
26,680
18,601
60,300
14,470
11,600
13,749
14,250
4,400
10,600
24,470
262,600
31,285
11,150
19,948
524,103
37,127
29,805
17,063
24,323
45,114
13,920
12,183
2,759
30,378
88,678
301,349
46,546
27,617
11,102
21,481
6,741
8,609
12.0
49.1
43.1
23.0
30.0
16.0
25.8
20.4
22.2
23.0
13.5
17.9
28.5
18.6
18.1
23.2
21.8
20.0
7.8
9.5
-1.0
9.9
9.1
6.3
17.2
-12.3
31.5
10.3
18.0
27.9
2.6
10.8
7.5
4.2
17.0
18.8
64.6
7.9
19.9
-4.0
18.1
33.8
23.8
22.0
22.0
13.5
20.0
27.0
30.0
6.1
-28.0
15.0
0.7
9.0
1.2
-0.4
4.5
-1.0
5.2
5.6
-0.9
6.5
1.0
-24.3
4.9
-11.3
5.6
-48.5
-40.6
-2.1
3.0
-3.9
15.6
-13.7
30.2
-3.5
-35.4
-4.7
-22.7
-2.6
-28.1
2.4
4.1
3.4
-7.8
-2.0
-0.4
-2.7
8.8
8.1
-1.5
0.1
3.8
8.8
1.7
5.7
9.3
6.7
EBITDA (INR m)
Var
Var
Jun-18
% YoY % QoQ
2,445
5,871
15,162
4,283
6,541
1,786
7,986
2,679
1,691
3,699
14,505
20,748
34,195
14,861
69,245
3,264
208,962
2,080
1,651
1,700
915
1,503
1,102
2,230
935
650
3,185
27,800
3,149
1,030
2,290
50,220
5,033
4,992
2,635
5,505
8,417
1,702
2,697
480
6,774
16,726
54,961
8,816
4,422
2,962
4,136
1,423
177
26.8
91.8
61.6
28.5
49.0
226.8
28.6
25.4
73.4
14.1
3.6
42.7
46.7
25.3
39.5
54.4
38.7
41.2
1.1
LP
1.3
16.2
68.8
14.2
14.3
-38.4
84.7
35.2
39.6
42.8
7.8
38.4
-20.8
-23.3
9.6
-1.1
51.6
-8.3
-3.0
-27.3
-5.0
7.2
1.0
32.5
34.6
33.5
33.9
77.5
106.6
16.0
-43.2
15.3
2.5
-5.4
-9.6
0.2
2.2
-2.7
9.4
5.8
4.0
13.4
-0.9
-36.4
16.3
-14.7
10.1
-79.3
-86.2
-1.3
-8.6
-4.7
28.9
17.6
263.3
-11.0
-48.4
-2.5
-25.5
-9.6
-46.1
2.5
-1.6
5.1
-6.5
-0.3
7.3
0.1
16.4
7.6
-1.8
0.2
5.0
11.4
-3.7
-14.7
-17.9
9.4
PAT (INR m)
Var
Var
Jun-18
% YoY % QoQ
1,306
3,316
12,573
2,418
4,442
843
6,200
1,260
1,116
2,153
9,897
12,236
22,958
4,513
8,527
1,725
95,482
1,100
1,006
1,050
578
918
633
1,841
910
440
2,105
14,550
2,210
635
1,954
29,930
2,728
3,511
889
1,555
5,740
248
1,386
266
4,487
6,046
26,857
5,821
2,913
1,806
3,606
1,056
1
30.7
176.5
32.8
38.1
46.8
7876.9
34.9
30.5
78.1
13.9
8.3
59.3
47.5
27.3
-12.2
33.2
33.6
46.5
-19.7
29.9
-1.1
14.5
242.0
10.9
11.7
-28.6
73.4
63.0
35.7
56.3
5.1
39.2
-15.2
-10.5
105.8
6.9
65.3
-6.0
-11.1
-15.8
2.0
-32.1
-3.9
32.8
34.9
32.4
29.4
74.5
LP
18.9
-50.3
16.4
3.6
-10.9
-9.3
-4.4
8.3
-0.9
13.6
2.3
9.0
11.4
-14.7
-72.7
4.2
-18.5
7.3
-82.0
-77.0
25.8
-11.0
1.0
14.2
0.0
44.1
-10.3
-54.1
0.6
-16.1
0.7
-45.6
11.3
29.2
-32.2
-16.0
6.7
-29.6
0.8
43.0
12.4
-4.3
3.5
17.4
10.4
-8.1
-9.0
-12.6
LP
1,185
104
69
647
226
58
650
123
272
546
1,259
972
1,033
526
Sell
Buy
Sell
Neutral
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
Neutral
1,353
201
718
2,241
966
105
700
82
15,937
3,789
Neutral
Neutral
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
1,292
6,301
1,165
380
516
49
Neutral
Buy
Buy
Buy
Buy
Buy
July 2018
53
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Quarterly performance
CMP
(INR)
1,263
6,409
1,676
264
242
343
9,867
9,856
28,001
1,068
1,179
667
Rating
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Neutral
Neutral
Buy
Buy
Buy
Neutral
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Jyothy Labs
Marico
Nestle
P&G Hygiene
Page Industries
Pidilite Inds.
United Breweries
United Spirits
Sector Aggregate
Healthcare
Alembic Pharma
Alkem Lab
Ajanta Pharma
Aurobindo Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’ s Labs
Fortis Health
Glenmark Pharma
Granules India
GSK Pharma
IPCA Labs.
Jubilant Life
Laurus Labs
Lupin
Sanofi India
Shilpa Medicare
Strides Shasun
Sun Pharma
Torrent Pharma
Sector Aggregate
Infrastructure
Ashoka Buildcon
IRB Infra
KNR Constructions
Sadbhav Engineering
Sector Aggregate
Logistics
Allcargo Logistics
Concor
Sector Aggregate
Media
D B Corp
Dish TV
Ent.Network
HT Media
Jagran Prakashan
Sales (INR m)
Var
Var
Jun-18
% YoY
% QoQ
25,204
16.0
1.0
11,134
13.0
-5.6
98,084
15.0
7.8
113,483
14.0
7.2
4,784
30.0
-7.4
19,673
17.0
32.9
26,968
13.0
-1.5
5,532
10.0
-2.8
8,250
18.5
35.6
18,548
22.0
24.9
19,253
15.0
31.0
22,183
24.5
2.1
495,192
17.1
7.7
8,593
17,552
4,705
42,026
11,856
32,673
40,447
10,511
36,081
12,332
23,061
4,824
7,041
8,444
20,971
5,533
42,632
6,786
2,041
6,334
70,781
18,069
433,295
9,247
19,979
4,859
11,034
45,119
16,602
16,026
32,628
6,290
15,484
1,186
6,209
6,176
32.6
35.5
-0.5
14.2
27.0
48.7
14.7
28.0
8.8
6.6
-1.0
25.0
20.0
18.4
31.4
12.6
10.2
13.0
21.1
-3.7
14.8
31.5
17.2
27.9
10.0
1.1
16.8
13.8
11.9
10.0
11.0
5.8
109.6
13.6
3.7
4.4
0.7
16.0
-11.3
3.8
1.3
0.5
9.4
-3.4
2.1
13.5
2.6
-4.2
-5.9
7.9
-6.9
-1.2
5.7
9.9
-13.0
-4.6
5.5
4.9
3.5
31.7
44.5
-22.2
-0.1
18.3
8.1
2.8
5.4
10.9
1.0
-25.6
10.6
12.7
EBITDA (INR m)
Var
Var
Jun-18
% YoY % QoQ
4,383
27.0
-23.2
2,158
29.7
-13.7
22,930
22.9
12.0
42,142
12.5
1.7
739
75.4
-16.4
3,499
7.9
38.7
6,084
37.4
-12.0
1,383
5.5
-5.5
1,700
24.5
15.8
3,916
22.0
43.0
3,716
16.7
78.5
2,958
87.9
7.9
117,544
22.3
3.9
1,796
3,335
1,280
9,036
2,596
8,005
7,483
3,732
6,495
925
3,459
772
951
1,399
4,257
1,057
7,674
1,495
452
855
15,572
4,042
86,667
1,148
9,290
739
1,324
12,500
914
3,836
4,749
1,874
4,395
246
785
1,624
77.1
253.4
-2.1
7.4
35.2
188.7
15.7
52.4
112.4
7.4
-36.4
0.3
LP
550.3
26.1
9.5
-0.1
29.6
30.7
35.9
47.8
36.1
37.0
17.7
13.6
-12.6
24.0
13.0
-11.3
17.4
10.5
0.5
118.4
47.0
-1.7
0.7
3.7
134.8
-8.3
12.4
11.4
-8.0
34.4
-3.5
17.9
630.0
17.3
76.9
-38.6
27.3
-7.0
-9.6
8.3
11.3
-4.8
-1.2
9.9
11.0
11.0
42.1
41.0
-38.8
6.8
27.0
23.7
10.7
13.0
91.3
9.7
-30.3
-2.5
34.8
PAT (INR m)
Var
Var
Jun-18
% YoY % QoQ
2,979
28.0
-29.6
1,636
23.7
-22.8
16,002
23.9
13.6
29,092
13.6
-0.8
433
78.4
-11.0
2,541
7.7
38.7
3,850
53.6
-12.3
888
13.8
-2.9
1,113
30.4
18.1
2,759
22.1
11.8
1,908
17.9
110.0
1,611
152.9
-13.0
80,015
23.8
2.2
1,120
2,350
899
5,624
1,154
5,098
3,930
2,860
2,702
27
1,810
363
790
756
2,011
448
3,444
922
394
157
9,696
1,533
48,087
713
2,493
417
748
4,371
496
2,668
3,164
1,145
687
60
428
891
67.9
228.4
-8.3
7.6
88.3
268.3
-3.9
62.0
357.2
-51.5
-45.7
-1.4
473.4
LP
36.7
15.0
-3.8
25.1
64.1
226.8
84.5
-18.4
44.3
15.2
4.8
-38.3
34.7
3.4
-18.8
9.6
3.9
4.0
LP
263.0
3.0
2.9
19.4
146.5
-4.9
3.9
-11.2
-16.0
17.8
9.3
-10.6
LP
19.4
77.5
-25.1
47.4
-29.3
-0.7
-67.0
11.7
29.6
49.6
5.4
-44.8
-10.5
-32.3
4.0
-47.7
7.0
-11.7
168.0
18.8
30.1
100.6
-43.3
-48.5
-42.9
51.0
539
1,867
1,030
625
628
395
629
1,100
2,311
144
597
84
2,911
714
713
490
933
5,193
378
410
579
1,427
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
227
210
224
276
Buy
Neutral
Buy
Buy
117
649
Buy
Buy
263
72
699
73
138
Buy
Buy
Buy
Neutral
Buy
July 2018
54
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Quarterly performance
CMP
(INR)
313
1,379
793
541
Rating
Buy
Buy
Buy
Buy
Music Broadcast
PVR
Sun TV
Zee Entertainment
Sector Aggregate
Metals
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
Rain Industries
SAIL
Tata Steel
Vedanta
Sector Aggregate
Oil & Gas
Aegis Logistics
BPCL
GAIL
Gujarat Gas
Gujarat State Petronet
HPCL
IOC
Indraprastha Gas
Mahanagar Gas
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Oil & Gas Sector Aggregate
Oil & Gas Excl. OMCs
Retail
Jubilant Foodworks
Titan Company
Retail Sector Aggregate
Technology
Cyient
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
L&T Infotech
Mindtree
MphasiS
NIIT Tech.
Persistent Systems
Tata Elxsi
TCS
Sales (INR m)
Var
Var
Jun-18
% YoY
% QoQ
770
9.5
1.4
7,003
10.0
19.7
9,711
23.5
35.5
17,838
15.8
3.4
70,667
24.8
9.2
318,557
55,531
84,950
194,275
28,206
26,278
36,230
159,250
339,686
218,558
1461,522
15,500
755,835
161,494
18,244
3,614
685,463
1331,200
12,789
5,725
157,599
35,321
259,976
88,925
1205,550
4,737236
1,964738
8,248
42,641
50,889
10,842
139,152
11,346
190,243
10,208
21,376
15,787
18,098
8,067
8,088
3,923
339,273
18.4
21.4
43.1
31.0
56.5
-7.5
37.4
37.5
14.9
19.5
22.9
81.1
32.3
41.6
23.4
21.9
28.2
26.3
21.9
7.9
53.6
51.5
36.3
38.2
44.4
34.1
43.2
21.5
7.0
9.1
19.5
14.5
15.4
11.4
17.3
27.9
22.4
17.8
13.8
11.1
21.4
14.7
1.6
-11.5
-2.3
-5.0
-1.5
-32.3
9.6
-6.5
-6.0
-20.9
-7.3
23.8
15.9
4.7
5.2
3.1
12.7
13.4
3.7
-2.5
5.1
17.8
8.5
3.0
3.1
9.8
4.5
5.8
3.8
4.1
2.1
5.6
8.2
5.2
5.6
6.8
7.8
3.7
2.3
7.5
4.5
5.8
EBITDA (INR m)
Var
Var
Jun-18
% YoY % QoQ
256
15.7
-6.3
1,260
12.5
33.5
5,966
33.1
14.2
5,672
17.1
12.1
22,077
28.9
17.1
36,897
30,817
21,805
42,137
6,920
15,027
6,457
25,884
68,056
68,100
322,100
910
26,990
20,602
1,902
2,994
25,443
80,404
2,922
1,817
10,559
16,131
146,621
8,541
182,039
527,875
395,038
1,297
4,331
5,628
1,424
32,371
1,870
49,945
1,237
3,802
2,295
3,281
1,290
1,321
902
89,253
13.8
29.3
61.2
53.4
204.2
-7.3
38.0
9852.7
36.8
39.7
47.0
60.9
2.4
8.5
-29.5
8.5
-20.6
-12.9
5.4
-10.6
81.2
84.5
48.4
14.8
45.0
23.7
43.0
63.0
18.7
26.6
22.8
20.7
17.0
9.5
57.1
35.8
59.9
42.9
16.4
26.6
22.9
20.4
2.7
-14.9
2.1
-14.4
9.9
-27.8
0.7
-0.4
4.7
-13.1
-6.8
30.3
-17.6
21.5
-14.6
3.5
-8.0
6.1
6.1
3.2
1.1
101.5
28.8
3.9
-1.4
8.0
12.1
1.5
-0.5
-0.1
-4.5
6.6
15.0
1.3
12.6
7.5
-2.6
6.0
-9.0
18.9
-5.1
3.2
PAT (INR m)
Var
Var
Jun-18
% YoY % QoQ
154
42.1
-5.3
452
1.7
72.3
3,509
39.4
21.1
3,774
50.0
63.4
11,101
41.1
25.1
12,336
23,811
-138
17,757
4,348
9,327
2,863
5,388
26,821
17,576
120,089
589
18,706
12,629
617
1,659
15,185
57,714
1,815
1,073
5,403
10,614
62,722
5,591
94,362
288,679
197,074
542
2,988
3,530
1,109
23,505
1,497
37,842
862
3,355
1,648
2,783
778
931
593
71,081
23.3
26.9
Loss
168.1
237.0
-13.0
88.9
LP
74.7
15.2
74.6
34.1
151.2
23.1
-40.9
8.7
64.2
115.6
12.6
-13.7
130.9
135.7
61.5
27.8
3.9
44.0
25.5
127.2
20.0
29.3
26.6
8.3
22.3
8.5
55.3
25.5
77.1
48.7
51.6
24.0
19.1
19.6
6.7
-6.8
PL
-33.5
18.0
-32.2
14.0
-10.5
-17.8
-22.8
-18.0
22.1
-30.0
25.5
-6.5
5.4
-13.1
10.6
10.4
2.5
-0.3
22.5
6.0
7.0
-0.2
1.3
4.5
-20.4
-4.2
-7.1
-6.1
5.5
11.4
2.6
2.8
-0.7
-2.8
11.0
-9.7
26.3
-15.7
3.0
224
280
216
312
62
104
197
80
569
228
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
210
368
349
733
179
253
155
258
811
78
208
156
220
990
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
1,429 Neutral
887 Buy
734
925
462
1,345
276
1,644
1,010
1,090
1,111
827
1,357
1,870
Neutral
Neutral
Sell
Buy
UR
Neutral
Buy
Neutral
Neutral
Buy
Buy
Neutral
July 2018
55
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Quarterly performance
CMP
(INR)
653
263
1,243
Rating
Buy
Neutral
Buy
Tech Mahindra
Wipro
Zensar Tech
Technology Sector Aggregate
Telecom
201,218
Bharti Airtel
366 Buy
36,257
Bharti Infratel
300 Neutral
60,064
Idea Cellular
55
Buy
40,413
Tata Comm
588 Buy
Telecom Sector Aggregate
337,951
Utilities
18,514
CESC
878 Buy
244,489
Coal India
264 Buy
23,630
JSW Energy
66
Neutral
21,975
NHPC
23
Buy
210,958
NTPC
153 Buy
81,457
Power Grid Corp.
183 Buy
69,477
Tata Power
72
Neutral
670,501
Sector Aggregate
Others
26,101
Arvind
395 Neutral
43,897
Avenue Supermarts
1,542 Sell
1,214
BSE
855 Buy
9,381
Castrol India
162 Buy
25,563
Coromandel International
434 Buy
1,691
Delta Corp
225 Buy
4,361
Indo Count Inds.
68
UR
2,580
Info Edge
1,167 Buy
72,052
Interglobe Aviation
1,082 Neutral
6,166
Kaveri Seed
554 UR
775
MCX
737 Buy
6,453
Navneet Education
128 Neutral
10,950
Oberoi Realty
472 Buy
6,488
P I Industries
788 Buy
4,487
Phoenix Mills
648 Buy
20,538
Quess Corp
1,094 Buy
2,731
S H Kelkar
223 Buy
15,248
SRF
1,647 Buy
27,919
Tata Chemicals
693 Buy
11,573
Team Lease Serv.
2,972 Buy
12,300
Trident
55
Buy
41,934
UPL
625 Buy
Sector Aggregate
354,402
PL: Profit to Loss; LP: Loss to Profit; UR: Under Review
Sales (INR m)
Var
Var
Jun-18
% YoY
% QoQ
81,331
10.9
1.0
139,590
2.4
1.4
8,674
17.7
6.5
1,005997 12.4
4.6
-8.4
2.9
-26.5
-6.2
-11.0
-15.2
27.6
5.9
-5.6
4.9
13.4
-0.3
11.4
5.5
22.0
13.3
7.8
14.4
31.5
1.0
16.0
25.2
4.4
31.0
14.2
320.0
17.3
13.3
58.3
16.2
9.8
8.7
35.7
5.3
12.6
20.2
2.5
-1.0
-2.1
0.8
1.1
3.1
-9.1
33.1
93.3
-9.8
4.3
-12.0
-5.2
-12.7
15.2
-12.4
1.2
7.8
-1.4
2.9
7.2
24.2
1382.0
9.9
203.5
217.4
3.8
2.8
8.6
-4.2
-5.4
9.3
18.4
3.8
-26.3
8.0
EBITDA (INR m)
Var
Var
Jun-18
% YoY % QoQ
13,215
41.4
-6.4
27,445
2.9
3.1
1,196
60.0
24.5
230,846
17.6
2.8
66,551
15,232
8,854
5,691
96,329
4,235
69,680
7,103
12,299
61,288
72,069
15,091
241,767
2,323
3,841
218
2,520
2,019
558
641
745
21,407
2,170
296
1,916
5,059
1,557
2,207
1,212
415
2,455
5,249
259
2,340
8,638
68,046
-14.2
-3.3
-52.8
1.9
-18.1
-30.2
104.0
-18.2
-11.3
16.3
14.9
-17.6
23.1
16.1
26.7
7.6
20.3
17.8
23.1
-1.8
5.9
9.7
4.9
123.7
18.0
273.3
19.4
25.4
61.1
-2.8
17.4
16.7
98.6
1.9
15.2
20.9
-4.0
-4.3
-38.8
2.5
-8.5
59.8
-30.8
68.5
244.0
-1.3
7.8
1.4
-5.1
-13.2
30.4
-21.7
-8.1
19.4
-17.3
7.6
25.5
90.6
LP
22.8
703.9
175.9
15.6
2.1
10.8
53.5
-12.0
2.4
13.9
7.9
-29.1
28.5
PAT (INR m)
Var
Var
Jun-18
% YoY % QoQ
9,312
16.6
-23.8
20,403
-1.7
9.3
836
77.2
15.1
176,537
13.8
2.0
-660
6,606
-15,688
17
-9,726
1,836
47,085
1,451
7,325
25,387
24,230
4,333
111,647
620
2,192
529
1,698
973
361
309
652
8,104
2,115
373
1,245
3,332
1,165
656
864
262
1,196
1,731
280
831
5,819
35,306
PL
-0.5
Loss
-94.8
PL
3.1
100.2
-33.2
-15.1
7.3
13.3
164.6
34.9
9.2
25.4
6.7
23.1
29.0
71.0
-3.4
1.5
-0.1
4.5
42.1
13.6
264.6
16.4
54.0
123.3
-2.5
15.2
6.7
70.7
-6.6
16.1
20.4
Loss
4.1
Loss
-95.9
Loss
-37.1
-23.7
LP
286.7
-9.3
14.7
59.7
-5.2
-46.3
31.2
-6.8
-6.6
32.3
-21.2
15.3
15.2
588.8
LP
9.8
723.0
133.1
10.5
-29.2
14.1
13.3
-3.5
-44.6
30.1
63.3
-23.9
36.5
July 2018
56
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Quarterly performance
Sector
CMP
(INR)
Rating
NII (INR M)
Var
Var
Jun-18
% YoY % QoQ
OP. PROFITS (INR M)
Var
Var %
Jun-18
% YoY
QoQ
NET PROFIT (INR M)
Var %
Var %
Jun-18
YoY
QoQ
Financials
Private Banks
Axis Bank
514 Buy
48,889
5.9
DCB Bank
166 Neutral
2,845
22.0
Equitas Holdings
139 Buy
2,381
10.2
Federal Bank
83
Buy
9,557
19.4
HDFC Bank
2,103 Buy
106,146 13.3
ICICI Bank
273 Buy
58,490
4.6
IndusInd Bank
1,975 Buy
22,208
25.2
Kotak Mahindra Bank
1,366 UR
24,925
11.0
RBL Bank
570 Buy
5,472
44.6
Yes Bank
336 Buy
23,266
28.6
Pvt Banking Sector Aggregate
304,177 12.5
PSU Banks
Bank of Baroda
114 Buy
42,302
24.2
Indian Bank
336 Buy
16,855
15.5
Punjab National Bank
76
Neutral
33,413
-13.3
State Bank
258 Buy
205,039 16.5
PSU Banking Sector Aggregate
297,608 13.0
Life Insurance
HDFC Stand. Life
460 UR
51,586
40.9
ICICI Pru Life
372 Buy
50,749
5.3
Life Insurance Sector Aggregate
102,334 20.7
NBFC
Bajaj Finance
2,332 UR
27,987
37.6
Chola. Inv & Fin.
1,498 Buy
8,149
18.7
Dewan Housing
622 Buy
7,072
25.0
GRUH Finance
333 Neutral
1,846
14.2
HDFC
1,923 Buy
29,954
15.9
Indiabulls Housing
1,140 Buy
15,818
33.6
L&T Fin.Holdings
147 Buy
13,563
32.2
LIC Housing Fin
463 Neutral
9,840
5.0
M & M Financial
464 Buy
11,210
30.4
MAS Financial
552 Buy
818
35.8
Muthoot Finance
396 Neutral
10,624
26.0
PNB Housing
1,123 Buy
4,733
37.7
Repco Home Fin
576 Buy
1,125
17.3
Shriram City Union
2,074 Buy
8,438
3.5
Shriram Transport Fin.
1,145 Buy
19,029
20.0
NBFC Banking Sector Aggregate
170,206 23.5
Financials Sector Aggregate
874,326 15.6
PL: Profit to Loss; LP: Loss to Profit; UR: Under Review
For Banks: Sales = Net Interest Income, EBITDA = Operating Profits
For Life Insurance: Sales = Net Premium, EBITDA = Operating Profits
3.3
7.9
-3.9
2.4
-0.4
-2.9
10.6
-3.4
9.3
8.0
1.1
5.7
2.9
9.1
2.7
3.8
-42.0
-41.4
-41.7
19.5
-7.8
6.0
-20.1
-6.7
-0.9
3.5
-2.0
-14.1
4.5
-1.0
4.7
-3.3
3.9
14.5
1.6
-6.1
40,327
1,510
865
6,085
88,650
62,708
19,613
19,248
4,136
23,706
266,849
31,042
12,967
27,965
164,869
236,842
3,701
3,073
6,775
16,843
4,942
6,842
1,551
28,257
13,510
10,615
8,977
6,989
611
7,722
4,470
1,006
4,944
15,304
132,583
643,048
-6.0
10.7
24.6
9.1
17.9
21.0
23.5
20.7
32.8
39.1
16.2
17.2
3.5
-13.1
38.8
24.7
22.9
-22.5
-2.9
39.5
18.7
47.5
13.9
19.3
27.5
31.8
9.1
42.8
37.8
38.3
35.0
17.1
-0.6
20.6
25.6
20.9
9.8
6.7
28.2
3.4
0.3
-16.5
10.8
-4.6
8.0
11.0
-1.6
16.5
11.4
LP
3.8
22.9
-6.7
12.1
1.0
22.7
-3.6
12.2
-25.3
-7.2
8.7
2.7
3.6
-15.4
1.1
-2.5
15.5
-0.3
1.4
8.2
2.3
7.1
7,916
713
414
2,503
46,718
19,001
10,660
11,308
1,917
12,587
113,738
1,379
2,076
-23,633
16,829
-3,350
3,930
3,731
7,661
8,713
2,459
3,286
959
23,046
10,198
4,115
5,526
2,533
308
4,759
2,437
571
1,994
6,041
76,946
194,994
-39.4
9.3
167.2
19.1
20.0
-7.3
27.4
23.9
35.9
30.4
9.4
-32.2
-44.3
PL
-16.1
PL
24.2
-8.1
6.1
44.7
19.0
26.2
32.7
48.1
29.4
33.1
17.6
434.6
33.8
35.6
31.9
26.3
2.8
34.6
38.4
-0.5
LP
11.1
18.9
72.7
-2.7
86.3
11.8
0.6
7.6
6.7
55.6
LP
57.3
Loss
LP
Loss
13.3
9.6
11.4
20.9
-15.5
5.2
-26.5
-13.4
-1.0
1.4
2.5
-40.3
3.1
5.4
10.5
0.8
324.0
75.3
0.4
LP
July 2018
57
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Full year valuations
Sector / Companies
Automobiles
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
CEAT
Endurance Tech.
Eicher Motors
Escorts
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Motherson Sumi
Tata Motors
TVS Motor
Sector Aggregate
Capital Goods
ABB
Bharat Electronics
BHEL
Blue Star
CG Consumer Elect.
CG Power & Indl.
Cummins India
Engineers India
GE T&D India
Havells India
K E C International
Larsen & Toubro
Siemens
Solar Inds.
Thermax
Va Tech Wabag
Voltas
Sector Aggregate
Cement
ACC
Ambuja Cements
Birla Corporation
Dalmia Bharat
Grasim Industries
India Cements
JK Lakshmi Cem.
Orient Cement
Prism Johnson
Ramco Cements
Sanghi Inds.
Shree Cement
Ultratech Cement
Sector Aggregate
CMP
(INR)
777
128
2,978
636
17,545
1,271
1,251
28,257
879
262
3,468
899
9,221
295
267
581
RECO
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E
27.6
5.4
151.3
17.7
469.8
64.0
29.1
553.2
39.5
8.2
185.1
40.2
266.7
8.2
22.9
13.9
31.9
6.9
171.1
23.9
579.1
81.2
36.6
985.7
50.7
10.4
202.4
50.5
337.5
11.4
40.1
17.6
37.8
9.2
197.9
30.2
704.3
104.9
49.4
1289.3
64.9
12.7
230.1
55.2
429.6
16.6
45.0
25.7
28.2
23.7
19.7
36.0
37.3
19.9
43.0
51.1
22.2
32.0
18.7
22.3
34.6
36.2
11.7
41.7
25.7
59.8
18.2
31.5
42.9
43.8
20.1
27.6
19.7
36.3
48.6
18.6
24.3
49.2
47.4
50.3
15.4
30.4
29.0
28.5
33.1
36.2
37.2
16.8
30.1
42.6
50.9
93.2
29.4
22.0
41.0
45.0
34.4
24.4
18.4
17.4
26.6
30.3
15.6
34.1
28.7
17.3
25.1
17.1
17.8
27.3
25.8
6.7
32.9
18.9
43.4
16.8
24.3
32.6
36.3
12.6
23.5
18.8
22.1
37.6
17.0
22.0
37.3
40.0
31.3
11.1
27.3
24.8
22.3
24.7
18.3
32.8
7.9
19.4
24.7
20.5
19.9
24.0
12.4
33.5
31.8
21.9
20.6
13.8
15.1
21.1
24.9
12.1
25.3
21.9
13.5
20.6
15.1
16.3
21.5
17.8
5.9
22.6
15.7
36.9
14.2
18.6
25.5
29.8
11.5
19.6
16.0
19.6
31.6
13.0
18.2
30.9
31.4
24.4
9.7
24.6
20.5
16.9
21.0
14.6
21.2
6.6
13.2
14.4
12.6
14.1
18.8
9.1
24.6
22.7
16.7
15.3
13.4
12.8
19.4
23.0
11.1
19.2
33.1
16.6
13.5
12.0
5.2
19.3
14.1
3.3
27.1
9.9
36.2
15.3
9.3
26.3
28.8
16.6
25.5
16.5
34.8
27.7
11.4
19.7
32.4
24.4
29.7
10.3
26.6
20.4
13.6
22.5
11.8
14.3
6.0
10.6
17.6
13.7
17.8
16.7
14.8
21.8
20.6
13.9
12.6
8.7
12.0
14.3
17.9
9.9
15.9
20.2
14.0
13.2
10.3
5.3
16.4
9.4
2.7
19.2
8.1
23.5
9.6
7.7
18.9
23.0
8.5
19.0
12.6
18.1
23.9
8.2
16.7
22.3
21.8
18.5
4.9
18.0
16.2
10.9
15.0
8.5
10.5
4.2
8.0
9.7
8.8
10.7
13.9
11.0
17.9
15.1
10.0
10.4
5.9
9.8
11.8
14.5
7.6
12.5
15.7
10.8
10.9
9.0
5.1
12.8
6.5
2.2
14.0
6.7
20.2
8.1
6.3
15.5
19.6
7.1
15.4
9.6
14.3
19.7
6.5
14.9
18.8
17.3
13.9
4.2
15.9
13.8
8.3
13.2
7.0
9.2
3.2
7.0
7.3
6.8
8.4
11.6
9.7
13.5
11.0
8.0
17.0
23.7
24.2
18.8
15.3
10.3
21.0
24.4
18.3
12.9
33.8
14.2
18.5
19.5
10.1
25.1
15.2
11.6
18.0
2.5
18.1
48.7
4.5
18.3
15.7
17.3
18.7
23.1
13.7
9.1
21.9
8.8
12.4
15.9
11.0
9.8
6.1
4.6
10.3
8.6
2.1
6.1
4.4
5.5
14.2
6.9
16.3
9.3
8.6
17.2
26.1
24.5
22.0
16.8
11.9
21.7
33.2
18.7
14.7
32.3
15.1
20.8
23.7
13.3
26.3
17.9
14.3
17.5
3.2
21.6
43.9
7.3
18.5
17.3
24.5
21.2
20.8
13.8
11.2
22.0
13.0
15.2
15.4
11.9
11.9
7.8
8.7
10.5
16.9
3.2
9.8
10.3
22.8
15.4
9.8
17.2
12.0
12.2
17.7
29.0
25.3
23.4
18.4
13.8
24.7
33.2
20.3
15.9
32.4
15.0
22.7
28.5
13.0
30.8
18.7
15.0
18.4
4.1
24.9
42.8
7.5
20.4
18.5
23.7
22.0
22.2
14.1
12.4
23.4
14.9
15.4
15.3
12.4
14.7
8.7
10.2
14.4
17.1
4.5
15.0
14.9
25.8
17.0
11.9
19.8
14.7
13.9
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
1,185
104
69
647
226
58
650
123
272
546
334
1,259
972
1,156
1,033
370
526
Sell
Buy
Sell
Neutral
Buy
Neutral
Buy
Buy
Neutral
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Neutral
19.8
5.7
2.2
15.1
5.2
2.9
23.5
6.3
7.5
11.2
17.9
51.8
19.8
24.4
20.5
24.1
17.3
27.3
6.2
2.8
19.8
6.2
4.6
27.7
6.5
12.3
14.5
19.6
57.2
26.1
28.9
33.0
33.4
19.2
32.1
7.3
3.7
25.4
7.6
5.0
33.2
7.7
13.9
17.3
25.7
69.1
31.5
36.8
42.3
38.2
21.4
1,353
201
718
2,241
966
105
314
110
99
700
82
15,937
3,789
Neutral
Neutral
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
47.4
6.1
19.8
60.2
57.4
3.5
7.4
2.2
1.1
23.9
3.7
388.6
84.3
60.7
8.1
39.3
68.4
122.6
5.4
12.7
5.4
5.0
29.2
6.6
475.7
119.3
79.8
9.6
49.1
105.6
146.5
8.0
21.8
8.7
7.0
37.2
9.0
647.1
167.1
July 2018
58
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Full year valuations
Sector / Companies
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Future Consumer
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Jyothy Labs
Marico
Nestle
P&G Hygiene
Page Industries
Pidilite Inds.
United Breweries
United Spirits
Sector Aggregate
Healthcare
Alembic Pharma
Alkem Lab
Ajanta Pharma
Aurobindo Pharma
Biocon
Cadila Health
Cipla
Divis Labs
Dr Reddy’ s Labs
Fortis Health
Glenmark Pharma
Granules India
GSK Pharma
IPCA Labs.
Jubilant Life
Laurus Labs
Lupin
Sanofi India
Sun Pharma
Shilpa Medicare
Strides Shasun
Torrent Pharma
Sector Aggregate
Infrastructure
Ashoka Buildcon
IRB Infra
KNR Constructions
Sadbhav Engineering
Sector Aggregate
Logistics
Allcargo Logistics
Concor
Sector Aggregate
CMP
(INR)
1,292
6,301
1,165
380
516
49
1,263
6,409
1,676
264
242
343
9,867
9,856
28,001
1,068
1,179
667
RECO
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E
21.1
83.6
25.2
7.8
12.1
-0.2
21.1
166.5
24.5
8.9
4.1
6.4
140.0
131.3
311.1
18.1
14.9
6.7
25.6
107.4
29.2
9.0
14.8
0.3
24.4
187.8
28.9
10.0
5.5
7.6
189.3
162.1
423.2
20.8
18.8
11.1
30.4
133.2
34.6
10.4
17.8
1.1
28.3
215.6
35.2
11.3
6.5
9.0
209.0
187.8
564.5
23.7
23.9
14.4
61.1
75.3
46.2
48.9
42.6
-311.0
59.8
38.5
68.5
29.9
58.9
53.5
70.5
75.0
90.0
59.1
79.0
99.0
51.2
24.6
31.7
19.4
14.6
101.2
23.3
31.5
33.3
35.7
-62.1
20.9
14.8
74.1
37.7
15.6
30.9
20.0
36.6
43.1
29.5
36.4
26.6
30.5
50.4
58.7
39.9
42.2
34.9
174.2
51.7
34.1
57.9
26.4
44.4
45.2
52.1
60.8
66.2
51.5
62.8
60.2
43.2
21.5
24.5
19.9
13.5
58.0
21.7
25.2
25.0
21.3
101.0
20.3
13.2
51.1
23.8
11.4
18.0
25.8
32.2
30.4
16.4
25.5
28.7
25.0
42.4 33.3 31.7
47.3 39.2 38.8
33.7 25.5 23.8
36.5 33.6 33.7
29.0 33.9 26.0
45.3 201.1 73.1
44.6 37.2 37.0
29.7 25.0 22.5
47.6 38.9 40.5
23.3 19.3 17.5
37.2 26.3 26.1
38.3 36.6 31.9
47.2 35.2 31.9
52.5 44.0 37.9
49.6 46.4 43.5
45.0 33.8 33.9
49.4 28.4 29.3
46.4 46.9 35.1
36.7 30.1 28.8
19.1
18.7
15.8
12.5
31.7
19.1
21.0
20.9
17.4
30.2
16.8
9.6
46.8
18.2
9.8
14.3
19.4
27.7
23.1
13.3
14.6
21.4
20.0
17.1
22.2
18.3
9.4
42.9
14.9
16.5
21.4
15.9
21.4
12.2
11.9
32.4
18.9
10.9
15.2
12.4
20.8
22.3
24.0
19.8
19.3
17.2
7.9
6.2
9.4
18.1
8.0
10.1
21.8
19.1
14.7
16.1
14.1
9.2
29.1
13.6
14.8
17.3
11.0
14.5
13.2
7.2
37.4
13.9
7.5
11.2
13.7
17.2
18.3
14.1
11.8
14.6
14.7
6.9
6.1
7.6
9.9
6.7
6.2
18.4
15.7
26.7
31.4
20.3
29.0
22.2
32.9
31.6
18.7
33.3
15.3
21.9
27.0
29.2
32.5
32.9
29.4
24.0
28.6
24.5
12.9
12.5
11.2
8.0
18.5
12.0
12.4
14.3
8.9
9.3
11.0
5.9
33.3
10.9
6.3
9.2
10.8
14.6
14.1
11.1
9.3
11.9
11.9
5.8
6.2
5.5
7.6
6.2
4.7
14.6
12.5
25.3
32.9
49.0
25.9
29.2
-2.8
24.9
21.2
78.1
22.3
13.4
34.0
40.3
57.0
41.0
26.1
15.8
19.6
26.7
19.6
15.1
26.0
23.8
7.2
22.1
11.3
15.5
8.6
-2.3
15.6
12.2
16.2
9.3
18.9
11.9
15.8
16.1
8.7
10.3
3.9
20.3
12.6
27.9 30.7
35.5 39.9
50.6 58.0
26.5 28.0
31.3 33.9
4.6 15.8
23.3 22.6
21.4 22.1
86.4 102.1
22.8 24.1
17.1 19.8
35.8 37.9
50.2 51.3
59.7 58.4
43.6 46.2
26.4 26.4
17.2 18.7
21.2 20.5
28.3 30.7
19.3
17.4
20.4
20.9
11.5
20.1
12.9
19.3
13.4
1.6
14.1
11.9
26.0
13.3
21.5
17.8
11.8
16.8
11.6
15.6
5.7
16.7
13.8
18.8
19.8
21.5
18.7
18.3
19.8
13.6
21.3
14.3
5.2
14.8
15.2
28.4
15.4
20.5
18.7
14.2
17.5
14.0
16.4
9.5
19.4
15.2
12.8
12.9
17.5
13.1
12.6
11.7
15.0
13.9
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Neutral
Neutral
Buy
Buy
Buy
Neutral
539
1,867
1,030
625
628
395
629
1,100
2,311
144
597
84
2,911
714
713
490
933
5,193
579
378
410
1,427
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
21.9
58.9
53.0
42.7
6.2
16.9
20.0
33.0
64.7
-2.3
28.5
5.7
39.3
19.0
45.6
15.8
46.8
141.7
13.5
12.8
11.3
53.7
25.0
76.1
51.6
46.3
10.8
18.2
24.9
43.9
108.7
1.4
29.4
6.3
56.9
30.0
62.6
27.3
36.2
161.5
19.0
23.1
16.1
49.8
28.2
100.0
65.0
50.0
19.8
20.7
30.0
52.6
132.9
4.8
35.6
8.7
62.3
39.3
72.5
34.3
48.0
187.4
25.1
28.5
28.1
66.8
227
210
224
276
Buy
Neutral
Buy
Buy
-6.3
23.9
19.4
12.9
1.2
24.6
13.8
17.3
3.9
26.5
18.3
17.4
-35.9 191.2 57.8
8.8
8.5
7.9
11.6 16.3 12.3
21.5 16.0 15.9
16.1 14.2 12.5
16.2
38.1
34.2
14.3
24.3
23.0
11.1
20.1
18.8
-30.2
5.8
14.6 13.4
26.5 15.5
12.5 14.8
12.8 12.8
9.5
9.1
8.9
9.9
13.4
12.3
117
649
Buy
Buy
7.3
17.1
8.2
26.7
10.6
32.3
July 2018
59
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Full year valuations
Sector / Companies
Media
D B Corp
Dish TV
Ent.Network
Hindustan Media
HT Media
Jagran Prakashan
Music Broadcast
PVR
Sun TV
Zee Entertainment
Sector Aggregate
Metals
Hindalco
Hindustan Zinc
JSPL
JSW Steel
Nalco
NMDC
Rain Industries
SAIL
Tata Steel
Vedanta
Sector Aggregate
Oil & Gas
Aegis Logistics
BPCL
GAIL
Gujarat Gas
Gujarat State Petronet
HPCL
Indraprastha Gas
IOC
Mahanagar Gas
MRPL
Oil India
ONGC
Petronet LNG
Reliance Inds.
Oil & Gas Sector Aggregate
Oil & Gas Ex OMCs
Retail
Jubilant Foodworks
Titan Company
Sector Aggregate
Technology
Cyient
HCL Technologies
Hexaware Tech.
Infosys
KPIT Tech.
L&T Infotech
Mindtree
MphasiS
CMP
(INR)
263
72
699
213
73
138
313
1,379
793
541
RECO
EPS (INR)
PE (x)
EV/EBIDTA (x)
ROE (%)
FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E
17.6
-0.4
6.9
23.9
13.2
9.6
9.1
26.7
27.7
14.5
20.5
2.6
14.9
23.9
10.5
12.6
13.2
36.5
35.0
16.5
24.9 14.9 12.8
4.0 -176.4 27.3
22.0 101.8 46.9
26.3 8.9
8.9
11.5 5.5
6.9
15.3 14.3 10.9
17.3 34.5 23.8
49.3 51.7 37.8
40.5 28.6 22.7
19.7 37.3 32.7
30.8 23.3
27.2 11.9 9.3
26.4 13.3 12.1
3.9 -25.5 -1985.6
30.5 13.4 10.1
7.8 12.3 7.7
14.6 7.9
7.6
34.3 8.3
6.1
7.1 312.1 9.5
67.4 7.9
6.1
28.8 10.7 9.7
12.5 9.5
11.6
48.7
31.4
40.1
12.2
46.9
12.9
21.7
47.0
12.0
37.9
32.2
19.3
81.3
35.5
7.4
17.1
34.6
15.1
5.3
25.6
6.5
16.8
6.1
9.4
7.7
15.8
16.3
10.8
12.3
96.1
70.4
74.2
19.2
14.8
27.8
20.8
21.7
24.8
29.4
24.8
24.0
8.3
13.4
25.5
14.7
5.9
22.6
7.8
18.6
7.0
5.8
5.7
13.3
13.5
9.6
10.2
68.4
54.7
56.9
17.9
13.3
23.2
18.2
16.4
22.1
21.3
19.9
10.5
18.1
31.8
8.1
6.3
9.0
18.0
28.0
19.6
27.5
19.1
8.2
10.6
56.1
10.2
7.9
7.1
5.7
11.3
8.4
7.9
9.3
18.1
7.6
11.1
18.3
14.7
5.4
19.9
7.2
17.3
6.5
5.5
4.8
11.4
12.2
8.5
8.9
52.1
43.4
44.8
15.5
11.8
19.7
15.6
14.5
18.0
16.8
17.0
9.4
11.6
29.6
3.1
1.1
8.3
21.5
15.7
16.0
25.9
16.0
6.5
8.6
10.1
8.0
5.3
5.2
8.6
16.4
6.2
7.3
7.7
33.0
8.1
10.2
15.1
6.8
5.5
17.0
4.5
11.2
5.0
7.3
5.0
9.2
10.2
7.1
7.8
34.0
50.5
47.0
12.3
10.9
16.2
11.4
9.8
16.9
16.7
15.0
6.7
4.2
18.7
1.8
-0.7
5.6
12.2
14.8
12.2
20.5
11.3
6.0
7.3
7.4
7.0
3.0
4.3
5.1
8.2
4.9
5.6
6.1
15.9
6.6
8.9
12.0
5.7
4.1
13.8
4.4
9.5
3.4
4.5
2.9
7.2
8.1
5.5
5.7
32.9
37.1
36.2
11.4
8.6
17.4
12.6
8.3
16.4
14.5
16.7
5.3
3.0
14.5
0.8
-1.7
4.4
9.0
12.0
10.6
17.0
9.3
5.3
6.0
6.6
7.3
2.9
4.0
4.5
9.2
6.9
4.6
6.1
12.0
6.3
8.4
9.6
5.3
4.1
11.8
4.0
8.3
2.3
3.9
2.5
5.9
6.9
4.8
4.9
26.5
30.1
29.4
9.2
7.4
14.1
11.1
6.8
12.7
11.0
13.5
18.4
-2.1
3.8
14.0
12.8
14.3
9.0
12.2
25.2
19.6
12.7
12.8
26.7
-2.7
22.5
9.1
17.7
22.9
0.3
17.8
13.4
11.8
19.4
29.0
11.8
16.7
14.0
31.0
20.8
21.0
24.3
21.3
9.4
13.0
23.3
13.0
14.9
13.5
20.3
23.9
21.7
18.1
25.0
26.9
24.1
15.4
33.1
18.8
14.6
18.2
7.0
7.7
12.4
9.1
18.4
11.8
14.8
28.4
19.4
15.2
14.4
25.2
0.0
24.2
13.4
17.0
24.3
9.1
17.9
14.6
14.0
22.2
22.4
13.9
19.7
12.8
23.8
20.8
16.0
19.4
16.5
14.7
16.2
23.7
13.8
14.9
14.5
23.3
26.7
25.0
17.6
24.9
27.6
24.0
18.5
29.9
26.2
18.4
19.1
9.6
10.5
12.2
9.2
20.8
13.7
17.1
30.1
19.7
16.4
14.9
24.9
1.2
19.7
11.8
16.7
21.0
7.1
11.4
16.3
13.0
24.7
21.9
15.3
23.1
11.6
22.8
20.2
16.2
18.8
15.8
14.3
17.4
23.9
13.3
15.1
14.7
25.0
31.2
29.4
18.4
25.1
27.8
26.9
17.5
29.3
27.9
19.5
Buy
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
224
280
216
312
62
104
197
80
569
228
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
18.9
21.1
-8.5
23.3
5.0
13.1
23.7
0.3
71.9
21.3
24.1
23.1
-0.1
30.9
8.1
13.6
32.1
8.5
93.0
23.6
210
368
349
733
179
253
258
155
811
78
208
156
220
990
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
5.9
49.8
20.4
21.2
11.9
47.4
10.1
23.9
48.4
12.8
22.2
20.2
13.9
60.9
8.8
44.3
26.0
28.7
12.2
42.8
11.4
19.9
43.7
11.1
35.8
27.1
16.5
73.3
1,429
887
Neutral
Buy
14.9
12.6
20.9
16.2
27.4
20.5
734
925
462
1,345
276
1,644
1,010
1,090
Neutral
Neutral
Sell
Buy
Under Review
Neutral
Buy
Neutral
38.2
62.6
16.6
64.8
12.7
66.3
34.4
44.0
40.9
69.6
19.9
74.0
16.8
74.4
47.5
54.7
47.3
78.2
23.5
86.1
19.0
91.2
60.0
64.3
July 2018
60
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Full year valuations
Sector / Companies
NIIT Tech.
Persistent Systems
TCS
Tata Elxsi
Tech Mahindra
Zensar Tech
Wipro
Sector Aggregate
Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Tata Comm
Sector Aggregate
Utilities
CESC
Coal India
JSW Energy
NHPC
NTPC
Power Grid Corp.
Tata Power
Sector Aggregate
Others
Arvind
Avenue Supermarts
BSE
Castrol India
Coromandel International
Delta Corp
Indo Count Inds.
Info Edge
Interglobe Aviation
Kaveri Seed
MCX
Navneet Education
Oberoi Realty
P I Industries
Piramal Enterprises
Phoenix Mills
Quess Corp
S H Kelkar
SRF
Tata Chemicals
Team Lease Serv.
Trident
UPL
Sector Aggregate
UR: Under Review
CMP
(INR)
1,111
827
1,870
1,357
653
1,243
263
RECO
Neutral
Buy
Neutral
Buy
Buy
Buy
Neutral
EPS (INR)
FY18 FY19E FY20E
45.6 57.1 70.7
40.4 48.4 59.9
66.0 81.0 92.0
38.7 45.4 52.9
42.6 44.7 53.0
52.8 70.7 92.2
18.9 18.4 21.1
FY18
24.4
20.5
28.3
35.0
15.3
23.6
13.9
21.8
PE (x)
FY19E
19.4
17.1
23.1
29.9
14.6
17.6
14.2
20.0
EV/EBIDTA (x)
FY20E FY18 FY19E FY20E
15.7 9.0 10.4 8.7
13.8 9.9
9.9
7.9
20.3 15.5 17.8 15.5
25.7 16.3 19.3 15.7
12.3 12.9 10.1 8.1
13.5 10.2 10.5 7.9
12.5 10.2 8.5
7.4
17.5 13.0 13.6 11.7
69.6 8.2
20.6 9.0
-5.2 13.8
29.1 10.8
324.1 9.2
8.2
8.6
13.7
7.2
9.4
8.9
9.2
8.9
20.3
71.1
16.2
25.8
15.6
24.8
7.9
38.2
16.6
13.4
22.2
15.2
11.4
19.8
16.4
26.4
27.2
19.9
12.7
12.2
31.1
6.4
11.2
20.1
7.6
8.6
9.0
10.4
11.2
8.6
11.8
9.6
13.4
60.9
-
18.9
14.3
24.9
7.7
47.3
5.9
11.7
40.0
15.7
27.9
24.3
14.9
15.5
41.8
23.2
14.5
8.6
51.9
6.9
11.6
15.3
8.0
8.7
14.9
9.3
8.9
6.3
5.7
8.2
6.2
8.6
7.6
10.1
7.5
11.1
55.0
12.3
15.9
12.0
19.1
5.5
42.6
3.7
13.5
27.8
10.4
14.5
17.8
10.7
13.8
27.8
16.4
9.4
7.3
46.5
5.4
8.5
12.2
6.5
8.3
10.1
6.8
7.3
5.7
5.0
7.9
5.5
7.5
6.9
9.2
6.7
9.4
41.9
7.3
16.9
10.4
14.4
4.8
32.1
2.7
11.1
19.0
9.4
10.8
14.1
8.9
12.2
21.1
12.4
7.6
6.2
31.9
4.4
7.1
10.1
ROE (%)
FY18 FY19E FY20E
16.2 18.6 21.2
16.7 19.2 23.1
29.4 34.4 35.0
37.6 34.6 28.7
21.5 19.6 20.1
15.3 18.0 20.2
17.0 15.9 16.2
24.2 24.4 25.0
2.4
0.8
3.0
15.6 15.7 16.7
-16.0 -22.5 -23.7
9.4 31.1 59.3
0.1
-2.0
0.7
9.2
36.5
4.6
8.5
10.9
16.3
10.7
15.0
8.9
18.9
7.6
69.1
22.1
11.9
14.0
13.4
41.3
20.9
7.9
17.4
7.8
20.7
7.5
9.6
18.8
12.3
13.7
24.9
17.6
9.2
26.9
13.1
11.0
77.8
5.7
9.8
11.4
16.4
10.3
16.8
9.9
19.8
6.0
58.8
20.5
10.3
14.3
13.2
30.5
21.6
10.5
22.1
11.7
21.3
8.7
9.2
15.4
13.5
15.4
10.6
21.4
11.8
23.3
13.6
11.0
83.3
6.9
10.3
11.7
15.9
11.4
17.5
11.7
21.2
7.4
55.6
21.1
12.3
14.8
15.2
32.8
23.2
10.8
22.2
17.5
22.2
10.3
10.0
18.1
16.2
17.5
11.6
25.3
12.9
23.1
15.2
366
300
55
588
Buy
Neutral
Buy
Buy
4.1
1.4
5.3 89.9 270.2
13.6 14.1 14.6 22.0 21.3
-9.6 -12.7 -10.6
-5.8 -4.4
3.5
6.5 20.2 169.7 91.1
2897.5 -110.1
75.5
19.2
3.0
2.4
13.4
16.5
5.3
97.5 106.7 11.6
26.2 30.6 13.8
3.9
4.8 21.9
2.9
3.2
9.4
14.9 16.3 11.4
18.8 20.6 11.1
6.3
7.8 13.5
12.2
31.1
119.3
19.7
23.1
19.1
38.9
10.7
52.0
18.5
17.3
34.8
23.7
37.4
29.6
31.7
40.9
50.2
31.5
20.5
14.4
69.0
10.5
14.1
29.5
9.0
10.1
17.2
7.8
10.2
9.7
11.3
10.0
26.2
94.0
20.2
25.9
18.5
33.0
9.2
48.8
18.8
16.0
25.4
16.9
20.9
24.4
20.7
33.5
38.0
26.5
16.5
14.5
46.7
7.7
13.4
25.2
878
264
66
23
153
183
72
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
395
1,542
855
162
434
225
68
1,167
1,082
554
737
128
472
788
2,465
648
1,094
223
1,647
693
2,972
55
625
Neutral
Sell
Buy
Buy
Buy
Buy
Under Review
Buy
Neutral
Under Review
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
12.7 15.1 19.5
12.9 16.4 21.7
43.5 42.3 52.7
7.0
6.2
6.3
22.7 23.5 27.9
5.8
6.8
9.1
6.4
7.4
8.6
22.5 23.9 30.6
58.3 57.7 65.3
32.0 34.5 41.2
21.2 29.1 33.2
5.4
7.6
8.4
12.6 22.6 41.3
26.7 32.3 39.8
77.8 119.2 150.3
15.8 19.3 24.5
21.8 28.8 40.2
7.1
8.4 11.2
80.4 99.6 129.8
48.2 47.7 56.9
43.0 63.6 95.6
5.3
7.2
8.6
44.2 46.7 55.6
July 2018
61
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Ready reckoner: Full year valuations
Sector / Companies
Banks-Private
Axis Bank
DCB Bank
Equitas Holdings
Federal Bank
HDFC Bank
ICICI Bank
IndusInd Bank
Kotak Mahindra Bank
RBL Bank
South Indian Bank
Yes Bank
Private Bank Aggregate
Banks-PSU
Bank of Baroda
Bank of India
Canara Bank
Indian Bank
Punjab National Bank
State Bank
Union Bank
PSU Bank Aggregate
Life Insurance
HDFC Stand. Life
ICICI Pru Life
Life Insurance Aggregate
NBFC
Aditya Birla Cap
Bajaj Finance
Capital First
Chola. Inv & Fin.
Dewan Housing
GRUH Finance
HDFC
Indiabulls Housing
L&T Fin.Holdings
LIC Housing Fin
M & M Financial
MAS Financial
Muthoot Finance
PNB Housing
Repco Home Fin
Shriram City Union
Shriram Transport Fin.
NBFC Aggregate
Fin. Sector Aggregate
CMP
(INR) Reco
514
166
139
83
2,103
273
1,975
1,366
570
22
336
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
UR
Buy
Buy
Buy
EPS (INR)
FY18 FY19E FY20E
1.1
8.0
0.9
4.8
67.8
11.1
60.2
32.5
15.1
1.9
18.4
21.7
10.1
5.3
5.8
79.2
16.4
81.8
43.4
20.1
3.0
23.8
PE (x)
FY18 FY19E FY20E
23.7
16.5
26.2
14.4
26.5
16.6
24.1
31.5
28.3
7.2
14.1
23.0
19.3
67.8
29.3
10.0
-6.7
14.4
-18.5
20.8
67.3
27.7
44.1
24.3
37.5
11.8
22.2
13.7
55.8
39.5
10.5
15.8
10.3
22.7
22.5
8.8
17.1
15.3
15.0
9.6
23.0
23.3
14.0
13.4
14.6
10.1
22.1
11.8
18.2
24.8
19.8
5.8
10.9
17.1
9.0
20.6
6.1
7.1
12.8
8.4
22.5
8.8
54.5
24.7
37.7
17.1
28.1
9.3
18.7
9.4
46.6
33.2
8.7
10.6
8.7
17.7
18.0
8.1
12.9
13.0
12.7
8.1
18.4
16.0
PB (x)
FY18 FY19E FY20E
2.1
1.9
2.1
1.3
5.1
1.7
5.0
5.2
3.6
0.8
3.0
3.5
0.7
0.5
0.5
0.9
0.5
1.1
0.4
0.8
6.1
2.8
12.5
3.3
8.2
2.0
4.6
2.2
19.7
5.1
3.8
2.4
1.9
3.1
4.3
2.0
3.0
2.8
2.5
2.1
4.2
2.6
1.9
1.7
2.0
1.3
3.9
1.6
4.4
4.4
3.3
0.7
2.5
2.9
0.7
0.4
0.6
0.9
0.6
1.0
0.4
0.8
5.0
2.4
10.4
2.6
6.9
1.7
3.9
2.0
16.2
4.5
3.2
2.1
1.7
2.8
3.7
1.8
2.7
2.4
2.2
1.7
3.6
2.4
1.7
1.5
1.7
1.1
3.4
1.5
3.4
3.8
2.9
0.6
2.1
2.6
0.7
0.4
0.5
0.8
0.6
0.9
0.4
0.8
4.1
2.1
8.7
2.0
5.7
1.5
3.3
1.7
13.4
4.1
2.8
1.8
1.4
2.5
3.2
1.5
2.3
2.0
1.9
1.5
3.1
2.1
ROE (%)
FY18 FY19E FY20E
0.5
10.9
1.4
8.3
17.9
6.8
16.5
12.5
11.6
6.6
17.7
10.4
-5.8
-17.8
-12.2
8.3
-29.6
-3.5
-23.7
-8.0
22.0
16.1
23.5
12.4
20.7
13.4
20.8
14.1
32.6
18.6
30.7
13.4
17.0
10.5
21.2
24.1
14.3
16.9
12.7
13.2
14.4
3.6
8.4
11.5
7.7
9.0
16.6
10.1
19.4
12.7
12.2
10.0
19.5
12.8
3.5
0.6
1.8
9.8
-8.1
7.4
-2.1
4.1
21.2
17.4
23.6
12.1
20.1
15.7
18.9
15.4
31.9
17.5
33.2
14.1
17.2
12.9
17.7
21.4
16.5
16.7
15.5
19.7
15.5
10.3
12.9
12.6
12.6
11.7
16.4
13.2
21.0
13.8
15.8
11.3
21.2
15.1
7.2
1.9
8.3
12.8
4.4
13.2
1.6
9.0
21.3
16.5
23.1
13.5
22.2
17.1
19.0
19.5
31.4
17.7
34.3
18.3
17.8
15.0
19.3
20.2
19.1
16.8
16.0
19.6
16.9
13.4
36.9 462.8
12.4 20.9
9.5 149.6
8.2
17.5
94.9 31.0
23.2 24.7
108.2 32.8
55.1 42.0
28.7 37.6
3.7
11.6
30.7 18.2
33.5
12.6
4.2
39.9
47.4
5.9
30.6
3.5
-11.6
-2.0
-3.9
12.8
-1.5
-48.1
-1.4
-10.1
83.1
32.9
53.3
34.4
50.2
15.7
24.1
16.7
67.2
45.5
12.6
21.7
11.8
31.9
28.8
9.2
22.5
17.5
20.6
16.6
28.9
71.8
114
86
245
336
76
258
80
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
-9.8
-43.2
-63.5
26.2
-50.3
-5.3
-56.5
5.9
1.3
8.3
33.6
-11.4
17.9
-4.3
460
372
UR
Buy
5.5
11.3
6.8
13.4
8.4
15.0
129
2,332
520
1,498
622
333
1,923
1,140
147
463
464
552
396
1,123
576
2,074
1,145
Buy
UR
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
3.8
5.3
7.5
46.5 62.3 83.1
33.1 44.2 55.6
62.3 67.4 80.1
37.4 45.4 65.9
5.0
6.0
7.1
42.3 48.7 57.9
90.2 108.8 131.5
6.8
9.3
13.9
39.4 45.0 53.5
14.5 20.4 26.2
19.2 24.5 30.7
43.0 44.8 48.9
49.9 65.7 87.3
32.9 37.7 44.3
100.8 138.1 163.9
69.1 119.4 140.8
UR: Under Review;
Note:
Consensus estimates are used for Adani Ports, Bajaj Finserv and HDFC Bank
July 2018
62
 Motilal Oswal Financial Services
India Strategy | ‘Recovery’ ball starts rolling
Sectors & Companies
BSE Sensex: 35,645
S&P CNX: 10,770
July 2018
MOSL Universe:
3QFY18 Highlights
&
Ready Reckoner
Note:
In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year
numbers. This is because of differences in classification of account heads in the company’s quarterly and
annual results or because of differences in the way we classify account heads as opposed to the company.
All stock prices and indices as on 4 July 2018, unless otherwise stated.
July 2018
63
 Motilal Oswal Financial Services
June 2018 Results Preview | Sector: Automobiles
Automobiles
Company name
Amara Raja Batteries
Ashok Leyland
Bajaj Auto
Bharat Forge
BOSCH
CEAT
Eicher Motors
Endurance technologies
Escort
Exide Industries
Hero MotoCorp
Mahindra & Mahindra
Maruti Suzuki
Motherson sumi
Tata Motors
TVS Motor Company
Demand intact; rural sales healthy
EBITDA margin to expand for fourth consecutive quarter
Healthy volume growth momentum continued in 1QFY19 – 2Ws grew 15% YoY, 3Ws
grew 67% YoY, UVs grew 21% YoY, and CVs grew 50% YoY.
EBITDA margin for our auto OEM (ex-JLR) universe is likely to expand (200bp YoY and
60bp QoQ to 13.8%) for the fourth consecutive quarter, as high commodity costs are
offset by price increases and operating leverage. In 1QFY18, margins of OEMs were
impacted by one-time GST-related compensation and discounts on BS-3 stocks.
We have lowered our FY19/20 EPS estimates for by 10.5%/10.9% for TVSL, by
9.5%/13.3% for BHFC, and by 6.1%/4.3% for EIM to factor in for higher RM and tax.
Our top picks are MSIL and MSS among large caps, and AL, ENDU and EXID among
midcaps. We also believe that MM is the best play on rural market recovery.
Healthy rural sales momentum driving auto volumes
Healthy momentum in rural areas and pick-up in construction/mining activities
drove sustained recovery in volumes. Our channel checks indicate continued above-
average volume growth in rural markets. This has resulted in strong 2W demand,
which is estimated to have grown 15% in 1QFY19. CV volumes are being driven by
pick-up in construction/mining activities and cyclical recovery in LCVs. CV volumes
are estimated to have grown ~50%, with LCVs growing ~38% and M&HCVs growing
73%. PV demand grew ~16%, with ~14% growth in cars and ~21% growth in UVs.
Fourth consecutive quarter of margin expansion – better product mix,
operating leverage to offset RM cost inflation
EBITDA margin for our auto OEM (ex-JLR) universe is likely to expand (200bp YoY
and 60bp QoQ to 13.8%) for the fourth consecutive quarter, boosted by price
increases and operating leverage, despite RM inflation. We expect the highest YoY
margin expansion for TTMT S/A (+700bp), MM (+280bp), AL (+210bp) and MSIL
(+190bp); HMCL is likely to see margin contraction of 20bp YoY. On a QoQ basis,
TVSL’s margin to expand by 80bp while that of EIM is likely to shrink by 60bp.
Demand outlook healthy across segments
Demand outlook for FY19 is positive across segments, driven by healthy rural sales
momentum, expectation of normal monsoon for the third year in a row, and a pick-
up in economic activity. We estimate 10-12% growth for 2Ws, 8-10% for 4Ws, 8-10%
for CVs and 9-10% for tractors. Key threats to demand are posed by inflationary fuel
prices and higher interest rates. While we expect margins to improve, competitive
intensity and commodity inflation could have an impact.
Valuation and view
We have lowered our FY19/20E EPS estimates by 10.5%/10.9% for TVSL as we cut
margins by ~50bp in FY19/20E to factor in for RM inflation and low realizations, by
9.5%/13.3% for BHFC to factor in RM inflation and higher tax rate, and by 6.1%/4.3%
for EIM as we cut RE and VECV margins by 30bp/90bp. The demand environment
and the changing competitive landscape would be the key determinants of stock
performance. Our top picks are MSIL and MSS among large caps, and AL, ENDU and
EXID among midcaps. We believe MM is the best play on rural market recovery.
Jinesh Gandhi - Research Analyst
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Deep A Shah - Research Analyst
(Deep.S@MotilalOswal.com);+912261291533/
Suneeta Kamath
(Suneeta.Kamath@MotilalOswal.com)
July 2018
64
 Motilal Oswal Financial Services
June 2018 Results Preview | Sector: Automobiles
Exhibit 1: Summary of expected quarterly performance (INR m)
Sector
CMP
(INR)
Automobiles
Amara Raja Batt.
Ashok Leyland
Bajaj Auto
Bharat Forge
Bosch
CEAT
Eicher Motors
Endurance Tech.
Escorts
Exide Inds.
Hero Motocorp
Mahindra & Mahindra
Maruti Suzuki
Motherson Sumi
Tata Motors
TVS Motor
Sector Aggregate
777
128
2,978
636
17,545
1,271
28,257
1,251
879
262
3,468
899
9,221
295
267
581
Reco
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
Sales (INR m)
Var %
Var %
Jun-18
YoY
QoQ
16,771
63,193
77,888
14,776
34,429
16,933
25,173
18,667
14,213
25,865
90,441
130,761
225,376
155,667
690,866
41,894
1,642,913
12.0
49.1
43.1
23.0
30.0
16.0
25.8
20.4
22.2
23.0
13.5
17.9
28.5
18.6
18.1
23.2
21.8
6.1
-28.0
15.0
0.7
9.0
1.2
-0.4
4.5
-1.0
5.2
5.6
-0.9
6.5
1.0
-24.3
4.9
-11.3
EBDITA (INR m)
Var %
Var %
Jun-18
YoY
QoQ
2,445
5,871
15,162
4,283
6,541
1,786
7,986
2,679
1,691
3,699
14,505
20,748
34,195
14,861
69,245
3,264
208,962
26.8
91.8
61.6
28.5
49.0
226.8
28.6
25.4
73.4
14.1
3.6
42.7
46.7
25.3
39.5
54.4
38.7
16.0
-43.2
15.3
2.5
-5.4
-9.6
0.2
2.2
-2.7
9.4
5.8
4.0
13.4
-0.9
-36.4
16.3
-14.7
Net Profit (INR m)
Var %
Var %
Jun-18
YoY
QoQ
1,306
3,316
12,573
2,418
4,442
843
6,200
1,260
1,116
2,153
9,897
12,236
22,958
4,513
8,527
1,725
95,482
30.7
176.5
32.8
38.1
46.8
7876.9
34.9
30.5
78.1
13.9
8.3
59.3
47.5
27.3
-12.2
33.2
33.6
18.9
-50.3
16.4
3.6
-10.9
-9.3
-4.4
8.3
-0.9
13.6
2.3
9.0
11.4
-14.7
-72.7
4.2
-18.5
Exhibit 2: Volume snapshot for 1QFY19 ('000 units)
Two wheelers
Three wheelers
Passenger cars
UVs & MPVs
Total PVs
M&HCV
LCV
Total CVs
Total
1QFY19
6,400
313
724
331
1,055
99
152
251
8,019
1QFY18
5,553
187
634
273
907
57
110
167
6,815
YoY (%)
15.2
67.4
14.1
21.4
16.3
72.9
38.3
50.1
17.7
4QFY18
5,850
295
699
351
1,049
130
175
305
7,500
QoQ (%)
9.4
6.0
3.6
-5.5
0.5
-23.6
-13.2
-17.6
6.9
FY18
22,979
1,016
2,751
1,277
4,028
384
555
939
28,961
FY17
19,921
784
2,705
1,098
3,803
346
473
819
25,327
YoY (%)
15.3
29.6
1.7
16.2
5.9
11.0
17.3
14.6
14.3
Exhibit 3: Trend in segment-wise EBITDA margins (%)
1QFY18
3QFY18
2QFY18
4QFY18
1QFY19
Exhibit 4: Commodity prices remain at higher levels
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
16.3 15.7
14.515.4 15.3
16.6
15.4 14.615.4
13.2
9.5
7.9 8.4 7.7
2.3
2W
Cars
CVs
Source: Company, MOSL
Steel
Lead
Alu
Rubber
Source: Company, MOSL
July 2018
65
 Motilal Oswal Financial Services
June 2018 Results Preview | Sector: Automobiles
Exhibit 5: Trend in key currencies v/s INR
120
110
100
90
80
USD
GBP
JPY
Exhibit 6: Margins (ex-JLR) to expand YoY and QoQ
Aggregate (excld JLR)
18
16
13
11
8
Aggregate (incl JLR)
Source: Bloomberg, MOSL
Source: Company, MOSL
Exhibit 7: Revised estimates
Bajaj Auto
Hero MotoCorp
TVS Motor
Maruti *
M&M *
Tata Motors *
Ashok Leyland
Eicher Motors *
Amara Raja
Bharat Forge *
BOSCH
Ceat
Escorts
Endurance Tech*
Exide Industries
Motherson Sumi
* Consolidated
Rev
171.1
185.1
17.6
337.5
50.5
40.1
6.9
985.7
31.9
23.9
579.1
81.2
50.7
36.6
10.3
11.4
FY19E
Old
167.2
186.1
19.7
351.7
49.3
40.1
7.3
1050.3
31.6
26.4
578.6
84.9
52.4
38.4
9.9
12.1
Chg (%)
2.3
-0.5
-10.5
-4.0
2.3
0.0
-4.4
-6.1
0.8
-9.5
0.1
-4.4
-3.2
-4.5
3.7
-5.6
Rev
197.9
202.4
25.7
429.6
55.2
45.0
9.2
1289.3
37.8
30.2
704.3
104.9
64.9
49.4
12.5
16.6
FY20E
Old
191.7
201.2
28.8
446.8
54.0
45.2
9.1
1347.1
38.1
34.8
714.5
115.3
65.5
51.0
12.5
17.0
Chg (%)
3.2
0.6
-10.9
-3.9
2.3
-0.4
1.3
-4.3
-0.8
-13.3
-1.4
-9.1
-0.9
-3.1
0.3
-2.9
Exhibit 8: EBITDA margin to expand YoY for fourth consecutive quarter
Volumes ('000 units)
1QFY19
YoY (%)
QoQ (%)
1227
38.1
17.3
2105
13.3
5.4
928
15.7
4.4
490
24.3
6.2
241
19.2
1.9
177
61.4
-13.3
144
4.0
-21.2
42
225
16
5452
47.9
22.5
40.0
21.7
-28.3
-0.7
-29.8
6.0
EBITDA margins (%)
1QFY19
YoY (bp)
QoQ (bp)
19.5
220
0
16.0
-20