10 September 2018

Market snapshot

Equities - India

Sensex

Nifty-50

Nifty-M 100

Equities-Global

S&P 500

Nasdaq

FTSE 100

DAX

Hang Seng

Nikkei 225

Commodities

Brent (US$/Bbl)

Gold ($/OZ)

Cu (US$/MT)

Almn (US$/MT)

Currency

USD/INR

USD/EUR

USD/JPY

YIELD (%)

10 Yrs G-Sec

10 Yrs AAA Corp

Flows (USD b)

FIIs

DIIs

Volumes (INRb)

Cash

F&O

Close

38,390

11,589

19,579

Close

2,872

7,903

7,278

11,960

10,560

22,307

Close

77

1,196

5,915

2,031

Close

71.7

1.2

111.0

Close

8.0

8.9

7-Sep

0.01

0.13

7-Sep

405

6,782

Chg .%

0.4

0.5

1.3

Chg .%

-0.2

-0.3

-0.6

0.0

-0.2

-0.8

Chg .%

0.5

-0.3

0.2

1.4

Chg .%

-0.3

-0.6

0.2

1MChg

-0.34

-0.02

MTD

0.3

0.3

MTD*

374

9,959

YTD.%

12.7

10.1

-7.4

YTD.%

7.4

14.5

-5.3

-7.4

-9.8

-2.0

YTD.%

14.8

-8.2

-17.9

-10.0

YTD.%

12.3

-3.8

-1.5

YTDchg

0.7

1.0

YTD

-0.4

10.6

YTD*

359

8,582

Today’s top research idea

Sun Pharma: Recent Halol 483 - Not a show stopper



US FDA recently conducted an inspection at SUNP's Halol plant from 27-31

August and issued Form-483 with six observations. We believe the observations

are resolvable and should not impact existing business and/or new approvals,

pertaining to SUNP.



We raise EPS estimate by 1%/3% for FY19/FY20 to factor in the favorable

currency movement. We expect a premium for SUNP to further expand from

25% to 35%, compared to an industry average of 20x 12M forward earnings on

the back of increasing share of specialty portfolio. SUNP is the only Indian-listed

entity, which is progressing well in the specialty portfolio.



We believe, the incremental generics business from new launches, which

should be higher than base business erosion, increased traction in specialty

products and sustained outperformance in the domestic formulation business

should drive growth. Accordingly, we revise our target price to INR790 (from

INR700 earlier).

Research covered

Cos/Sector

Axis Bank

Sun Pharma

NCLT & Insolvency

Day

Lupin – (ART)

EcoScope

Economy

Key Highlights

RBI approves appointment of new MD & CEO

Recent Halol 483 - Not a show stopper

Stressed assets outlook from India’s key ARCs and resolution experts

Besides competitive intensity, acquired businesses drag profitability

1QFY19 CAD below expectations

Monsoon deficit at 7%, kharif sowing 0.2% higher YoY

Piping hot news

A Securities and Exchange Board of India (Sebi)-appointed experts group on

Saturday made a slew of recommendations which are likely to soothe the nerve of

foreign portfolio investors (FPIs)…

Sebi panel eases deal for FPIs, allows NRIs to hold 25% in offshore funds

Note: YTD is calendar year, *Avg

Chart of the Day: Sun Pharma— Recent Halol 483 - Not a show stopper

US sales to improve FY19 onwards

Margins to gradually improve

Source: Company, MOSL

Source: Company, MOSL

Research Team (Gautam.Duggad@MotilalOswal.com)

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

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

In the news today

Kindly click on textbox for the detailed news link

1

Sebi panel eases deal for FPIs,

allows NRIs to hold 25% in

offshore funds

A Securities and Exchange Board

of India (Sebi)-appointed experts

group on Saturday made a slew of

recommendations which are likely

to soothe the nerve of foreign

portfolio investors (FPIs)…

2

FPIs turn net sellers in Sept, pull out Rs 5,600 crore

Foreign investors have pulled out a massive Rs 5,600 crore from the

Indian capital markets in the last five trading sessions, after putting in

money during the previous two months, on unabated fall in rupee and

rise in crude oil prices. The latest outflow comes following a net

infusion of close to Rs 5,200 crore in the capital markets, both equity

and debt, last month and Rs 2,300 crore in August. Prior to that,

overseas investors had pulled out over Rs 61,000 crore during April-

June…

3

Two decades after it bought

Parle’s beverage brands,

including Thums Up, and

returned to India, Coca-Cola is

poised for its second big

acquisition here. The world’s

largest beverage company has

emerged as the frontrunner to

buy the consumer brand portfolio

of Kraft Heinz — which includes

children’s milk drink Complan,…

4

Amitabh Chaudhry of HDFC

Life appointed CEO & MD of

Axis Bank

Ending the speculation around the

appointment of its next head once

Shikha Sharma demits office, Axis

Bank today chose Amitabh

Chaudhry, 54, as the next CEO.

Chaudhry, who is currently the

managing director of HDFC Life was

widely speculated to take over as

the next boss at Axis…

After tax googly, Complan

may end up in Coke bottle

5

Congress, TDP set for poll

alliance in Telangana

The dissolution of the Telangana

assembly has triggered an

unlikely alliance in the state, with

the Congress set to tie up with

one-time rival Telugu Desam

Party (TDP). Last week’s decision

by Telangana's ruling Telangana

Rashtra Samithi (TRS) to call for

snap elections hastened the

alliance which will be formalized

this week, senior party leaders

said. The alliance will be effective

for the assembly and Lok Sabha

elections. The TDP was founded

in 1982 as an anti-Congress force,

but a new common enemy in the

ruling TRS seems to have bridged

the gap between the two. K.

Chandrashekar Rao, currently

caretaker chief minister,…

6

JNPT seen buying Air India

building for ₹ 2,000 crore by

year-end

Air India Ltd expects to sell its

former head office in Mumbai for

an estimated

₹ 2,000

crore by the

end of March to state-run

Jawaharlal Nehru Port Trust

(JNPT), said a senior airline official.

Both JNPT and Air India are

carrying out their individual

valuations of the iconic Air India

building at Mumbai’s Nariman

Point, the Air India official,…

10 September 2018

7

Arohan Financial to raise ₹ 350

crore, plans IPO in 12-15

months

Arohan Financial Services Ltd, the

Kolkata-based microfinance

company, will raise around ₹ 350

crore from its promoters and

existing investors to strengthen

its presence in east and north

India, a top company official said.

The micro financier is also looking

to launch its initial public offering

(IPO) in the next 12-15 months…

2

9 September 2018

Update | Sector: Financials

Axis Bank

BUY

BSE SENSEX

38,390

S&P CNX

11,589

CMP: INR645

TP: INR750 (+16%)

RBI approves appointment of new MD & CEO

Building blocks falling in place to further strengthen recovery

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

AXSB IN

2,568

1657.1 / 23.1

671 / 448

7/12/9

4640

74.9

RBI approves appointment of Mr. Amitabh Chaudhry as MD & CEO of Axis Bank for a

period of 3 years with effect from 1-Jan-19 up to 31-Dec-21. Mr. Chaudhry’s term will

thus begin after Ms. Shikha Sharma, the current CEO demits office on 31-Dec-18. It’s

going to be a second consecutive time that Axis Bank’s MD & CEO will come from a life

insurance company.

Brief profile of Mr. Amitabh Chaudhry

Mr. Amitabh Chaudhry has been the MD & CEO of HDFC Standard Life since Jan-

10. Mr. Chaudhry started his career in corporate banking with Bank of America in

1987, where he worked in diverse roles ranging from Country Finance Officer,

Head of Wholesale and thereafter as MD and Head Technology - Investment

Banking, Asia. Mr. Chaudhry was also associated with CLSA as its MD, Head South

East Asian Investment Banking and Head Technology Investment Banking. Prior to

joining HDFC Life, Mr. Chaudhry worked as MD & CEO at Infosys BPO Ltd. Mr.

Chaudhry is a B. Tech (Electronic & Electricals) from BITS-Pilani and is an alumnus

of IIM-Ahmedabad.

Financials Snapshot (INR b)

Y/E March

FY19E FY20E FY21E

NII

OP

NP

NIM (%)

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

ABV/Sh. (INR)

RoE (%)

RoA (%)

Valuations

P/E(X)

P/BV (X)

P/ABV (X)

208.3

175.5

51.9

3.0

20.1

1,704.6

267.7

222.4

7.8

0.68

32.2

2.4

2.9

243.5

216.9

93.9

2.9

35.9

79.2

299.1

263.1

12.7

1.04

18.0

2.2

2.5

294.7

277.5

127.4

3.0

48.8

35.8

342.1

312.7

15.2

1.20

13.2

1.9

2.1

AXSB will have the youngest CEO amongst all new private banks; rich

business/technology experience will help boost growth/productivity

levels

Post this management change AXSB will have the youngest CEO in Mr. Amitabh

Chaudhry, age 54 years, amongst all new private banks - though several banks are

going to see a change in top management over next two years. Mr. Chaudhry also

has a vast experience on the technology front which will come in handy as bank

further builds upon its digital capabilities and thus boost growth/productivity

levels.

Shareholding pattern (%)

As On

Jun-18 Mar-18 Jun-17

DII

25.1

26.4

28.7

FII

14.1

12.8

8.7

Others

52.3

52.2

52.4

FII Includes depository receipts

Stock Performance (1-year)

Axis Bank

Sensex - Rebased

680

610

540

470

400

RBI’s approval removes a big overhang; building blocks falling in place to

further strengthen recovery

RBI approval has ended months of speculation on the top management change at

Axis Bank – particularly after the Axis Bank board submitted three names to RBI in

Jul-18. We believe that after three painful years, things are now falling in place and

we expect earnings momentum to accelerate over FY18-21E. The net stressed

asset for the bank has declined to 6.7% while bank has already improved its

coverage ratio to 69% (including technical W.off) and guided for a normalization in

credit cost during 2HFY19E.

10 September 2018

3

Don’t see any disruption at HDFC Life

HDFC life has reported robust performance under the leadership of Mr. Amitabh

Chaudhary who has been the MD & CEO of the company since Jan-10. During FY14-

18, HDFC Life reported ~30% CAGR growth in new business premiums (unwtd) while

its market share on un-weighted basis increased to 19.1% (as on FY18) amongst

private players thus making it the largest private insurer (13.2% as per wrp basis).

While HDFC Life stock has been in a consolidation phase over past few months post

the spectacular listing in Nov-17, we believe that the company’s growth trajectory

will remain unperturbed. We estimate HDFC Life to deliver 28.2% CAGR in earnings

over FY18-20E while RoEV remains healthy at avg. ~20%. We currently have a BUY

rating on HDFC Life with PT of INR525. We note that recently even ICICI PruLife

witnessed the change in CEO as Mr. Sandeep Bakhshi moved to ICICI Bank as the

COO.

What strategic changes can one look at as new CEO takes charge?

1) There has been few changes in top management at AXSB and as Mr. Chaudhary

assumes office, the focus will be on ensuring management stability and alongside

delivering business growth. 2) The business mix and loan growth strategy may also

see a change as the new management evaluates the risk-adjusted returns across

business segments and look at it in context to long term sustainable growth

ambitions and strengths of the bank. 3) There has been media reports in the past

that AXSB may enter into life insurance and now with Mr. Chaudhary taking charge

as the CEO, with such a proven track record in building the life insurance business,

expectations will naturally be higher about (a) AXSB entering into life insurance

through organic or inorganic route. (b) Alternately, will AXSB look to tie-up with

other life insurers, including HDFC Life! This may seem a little pre-mature at this

stage but will have material implications for Max Life.

Valuation and view

AXSB’s stock has delivered 23% return in past two months in anticipation of this

management change and also aided by the early signs of recovery in NPL cycle. With

management overhang done away with and improving outlook on fresh

slippages/credit cost, we expect earnings to start normalizing 2HFY19 onward. AXSB

has already increased the PCR to 69% (NCLT-1 provisions of 83%), which will further

curb incremental provisioning requirement. We revise our PT to INR750 (SOTP basis)

as we roll forward our valuations even as we keep our target multiple unchanged at

2.5x Sep-20E ABV for standalone bank. Maintain Buy.

10 September 2018

4

Sun Pharma

BSE SENSEX

38,390

S&P CNX

11,589

7 September 2018

Update | Sector: Healthcare

CMP: INR664

TP: INR790 (+19%)

Buy

Recent Halol 483 - Not a show stopper





Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

SUNP IN

2,399

1593.6 / 22.2

679 / 435

15/16/17

3363

45.6





Financials Snapshot (INR b)

2018 2019E 2020E

Y/E Mar

Net Sales

260.7 311.7 361.6

EBITDA

51.8

68.6

92.2

PAT

32.4

44.8

63.3

EPS (INR)

13.5

18.6

26.3

Gr. (%)

-48.5

38.6

41.2

BV/Sh (INR)

158.4 170.0 189.3

RoE (%)

8.7

11.4

14.6

RoCE (%)

8.1

11.3

15.0

P/E (x)

49.4

35.6

25.2

P/BV (x)

4.2

3.9

3.5

Shareholding pattern (%)

As On

Jun-18 Mar-18 Jun-17

Promoter

54.4

54.4

54.4

DII

16.6

16.2

12.9

FII

16.4

16.3

19.7

Others

12.6

13.1

13.0

FII Includes depository receipts

Stock Performance (1-year)

Sun Pharma.Inds.

Sensex - Rebased

680

610

540

470

400



US FDA recently conducted an inspection at SUNP’s Halol plant from 27-31 August

and issued Form-483 with six observations.

We believe the observations are resolvable and should not impact existing business

and/or new approvals, pertaining to SUNP.

We raise EPS estimate by 1%/3% for FY19/FY20 to factor in the favorable currency

movement.

We expect a premium for SUNP to further expand from 25% to 35%, compared to an

industry average of 20x 12M Forward Earnings on the back of increasing share of

specialty portfolio. SUNP is the only Indian-listed entity, which is progressing well in

the specialty portfolio. We believe, the incremental generics business from new

launches should be higher than base business erosion, and sustained

outperformance in the domestic formulation business should also support multiple

re-rating.

Accordingly, we raise our P/E multiple to 27x (from 25x earlier) and revise our price

target to INR790 (from INR700 earlier); reiterate a Buy.





Observations largely procedural in nature:

The US FDA issued Form-483 with

six observations, with respect to the recent US FDA inspection conducted

during 27-31 August 2018. There are three observations related to laboratory

systems, one related to production system and two related to quality system.

The observations at the laboratory system are towards test procedures

designed to assure appropriate standards of identity/quality/strength/purity,

procedures to prevent objectionable micro-organisms in drug products that

are not required to be sterile and non-inclusion of sample size (based on

statistical criteria) in written stability program. The observation at the

production systems are related to line clearances required during intervention

activities performed by production operators. The observation at quality

systems are towards written procedures for cleaning/maintenance of

equipment and procedures for batch trending of critical alarms raised during

production activities. We expect this observation to be non-critical and to

warrant stoppage of existing production or new approvals.

Second consecutive inspection within six months:

This is the second

inspection by the US FDA within a short span of six months at the Halol facility.

Also, given the facility size, this inspection would be the shortest in terms of

the number of days. Post clearance, the company received its first approval

from the plant in five years. Halol is an important facility for SUNP as it would

provide visibility regarding key approvals including Xelpros, Elepsia, Vagifem,

etc. We expect incremental sales of ~USD100-150m from this facility on

annualised basis.

10 September 2018

5





Well-placed to deliver growth in the US market:

SUNP has a portfolio of 10

specialty products, a few are already commercialized. In 1QFY19, it launched

Yoansa. The company has also received an approval for Cequa, expected to be

launched in the coming quarters and Ilumya, to be launched in 2QFY19.

Although, the generic market in the US is expected to remain under pressure,

we expect SUNP’s growth in the US to be higher than the base-business erosion

on the back of new launches, in both generics and in the specialty products

category.

Valuation and view:

We raise EPS estimates by 1%/3% for FY19/FY20 to factor

in the favorable currency movement. We also raise our P/E multiple to 27x from

25x 12M Forward Earnings as we expect a premium to industry average for

SUNP to expand. Incremental generics business from new launches, which

should be higher than base business erosion, increased traction in specialty

products and sustained outperformance in the domestic formulation business

should drive growth. Accordingly, we revise our target price to INR790 (from

INR700 earlier).

10 September 2018

6

Update | 7 September 2018

Sector: Financials

NCLT & Insolvency Day

Stressed assets outlook from India’s key ARCs and

resolution experts

We hosted the ‘Bankruptcy and Insolvency Day’ at our conference, wherein we invited top

management of leading ARCs, a partner from one of the big four consulting firms and a

resolution expert to share their experience and outlook on the overall stressed assets. Key

takeaways:

Stressed assets have ballooned; distressed asset funds to become active as

IBC stabilizes

Mr. R.K. Bansal

(MD and CEO, Edelweiss ARC)

Mr. Pramod Gupta

(Chief Financial Officer, ARCIL)

Policy hurdles (which led to value destruction), commodity super-cycle (which led to

overcapacity) and the overleveraged balance sheets were the key reasons behind

the ballooning of

stressed assets to INR12.3t (13.8% of loans) as of FY18, with the

metals, power and construction sectors contributing the bulk of it.

Prior to the

Insolvency and Bankruptcy Code (IBC), the Government of India (GoI) came up with

various legislations to deal with distressed assets, but the results were not

convincing (for instance, CDR succeeded initially in 2004 because the commodity

cycle had turned positive; however, post 2010, the results were far from

encouraging). The fact that the government and the regulator are on the same page

is encouraging and can make the IBC a success story. Further, as the IBC stabilizes,

stressed asset funds (including overseas funds) are likely to become more active in

the distressed asset space.

IBC – resolutions on track; resolution time still better than other countries

Of the 701 cases that have been admitted to the IBC until Mar-18, the resolution

plan has been approved for 32 cases, while 87 cases have gone for liquidation. The

average time taken for a case to get completed under the IBC is ~234 days, which is

faster in comparison to other countries. Of the 40 cases referred by the RBI (list 1

and list 2), Amtek Auto, Bhushan Steel, Electro Steel and Monnet Ispat are the only

ones to complete the resolution process. Jyoti Structures and Lanco Infratech have

been entered into liquidation as per an order from the NCLT after its resolution

process failed. However, only Bhushan Steel and Electro Steel have received the

final payment so far.

Mr. Sumit Khanna

(Partner, Corporate Finance &

Restructuring services, Deloitte)

Power assets to face higher haircuts; gas-based and under-construction

projects are at most risk

Power exposure can be divided into four key categories:



Fixed tariff

– better prospects with haircut of ~30%



Project is complete but no/partial PPAs –

Parivartan scheme is launched for its

revival; expected haircut of ~50%



Gas-based –

not much demand with expected haircut of ~80%-90%



Project is not complete –

no buyer; to be treated as scrap with a loss of ~90%-

100%.

Mr. Dhaivat Anjaria

(Resolution Expert)

10 September 2018

7

IBC’s effectiveness likely to improve; expect 70-75% haircut for NCLT-2

Initially though we have seen appeals being made in many of the cases which led to

delay in resolution and despite the challenges faced by the RPs, we believe that as

more cases get resolved, the IBC would evolve as an effective tool in resolving

stressed accounts in an accelerated manner. Due to low demand/participation for

the NCLT list-2 accounts (which are dominated by infra/EPC accounts), we expect

haircuts to be higher in the range of 70%-75%, as against the haircuts for NCLT list-1

of ~55%-60%.

ARCs too undergoing an evolution; playground getting shifted to SME/retail

assets

ARCs’ AUM grew from INR413b in June 2015 to ~INR914b in June 2018, implying a

CAGR of 30%. The IBC passed by the government in 2016 has provided a boost to

the ARC sector, while the increase in FDI to 100% from 49% and the 100% pass-

through status provided to trusts set up for the acquisition of stressed assets have

further acted as growth enablers. Improving effectiveness of the NCLT and the

recent regulatory guideline that directs all NPL accounts >INR20b failing to secure a

resolution plan within 180 days to be moved to NCLT have affected ARCs’ business.

ARCs, thus, will play an increasingly important role in dealing with SME/retail assets,

though select larger ARCs have also been acquiring smaller stakes in large stressed

corporate assets.

Activities and challenges faced by the resolution professionals

Government and judiciary have been very proactive and taken the necessary steps

to ensure (a) smooth resolution of stressed assets and (b) stakeholders get the best

value. Although serious efforts are being made for optimal resolution, there are

some practical difficulties being faced by the resolution professionals which pose

certain challenges in the overall functioning. These include:



Taking charge

of cash and documentary backup is the first and the foremost

step undertaken by a resolution professional.



Budgeting –

it is the most important exercise to be undertaken initially in order

to make payments to employees, creditors, etc., when physical assets/plants are

taken over by the RP, as securing interim financing through market has been a

major challenge.



Maintenance

of the plant and the

working capital

attached to it.



Getting all the members together and

reach a consensus

on a decision.



Tracing the audit trail

to check if siphoning of funds has taken place.

10 September 2018

8

10 September 2018

A

nnual

R

eport

T

hreadbare

LUPIN FY18

LPC’s FY18 annual report analysis highlights a weak operating

performance, with EBITDA declining 31% to INR31.5b, primarily due to

continuing pricing pressure in the US market. OCF declined 61% to

INR15.5b, as cash conversion days deteriorated to 218 (FY17: 186 days),

majorly due to rising trade receivables. Further, inorganic growth

continued with the acquisition of Solosec for an upfront cash payout of

~INR3.7b (total consideration: USD124.1m, ~INR8.1b), which led to FCF

post interest declining to INR0.6b (FY17: INR13.6b). Our analysis reveals

that revenue growth from the acquired subsidiaries has been high;

however, their profit contribution has remained muted. Intangibles

assets remained elevated at INR46.5b, 34% of NW. This is despite an

impairment of INR14.6b recognized on acquired intangibles of the Gavis

portfolio. Interestingly, the transfer of IP rights (primarily Gavis) within

the group (from Lupin Atlantis Holdings SA to Lupin Inc) before

impairment led to a reduction in an otherwise high ETR (at 123%) to

57.2% (FY17: 29.9%).



The

ART

of annual report analysis

Rise in working capital

intensity at INR10.2b

(FY17: -INR5.1b) led to a

61% decline in OCF to

INR15.5b



Intra-group asset transfer

(primarily gavis’ IP) led to

tax benefit of INR3.6b

Revenue contribution of acquired businesses

remains strong; however, their profit

contribution remains subdued





Stock Info

Bloomberg

CMP

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

LPC IN

919

452

415.7 / 5.8

1090 / 724

4/5/-26

2083

53.0

Jun-18

47.0

12.1

25.8

15.1

Mar-18

47.0

12.2

25.4

15.4

Jun-17

46.7

9.8

30.9

12.6







Op. performance deteriorates, further drag on impairment

High pricing pressure, intensified competition, volatile industry

conditions and regulatory challenges in the US markets led to a

revenue decline of 10% to INR158b. Further, rising input costs

dragged EBITDA by 31% to INR31.5b with margins declining

600bps to 20%. Impairment charges (at INR14.6b) for the Gavis

portfolio and higher taxes (ETR at 57.2% v/s 29.9% in FY17) led

to a decline in profitability by 90% to INR2.6b.

Rising working capital intensity dents cash flows

Increased investment in working capital at INR10.2b as against

release of INR5.1b in FY17 led to a decline in operating cash

flows post interest declining 61% to INR15.5b (FY17: INR39.6b).

Trade receivables increased by 21% to INR51.9b (despite a

decline in revenue) leading to an increase in receivable days to

120 days (FY17: 90 days). Cash conversion cycle in turn

increased to 218 days from 186 days in FY17. Net debt increased

by INR4.2b to INR58.3b.

Acquisitions boost revenue, profitability remains muted

LPC has made ~15 acquisitions over FY08-18. The revenue

contribution from these acquisitions has been strong; however,

their profitability contribution continues to be weak. These

acquisitions have led to significant intangibles (including ITUD and

Goodwill) from INR7.7b in FY14 to INR70.9b in FY18 (52% of NW).

Intra-group transfer of assets aid ETR reduction

LAHSA (Lupin Atlantis Holdings SA) transferred various

Intangible products, primarily comprising portfolio of Gavis’ to

Lupin Inc. for a consideration of USD682m. Lupin Inc, recorded

the intangibles for USD302.3m and wrote of USD379.7m

(~INR24.5b) through net worth. This intra-group transfer has led

to a tax benefit of INR3.6b, thereby aiding to reduce ETR to

57.2% (FY17:29.9%). ETR (excluding this benefit) rose to 123%

due to non-deductibility of expenses (primarily impairment

related in our view).

Shareholding pattern (%)

Promoter

DII

FII

Others

Note: FII Includes depository receipts

Stock Performance (1-year)

Auditor’s name

B S R & Co LLP

Sandeep Ashok Gupta

(S.Gupta@MotilalOswal.com); +91 22 39825544

Mohit Baheti

(Mohit.Baheti@MotilalOswal.com); +91 22 3010 2492

Somil Shah

(Somil.Shah@MotilalOswal.com); +91 22 3312 4975

10 September 2018

9

E

CO

S

COPE

The Economy Observer

7 September 2018

1QFY19 CAD below expectations

Sharp fall in capital inflows leads to reserve drawdown of USD11.3b



India’s current account deficit (CAD) came in at a 5-year high of USD15.8b (2.4% of GDP) in 1QFY19 as against USD15b

(2.5% of GDP) in the year ago quarter. The number is below our/consensus estimate of USD16.7b/USD17.3b. While the

merchandise trade deficit rose in the quarter, it was partially offset by higher invisible earnings.



Capital inflows came in at a 9-quarter low of USD5.2b (0.8% of GDP) in 1QFY19 as against USD26.9b (4.5% of GDP) in

1QFY18, and at an average quarterly level of USD22.8b during FY18. Consequently, India witnessed a drawdown of

USD11.3b from its reserves in 1QFY19 – the largest drawdown in six years.



Total domestic savings (implied from the difference between investments and CAD) declined to 28.6% of GDP in 1QFY19

from 29.1% in 1QFY18. This was the lowest savings rate in any first quarter in at least seven years.

We expect India’s CAD to widen to 2.8% in FY19 from 1.9% in FY18 and slightly higher than our

earlier forecast

of 2.6%.

The revision in our forecast is largely due to a downward revision in the nominal GDP estimate in dollar terms owing to

the rapid depreciation seen in the INR in recent months.











Current account deficit lower than expectations in 1QFY19:

India’s current

account deficit (CAD) came in at a five-year high of USD15.8b in 1QFY19 only

slightly higher than USD15b in the same quarter last year (Exhibit

1).

The

number, however, was lower than our estimate of USD16.7b, as well as market

consensus of USD17.3b for the quarter. As a proportion of GDP, CAD actually

declined slightly to 2.4% from 2.5% in the year ago quarter.

Higher merchandise deficit offset by increase in invisible earnings:

Although,

CAD remained largely stable on a YoY basis, India’s merchandise trade deficit

rose to USD45.7b in 1QFY19 from USD41.9b in the corresponding quarter last

year. This was entirely on account of a surge in the net oil import bill, which

touched a 14-quarter high of USD22.6b (3.2% of GDP) up from USD16.6b (2.7%

of GDP) in the year ago quarter. Invisible earnings rose by 11% YoY to USD29.9b

in 1QFY19, partially offsetting the higher merchandise trade deficit.

Sharp drop in capital inflows leads to drawdown of reserves:

Capital inflows

declined sharply to USD5.2b (0.8% of GDP) from USD26.9b (4.5% of GDP) and an

average of USD22.8b (3.5% of GDP) per quarter during FY18. This was entirely

on the back of large foreign portfolio investment (FPI) outflows, to the extent of

USD8.1b (of which USD6.4b was out of debt securities). While FDI inflows

improved to USD9.7b in 1QFY19 from an average of USD7.6b in the last 4four

quarters, other investment inflows came in lower at USD5.1bvis-à-vis an average

of USD10.5b. This was on account of net repayments of trade credit amounting

to USD3.5b as against inflows in the last four quarters. Capital flows were not

sufficient to fund the CAD, resulting in a drawdown of USD11.3b from India’s

foreign exchange reserves in 1QFY19

(Exhibit 3).

This was the largest drawdown

in six years.

National savings continue to fall:

As per our calculations, (implied) domestic

savings (domestic investments

minus

CAD) declined to 28.6% in 1QFY19 from

29.1% in 1QFY18 (Exhibit 4). This was the lowest savings rate in any first quarter

in at least seven years.

10 September 2018

10



CAD to surge to 2.8% of GDP in FY19:

We expect India’s CAD to widen in the

ensuing quarters, primarily on account of a higher net oil import bill. As a result,

we expect the CAD to rise to 2.8% in FY19 from 1.9% in FY18, and slightly higher

than our

earlier forecast

of 2.6%. The revision in our forecast is largely due to a

downward revision in the nominal GDP estimate in dollar terms owing to the

rapid depreciation seen in the INR in the recent months. Although, this will be

the highest level of the CAD in six years, it will still be lower than the levels seen

during FY12-FY13.

invisible earnings

8

4

0

(% of GDP)

in 1QFY19

2

0

-2

-4

-6

-8

Exhibit 1:

India’s current account deficit at 2.4% of GDP

CAB

CAB excl Gold

Exhibit 2:

Higher merchandise deficit partially offset by

Goods

Services

Income

(% of GDP)

(4)

(8)

Source: Reserve Bank of India (RBI), MOSL

Source: RBI, MOSL

drawdown in 1QFY19

40,000

20,000

0

-20,000

-40,000

(USD mn)

Exhibit 3:

Lower capital flows leads to reserve

Forex reserves*

CAB

Capital account

1QFY19

39

36

33

31

28

25

Exhibit 4:

Implied domestic savings declined to 28.6% in

CAB (RHS)

Savings#

Investments

0.0

-0.8

-1.5

(% of GDP)

(% of GDP)

-2.3

-3.0

* (-) Implies accretion to reserves, (+) implies withdrawal (reduction)

# Implied savings; Does not include ‘errors & omissions’

10 September 2018

11

E

CO

S

COPE

Monsoon deficit at 7%,

kharif

sowing 0.2% higher YoY





10 September 2018

The Economy Observer





India received 721.9mm of rainfall between June 1st, 2018 and September 9th, 2018. This is 7% below the

long period average (LPA) for the period.

While East & Northeast India witnessed a deficit of 24%, Northwest India and Central India witnessed a deficit

of 3% and 1% respectively. South India witnessed a surplus of 3%, largely on account of heavy rainfall in

Kerala (+31%).

Main rainfall deficit areas during June 1st, 2018 and September 9th, 2018: Gujarat (-23%), Bihar (-18%),

Jharkhand (-20%), West Bengal (-20%), Haryana (-19%), Punjab (-15%) and the Northeastern states (-20% to -

54%).

India’s water reservoir stood at 119 billion cubic meters (BCM) as on September 6th, 2018. This is 73.5% of the

total live storage capacity of the country’s 91 reservoirs. This is higher than the average level of 68.1% seen

during the last ten years (Exhibit 2).

Exhibit 1: India's Southwest monsoon

(% departure from LPA)

30 June 2018

Northwest India

Central India

South India

East & Northeast India

All-India

16

-3

16

-27

-5

th

Cumulative rainfall scenario as on

31 July 2018

-2

5

1

-26

-6

st

31 August 2018 9 September 2018

-4

-1

7

-24

-6

-3

-1

3

-24

-7

Source: IMD, MOSL

st

th

Exhibit 2: Current reservoir levels in India

90

80

70

60

50

40

30

20

2010

As of 6 September

th

Current reservoir levels as % of total

78.7

68.0

65.3

58.5

82.6

77.3

10-year average

68.5

73.5

57.8

2011

2012

2013

2014

2015

2016

2017

2018

Source: Central Water Commission, CMIE, MOSL

10 September 2018

12

Area sown for kharif crops 0.2% higher up to September 7th, 2018





The total area sown for kharif crops touched 104.2mn ha by September 7

th

,

2018 – this is 0.2%

higher

than the area sown by the same period last year

(Exhibit

3).

The area sown for pulses and coarse cereals was down 2.2% and 4%,

respectively, by September 7

th

2018.

Exhibit 3: Area sown for kharif crops until to September 7, 2018 (Mn hectares)

Crop

Rice

Pulses

Coarse Cereals

Oilseeds

Sugarcane

Jute & Mesta

Cotton

Total

Area sown in

2018-19

38.2

13.4

17.4

17.4

5.2

0.7

11.8

104.2

Area sown in

2017-18

37.3

13.7

18.2

16.9

5.0

0.7

12.1

%

YoY

2.3

(2.2)

(4.0)

2.8

4.2

(0.7)

(2.4)

104.0

0.2

Source: Ministry of Agriculture, MOSL

10 September 2018

13

In conversation

1. BAJAJ AUTO: No-permit regime for auto rickshaws run on

alternate fuel a progressive step; Rakesh Sharma, Chief

Commercial Officer

















** Union Minister for Road Transport and Highways, Nitin Gadkari on Thursday

announced a "no-permit" regime for auto rickshaws run on alternate fuel.

It is a forward looking and a positive announcement by the minister in the drive

to get to pollution-free cities.

It is based on a recommendation by a committee, which the ministry had

constituted 12-18 months ago,

which comprised of a lot of state transport ministers wanting to address the

issue of congestion and the consequent impact on the environment of this

transport.

On the domestic side with all these positive moves, company feels that this kind

of a growth is sustainable and this year itself

company is certainly trying to breach the 400,000 mark in this financial year.

Coupled with international business, also at a similar level, company is already

touching 1 million whereas capacity was 750,000.

That is why this announcement was a trigger to action out company’s plan to

expand the capacity.



2. L&T TECHNOLOGY: Graphene is more than a revenue play;

Amit Chadha, President and ED









** L&T Technology Services has bought Graphene Semiconductor Services for an

all-cash deal of Rs 93 crore.

Graphene more than a revenue play is a capability or a niche acquisition. Have

gone to the market and announced that company is looking to get to a billion

dollars in revenues by FY21 and to get to that, company will need to expand its

telecom and hi-tech footprint.

Graphene has had 57 percent CAGR over the last four years. Will be able to do a

lot more because company is bringing in specific capability that it has gone in for

this acquisition.

Company is largely organic growth driven. Do expect to make one-two more

acquisitions, may or may not happen in this financial year but looking at specific

sectors and areas to see how company can augment that to scale up to the

ambitions that it has got.

3. L&T INFOTECH: Posive on customer spends; Sanjay Jalona- MD

& CEO













Customer economies are growing well in Europe & North America.

Typical customer spend has changed from support businesses to digital spend.

If IT companies can offer a good proposition, customers are ready to make the

IT budgets.

Company maintains its focus on large accounts and large deals.

Management expect to be leader in revenue growth in FY19 as well

Net profit margin will remain in narrow band of 15 percent despite Rupee

depreciation as company will set off 180pbs salary hike impact on margins.

10 September 2018

14

From the think tank

1. Has the time come to change retail promotions?



Brand promotions have several objectives. Creating awareness is one, and repeat

business and increased sales are some others. But according to one-to-one

marketing expert and database marketing veteran Raj Bhatia, the end goal is to

build market share. He says that two things have to work in order to meet the

objective—incremental purchase by existing customers and large number of trials

from lapsed or new customers. “While advertising spreads the word, the make-or-

break moment is the point of sale, which often happens to be the store.”

Unfortunately, for 50 years, in-store product promotions have remained

unchanged. They include limited kind of offers: Price-offs, a free gift (bowls and

buckets), bundling (say, four soaps with ₹15 off) or cross-promotions

(usually

between two different brands, say, biscuits plus oats or milk plus breakfast

cereal). Some other kind of promos, such as lucky draws and scratch cards, are

now passé owing to logistical constraints.

2. CODE RED



With domestic airlines expected to rack up combined losses in excess of ₹13,000

crore this year, it’s crisis time in India’s civil aviation sector. Responding to panic

calls, the Centre is reportedly working on a relief package to help airlines cut

costs. Details of the package are not known yet and no deadline has been

specified for its roll-out. Carriers would be hoping for some long-pending

demands to be addressed, including lower taxes on aviation turbine fuel (ATF)

and rationalisation of airport charges. On average, fuel accounts for 34 per cent

of the operating costs of airlines in India, well above the global average of 24 per

cent. While the oil price rally and the rupee’s rout have primarily led to fuel

costs escalating this year, high taxes levied by the Centre and many States have

made a bad situation worse. While there is a case to cut taxes on ATF, the

Centre may be in a bind. The prices of petrol, diesel and other fuels have also

shot up. Cutting tax on ATF alone will make for bad optics, more so in an

election year. The Centre’s tight financial position gives it little room to cut taxes

on other fuels.

3. Why gst exemptions would prove to be a bane rather than a

boon



Now that more than a year has passed since the GST implementation, and the

revenues are more or less steady, and considering the fact that the general

elections are scheduled for next year, expectations that the government should

exempt more and more goods and services from GST levy are high. In the last

GST Council meeting, many decisions were taken concerning GST exemptions.

On the face of it, exempting any supply of goods/services from the levy of GST

appears to be consumer-friendly as no GST is payable on such supply. However,

in reality, the consumers may end up carrying the burden of at least a certain

amount of GST due to the cascading effect of the GST exemption. GST follows

the value-added tax (VAT) mechanism, where tax is payable on every value-add

in the supply-chain (either supply of goods and / or services). Further, India’s

policymakers have chosen the tax-invoice method (which is the most popular

method, globally) for the VAT mechanism to be followed by businesses.

10 September 2018

15

International



4. State capitalism 2.0

The fall of the Berlin Wall almost 30 years ago represented a high-water mark in

the retreat of the state from the global economy, signaling a defeat of socialist

economics virtually worldwide. From dirigiste France to communist China,

countries with widely divergent economic models began to adopt a more

laissez-faire policymaking approach, predicated on the idea that the less state

intervention, the better. Amid this global rollback of statist and socialist

economics, some state-owned enterprises (SOEs) were privatized outright. But

the vast majority of “crown jewels” remained partly in the hands of

governments, with a strategic private partner or private investors acquiring

stakes through capital markets. Whatever its form, privatization did not just

express a philosophical direction; it also had wide-ranging economic

consequences, not least on stock exchanges, which were revitalized through

SOE listings in countries as different as Italy and Egypt.

10 September 2018

16

Click excel icon

for detailed

valuation guide

CMP

(INR)

817

132

2924

687

21343

1399

28651

1476

798

279

3327

973

8733

304

278

591

Valuation snapshot

Company

Reco

Automobiles

Amara Raja

Buy

Ashok Ley.

Buy

Bajaj Auto

Buy

Bharat Forge

Buy

Bosch

Neutral

CEAT

Buy

Eicher Mot.

Buy

Endurance Tech. Buy

Escorts

Neutral

Exide Ind

Buy

Hero Moto

Neutral

M&M

Buy

Maruti Suzuki

Buy

Motherson Sumi Buy

Tata Motors

Buy

TVS Motor

Neutral

Aggregate

Banks - Private

AU Small Finance Buy

Axis Bank

Buy

DCB Bank

Neutral

Equitas Hold.

Buy

Federal Bank

Buy

HDFC Bank

Buy

ICICI Bank

Buy

IndusInd

Buy

J&K Bank

Buy

Kotak Mah. Bk Neutral

RBL Bank

Buy

South Indian

Buy

Yes Bank

Buy

Aggregate

Banks - PSU

BOB

Buy

BOI

Neutral

Canara

Neutral

Indian Bk

Buy

PNB

Neutral

SBI

Buy

Union Bk

Neutral

Aggregate

NBFCs

Aditya Birla Cap Buy

Bajaj Fin.

Neutral

Capital First

Buy

Cholaman.Inv.&F

Buy

n

GRUH Fin.

Neutral

HDFC

Buy

HDFC Stand. Life Buy

ICICI Pru Life

Buy

Indiabulls Hsg

Buy

L&T Fin Holdings Buy

LIC Hsg Fin

Neutral

TP % Upside

EPS (INR)

EPS Gr. YoY (%)

P/E (x)

P/B (x)

ROE (%)

(INR) Downside FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY18 FY19E FY18 FY19E

946

149

3223

747

19280

1588

34111

1691

988

314

3446

1103

10805

388

338

546

16

13

10

9

-10

13

19

15

24

12

4

13

24

28

22

-8

27.6

5.4

151.3

17.7

469.8

64.0

799.6

29.1

39.5

8.2

185.1

41.0

266.7

8.2

22.9

13.9

29.3

6.6

153.9

23.5

584.2

76.1

966

37.1

52.5

10.6

193.4

48.3

311.2

10.2

30.1

15.6

36.3

8.7

174.6

29.3

712.6

99.2

1,238

49.1

65.9

12.8

219.0

55.5

409.2

14.6

38.2

22.8

-1.5

23.9

7.3

34.9

-0.7

-31.5

27.0

23.8

88.0

0.4

9.5

49.8

7.3

5.9

15.7

18.7

15.2

6.2

23.4

1.7

33.2

24.3

19.0

20.9

27.8

32.8

29.1

4.5

17.8

16.7

24.4

31.3

11.6

18.6

23.8

30.5

13.5

24.5

22.0

30.4

28.1

32.3

25.5

21.4

13.2

14.8

31.5

44.0

26.9

46.1

24.9

29.6

24.5

19.3

38.9

45.4

21.9

35.8

50.8

20.2

34.1

18.0

23.7

32.7

37.2

12.1

42.3

25.1

27.9

19.8

19.0

29.2

36.5

18.4

29.6

39.8

15.2

26.4

17.2

20.1

28.1

29.9

9.2

37.9

21.2

4.7

5.4

4.4

6.9

6.5

2.2

11.1

9.6

3.2

4.4

5.6

3.8

6.3

6.9

1.0

9.7

3.9

8.7

2.6

1.9

2.3

1.3

5.0

2.1

4.8

0.5

4.7

3.8

0.6

2.9

3.6

0.9

0.5

0.6

0.9

0.6

1.2

0.4

0.9

3.5

10.2

2.4

4.4

18.8

5.2

5.9

2.9

3.4

3.0

2.1

4.2

4.6

4.0

5.9

5.9

2.0

8.6

8.0

2.7

3.9

5.1

3.4

5.6

5.9

0.9

8.3

3.4

6.4

2.4

1.8

2.2

1.2

3.8

2.1

4.2

0.5

4.1

3.5

0.6

2.5

3.1

0.9

0.5

0.6

0.8

0.7

1.2

0.4

0.9

2.9

8.4

2.1

3.7

15.5

4.5

5.0

2.5

3.0

2.5

1.8

17.0

23.7

24.2

18.8

15.3

10.3

35.2

21.0

18.3

12.9

33.8

14.2

18.5

19.5

10.1

25.1

15.5

13.8

0.5

10.9

1.4

8.3

17.9

6.8

16.5

3.8

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

12.4

20.4

13.4

20.9

31.8

18.6

25.8

16.1

27.9

14.2

17.0

15.9

25.1

22.1

21.7

17.0

11.2

32.7

22.0

19.3

14.9

31.1

14.5

19.5

21.2

10.1

23.6

16.3

14.9

7.8

10.8

7.1

9.1

16.6

6.2

19.4

6.7

11.8

12.3

5.7

19.5

11.6

6.9

2.5

3.9

9.4

-6.4

2.4

-2.1

2.5

10.9

21.1

15.7

21.0

31.8

17.5

26.0

16.8

28.3

19.3

17.2

692

645

169

157

78

2058

335

1876

55

1248

609

17

323

760

750

170

175

110

2400

355

2250

100

1400

700

26

444

10

16

1

11

41

17

6

20

83

12

15

54

37

10.2

1.1

8.0

0.9

4.8

67.8

11.1

60.2

3.8

32.5

15.1

1.9

18.4

14.0

20.1

9.5

4.9

5.8

79.2

9.9

81.8

6.5

37.2

20.6

1.7

23.8

19.8

35.9

11.2

9.7

7.9

94.9

20.8

108.2

7.8

45.7

28.0

3.9

30.7

-79.5 37

-92.8 1,705

13.8 18.9

-82.3 427.2

-1.3 22.8

19.4 16.8

-34.3 -10.8

25.2 36.0

LP

74.1

21.3 14.2

27.3 36.3

-25.5 -9.7

26.3 29.0

-1.3 30.7

PL

Loss

PL

-10.4

PL

PL

PL

PL

NA

35.9

34.3

35.5

LP

LP

LP

22.7

Loss

LP

Loss

LP

22.4

44.5

33.4

20.8

25.5

10.1

22.6

2.4

18.0

74.7

14.3

40.8 67.6 49.4

79.2 580.6 32.2

18.2 21.2 17.8

99.5 169.7 32.2

35.2 16.4 13.4

19.9 30.3 26.0

110.5 30.3 34.0

32.2 31.2 22.9

19.7 14.6 8.4

22.9 38.4 33.6

35.6 40.3 29.5

134.2 9.1 10.1

29.2 17.6 13.6

43.1 34.5 26.4

67.9

62.7

129.2

66.1

LP

286.2

LP

291.2

34.8

32.2

26.0

18.9

13.1

19.4

22.5

8.4

19.0

17.4

18.7

NM

NM

NM

12.3

NM

NM

NM

0.0

36.5

63.1

18.6

23.1

67.2

45.5

81.5

33.6

13.4

24.8

12.7

12.7

18.5

14.0

10.0

NM

36.9

NM

35.6

29.8

43.7

14.0

19.1

53.5

41.4

66.5

32.8

11.4

14.2

11.1

148

94

271

322

84

292

84

175

90

278

430

85

360

97

18

-4

3

34

1

23

16

-9.8

-43.2

-63.5

26.2

-50.3

-5.3

-56.5

11.7

5.1

19.3

32.2

-8.9

7.9

-4.3

19.6

8.3

44.2

53.4

8.0

30.5

3.5

137

2740

616

1437

333

1925

451

379

1209

168

501

200

2500

960

1700

300

2335

525

450

1650

240

600

46

-9

56

18

-10

21

17

19

36

43

20

3.8

43.4

33.1

62.3

4.6

62.7

44.2

75.3

6.2

82.9

55.6

89.5

5.0

6.2

7.0 21.9

42.3 46.5 55.6 6.2

5.5

6.8

8.3 23.7

11.3 11.6 12.5 -3.8

90.2 106.4 126.6 31.5

6.8 11.8 13.9 29.5

39.4 45.0 53.5 3.0

10 September 2018

17

Click excel icon

for detailed

valuation guide

CMP

(INR)

606

460

467

1302

541

2027

1214

TP % Upside

(INR) Downside

780

29

600

30

490

5

1520

17

710

31

2500

1650

23

36

EPS (INR)

FY18 FY19E FY20E

19.2 24.4 30.7

17.4 20.3 24.2

43.0 51.2 58.1

49.9 67.1 81.4

32.9 40.9 45.9

Valuation snapshot

ROE (%)

FY18 FY19E

20.7 17.2

12.5 12.4

24.1 24.2

13.9 16.1

16.9 18.0

12.7

12.7

14.8

11.6

18.0

2.5

17.5

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

6.1

9.7

3.8

9.5

8.0

2.0

6.1

14.4

4.4

27.4

6.5

6.9

16.2

9.4

8.2

25.3

32.9

49.0

25.9

29.2

-3.3

24.9

21.2

78.1

22.3

15.4

16.9

15.8

13.3

17.8

3.6

21.8

44.8

6.9

17.7

16.8

23.4

20.4

21.3

14.3

10.8

22.4

12.3

12.9

15.1

12.1

7.8

14.0

6.6

11.1

12.6

3.5

9.1

14.1

9.9

22.7

12.0

8.1

15.5

10.5

10.8

25.7

32.6

48.3

23.4

30.2

1.2

24.8

22.5

86.9

22.9

Company

Reco

MAS Financial

Buy

M&M Fin.

Buy

Muthoot Fin

Neutral

PNB Housing

Buy

Repco Home

Buy

Shriram

City

Buy

Union

Shriram Trans. Buy

Aggregate

Capital Goods

ABB

Sell

Bharat Elec.

Buy

BHEL

Sell

Blue Star

Neutral

CG Cons. Elec.

Buy

CG Power & Indu. Neutral

Cummins

Buy

Engineers India Buy

GE T&D

Neutral

Havells

Buy

K E C Intl

Neutral

L&T

Buy

Siemens

Neutral

Solar Ind

Neutral

Thermax

Buy

Va Tech Wab.

Buy

Voltas

Neutral

Aggregate

Cement

Ambuja Cem.

Neutral

ACC

Buy

Birla Corp.

Buy

Dalmia Bharat

Buy

Grasim Inds.

Neutral

India Cem

Neutral

JK Lakshmi Ce

Buy

Ramco Cem

Buy

Orient Cem

Buy

Prism Johnson Buy

Sagar Cements Not Rated

Sanghi Inds.

Buy

Shree Cem

Buy

Ultratech

Buy

Aggregate

Consumer

Asian Paints

Neutral

Britannia

Buy

Colgate

Buy

Dabur

Neutral

Emami

Buy

Future Consumer Buy

Godrej Cons.

Neutral

GSK Cons.

Neutral

HUL

Buy

ITC

Neutral

EPS Gr. YoY (%)

P/E (x)

P/B (x)

FY18 FY19E FY20E FY18 FY19E FY18 FY19E

27.5 27.5

25.4 31.6 24.8 4.6

4.0

146.3 16.2

19.3 26.4 22.7 2.9

2.7

45.6 19.1

13.3 10.9 9.1

2.4

2.0

57.7 34.5

21.4 26.1 19.4 3.3

2.9

13.1 24.0

12.3 16.4 13.2 2.6

2.2

35.8

58.4

24.9

27.0

10.2

45.6

37.6

23.4

52.6

12.6

0.8

56.4

23.4

12.5

15.4

27.0

21.1

51.4

34.5

9.3

19.2

33.9

54.7

99.2

28.7

76.8

80.2

58.1

8.0

138.5

416.9

101.0

45.4

10.0

20.5

43.6

15.8

23.8

20.7

24.5

16.1

28.0

25.7

22.6

16.1

20.4

17.0

12.7

22.1

27.8

22.0

19.8

29.8

30.1

14.8

14.5

21.6

18.0

27.4

31.6

51.8

27.2

38.1

67.3

47.4

62.6

33.5

39.7

40.5

45.3

36.9

34.4

20.1

17.6

33.2

67.9

16.0

36.0

46.9

42.6

19.5

32.4

20.2

37.5

60.0

16.5

26.1

50.3

47.3

48.7

16.6

34.6

31.0

37.4

33.6

39.9

45.9

17.9

37.1

44.7

27.9

52.9

102.3

29.3

22.4

46.5

49.8

37.8

14.8

11.1

26.6

53.4

14.5

24.8

34.1

34.6

12.8

28.8

20.1

24.0

48.6

14.7

22.6

39.6

39.0

32.2

12.3

31.7

26.0

27.9

21.7

20.0

35.7

10.1

20.6

28.3

25.8

22.2

19.8

14.6

15.4

42.3

41.4

26.3

2.4

2.0

4.9

7.9

2.9

0.9

7.8

17.5

0.9

5.3

3.8

6.0

11.2

3.8

3.4

4.6

9.6

4.1

1.9

5.1

3.4

2.3

3.2

1.4

4.2

1.4

0.7

2.7

3.9

2.3

5.3

1.9

1.3

7.0

4.5

3.1

2.1

1.7

4.2

7.1

2.6

0.9

7.1

13.9

0.9

4.9

3.4

5.2

9.9

3.1

3.1

4.3

8.0

3.8

1.7

4.5

3.1

2.1

2.9

1.3

3.7

1.2

0.7

2.5

3.5

2.1

4.2

1.7

1.2

6.1

4.2

2.8

14.1

19.5

19.3

11.5

10.9

8.7

12.6

7.8

47.4

6.8

100.8 136.9 158.5 19.5

69.1 109.4 135.5 24.7

25.2

19.8

5.7

2.2

14.5

5.2

2.9

23.5

6.3

7.5

11.2

17.9

51.7

19.8

24.4

20.5

24.1

17.3

25.2

6.3

3.2

20.0

6.4

4.4

26.5

6.3

11.7

13.8

20.1

59.7

25.1

29.5

31.1

32.4

18.9

31.3

7.3

4.1

25.1

7.8

5.1

31.9

7.4

13.2

16.9

25.7

72.8

30.1

38.3

40.4

37.2

21.6

8.1

-8.8

64.1

12.7

14.3

-29.8

-11.2

14.8

30.8

17.4

51.1

22.4

10.9

18.2

-1.2

27.6

11.9

15.1

30.5

27.7

-35.6

106.8

-15.4

-42.0

5.8

-12.3

LP

288.2

LP

29.5

0.4

-10.9

-0.7

1345

92

79

681

220

56

763

127

281

673

296

1349

993

1152

1000

399

598

950

120

60

695

305

60

800

155

330

645

360

1570

1070

1150

1295

450

590

-29

30

-24

2

39

7

5

23

18

-4

22

16

8

0

29

13

-1

227

1574

755

2566

1024

121

329

665

114

108

736

83

17944

4271

231

1633

1030

3198

1084

120

384

802

139

136

-

130

19804

4536

2

4

36

25

6

-1

17

21

22

25

56

10

6

6.1

46.9

18.9

55.9

57.4

3.3

7.4

23.9

2.2

1.1

25.2

3.7

385.8

85.7

8.1

72.5

37.7

71.9

101.4

5.9

11.6

25.8

5.1

5.5

50.6

5.4

424.5

103.3

9.6

92.4

49.6

109.1

129.0

8.1

19.5

38.0

8.4

7.3

70.6

7.6

617.1

141.4

1317

6232

1141

468

558

53

1339

7234

1639

310

1405

7165

1360

440

665

69

1240

6710

2010

295

7

15

19

-6

19

30

-7

-7

23

-5

21.1

83.6

25.2

7.8

12.1

-0.2

21.1

166.5

24.5

8.9

23.3 28.3 1.9

98.6 124.9 13.5

27.8 32.5 18.6

8.5

10.1 7.2

14.4 17.2 -8.5

0.1

0.9

Loss

24.5 28.5 11.4

197.3 222.1 6.6

29.2 35.6 24.7

10.0 11.4 5.5

10.1

21.6 62.3 56.6 15.0

17.8

26.7 74.5 63.2 22.0

10.5

16.7 45.3 41.0 20.4

9.7

18.9 60.3 54.9 14.5

18.8

19.5 46.0 38.7 12.6

LP 1,080.9 NM 705.1 8.8

16.1

16.2 63.4 54.6 14.6

18.5

12.6 43.5 36.7 8.7

19.5

21.8 66.9 56.0 50.1

13.2

13.8 35.0 31.0 7.4

10 September 2018

18

Click excel icon

for detailed

valuation guide

CMP

Company

Reco

(INR)

Jyothy Lab

Neutral

210

Marico

Neutral

358

Nestle

Neutral 10447

Page Inds

Neutral 33322

Parag Milk Foods Neutral

293

Pidilite Ind.

Buy

1159

P&G Hygiene

Neutral 10115

Prabhat Dairy

Not Rated 157

United Brew

Buy

1343

United Spirits

Neutral

605

Aggregate

Healthcare

Alembic Phar

Neutral

639

Alkem Lab

Buy

2202

Ajanta Pharma Buy

1270

Aurobindo

Buy

801

Biocon

Neutral

661

Cadila

Buy

426

Cipla

Neutral

664

Divis Lab

Neutral

1315

Dr Reddy’s

Neutral

2634

Fortis Health

Buy

147

Glenmark

Neutral

683

Granules

Buy

121

GSK Pharma

Neutral

3498

IPCA Labs

Buy

791

Jubilant Life

Buy

821

Laurus Labs

Buy

431

Lupin

Buy

957

Sanofi India

Buy

6584

Shilpa Medicare Buy

489

Strides Pharma Buy

506

Sun Pharma

Buy

664

Torrent Pharma Neutral

1828

Aggregate

Infrastructure

Ashoka Buildcon Buy

137

IRB Infra

Neutral

178

KNR

Buy

217

Constructions

Sadbhav

Buy

271

Engineering

Aggregate

Logistics

Allcargo Logistics Buy

117

Concor

Buy

658

Aggregate

Media

Dish TV

Buy

69

D B Corp

Neutral

226

Ent.Network

Buy

658

Hathway Cable Buy

23

Hind. Media

Neutral

170

HT Media

Neutral

54

Jagran Prak.

Buy

123

TP % Upside

(INR) Downside

220

5

370

3

10620

2

31600

-5

314

7

1325

14

10250

1

-

1730

29

615

2

EPS (INR)

FY18 FY19E FY20E

4.9

5.7

7.0

6.5

7.6

9.0

140.0 181.0 197.8

311.1 412.2 529.4

10.4 12.0 14.9

18.9 19.7 23.5

115.3 156.6 186.4

3.5

6.4

9.7

14.9 19.2 24.1

6.7

9.2

13.2

EPS Gr. YoY (%)

P/E (x)

FY18 FY19E FY20E FY18 FY19E

-12.4 14.9

24.5 42.7 37.2

-2.8 17.6

18.2 55.4 47.1

13.2 29.2

9.3

74.6 57.7

30.3 32.5

28.5 107.1 80.8

187.1 15.8

24.3 28.3 24.4

13.2 4.0

19.3 61.2 58.8

-13.4 35.9

19.0 87.7 64.6

-2.0 83.8

52.1 45.1 24.5

71.7 28.8

25.6 90.1 69.9

26.1 36.4

43.1 89.7 65.8

10.5 16.4

18.4 53.8 46.2

Valuation snapshot

P/B (x)

FY18 FY19E

6.7

6.2

18.1 15.8

29.4 26.7

43.9 35.3

3.4

3.1

16.5 14.5

35.3 30.6

2.2

2.0

13.2 11.3

17.6 12.9

14.2 12.8

4.7

4.7

4.6

3.3

7.0

4.3

3.4

5.4

3.2

1.6

3.2

2.2

15.7

3.4

2.6

2.7

3.0

6.8

3.1

1.8

3.9

5.7

3.9

ROE (%)

FY18 FY19E

16.0 17.3

34.2 35.8

40.3 48.5

41.0 43.6

13.0 13.2

27.3 26.2

46.3 50.8

4.9

8.5

15.7 17.5

19.6 19.6

26.4 27.7

19.6

15.1

26.0

23.8

7.2

22.1

11.5

15.5

8.6

-2.3

15.6

12.2

16.2

9.3

18.9

11.9

15.6

16.1

10.3

3.9

8.7

20.3

12.6

19.3

17.0

20.4

20.1

11.3

19.5

11.7

18.6

12.5

1.6

14.0

12.7

27.5

12.7

21.6

14.0

9.4

17.2

14.5

4.4

11.4

16.2

13.2

540

2475

1560

910

625

440

620

1270

2170

171

550

130

2888

850

1020

552

950

6590

620

481

790

1430

-15

12

23

14

-5

3

-7

-3

-18

17

-20

7

-17

7

24

28

-1

0

27

-5

19

-22

21.9

58.9

53.0

42.7

6.2

17.5

20.3

33.0

64.7

-2.3

28.5

5.7

39.3

19.0

45.6

15.8

46.8

141.7

12.8

11.3

13.5

53.7

25.0 28.2 2.5 14.3

74.0 98.6 -21.1 25.7

51.5 65.0 -7.5 -2.7

44.2 59.1 8.7

3.5

10.6 20.9 -39.2 71.1

18.0 19.6 20.6 2.5

23.2 30.2 31.2 14.3

43.3 52.6 -17.3 31.0

99.3 120.6 -10.9 53.6

1.4

4.8

PL

LP

29.7 35.6 -27.5 4.1

6.8

8.7 -21.8 20.2

61.3 69.4 14.4 56.0

28.4 38.3 18.1 49.8

63.0 73.3 23.3 38.2

21.1 31.2 -10.9 33.1

29.2 45.1 -17.4 -37.6

166.8 191.6 9.8 17.7

21.2 26.9 -0.7 65.4

12.2 23.4 -65.1 8.4

18.6 26.3 -48.5 38.3

48.1 65.0 -2.6 -10.4

-18.2 15.9

0.8

23.8

13.7

16.0

2.6

23.5

16.8

17.8

Loss

17.5

61.8

17.5

LP

-0.5

-29.1

24.7

12.5 29.2 25.5 5.4

33.2 37.4 29.8 5.4

26.2 24.0 24.6 5.5

33.8 18.8 18.1 4.0

96.5 106.5 62.2 7.7

8.9

24.3 23.7 5.0

29.8 32.6 28.6 3.8

21.5 39.8 30.4 5.9

21.4 40.7 26.5 3.5

234.2 NM 102.6 1.7

20.0 24.0 23.0 3.7

28.0 21.4 17.8 2.4

13.2 89.0 57.0 14.4

34.6 41.7 27.8 3.7

16.4 18.0 13.0 3.1

47.7 27.2 20.4 3.1

54.5 20.5 32.8 3.2

14.8 46.5 39.5 7.5

26.8 38.1 23.0 3.7

92.0 45.0 41.5 1.8

41.4 49.4 35.6 4.2

35.0 34.0 38.0 6.7

32.2 34.4 29.6 4.3

231.2

-1.2

22.3

11.3

NM

7.5

11.2

21.0

14.6

172.5 12.1

7.5

1.0

15.8

16.9

13.4

13.9

25.5

23.3

37.7

12.3

50.0

NM

6.6

6.3

10.3

2.6

2.5

1.9

1.5

3.4

3.0

1.9

2.2

3.5

2.4

0.9

0.5

1.9

195

225

315

385

43

26

45

42

-4.2

23.9

19.4

12.9

11.3 -30.2 6.8

0.9 14.6 12.9

2.3

2.2

1.7

1.3

3.2

2.8

1.8

2.2

3.3

2.7

0.8

0.5

1.8

26.5

12.5

12.8

9.5

9.1

8.9

-2.1

18.4

3.7

-8.7

14.0

12.6

14.3

15.5

13.8

12.5

10.0

12.9

12.0

4.9

17.0

6.9

-8.2

13.2

7.5

17.5

146

769

25

17

7.3

17.1

8.4

25.8

10.5

30.9

-23.1

13.4

4.7

16.3

51.2

45.1

24.3

19.7

20.4

201.8

25.7

64.4

Loss

9.5

16.6

24.7

16.2

38.6

33.9

NM

12.8

96.9

NM

7.1

4.1

12.8

100

300

851

47

237

59

156

46

33

29

100

40

10

27

-0.4

17.6

6.8

-0.9

23.9

13.0

9.6

1.8

18.4

13.2

-0.8

25.5

8.5

11.9

5.5

23.1

21.6

-0.6

28.0

9.9

14.9

PL

LP

-13.8 4.3

-40.5 93.7

Loss Loss

-7.5

6.9

75.6 -34.5

-9.5 23.8

10 September 2018

19

Click excel icon

for detailed

valuation guide

CMP

(INR)

325

1361

695

470

TP % Upside

(INR) Downside

455

40

1565

15

1050

51

680

45

EPS (INR)

FY18 FY19E FY20E

9.1 13.0 17.1

26.7 34.3 44.8

27.7 36.5 41.9

14.6 16.1 19.5

Valuation snapshot

ROE (%)

FY18 FY19E

9.0 11.9

12.2 13.9

25.2 29.6

19.6 19.0

12.1 14.2

12.8

26.7

-2.7

22.2

9.1

17.7

0.3

22.9

12.2

17.8

11.5

19.4

29.0

11.8

16.7

14.0

31.0

21.0

20.8

24.3

21.2

9.4

13.0

23.3

13.0

14.9

20.3

24.0

21.8

18.3

25.0

26.9

24.1

15.4

18.8

14.6

16.2

16.7

37.6

29.4

21.5

17.0

15.3

24.1

2.4

14.2

24.2

0.6

25.5

14.8

17.1

9.5

24.5

12.2

16.5

13.5

20.7

24.4

14.2

22.3

13.0

27.8

14.5

21.0

22.5

15.0

13.7

16.9

24.6

14.3

15.3

24.2

28.2

27.4

16.7

25.3

26.4

25.0

16.1

25.7

20.9

19.5

18.3

35.8

34.9

19.3

15.7

18.2

25.0

-0.5

Company

Music Broadcast

PVR

Sun TV

Zee Ent.

Aggregate

Metals

Hindalco

Hind. Zinc

JSPL

JSW Steel

Nalco

NMDC

SAIL

Rain Industries

Vedanta

Tata Steel

Aggregate

Oil & Gas

Aegis Logistics

BPCL

GAIL

Gujarat Gas

Gujarat St. Pet.

HPCL

IOC

IGL

Mahanagar Gas

MRPL

Oil India

ONGC

PLNG

Reliance Ind.

Aggregate

Retail

Jubilant Food

Titan Co.

Aggregate

Technology

Cyient

HCL Tech.

Hexaware

Infosys

KPIT Tech

Mindtree

Mphasis

NIIT Tech

Persistent Sys

Tata Elxsi

TCS

Tech Mah

Wipro

Zensar Tech

Aggregate

Telecom

Bharti Airtel

Reco

Buy

Buy

Buy

Buy

EPS Gr. YoY (%)

P/E (x)

P/B (x)

FY18 FY19E FY20E FY18 FY19E FY18 FY19E

41.1 43.5

31.6 35.8 25.0 3.1

2.9

29.9 28.6

30.5 51.0 39.7 5.9

5.2

11.6 31.5

14.9 25.1 19.1 5.9

5.4

-7.0 10.6

21.3 32.2 29.1 6.0

5.2

0.1 26.3

33.9 29.3 23.2 3.5

3.3

13.6 12.8 9.9

18.6 14.1 13.5

101.2 NM 115.7

-9.8

17.3 12.1

-10.4 14.3 7.9

6.1

9.1

8.7

-23.8 303.3 8.8

5.7

8.1

5.9

24.9 11.3 10.7

-19.3

8.6

7.3

2.2

13.6 10.4

35.9

0.5

21.9

23.8

-1.0

2.4

4.7

11.5

7.3

19.0

5.8

11.3

11.9

23.9

13.9

24.8

26.5

26.2

18.2

13.1

17.3

16.5

18.0

34.5

9.5

18.4

28.0

16.8

14.1

21.6

14.2

33.0

14.6

LP

36.6

7.2

18.5

33.6

16.2

5.3

6.4

29.3

17.6

6.1

9.3

8.5

17.5

21.0

12.4

94.9

68.6

72.5

20.7

17.2

26.6

17.9

24.3

33.8

28.2

30.0

21.5

35.2

31.5

18.0

18.1

30.9

24.4

95.9

26.7

7.3

14.2

21.6

15.6

5.0

8.6

24.0

16.7

7.8

6.2

6.1

14.1

16.7

10.8

64.1

53.4

55.2

20.4

14.9

23.1

20.3

20.0

25.1

21.5

23.1

18.9

28.8

25.4

17.8

17.2

22.8

22.2

NM

1.5

3.5

0.7

3.5

1.2

1.5

0.9

1.6

1.4

1.3

1.6

6.0

1.9

2.1

5.3

2.1

1.5

1.3

5.5

4.0

1.2

0.9

1.1

3.7

2.6

1.8

19.2

15.1

15.8

3.8

4.1

6.7

4.1

3.4

7.0

4.4

4.7

3.4

11.7

9.1

3.6

3.0

4.5

5.9

2.2

1.4

3.0

0.7

2.8

1.1

1.4

0.8

1.3

1.3

1.1

1.4

5.1

1.7

1.9

4.4

1.9

1.3

1.2

4.7

3.5

1.1

0.8

1.0

3.2

2.2

1.6

15.5

15.1

15.2

3.4

3.5

5.6

5.0

2.9

6.0

5.0

4.3

3.3

9.2

8.8

3.2

2.6

3.9

5.6

2.3

Buy

Neutral

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Neutral

242

298

220

406

72

119

78

192

231

619

331

295

327

385

108

178

82

241

269

632

37

-1

49

-5

50

49

5

26

16

2

18.9

21.1

-8.5

23.4

5.0

13.1

0.3

23.7

20.4

71.9

24.4

22.2

1.9

33.4

9.1

13.7

8.9

32.4

21.6

85.1

27.8 120.5 29.4

26.3 7.2

5.0

3.8

Loss

LP

30.1 56.9 42.8

8.2 35.3 80.7

14.6 31.5 4.7

6.8

LP 3,359

34.2 238.1 36.4

27.0 34.6 6.2

68.7 76.5 18.4

73.3 31.2

11.0

48.9

32.5

40.7

12.2

51.8

18.8

12.8

54.8

11.9

35.1

31.5

19.3

94.9

64.5 36.9

3.0

-2.3

20.5 30.6

32.0 55.4

34.6 4.0

-12.4 6.7

11.0 -24.9

9.2 22.1

21.5 5.5

-13.6 -21.6

-1.2 49.3

-9.9 40.1

21.8 24.5

20.7 25.7

5.5 15.1

Buy

Buy

Neutral

Buy

Neutral

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Buy

217

357

377

712

192

253

154

276

853

78

207

172

243

1277

311

534

361

990

196

426

252

383

1097

88

296

219

312

1477

44

50

-4

39

2

68

64

39

29

13

43

27

29

16

5.9

49.8

20.4

21.2

11.9

47.4

23.9

9.4

48.4

12.8

22.2

20.2

13.9

60.9

8.1

48.6

26.6

32.9

12.3

50.6

17.9

11.5

51.1

10.0

33.1

28.3

17.2

76.6

Neutral

Buy

1412

867

1320

1130

-6

30

14.9

12.6

22.0

16.2

27.5 180.6 48.2

20.5 39.9 28.4

51.2 31.3

45.9

81.5

22.4

42.1

18.2

62.3

63.2

70.2

58.9

55.4

93.5

52.6

21.5

19.1

24.8

4.5

21.2

30.2

6.1

38.0

13.2

19.8

7.2

37.7

-1.0

33.6

7.7

1.3

5.0

-63.3

1.4

15.2

15.1

-11.5

21.3

34.8

31.1

30.1

13.9

22.3

24.1

1.3

5.2

35.9

10.0

PL

Neutral

Neutral

Sell

Buy

Neutral

Buy

Neutral

Neutral

Buy

Buy

Neutral

Buy

Neutral

Buy

792

1074

442

733

308

1161

1242

1368

869

1364

2080

770

324

326

780

1100

380

800

320

1260

1100

1100

950

1700

1950

800

300

300

-2

2

-14

9

4

9

-11

-20

9

25

-6

4

-7

-8

38.2

62.6

16.6

40.9

12.7

34.4

44.0

45.6

40.4

38.7

66.0

42.7

17.9

10.6

38.8

72.0

19.1

36.2

15.4

46.3

57.7

59.3

46.0

47.4

81.9

43.3

18.8

14.3

Buy

391

470

20

4.1

-0.8

1.2

10 September 2018

20