20 Long-Term Core Portfolio Midcap Stocks for 2020mailers.sparkcapital.in/uploads/strategy/Spark Strategy - 20 Long... · note is to identify core portfolio mid cap stocks to buy

Page 1

Spark Strategy believes in stock picking and portfolio construction with an eye each on Macro Environment and

Management Capability being the two most critical reasons to buy or sell a stock. While ordinary managements

deliver strong performance when their operating environment is favorable, better managements build businesses with

innate ability to deliver credible performance irrespective of how their operating environment is.

Balancing a portfolio with long-term (3-5 year) core portfolio stocks based on management capability and shorter

term (1-3 year) tactical portfolio stocks based on the likely macro environment becomes imperative for portfolio

outperformance over up cycles and down cycles. Our recommended portfolio is more biased towards tactical portfolio

currently given how we see the improving macro environment. Nevertheless, the objective of this Portfolio Strategy

note is to identify core portfolio mid cap stocks to buy and hold till 2020. Our framework has two buckets –

1.Excellent managements who have demonstrated a track record of creating superior businesses which are not

vulnerable to business cycles, Govt. regulation, fiscal/ monetary/ currency environment or any other uncontrollable

extraneous domestic and global events.

Their business model innards suggest strong franchise or a moat leading to market leadership or a structural competitive

advantage which means their current consistency and predictability leading to high cashflows and/ or RoE can sustain

beyond 2020.

Stocks which fit this framework – City Union Bank, Berger Paints, InfoEdge, Page Industries, Kajaria Ceramics,

Dabur India, Torrent Pharma, Ramco Cements, Cummins, AIA Engineering, Amara Raja Batteries and Suprajit

Engineering.

While these stocks are not value given the delivered performance and high expectations, we are not building in a

valuation re-rating upwards as our investment thesis. Earnings growth of 15%-20% CAGR built in the business model

drives our stock upside. A few of these stocks may be overpriced driving the need to wait for a better entry multiple.

2.Capable managements whose businesses should improve and fit into the first bucket during the lead up to

2020. These businesses are fundamentally good, not cyclical, but are not yet resilient or immune to their environment

and performance remains volatile. However, we believe that these Managements are working on the right strategies

which should payoff and make them more consistent, predictable and resilient to externalities.

Stocks which fit this framework – Biocon, Federal Bank, Karur Vysya Bank, Cholamandalam Finance, Bata

India, Blue Star, V Guard, Gateway Distriparks, Timken India, Cyient, Intellect Design, Indian Terrain, VIP

Industries and Sadbhav Engineering.

These stocks are more attractively valued given the question marks still on the strategies of the managements and offer

multi-bagger potential over a 3-5 year horizon. We are aggressive buyers on these names.

We also identify a couple of likely IPO candidates which should fit favorably into either bucket of this framework –

National Stock Exchange and Equitas Holdings.

Market data

BSE Sensex 24,718

NSE Nifty 7,510

Date Mar 14, 2016

Performance (%)

1m 3m 12m

BSE200 7% -2% -15%

Sensex 8% -1% -16%

20 Long-Term Core Portfolio Midcap Stocks for 2020 STRATEGY

Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

SPARK RESEARCH [email protected] +91 22 4228 8152

-30%

-20%

-10%

0%

10%

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

Sensex BSE 200

Page 2

Core Portfolio Midcap Ideas for 2020

Core Portfolio Buys on Likely

IPOs

1 National Stock Exchange

2 Equitas Holdings

20 Core Portfolio Midcaps for 2020

1 City Union Bank 11 Cyient

2 Karur Vysya Bank 12 Intellect Design Arena

3 Biocon 13 Bata India

4 Torrent Pharmaceuticals 14 Berger Paints

5 Ramco Cements 15 Indian Terrain

6 AIA Engineering 16 VIP Industries

7 Blue Star 17 Amara Raja Batteries

8 Cummins 18 Gateway Distriparks

9 V Guard 19 Suprajit Industries

10 Sadbhav Engineering 20 Timken India

Core Portfolio Buys after 20%

correction

1 Cholamandalam Finance

2 Dabur India

3 InfoEdge

4 Kajaria Ceramics

5 Page Industries

Page 3

Why do we like the Company?

Collateralized lending opportunity to small & medium sized businesses is

structural, relationships are sticky and lower competition offers moderate

pricing power esp. with PSU banks vacating the space.

CUB has demonstrated predictable and consistent earnings growth at 16%

CAGR over the past five years, highest among relevant peers;

Healthy asset quality with a well distributed customer base (average SME client

exposure at ~Rs. 3mn), 5 year average slippage at 2.0%, negligible

restructured assets of 1.6% (lowest in the peer group); Being sole banker for

most customers an added advantage;

Robust and sustainable ~3.5% NIMs given adequate pricing power with its loyal

SME customer base, reliance on retail term deposit customers, low

dependence on wholesale deposits at just ~%5 and negligible ALM mismatch;

High RoAs in excess of 1.4% and ~18%+ sustainable RoEs.

Valuation comfort with entry multiple at 1.5x FY17E ABV.

Why do we like the Management team?

What we like in Mr. Kamakodi, MD & CEO, is his deep understanding of the

bank’s strengths and more importantly, its limitations to build its strategies

around core competence than unrealistic ambitions.

For 10 years of our engagement with the management, we have heard one

high conviction voice of the bank’s unwavering uncomplicated focus, avoiding

“attractive but potentially risky” segments irrespective of competitors’ strategies,

market’s temporary preferences and investors’ feedback.

Alignment of interests of Promoter, Board, Management and Shareholders.

Continuity of management team is comforting.

Three years back identified third tier management team fast graduating to

second tier adding depth and breadth.

Strong credit culture, appreciation of growth-margin-asset quality- RoA/RoE

equation and consistent performance track record of setting and meeting

expectations.

14 Mar, 2016

Bloomberg CUBK IN

Shares o/s 598mn

Market Cap Rs. 51bn

52-wk High-Low Rs. 106-77

3m Avg. Daily

Vol Rs. 43mn

Index BSE 500

Snapshot

Promoters 0.0

Institutions 47.3

Public 52.7

% 1m 3m 12m

CUBK 3 -5 -12

Sensex 8 -1 -14

Bankex 9 -8 -21

Financial summary

Year NII

(Rs. mn)

PAT

(Rs. mn)

ROE

(%) ROA (%) ABV (Rs.)

P/ABV

(x)

FY16E 9,644 4,448 15.5 1.5 47 1.7

FY17E 10,996 5,470 16.6 1.6 55 1.5

FY18E 13,020 6,856 18.0 1.7 64 1.3

FY19E 15,775 8,463 18.9 1.7 76 1.1

FY20E 19,527 10,590 19.9 1.7 91 0.9

Relative benchmarking

Ranking matrix (1 to 6) CUBK DCBB FB JKBK KVB SIB

Market Share & Growth 2 1 4 6 3 5

Profitability 1 6 2 3 4 5

Asset Quality 2 1 3 6 5 4

Capital 1 4 2 5 3 6

Valuation 6 5 4 1 3 2

Overall Rank 1 5 2 4 3 6

City Union Bank CMP

Rs. 86

3Y Target

Rs. 191

Page 4

City Union Bank – Crystal Gazing

Over FY16-19,

CUB is expected

to clock a 20%

business CAGR

translating into a

loan book size of

Rs.352bn with

deposits of

Rs.473bn – a 1.8x

increase in

business from

current levels

(loan book of

Rs.194bn and

deposits of

Rs.260bn). With

80% of

incremental

expansion slated

for the 4 southern

states and a

carefully

calibrated

expansion

strategy of ~50

branches a year,

we expect costs

to remain under

control with an

average CIR of

40% in this phase

A probable

re-rating

Increasing RoE to

20%, with no risk of

dilution; expect

17% CAGR in ABV

over this phase.

A fall in credit costs

to 60bps against

100bps currently

resulting in RoA

expanding to 1.7%

Consistent

NIMs of 3.5%

with falling

slippages

resulting in

Increasing

leverage to

result in

Consistent

growth in

business to be

rewarded by

FY11 FY15 FY16E FY17E FY18E FY19E FY20E

NIM 3.6% 3.3% 3.5% 3.5% 3.5% 3.4% 3.4% ◄►

Slippage 1.8% 2.4% 2.0% 1.8% 1.7% 1.6% 1.5% ▲ Credit

costs 0.4% 0.6% 1.0% 0.9% 0.7% 0.6% 0.6% ▲

RoA 1.6% 1.5% 1.5% 1.6% 1.7% 1.7% 1.7% ▲


RoE 23% 17% 15% 17% 18% 19% 19% ▲

Leverage 14x 11x 10x 11x 11x 11x 12x ▲

T1 CAR 12.8% 16.5% 15.8% 15.5% 15.1% 14.5% 14.0% ▼

ABV (Rs.) 21 43 47 55 64 76 91 ▲

Trading bands (% of days in last 5 years)

< 1.00x 1.00x -

1.25x

1.25x -

1.50x

1.50x -

1.75x

1.75x -

2.00x

2.00x -

2.25x

1% 18% 30% 27% 13% 11%

The stock is trading at 1.6x 1-year forward, and has

traded above this multiple for 40% of the days in the

past 5 years.

FY11-16E CAGR %

NII PPOP PAT Price

18% 18% 16% 14%

Entry = Rs. 86 @ 1.5x

Cumulative Dividends of

Rs. 4.2

ABV CAGR of 17%, exit

multiple of 2.1x

TOTAL RETURN OF 2.4x

Page 5

14 Mar, 2016

Bloomberg KVB IN

Shares o/s 121mn

Market Cap Rs. 50bn


3m Avg. Daily Vol Rs. 58mn

Index BSE 500

Snapshot

Promoters 2.2

Institutions 44.8

Public 53.0

% 1m 3m 12m

KVB -3 -7 -31

Sensex 8 -1 -14

Bankex 9 -8 -21

Financial summary

Year NII (Rs.

mn)

PAT (Rs.

mn)

ROE

(%) ROA (%) ABV (Rs.)

P/ABV

(x)

FY16E 14,659 4,566 12.1 0.9 334 1.2

FY17E 17,501 5,974 13.4 1.1 363 1.1

FY18E 18,930 7,214 14.6 1.2 407 1.0

FY19E 21,408 9,057 16.3 1.3 465 0.9

FY20E 24,981 11,524 18.1 1.4 541 0.7

Relative benchmarking (Based on ranks, lower the better)

Ranking matrix (1 to 7) CUBK DCBB FB JKBK KVB SIB



Asset Quality 2 1 3 6 5 4

Capital 1 4 2 5 3 6




Collateralized lending opportunity to small & medium sized businesses is

secular, relationships are sticky and lower competition offers moderate pricing

power. KVB is one of India’s best SME lending banks.

The bank had a best in breed track record of balancing growth–margins–asset

quality–capital efficiencies for close to two decades till mid-2013. Cyclical and

credit challenges and its impact on income reversals coupled with high

operating costs led to its RoAs getting impacted from close to its long term

average of 1.5% to as low as 0.75%. Measures taken to address these issues

started two years back, asset quality issues have bottomed out and the RoA is

back to 1.1%.

Robust and sustainable ~3.3% NIMs given adequate pricing power with a loyal

SME customer base, reliance on retail term deposit customers, steady growth

in CASA, low reliance on bulk deposits and negligible ALM mismatch and

Operating leverage; We see RoAs increasing to 1.4% and RoEs of ~19%.

Valuation comfort with entry multiple at 1.0x FY17E ABV.


Unlike many banks where the Management team calls the shots, KVB is largely

a Board managed bank, which is where our highest comfort with the bank is.

While day to day execution is left to the Management team, the Board meets

close to once a fortnight (the highest in the sector) and is involved in strategic

as well as critical operational decisions.

The members of the Promoter group and independent directors have strong

local knowledge, native intelligence rather than flamboyance and have long

demonstrated ability of creating a strong credit culture in the bank, RoA focus

and build shareholders’ wealth.

Mr. Venkataraman, the CEO of the bank from 2011 (his term ends in June

2017) inherited and initially continued the then strategy of taking larger ticket

loans to sectors and geographies beyond their comfort zone, which had its

negative repercussions in the subsequent years. We believe that the Board and

the Management is completely seized of these challenges and has corrected

the mistakes committed over the past few years in lending decisions. This

course correction should have the bank in good stead over the next 3-4 years.

Karur Vysya Bank CMP

Rs. 412

3Y Target

Rs. 1151

Page 6

Karur Vysya Bank – Crystal Gazing

Over FY16-19, KVB

is expected to clock

a 18% business

CAGR translating

into a loan book

size of Rs.625bn

with deposits of

Rs.762bn – a 1.6x

increase in

business from

current levels (loan

book of Rs.379bn

and deposits of

Rs.473bn). With

80% of incremental

expansion slated

for the 4 southern

states and a

carefully calibrated

expansion strategy

of ~50 branches a

year, we expect

costs to remain

under control with

an average CIR of

47% in this phase

(54% in FY15).

A probable

re-rating

Increasing RoE to


dilution; expect

15% CAGR in ABV

over this phase.


to 71bps against

115bps currently

resulting in RoA

expanding to 1.4%

Consistent

NIMs of 3.3%

with falling

slippages

resulting in

Increasing

leverage to

result in

Consistent

growth in

business to be

rewarded by


NIM 3.4% 3.0% 3.4% 3.3% 3.3% 3.3% 3.2% ◄►

Slippage 0.4% 1.8% 2.1% 1.9% 1.7% 1.6% 1.6% ▲ Credit

costs 0.3% 1.4% 1.2% 1.0% 0.9% 0.7% 0.7% ▲

RoA 1.7% 0.9% 1.1% 1.2% 1.3% 1.4% 1.4% ▲


RoE 22% 12% 13% 15% 16% 18% 19% ▲


T1 CAR 14.4% 14.6% 12.7% 12.7% 12.5% 12.2% 11.7% ▼

ABV (Rs.) 227 334 363 407 465 541 639 ▲


< 0.75x 0.75x -

1.00x

1.00x -

1.25x

1.25x -

1.50x

1.50x -

1.75x

1.75x -

2.00x

1% 5% 23% 42% 27% 2% The stock is trading at 1.0x 1-year forward, and has

traded above this multiple for 93% of the days in the

past 5 years.

FY11-16E CAGR %

NII PPOP PAT Price

18% 17% 8% 1%

Entry = Rs. 398 @ 1.0x


Rs. 55


multiple of 1.7x


Page 7


Biocon is uniquely positioned to capitalize on the global biosimilars opportunity.

Biosimilars are the biggest opportunity for generic players over the next decade

and Biocon with 9 biosimilar assets at different stages of development is among

the frontrunners in the segment globally. Biocon has 6 biosimilars in phase III

trials and plans to file for 4 biosimilars – peg-filgrastim, insulin glargine,

trastuzumab and adalimumab – in the US and EU in CY16. Biocon is also

targeting the top emerging markets, where the potential for volume expansion in

biologic drugs post biosimilar launches, is quite significant

Biocon’s ~75%-owned subsidiary Syngene, which is the largest Indian CRO, is

on a strong growth trajectory. Syngene is in the midst of expanding its research

services capacities and is also adding capabilities in biologics and formulations

development and contract manufacturing, which augurs well for the long-term

With more than 60% of sales from biologics, Biocon has a differentiated

domestic business. In the recent past, management has focused on portfolio

and MR productivity rationalization in the segment. Going forward, we expect

benefits from operating leverage and further significant expansion in margins for

the segment

Biocon is among the largest manufacturers of statin and immunosuppressant

APIs globally. With the objective of forward-integrating its capabilities in APIs,

Biocon has commenced filings for formulations in US and EU and we expect the

next leg of growth for the segment to be driven by these initiatives


Biocon’s management team is led by Kiran Mazumdar Shaw (Chairperson and

MD) and Arun Chandvarkar (CEO and Joint MD). Biocon operates in segments

(biosimilars and novel molecules), which are characterised by higher gestation

periods compared to plain vanilla generics. The management team has been

successful in deploying significant capital into these segments without 1)

compromising the company’s balance sheet quality 2) diluting equity. We

believe the company is on the verge of monetizing these investments and we

are admirers of management’s perseverance and vision to invest in higher-risk

higher-entry barrier segments

Biocon’s focus on quality and CGMP compliance driven by top management is

evident in the company’s strong track record in regulatory audits

14 Mar 2016

Bloomberg BIOS IN

Shares o/s 200mn

Market Cap Rs. 97bn


3m Avg. Daily

Vol Rs. 344mn

Index BSE200

Snapshot

Promoters 60.7

Institutions 19.8

Public 19.5

1m 3m 12m

BIOS 10% 4% 14%

Sensex 8% -1% -14%

BSEHC 5% -1% -5%

Financial summary

Year Revenue

(Rs. mn)

EBITDA

margin %

Adj. PAT

(Rs. mn) EPS (Rs.) P/E (x) ROE (%)

FY16E 33,993 23.6% 4,422 22.1 21.9 13.3%

FY17E 38,327 23.7% 4,815 24.1 20.1 12.5%

FY18E 43,634 25.1% 5,525 27.6 17.5 13.1%

FY19E 52,633 26.4% 6,571 32.9 14.7 14.1%

FY20E 64,873 28.6% 8,772 43.9 11.0 16.6%

Consolidated financials

Rs. mn FY16E FY17E FY18E FY19E FY20E

Biocon (ex-Syngene) 23,178 25,473 28,304 33,778 41,630

Syngene 10,815 12,854 15,330 18,856 23,243

Consolidated revenue 33,993 38,327 43,634 52,633 64,873

Biocon (ex-Syngene) 4,919 2,781 3,024 3,644 5,060

Syngene 2,225 2,767 3,402 3,979 5,048

Consolidated PAT 7,143 5,547 6,425 7,624 10,108

Minority Interest -694 -732 -900 -1,053 -1,336

PAT after minority interest 6,450 4,815 5,525 6,571 8,772

Biocon CMP

Rs. 484

3Y Target

Rs. 877

Page 8

Biocon – Crystal Gazing

Over the next 3-4

years, the key

drivers for

Biocon’s

performance will

be 1) biosimilar

launches in

regulated markets

– 4 assets (peg-

filgrastim, insulin

glargine,

trastuzumab and

adalimumab)

currently in global

phase III trials 2)

Syngene’s

addition of

capabilities in

biologics and

formulations

development and

contract

manufacturing 3)

operating leverage

in domestic

business and

forward integration

through ANDA

filings in small

molecules

segment

Regulated market

biosimilar launches

by FY19 and strong

growth in Syngene

Healthy ~18%

revenue CAGR

driven by

Improvement

in operational

performance

to result in

Biosimilar

launches in

advanced

markets can

lead to

P/E multiple FY20E EPS Price target

17x 43.9 746 ▲

20x 43.9 877

Entry = Rs. 484 @ 17x FY18E EPS


Rs. 32.5

Adj. PAT CAGR of 19%, exit multiple of

20x


Rs.mn FY11 FY15 FY16E FY17E FY18E FY19E FY20E

Small

molecules 10,795 14,992 14,281 15,418 16,440 17,462 18,485 ◄►

Biosimilar 683 2,646 3,167 4,182 5,172 8,690 14,454 ▲

Branded

formulations 1,863 4,296 4,455 5,123 5,892 6,775 7,792 ▲

Syngene 3,143 8,629 10,747 12,953 15,466 19,083 23,583 ▲


EBITDA

margin 28.9% 22.5% 23.6% 23.7% 25.1% 26.4% 28.6% ▲

ROE 17.6% 13.4% 13.3% 12.5% 13.1% 14.1% 16.6% ▲

ROCE 15.4% 10.1% 8.6% 10.8% 11.5% 12.3% 14.6% ▲

Adj. EPS 17.0 20.4 22.1 24.1 27.6 32.9 43.9 ▲

Significant

expansion (~600bps)

in ROCE and 19%

EPS CAGR in FY16-

20

Re-rating

FY11-16E CAGR %

Revenue EBITDA Adj. PAT Price

13% 9% 5% 7%

Trading History – % of times stock traded

PE range <12x 12x-14x 14x-16x 16x-18x >18x

10% 22% 20% 29% 19%

Page 9


Strong presence in key branded (India, Brazil) and unbranded (US, Germany)

generic markets, Torrent has one of the most diversified business models

among leading pharma players.

Robust India franchise in chronic therapies such as CNS (rank 3) and CVS

(rank 4). Elder Pharma acquisition has given Torrent strong platforms in

segments such as nutraceuticals and pain management. We like Torrent’s

recent strategic initiatives in the domestic market including 1) rationalisation of

discounts and bonus offers to the channel, 2) MR productivity focus 3) greater

in-house manufacturing. We expect these steps to drive significant

improvement in Torrent’s domestic margins.

Execution (timely launch, strong Rx share gains) on product opportunities (such

as gCymbalta, gAbilify) has been Torrent’s key strength compared to other late

entrants in the US market. Strong cash flows from these opportunities have

enabled the company to step up its R&D efforts and filings in attractive

segments such as oncology, dermatology and ophthalmology

Torrent is the largest Indian player in key markets such as Brazil and Germany

and the company’s focused efforts in these markets will be key differentiators

going forward. The commercialisation of Dahej facility (from Q4FY16) should

ease capacity constraints and boost Torrent’s presence in key export markets


Torrent’s management team is led by Samir Mehta (Executive Chairman),

Ashok Modi (ED and CFO), Sanjay Gupta (ED – International business) and

Ruchir Modi (ED – India and RoW operations). In our view, Torrent’s

management is among the most return-on-capital-focused in the industry. We

like Torrent’s consistent dividend policy (of 30% dividend payout)

We also highlight the turnarounds in Torrent’s India and US businesses, under

the leaderships of Ruchir Modi and Sanjay Gupta, respectively. Torrent’s

successful integration of acquired Elder business, improvement in field force

productivity and rationalization of product portfolio and trade terms can be

attributed to Ruchir Modi’s leadership. Sanjay Gupta, through his focus on

customer relationships and execution on product opportunities, has been

instrumental in building Torrent’s visibility in the US

14 Mar 2016

Bloomberg TRP IN

Shares o/s 169mn

Market Cap Rs. 218bn

52-wk High-Low Rs. 1,720-1,073

3m Avg. Daily

Vol Rs. 278mn

Index BSE200

Snapshot

Promoters 71.3

Institutions 18.0

Public 10.7

1m 3m 12m

TRP 2% -10% 19%

Sensex 8% -1% -14%

BSEHC 5% -1% -5%

Financial summary

Year Revenue

(Rs. mn)

EBITDA

margin %

Adj. PAT

(Rs. mn) EPS (Rs.) P/E (x) ROE (%)

FY16E 67,843 39.7% 17,991 106.3 12.1 59.8%

FY17E 68,746 28.5% 12,654 74.8 17.2 31.8%

FY18E 74,723 27.7% 13,742 81.2 15.9 28.0%

FY19E 83,815 27.9% 15,873 93.8 13.7 26.6%

FY20E 95,040 28.1% 18,508 109.4 11.8 25.8%

Revenue breakup

Rs. mn FY16E FY17E FY18E FY19E FY20E

India formulations 18,230 21,147 24,530 28,455 33,008

US 27,111 22,360 21,819 23,791 26,865

Brazil 5,060 5,739 6,658 7,723 8,959

Contract manufacturing 3,800 4,180 4,598 4,828 5,069

Branded (ex India, Brazil) 3,220 3,606 4,039 4,524 5,067

Generic (ex US) 8,832 9,714 10,879 12,185 13,647

Others 1,590 2,000 2,200 2,310 2,426

Revenue 67,843 68,746 74,723 83,815 95,040

Torrent Pharmaceuticals CMP

Rs. 1289

3Y Target

Rs. 2187

Page 10

Torrent Pharmaceuticals – Crystal Gazing

Over the next 3-4

years, the

company’s

performance will

be driven by 1)

new product

launches in

dermatology, pain

and nephrology

segments and

consolidation of

its presence in

CVS,

nutraceuticals

and CNS

segments in the

domestic market

2) improvement in

Rx shares in

existing products

and new product

launches in the

US market

Recent strategic

initiatives to drive

operational

efficiencies and

margins across

markets

Healthy ~15%

revenue CAGR in

FY15-20E

Strong growth

in the US and

India lead to


18x 109.4 1.969 ▲

20x 109.4 2,187

Entry = Rs. 1289 @ 16x FY18E EPS


Rs. 127

Adj. PAT CAGR of 20% in FY15-20E,

exit multiple of 20x


Rs.mn FY11 FY15 FY16E FY17E FY18E FY19E FY20E

Revenue 21,978 46,535 67,843 68,746 74,723 83,815 95,040 ▲

EBITDA 3,878 10,202 26,947 19,560 20,680 23,352 26,733 ▲

Adj. PAT 2,702 7,509 17,991 12,654 13,742 15,873 18,508 ▲

Adj. EPS 16.0 44.4 106.3 74.8 81.2 93.8 109.4 ▲


EBITDA

margin % 17.6% 21.9% 39.7% 28.5% 27.7% 27.9% 28.1% ▲

ROE 29.1% 34.2% 59.8% 31.8% 28.0% 26.6% 25.8% ▲

ROCE 21.0% 22.4% 35.5% 23.8% 24.2% 24.7% 24.3% ▲

Net debt/

EBITDA 0.6 1.8 0.5 0.3 (0.1) (0.4) (0.8) ▲

>600 bps expansion

in EBITDA margin in

FY15-FY20; ROCE to

remain steady (FY15,

FY16 return ratios

boosted by on-offs)

Significant re-rating

in the last two years;

going forward,

earnings growth to

drive stock returns

FY11-16E CAGR %

Revenue EBITDA Adj. PAT Price

25% 47% 46^ 35%



24% 33% 14% 9% 20%

Strong balance sheet and free cash generation; inorganic

initiatives can provide upsides to current estimates

Page 11


Ramco Cements (TRCL) is one of the largest cement producers in South and

remains among the best plays on Southern market demand recovery.

We are positive on the prospects of the South Cement industry over a 3-5 year

outlook. With bifurcation of Andhra Pradesh and a stable government at the centre,

we anticipate strong demand recovery over the next five years.

South region is not expected to see any capacity additions over the next three

years. Utilizations will increase to ~75% by FY20E from the current 50% levels,

leading to lower pricing power for the cement producers. In our view, cement prices

in the South will continue to be driven by production discipline which in turn will be

led by cost inflation.

We expect TRCL to generate cumulative free cash flows (FCF) of ~Rs. 20-25bn

over FY16E-20E (5% FCF yield). With minimal capex over the next two years, we

expect TRCL to continue to reduce debt. Net debt to equity to trend down from 1x in

FY15 to 0.1x in FY12E.

We believe company has multiple earnings lever heading into FY18 led by (1)

sustenance of cement prices in South led by tight production discipline; (2) volume

recovery from 2HFY17E led by pick up of demand in Andhra Pradesh; and (3) cost

savings from lower imports of limestone and decline in fuel prices (4) Significant free

cash flow generation in next 5 years . Given improving profitability and

deleveraging, we attribute premium valuations of 10x FY20E EV/EBITDA.


Ramco cement- part of Ramco group which is one the oldest and most renowned

family business house in South – is helmed by Mr Dharmakrishnan A.V. who is with

company for last 30 years and got promoted to CEO position in 2012. He is credited

with lot of initiatives to increase operational efficiencies leading to one of the highest

Ebitda per ton generation in industry.

Group is known to be conservative with leverage, expansions and re-payment of

debt. The company has never raised equity.

Management has always taken proactive measures to lower cost of operations, like

setting up beneficiation plant, increasing petcoke usage, and lower fuel and power

consumption.

De-risked from South markets by setting up grinding unit in East. The company has

built a sizeable dealer network in the Eastern markets over the last three years.

14 Mar 2016

Bloomberg TRCL IN

Shares o/s 238mn

Market Cap Rs. 91bn


3m Avg. Daily

Val Rs. 85mn

Index BSE 500

Snapshot

Promoters 42.3

Institutions 35.0

Public 12.7

% 1m 3m 12m

TRCL 9% 5% 5%

Sensex 2% -1% -13%

BSE 200 0% -2% -15%


Ranking matrix (1 to 6) TRCL ICEM DBL JKLC ORCM

NT

Cost of operations 4 5 3 2 1

Regional exposure 2 4 1 3 5

Return metrics 1 5 4 3 2

Balance Sheet 1 5 4 2 3

Valuation 3 4 1 2 5

Overall Rank 1 5 3 2 4

Financial summary

Year Revenues

(Rs. Mn)

EBITDA (Rs.

Mn)

PAT (Rs.

Mn) EPS (Rs.) EV/EBITDA

EV/ton

(Rs./t)

FY16E 35,772 9,887 4,788 20.1 10.6 7,733

FY17E 39,302 10,643 5,591 23.5 9.4 7,415

FY18E 44,027 11,509 6,341 26.6 8.3 7,111

FY19E 49,563 12,579 6,330 26.6 7.5 7,007

FY20E 55,801 13,816 7,327 30.8 6.3 6,472

Ramco Cements CMP

Rs. 390

3Y Target

Rs. 600

Page 12

Ramco Cements– Crystal Gazing

Play on demand

recovery in South

India. We assume

realization to lag

cost inflation as

current cement

prices in south are

artificially inflated

and low utilizations.

Despite this, TRCL

will generate

significant free cash

flows (5% FCF

yield), hence

resulting in de-

leveraging of

balance sheet.

Expect low capex

intensity until

FY18E.

Volume recovery in

southern markets,

esp. in Andhra

Pradesh and

Telangana

Volume

growth cagr

FY16E-20E at

10%

Increasing

cash flow

from

operations

Prudent capital

allocation

leading to

EV/Ebitda

multiple FY20E Ebitda Price target

9x 13,816 525

10x 13,816 600

Entry = Rs. 390 @ 8x

FY18E Ebitda

Cumulative Dividends of Rs. 16

Ebitda CAGR of

9%, EV/Ebitda

exit multiple of 10x FY20E


Strong cash flow

generation story,

resulting in de-

leveraging

Multiples to sustain


Volumes in

mt 7.3 7.7 7.0 7.7 8.5 9.3 10.3 ▲

Realisation

/t 3,376 4,564 4,975 4,975 5,075 5,201 5,331 ▲

Ebitda Rs

mn 6,174 6,622 9,887 10,643 11,509 12,579 13,816 ▲

Ebitda

Margins % 23.7% 18.4% 28% 27% 26% 25% 25% ▼

Utilisations 70% 62% 54% 57% 63% 69% 76% ▲


RoE 12.8% 9.5% 16.8% 16.9% 16.5% 14.5% 14.8% ▼

Leverag

e 1.6 1.0 0.71 0.47 0.29 0.22 0.13

▼

CFO (Rs

nm) 6,192 9,147 8,574 8,523 8,920 9,554 10,226

▲

FCF (Rs

nm) (2,063) 2,413 5,384 5,734 5,729 2,518 4,826

▲

FY11-16E CAGR %

Revenue EBITDA PAT Price

7% 10% 18% 29%


EV/Ebitda

range

<6x 6x-8x 8x-10x >10x

19% 40% 8% 17%

Page 13


AIA Engineering (AIAE) is a leading grinding media manufacturer which has

transformed from a domestic player to a well-recognized international

manufacturer and supplier of high quality grinding media over the past decade

AIAE has demonstrated strong growth in the mining market (>40% volume

CAGR) after foray into this segment five years ago. It is already the second

largest player in the high chrome grinding media market after Magotteaux.

Mining revenue currently constitute ~36% of AIAE’s revenue vs. <10% of

revenue in FY10

AIAE’s centralized manufacturing process, based out of Gujarat, gives it

considerable cost advantages over its competitors (Molycop and Magotteaux)

who have manufacturing facilities in high cost destinations. This has given AIAE

product pricing and cost advantages in a price sensitive market

It is a large beneficiary of the shifting trend from forged media to high chrome

grinding media and should continue to see long term volume growth driven by a

large addressable market > 3mn MT and market share gains. Its foray into new

products (primary grinding media) should expand its addressable market and

should be an additional growth driver


Mr. Bhadresh Shah, Promoter, is an industry veteran and a very focused

businessman. He is ably supported by his nephew Mr. Kunal Shah,

Executive Director.

The management has been very pro-active in indentifying and targeting

growth segments and has been aggressive in marketing its products during

periods when its competitors lacked focus

We like the management’s effort in bringing AIAE’s high chrome products

onto global standards in terms of technology and quality. Its call of having a

low cost centralized manufacturing has been a success and is a strong

business moat

The management’s ability to think ahead of the curve and foray into mining

markets five years ago to seek growth has been a strategic success and

has positioned AIAE for long term growth

14 Mar 2016

Bloomberg AIAE IN

Shares o/s 94mn

Market Cap Rs. 78bn

52-wk High-Low Rs. 1,364-700

3m Avg. Daily

Vol Rs. 53mn

Index BSE 200

Snapshot

Promoters 61.7

Institutions 32.0

Public 6.4

% 1m 3m 12m

AIAE 3% -8% -28%

Sensex 2% -5% -17%

CG Index 2% -15% -34%

Financial summary

Year Revenue

(Rs. mn)

EBITDA

(Rs. mn)

PAT

(Rs.

mn)

EPS (Rs.) P/E(x) RoE(%)

FY16E 21,458 6,158 4,026 42.7 19.3 18.0

FY17E 24,363 6,359 4,059 43.0 19.1 15.9

FY18E 27,838 7,321 4,610 48.9 16.8 16.0

FY19E 32,292 8,396 5,348 56.7 14.5 17.2

FY20E 37,459 9,739 6,203 65.8 12.5 18.0

AIA Engineering

0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

AIAE - Mining Volume (in MT)

Mining Volume (in MT)

CMP

Rs. 824

3Y Target

Rs. 1434

Page 14

AIA Engineering – Crystal Gazing

AIAE to grow

revenue and PAT

by 13% and 11%

in next 4 years

from FY16E-

FY20E. Market

share gains in the

mining grinding

media market,

foray into new

products and

possible recovery

in overall mining

market to drive

growth

Improved grinding

media volumes

through market

share gains and

foray into primary

grinding media

Improved

volumes to

drive growth

Strong cash

flow

generation

Market share

gains to sustain

multiples


22x 65.2 1434

24x 65.2 1565

Entry = Rs. 824 @ 17x

FY18E


Rs. 50

EPS CAGR of 11%, exit

multiple of 22x FY20E



Volumes 1,25,817 1,88,000 1,80,777 1,97,739 2,21,882 2,51,803 2,85,512

Revenue 11,607 21,836 21,458 24,363 27,402 30,934 34,972

EBITDA 2,492 5,848 6,158 6,359 7,207 8,352 9,687

EBITDA

Margin 21.5 26.8 28.7 26.1 26.3 27.0 27.7

PAT 1,836 4,309 4,026 4,059 4,533 5,258 6,148


RoE 18.8 22.5 18.0 15.9 15.8 16.2 16.7

RoIC 24.9 30.8 26.6 23.1 21.6 22.7 25.1

CFO (Rs mn) 347 3055 5264 3842 4617 5227 6000

FCF (Rs. Mn) -465 1,229 3,264 842 1,617 4,027 4,800

Strong Cash flow

generation inspite of

capex plans till

FY18E

High multiple



7% 15% 48% 14% 16%

FY11-16E CAGR %


13% 20% 17% 24%

Page 15


Blue Star (BLSTR) has transformed itself from a cyclical EMP contractor (B2B)

to a fast-growing air conditioner player (B2C) over the past five years. It already

has ~10% market share in room air conditioner market and is among the top

five players in the industry

The company has leverage its strong commercial air conditioning brand and

has successful forayed into the room air conditioning segment through

increased distribution reach and launching/introduction of new models in the

segment. Room air conditioners-led Cooling Products segment’s revenue has

increased from ~25% of overall revenue in FY11 to ~45% currently. EBIT

contribution has increased from ~25% to 60% during the same period

We believe Cooling Products would remain at the center-stage and be a

sustained growth driver going forward given the large and expanding air

conditioner market, BLSTR’s increasing market share and improving product

mix. A recovery in the EMP segment, which we believe is around the corner,

would be an additional growth driver.


BLSTR’s management is led by Mr. Vir Advani, Managing Director in the

EMP segment and by Mr. Thiyagarajan, Joint Managing Director in the

Cooling Products segment.

The management’s decision on reducing its focus from the volatile EMP

segment and foraying into a steady growing room air conditioners segment

over the past five years has been a strategic success and has de-risked the

cyclical nature, the business model was carrying earlier

Within room air conditioners, we believe the management’s focus on foraying

into new products (inverter air conditioners and air coolers) should deliver

the next leg to growth in the segment

Ability to turn down orders with low margin or unfavourable working capital

terms in the EMP segment and decision to not to foray into the Middle East

market over the past few years seeking growth have been solid instances of

the management conservative and prudent decision making skills.

14 Mar 2016

Bloomberg BLSTR IN

Shares o/s 90mn

Market Cap Rs. 30bn


3m Avg. Daily

Vol Rs. 26mn

Index BSE 500

Snapshot

Promoters 39.5

Institutions 28.8

Public 31.7

% 1m 3m 12m

BLSTR 0% -8% 1%

Sensex 4% -2% -14%

CG Index 2% -13% -31%

Financial summary

Year Revenue

(Rs. mn)

EBITDA

(Rs. mn)

PAT

(Rs.

mn)


FY16E 35,120 2,212 1,138 12.6 26.2 23.4

FY17E 40,686 2,598 1,305 14.5 22.9 23.5

FY18E 48,125 3,579 1,879 20.9 15.9 28.4

FY19E 56,307 4,332 2,400 26.7 12.4 29.1

FY20E 66,847 5,274 3,102 34.5 9.6 29.6

Blue Star

5%6%

7.5%

9%10%

0%

2%

4%

6%

8%

10%

12%

FY12 FY13 FY14 FY15 9MFY16

Blue Star - Air Conditioners market share (%)

Blue Star - Air Conditioners market share (%)

CMP

Rs. 331

3Y Target

Rs. 627

Page 16

Blue Star – Crystal Gazing

FY11-16E CAGR %


4% -3% -8% 4%

BLSTR to grow

revenue and PAT

by 16% and 27%

in next 4 years

from FY16E-

FY20E with

EBITDA margin

inching up to 8%

range. As a

result, we expect

company to

generate OCF of

Rs 10bn in next 4

years.

Turnaround in the

EMP segment and

structural growth in

the cooling products

segment to drive

growth and margins

Strong

revenue

growth of 16%

Improved

EMP

segment

working

capital

situation

Turnaround in EMP

segment and market

share gains in air

conditioners to lead

to multiple expansion


18x 34.5 627

20x 34.5 690

Entry = Rs. 331 @ 16x

FY18E


Rs. 25





Revenue 29,807 31,819 35,120 40,686 48,125 56,307 66,847

Ebitda 2,563 1,673 2,212 2,598 3,579 4,332 5,274

Margins 8.6 5.3 6.3 6.4 7.4 7.7 7.9

PAT 1,578 920 1,138 1,305 1,879 2,400 3,102


RoE 30.9 19.7 23.4 23.5 28.4 29.1 29.6

Leverage 0.9 0.9 0.7 0.7 0.5 0.3 0.1

Working

capital days 94 65 64 59 53 50 48

CFO (Rs nm) -1133 2149 1587 1940 2583 2766 3224

Reducing working

capital days and

higher cash flow

from operations

High multiple



7% 15% 48% 14% 16%

Page 17


Cummins India (KKC) is a technologically driven, well diversified player in the

diesel engine/back-up power generator industry with a strong brand recall and

a market leadership position.

With technological backing from its parent, KKC has a wide range of product

portfolio (0-2250kVA rating engines) catering to various sector/end-customers.

Given its diversified product range and clientele (both domestic and exports),

we believe KKC has insulated itself from any growth shock arising from

weakness from a single sector. KKC has grown by ~9% CAGR between FY10

and FY16E inspite of a weak domestic demand environment

KKC has been very active in introducing new models/filling product gaps and is

positioning itself to grow further in the lower kVA rating power generation

segment. Its product range in the industrial segment is also well placed to gain

from any recovery in the Industrial segment.

Cummins Inc’s identification of KKC to be a major manufacturing export hub is

providing a long runway of growth for KKC in exports. Exports have grown at

>20% CAGR over the past six years


KKC has a well established professional management structure led by Mr.

Anant Talualicar, Managing Director. Given the MNC nature of the

company, its regular operations are not dependent on the decision making

of any single individual thereby insulting it from any management

concentration risk.

The KKC’s India team has been aggressive in introduction of new products,

foray into new segments, geographies and has led to its growth/market

share gains in a challenging market

KKC has a process oriented system and has various internal programs to

contain costs, improvement of internal efficiencies and centralization of

processes. This has greatly improved the productivity of the company,

giving it an added advantage over its peers

Cummins Inc has identified KKC as a key export manufacturing hub

(outside the US) and the Phaltan Megasite has been established with a view

to increase exports from the facility in the future.

14 Mar 2016

Bloomberg KKC IN

Shares o/s 277mn


52-wk High-Low Rs. 1,248-790

3m Avg. Daily

Vol Rs. 179mn

Index BSE100

Snapshot

Promoters 51.0

Institutions 34.9

Public 14.1

% 1m 3m 12m

KKC -9% -14% -5%

Sensex 4% -2% -14%

CG Index 2% -13% -31%

Financial summary

Year Revenue

(Rs. mn)

EBITDA

(Rs. mn)

PAT

(Rs.

mn)


FY16E 48,189 7,951 8,003 28.9 29.6 26.4

FY17E 53,386 9,343 9,002 32.5 26.3 27.0

FY18E 61,024 10,923 10,330 37.3 22.9 28.7

FY19E 70,116 12,901 12,111 43.7 19.5 31.4

FY20E 80,592 15,151 14,131 51.0 16.8 33.6

Cummins

Parameters KKC KOEL

Revenue CAGR (FY10-

FY15) 9% 2%

EBITDA CAGR (FY10-

FY15) 8% -7%

PAT CAGR (FY10-

FY15) 12% -3%

Average RoE, % 29.7% 15.5%

CMP

Rs. 854

3Y Target

Rs. 1593

Page 18

Cummins – Crystal Gazing

FY11-16E CAGR %


4% 3% 6% 15%

KKC to grow

revenue and PAT

by 14% and 15%

in next 4 years

from FY16E-

FY20E. Recovery

in the domestic

market driven by

industrial

segment, pick-up

in exports from a

low base and

margin expansion

to drive growth

and margins

Improved demand

from power

generation, industrial

segments and

market share gains

to drive growth

Strong

revenue

growth of 14%

Increased

cash flow

as major

capex ends

Improved

domestic

demand

environment,

margin share

gains


27x 51 1376

30x 51 1529

Entry = Rs. 854 @ 23x

FY18E


~Rs. 100





Revenue 39,512 44,058 48,189 53,386 61,024 70,116 80,592

EBITDA 6,720 7,351 7,951 9,343 10,923 12,901 15,151

EBITDA

Margin 17.0 16.7 16.5 17.5 17.9 18.4 18.8

PAT 5,996 7,859 8,003 9,002 10,330 12,111 14,131


RoE 35.6 28.8 26.4 27.0 28.7 31.4 33.6

RoIC 34 26.6 24.5 25.3 27.3 30.4 33.5

CFO (Rs mn) 4266 5012 8805 8960 9842 11396 13216

FCF (Rs. Mn) 2,780 1,625 5,011 6,460 8,342 9,896 11,716

Strong Cash flow

generation inspite of

capex plans till

FY17E

High multiple



18% 34% 19% 17% 12%

Page 19


V-Guard (VGRD) has grown into a well recognized, emerging pan-India based

player with a wide product portfolio - very different from its single-product,

region-specific business model a decade ago.

VGRD has expanded its product portfolio and its geographical presence using

its existing electrical distribution network (used for stabilizers). Dependence on

stabilizers has considerably reduced from ~45% of overall revenue in FY06 to

~18% of revenue currently. Non-south markets currently constitute ~35% of

overall revenue vs. negligible presence in FY06

VGRD has met with considerable success in the new products launched. In

water heaters, VGRD’s models have been successful and is currently the No.2

player in the market (Rs. 2bn FY16E revenue). Similarly, growth in pumps,

cable and fans has also been strong with increased brand acceptance.

We believe there is considerable headroom for growth in new products given its

increasing distribution reach, strong dealer incentives and potential for market

share gains.


Mr. Mithun Chittilappilly, Promoter, Managing Director, has ably taken the

company forward from his father, Mr. Kochouseph Chittilappilly, and has

driven strong growth (>20% CAGR) since becoming the managing director

in 2012

The management’s clear thought process, self analysis and measured

foray into new products and geographies has led to the building of a strong

brand and business

The management has a very good understanding of the overall market

dynamics, strength/weakness of competitors, is in touch with large

distributors/dealers and abreast of latest trends on a regular basis. This we

believe is critical to succeed in a competitive market

Heavy focus on cash flow generation and transparency in both business

strategy and financials are above industry standards

14 Mar 2016

Bloomberg VGRD IN

Shares o/s 30mn

Market Cap Rs. 25bn

52-wk High-Low Rs. 1,135-780

3m Avg. Daily

Vol Rs. 8mn

Index BSE 500

Snapshot

Promoters 65.9

Institutions 24.6

Public 9.6

% 1m 3m 12m

VGRD -7% -7% -12%

Sensex 2% -5% -17%

CG Index 2% -15% -34%

Financial summary

Year Revenue

(Rs. mn)

EBITDA

(Rs. mn)

PAT

(Rs.

mn)


FY16E 18,681 1,572 941 31.4 27.0 22.0

FY17E 21,166 1,807 1,120 37.4 22.7 24.0

FY18E 24,612 2,135 1,352 45.1 18.8 25.2

FY19E 28,698 2,736 1,774 59.2 14.3 28.0

FY20E 33,545 3,460 2,284 76.2 11.1 30.0

V-Guard

Parameters FY10-FY15 FY16E-FY20E

Revenue CAGR 30% 13%

EBITDA CAGR 21% 18%

PAT CAGR 22% 20%

Average RoE, % 23.7% 26.0%

CMP

Rs. 847

3Y Target

Rs. 1593

Page 20

V-Guard – Crystal Gazing

VGRD to grow

revenue and PAT

by 14% and 28%

in next 4 years

from FY16E-

FY20E. Strong

growth in the

stabilizer

segment, traction

in new product

launches and a

better pricing

environment

should drive

growth and

margins

Market leadership in

stabilizers, increased

penetration in non-

south & traction in

new products to

drive growth

Strong

revenue

growth of 14%

Sustained

improveme

nt in

working

capital

Better than market

level growth to

drive higher

multiples


20x 79.7 1593

24x 79.7 1753

Entry = Rs. 847 @ 19x

FY18E


~Rs. 80





Revenue

7,266

17,459

18,681

21,166

24,612

28,931

34,093

EBITDA

730

1,330

1,572

1,807

2,135

2,800

3,610

EBITDA

Margin 10.1% 7.6% 8.4% 8.5% 8.7% 9.7% 10.6%

PAT

426

707

941

1,120

1,352

1,818

2,388


RoE 17.0 20.3 23.1 23.7 24.6 28.0 30.6

Working Capital

(days) 125 61 55 50 50 50 50

CFO (Rs mn) -339 689 1211 1029 1056 1392 1830

FCF (Rs. Mn) -425 561 1011 809 836 1172 1610

Strong Cash flow

generation on the

back of sustained

improvement in

working capital cycle

High multiple



9% 36% 11% 32% 13%

FY11-16E CAGR %


21% 17% 17% 41%

Page 21


Sadbhav is amongst the few infrastructure developers in India, which has built a

credible EPC franchise and owns a well-funded BOT asset portfolio and it

should benefit from the NHAI’s rising pace of order awards and it scores

relatively better on accounting and corporate governance practices

Strong track-record in completion of road EPC projects ahead of schedule.

Large well-funded road portfolio (3739 lane kms) set it apart from many of its

peers. Entire BOT portfolio will be operational in its asset owning subsidiary

(68% holding) Sadbhav Infrastructure projects (SIPL) by 1HFY17

Portfolio of 12 road assets running through India’s most industrially advanced

states. Out of the 12 roads, 8 are commissioned (MBCP is partially

commissioned) and 4 are under advanced stages of implementation

Revenue/EPS CAGR of 20%/18% between FY10-15 demonstrates Sadbhav’s

stable performance over business cycle


Like a typical mid-sized infrastructure company, Sadbhav remains a promoter-

driven company and the promoters/family members are the key strategic

decision makers say in the case of project tenders. Vishnubhai Patel, Chairman

& Managing Director with 40 years of industry experience is spearheading the

company supported by his family members and professionals

Relative to the sector, Sadbhav stayed focused on its core competency which is

largely roads, followed by irrigation and mining. As per our understanding,

promoters of Sadbhav are not involved in major businesses in any other

sectors thereby ensuring dedicated focus

We like the ability of the promoters to pick right projects both on BOT and EPC

format which set them apart from its peers. Track record of picking & owning

assets in Gujarat, Maharashtra, Rajasthan, Karnataka and Haryana which are

economically and politically stable and which are expected to have higher than

average Gross State Domestic Product (GSDP)

In the last five years, Sadbhav has recruited and trained employees in the

middle management who share the vision and have the potential to contribute

to the long term success of the company

14 Mar 2016

Bloomberg SADE IN

Shares o/s 172mn

Market Cap Rs. 42bn


3m Avg. Daily

Vol Rs. 42bn

Index BSE500

Snapshot

Promoters 47%

Institutions 42%

Public 11%

% 1m 3m 12m

SADE -6.3% -28.3% -29.5%

Sensex 7.7% -1.3% -13.8%

BSE500 7.0% -2.8% -12.6%

Financial summary (Standalone), Rs. mn

Year Revenues EBITDA margin PAT EPS (Rs./

Share) RoE

FY16E 31,779 3,513 11% 1,211 7.1 9%

FY17E 36,319 4,080 11% 1,541 9.0 11%

FY18E 41,305 5,111 12% 2,182 12.7 14%

FY19E 45,436 5,622 12% 2,400 14.0 14%

FY20E 49,979 6,184 12% 2,640 15.4 14%

Rs. mn FY10-15 FY16E-20E

Cumulative Order inflow 132,995 266,058

Cumulative Revenues 132,808 204,818

Cumulative EBITDA 13,710 24,509

Cumulative OCF 7,629 15,209

Post tax OCF/ EBITDA 56% 62%

Average RoE, % 14.9% 12.4%

Sadbhav Engineering CMP

Rs. 245

3Y Target

Rs. 390

Page 22

Sadbhav Engineering – Crystal Gazing

EPC business’s

profits to grow at

a CAGR of 22%

for FY16-FY20%

with stable RoE

profile

Growth potential in

EPC business’

revenues due to

order inflow in road

sector projects

Consistent

revenue

growth of 16%

Stable

Balance

Sheet

quality

Consistent

growth in

business to be

rewarded by


12x 15.4 185 ▲

15x 15.4 231*

Entry = Rs. 245 @ 9.5x

FY18E


Rs. 3.5





Revenue 12,569 29,698 31,779 36,319 41,305 45,436 49,979 ▲

Ebitda 1,377 3,002 3,513 4,080 5,111 5,622 6,184 ▲

Margins 11% 10% 11% 11% 12% 12% 12% ◄►

PAT 538 1,137 1,211 1,541 2,182 2,400 2,640 ▲


RoE 15% 10% 9% 11% 14% 14% 14% ▲

Leverage 0.6 0.7 0.4 0.5 0.4 0.4 0.4 ◄►

Working

capital days 123 80 55 55 55 55 55 ◄►

CFO (Rs mn) 863 807 4,640 2,613 3,258 2,254 2,444 ▲

EPC business’

balance sheet quality

and return metrics to

remain stable (no

funding required for

SIPL’s BOT assets)

High multiple

FY10-16E CAGR %


20% 21% 18% 14%



0% 5% 7% 6% 82%

Total target price of Rs. 390/- (1.6x) includes SIPL value of Rs. 159/share. Rs. 231/- implies the value for EPC business;

Page 23


Cyient is a pure-play engineering services and geospatial services provider,

without any presence in vanilla IT services such as ADM which is getting

impacted by technological disruption or to verticals such as Banking which is

under tremendous cost pressure driving need for automation in IT services.

The two weak years of FY13 and FY14 saw Cyient concentrate on profitability

and free cash generation. It also recognized the need to broaden its revenue

base from clients and so started to focus on the top 50 accounts. It has also put

in place a list of 600 “must have” accounts that spend heavily on R&D and the

sales force also receives a commission that’s 3x of a non-must have account.

The evidence of its efforts on account management and new client addition was

seen in FY15 with organic revenues growing 20%.

Just as with engineering services, we are likely to see the same in Product

realisation. Cyient’s move towards Product Realisation is less appreciated by

the street in our view. While initially it did not fully understand the nature of

execution of Rangsons order book and linkage to client order book, it seems to

have understood now and Design to Manufacture work in under way with 7 key

clients and over next three years we should see Cyient doing deeper and bigger

work here. This move will result in higher wallet share of client’s spending,

bigger projects and deeper and stickier relationships and help it achieve its

target of 19/20% ROE from higher revenue growth.


The core change in Cyient came in after Krishna Bodanapu was elevated to the

position of CEO and MD in April 2014 and with that came in management’s

focus on receivables management, FCF generation and profitability

improvement as a part of the senior leadership’s KRAs. This resulted in much

needed consistency and predictability in performance.

Despite the top level management change in CY14, the middle level

management have remained with the company for the longest period of time.

This is an area where Cyient’s management scores over its peers.

The gradual movement Design to Manufacture is also Krishna’s view of

focussing only on engineering and product realisation segment thereby selling

its IT services arm to Techwave Consulting and acquiring Rangsons.

11 March, 2016

Bloomberg CYL IN

Shares o/s 113mn

Market Cap Rs. 45bn


3m Avg. Daily

Vol Rs. 23mn

Index BSE Infotech

Snapshot

Promoters 22.0

Institutions 64.5

Public 13.5

% 1m 3m 12m

CYL 3 -17 -27

Sensex 8 -1 -16

IT Index 5 -2 -15


Ranking matrix (1 to 6) CYL NITEC HEXW MTCL ECLX PSYS

Growth 2 4 2 1 4 2


Return metrics 2 4 2 3 1 2

Balance Sheet 1 2 1 2 1 2



Financial summary

Year Revenue

s (Rs mn)

EBITDA

(Rs mn)

PAT

(Rs

mn)

EPS P/E(x) RoE%

FY16E 30,845 4,263 3,420 30.4 13.2 18.1%

FY17E 33,528 4,961 3,641 32.3 12.4 18.2%

FY18E 37,216 5,673 4,183 37.2 10.8 18.4%

FY19E 41,682 6,495 5,084 45.2 9.3 18.7%

FY20E 47,518 7,599 6,137 54.5 8.5 19.0%

Cyient CMP

Rs. 400

3Y Target

Rs. 800

Page 24

Cyient – Crystal Gazing

CYL to grow

revenue and PAT

by 12% and 21%

in next 4 years

from FY16E-

FY20E with

Ebitda margins

inching up to 16%

range. As a

result, we expect

company to

generate OCF as

% of EBITDA to

improve from

51% in FY16E to

65% in FY20

generating OCF

of Rs5bn in FY20.

Structural

improvement in

margins led by

operational

efficiencies and

growth in Rangsons

Consistent

revenue

growth of 12%

Margin

improveme

nt and

stable DSOs

result in

Consistent

growth and

stable margins

in business to

be rewarded by


12x 54.5 654 ▲

14x 54.5 763

Entry = Rs. 400 @ 11x

FY18E


Rs. 40



TOTAL RETURN OF

2.0x


Revenue 11,880 27,359 30,845 33,528 37,216 41,682 47,518 ▲

Ebitda 1,804 4,013 4,263 4,961 5,673 6,495 7,599 ▲

Margins 15.2% 14.7% 13.8% 14.8% 15.2% 15.6% 16.0% ◄►

PAT 1,385 3,533 3,420 3,641 4,183 5,084 6,137 ▲


RoE 14.3% 20.2% 18.1% 18.2% 18.4% 18.7% 19.0% ▲

Leverage 0.00 0.02 0.05 0.04 0.04 0.03 0.03 ◄

►

Debtor days 91 79 76 77 77 77 77 ◄

►

CFO (Rs nm) 934 3,617 2,204 3,267 3,711 4,319 4,853 ▲

Higher Return on

Equity and higher

cash flow from

operations

High multiple

FY11-16E CAGR %


21 19 20 20



8 29 35 20 8

Page 25


Intellect Design Arena (INDA) is a BFSI focused software product company

created by the vertical demerger of Polaris in March 2014. With the advent of

SMAC and other concepts like smart legacy modernisation, demand for

packaged software has been steadily improving after two years of sluggishness.

This coupled with heavy investments in S&M and R&D over the past three

years should result in doubling of revenues over FY16-20E.

Over the next three to four years the focus is to sell more products to existing

clients thereby increasing products per client from 1.3 currently to 2.5. INDA

business consists of five main product categories –Universal banking platform,

Treasury Banking platform, Risk & Treasury banking management, Central

banking platform and Enterprise insurance platform. These products have been

integrated across various OS and devices and rated highly by industry analysts.

In order to achieve this goal INDA has been spending 25% of its revenues on

sales and marketing over the last two years. This is largely going into recruiting

local sales people rather than Indians and who have been hired either from

large competitors or from banks having strong experience thereby driving

growth. For instance, if a person who has previously spent 20 years in Lloyds

Bank and is now leading sales of an INDA product, the chances of pipeline

getting converted into an order and to revenues is much higher than before.

To drive profitability, INDA has partnered with various IT vendors throughout

FY16. Agreement with IT service vendors would not only increase the size of

deal wins but also improve gross margins as Professional services or

Implementation has the lowest margins.


The biggest change in INDA management is Arun Jain’s willingness to delegate

and empower second leadership team which was not being done in Polaris.

This is being done by giving full P&L responsibility to four different product

CEOs of the product they lead. These four different product CEOs are having

separate sales team and separate functional R&D team bringing accountability.

In order to ensure consistent revenue growth, INDA management has given 7%

of their outstanding equity as ESOPs to employees. This is the best way to

incentivise the sales and delivery team.

11 March, 2016

Bloomberg INDA IN

Shares o/s 101mn

Market Cap Rs. 20bn


3m Avg. Daily

Vol Rs. 82mn

Index BSE Infotech

Snapshot

Promoters 32.1

Institutions 23.4

Public 44.5

% 1m 3m 12m

INDA 6 -22 73

Sensex 8 -1 -16

IT Index 5 -2 -15


Ranking matrix (1 to 6) INDA NSEL OFSS MJCO RMCO SUBX

Growth 1 4 6 3 3 4






Financial summary

Year Revenue

s (Rs mn)

EBITDA

(Rs mn)

PAT

(Rs

mn)

EPS P/E(x) RoE%

FY16E 8,079 -307 -323 -3.2 NA NM

FY17E 9,301 417 252 2.5 80.1 4.2%

FY18E 10,863 1,019 759 7.5 26.6 11.5%

FY19E 12,831 1,638 1,315 13.0 15.4 17.3%

FY20E 15,347 2,374 1,995 19.8 10.1 21.5%

Intellect Design Arena CMP

Rs. 200

3Y Target

Rs. 400

Page 26

Intellect Design Arena – Crystal Gazing

INDA to grow

revenue and PAT

by 17% and 100%

in next 4 years

from FY16E-

FY20E with

Ebitda moving

from negative

category to 15/16

range. As a

result, we expect

company to

generate ROEs in

excess of 20% by

FY20E and cash

conversion to

improve from

negative territory

to 75% of EBITDA

by FY20E.

More product sales

to existing clients

and product sales to

new clients

Consistent

revenue

growth of 17%

Margin

improveme

nt from SI

tie up to

result in

Consistent

growth and

margin

improvement in

business to be

rewarded by


18x 19.8 356 ▲

20x 19.8 395

Entry = Rs. 200 @ 1.7x

FY18E EV/Sales


Rs. 5



TOTAL RETURN OF

2.0x


Revenue NA 6,048 8,079 9,301 10,683 12,831 15,347 ▲

Ebitda NA -842 -307 417 1,019 1,638 2,374 ▲

Margins NA -13.9% -3.8% 4.5% 9.4% 12.8% 15.5% ▲

PAT NA 830 323 252 759 1,315 1,995 ▲


RoE NA NA NA 4.2% 11.5% 17.3% 21.5% ▲

Leverage NA 0.00 0.00 0.00 0.00 0.00 0.00 ◄

►

Net Working

Capital days NA 3 15 12 12 12 12

◄

►

CFO (Rs nm) NA -176 -604 332 755 1,217 1,756 ▲

Higher Return on

Equity and higher

cash flow from

operations

High multiple

FY11-16E CAGR %


NA NA NA NA

Page 27


By virtue of being one of the early entrants into the footwear retail space and

by straddling products across price points, Bata has become a household

name and has emerged as one of the very few successful retailers in India.

We note that Bata had taken balanced approach to growth by neither being

too aggressive nor being conservative in retail expansion, which we believe

is one of the key success factors that has enabled them to survive across

consumption cycles.

Bata has faced its fair share of challenges including Labour union issues, rise

in employee cost & rental expenses, outdated merchandise, inefficient sales

force, lack of funds and supply chain related issues which led to the downfall

of several retail companies in India. Bata not only successfully transformed

these challenges but emerged stronger with K-store concept, improved billing

networks and rationality in expansion.

Rising prominence of alternate retail channels (Wholesale & e-Commerce) in

footwear, excess inventory on account of failure of SAP implementation and

higher rental costs have emerged to be the recent challenges which have led

to growth and earnings floundering offlate. We however remain sanguine of

the prospects as we believe Bata has the ability to transform itself to

changing needs as they have demonstrated in the past.


Unlike a typical MNC, Bata’s decision making has stemmed from regional

centres, which we believe understands and responds to local challenges

better and aids in making quicker decisions and implementation.

Bata India accommodates the global parent chairman as an independent

director in Bata India BOD. Mr.Rajeev Gopalakrishnan is the CEO for the

past 5 years with ~26 years experience across Bata organisations.

Mr. Ram Kumar Gupta, the recently appointed CFO has been with Bata for

around 27 years, we understand that Mr. R.K. Gupta was one of the key

member in transforming Bata operations during the challenges that the

company faced in the first decade of 2000.

We believe the current management has understood the problems in hand

and is well equipped to tackle the necessary medium-long term challenges.

14 Mar, 2016

Bloomberg BATA IN

Shares o/s 129mn

Market Cap Rs. 62bn


3m Avg. Daily

Val Rs. 220mn

Index BSE 200

Snapshot

Promoters 53.0

Institutions 27.9

Public 19.2

% 1m 3m 12m

BATA 1% 3% -21%

Sensex 4% -2% -14%

BSE DIS 2% -5% -3%

Financial summary

Year Revenue

s (Rs mn)

EBITDA

(Rs mn)

PAT (Rs

mn) EPS P/E(x) RoE%

FY16E 24,387 2,736 1,634 12.7 38.1 14.8%

FY17E 27,622 3,431 2,121 16.5 29.3 16.7%

FY18E 31,489 4,306 2,694 21.0 23.1 18.5%

FY19E 35,897 4,903 3,122 24.3 19.9 17.2%

FY20E 40,923 5,577 3,616 28.1 17.2 18.6%

Bata India

Operating leverage to accrue as revenue growth drivers bounce back

Rs.mn FY11 FY12 FY13 FY15 FY16 FY17 FY18

Revenue 15,491 18,425 20,652 26,940 24,387 27,622 31,489

Rental

costs 1,453 2,153 2,619 3,741 3,386 3,733 4,144

% of sales 9.4% 11.7% 12.7% 13.9% 13.9% 13.5% 13.2%

EBITDA 2,304 2,750 3,220 3,350 2,736 3,431 4,306

EBITDA

margin 14.9% 14.9% 15.6% 12.4% 11.2% 12.4% 13.7%

CMP

Rs. 484

3Y Target

Rs.844

Page 28

We pencil in a 4-

year revenue and

EBITDA CAGR of

~14% and ~19%

respectively

(FY17-FY20).

BIL's portfolio of

strong brands,

immense

potential to

capitalise on the

growth

opportunities

and the dormant

operating

leverage to play

out over the

medium to long

term.

Steady state revenue

growth assumed

given the inching

competitive intensity

and diminishing

distribution

advantage.


30X 28.1 844

35X 28.1 985

Entry = Rs.484 @ 29x FY17E

Cumulative Dividends of Rs. 17

EBITDA CAGR of

~18%, exit multiple of 30x FY20E


FY11 FY16E FY17E FY18E FY19E FY20E

Revenue 15,491 24,387 27,622 31,489 35,897 40,923

EBITDA 2,304 2,736 3,431 4,306 4,903 5,577

Margins 14.9% 11.2% 12.4% 13.7% 13.7% 13.6%

PAT 1,537 1,634 2,121 2,694 3,122 3,616

EPS 12.0 12.7 16.5 21.0 24.3 28.1

FY11 FY16E FY17E FY18E FY19E FY20E

Rental

expenses 9.4% 13.9% 13.5% 13.2% 12.8% 12.5%

ROE 31.8% 16.7% 18.5% 17.2% 18.6% 14.8%

ROCE 29.7% 16.8% 18.6% 17.3% 18.7% 14.9%

Huge operating

leverage to play out

from rental expenses

with increasing scale

of operations to

enhance returns.

Multiple assumed in line

with past performance

with no downgrading

assumed given its

vintage and robust

brand enquiry.

Bata India – Crystal Gazing

FY11-16E CAGR %


12% 4% 2% 23%


PE

range

<23x 23x-25x 25x-27x 27x-29x 29x-31x >31x

18% 9% 20% 18% 15% 20%

Page 29


Decorative paints; Cosy Oligopoly: Our penchant among paint companies

is aligned towards players who have higher contribution from decorative

paints segment given that superior pricing power and robust demand drivers

makes decorative paints a safe bet across economic cycles. We believe that

the crux of sectoral moat comes from current distribution structure and unless

any disruptive innovation happens, the incumbents will continue to enjoy the

ever expanding pie of the Indian decorative paints market.

Benefit from ‘solvent’ to ‘water’ changing preference: With consumption

of water based paints in India on the rise, BRGR had undertaken a massive

rebranding initiative to promote premium water based paints. Having been a

late entrant into the decorative paints market, the rebranding and fresh

positioning assisted BRGR in cementing a place for its own in the decorative

paints market.

Premiumising portfolio: BRGR over the past 5 years has increased its

focus on premium offerings enabling gross margins expand ~450bps from

FY11-FY15 despite limited raw material tailwinds.

Distribution expansion & focus on supply chain: ERP implementation,

better incentive programs for sales force, improving links with painters and

initiatives as ‘express painting’ has enabled BRGR developing better liaison

with painters and dealers..


Entrepreneural attention from promoters (Kuldip and Gurbachan Singh

Dhingra) & professional expertise has not only led BRGR becoming the 2nd

largest decorative paint player but also has enabled them to widen the gap

between themselves and rest of the trailing market.

Mr. Abhijit Roy, since his appointment as CEO and MD in 2012 has

undertaken several long term initiatives as product premiumisation, capacity

expansion and increase in marketing spends focussing on strengthening

product, brand and supply chain.

Further, incessant innovations to remain relevant to changing market needs

as express painting & ‘aggregator’ model keeps us optimistic on

management’s ability to align to changing needs.

14 March 2016

Bloomberg BRGR IN

Shares o/s 693mn



3m Avg. Daily

Val Rs. 108mn

Index BSE 200

Snapshot

Promoters 75.0

Institutions 13.6

Public 11.5

% 1m 3m 12m

BRGR -5% 8% 13%

Sensex 8% -1% -14%

BSE DIS 6% -3% -3%

Financial summary

Year Revenue

s (Rs mn)

EBITDA

(Rs mn)

PAT (Rs

mn) EPS P/E(x) RoE%

FY16E 46,994 6,970 3,981 5.7 41.4 28.5%

FY17E 53,609 8,156 4,871 7.0 33.9 28.6%

FY18E 62,822 9,800 6,054 8.7 27.3 28.8%

FY19E 74,130 11,817 7,499 10.8 22.0 28.7%

FY20E 87,473 14,225 9,140 13.2 18.1 28.2%

Berger Paints

BRGR consistently outgrowing trailing peers in revenue growth

Revenue

growth FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Berger Paints 23.8% 25.9% 13.5% 15.6% 11.7% 8.7% 14.1% 17.2%

Akzo Nobel India 16.9% 81.2% 12.3% 8.3% 4.5% 7.3% 8.6% 13.4%

Kansai Nerolac 25.5% 21.4% 9.8% 10.8% 12.2% 7.6% 14.0% 17.1%

CMP

Rs.238

3Y Target

Rs.448

Page 30

We believe

BRGR should

continue to

outperform

industry

growth led by

incessant

product and

marketing

initiatives.

Gross margins

to contract as

raw material

prices stabilise

however

operating

margins

expansion to

accrue on the

back of rise in

operating

leverage.

Multiples to

hover around

current levels

Revenues and

Earnings to grow at a

CAGR of ~17% &

~23% respectively

over next four years.


30x 13.2 396

34x 13.2 448


Cumulative Dividends of Rs. 8.4

EPS CAGR of ~23%,




Revenue 23,407 43,221 46,994 53,609 62,822 74,130 87,473

EBITDA 2,503 5,107 6,970 8,156 9,800 11,817 14,225

Margins 10.7% 11.8% 14.8% 15.2% 15.6% 15.9% 16.3%

PAT 1,500 2,647 3,981 4,871 6,054 7,499 9,143

EPS 2.2 3.8 5.7 7.0 8.7 10.8 13.2


Gross Margins 37.3% 41.4% 44.7% 44.4% 44.1% 43.0% 42.5%

ROE 23.3% 24.0% 28.5% 28.6% 28.8% 28.7% 28.2%

ROCE 17.3% 17.2% 21.0% 23.0% 25.0% 26.1% 26.3%

CFO (Rs nm) 1,261 3,454 4,340 4,637 5,183 6,117 7,355

Gross margins to

come down as raw

material headwinds

emerge

Multiples to hover

around 30x-35x

Berger Paints – Crystal Gazing

FY11-16E CAGR %


15% 23% 22% 41%


PE

range

<20x 20x-25x 25x-30x 30x-35x 35x-40x >40x

26% 20% 19% 9% 23% 3%

Page 31


Targeting a niche but an expanding consumer segment, Indian Terrain

Fashion (ITFL) has built a strong brand equity in the affordable premium

men’s wear market through its superior and differentiated product offerings.

Having commenced operations only in 2001 and being a relatively younger

brand, ITFL’s terms of trade were more favourable for its partners and below

industry standards. However, with the company now having reached an

inflection point, ITFL has taken the initial steps in the process and all new

EBOs are expected to be contracted with improved terms of trade.

Renegotiation of existing franchise arrangements can also yield gross margin

and EBITDA margin expansion over the next 3 years.

An entrenched distribution structure with over ~1000 points of sales

(Exclusive Brand Outlets (EBOs), Multi Brand Outlets (MBOs), Large Format

Stores (LFS) and E-Commerce) illustrates the reach as well as establishes a

strong platform for expansion. ITFL also encompasses sturdy back-end

capabilities, with sourcing expertise and design competencies.

Since, ITFL was not a cash rich company and leveraged significantly till

recently, ITFL had low advertising budgets (while maintaining high Sales

Promotion / Discount budgets) and hence could not fully utilize its improving

brand salience through A&P. However, with the company having raised

Rs.750mn in 2015, the company is flushed with the necessary funds to

commence its next phase of growth.


ITFL got de-merged from Celebrity Fashions in 2011, both the cos. are

promoted and managed by Mr. V Rajagopal. The day to day operations of

the company are overseen by Mr. Charath (CEO) and Mr. Amitabh Suri

(COO) who are the driving force behind the brand and the company.

Inspite of going through a very difficult journey of last 11/2 decade, with the

limited resource at disposal the ITFL team managed to create a very strong

brand equity of INDIAN TERRAIN in the market place, solely based on their

unflinching focus on design, fit and product quality.

Meaningful ESOPs to the top management ensures continuity at the top and

also aligns interest of shareholders and the management for value creation.

14 March 2016

Bloomberg ITFL IN

Shares o/s 37mn

Market Cap Rs. 4bn


3m Avg. Daily

Val Rs. 9mn

Index -

Snapshot

Promoters 30.9

Institutions 31.1

Public 38.1

% 1m 3m 12m

ITFL 6% -11% -4%

Sensex 8% -1% -14%

BSE DIS 6% -3% -3%

Financial summary

Year Revenues

(Rs mn)

EBITDA

(Rs mn)

PAT

(Rs mn) EPS P/E(x) RoE%

FY16E 3,126 398 305 8.5 14.1 21.6%

FY17E 3,689 504 329 9.2 13.1 19.0%

FY18E 4,487 653 431 12.0 10.0 20.6%

FY19E 5,295 757 500 13.9 8.6 20.0%

FY20E 6,118 887 587 16.3 7.4 19.9%

Indian Terrain

Despite limited A&P outlay, ITFL has built a strong brand equity

FY11 FY12 FY13 FY14 FY15

Revenue 1,211 1,410 1,567 2,321 2,904

Growth (%) na 16.4% 11.2% 48.1% 25.1%

A&P 77 65 62 102 121

% of sales 6.3% 4.6% 4.0% 4.4% 4.2%

Commission and discounts 142 203 256 357 504

Margin (%) 11.7% 14.4% 16.3% 15.4% 17.4%

CMP

Rs.120

3Y Target

Rs.294

Page 32

We believe

ITFL has the

ability to

outgrow the

market led by

underlying

product quality,

distribution

expansion and

its brand

extensions.

Assuming a revenue

and PAT CAGR of ~18%

each respectively over

the next four years

Entry = Rs.120 @ PE of 13x

FY17E

Cumulative Dividends of Rs.5.5

Exit multiple of 18x FY20E



Revenue 1,211 2,904 3,126 3,689 4,487 5,295 6,118

EBITDA 124 335 398 504 653 757 887

Margins 10.3% 11.5% 12.7% 13.7% 14.5% 14.3% 14.5%

PAT 63 180 305 329 431 500 587

EPS 2.3 5.0 8.5 9.2 12.0 13.9 16.3


ROE 31.8% 22.1% 21.6% 19.0% 20.6% 20.0% 19.9%

ROCE 16.1% 18.6% 19.3% 17.3% 19.2% 19.1% 19.3%

Leverage 2.62 0.37 0.24 0.15 0.11 0.07 0.05

Working

Capital Days 180 129 143 135 132 132 132

Working capital

management however

continues to be a

concern

We believe the company

can benefit from potential

valuation re-rating given

that it can possibly reach

the Rs.8bn retail revenue

threshold level by 2020.

Indian Terrain – Crystal Gazing

FY11-16E CAGR %


21% 26% 37% 49%


18x 16.3 Rs.294

22x 16.3 Rs.359

Page 33


VIP industries (VIP IN), market leader in the oligopolistic organized luggage

market in India led by its strong products, brands and distribution moat would

be an indisputable beneficiary of the increase in number of airline passengers

and Indian consumers’ innate need to migrate towards branded goods.

Wide portfolio of brands straddling across price points with distinct

positioning have been inline to meet changing consumer needs.

Growth drivers for the three new age brands viz. Skybags, Carlton and

Caprese remain on a strong footing with brands expected to deliver growth in

excess of ~20% over the next 3-4 years. These youth centric brands augurs

well to remain relevant to the young customers with increasing disposable

income.

With ~10,700 points of sales, VIP IN has the strongest distribution network

among peers. Though VIP IN has struggled on the growth and margin front in

the recent past, we can’t overemphasise the fact that throughout this difficult

cycle, VIP IN has been able to protect its terms of trade of trade, clearly

reflects brand strength of the portfolio.

Huge share (~60%) of unorganized market in the category, possible

inflection point in consumers’ preference for branded luggage and probable

gross margin expansion on the back of in-house production could be

additional levers.


VIP IN is managed by the promoter family with Ms. Radhika Pirmal (third

generation) at the helm of operations. With high attrition at top management

in 2009, Ms. Radhika’s induction was instrumental in reviving VIP fortunes.

Despite intense competition, Ms.Radhika has credibly managed to sustain

market leadership by developing separate strategy for each brand & network.

Samsonite’s (global leader in luggage industry) inability to become market

leader despite possessing favourable brands and funds is a testament to

Ms.Radhika’s ability and achievements.

Credited with adding impetus to growth with the three new youth brands, we

note that Ms. Radhika has also been able to attract good talent from industry

indicating that Ms.Radhika is indeed pulling all strings to lead VIP growth.

14 Mar, 2016

Bloomberg VIP IN

Shares o/s 141mn

Market Cap Rs. 14bn


3m Avg. Daily

Val Rs. 44mn

Index BSE 500

Snapshot

Promoters 52.5

Institutions 18.1

Public 29.4

% 1m 3m 12m

VIP 9% 8% -2%

Sensex 4% -2% -14%

BSE DIS 2% -5% -3%

Financial summary

Year Revenue

s (Rs mn)

EBITDA

(Rs mn)

PAT (Rs

mn) EPS P/E(x) RoE%

FY16E 12,219 985 588 4.2 23.3 18.3%

FY17E 13,865 1,235 753 5.3 18.2 19.5%

FY18E 16,014 1,469 922 6.5 14.9 17.6%

FY19E 18,564 1,771 1,219 8.6 11.2 21.6%

FY20E 21,246 2,009 1,404 9.9 9.8 23.1%

VIP Industries

Contribution from new age brands on the rising trend

FY14 FY15 FY16e FY17e FY18e

VIP 50% 49% 46% 45% 44%

Skybags 23% 23% 24% 25% 26%

Carlton 6% 6% 6% 7% 7%

Caprese 2% 2% 3% 3% 3%

Alfa & Aristocrat 20% 19% 22% 21% 20%

CMP

Rs.97

3Y Target

Rs. 199

Page 34

We believe VIP,

the market

leader led by

its strong

products,

brands and

distribution

moat would be

a beneficiary of

the macro

economic

revival leading

to healthy

growth for the

company. New

age brands

which are the

growth drivers

of the company

along with

operating

leverage to aid

a ~21% PAT

CAGR over

next four years

Revenues and

Earnings to grow at a

CAGR of ~14% &

~21% respectively

over next four years.


20x 9.9 199

25x 9.9 248

Entry = Rs.97 @

18x FY17E

Cumulative Dividends of Rs.9.3

EPS CAGR of ~21%,




Revenue 7,584 10,477 12,219 13,865 16,014 18,564 21,246

EBITDA 1,203 775 985 1,235 1,469 1,771 2,009

Margins 15.9% 7.4% 8.1% 8.9% 9.2% 9.5% 9.5%

PAT 887 435 588 753 922 1,219 1,404

EPS 6.3 3.1 4.2 5.3 6.5 8.6 9.9


Gross Margins 53.5% 45.3% 43.9% 43.7% 43.5% 43.7% 43.7%

ROE 51.0% 14.7% 18.3% 19.5% 18.2% 19.8% 21.9%

ROCE 34.7% 13.8% 16.9% 18.7% 18.0% 19.6% 21.7%

Enhanced capital

efficiency on the

back of increasing

scale provided rupee

depreciation doesn’t

play a damper.

Huge potential for re-

rating given that it

currently trades at

~1.4x FY15 sales.

VIP Industries – Crystal Gazing

FY11-16E CAGR %


10% -4% -8% -3%



10% 19% 24% 41% 7%

Page 35


Superior business model, having exposures to the right end-markets with optimum

OEM/replacement segment mix. (Auto/Industrial : 55/45; OEM/Replacement: 30/70)

Gaining market share in OEM and replacement market for both the 4W and 2W

segment. Continues to be the leader in telecom battery space

22% revenue CAGR from FY11-FY16 coupled with EBITDA CAGR of 27% vs. the

industry leader Exide having a revenue and EBITDA CAGR of 8% and 3% in the

same period

Significant capacity expansion undertaken in all the segments at the right time as

volume growth remains strong. Company is entering new segment of inverter

tubular batteries (traded thus far) as demand for its batteries remains string and the

company is facing supply constraints from contract manufacturers.

Industry leading margins (17.5%+), post tax RoCEs (25%) and consistent free cash

flows


AMRJ is a JV between Johnson Controls and the Galla family owning 26% each.

Johnson controls is globally the leading lead-acid battery manufacturer in terms of

size, technology and operating efficiencies. AMRJ has significantly benefited from

Johnson Controls operating capabilities. Mr. Ramachandra Galla (promoter)

is a technocrat having worked as a Consulting Engineer for the Designing of

Nuclear & Coal Fired Power Plant in the USA.

We like the management team as they have gone about doing the business by

following not following the leader (Exide) in terms of technology, sales infrastructure

and new product introductions. In all the cases, they have had huge success in

terms of sales and market share. Below are some examples

AMRJ pioneered the sale of pre-charged automotive batteries (available off the

shelf) in India. This changed the industry landscape as Exide followed conventional

methods of charging the battery at the point of sale. Pioneer in the VRLA

technology for 2W batteries and QRS (quick recharge system) batteries in Telecom

Management at AMRJ followed a two-tier structure by appointing franchisees who

would in-turn supply to retailers. This model has proven to be a huge success vs.

Exide’s single tier structure

14 Mar, 2016

Bloomberg AMRJ

Shares o/s 170.8


52-wk High-Low Rs. 1,132-773

3m Avg. Daily

Vol Rs. 268mn

Index BSE 200

Snapshot

Promoters 52.1

Institutions 28.9

Public 19.1

% 1m 3m 12m

AMRJ 4% 7% 5%

Sensex 8% -1% -14%

BSEAUT

O 11% -3% -12%

Financial summary

Year Revenue

(Rs. mn)

EBITDA

Margin % PAT EPS (Rs.) P/E (x)

EV/EBITDA

(x)

FY16E 47,545 17.7% 5,143 30.1 37.3 21.0

FY17E 57,979 18.0% 6,568 38.5 29.8 17.9

FY18E 68,474 18.3% 8,274 48.4 23.3 14.1

FY19E 79,109 17.5% 9,321 54.6 18.5 11.2

FY20E 89,462 17.5% 10,988 64.3 16.4 9.7


Amara vs. Exide Amara Raja Exide

5Y Revenue CAGR 22% 8%

5Y EBITDA CAGR 27% 3%

FY16 EBITDA Margin % 17.7% 15.2%

FY16 RoCE % 24% 13%

4W Replacement Market

Share 22% 35%

2W Replacement Market

Share 17% 30%

Amara Raja Batteries CMP

Rs. 870

3Y Target

Rs.1,510

Page 36

Amara Raja Batteries – Crystal Gazing

Limited re-rating

potential

EBITDA growth to

mirror revenue

growth

Revenue CAGR of

17% from FY16 to

FY20

Rs. Mn FY11 FY15 FY16E FY17E FY18E FY19E FY20E

Auto 9,719 22,630 26,457 25,874 30,123 34,353 38,314 ▲

Industrial 7,952 19,554 21,073 32,085 38,329 44,732 51,121 ▲

Total 17,671 42,110 47,530 57,959 68,452 79,085 89,436 ▲


EBITDA

(Rs.mn) 2,574 7,233 8,420 10,436 12,531 13,836 15,656 ▲

EBITDA

Margin(%) 14.6% 17.1% 17.7% 18.0% 18.3% 17.5% 17.5% ▲

Entry = Rs. 850

(22x FY17 P/E)


Exit at 23x FY20

P/E

TOTAL RETURN OF 68%

Over FY16-20, AMRJ is

expected to see a 17%

revenue and EBITDA

growth equally driven by

Auto and Industrial

segment.

EBITDA margin is expected

to remain stable at ~17.5%.

Do not expect to see

pricing pressure as it is a

duopoly

Growth from new segment

such as tubular inverter

battery to offset the

moderation in 4W

replacement market

volumes. 2W to continue

seeing string growth

Overall replacement

segment to be driven by

reduction in unorganized

segment which accounts

for ~40% of the

replacement market



27% 30% 12% 21% 10%

FY11-16E CAGR %


26.9% 32.3% 34.7% 36.5%

Page 37


It is one of the best plays on India’s improving port and rail infrastructure. The

company is a unique mix of being an ‘infra’ company yet having a near debt-free

balance sheet with steady free cash generation. We expect India’s containerization

to improve from current ~50% towards world average of ~80%

GDL is among the top three CFSs at JNPT (India’s largest container port) and

Chennai port. Other assets (CFS/ICD) are also at the right locations so as to take

advantage of expected improvement in container volumes due to the Dedicated

Freight Corridor (DFC) – Gurgaon, Faridabad, Ludhiana and planned increase in

port capacity – Mumbai, Chennai, Krishnapatnam, Vizag and Kochi

Expect ~12% volume CAGR from FY16-FY20 on the back of new terminals and

benefit from DFC and port capacity expansion. EBITDA CAGR is expected to be

higher at ~17% given improving rail margins (higher double stacking)

The stock trades at 21x FY17 EPS (assuming 50% stake in rail). We expect

Blackstone to sell its ~50% stake in the rail subsidiary in FY17


One of the first movers in the rail segment when container train operations were

opened for private participation. Only about five of the 16 companies awarded rail

licence are currently active. GDL is the largest of those (ex-Concor). This was

primarily lead by strong management team which focused on 1) profitable routes

based on the key catchment areas 2) reducing exposure to the low margin

domestic business 3) strategic plan of providing end-to-end solution by way of

owning terminals in the right locations apart from haulage activity 4) strong

relationship with shipping lines coupled with raising the bar in terms of value added

services resulting in strong volume growth and high market share in NCR region

Prior to joining Gateway Rail, CEO of Gateway Rail, Mr. Sachin Bhanushali spent

~15 years with Indian Railways and Concor, he hence understands the nitty-gritty of

the business thoroughly especially on operations management

Mr. Prem Kishan Gupta, Chairman and MD of GDL is a visionary promoter with

focus on creating the right assets with a long term view. Key examples are

Acquisition of Snowman Logistics (one of the fastest growing climate controlled cold

chain operations), land acquisition for terminals at attractive value well ahead of the

curve, which places the company beneficially for future expansion as strategically

located contiguous land is a key constraint for the ICD/CFS business

12 Mar, 2016

Bloomberg GDPL

Shares o/s 108mn

Market Cap Rs. 28bn


3m Avg. Daily

Vol Rs. 66mn

Index BSE 500

Snapshot

Promoters 25.2

Institutions 64.5

Public 10.3

% 1m 3m 12m

GDL -1% -21% -40%

Sensex 8% -1% -14%

Financial summary (multiples adjusted for 50% stake in Rail)

Year Revenue

(Rs. mn)

EBITDA


EV/EBITDA

(x)

FY16E 10,635 24.9% 1,325 12.2 27.0 14.9

FY17E 12,335 25.4% 1,740 16.0 20.9 12.4

FY18E 14,164 28.9% 2,673 24.6 14.3 9.1

FY19E 15,925 29.6% 3,279 30.2 11.5 7.6

FY20E 17,676 30.1% 3,892 35.8 9.6 6.3


GDL vs. CONCOR GDL CONCOR

5Y Volume CAGR 4.5% 2.5%

5Y Revenue CAGR 14.3% 8.5%

5Y EBITDA CAGR 11.3% 2.8%

EBITDA Margin % 25% 20.4%

FY15 RoCE % 15% 14%

EBITDA / TEU (Rs. ) Rs. 4,610 Rs. 4,042

Gateway Distriparks CMP

Rs. 255

3Y Target

Rs. 460

Page 38

Gateway Distriparks – Crystal Gazing

Limited re-rating

potential

EBITDA/TEU to

improve from Rs.

3,000 to Rs. 3,425 in

CFS and from ~Rs.

7,500 to ~Rs. 9.740

CFS volume growth

of ~12%, Rail volume

growth of ~13.5%

resulting in revenue

growth of ~14%

FY16E FY17E FY18E FY19E FY20E

CFS volume

(TEUs) 3,71,251 4,08,420 4,75,600 5,39,600 5,89,200 ▲

Rail Volume

(TEUs) 2,03,512 2,33,400 2,68,555 3,02,419 3,38,910 ▲

Revenue

(Rs. Mn) 10,635 12,335 14,164 15,925 17,676 ▲


Rail

EBITDA/TEU

(Rs.)

7,491 7,865 9,178 9,473 9,736 ▲

CFS EBITDA /

TEU (Rs.) 3,036 3,189 3,430 3,428 3,427 ▲

Entry = Rs. 255 (implied

14.5x EV/EBITDA)


Rs. 28.5

Exit at 11.5x implied

EV/EBITDA

TOTAL RETURN OF 80%

Over FY16-20, GDL is

expected to clock a ~14% /

19% revenue / EBITDA

growth. Volume growth is

driven by increasing port

capacity (JNPT,

Krishnapatnam) and

containerization levels

(currently at ~50% vs.

global average of 75-80%).

Revenue growth is

expected to be across the

board, however EBITDA

growth is expected to be

driven by rail business

(21.5% EBITDA CAGR) as

the benefits of double

stacking from the

Viramgam terminal would

kick in in FY18-FY20.

SOTP Valuation Multiple (x) Net

Debt

Per share

value (Rs.) Mumbai + Chennai

CFS P/E 17 144

Other CFSs P/E 17 43

GRFL (54% stake) EV/EBITDA 13

(2,308) 216

Snowman Market cap 25

Consolidated 429



35% 29% 13% 13% 11%

Page 39


SEL is the largest control cables manufacturers in India with a strongly diversified

revenue and customer profile. These strengths are further complemented by dominant

market position in major customer segments and supplemented by meaningful inroads

in the domestic AM segment (currently ~10% market share) and export markets driven

by marquee brands.

SEL derives ~52% of its revenue from 2W segment, 33% from 4W, 10% from AM and

6% from non-auto segment. It has more than 70% market share in the 2W segment and

~35% market share in the 4W business.

Increasing thrust in the domestic AM segment and OEM exports, coupled with growing

wallet share with 2W (specifically HMSI) and 4W OEMs, sets up SEL’s (excl. Phoenix

Lamps Ltd, PLL) revenue and PAT to grow at CAGR of 19% and 27%, over FY16-FY20.

SEL’s (with a proven track record of synergising acquisitions) acquisition of PLL would

enable it to reap benefits of PLL’s mkt. leadership (61% share in domestic OE lamps

segment), besides opening up cross-selling opportunities in the AM space.

PLL’s profitability drivers to unravel over the medium term, through SEL driven cost and

capital rationalisation efforts with steady revenue growth over the medium term. Expect

revenue and PAT from PLL (excl. MI) to grow at CAGR of 12% & ~20%, FY16-20


We are extremely positive on SEL’s mgmt., which under the aegis of Ajith Rai, MD and

Chairman, has relentlessly focussed on incessant, yet conservative and well considered

,expansions (organic/inorganic) consistently de-risking the revenue profile. The share of

2W in cables business revenue mix has reduced from 97% in FY02 to 52% in 1HFY16,

and share of exports has increased from 1% in FY02 to 19% in 1HFY16.

Mgmt.’s focus on flawless execution has enabled SEL to generate best in industry

margin and ROE’s. SEL works closely with OEMs, setting up plants in proximity to most

OEM clusters enabling significant saving of freight costs. Additionally, mgmt. keeps a

tight leash on working capital cycles, closely aligning it with that of the OEMs (through

best manufacturing practices, including JIT) which aids in achievement of sustainable

RoEs in the range of 25-30%.

We believe that the management would be would be able to bring in the same

execution ethic to PLL as well, favourably impacting its ROE, projected at 17% by FY20,

up from an expected 11% in FY16. Post-acquisition, SEL has made changes to the top

brass at PLL, whose primary mandate is to ensure efficiency in asset utilisation and cost

rationalisation, and we expect benefits to be visible over the near term.

12 Mar, 2016

Bloomberg SEL

Shares o/s 131.3mn

Market Cap Rs. 17bn


3m Avg. Daily

Vol Rs. 6mn

Index BSE Small Cap

Snapshot

Promoters 51.8

Institutions 7.6

Public 40.6

% 1m 3m 12m

SEL -4% -4% -3%

Sensex 8% -1% -14%

BSEAUT

O 11% -3% -12%

Financial summary (Consolidated, incl. PLL)

Year Revenue

(Rs. mn)

EBITDA


EV/EBITDA

(x)

FY16E 10,076 15.3% 720 6.0 21.7 8.4

FY17E 11,915 15.4% 920 7.7 17.0 7.3

FY18E 13,934 16.0% 1,178 9.8 13.3 6.2

FY19E 16,079 17.6% 1,519 12.6 10.3 5.0

FY20E 18,605 17.8% 1,819 15.1 8.6 4.4


SEL AMRJ EXID WHL SF GABR

5Y Revenue CAGR 14.6% 22.0% 8.2% 3.3% 7.4% 8.2%

5Y EBITDA CAGR 13.9% 27.0% 3.2% 5.3% 11.0% 6.4%

FY16 EBITDA

Margin % 15.9% 17.7% 15.2% 8.4% 14.8% 8.9%

FY16 RoCE % 13.5% 24.0% 12.8% 9.0% 12.4% 19.1%

FY16 Leverage 0.8 0.0 - 0.7 0.7 0.0

Suprajit Engineering CMP

Rs. 130

3Y Target

Rs. 268

Page 40

Suprajit Engineering – Crystal Gazing

High multiples to be

maintained

EBITDA margin to

improve more than

in proportion to

revenue growth led

by improving

efficiencies and

revenue mix

Revenue CAGR of

17% from FY16 to

FY20


SEL (excl.

PLL) 3,467 6,118 6,855 8,337 9,934 11,598 13,578 ▲

PLL - - 3,220 3,577 4,000 4,481 5,027 ▲

Total 3,467 6,118 10,076 11,915 13,934 16,079 18,605 ▲


Consol

EBITDA

(Rs.mn)

566 961 1,542 1,834 2,223 2,824 3,308 ▲

Consol

EBITDA

Margin(%)

16.3% 15.7% 15.3% 15.4% 16.0% 17.6% 17.8% ▲

Entry = Rs. 130 (Implied

17x FY17 P/E)


Exit at 17.5x FY20

P/E

TOTAL RETURN OF 105%

Over FY16-20, SEL

(Consol) is expected to

register a 17% revenue

and 26% PAT CAGR

driven by steady scale up

of primarily SEL (excl.

PLL) revenue and

improving profitability

across the board., driven

by improving revenue

mix and cost

rationalization efforts.

Revenue growth would

be driven by improving

market share with

existing customers and

increasing foray into

newer segments (AM and

exports)

Consol EBITDA margin

are expected to improve

from 15% to 18%.

P/E Multiple FY20 EPS/PAT Target price

SEL (excl. PLL): 17.5X

PLL:16X (61.9% holding)

SEL (excl. PLL):

EPS: Rs.13

PLL PAT:

Rs.407mn Rs. 268

Dividend Rs.6.2

Consistent,

rounded

revenue

growth

Increasing

operational

efficiency

and product

mix

Increasingly

de-risked

revenue

profile and

improved

margins to be

rewarded

SEL Trading History – % of times stock traded


20% 35% 9% 20% 15%

FY11-16E CAGR %


14.6% 13.9% 12.4% 46.1%

Page 41


TMKN is amongst the best plays in the bearings space given its leadership in tapered

roller bearings, with exposure to the right end-markets – specifically railways, exports

(to parent) and CVs.

We believe that strong growth prospects (with a high probability of fruition), in the

railways division (~25% of revenue) and exports (35% of revenue), poises TMKN for

exponential growth.

Drivers for these opportunities would be wagon addition & the DFC and continued

American parent patronage on the back of superior engineering capabilities and low-

cost manufacturing capabilities, respectively. Steady revenue from the CV segment

and catering to newer markets in industrial bearings (which would be increasingly

manufactured in India), would be supplementary growth drivers.

Expect revenue to grow at CAGR of 22% over FY16-FY20.

The increase in the scale of ops. would be enabled by TMKN’s capacity doubling

capex involving an outlay of Rs.1.25bn (already underway), underpinned by

empirically, best in industry asset turns and capital efficiency ratios.

Expect margins to improve to 16.5% by FY20 from 14.4% in FY16E, on the back of

improving leverage, better revenue mix and scaling up of operations at new facilities.

Expect PAT to grow at CAGR of 27.4% over FY16-FY20.

Why do we like the Management team? Timken India is a wholly owned subsidiary of The Timken Company (USA), a pioneer in

tapered roller bearings and also a supplier of power transmission components and

related services. It has operations spread across 28 countries with 62 mfg. facilities.

Timken (US) has been acquiring companies to add to its offerings, with nine

companies/businesses with a combined sales potential of ~US$300 mn. acquired in the

last four years.

According to the mgmt., the parent brings in some of these new product lines to India if it

could be profitably commercialised. The industrial gears drives business in Raipur was

set up using the expertise from the acquisition of Philadelphia Gear.

Timken (US) operates a R&D and Engg center in Bangalore, wherefrom R&D support

flows in to Timken India as well.

Also, Timken US, has highlighted Timken India as its preferred sourcing

destination,(over China) due to its combination of high engg. capabilities and low cost

mfg. base.

14 Feb, 2016

Bloomberg TMKN

Shares o/s 68mn

Market Cap Rs. 29bn


3m Avg. Daily

Vol Rs. 8mn

Index BSE 500

Snapshot

Promoters 75.0

Institutions 11.2

Public 13.8

% 1m 3m 12m

TMKN -3% -22% -25%

Sensex 8% -1% -14%

BSEAUT

O 11% -3% -12%

Financial summary

Year Revenue

(Rs. mn)

EBITDA


EV/EBITDA

(x)

FY16E 10,451 14.4% 929 13.7 30.5 18.5

FY17E 12,602 16.0% 1,273 18.7 22.3 13.9

FY18E 16,667 16.5% 1,747 25.7 16.2 10.2

FY19E 19,826 16.5% 2,086 30.7 13.6 8.4

FY20E 23,183 16.5% 2,447 36.0 11.6 6.9


TMKN SKF FAG NRB

5Y Revenue CAGR 17.4% 4.4% 28.2% 6.7%

5Y EBITDA CAGR 16.1% 3.8% 27.2% -1.0%

FY16 EBITDA Margin % 14.4% 11.9% 17.7% 15.2%

FY16 RoCE % 18.9% 12.7% 13.3% 9.1%

FY16 Leverage 0.0 - - 0.9

Timken India CMP

Rs. 417

3Y Target

Rs. 750

Page 42

Timken India – Crystal Gazing

High multiples to be

sustained backed by

continued

diversification of

revenue and best in

industry margin

EBITDA margin to

improve more than

in proportion to

revenue growth led

by improving

efficiencies and

revenue mix

Revenue CAGR of

22% from FY16 to

FY20


Revenue 4,681 9349 10,451 12,602 16,667 19,826 23,183 ▲


EBITDA 712 1,396 1,500 2,016 2,750 3,271 3,825 ▲

EBITDA (%) 15.2 14.9 14.4% 16.0% 16.5% 16.5% 16.5% ▲

Entry = Rs. 417

(22x FY17 P/E)


Exit at 20x FY20

P/E

TOTAL RETURN OF 80%

Over FY16-20, TMKN is

expected to register a

22% revenue CAGR

driven by the railways

and export segments.

TMKN is well poised to

capitalize on significant

opportunities in the

aforesaid segments on

the back of Its

demonstrated execution

track record and

technical cum mfg.

capabilities.

Expect margins to

steadily improve on the

back of improving

product mix and

operating leverage, from

14% in FY16E to 16.5% in

FY20.

P/E Multiple FY20 EPS Target price

20x Rs.36 Rs.750

Dividend (FY17-20) Rs. 28

Consistent,

rounded

revenue

growth

Increasing

operational

efficiency

and product

mix

Continued

benefits of

de-risked

revenue

profile and

improved

margins to be

rewarded



10% 46% 9% 17% 18%

FY11-16E CAGR %


17.4% 16.1% 28.1% 20.1%

Page 43

5 CORE PORTFOLIO STOCKS AFTER A 20% CORRECTION TO MULTIPLES

Page 44


Positioned as a player lending to middle of the pyramid customers through new

CVs, used CVs and MUVs. It also finances bottom of the pyramid customers

through SCVs and older vehicles. About 65% of its disbursements are to micro

and small enterprises and agri-based customers.

Well diversified portfolio across India with 90% of branches in tier-II, tier-III and

tier-IV towns. It has 25% presence in LCV segment with Cars and MUVs

constituting 16%, HCVs about 13% and refinancing portfolio constitutes about

15% of the total AUM.

CIFC has demonstrated consistent earnings growth at 54% CAGR over the

past five years, highest among relevant peers. Quarterly NIMs trending at a 18

quarter high currently.

Healthy asset quality with transitionary pressures being a tailwind now unlike

comparable peers who are still grappling with transition challenges. Already at

120 DPD recognition, a year ahead of RBI guidelines.


Mr. Vellayan’s approach on asset quality over growth has been commendable.

The calibrated efforts on containing asset quality delinquencies have begun to

bear fruits with CIFC being one of the few players to see an improvement in

GNPAs in 3QFY16 despite a weak rural macro and accelerated NPA transition.

Management has also scored on the growth front, delivering above guidance

and is likely to deliver 17% in the medium term.

Extreme prudence exhibited by the management in terms of dealing with

transition related challenges. Moving to 120 DPD in a smooth manner well

ahead of RBI requirements has instilled high confidence amongst investors.

Moreover, transition to 90 DPD is expected to be fairly smooth.

At a time when most managements are looking to adopt technology to enable

business operations, CIFC is one of the most advanced entities in terms of

technology being at the forefront of business conduct and operations.

The 54% CAGR in profits between FY11-16 coincides with Mr. Vellayan taking

charge as MD of the company since August 2010.

14 Mar, 2016

Bloomberg CIFC IN

Shares o/s 156mn



3m Avg. Daily

Vol Rs. 49mn

Index BSE 500

Snapshot

Promoters 53.2

Institutions 39.8

Public 7.1

% 1m 3m 12m

CIFC -1% 6% 17%

Sensex 8% -1% -14%

Bankex 9% -8% -21%

Financial summary

Year NII

(Rs. mn)

PAT

(Rs. mn) ROE (%) ROA (%)

ABV

(Rs.)

P/ABV

(x)

FY16E 20,938 5,323 16.9% 1.8% 197 3.3

FY17E 24,477 6,431 16.4% 1.9% 219 3.0

FY18E 28,822 7,872 17.2% 2.0% 260 2.5

FY19E 34,911 9,657 17.9% 2.1% 309 2.1

FY20E 43,511 12,839 20.0% 2.2% 383 1.7


Ranking matrix (1 to 5) CIFC MMFS SHTF SCUF SUF

Growth 1 4 3 2 5

Profitability 2 5 4 1 3

Asset Quality 2 5 4 3 1

Transitionary Pressures 1 3 5 4 2

Valuation 3 4 2 1 5


Cholamandalam Finance CMP

Rs. 668

3Y Target

Rs. 1,312

Page 45

Cholamandalam Finance – Crystal Gazing

Over FY16-19,

CIFC is expected

to clock a 20%

business CAGR

translating into a

loan book size of

Rs.502bn with LAP

constituting ~29%

of the overall AUM

(current loan book

of Rs.280bn and

LAP @ 30% of

AUM). With rural

India bottoming

out and LCV

segment at the

cusp of revival,

CIFC is well

networked in

terms of branches

and employee

count to capitalize

on the turnaround.

With growth

estimated to trend

at an average of

20% over the next

three years, we

believe significant

operating leverage

to play out for

CIFC.

A probable

re-rating

Increasing RoE to


dilution; expect

18% CAGR in ABV

over this phase.


to 110bps against

150bps currently

resulting in RoA

expanding to 2.2%

Consistent

improvement

in NIMs fuelled

by growth

revival with

Leverage

sustained at

current levels

to drive

ROEs

Consistent

growth in

business to be

rewarded by


NIM 7.5% 7.1% 7.2% 7.3% 7.4% 7.5% 7.5% ◄►

Provisions 2.3% 1.2% 1.5% 1.4% 1.4% 1.4% 1.2% ▲

Credit

costs 2.5% 1.3% 1.5% 1.4% 1.3% 1.3% 1.1% ▲

RoA 0.6% 1.6% 1.8% 1.9% 2.0% 2.1% 2.2% ▲


RoE 6.7% 17.5% 16.9% 16.4% 17.2% 17.9% 20.0% ▲


T1 CAR 11.1% 13.0% 13.0% 13.0% 12.7% 12.1% 11.4% ▼

ABV (Rs.) 87 170 197 219 260 309 383 ▲


< 1.00x 1.00x -

1.50x

1.50x –

2.00x

2.00x-

2.50x

2.50x-

3.00x

3.00x-

4.00x

2% 33% 30% 8% 18% 10%

The stock is trading at 3.0x 1-year forward, and has traded above

this multiple for 10% of the days in the past 5 years.

FY11-16E CAGR %

NII PPOP PAT Price

28% 27% 54% 32%

Entry = Rs. 650 @ 3.0x


Rs. 11.5


multiple of 3.4x


Page 46


We see that Dabur has managed to find alternating growth drivers in different

brands across several consumption cycles enabling the company to sustain

healthy volume growth across cycles. We acknowledge that several of these

growth drivers emerged out of management’s pro-active vision to spot market

and growth opportunities well ahead of time.

We note that Dabur has also managed to carve a niche offering within each

category on the back of Ayurveda proposition which we believe has not only

led to brand differentiation but also enabled Dabur to command a significant

pricing premium.

Though we acknowledge the recent threat that has sprung with the advent of

Patanjali Ayurveda to this portfolio, we believe Dabur has enough

ammunitions to tackle this from a long term perspective. With Dabur in clear

cognizant of the problem, we believe the management would take necessary

steps to mitigate the risk as they had done historically when exposed to

disruptive competitions in several categories.

Use of digital media, continuous re-packaging and reformulation initiatives to

be relevant to changing consumer needs along with incessant distribution

initiatives based by identifying early trends as Project Double (focussing on

Rural), Project 20-20 (Focussing on Urban), Project LEAD & project CORE

(focussing on healthcare) indicates their intent of attempting to develop a

network for category through which potential of a category can be explored.


Burmans family were among the first business families in India to segregate

family and business when they handed over the management to

professionals in 1998. The combination of entrepreneurial attention and

professional approach has worked out very well for the group.

Mr.Sunil Duggal who took over as the CEO in 2002 has transformed Dabur

from an OTC company to a FMCG company.

Balsara acquisition, restructuring of divisions to stem maximum value out of

field sales, dealer integration through ERP, manufacturing plant

rationalisation, incessant new product/marketing/distribution initiatives have

been the hallmarks of Mr. Duggal’s achievements.

14 Mar, 2016

Bloomberg DABUR IN

Shares o/s 1,759mn



3m Avg. Daily

Val Rs. 332mn

Index BSE 100

Snapshot

Promoters 68.1

Institutions 25.1

Public 6.8

% 1m 3m 12m

DABUR 3% -8% -8%

Sensex 4% -2% -14%

Bse fmcg 2% -3% -9%

Financial summary

Year Revenue

s (Rs mn)

EBITDA

(Rs mn)

PAT (Rs

mn) EPS P/E(x) RoE%

FY16E 84,180 15,141 12,406 7.1 34.4 33.4%

FY17E 93,993 17,600 14,298 8.1 29.9 32.0%

FY18E 1,08,096 20,464 16,545 9.4 25.8 31.1%

FY19E 1,24,323 23,643 19,067 10.9 22.4 30.5%

FY20E 1,42,996 27,306 22,350 12.7 19.1 30.8%

Dabur India

Despite hindrances emerging, Dabur has held its own through innovations

FY11 FY12 FY13 FY14 FY15 FY16e FY17e FY18e

Revenue 77,223 96,322 1,09,386 70,753 78,272 84,180 93,993 1,08,096

Growth (%) 16% 25% 14% 15% 11% 8% 12% 15%

EBITDA 13,281 15,088 17,320 11,598 13,164 15,141 17,600 20,464

Margin (%) 17.2% 15.7% 15.8% 16.4% 16.8% 18.0% 18.7% 18.9%

PAT 8,428 9,887 11,139 9,145 10,658 12,406 14,298 16,545

Margin (%) 11.4% 10.6% 10.6% 12.9% 13.6% 14.7% 15.2% 15.3%

CMP

Rs.243

3Y Target

Rs.394

Page 47

Dabur operates

in a plethora of

niche consumer

categories and

remains one of

the companies

which we believe

could adjust its

strategy at any

given point of

time to take

advantage of

strong rural or

urban growth

drivers. Though

the company has

been facing the

heat of

competition

lately, we believe

it would only be a

matter of time

before the

company

emerges

stronger and

unscathed.

We believe Dabur

would deliver a

revenue and

earnings CAGR of

~14% & ~16%

respectively over the

next four years


31x 12.7 Rs.394

35x 12.7 Rs.445


Cumulative Dividends of Rs.17

EPS CAGR of ~16%,




Revenue 40,774 78,272 84,180 93,993 1,08,096 1,24,323 1,42,996

EBITDA 7,730 13,164 15,141 17,600 20,464 23,643 27,306

Margins 19.0% 16.8% 18.0% 18.7% 18.9% 19.0% 19.1%

PAT 5,686 10,658 12,406 14,298 16,545 19,067 22,350

EPS 3.3 6.1 7.1 8.1 9.4 10.9 12.7


RoE 48.9% 35.5% 33.4% 32.0% 31.1% 30.5% 30.8%

ROCE 33.2% 28.6% 28.4% 28.6% 29.0% 29.1% 29.7%

Working

capital days 36 27 35 38 38 38 38

Capital efficiency to

remain at similar

healthy levels in the

medium to long term.

We believe Dabur

would continue to

remain a

compounding play

given its steady stay

business model.

Dabur India – Crystal Gazing

FY11-16E CAGR %


16% 16% 17% 21%


PE

range

<24x 24x-27x 27x-30x 30x-33x 33x-36x >36x

21% 31% 25% 6% 13% 4%

Page 48


Kajaria Ceramics (KJC) is India’s largest tile manufacturer with strong brand

equity and a well entrenched distribution network

KJC has demonstrated consistent market share gains over the last 10 years,

resulting in a revenue CAGR of 21%. Importantly, despite the slowdown in real

estate and influx of Chinese imports, KJC has grown at a superior rate of 15%

over the last two years, indicating strong franchise value

Long term demand prospects for tiles remain strong led by (1) increasing

penetration of tiles as a flooring material; (2) increasing usage of wall tiles; (3)

low per capita consumption and increasing urbanisation; and (4) increasing

consumer preference for aesthetics and branded products.

Combination of strong long term demand prospects for tiles, robust franchise

(brand and distribution network) of KJC, and strong balance sheet, makes us

positive on its prospects.

KCJ will see a structural improvement in margins led by reduction in long term

gas prices by 40-50% post RasGas-Petronet deal and the proposed imposition

of Anti-dumping duty on Chinese vitrified tiles.

We expect KJC to grow revenue and PAT by 16% and 21% in next 4 years from

FY16E-FY20E with EBITDA margins inching up to 18-20% range. As a result,

we expect company to generate OCF of Rs 20bn in next 4 years. With structural

improving demand of tiles, market share gains and robust margins profile, we

attribute 25x FY20E EPS of 62.4, arriving at TP of Rs1550.


Mr. Ashok Kajaria, Founder, has ~40 years of experience in the tiles industry.

He is credited with pioneering the launch of value added tiles (large format and

glazed vitrified ) in India.

Strong management bandwidth, with two sons of the promoter managing

separate verticals.

Proven track record of re-investing cash flows in return accretive projects.

Continues to focus on market share growth along with maintaining profitability.

Market share increase from 7% in FY10 to 11% in FY15. The company has

displaced “Johnson” to become the leading tiles player in the country.

14 Mar 2016

Bloomberg KJC IN

Shares o/s 79mn

Market Cap Rs. 74bn


3m Avg. Daily

Val Rs. 91mn

Index BSE 500

Snapshot

Promoters 47.2

Institutions 30.9

Public 21.9

% 1m 3m 12m

KJC -2% -3% 20%

Sensex 3% -2% -14%


Ranking matrix (1 to 6) KJC SOMC CERA HSIL GIL CPBI







Financial summary

Year Revenues

(Rs mn)

EBITDA

(Rs mn)

PAT (Rs

mn) EPS P/E(x) RoE%

FY16E 24,382 4,672 2,318 29.2 31.5 27.7%

FY17E 27,477 5,763 2,987 37.6 24.5 28.4%

FY18E 31,631 6,501 3,458 43.5 21.1 26.5%

FY19E 37,026 7,348 4,068 51.2 18.0 25.4%

FY20E 43,829 8,694 4,956 62.4 14.8 25.2%

Kajaria Ceramics CMP

Rs. 920

3Y Target

Rs. 1550

Page 49

Kajaria Ceramics – Crystal Gazing

Expect KJC to

continue to

outpace industry

growth. This will

be driven by

aggressive

capacity

additions, new

product launches,

and better

product mix.

Further, we

expect KJC’s

foray in to new

verticals

(Faucets, Sanitary

ware) will

succeed driven

by brand image

and dealer

network.

Market share gain to

continue. Expect the

current peak margins

to sustain led by

product mix and

anti-dumping duty

Consistent

revenue

growth of 16%

Increasing

operational

efficiency

result in

Consistent

growth in

business to be

rewarded by


23x 62.4 1,434

25x 62.4 1,559

Entry = Rs. 920 @ 21x

FY18E


Rs. 40





Revenue 9,533 21,746 24,382 27,477 31,631 37,026 43,829 ▲

Ebitda 1,487 3,418 4,672 5,763 6,501 7,348 8,694 ▲

Margins 15.6% 15.7% 19.2% 21.0% 20.6% 19.8% 19.8% ◄►

PAT 607 1,756 2,318 2,987 3,458 4,068 4,956 ▲

Market

share % 11% 15%


RoE 29.5% 27.6% 27.7% 28.4% 26.5% 25.4% 25.2% ▼

Leverage 1.3 0.31 0.30 0.17 0.06 -0.04 -0.14 ▼

Working

capital days 28 30 43 43 41 41 41 ▼

CFO (Rs nm) 1,304 2,098 2,264 3,740 4,254 4,555 5,241 ▲

Expect the stretched

(FY16E) working

capital days to

continue. However,

in case of strong

pick up in demand,

working capital can

come down

Expect multiple to re-

rate

FY11-16E CAGR %


21% 26% 31% 65%


Fwd PE

range

<16x 16x-20x 20x-24x 24x-28x >28x

16% 9% 14% 47% 14%

Page 50


Naukri.com has the benefit of being the first mover in the job portal segment

and the company has also capitalized on it by maintaining its leadership after

being in operation for more than 18 years. The portal has over 200,000 jobs and

over 45m résumés on its website, which gives it a competitive edge.

Naurki.com works as a subscription-based model for both job seekers as well

as recruiters/ consultants. Job seekers have an option to upload their résumés

and stay as a free user. However, they can buy add-ons and premium services

on a subscription basis. Given this model, jobs posted by a recruiter become a

factor in the number of profiles available on the portal as a large portion of the

revenue comes from access to the résumé database.

In the housing portal segment the number of listings is the key metric as the

higher the number of listings, the higher the web traffic from buyers, which

should lead to more interest from property sellers to list on the website. 99acres

currently has over 900K listings on its website which is higher than any other

player in the market; the second largest player magicbricks, has c.750K listings.

Despite entry of new players which has driven traffic share of 99acres down

(30-40% from 50-60% in FY11), it has still maintained its leadership position as

it has the highest number of association with builders and property agents and

brokers which drives credible leads and traffic.

Zomato has developed itself from being a restaurant listing platform to a social

media platform wherein it is well placed to own the entire communication

channel between consumers and the enterprise which generally takes years to

build. It is a highly monetizable asset with advertising generating upfront cash,

analytics solutions bringing in higher margins and ordering and table booking

solution closing the loop with consistent revenue generation.


The success of Info Edge is largely a story of Sanjeev Bikchandani and Hitesh

Oberoi’s consistency and key focus on organic growth. Monster India followed

an acquisition route to expand (it bought Jobsahead in May 2004) and started

facing internal issues related to integration and management changes, which

led to a steep fall in traffic share.

Management’s ability to deploy free cash by making investments in the Indian

internet sector run by people having clarity of thought remains unmatched.

15 Feb, 2016

Bloomberg INFOE IN

Shares o/s 121mn

Market Cap Rs. 94bn


3m Avg. Daily

Vol Rs. 103mn

Index BSE 500

Snapshot

Promoters 43.2

Institutions 45.3

Public 11.3

% 1m 3m 12m

INFOE 7 -7 -16

Sensex -7 -11 -20

BSE-500 7 -3 -15


Ranking matrix (1 to 6) INFOE JUST

Growth 1 6

Profitability 1 6

Return Ratios 1 3

Balance Sheet 1 2

Valuation 1 2

Overall Rank 1 5

Financial summary (Standalone)

Year Revenue

s (Rs mn)

EBITDA

(Rs mn)

PAT

(Rs

mn)

EPS P/E(x) RoE%

FY16E 7,202 1,478 1,405 11.6 67.0 8.2%

FY17E 8,631 2,369 2,044 16.9 46.1 11.0%

FY18E 10,618 3,224 2,734 22.6 34.4 13.2%

FY19E 13,325 4,190 3,580 29.7 26.3 15.2%

FY20E 16,757 5,273 4,558 37.8 20.7 16.6%

Info Edge CMP

Rs. 780

3Y Target

Rs. 1,600

Page 51

Info Edge – Crystal Gazing

Info Edge to grow

revenue and PAT

by 24% and 34%

in next 4 years

from FY16E-

FY20E with

Ebitda margins

inching up to 31-

32% range. As a

result, we expect

company to

generate annual

OCF of Rs4.5bn

in FY20 and

cumulative OCF

of Rs15bn over

next 4 years.

Driven by near

monopoly

Naukri.com segment

and improving

industry structure in

real estate portals

Sustainable

revenue

growth of 24%

Margin

improveme

nt in

99acres

resulting in

Consistent

growth and

improving

margins to be

rewarded by


40x 37.8 1,510 ▲

42x 37.8 1,585

Entry = Rs. 780 @ 34x

FY18E


Rs. 15



TOTAL RETURN OF

2.0x


Revenue 2,940 6,116 7,202 8,631 10,618 13,325 16,757 ▲

Ebitda 996 1,822 1,478 2,369 3,224 4,190 5,273 ▲

Margins 33.9% 29.8% 20.5% 27.5% 30.4% 31.4% 31.5% ▲

PAT 496 1,639 1,405 2,044 2,734 3,580 4,558 ▲


RoE 10.7% 13.5% 8.2% 11.0% 13.2% 15.2% 16.6% ▲

Leverage 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ◄

►

Net Working

Capital days -121 -102 -123 -121 -121 -121 -121

◄

►

CFO (Rs nm) 1,101 1,390 1,600 2,008 2,763 3,598 4,513 ▲

Higher Return on

Equity and higher

cash flow from

operations

High multiple

FY11-16E CAGR %


20 8 23 21



6 36 44 12 2

Page 52


Page Industries (PAG), the exclusive licensee for Jockey in India, has

scripted one of the unique success stories in Indian garmenting industry,

thanks to its unflinching focus on key value propositions – Brand, Product

and Distribution. Though it may appear very simple on the surface, but to do

the basic things right consistently over ~2 decades leads one to command

the brand loyalty ‘Jockey’ commands today in the market.

PAG’s consistent delivery on the core value proposition has enabled it to

extend its lead in the Indian innerwear market and extend the brand loyalty

seamlessly into the adjacencies like leisure wear. Throughout its ~2.5 decade

journey in Indian market so far, it managed the complex equation of

remaining affordable cum aspiration and that has ensured that no domestic

or foreign brands have been able to match PAG’s value proposition so far.

PAG' revenues and PAT have grown at a robust CAGR of ~35% and ~47%

respectively over the last ten years across cycles outpacing the industry

growth rate of ~13%. We believe that ~20% sustained revenue growth is

achievable on the back of expanding consumer franchisee.

Though we fail to see the possibility of multiple revision in the stock, we

believe an achievable ~20% earnings growth CAGR over the next 3-4 years

makes PAG a lucrative compounding engine.

. Why do we like the Management team?

Page Industries is promoted and managed by the Genomal family with Mr.

Sunder Genomal at the forefront of operations. While brand ‘Jockey’ has

found growth challenging across other markets, we believe it is the

management’s vision and strategy which aided ‘jockey’ to grow into a

Rs.15bn brand in India with its revenues growing at a CAGR of ~35% over

the last ten years.

Despite being the market leader for years and still growing, we believe the

management has never been complacent and leaves ‘no stone unturned’

ensuring its market share is preserved and continues to deliver growth by

undertaking multiple initiatives across the board.

Average dividend payout of ~53% over last ten years further underscores

management’s intentions to reward minority shareholders as well.

14 Mar, 2016

Bloomberg PAG IN

Shares o/s 11mn


52-wk High-Low Rs. 17,000-9,752

3m Avg. Daily

Val Rs. 155mn

Index BSE 500

Snapshot

Promoters 51.0

Institutions 39.7

Public 9.3

% 1m 3m 12m

PAG 7% -11% -11%

Sensex 4% -2% -14%

BSE DIS 2% -5% -3%

Financial summary

Year Revenue

s (Rs mn)

EBITDA

(Rs mn)

PAT (Rs

mn) EPS P/E(x) RoE%

FY16E 17,613 3,549 2,388 214.1 53.1 53.2%

FY17E 21,214 4,308 2,890 259.1 43.9 49.4%

FY18E 25,783 5,219 3,498 313.6 36.3 46.8%

FY19E 30,305 6,304 4,224 378.7 30.0 45.1%

FY20E 35,828 7,378 4,944 443.3 25.7 42.5%

Page Industries

Consistent volume growth and favorable price mix on brand equity

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Volume growth 27% 19% 17% 17% 18% 11% 13% 14%

Price Mix 18% 20% 9% 19% 11% 5% 7% 8%

Revenue growth 45% 39% 26% 36% 29% 16% 20% 22%

EBITDA (Rs.mn) 903 1,330 1,642 2,405 2,899 3,549 4,308 5,219

Margin (%) 18.4% 19.5% 19.0% 20.5% 19.2% 20.1% 20.3% 20.2%

CMP

Rs.11,372

3Y Target

Rs.17,732

Page 53

Page Industries

revenues and

PAT is

expected to

grow at a

CAGR of ~19%

and ~20%

respectively

over the next

four years on

the back of

long term

penetration,

brand

extension and

per capita

consumption

prospects

remain

favourable .

Though growth is

expected to taper down

given the high base,

pace of growth still

healthy and possible

given the increasing

penetration and robust

brand equity.


40x 443.4 17,732

45x 443.4 19,948

Entry = Rs.11,372

@ 44x FY17E

Cumulative Dividends of Rs.581

EPS CAGR of 20%, exit multiple of 40x FY20E



Revenue 4,916 15,140 17,613 21,214 25,783 30,305 35,828

EBITDA 903 2,899 3,549 4,308 5,219 6,304 7,378

Margins 18.4% 19.2% 20.1% 20.3% 20.2% 20.8% 20.6%

PAT 585 1,960 2,388 2,890 3,498 4,224 4,944

EPS 52.5 175.7 214.1 259.1 313.6 378.7 443.3


RoE 53% 58.0% 53.2% 49.4% 46.8% 45.1% 42.5%

ROCE 30% 37.1% 37.1% 37.0% 37.3% 37.7% 37.0%

Working

capital days 81 108 109 109 109 109 109

capital efficiecy to

remain robust given

the increasing scale

of operations

alongside an asset

light business model.

We believe an

achievable ~20%

earnings growth CAGR

over the next 3-4 years

makes PAG a lucrative

compounding engine.

Page Industries – Crystal Gazing

FY11-16E CAGR %


29% 31% 32% 51%


PE

range

<25x 25x-30x 30x-35x 35x-45x 45x-55x >55x

10% 36% 19% 11% 15% 9%

Page 54

STRUCTURAL BUY IDEAS ON LIKELY IPOs

Page 55


Amongst small finance bank licensees who are largely mono-line MFIs seeking

to evolve as a diversified small finance bank play, Equitas stands relatively

better positioned; unlike other SFB aspirants, Equitas already has a well

diversified bouquet of products, meaning minimal product side tweaking post

transition.

An unambiguous stance on what a small finance bank cannot do minimises

transition related risks, we believe the business is likely to command RoAs of

~2.1% by FY20, with further scope for expansion as scale kicks in.

Even during its formative years in 2007, Equitas built its portfolio by charging

interest on a reducing balance method @ 26% while most of the market players

were charging much higher on a flat rate basis.

Equitas was also compliant with most of the Malegam Committee’s

recommendations well ahead of time, amply demonstrating management

prudence.

A volume driven growth philosophy, focus on asset quality and an ability to

proactively interpret and respond to market trends singles Equitas out.


Mr. P N Vasudevan has been the MD of EHL since inception (2007) and has

unparalleled experience in the financial services industry – has spent two

decades in Cholamandalam Finance and drove the vehicle financing business.

Management’s focussed understanding of lending to weaker sections of the

society and highly regarded CSR initiatives make the model sustainable.

Management’s relentless focus on a sustainable volume driven growth centric

model rather than an unrealistic temporary high growth model.

A comprehensive understanding of the underserved segment of customers

inadequately catered to by formal financing channels, proven ability to cross-

sell to the bread and butter unbanked/under-banked populace, judicious risk

management backed by robust technology, and a prudent management team

known for its conservative bent of mind holds the group in good stead.

14 Mar, 2016

Bloomberg NA

Shares o/s NA

Market Cap NA

52-wk High-Low NA

3m Avg. Daily

Vol NA

Index NA

Snapshot

Promoters NA

Institutions 100.0

Public NA

% 1m 3m 12m

Sensex 8 -1 -14

Bankex 9 -8 -21

Financial summary

Year NII

(Rs. mn)

PAT

(Rs. mn) ROE (%) ROA (%) ABV (Rs.) P/ABV (x)

FY16E 6,279 1,535 12.3 2.6 47 2.3

FY17E 8,720 1,870 10.5 1.9 64 1.7

FY18E 11,592 2,623 11.1 1.8 71 1.6

FY19E 15,122 3,840 14.3 2.0 81 1.4

FY20E 19,486 5,561 17.6 2.1 96 1.1


Ranking matrix (1 to 6) Equitas AU Fin Jana* Ujjivan CLAB*

Diversified Portfolio 1 3 4 4 2

Size 2 3 1 2 5

Cost of Borrowings 2 2 2 2 1

Ability to build liability

book 2 5 3 3 1


*Jana – Janalakshmi Financial Services; CLAB – Capital Local Area Bank

Equitas Holdings CMP

NA

3Y Target

Rs. 192

Page 56

Equitas Holdings – Crystal Gazing

Over FY16-19, Equitas is

expected to clock a 37%

advances book CAGR

translating into a loan book

size of Rs.213bn with

deposits of Rs.170bn – a

>5x increase in business

from FY16 levels. With

bulk of incremental

expansion from high

yielding SME and MFI and

a carefully calibrated

expansion strategy to

contain costs and build a

liability story, we expect

ROAs to trend upwards

post stabilization of the

banking operations in

FY18. A probable

re-rating

Increasing RoE to

17.5%, with no risk

of dilution; expect

20% CAGR in ABV

over this phase.

Normalization of

opex post transition

to an SFB from FY18

onwards is likely to

expand ROAs from

the trough in FY18

Consistently

healthy NIMs

of >7.5% until

FY20

Increasing

leverage to

result in

Consistent

growth in

business to be

rewarded by


NIM 11.5% 9.5% 8.8% 8.5% 8.1% ▼

Opex 6.0% 5.7% 5.0% 4.6% 4.2% ▲

Provisions 1.9% 1.4% 1.3% 1.2% 1.1% ▲

RoA 2.6% 1.9% 1.8% 2.0% 2.1% ▲


RoE 12% 11% 11% 14% 18% ▲

Leverage 4.4x 4.1x 5.2x 6.3x 7.3x ▲

T1 CAR 19.5% 21.8% 17.9% 15.2% 13.5% ▼

ABV (Rs.) 47 64 71 81 96 ▲

Entry = Rs. 110 @ 1.7x

Cumulative Dividends

of Rs. 0 (no indicative history)

ABV CAGR of 20%, exit multiple of

2.0x


P/ABV multiple FY20E ABV Price target

2.0x 96 192 ▲

2.2x 96 211

Page 57


National Stock Exchange (NSE) is India’s largest exchange offering products

across cash equities, equity derivatives, interest rate derivatives and currency

derivatives. NSE has a dominant market share across product categories.

Exchanges are almost the perfect business models with limited competition,

high operating leverage and robust cash flows. Stock exchanges in particular

have a strong correlation to underlying economic activity.

Allocation to equity is at ~3% of total savings in India vs. ~18% in other

emerging markets and 40% in developed markets. Economies tend to migrate

to higher allocation of savings to equities as evident in markets such as South

Korea, China.

Hedging products such as Interest rate and Currency derivatives have very low

penetration in India and over a period time could become meaningful for NSE.

Globally, interest derivatives are the largest class of derivatives traded.

Exchange businesses are very unique in comparison to other businesses given

their limited need for incremental capex or opex to drive revenue growth. NSE

business model is extremely robust as evident from the profit of Rs. 8.3bn

company generated in a year like FY13. NSE has one of the lowest pricing

across markets and still generates EBITDA margins in excess of 60% owing to

strong technology and operations. In a good year like FY15, NSE EBITDA

margin expanded by 400bps with hardly any change to Capex.

BSE continues to adopt aggressive pricing in derivatives, however BSE’s ability

to increase market share has been minimal.


NSE management’s focus is to ensure they do not cede market share across

products a fact reinforced by NSE maintaining / improving market share despite

BSE having aggressive pricing

Inspite of its dominant position NSE has continuously improved the core

technology platform, continue to lead in the launch of innovative products

NSE has focused on creating management capacity at various levels of the

organisation, a fact evident from the numerous interactions we have had with

various business heads.

.

Financial summary

Year Revenues

(Rs mn)

EBITDA

(Rs mn)

PAT (Rs

mn) EPS P/E(x)

EV/EBITD

A

FY14 13,618 8,552 9,652 209 19.1 16.5

FY15 17,231 11,577 10,264 228 17.5 11.6

FY16E 17,345 11,166 10,692 238 16.8 11.1

FY17E 19,836 13,080 12,260 272 14.7 9.2

FY18E 24,042 16,656 14,737 327 12.2 6.9

FY19E 24,311 16,235 14,696 327 12.2 6.7

FY20E 28,047 19,216 16,965 377 10.6 5.3

NSE market share across product categories

85%

99%

88%

56%

63%

81%

40%

50%

60%

70%

80%

90%

100%

Cash Eqities Equity Futures Equity Options CurrencyFutures

CurrencyOptions

Bond Futures

National Stock Exchange CMP

Rs. 4,000

3Y Target

Rs. 10,000

Page 58

NSE – Crystal Gazing

NSE to grow

revenue and PAT

by 10% in next 4

years from FY15-

FY20E . We

expect dividend

pay-out to

increase to 50%

of PAT leading to

high dividend

yield

Though exchanges

are cyclical

business, even at the

bottom of the cycle

they make adequate

profits

Consistent

revenue

growth of 10%

Consistent

growth and

stable margins

in business to

be rewarded by


25x 377 9,425 ▲

30x 377 11,310

Entry = Rs. 4000 @ 15x

FY17E


Rs. 690



TOTAL RETURN OF

2.5x


Revenue 12,321 17,231 17,345 19,836 24,042 24,311 28,047 ▲

Ebitda 8,814 11,577 11,166 13,080 16,656 16,235 19,216 ▲

Margins 72% 67% 64% 66% 69% 67% 69% ◄►

PAT 7,902 10,264 10,692 12,260 14,737 14,696 16,965 ▲


RoE 19% 18 17% 18% 18% 19% 19.0% ▲

Leverage 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ◄

►

Higher Return on

Equity and higher

return on investment

High multiple

FY11-16E CAGR %

Revenue EBITDA PAT

7 5 6

Page 59

Core Portfolio Midcap Ideas for 2020

Core Portfolio Buys on Likely

IPOs

1 National Stock Exchange

2 Equitas Holdings

20 Core Portfolio Midcaps for 2020

1 City Union Bank 11 Cyient

2 Karur Vysya Bank 12 Intellect Design Arena

3 Biocon 13 Bata India

4 Torrent Pharmaceuticals 14 Berger Paints

5 Ramco Cements 15 Indian Terrain

6 AIA Engineering 16 VIP Industries

7 Blue Star 17 Amara Raja Batteries

8 Cummins 18 Gateway Distriparks

9 V Guard 19 Suprajit Industries

10 Sadbhav Engineering 20 Timken India

Core Portfolio Buys after 20%

correction

1 Cholamandalam Finance

2 Dabur India

3 InfoEdge

4 Kajaria Ceramics

5 Page Industries

Page 60

Tactical Portfolio

Five Themes to play Tactically in FY17

Factors Explanation

1 Improving Monetary

environment

Savings and deposit pickup, low inflation, falling Govt.

borrowing, 25-50bps likely policy rate cut, steepening yield

curve, reverse repo to become operative rate

2 Increasing and improving

Govt. spend esp. States

Multiplier effect of Road, Rail spend by Govt to play out. State

Govt. spend to increase materially

3 Bottoming out of Rural

economy

Agri economy to improve on multiple measures. Rural push by

Govt should help consumption

4 Pay Commission Nominal wage growth and discretionary consumption to get a

leg up on Pay Commission impact on large Govt. employees

5 Real Estate is biggest

Fault-line

Vulnerable real estate scene – Falling sales volumes and

prices are a double whammy to the real estate economy

Tactical Sector Weights

Overweight Underweight

Retail/ SME Financials IT

Consumer Discretionary Pharma

Automobiles Oil

Infrastructure PSU/ Corporate Banks

Commodity importers Cement & Real Estate

Top Large Cap Buys

1 HDFC Bank 6 Maruti Suzuki

2 Indusind Bank 7 Asian Paints

3 Kotak Mahindra Bank 8 Coal India

4 Hero Motocorp 9 Infosys

5 Bajaj Motocorp 10 Sun Pharma

Top Sells

1 PSU Banks excl SBI

2 Axis Bank

3 HDFC

4 Mahindra Finance

5 Shriram Transport

6 BHEL

7 Havells

8 Lupin

9 Shree Cement

10 HCL Tech

Top Mid & Small Cap Buys

1 Yes Bank 6 Kaveri Seeds

2 Voltas 7 Arvind

3 Kansai Nerolac 8 Bajaj Corp

4 Dalmia Bharat Cement 9 VST Tillers

5 GSPL 10 KNR Construction

Page 61

Company Name CMP Mkt Cap

(Rs. bn)

Net Sales (Rs. bn) EBITDA (Rs. bn) Net Profit (Rs. bn) ROE (%) P/E (x) EV/EBITDA (x) TP Rating

FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E

Auto Mukesh Saraf | +91 44 4344 0041 | [email protected]

Amararja Batteries Ltd 894 153 47.5 58.0 68.5 8.4 10.4 12.5 5.1 6.6 8.3 26.9 27.4 27.4 29.7 23.3 18.5 18.2 14.7 12.2 1,000 Buy

Ashok Leyland Ltd 97 276 178.3 210.2 242.7 20.1 25.2 27.9 9.5 13.3 15.1 17.3 20.9 20.3 28.8 20.5 18.1 13.6 10.5 9.4 95 ADD

Apollo Tyres Ltd 168 85 117.3 126.5 146.3 19.9 20.9 24.1 11.1 10.7 12.2 20.0 16.2 15.8 7.7 8.0 7.0 4.7 4.9 4.5 180 Buy

Bajaj Auto Ltd 2,326 673 231.1 275.0 309.1 48.6 58.0 65.3 37.2 45.1 51.4 31.8 32.1 30.0 18.1 14.9 13.1 12.2 11.8 10.5 2,620 ADD

Bharat Forge Ltd 816 190 75.8 85.9 105.7 14.3 16.9 21.2 6.9 8.9 12.0 18.8 21.1 24.0 27.6 21.4 16.0 14.4 11.8 9.2 850 Add

Eicher Motors Ltd 20,004 543 154.9 164.7 200.0 24.0 29.3 37.8 12.6 16.3 21.5 30.4 30.1 30.8 43.4 33.5 25.4 22.2 18.2 14.1 20,660 Buy

Exide Industries Ltd 132 112 68.0 72.9 81.0 10.3 11.5 13.0 6.0 6.7 7.6 13.5 12.5 12.2 18.6 16.8 14.7 10.5 9.4 8.3 125 Reduce

Hero Motocorp Ltd 2,813 562 279.1 318.9 362.5 43.2 50.2 56.2 30.6 36.4 42.2 41.9 40.3 37.7 18.4 15.4 13.3 12.3 10.2 8.8 3,200 BUY

Mahindra & Mahindra Ltd 1,221 758 406.7 468.4 528.5 49.6 57.1 64.5 34.9 40.4 45.4 17.0 17.4 16.9 21.5 18.6 16.5 13.0 10.9 9.3 1,340 ADD

Maruti Suzuki India Ltd 3,641 1,100 569.6 676.5 765.8 89.3 100.1 113.6 45.5 61.8 61.8 17.9 21.2 21.9 24.2 17.8 14.8 10.6 9.0 7.4 4,290 BUY

NRB Bearings Ltd 116 11 6.5 7.5 8.7 1.0 1.3 1.6 0.5 0.7 0.8 16.1 21.8 23.8 24.5 16.6 13.4 13.8 10.5 8.8 132 Buy

Ramkrishna Forgings Ltd 340 9 9.1 11.3 13.5 1.8 2.3 2.8 0.6 0.7 1.1 12.8 14.3 19.0 17.4 13.7 8.9 9.6 7.8 6.2 440 Buy

Suprajit Engineering Ltd 132 17 6.9 8.3 9.9 1.1 1.4 1.7 0.6 0.8 1.0 22.7 25.0 26.2 26.5 19.9 15.4 16.5 12.9 10.4 160 Buy

SKF India Ltd 1,201 63 30.2 27.8 32.1 3.6 3.6 4.2 2.7 2.7 3.2 18.0 16.1 17.1 23.3 23.2 19.5 17.6 17.8 15.2 1,025 Sell

Tata Motors Ltd 354 1,152 2,677.0 2,817.6 3,259.9 343.8 371.8 450.7 129.8 132.9 155.9 21.1 18.4 18.5 9.3 9.1 7.7 5.6 5.2 4.3 490 Buy

Timken India Ltd 421 29 10.5 12.6 16.7 1.5 2.0 2.8 0.9 1.3 1.7 19.9 23.7 27.0 30.8 22.5 16.4 19.1 14.2 10.4 550 Buy

TVS Motor Company Ltd 288 137 115.6 139.4 157.0 8.2 10.7 12.9 4.5 6.5 6.5 24.8 28.9 28.0 30.3 20.9 16.9 17.5 13.2 10.9 215 SELL

WABCO India Ltd 5,433 103 17.9 25.7 32.4 3.1 4.7 5.9 2.1 3.2 4.1 21.8 26.6 26.6 49.4 32.3 25.2 32.7 22.0 17.3 6,550 Buy

VSTTillers Tractors Ltd 1,438 12 6.3 7.5 8.7 1.1 1.3 1.5 0.7 0.9 1.0 21.6 29.8 20.5 16.9 14.1 12.1 13.8 12.1 11.0 1,660 Buy

Capital Goods & Engineering Vijayaraghavan Swaminathan | +91 44 4344 0022 | [email protected]

AIA Engineering Ltd 825 78 21.5 24.4 27.8 6.2 6.4 7.3 4.0 4.1 4.6 18.0 15.9 16.0 19.3 19.2 16.9 11.8 11.4 9.9 1,076 Buy

Bajaj Electricals Ltd 188 19 46.8 52.8 60.7 2.6 3.0 3.3 1.0 1.2 1.4 13.6 15.1 15.1 19.2 15.5 13.8 8.7 7.8 7.2 155 Sell

Bharat Heavy Electricals Ltd 104 254 274.3 299.6 342.2 -14.4 23.8 32.5 -8.3 16.8 23.0 -2.5 5.3 7.1 NA 15.1 11.1 NA 10.5 7.7 94 Sell

Blue Star Ltd 332 30 35.1 40.7 48.9 2.2 2.7 3.8 1.1 1.4 2.0 23.4 24.9 29.7 26.2 21.4 14.8 15.1 12.3 8.7 413 Buy

Crompton Greaves Ltd 146 92 129.9 141.8 155.5 4.9 5.9 7.8 0.7 2.5 3.7 1.8 6.3 8.7 132.3 36.5 25.0 21.9 18.6 14.4 158 Reduce

Elgi Equipments Ltd 131 21 13.8 15.4 17.7 1.2 1.6 2.0 0.6 0.8 1.2 10.9 14.2 19.2 36.0 25.2 17.3 19.3 15.3 11.8 152 Buy

Havells India Ltd 291 182 85.2 91.9 99.9 8.3 9.8 10.9 4.5 5.7 6.2 25.0 28.2 27.1 40.2 31.9 29.1 21.9 18.6 16.7 231 Sell

Kalpataru Power Transmission Ltd 196 30 66.7 75.7 89.4 7.1 8.3 9.9 1.2 1.7 2.4 5.9 8.0 10.0 25.2 17.3 12.6 8.9 8.0 7.1 250 Buy

KEC International Ltd 118 30 85.3 95.1 107.0 6.5 7.6 8.8 1.8 2.5 3.2 12.5 16.1 18.0 17.3 12.0 9.4 7.9 6.8 6.0 150 Buy

Cummins India Ltd 847 235 48.2 55.9 66.1 8.0 9.8 12.2 8.0 9.5 11.6 26.4 27.9 29.9 29.4 24.8 20.3 29.0 23.5 18.8 1,129 Buy

Kirloskar Oil Engines Ltd 210 30 24.4 27.5 31.9 1.9 2.7 3.6 1.4 2.0 2.7 10.7 13.8 17.6 20.7 15.3 11.3 11.4 7.9 6.0 279 Buy

Techno Electric & Engineering 480 27 11.5 12.9 14.5 2.4 2.6 2.8 1.5 1.7 2.0 13.5 15.9 16.5 20.9 15.7 13.4 12.6 11.3 10.1 579 Buy

Thermax Ltd 755 90 54.9 55.9 56.2 5.1 5.7 5.7 2.8 3.2 3.3 12.5 13.2 12.7 32.4 28.4 27.2 16.7 14.8 14.4 694 Sell

Triveni Turbine Ltd 98 32 7.7 9.2 11.1 1.6 2.0 2.5 1.0 1.3 1.7 38.7 39.8 40.4 32.2 24.6 19.6 20.7 16.1 13.1 125 Add

VA Tech Wabag Ltd 520 28 27.2 31.4 37.8 2.4 2.8 3.5 1.0 1.4 1.8 10.8 13.6 15.9 27.9 20.0 15.4 13.3 11.4 9.2 609 Add

V-Guard Industries Ltd 831 25 18.7 21.2 24.6 1.6 1.8 2.1 0.9 1.1 1.4 23.1 23.7 24.3 26.5 22.2 18.4 16.0 13.8 11.7 1,037 Buy

Voltas Ltd 247 82 54.8 61.3 69.8 3.7 4.2 5.2 3.1 3.6 4.4 14.2 15.0 16.9 26.2 22.7 18.7 19.5 16.9 13.7 290 Buy

TTK Prestige Ltd 4,164 48 15.4 17.6 20.3 1.9 2.2 2.5 1.2 1.4 1.7 17.8 18.6 19.8 39.9 34.4 29.2 25.9 22.4 19.3 3,268 Sell

Whirlpool of India Ltd 630 80 35.1 39.0 44.7 3.9 4.6 5.5 2.5 2.9 3.6 25.4 26.5 29.1 32.0 27.1 22.4 20.4 17.5 14.7 707 Buy

Spark Coverage Universe – Valuation Summary

Page 62


(Rs. bn)



Cement / Materials Girish Choudhary | +91 44 4344 0021 | [email protected]

ACC Ltd 1,227 230 114.3 119.9 133.2 11.7 15.1 19.1 5.9 10.1 13.0 7.1 11.6 13.9 39.0 22.7 17.7 18.6 14.7 11.7 1,330 Add

Ambuja Cements Ltd 201 311 93.7 98.4 107.5 14.4 17.4 22.8 8.1 12.7 17.2 7.9 8.7 8.9 38.5 31.3 23.1 20.2 17.0 13.0 220 Buy

Birla Corporation Ltd 346 27 32.1 34.6 37.5 1.8 3.0 3.5 0.9 2.2 2.6 3.4 8.1 8.9 29.7 12.1 10.3 14.5 8.8 7.6 UR UR

Dalmia Bharat Enterprises 723 59 63.2 72.8 83.1 13.7 15.7 17.5 1.0 2.3 3.4 3.3 6.4 8.2 57.3 28.0 18.9 9.0 8.1 7.1 875 Buy

India Cements Ltd 75 23 40.7 44.4 49.5 7.8 8.0 8.3 1.3 1.7 2.1 3.9 5.1 5.8 17.6 13.3 11.1 6.8 6.4 6.1 75 Add

JK Lakshmi Cement Ltd 298 35 25.2 28.9 34.6 2.5 3.8 6.2 -0.8 0.2 2.0 -5.9 1.7 15.1 NA 164.6 17.5 22.2 14.6 8.7 310 Buy

Madras Cements 384 91 35.8 39.3 44.0 9.9 10.6 11.5 4.8 5.6 6.3 16.8 16.9 16.5 19.1 16.4 14.4 11.5 10.2 9.0 425 Buy

Shree Cement Ltd 11,259 392 77.3 90.3 103.5 16.7 21.0 24.4 5.8 10.5 13.2 15.1 23.5 25.8 67.9 37.4 29.7 23.1 18.3 15.8 9,100 Sell

Ultratech Cement Ltd 2,994 822 242.1 266.3 293.5 42.1 49.9 55.0 18.8 23.8 26.3 9.6 11.1 11.1 43.7 34.6 31.3 20.2 17.1 15.5 2,900 Add

Orient Cement Ltd 139 28 14.4 19.6 22.7 1.8 3.8 4.8 0.0 0.9 1.6 0.3 9.4 15.3 NA 30.8 17.4 22.9 11.3 8.7 125 Reduce

IT Services Soumitra Chatterjee | +91 22 4228 8151 | [email protected]

eClerx Services Ltd 1,315 54 13.2 14.4 16.2 4.7 4.8 5.3 3.4 3.4 3.7 44.0 38.4 38.1 16.0 16.2 14.6 10.1 9.6 8.7 1,250 Sell

Firstsource Solutions Ltd 35 23 32.4 36.4 38.5 4.0 4.5 5.1 2.6 2.9 3.3 11.5 11.3 12.1 9.4 8.5 7.4 6.7 5.3 4.3 42 Buy

HCL Technologies Ltd 823 1,161 420.7 465.5 505.4 92.5 99.9 106.2 75.2 79.7 85.8 27.5 24.0 21.7 15.5 14.6 13.6 11.1 9.8 8.7 810 Reduce

Hexaware Technologies Ltd 255 77 34.9 38.9 43.8 5.8 6.2 7.1 4.1 4.4 5.1 27.7 27.2 29.0 18.8 17.7 15.3 12.6 11.8 10.2 225 Reduce

Infosys Ltd 1,143 2,634 618.2 670.3 744.6 169.8 187.9 212.5 132.9 142.1 160.4 23.9 24.2 25.0 19.7 18.4 16.3 13.6 12.1 10.4 1,260 Buy

Info Edge (India) Ltd 552 94 7.2 8.6 10.6 1.5 2.4 3.2 1.4 2.0 2.7 8.2 11.0 13.2 47.4 32.6 24.4 56.3 34.1 24.1 1,130 Buy

Cyient Ltd 405 46 30.8 33.5 37.2 4.3 5.0 5.7 3.4 3.6 4.2 18.1 18.2 18.4 13.3 12.5 10.9 9.0 7.5 6.1 520 Add

Intellect Design Arena Ltd 203 20 8.1 9.3 10.9 -0.3 0.4 1.0 -0.3 0.3 0.8 NM 4.2 11.5 NA 81.4 27.0 NA 45.0 17.7 290 Buy

MindTree Ltd 663 111 46.1 52.6 59.0 8.2 9.2 10.0 5.4 6.2 6.8 25.6 25.0 24.8 10.3 9.0 8.2 13.1 11.3 10.3 1,220 Sell

MCX Ltd 843 43 2.3 2.6 3.2 0.8 1.1 1.5 0.4 1.2 1.6 3.7 10.6 12.9 97.4 34.3 26.9 37.6 27.2 18.5 720 Sell

Mphasis Ltd 448 94 60.4 61.0 64.9 8.7 9.0 10.1 6.9 7.5 8.2 11.9 12.4 13.0 13.7 12.6 11.5 9.8 9.3 8.0 430 Reduce

Persistent Systems Ltd 599 48 22.4 25.2 27.8 4.2 5.0 5.5 2.9 3.3 3.8 19.4 19.6 20.0 16.4 14.5 12.7 9.3 7.6 6.5 660 Add

Redington (India) Ltd 109 44 340.6 361.6 396.9 7.7 8.4 9.4 4.1 4.5 5.2 16.2 15.7 16.0 10.6 9.6 8.3 6.1 5.6 5.2 110 Add

NIIT Technologies Ltd 462 28 26.7 28.1 30.5 4.7 4.8 5.1 0.2 0.1 0.1 18.5 17.6 17.7 10.4 9.5 8.3 5.5 5.1 4.3 610 Buy

KPIT Technologies Ltd 142 28 31.7 32.4 33.7 4.2 4.5 4.7 2.7 2.8 3.1 18.7 16.7 16.0 10.7 10.2 9.2 6.8 5.7 4.8 120 Sell

Tata Consultancy Services Ltd 2,365 4,661 1,077.1 1,167.4 1,295.8 305.5 326.5 353.4 237.5 248.2 276.2 38.1 33.4 30.8 19.5 18.7 16.8 14.4 13.1 11.7 2,530 Add

Tech Mahindra Ltd 458 443 262.7 278.5 304.5 42.7 46.4 53.3 29.8 33.8 40.7 22.0 21.0 21.3 13.7 12.0 10.0 9.2 7.9 6.3 550 Buy

Wipro Ltd 539 1,332 510.9 536.0 576.9 110.3 117.0 128.6 88.8 93.3 101.7 20.4 19.3 19.2 14.9 14.2 13.0 11.4 10.4 9.2 570 Reduce

Building Material Girish Choudhary | +91 44 4344 0021 | [email protected]

Kajaria Ceramics Ltd 930 74 24.4 27.5 31.6 4.7 5.8 6.5 2.3 3.0 3.4 27.7 28.4 26.4 31.9 24.7 21.5 16.5 13.3 11.8 1,125 Buy

Century Plyboards (I) Ltd 167 37 16.1 18.0 21.6 2.6 2.9 3.8 1.6 1.8 2.2 36.9 31.2 30.8 22.6 21.1 17.1 16.1 15.3 12.0 200 Buy

Somany Ceramics Ltd 361 15 17.1 18.9 21.7 1.3 1.5 1.8 0.6 0.8 0.9 17.4 17.3 17.3 25.6 19.2 16.7 13.2 11.1 9.8 435 Buy

Cera Sanitaryware Ltd 1,762 23 9.4 10.8 13.0 1.3 1.6 1.9 0.8 0.9 1.1 20.2 20.1 20.8 29.6 25.4 20.8 17.6 15.0 12.5 1,690 Reduce

Greenply Industries Ltd 188 23 16.8 18.0 20.3 2.6 2.8 3.1 1.1 1.2 1.4 25.3 22.2 20.7 16.3 14.9 13.0 9.6 9.2 9.3 230 Buy

HSIL Ltd 271 20 20.4 23.0 26.1 3.1 3.5 4.0 0.9 1.2 1.5 6.6 8.3 9.8 21.9 16.6 13.1 8.6 7.6 6.7 270 Reduce


Page 63


(Rs. bn)



Consumptions Tejash Shah | +91 22 4228 8155 | [email protected]

Asian Paint Ltd 898 862 155.2 178.5 207.3 28.8 34.2 37.2 18.6 22.5 24.5 35.6 35.6 32.0 46.4 38.2 35.2 29.4 24.6 22.5 904 Add

Arvind Ltd 274 71 83.9 96.1 111.9 10.8 12.9 15.3 3.7 4.8 6.5 12.9 15.0 18.0 19.1 14.8 10.9 9.1 7.5 6.3 334 Buy

Berger Paint India Ltd 237 164 47.4 55.6 66.5 6.8 8.2 10.4 3.9 4.9 6.4 27.7 28.7 30.4 42.6 33.8 25.6 24.6 20.2 15.8 256 Reduce

Akzo Nobel India Ltd 1,306 63 27.1 29.4 33.4 2.9 3.2 3.8 2.0 2.2 2.6 19.7 21.2 23.2 32.3 27.8 23.1 19.9 17.7 14.6 1,223 Reduce

Kansai Nerolac Paints Ltd 278 150 38.1 43.5 51.2 5.6 6.7 7.9 3.6 4.3 5.1 20.6 21.3 21.5 42.1 34.8 29.3 26.1 22.1 18.6 283 Add

Pidilite Industries Ltd 604 310 52.7 60.1 69.5 11.2 13.2 15.0 7.1 8.6 9.9 28.4 28.3 26.9 43.4 36.0 31.3 27.2 23.1 20.3 594 Reduce

Page Industries Ltd 11,367 127 17.6 21.2 25.8 3.5 4.3 5.2 2.4 2.9 3.5 52.7 48.7 45.9 53.3 43.9 36.3 36.4 29.9 24.7 11,916 BUY

Kewal Kiran Clothing Ltd 1,801 22 4.5 5.6 6.8 1.1 1.8 1.8 0.7 1.2 1.1 20.8 32.7 26.1 32.3 18.1 19.5 18.3 11.5 11.1 2,398 Add

Indian Terrain Fashions Ltd 119 4 3.1 3.7 4.5 0.4 0.5 0.7 0.3 0.3 0.4 21.6 19.0 20.6 14.0 13.0 9.9 10.1 7.7 5.8 155 Buy

La Opala RG Ltd 578 32 2.7 3.4 4.2 0.9 1.1 1.5 0.6 0.7 1.0 27.6 27.9 28.5 55.5 43.4 33.4 35.2 27.4 21.6 577 Reduce

Wonderla 368 21 2.1 2.9 3.5 0.9 1.2 1.6 0.6 0.7 0.9 14.9 16.8 18.1 35.6 28.1 22.7 22.0 16.9 13.3

Relaxo Footwears Ltd 387 46 17.6 20.9 25.0 2.6 3.1 3.8 1.4 1.7 2.2 31.7 29.8 28.6 33.9 27.1 21.5 18.5 15.3 12.2 557 Add

Bata India Ltd 494 63 24.4 27.6 31.4 2.7 3.4 4.3 1.6 2.1 3.6 14.8 16.7 17.2 38.8 29.9 23.1 22.5 18.0 16.2 495 Add

Titan Company Ltd 346 307 119.3 138.3 161.6 10.9 13.4 16.4 7.9 9.8 12.0 23.6 24.9 25.8 38.8 31.5 25.7 27.8 22.6 18.5 330 Reduce

Bajaj Corp Ltd 398 59 9.4 11.0 12.8 2.9 3.3 3.4 2.5 2.9 3.1 51.0 52.9 48.0 23.4 20.6 19.0 19.5 17.1 16.3 484 Buy

VIP Industries 97 14 12.2 13.8 16.0 1.0 1.2 1.5 0.6 0.8 0.9 18.3 19.5 21.0 23.2 18.1 14.8 13.9 11.0 9.2 117 Buy

Dabur India Ltd 250 440 84.2 94.0 108.1 15.1 17.6 20.5 12.4 14.3 16.5 33.4 32.0 31.1 35.4 30.7 26.5 28.1 23.8 20.2 252 Reduce

Marico Ltd 246 317 61.2 67.6 79.4 10.6 12.6 14.4 7.2 8.6 10.0 35.5 34.6 33.3 43.9 36.7 31.8 29.7 24.7 21.3 234 Add

Jyothy Laboratories Ltd 286 52 16.3 18.4 21.5 2.5 2.7 3.1 1.8 1.8 1.9 21.5 20.2 19.8 29.7 29.2 27.4 21.4 18.7 16.4 301 Add

Zydus Wellness Ltd 741 29 4.3 4.6 5.0 0.9 1.1 1.2 1.0 1.2 1.4 22.4 22.4 22.3 29.3 25.1 21.4 31.5 25.1 20.9 621 Sell

Emami Ltd 940 213 26.2 31.7 38.3 6.8 8.5 10.6 5.3 6.3 8.1 40.9 43.2 47.1 40.0 33.7 26.2 32.6 25.5 20.0 893 Reduce

Hindustan Unilever Ltd 852 1,843 333.2 366.6 412.8 59.8 68.8 77.8 42.7 49.5 55.7 104.8 113.0 109.6 43.2 37.2 33.1 30.1 26.1 22.9 921 Buy

ITC Ltd 321 2,583 360.8 403.8 457.0 138.5 159.8 180.3 98.8 113.7 128.3 30.4 31.1 30.8 26.1 22.7 20.1 18.2 15.8 14.0 351 Buy

Pharma Dr Harith Ahamed | +91-44-4344 0052 | [email protected]

Aurobindo Pharma 732 428 137.5 160.6 180.1 31.9 39.8 46.6 20.4 25.2 29.6 33.7 31.3 28.2 21.0 17.0 14.4 14.7 11.7 9.8 1,015 Buy

Biocon Ltd 485 97 34.0 38.3 43.6 8.0 9.1 10.9 4.4 4.8 5.5 13.3 12.5 13.1 22.0 20.2 17.6 12.8 11.4 9.7 572 Buy

Cadila Healthcare 345 353 99.5 110.3 127.8 24.1 25.2 29.8 15.7 16.9 20.2 31.8 27.4 26.5 22.5 20.9 17.5 15.4 14.6 12.2 355 Add

Divi's Laboratories 1,004 267 36.1 39.9 45.5 13.7 15.6 17.6 10.6 11.8 13.3 27.7 25.9 25.0 25.1 22.7 20.1 18.8 16.4 14.3 1,000 Sell

Dr. Reddy's Laboratories 3,211 548 157.3 172.9 193.9 40.8 41.7 48.9 24.6 25.7 30.6 20.2 18.0 18.4 22.3 21.3 17.9 14.3 13.7 11.7 3,226 Add

Granules India Ltd 126 26 14.3 16.7 19.2 2.7 3.3 3.9 1.2 1.5 1.9 23.0 20.7 19.6 24.5 18.9 15.2 11.7 9.4 7.9 125 Add

Lupin 1,856 836 139.0 176.6 206.5 34.7 47.7 54.6 22.3 29.7 34.3 22.8 24.9 23.4 37.6 28.2 24.4 25.6 18.3 15.6 1,670 Sell

Sun Pharmaceutical Industries 868 2,089 281.2 328.4 373.8 85.5 113.2 134.2 45.7 70.3 86.4 19.1 21.8 22.1 39.8 29.7 24.2 25.1 18.7 15.5 944 Buy

Syngene International 400 80 11.0 13.2 15.7 3.6 4.4 5.4 2.2 2.8 3.4 24.3 25.8 26.7 35.9 28.9 23.5 22.1 18.1 14.7 422 Add

Torrent Pharmaceuticals 1,288 218 67.8 68.7 74.7 26.9 19.6 20.7 18.0 12.7 13.7 59.8 31.8 28.0 12.1 17.2 15.9 9.0 11.9 10.9 1,628 Buy


Page 64


(Rs. bn)



Oil & Gas Vishnu Kumar A S | +91 44 4344 0069 | [email protected]

Oil & Natural Gas Corp 205 1,755 768.6 779.6 902.0 372.4 366.7 447.9 154.9 146.7 205.4 10.7 10.0 13.7 11.3 12.0 8.5 4.7 4.8 3.9 303 Buy

Indian Oil Corp 386 937 3,203.3 3,379.3 3,963.1 219.2 222.7 222.7 107.2 108.1 110.4 17.1 13.6 12.8 8.7 8.7 8.5 6.2 6.2 6.2 524 Buy

Bharat Petroleum Corp 804 581 1,469.6 1,499.1 1,866.6 104.8 87.7 85.0 65.6 51.4 48.7 26.6 18.1 15.6 8.9 11.3 11.9 6.6 7.8 8.1 941 Buy

Hindustan Petroleum Corp 729 247 1,429.3 1,541.2 1,845.6 70.2 68.2 65.5 33.4 30.8 25.3 18.0 16.0 12.2 7.4 8.0 9.7 5.9 6.1 6.7 700 SELL

Oil India 311 187 101.3 103.4 120.9 38.2 38.1 46.0 24.7 24.4 28.7 11.2 10.5 11.8 7.6 7.7 6.5 6.8 6.8 5.6 535 Buy

Indraprastha Gas 529 74 37.5 38.0 39.6 7.5 8.3 8.5 4.1 4.6 4.7 18.0 17.9 15.8 18.2 16.0 15.8 8.3 7.2 6.8 448 Sell

Petronet LNG 251 188 320.3 249.4 317.0 17.1 20.2 27.2 9.2 11.2 16.0 15.3 16.5 20.8 20.5 16.9 11.7 12.7 10.3 7.7 273 Buy

Gujarat Gas Co 509 70 61.9 65.7 68.3 8.1 10.4 11.2 2.4 3.9 4.6 11.7 17.0 17.4 29.0 17.9 15.3 11.9 9.0 8.3 500 Reduce

Gujarat State Petronet 127 72 10.1 12.0 12.4 8.7 10.5 10.9 4.4 5.6 5.9 11.6 13.3 12.8 16.3 12.9 12.2 9.2 7.6 7.0 164 Buy

Agri & Logistics Mukesh Saraf | +91 44 4344 0041 | [email protected]

Container Corp of India Ltd 1,148 224 57.8 64.2 73.4 11.7 13.3 15.7 8.6 9.0 10.4 10.6 10.4 11.2 26.1 24.9 21.5 18.8 16.5 13.9 1,135 Reduce

Gateway Distriparks Ltd 257 28 10.6 12.3 14.2 2.6 3.1 4.1 1.3 1.7 2.7 10.7 13.4 18.7 21.0 16.0 10.4 10.3 8.6 6.6 333 Buy

Infra & Power Bharanidhar Vijayakumar | +91 44 4344 0038 | [email protected]

Adani Ports and Special

Economic Zone 231 479 72.0 81.8 95.7 46.5 52.4 61.3 28.0 32.2 40.8 23.2 21.6 22.2 17.1 14.9 11.7 13.3 11.5 9.5 253 Buy

Ashoka Buildcon Ltd 186 35 24.5 27.8 32.9 6.8 7.4 8.8 0.8 1.1 1.9 3.7 4.3 7.5 44.2 33.0 18.6 10.4 9.5 7.9 235 BUY

COAL India 319 2,014 782.2 870.7 985.1 187.8 230.8 254.5 151.1 175.5 187.3 36.4 39.8 39.5 13.3 11.5 10.8 10.6 8.7 7.9 410 Buy

Gujarat Pipavav Port Ltd 159 77 7.1 8.4 9.9 3.8 4.8 6.1 2.4 3.0 3.7 15.9 17.0 15.9 20.6 17.1 20.6 20.4 16.2 13.0 173 Add

IRB Infrastructure Developers Ltd 232 82 62.1 73.4 70.2 31.2 34.7 38.1 6.9 8.1 5.4 14.7 14.8 9.2 11.8 10.1 15.1 7.0 7.1 7.0 237 ADD

KNR Constructions Ltd 515 14 8.2 13.8 16.0 1.4 2.7 3.1 0.7 0.6 1.0 8.2 6.7 10.2 21.6 25.0 15.7 16.6 8.2 7.1 560 BUY

PNC Infratech Ltd 490 25 23.1 28.5 33.2 3.9 5.8 6.4 0.6 1.0 1.3 5.8 6.9 8.8 38.9 25.6 18.7 11.7 7.7 6.9 650 BUY

Sadbhav Engineering Ltd 246 42 40.7 49.6 59.6 7.2 10.3 14.0 -0.5 0.8 1.9 -2.6 3.8 8.7 NA 54.0 22.1 15.8 11.3 8.2 315 BUY


Page 65


(Rs. bn)

Net Interest Income (Rs. Bn) Operating Profits (Rs. Bn) PAT (Rs. Bn) ABV/share Rs. P/ABV RoE (%) Target

Price Rating


Financials Abhinesh Vijayaraj | +91 44 4344 0006 | [email protected]

Axis Bank 413 983 166 194 226 161 189 217 85 99 121 211 242 283 2.0 1.7 1.5 17.5 17.6 18.5 308 Sell

Bank of Baroda 141 324 125 133 154 84 89 108 -19 29 45 103 111 130 1.3 1.2 1.0 -4.8 7.2 10.4 77 Sell

Bank of India 93 76 114 119 134 60 63 72 -36 -1 15 143 98 78 0.7 1.0 1.3 -13.3 -0.5 5.6 49 Sell

Canara Bank 182 99 97 106 123 72 77 91 13 24 40 357 344 383 0.5 0.5 0.5 4.7 7.8 11.9 135 Sell

City Union Bank 85 51 10 11 13 8 9 11 4 5 7 47 55 64 1.7 1.4 1.2 15.5 16.6 18.0 112 Buy

DCB 76 22 6 7 8 3 3 4 2 2 2 57 63 70 1.3 1.1 1.0 10.5 10.2 10.3 68 Sell

Federal Bank 49 83 24 26 31 14 15 18 7 8 12 45 48 54 1.1 1.0 0.9 8.2 9.1 12.5 57 Buy

HDFC Bank 1,029 2,599 274 333 413 214 260 325 124 153 194 285 335 400 3.6 3.1 2.6 18.3 19.3 20.6 1,266 Buy

ICICI Bank 214 1,243 213 235 275 243 234 273 120 116 142 143 154 175 1.2 1.1 1.0 14.0 11.9 12.9 256 Buy

Indusind Bank 927 551 45 56 70 41 50 64 23 29 37 289 332 387 3.1 2.7 2.3 16.5 15.5 17.2 1,092 Buy

JKBK 62 30 28 30 35 17 19 22 7 9 12 118 133 152 0.6 0.5 0.5 10.2 13.2 14.7 93 Buy

Kotak Mahindra Bank 643 1,178 69 78 93 41 52 63 21 29 37 125 139 158 4.4 3.8 3.3 9.2 11.7 13.2 776 Buy

Karur Vysya Bank 410 50 18 19 21 13 14 17 6 7 9 363 407 465 1.2 1.1 0.9 13.4 14.6 16.3 593 Buy

Punjab National Bank 82 161 168 180 204 121 128 147 14 23 53 107 100 117 0.9 0.9 0.8 3.6 5.5 11.8 60 Sell

State Bank of India 180 1,398 559 630 740 400 459 549 108 169 247 144 158 183 1.0 0.9 0.8 7.9 11.0 14.5 187 Buy

South Indian Bank 17 23 16 18 21 9 11 13 4 5 7 24 27 31 0.8 0.7 0.6 10.4 12.9 14.7 25 Buy

Yes Bank 801 337 45 55 69 43 51 63 25 31 38 326 386 460 2.1 1.8 1.5 19.8 20.6 21.1 958 Buy

Cholamandalam Fin 670 105 21 24 29 12 14 17 5 6 8 197 219 260 3.1 2.8 2.4 16.9 16.4 17.2 700 Buy

HDFC 1,161 1,833 86 97 108 93 103 114 63 69 77 211 235 262 4.0 3.5 3.0 19.3 19.2 19.2 1,078 Sell

LIC Housing Fin 462 233 29 33 36 27 30 34 16 19 21 175 202 234 2.8 2.4 2.1 19.4 18.7 18.1 416 Sell

M&M Finance 229 130 30 33 39 19 21 24 5 5 11 86 82 100 2.3 2.4 2.0 8.3 8.1 16.9 181 Sell

REPCO 590 37 3 4 5 3 3 4 2 2 2 147 175 211 4.2 3.6 2.9 17.0 18.5 19.6 661 Buy

Sundaram Finance 1,212 135 11 12 14 7 8 9 5 5 6 299 326 361 3.7 3.4 3.0 14.8 13.7 14.5 1,464 Buy

Shriram City Union Fin 1,501 99 24 27 32 14 16 18 6 6 7 626 666 716 2.3 2.2 2.0 13.8 12.8 12.4 1,665 Buy

Shriram Transport Fin 927 210 49 56 63 37 42 47 14 15 17 392 416 716 1.9 1.8 1.8 14.0 14.1 13.9 708 Sell


Page 66

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Page 67

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