India Strategy & Top Ideas · PDF fileIndia Strategy & Top Ideas Demonetization effect in the ... stocks like Maruti Suzuki post the 20% correction in prices as the fundamentals remain

Click to edit Master title style November 2016

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India Strategy & Top Ideas Demonetization effect in the short term

Contents

11/22/2016 2

Page No.

Large Caps

HDFC Bank 22

State Bank of India 24

Infosys 26

Hindustan Unilever 28

Maruti Suzuki 30

Indian Oil Corporation 32

Kotak Mahindra Bank 34

Larsen & Toubro 36

Aurobindo Pharma 38

Tech Mahindra 40

Britannia Industries 42

Glenmark Pharmaceuticals 44

Bharat Forge 46

Mid-Caps

Indraprastha Gas 49

Jubilant Life Sciences 51

Hexaware Technologies 53

Sadbhav Engineering 55

SpiceJet 57

Rallis India 59

Thyrocare Technologies 61

Navneet Education 63

NIIT Technologies 65

VRL Logistics 67

Page No.

No surprises in 2QFY17 results 3

Demonetisation, will result in poor 3QFY17 4

Global Growth – US election results, a complete surprise 5

CAD, highest in the last ten months 6

Direct and Indirect Tax collections up 7

CPI down to 4.2% in Oct 2016 8

Markets

Not a good month for equity markets 9

Metals lead the way 10

Midcap indices take the brunt of the fall 11

EM currencies weak 12

FII turns negative in Nov 2016 13

Global Agri commodities - Palm oil gains 14

Shut downs boost prices of Industrial commodities 15

Global growth still an issue 16

Indian Market – Downward revision in earnings on the cards 17

Nifty Valuations: Historic Trends 18

Nifty Valuation 19

Top Pick Summary 20

(Prices as on November 22, 2016)

No surprises in 2QFY17 results

• 2QFY17, Performance below expectations: The performance of 2QFY17 were a mixture of expected lines as well as disappointments. Overall, the results were disappointing. While sales were down 3.2% YoY and 4% QoQ, EBITDA was down 0.6% YoY and 10.7% QoQ, Interest was up 3.9% YoY and down 1.5% QoQ, Tax outgo was down 2.4% YoY and 11.8% QoQ, PAT dropped 3.1% YoY and 3.0% QoQ. While we move towards the end of CY2016, we feel that the following three factors will drive the market, (i) Threat of a US rate hike more real now than ever before leading to an outflow from Emerging Markets, (ii) the mid caps and the small caps seeing a pressure from selling and hence contraction in their valuations, and (iii) the overall market valuations moving towards the bottom of the range. Hence it is going to be a challenging period ahead.

• Kharif production up on strong monsoon, Rabi also expected to be good: The good monsoon in the current year is expected to result in bumper kharif production. The food grain production is expected at 135.03mt against 124.01mt in the corresponding period last year up 9% while the Pulses which has seen a sharp increase in prices is estimated to have a production of 8.7mt against 5.54mt up 57% YoY. While it is too early to predict anything on Rabi production, the after effects of a good monsoon is expected to be felt through in the Rabi production too with a better output than last year.

• Banking sector, HDFC bank, Indusind, Kotak lead the way: The banking results were a mixed bag. While the private sector banks like HDFC bank, Indusind , Kotak and Yes bank were in line, both Axis and ICICI bank disappointed while among the PSU banks, BOB and SBI reported better results while higher provisions resulted in lower net profits. The key takeaways included the reducing pace of NPA additions which is a welcome sign. Clearly the worst seems to be over.

• 10 Year Gsec yields continue to head south: The 10 year GSecs yields touching a low of 6.41% on the November 16, 2016 having lost 43bps since the 4th of Nov 2016. With the strong inflow into the banks in terms of deposits following the demonetization of the Rs500/- and Rs1000/- currencies.

• Consumption as a theme still on for the next three to five years: We believe the effect of the demonetization is going to be more

temporary and the growth should get into the normal growth rate by 1QFY18 the latest. Our view of consumption theme still stands

though the de monetization can have an impact on the performance of the FMCG companies in the short term. In the short term the

lack availability of currency due to logistical issues may impact the business, we expect normalcy to return by 4QFY17. We have added

stocks like Maruti Suzuki post the 20% correction in prices as the fundamentals remain intact, Indraprastha gas and Jubilant Life

sciences, Tech Mahindra, Thyrocare and Rallis India are added to our top picks while we have removed ACC and Heidelberg Cement.

Hindustan Unilever and Britannia Industries remain as the best bets of the consumption theme. We believe that the recent correction in

the market should be taken as an opportunity to add to the fundamentally strong stocks and hence the additions.

11/22/2016 3 RSreesankar – [email protected]; +91-22-6632 2214

Demonetisation, will result in poor 3QFY17

• Demonetisation of Rs500 and Rs1000 notes and black money: On November 8, 2016, the Indian government announced the demonetisation of the Rs500 and the Rs1000 Rupee Indian currency notes in circulation then. Roughly 86.3% of in circulation is in Rs500 and Rs1000 denomination. India has always had a parallel economy working side by side to the official one though we haven't had any official data on it. At the last count, World bank had estimated the size of India's black money at 20% in 1999, which to have increased to 23.7% in 2007. The current Indian GDP is estimated at US2 trillion and if we go buy the world bank estimate, then we expect the

parallel economy to be around US$460bn is size. With the total Tax to GDP ratio in India estimated at around 16%, the tax loss works out to roughly US$73bn. Extrapolating this further, roughly 20-25% of the money in circulation is unlikely to be tendered for exchange .

• Implications of the move: While, the move is hailed as one of the strong measures after the series of earlier measures to drill out black money, the implications on the economy in the short term is more negative than what it can do to the economy in the long term. We expect to see the month of November to see a dip in GDP, while it could see an improvement in December 2016 it will be a far away from what was anticipated earlier. This effectively means that the 3QFY17 is a washout as far as the GDP is concerned and we may see a

recovery only in 4QFY17. This also could result in earnings downgrades for various companies going forward.

• Availability of currency, the key issue: With the existing Rs500 and Rs1000 currency withdrawn and the new Rs2000 and Rs500 currencies not being freely available in the banks and ATMs across the country, the businesses that has been transacting all along in cash is likely to see a tough period ahead of them. In India, many services still are transacted in cash especially in the markets and rural areas and this has been severely dented. The queues in front of ATMs have been fairly long, but most importantly most ATMs had run out of cash and refilling has been fairly slow impacting the availability of cash at ATMs. The banks have been exchanging the old currency for

new as well as giving an opportunity for the customers to withdraw the money from their accounts. But with the non availability of cash at ATMs, this has been a fairly elongated process and one could see serpentine queues outside the bank branches for withdrawal and exchange of cash. This is definitely out to impact consumption in the near term.

• Logistics, the issue to grapple with: While the Metros, Tier I cities etc has already started to see a good amount of online transactions ,

it is the rural and semi urban areas which will bore the brunt of the impact of non availability of cash. While currency chests are more in number at the Metros and Tier I cities, it is likely that these places the refilling of ATMs may happen at a faster pace than in the rural

areas. Hence the impact of this measure will be greater in rural areas and we expect the consumption in rural areas to be impacted more in the near term. In our own analysis when we had done the channel checks, even the Metros have seen a big impact in the last ten days and the rural even bigger. In case of some of the consumer durable companies, the sales have been down by more than 50%.


Global Growth – US election results, a complete surprise

• Trump’s election as the US president leaves the markets on a yoyo: US Presidential election results came as a surprise of the market with Mr Trump not only getting elected but the Republicans winning both houses of the Congress. The growth estimates remain unchanged at 1.6% for CY2016 while the estimates for CY17 still continue to remain at 2.3%. The non farm payroll employment in October 2016 saw an increase of 161,000 as against an increase of 156,000 in September 2016 which still gives the economy a strong push. The way the bond market has behaved in the last ten days indicates that the market has already priced in a stronger economic

growth, higher inflation and an early tightening resulting a FED rate hike soon. In our view, the resultant higher public spending is likely to be offset by quicker monetary tightening.

• Crude oil range bound in the last one month. Saudi- Russian effort yet to see any result in production freeze: Brent has ranged from US$44-53 in the last one month with a negative bias. With Trump repeatedly voicing his concerns on the environmental bottlenecks, it is to wait and seen how the US policies on oil exploration will change in the near term.

• High Volatility seen in the last one month: Both the global and the Indian volatility indices have been having a torrid time reflecting the issues that had affected the market. A surprise Trump victory against most predictions saw the CBOE VIX trading between 12.77-22.44 before steadying at 13.25 during the month. The Indian VIX traded between 13.78-20.74 before steadying at 17.80 more coming from the demonization effects rather the Trump effect.

• Fed tightening expected sooner: A Fed tightening is not good for Emerging Markets as they will see an outflow as seen now. The outflows from EMs continues and we expect that the US bond yields of 2.33% reflect the expectation of hike in the Fed rates. What is

more interesting will be how the Republicans clean sweep of both houses of Congress will make the passing of legislations easier.

• Emerging markets see outflows: The EMs will see outflows on a Fed rate hike. Mr Trump’s rhetoric on protectionism is a worry. The increased question mark on the new US economic policies and protectionism will keep the Emerging Market volatile and the growth in EMs will be slow. In the UK, a narrowing trade deficit as well as the lowest level of un employment in 11 years will be challenged in the near term with the handling of Brexit.


CAD, highest in the last ten months

11/22/2016 6

• After touching a low of US$4.8bn in April 2016, the trade deficit has been inching up on recovery in oil prices and

non oil non gold imports. The CAD has touched a level of US$10.1bn.

Trade Deficit

Source: RBI, PL Research

US $ Mn Dec'15 Jan’16 Feb’16 Mar’16 Apr’16 May’16 Jun’16 Jul’16 Aug’16 Sep’16 Oct’16 FYTD YTD YoY

Exports 22,297 21,076 20,739 22,719 20,569 22,171 22,572 21,690 21,519 22,881 23,513 154,913 154,880

Imports 33,961 28,715 27,280 27,790 25,414 28,444 30,689 29,451 29,193 31,220 33,674 208,083 232,454

- Oil 6,657 5,026 4,768 4,800 5,656 5,939 7,252 6,820 6,744 6,886 7,141 46,439 55,058

- Gold 3,806 2,912 1,397 973 1,238 1,473 1,209 2,966 1,118 1,800 3,500 11,415 19,126

- Non Oil Non Gold 23,498 20,777 21,115 22,017 18,520 21,032 22,228 19,665 21,331 22,534 23,032 150,229 158,270

Trade Deficit (11,664) (7,639) (6,542) (5,071) (4,845) (6,273) (8,117) (7,761) (7,674) (8,340) (10,161) (53,170) (77,574)

YoY Chng.

Exports -15% -14% -6% -5% -7% -1% 1% -7% 0% 5% 10% 0%

Imports -4% -11% -5% -22% -23% -20% -7% -19% -14% -3% 8% -10%

- Oil -33% -39% -22% -35% -24% -30% -16% -28% -8% 3% 4% -16%

- Gold 179% 85% -29% -80% -60% -39% -39% 0% -77% -10% 108% -40%

- Non Oil Non Gold -2% -7% 2% -6% -18% -3% -1% -18% -2% -4% 2% -5%

Trade Deficit 27% -3% -3% -57% -56% -52% -25% -41% -38% -18% 5% -31%

RSreesankar – [email protected]; +91-22-6632 2214

Direct and Indirect Tax collections up

Source: Controller General of Accounts – Ministry of Finance, PL Research

Trends in Government’s Fiscal Deficit • The gross tax revenue was up 16% in the first half year of FY17 with income tax, excise duties and service tax leading the way.

• Excise duty collections were up sharply by 48% YoY to Rs1523bn.

• Net tax revenues were up 21% to Rs4482bn as at Sep 2016.

Source: Controller General of Accounts – Ministry of Finance, PL Research

Trends in Tax Receipts


(Rs bn) Upto

Sep'15

Upto

Sep'16 YoY %

Budget

Est

% to total

Budget Est.

Revenue Receipts 5,134 5,669 10% 13,770 41%

Tax Revenue (Net) 3,697 4,482 21% 10,541 43%

Non-Tax Revenue 1,436 1,188 -17% 3,229 37%

Non-Debt Capital Receipts 186 128 -31% 671 19%

Recovery of Loans 58 68 17% 106 64%

Other Receipts 128 60 NA 565 11%

Total Receipts 5,320 5,797 9% 14,442 40%

Non-Plan Expenditure 6,567 7,051 7% 14,281 49%

On Revenue Account 6,114 6,483 6% 13,274 49%

(i) of which Interest Payments 1,977 2,132 8% 4,927 43%

On Capital Account 454 568 25% 1,006 56%

(i) of which Loans disbursed 100 231 131% 9 2620%

Plan Expenditure 2,538 3,226 27% 5,500 59%

On Revenue Account 1,710 2,445 43% 4,036 61%

On Capital Account 828 781 -6% 1,464 53%

(i) of which Loans disbursed 141 229 63% 270 85%

Total Expenditure 9,105 10,277 13% 19,781 52%

Fiscal Deficit 3,786 4,480 18% 5,339 84%

Revenue Deficit 2,690 3,259 21% 3,540 92%

Primary Deficit 1,809 2,348 30% 412 569%

Tax Revenue (Rs bn) Upto

Sep'15

Upto

Sep'16 YoY %

Budget

Est

% to total

Budget Est.

Corporate Tax 1,826 1,868 2% 4,939 38%

Income Tax 1,224 1,442 18% 3,532 41%

Customs 1,036 1,091 5% 2,300 47%

Union Excise Duties 1,030 1,523 48% 3,187 48%

Service Tax 787 967 23% 2,310 42%

Other Tax 65 30 -54% 41 72%

Gross Tax Revenue 5,969 6,921 16% 16,309 42%

Surcharges 26 31 20% 65 48%

Assignment to states 2,246 2,444 9% 5,703 43%

Net Tax Revenue 3,697 4,482 21% 10,541 43%

CPI down to 4.2% in Oct 2016

• The retail CPI has inched lower to 4.2% in Oct 2016. The CPI has been inching downwards for the last four months post the good monsoon and price corrections in food articles, especially pulses and vegetables.

• 10yr G-Sec Yield is trading at 6.44%, lowest in the last several years. With the demonetization move, the banks have seen a flush of deposit increase and we expect some of these deposits to be sticky in nature. With the credit off take still remaining slow, we expect the banks to drop the deposit rates further resulting in lower cost of funds for the banks as well as the corporates.

• With the IIP and credit growth remaining subdued and the demonetisation impact being felt through in a bigger manner, the probability of GDP growth falling below 7% for FY17 is more.

Source: Bloomberg, PL Research


CPI Inflation

GDP Growth YoY (Quarterly)


10yr. G-Sec Yield & Liquidity

11/22/2016 8

-

2.0

4.0

6.0

8.0

10.0 (2,500)

(2,000)

(1,500)

(1,000)

(500)

-

500

1,000

1,500

Mar

-11

Jul-

11

No

v-1

1

Mar

-12

Jul-

12

Nov

-12

Mar

-13

Jul-

13

Nov

-13

Ma

r-1

4

Jul-

14

Nov

-14

Mar

-15

Jul-

15

Nov

-15

Mar

-16

Jul-

16

Nov

-16

Liquidity (Rs bn) 10yr. G-Sec Yied (%) (RHS)

2

4

6

8

10

12

Ma

r-0

6Ju

n-0

6O

ct-0

6Fe

b-0

7Ju

n-0

7O

ct-0

7Fe

b-0

8Ju

n-0

8O

ct-0

8Fe

b-0

9Ju

n-0

9O

ct-0

9Fe

b-1

0Ju

n-1

0O

ct-1

0F

eb

-11

Jun

-11

Oct

-11

Jan

-12

Ma

y-1

2Se

p-1

2Ja

n-1

3M

ay-1

3Se

p-1

3Ja

n-1

4M

ay-1

4Se

p-1

4Ja

n-1

5M

ay-1

5Se

p-1

5Ja

n-1

6M

ay-1

6Se

p-1

6

(%)

8.5

6.8

3.3

5.4

3.7

5.0 5.76.1

4.2

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Jan

-14

Feb

-14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-

14

Aug

-14

Sep

-14

Oct

-14

Nov

-14

De

c-1

4Ja

n-1

5Fe

b-1

5M

ar-1

5A

pr-1

5M

ay-1

5Ju

n-1

5Ju

l-1

5A

ug-1

5Se

p-1

5O

ct-1

5N

ov-1

5D

ec-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-1

6M

ay-1

6Ju

n-1

6Ju

l-1

6A

ug

-16

Sep

-16

Oct

-16

Combined


Not a good month for equity markets

• MoM: Post Donald Trump’s election as the US President, the equity markets around the globe has seen a melt down. Though the US markets recovered fast, other emerging markets have been seeing a outflow of money. Japan was the best performer during the last one month.

• YoY and YTD: Over a 12 month period, Brazil, Indonesia and Russia have led with robust gains of 40.1%, 12.9% and 15.2% respectively. On a YTD basis, Brazil has seen the biggest gain of 28.6%.



Month-on-Month

Year-on-Year


Calendar Year-to-date

11/22/2016 9

5.6 5.0 4.3

3.7 2.4

1.5

(0.9)

(2.4) (2.8) (3.1) (3.4)(4.2) (4.4)(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

Jap

an

Chin

a

USA

Rus

sia

S&P

Ge

rma

ny

Aus

tral

ia

S.Ko

rea

FTSE

Bra

zil

Ho

ng

Ko

ng

Indo

nesi

a

Indi

a

(%)

(6.3)(9.8)

8.3 15.2

6.5

(0.7)

0.8 0.9

8.1

40.2

1.5

12.9

0.8

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

Jap

an

Chin

a

USA

Rus

sia

S&P

Ge

rma

ny

Aus

tral

ia

S.Ko

rea

FTSE

Bra

zil

Hon

g Ko

ng

Indo

nesi

a

Indi

a

(%)

(9.1)(11.4)

7.9

13.5

6.2

(2.8)

4.3 0.8

7.7

28.6

(0.1)

15.2

1.8

(15.0)(10.0)

(5.0)-

5.0 10.0 15.0 20.0 25.0 30.0 35.0

Japa

n

Chin

a

USA

Rus

sia

S&P

Ger

man

y

Aus

tral

ia

S.Ko

rea

FTSE

Bra

zil

Ho

ng

Ko

ng

Indo

nesi

a

Indi

a

(%)


Metals lead the way

• MoM: With an all-round loss in the last one month, all sectors had a poor month. Metals and Bankex were relatively better.

• YoY: On a YoY basis, Metals after being on the receiving end for the last few years have been the star performer followed by Oil & Gas.



Month-on-Month

Year-on-Year



11/22/2016 10

1.4 0.7

(1.8)(4.1) (5.6) (6.3) (6.6) (6.6)

(10.7)

(15.9)

(20.0)(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

(%)

42.3

12.1 4.5

31.4

(3.4) (0.8)

(12.5) (9.5)

6.8

(10.3)(6.1)

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

(%)

37.6

13.7

(0.6)

21.5

(2.0)

0.6

(14.7) (11.4)

6.4

(10.4) (9.9)(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

(%)


Midcap indices take the brunt of the fall

• MoM: The mid caps and small caps after out performing the large caps for better part of the year have fallen flat in the last one month, taking the brunt of fall.

• YoY: From YTD as well as CYTD, the mid caps have out performed the large caps by a huge margin on a relative basis. We believe that the increased out performance had made the valuations stretch and with the market tending to have a negative bias, the mid and smaller caps have suffered.



Month-on-Month

Year-on-Year



11/22/2016 11

(4.4)(4.8)

(5.2)

(6.3)

(9.4) (9.4)(10.0)

(9.0)

(8.0)

(7.0)

(6.0)

(5.0)

(4.0)

(3.0)

(2.0)

(1.0)

-

Sensex Nifty BSE-100 BSE-500 BSE Mid-Cap BSE Small-Cap

(%)

1.8

3.5 4.6

5.2

12.5

5.7

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Sensex Nifty BSE-100 BSE-500 BSE Mid-CapBSE Small-Cap

(%)

0.8

2.1

2.9 3.0

8.1

0.3

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Sensex Nifty BSE-100 BSE-500 BSE Mid-CapBSE Small-Cap

(%)


EM currencies remain weak

• MoM: With the US Presidential election results out, most EM currencies had seen a correction, with most of them losing against the US Dollar.

• CYTD and YoY: On a twelve month basis, Brazilian Real and Japanese Yen have been the strongest currencies.



Month-on-Month

Year-on-Year



11/22/2016 12

2.0

(0.4)(0.7)(1.0)(1.3)(1.6)(1.9)(2.0)(2.1)(2.2)(2.3)(2.6)(2.7)(3.4)(3.8)

(4.7)

(6.8)(7.2)(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

(%)

(15.6)

2.9 1.6

8.3

0.1

(2.5)(5.5)

2.6

(5.2)

3.0

12.9

3.4

(1.5)(0.1)(1.9)

10.3

(12.1)

14.8

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

(%)

(18.3)

2.8 1.5

(0.1)

1.3

(2.8)

(7.1)

5.2

(4.4)

(0.8)

0.8 2.7

0.5

(0.7)

0.2

13.2

(13.6)

10.4

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

(%)


FII turns negative in Oct and Nov 2016

• CY2016 have seen an inflow of US$6.6bn from FIIs, Oct 2016 has not been a good month with the FIIs ending up seeing a net sales in excess of Rs50bn. The selling pressure has continued in Nov 16 too with nest sales in excess of Rs110bn so far. The undertone remains negative, though the DIIs have been net buyers.

11/22/2016 13

(200.00)

(100.00)

-

100.00

200.00

300.00

Jan

-14

Feb

-14

Ma

r-1

4A

pr-1

4M

ay-1

4Ju

n-1

4Ju

l-1

4A

ug

-14

Se

p-1

4O

ct-1

4N

ov-1

4D

ec-1

4Ja

n-1

5F

eb

-15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-

15

Aug

-15

Sep

-15

Oct

-15

Nov

-15

De

c-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-1

6M

ay-

16

Jun-

16

Jul-

16

Aug

-16

Sep

-16

No

v-1

6

DII Net Cash Market FII Net Cash Market

CY14FII Rs973.5bn(US$ 14.52bn)DII Rs303.2bn(US$ 4.52bn)

CY15FII Rs183.5bn (US$ 2.74bn) DII Rs675.5bn (US$ 10.08bn)

CY16FII Rs450.14bn(US$ 6.6bn) DII Rs96.99bn(US$ 1.4bn)


Global Agri commodities - Palm oil gains

• Palm Oil prices to remain firm through 2016 as global output is expected to shrink due to prolong El-Nino leading to fall in production.

• Rice corrected due to subdued demand coupled with higher expected production and depreciating currencies in the importing countries to keeping the prices down.

• Wheat also came under pressure due bumper crops in Russia, Australia and Ukraine expected to keep the supply glut resulting on keeping prices under pressure.

• Sugar prices fall 12.1% MoM as Brazilian harvest is progressing as per expectation and falling value of Brazilian Real provides more incentives to farmers to export.


Source: Bloomberg, PL Research *Price in US$

Performance of Global Agricultural Commodities

Year-on-Year Performance


Month-on-Month Performance

11/22/2016 14

50

70

90

110

130

150

170

Nov

-15

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Apr

-16

Ma

y-1

6

Jun-

16

Jul-

16

Aug

-16

Sep

-16

Oct

-16

Nov

-16

Rice Wheat Corn Soya Plam Oil Sugar

4.3

0.1

(4.7)(6.1)

(9.7)

(12.1)(14.0)

(12.0)

(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

Palm Oil Soya Corn Wheat Rice Sugar

(%)

38.3

11.8

(13.0)

(20.9) (22.2)

41.0

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

Palm Oil Soya Corn Wheat Rice Sugar

(%)


Shut downs boost prices of Industrial commodities

• Copper was up by 16.5%, Zinc up 14.5% and Lead up 8.2% during the month.

• Brent crude was the only commodity which saw a decline during the month.

• Buoyed by shutdowns, the commodities saw a sharp spike. Coking coal saw the sharpest gains in the last one month.



Month-on-Month

Year-on-Year



11/22/2016 15

16.5 14.5

8.2 8.0

2.2

(0.6)

(8.2)(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

Copper Zinc Lead Nickel Aluminium Thermal Coal

Brent crude

(%)

15.6

62.0

35.2

21.7 17.7

(25.4)

9.9

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Copper Zinc Lead Nickel Aluminium Thermal

Coal

Brent

crude

(%)

15.3

59.8

19.5

28.5

13.9

(2.0)

28.2

(10.0)

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Copper Zinc Lead Nickel Aluminium Thermal

CoalBrent

crude

(%)


Global growth still an issue

Sources : Bloomberg

• The real GDP growth in USA is expected to be at 1.6% in CY2016, The growth is to be led by strong private consumption, steady job addition, higher real wages and higher disposable income resulting in increased consumption. The job additions in October16 were 161,000 up from 156,000 in September 2016.

• The oil prices have moved in a range of US$44-53 in the last one month. There has been a sharp correction in crude prices from the highs. The increased efforts of Saudi Arabia and Russia to come to a freeze on oil production is yet to see the results in curbing production.

• The Chinese growth is estimated to be lower in CY17 at 6.2% from the estimated growth of 6.7% in CY2016. Trump’s victory in the US Presidential elections have brought some tension in the trade side.

• The industrial commodity markets have seen some upward momentum due to shut down in some of the capacities. The metals sector has seen sharp increase in prices, but more than the increase in demand it has been the shut down in some of the capacities which has resulted in sharp increase in prices.

• The easy monetary policies bring used by the central banks across the world including developed world boost demand through cheaper credit is holding the global growth. The bond yields are at near zero or at record lows across markets, though the US bond yields have seen a sharp rise in the last ten days on expectation of a quicker Fed rate hike.

• It is expected that the protectionist rhetoric that Trump has been advocating is a risk, but at what pace it will happen is something the market has to watch out for. The market has already priced in stronger economic growth and a higher inflation the way the bond yields have performed touching 2.33%

World Equity Indices:


Index CountryClosing Value

(Local Currency)YTD (%) 1 Week (%) 1 Mth (%) 3 Mth (%)

Dow Jones USA 18,957 8.79 0.47 4.47 2.31

S&P 500 USA 2,198 7.55 1.57 2.66 0.71

Nasdaq USA 5,369 7.22 2.88 2.12 2.37

FTSE 100 LONDON 6,778 8.58 0.37 (3.45) (0.74)

DAX GERMANY 10,685 (0.54) (0.08) (0.24) 1.82

CAC 40 FRANCE 4,530 (2.32) 0.47 (0.14) 3.18

Nikkei JAPAN 18,140 (4.70) 2.67 5.56 9.29

TSX CANADA 15,040 15.60 3.02 0.67 1.98

MICEX RUSSIA 2,059 16.89 1.82 5.16 4.03

JSE SA 44,170 (3.55) 1.62 (2.00) (3.97)

SGX SA 7,957 0.14 (1.86) (8.46) (7.78)

TING TURKEY 92,320 5.59 1.66 (4.21) (3.61)

IBOV BRAZIL 61,070 40.88 3.19 (4.74) 5.69

Jakarta Comp INDONESIA 5,158 12.30 1.56 (4.65) (4.96)

PSEI Phill ipine PHILIPPINES 6,879 (1.05) 0.32 (10.08) (13.81)

SE THAI 50 THAILAND 926 13.81 0.62 (2.23) (5.76)

Euro Stoxx EUROZONE 3,033 (7.18) (0.22) (1.45) 2.45

IBEX 35 SPAIN 8,615 (9.74) (0.50) (5.34) 1.73

Hang Seng HONG KONG 22,646 3.34 1.44 (3.11) (1.53)

AS30 AUSTRALIA 5,489 2.69 1.64 (0.46) (2.21)

Shanghai CHINA 3,242 (8.41) 1.08 4.87 5.08

Taiwan TAIWAN 9,159 9.85 2.56 (1.58) 1.98

Kospi KOREA 1,983 1.12 0.80 (2.45) (2.89)

CNX Nifty INDIA 7,957 0.14 (1.86) (8.46) (7.78)

BSE Sensex INDIA 25,848 (1.03) (1.74) (7.94) (7.64)

KLCI MALAYSIA 1,631 (3.64) 0.02 (2.34) (3.56)

NZX 50 NEWZEALAND 6,816 7.78 0.68 (2.04) (8.65)

MEXBOL MEXICO 44,364 3.23 (1.37) (8.37) (8.14)

Indian Market – Downward revision in earnings on the cards

• NIFTY earnings for FY17 revised downwards to Rs436.7 : With all but three of the Nifty companies results for 2QFY17 published, an analysis of the

results point out to a mixed bag so far. While the IT sector was muted in terms of performance more on expected lines, the FMCG sector

disappointed with all hopes pinned now in 2HFY17. The new generation private sector banks continued to show strong performance with the

exception of Axis and ICICI bank, while the PSU banks have all been going through a phase of consolidation where they continue to grapple with

running down of low yielding assets and reducing the RWAs. SBI continues to report reasonably good set of numbers, though the worse in terms of

slippages seems to be behind the banks for the time being. After the severe loss in FY16, we were expecting the PSU banking space to report better

performance in FY17 with a 35% growth in earnings. However, with the demonetisation impact, it is anticipated that there could be an increased

stress levels in the financial services system including the NBFC as the strain on short term cash flows could lead to an increased slippage scenario

across. While we think that this could be temporary, this may lead to an earnings revision downwards for the overall market and the BFSI in

particular. This could result in the market PER trending downwards from the 12 month rolling PER of 18.3x downwards to 16x forward earnings, at a

discount to the market earnings.

• 3QFY17 earnings looks bleak: For 3QFY17, we expect to see poor performance from the corporate owing to the disruptions due to the

demonetisation impact. Though we are yet to have the revised 3QFY17 earnings estimates, we expect the earnings estimates to get revised by

anything from 5-8% for FY17 given that we are going to see a poor 3QFTY17. The worst hit are going to be financials, consumer discretionary and

autos. This also is likely to result in the GDP growth also to be downgraded to less than 7% in FY17. We expect the agriculture sector to have a good

harvest resulting in increased disposable income in the rural areas. However, this may be more back ended as in our channel checks in the rural

areas we find that they are feeling the brunt of demonetisation efforts and hence seeing a increased contraction in demand. Because of a bumper

agricultural production, we also believe that the rural areas could be the first one to see the recovery when the availability of cash is normalised.

• Indian valuations will contract: While the intent of demonetisation is not questioned, the impact that it is going to have in the short term is going to

be more painful. We expect a downward earnings revision followed by a contraction in the market PERs. The new trading range for the Nifty could

be in the range of 16X one year forward earnings till clarity sets in and we expect that to happen only by around 4QFY17. The Indian stocks are

trading at 16% discount to the MSCI Asia ex Japan valuations, a larger discount to the 10 year average of 32%. With the expected outflow from EMs,

we have been seeing increased selling by FIIs in the domestic market. This is expected to keep the pressure on the valuations as we expect the

market to trade lower. Though we expect to see relative overweight positions maintained, we are revising the market trading range to 7600-8300

levels for the near term.

• Nifty trading range at 7600-8300 levels: With the continued outflow of from emerging markets, the Indian equity markets have been seeing

increased pressure. We do not expect this to change in a hurry and we expect to see an increased pressure on the midcaps and small caps. We also

expect the market to trade at a discount to the 10 year average PER given the negatives that is built in. We are revising our trading range for the

Nifty to 7600-8300 levels for the near term reflecting the fall in earnings and growth.


Nifty Valuations: Historic Trends


Nifty 1-year forward P/E


MSCI India Premium to MSCI Asia (Ex‐Japan)

11/22/2016 18

16%

-40%

-20%

0%

20%

40%

60%

80%

No

v-0

6

Feb

-07

Ma

y-0

7

Aug

-07

No

v-0

7

Feb

-08

Ma

y-0

8

Aug

-08

No

v-0

8

Feb

-09

Ma

y-0

9

Au

g-0

9

No

v-0

9

Feb

-10

Ma

y-1

0

Au

g-1

0

Nov

-10

Feb

-11

May

-11

Au

g-1

1

Nov

-11

Feb

-12

May

-12

Au

g-1

2

Nov

-12

Feb

-13

May

-13

Au

g-1

3

No

v-1

3

Feb

-14

Ma

y-1

4

Au

g-1

4

No

v-1

4

Feb

-15

Ma

y-1

5

Aug

-15

No

v-1

5

Feb

-16

Ma

y-1

6

Aug

-16

No

v-1

6

10 year Avg.

32%

16.8

-

5.0

10.0

15.0

20.0

25.0

30.0

Nov

-06

Feb-

07

Ma

y-0

7

Au

g-0

7

Nov

-07

Fe

b-0

8

Ma

y-0

8

Au

g-0

8

Nov

-08

Fe

b-0

9

May

-09

Aug

-09

Nov

-09

Feb-

10

Ma

y-1

0

Au

g-1

0

Nov

-10

Fe

b-1

1

Ma

y-1

1

Au

g-1

1

Nov

-11

Fe

b-1

2

Ma

y-1

2

Aug

-12

Nov

-12

Feb-

13

May

-13

Aug

-13

Nov

-13

Fe

b-1

4

Ma

y-1

4

Au

g-1

4

Nov

-14

Fe

b-1

5

Ma

y-1

5

Au

g-1

5

Nov

-15

Feb-

16

May

-16

Aug

-16

Nov

-16

10 year Avg.18.3x


Nifty Valuation

11/22/2016 19

Note: Telecom, Media, Ports & Logistics Nos. are Bloomberg Consensus / Sector Weightages are updated as on November 22, 2016 3QFY17 downgrades not yet reflected in the earnings estimates


Weight-

age (%)FY15 FY16 FY17E FY18E

Weight-

age (%)FY15 FY16 FY17E FY18E

Banking & Fin. 32.4% Metals 2.9%

PER (x) 22.5 26.1 20.8 15.6 PER (x) 17.7 NA 12.6 (38.2)

PAT Growth (%) 14.2 (13.8) 25.5 33.4 PAT Growth (%) (29.1) NA NA (132.9)

Technology 13.6% Telecom 2.3%

PER (x) 18.2 15.8 15.1 14.0 PER (x) 20.8 19.7 24.3 23.9

PAT Growth (%) 11.3 15.2 5.0 8.0 PAT Growth (%) 65.7 5.6 (18.9) 1.7

Auto 11.1% Media 0.9%

PER (x) 21.2 21.0 17.0 13.6 PER (x) 46.6 44.4 36.1 27.0

PAT Growth (%) 7.4 1.1 23.3 25.5 PAT Growth (%) 9.6 5.0 22.7 33.8

FMCG 9.9% Ports & Logistics 0.8%

PER (x) 36.6 35.7 32.2 28.1 PER (x) 19.7 15.9 13.5 13.3

PAT Growth (%) 10.4 2.4 11.1 14.4 PAT Growth (%) 33.0 23.9 17.3 2.0

Nifty as on Nov 22 7,957

Oil & Gas 8.9% EPS (Rs) - Free Float 371.6 370.6 436.7 508.5

PER (x) 14.3 13.0 11.0 10.2 Growth (%) 4.7 (0.3) 17.8 16.4

PAT Growth (%) (14.3) 10.1 18.6 7.9 PER (x) 21.4 21.5 18.2 15.6

Eng. & Power 7.2% EPS (Rs) - Free Float

PER (x) 19.0 19.8 15.9 13.5 Nifty Cons. 371.6 370.6 432.7 521.7

PAT Growth (%) (12.7) (3.9) 24.1 18.3 Var. (PLe v/s Cons.) (%) - - 0.9 (2.5)

Pharma 6.5% Sensex as on Nov 22 25,848

PER (x) 29.4 28.1 25.7 21.9 EPS (Rs) - Free Float 1,230.6 1,264.3 1,417.2 1,639.8

PAT Growth (%) (0.2) 4.8 9.4 17.1 Growth (%) 3.9 2.7 12.1 15.7

PER (x) 21.0 20.4 18.2 15.8

Cement 3.0%

PER (x) 32.4 31.8 23.5 18.8 Sensex Cons. 1,230.6 1,264.3 1,412.3 1,700.6

PAT Growth (%) (1.5) 1.9 35.5 24.6 Var. (PLe v/s Cons.) (%) - - 0.3 (3.6)

Top Pick Summary


2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E

Large Cap

HDFCB IN HDFC Bank 1,199 1,555 29.7% 3,030.0 44,513.5 21.9 20.9 21.5 24.2 19.1 20.3 1.9 2.0 20.2 16.3 3.8 3.2

INFO IN Infosys 911 1,300 42.7% 2,084.7 30,626.0 11.0 10.1 6.3 10.0 22.2 22.2 22.2 22.2 14.5 13.2 3.1 2.8

SBIN IN State Bank of India 258 315 22.2% 2,000.9 29,394.1 4.6 15.6 7.3 54.7 6.6 8.9 0.4 0.6 18.4 11.9 2.0 1.7

HUVR IN Hindustan Unilever 800 1,200 50.1% 1,730.4 25,420.8 7.5 11.8 10.8 15.4 121.1 131.3 91.0 98.4 38.3 33.2 45.9 41.5

MSIL IN Maruti Suzuki 4,788 6,356 32.7% 1,446.5 21,249.7 19.0 18.3 56.3 19.0 24.0 23.5 24.1 23.6 20.2 17.0 4.4 3.6

IOCL IN Indian Oil Corporation 292 385 31.9% 1,417.2 20,819.7 3.5 3.4 69.0 (8.8) 21.9 17.4 13.6 11.8 7.9 8.6 1.6 1.4

KMB IN Kotak Mahindra Bank 763 860 12.8% 1,398.7 20,548.2 27.8 23.4 40.6 24.0 12.7 13.7 1.8 2.0 31.5 25.4 4.0 3.4

LT IN Larsen & Toubro 1,348 1,850 37.2% 1,255.9 18,450.0 15.0 18.0 22.8 31.6 10.4 12.5 4.8 5.6 25.6 19.5 2.7 2.4

ARBP IN Aurobindo Pharma 712 943 32.5% 416.5 6,119.4 14.4 11.0 22.5 19.1 31.5 29.4 20.5 21.7 16.6 13.9 4.7 3.6

TECHM IN Tech Mahindra 447 525 17.6% 390.6 5,737.6 8.2 7.1 (9.5) 4.3 19.0 17.2 17.3 15.7 12.7 12.2 2.2 2.0

BRIT IN Britannia Industries 2,895 3,850 33.0% 347.4 5,103.0 13.4 16.5 10.4 24.6 43.7 42.4 43.5 42.2 40.8 32.7 15.9 12.3

GNP IN Glenmark Pharmaceuticals 883 1,186 34.3% 249.3 3,661.9 28.5 18.3 97.0 31.8 26.4 25.8 16.0 18.4 18.0 13.7 4.0 3.1

BHFC IN Bharat Forge 858 957 11.6% 199.8 2,934.9 (1.2) 13.8 (1.9) 36.8 17.0 20.4 11.9 15.4 31.0 22.7 5.0 4.3

Mid Caps

IGL IN Indraprastha Gas 818 1,080 32.0% 114.5 1,682.8 12.5 11.0 46.2 15.8 23.0 22.4 23.0 22.4 18.8 16.3 4.0 3.3

JUBILANT IN Jubilant Life Sciences 607 740 21.9% 96.7 1,421.2 6.3 7.2 21.2 15.4 15.7 15.7 9.7 10.3 19.3 16.7 2.8 2.5

HEXW IN Hexaware Technologies 188 260 38.3% 56.7 833.1 12.6 12.3 5.5 8.0 27.8 27.9 27.2 27.3 13.7 12.7 3.7 3.4

SADE IN Sadbhav Engineering 273 351 28.4% 46.9 688.7 14.5 21.6 23.5 30.6 10.6 12.4 9.0 10.5 28.4 21.7 2.9 2.5

RALI IN Rallis India 183 236 29.2% 35.5 521.7 8.1 12.7 21.4 20.1 17.2 17.6 22.1 22.4 20.4 17.0 3.2 2.8

SJET IN SpiceJet 59 115 95.2% 35.4 520.0 20.3 22.6 27.2 39.2 NM 242.8 94.4 65.4 6.3 4.5 (51.2) 5.0

THYROCAR INThyrocare Technologies 616 1,067 73.2% 33.1 486.1 33.0 32.6 46.4 35.0 20.4 25.9 19.7 25.0 43.6 32.3 8.8 8.0

NELI IN Navneet Education 105 132 26.0% 24.9 366.0 17.5 19.2 24.1 17.5 24.9 26.3 20.0 21.2 16.2 13.8 3.9 3.4

NITEC IN NIIT Technologies 397 590 48.4% 24.3 356.4 3.8 7.1 (7.9) 10.9 15.7 15.7 16.3 16.2 9.4 8.4 1.4 1.3

VRLL IN VRL Logistics 263 338 28.4% 24.0 353.0 7.8 13.5 (12.6) 56.8 16.6 23.3 13.6 18.8 26.9 17.1 4.3 3.8

* For Banks P/ABV

Hindustan Unilever: Our TP is based on a 18-24 months view.

PER (x) P/BV (x)*RoE (%)Upside

Mcap

(Rs bn)

RoCE (%)CMP

(Rs.)TP (Rs)

Revenue Gr. (%) Earnings Gr. (%)Mcap

(US$ m)

Larsen & Toubro: We continue to believe L&T as a strong long term play in the infrastructure space. Our TP is for 18 months.

Birtannia Industries: Our TP is based on a 18 month price roll over.

Bloomberg

Code

LARGE CAP

11/22/2016 21

HDFC Bank (HDFCB IN) Rating: BUY | CMP: Rs1,199 | TP: Rs1,555 | Mcap: Rs3,030.0bn / US$45,513.5m

Operating profit trajectory remains robust: Operating performance remained robust as in Q2FY17, HDFCB continued to deliver strong NII of ~20% YoY, while better treasury (+70% YoY increase) and lower opex led to 19.5% YoY growth in PPOP. Despite lowering interest rates, margins remains best in class at 4.2% with guidance range of 4.1-4.4% in FY17. Bank is likely to benefit from this de-monetisation move and further improve cost of funds and able extrapolate to margins.

Continues to gain market share in many segments: Retail loans continued to be robust from all segments especially in the unsecured. Auto loans continued to grow strong, while business banking loan book continues to see some weakness. Loan growth stood at 18% YoY (5.1% QoQ) comparatively slower as wholesale piece saw some slowdown as some short term loans from Q4FY16 moved out, while we will likely not see major loan growth slowdown in FY17 and continues to gain market share from increased presence.

Asset quality better off despite tough environment: Asset quality remained stable with some stress still existing in the SME/Business banking. Overall GNPL/NNPL remained pristine at 1.02%/0.30% with PCR of 70%, while restructured portfolio remained at 0.1%. Stable asset quality and better quality of earnings makes HDFCB our preferred pick. We maintain “BUY” with PT of Rs1,350 based on 3.6x Mar-2018E ABV.

11/22/2016 22

Key Financials (Rs m)

Y/e March FY14 FY15 FY16 FY17E FY18E

Net interest income 184,826 223,957 275,915 336,271 406,518

Growth (%) 16.9 21.2 23.2 21.9 20.9

Operating profit 143,601 174,045 213,635 265,653 327,528

PAT 84,784 102,159 122,962 150,084 186,356

EPS (Rs) 35.5 41.7 48.8 59.4 73.7

Growth (%) 24.7 17.4 17.3 21.5 24.2

Net DPS (Rs) 6.8 8.0 9.5 10.5 12.0

Source: Company Data, PL Research

Profitability & valuation


NIM (%) 4.4 4.3 4.5 4.6 4.7

RoAE (%) 21.3 19.4 18.3 19.1 20.3

RoAA (%) 1.9 1.9 1.9 1.9 2.0

P / BV (x) 6.6 4.8 4.2 3.6 3.0

P / ABV (x) 7.0 5.1 4.4 3.8 3.2

PE (x) 33.8 28.8 24.5 20.2 16.3

Net dividend yield (%) 0.6 0.7 0.8 0.9 1.0


Stock Performance

(%) 1M 6M 12M

Absolute (5.7) 5.1 12.1

Relative to Sensex 2.6 3.3 12.5

RSreesankar – [email protected]; +91-22-6632 2214 / Pritesh Bumb – [email protected]; +91-22-6632 2232

Financials HDFC Bank

11/22/2016 23

Income Statement (Rs m)


Int. Earned from Adv. 316,869 371,808 448,279 555,875 680,517

Int. Earned from Invt. 90,368 98,585 141,200 134,625 135,545

Others - - - - -

Total Interest Income 411,355 484,699 602,214 707,178 836,043

Interest expense 226,529 260,742 326,299 370,907 429,525

NII 184,826 223,957 275,915 336,271 406,518

Growth (%) 16.9 21.2 23.2 21.9 20.9

Treasury Income 65 5,260 7,317 - -

NTNII 79,131 84,704 100,200 127,946 152,895

Non Interest Income 79,196 89,964 107,517 127,946 152,895

Total Income 490,552 574,663 709,732 835,123 988,938

Growth (%) 17.0 17.1 23.5 17.7 18.4

Operating Expense 120,422 139,875 169,797 198,563 231,885

Operating Profit 143,601 174,045 213,635 265,653 327,528

Growth (%) 25.7 21.2 22.7 24.3 23.3

NPA Provisions 16,326 17,236 21,336 32,060 38,089

Investment Provisions (41) (38) 152 137 123

Total Provisions 15,873 20,758 27,256 38,253 45,169

PBT 127,728 153,287 186,379 227,400 282,359

Tax Provisions 42,944 51,128 63,417 77,316 96,003

Effective Tax Rate (%) 33.6 33.4 34.0 34.0 34.0

PAT 84,784 102,159 122,962 150,084 186,356

Growth (%) 26.0 20.5 20.4 22.1 24.2


Balance Sheet (Rs m)


Par Value 2 2 2 2 2

No. of equity shares 2,399 2,506 2,528 2,528 2,528

Equity 4,798 5,013 5,056 5,056 5,056

Networth 434,786 620,094 726,778 844,885 994,697

Adj. Networth 426,586 611,131 713,574 827,431 976,156

Deposits 3,673,375 4,507,956 5,464,242 6,557,090 7,966,865

Growth (%) 24.0 22.7 21.2 20.0 21.5

Low Cost deposits 1,646,214 1,984,921 2,363,108 2,885,120 3,537,288

% of total deposits 44.8 44.0 43.2 44.0 44.4

Total Liabilities 4,915,995 5,905,031 7,088,456 8,421,578 10,138,128

Net Advances 3,030,003 3,654,950 4,645,940 5,695,922 7,000,288

Growth (%) 26.4 20.6 27.1 22.6 22.9

Investments 1,209,511 1,664,599 1,638,858 1,547,563 1,698,363

Total Assets 4,915,995 5,905,031 7,088,456 8,421,578 10,138,128


Infosys (INFO IN) Rating: BUY | CMP: Rs911 | TP: Rs1,300 | Mcap: Rs2,084.7bn / US$30,626.0m

Infosys’ Q2FY17 revenues grew 3.5%/3.9% QoQ in USD/CC against expectations of 2.3%/2.9%. Revenues grew 8.2%/8.9% YoY in USD/CC terms. Q2FY17 revenue growth marks recovery in revenue growth after a muted Q1. Company has, however, lowered FY17 revenue guidance and at mid‐point guidance implies flat revenues over the next two quarters. Weak outlook is attributed to a) furloughs in Q3, b) impact of RBS ramp‐down and client specific headwinds, c) muted outlook for consulting and d) revenue uncertainty in India business. We believe that FY17 is a cyclical low year for the industry and Infosys is navigating the challenges quite well. Company is on track to report sector leading revenue growth for second consecutive year. Infosys has opportunity to exceed the lowered expectations post the guidance reset.

Automation and Innovation are key areas of focus: Infosys is driving innovation and automation across entire delivery organization. Zero distance that brings innovation to every project now covers more than 95% of all the projects. Automation efforts resulted in saving of 2387 FTE equivalents in Q2FY17. Infosys Edge verve platform has been gaining traction and has won eight new deals with 43 go lives. Infosys AI platform MANA is bringing automation and innovation across all the aspects of service offering. Company outlined applying the knowledge‐based AI capabilities of Mana to complex scenarios that are more focused on increasing productivity.

We continue to like Infosys, which has demonstrated higher YoY USD revenue and EBIT growth, within the peer‐group. Infosys is likely to bridge the ~10% P/E discount against TCS as it continues to outperform on YoY USD revenue and EBIT growth. We have a BUY rating with a TP of Rs1,300 based on 18x Sep‐18 EPS.

11/22/2016 24



Revenue (Rs m) 501,330 533,190 624,410 693,048 762,976

Growth (%) 24.2 6.4 17.1 11.0 10.1

EBITDA (Rs m) 134,150 149,010 170,780 188,100 205,774

PAT (Rs m) 106,480 123,290 134,900 143,425 157,796

EPS (Rs) 46.5 53.9 59.0 62.7 69.0

Growth (%) 13.0 15.8 9.4 6.3 10.0

Net DPS (Rs) 15.7 22.2 30.0 35.0 40.0




EBITDA margin (%) 26.8 27.9 27.4 27.1 27.0

RoE (%) 24.4 24.1 23.2 22.2 22.2

RoCE (%) 24.3 24.0 23.2 22.2 22.2

EV / sales (x) 3.6 3.3 2.8 2.5 2.2

EV / EBITDA (x) 13.6 12.0 10.2 9.1 8.1

PER (x) 19.6 16.9 15.5 14.5 13.2

P / BV (x) 4.4 3.8 3.4 3.1 2.8



Stock Performance

(%) 1M 6M 12M

Absolute (12.2) (24.2) (13.5)

Relative to Sensex (4.0) (26.0) (13.1)

Financials Infosys

11/22/2016 25



Net Revenue 501,330 533,190 624,410 693,048 762,976

Direct Expenses 307,670 318,140 377,060 420,141 464,393

% of Net Sales 61.4 59.7 60.4 60.6 60.9

Employee Cost - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 59,510 66,040 76,570 84,807 92,810

% of Net Sales 11.9 12.4 12.3 12.2 12.2

Other Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 134,150 149,010 170,780 188,100 205,774

Margin (%) 26.8 27.9 27.4 27.1 27.0

Depreciation 13,740 10,690 14,590 16,340 18,058

PBIT 120,410 138,320 156,190 171,760 187,716

Interest Expenses - - - - -

PBT 144,910 172,590 187,440 202,007 222,248

Total tax 40,620 49,290 52,520 58,582 64,452

Effective Tax rate (%) 28.0 28.6 28.0 29.0 29.0

PAT 104,290 123,290 134,900 143,425 157,796

Extraordinary Gain/(Loss) (2,190) - - - -

Adjusted PAT 106,480 123,290 134,900 143,425 157,796




Share Capital 11,440 11,440 11,440 11,440 11,440

Reserves & Surplus 432,960 508,130 574,461 637,806 704,082

Shareholder's Fund 475,300 547,630 613,961 677,306 743,582

Preference Share Capital - - - - -

Total Debt - - - - -

Other Liabilities(net) 3,230 460 460 460 460

Deferred Tax Liability 640 1,600 1,600 1,600 1,600

Total Liabilities 479,170 549,690 616,021 679,366 745,642

Gross Block 134,120 155,470 181,071 209,486 240,768

Less: Depreciation 55,250 64,220 78,810 95,150 113,207

Net Block 78,870 91,250 102,261 114,336 127,560

Capital Work in Progress - - - - -

Cash & Cash Equivalent 292,210 313,420 344,866 384,288 425,270

Total Current Assets 397,480 462,210 509,608 568,212 628,735

Total Current Liabilities 91,380 113,830 105,888 113,222 120,693

Net Current Assets 306,100 348,380 403,721 454,990 508,042

Other Assets 61,490 100,310 100,310 100,310 100,310

Total Assets 479,170 549,690 616,041 679,386 745,662


State Bank of India (SBIN IN) Rating: BUY | CMP: Rs258 | TP: Rs315 | Mcap: Rs2,000.9bn / US$29,349.1m

Operating performance on track: SBIN operating performance continued to be on track as bank adjust some of its loan growth to focus on profitable segments. Focus continues to be on highly rated corporate & towards refinancing of operational projects. PPOP has been led by strong other income on back of robust treasury gains and as control on opex growth remained good. Bank continued to guide 12-13% loan growth. SBI continues to be leading industry growth despite we continue to see muted growth or even contraction. We also expect SBIN to deliver avg. 11% NII growth over FY16-18E, while margins likely to remain at current levels.

Some asset quality issues in mid-corporate but to glide lower: Bank has undertaken most of its big stressed names in last few quarters which has trended down slippages rate. In Q2FY17, some mid-corporate slippages continued but we expect it to glide lower in next few quarters arresting asset quality deterioration. Overall GNPAs/NNPAs stood at 6.9%/4.1% respectively with majority slippages from watchlist & restructured book, but we note that the proportion of net stressed assets for SBIN is lowest amongst large PSU banks at ~3.3% of FY17E loans.

Associates asset quality clean-up more or less done: Bank expects to merge its banking subsidiaries by Q3FY17 or FY17 end, as bank more or less completed aligning asset quality with itself, while it does not expect to have integration and opex issues like pension cost. We expect subs will add value to overall bank reducing cost, improve capital efficiency and improve business. SBI remains as one of our Top Picks in the sector.

11/22/2016 26




Growth (%) 11.2 11.6 3.4 4.6 15.6


PAT 108,912 131,016 99,507 108,807 168,378

EPS (Rs) 15.2 17.5 13.1 14.0 21.7

Growth (%) -26.9 15.3 -25.5 7.3 54.7

Net DPS (Rs) 1.5 3.5 2.6 3.5 4.5




NIM (%) 3.0 3.0 2.8 2.6 2.7

RoAE (%) 10.0 10.6 7.3 6.6 8.9

RoAA (%) 0.6 0.7 0.5 0.4 0.6

P / BV (x) 1.6 1.5 1.4 1.3 1.2

P / ABV (x) 2.2 1.9 2.1 2.0 1.7

PE (x) 16.9 14.7 19.7 18.4 11.9



Stock Performance

(%) 1M 6M 12M

Absolute (0.3) 50.3 6.1



Financials State Bank of India

11/22/2016 27



Int. Earned from Adv. 1,024,841 1,123,439 1,156,660 1,258,526 1,387,671


Others - - - - -

Total Interest Income 1,363,508 1,523,971 1,636,853 1,758,677 1,966,798

Interest expense 870,686 973,818 1,068,035 1,163,868 1,279,049

NII 492,822 550,153 568,818 594,809 687,750

Growth (%) 11.2 11.6 3.4 4.6 15.6

Treasury Income 20,767 36,180 51,688 67,194 79,289

NTNII 164,762 189,578 229,896 259,443 299,610


Total Income 1,549,037 1,749,730 1,918,437 2,085,313 2,345,697

Growth (%) 14.2 13.0 9.6 8.7 12.5



Growth (%) 3.3 21.2 11.2 5.8 20.2

NPA Provisions 144,785 168,636 298,808 293,399 275,810

Investment Provisions 5,633 (5,901) 1,496 1,346 1,373


PBT 161,739 193,140 137,741 151,121 249,449

Tax Provisions 52,827 62,124 38,234 42,314 81,071


PAT 108,912 131,016 99,507 108,807 168,378

Growth (%) (22.8) 20.3 (24.0) 9.3 54.7




Par Value 1 1 1 1 1


Equity 7,466 7,466 7,763 7,763 7,763

Networth 1,182,822 1,284,382 1,442,744 1,838,182 1,965,838

Adj. Networth 871,862 1,008,476 884,674 1,249,278 1,498,930

Deposits 13,944,085 15,767,932 17,307,224 19,643,700 22,492,036

Growth (%) 15.9 13.1 9.8 13.5 14.5

Low Cost deposits 5,984,004 6,519,051 7,375,531 8,407,503 9,694,068



Net Advances 12,098,287 13,000,264 14,637,004 16,247,075 18,229,218

Growth (%) 15.7 7.5 12.6 11.0 12.2

Investments 3,983,082 4,817,587 4,770,973 5,493,540 6,487,845

Total Assets 17,922,346 20,480,798 22,590,630 25,804,235 29,351,193


Hindustan Unilever (HUVR IN) Rating: Acc| CMP: Rs800 | TP: Rs1,200 | Mcap: Rs1,730.4bn / US$25,420.8m

We remain positive on HUVR despite 1% volume decline in 2Q and expected impact of demonetization in 3Q. Although 3Q will show increased pressure in the high margin quarter, We believe that small ticket necessities will be the first ones to report a bounce back in demand. We believe that confluence of demonetization and GST will be positive for growth momentum, once the recovery starts. HUVR seems well‐placed to capitalise on demand recovery given refreshed portfolio, distribution expansion and market development in premium categories. We believe HUVR’s success in premiumisation in Detergents, Skin Creams and hair Care are a testimony of its long term strategy. HUVR is setting up Rs10bn facility in personal care in Assam; the benefits of which are not factored in our estimates. We estimate 14.5% PAT CAGR over FY16‐19. Retain “Accumulate”.

2QFY17 Concall Takeaways: 1) HUVR expects demand to recover in coming quarters led by monsoons and improved sentiments 2) price realisations likely to increase as HUL rebalances prices post increase in input costs 3) HUVR has reduced promotions in soaps by 3% due to sharp spike in PFAD which has impacted volumes and Personal care sales 4) laundry is witnessing premiumisation led by Rs10 pack of Surf excel easy wash 5) Indulekha has been extended to 4 more states 6) popular segments in foods have been impacted in Salt, atta etc 7) HUVR has entered the baby care segment under the brand Dove Baby 8) Soaps and Coffee have price deflation in Q1, promotions in Personal wash coming down 9) Home care portfolio has seen major gains from Premiumisation and gains are likely to be sustained in the future.

Our TP is based on a 18-24 months view.

11/22/2016 28 Amnish Aggarwal – [email protected]; +91-22-6632 2233 / Gaurav Jogani – [email protected]; +91-22-6632 2238



Revenue (Rs m) 280,191 308,056 319,872 343,716 384,242

Growth (%) 8.6 9.9 3.8 7.5 11.8

EBITDA (Rs m) 44,753 52,082 57,299 64,321 74,736

PAT (Rs m) 35,553 37,946 40,778 45,162 52,139

EPS (Rs) 16.4 17.5 18.8 20.9 24.1

Growth (%) 7.3 6.7 7.4 10.8 15.4

Net DPS (Rs) 13.0 15.0 16.0 17.0 18.5




EBITDA margin (%) 16.0 16.9 17.9 18.7 19.5

RoE (%) 119.5 108.4 110.0 121.1 131.3

RoCE (%) 87.1 83.3 84.5 91.0 98.4

EV / sales (x) 6.0 5.4 5.3 4.9 4.3

EV / EBITDA (x) 37.6 32.2 29.3 26.1 22.3

PER (x) 48.6 45.6 42.4 38.3 33.2

P / BV (x) 52.8 46.4 46.9 45.9 41.5



Stock Performance

(%) 1M 6M 12M

Absolute (5.6) (4.9) 4.4

Relative to Sensex (4.0) (11.9) 2.7

Financials Hindustan Unilever

11/22/2016 29



Net Revenue 280,191 308,056 319,872 343,716 384,242

Direct Expenses 154,215 167,358 163,278 176,611 198,391

% of Net Sales 55.0 54.3 51.0 51.4 51.6

Employee Cost 14,360 15,789 15,920 16,734 18,016

% of Net Sales 5.1 5.1 5.0 4.9 4.7

SG&A Expenses 65,512 71,494 82,003 84,678 91,691

% of Net Sales 23.4 23.2 25.6 24.6 23.9

Other Expenses 1,352 1,333 1,371 1,371 1,409

% of Net Sales 0.5 0.4 0.4 0.4 0.4

EBITDA 44,753 52,082 57,299 64,321 74,736

Margin (%) 16.0 16.9 17.9 18.7 19.5

Depreciation 2,606 2,867 3,208 3,542 3,804

PBIT 42,147 49,216 54,092 60,778 70,932

Interest Expenses 360 168 2 5 5

PBT 47,997 55,231 59,096 65,452 76,005

Total tax 12,444 17,285 18,318 20,290 23,865


PAT 38,675 43,153 40,824 45,162 52,139

Extraordinary Gain/(Loss) 3,122 5,207 46 - -

Adjusted PAT 35,553 37,946 40,778 45,162 52,139




Share Capital 2,163 2,164 2,164 2,164 2,164





Other Liabilities(net) 10,811 10,495 11,919 12,730 13,870

Deferred Tax Liability - - - - -


Gross Block 44,429 47,214 53,787 57,787 62,037


Net Block 24,221 24,575 29,147 29,605 30,050

Capital Work in Progress 3,198 4,790 3,860 4,000 4,000





Other Assets 1,617 1,960 2,309 2,368 2,431

Total Assets 43,581 47,743 48,792 50,469 55,548


Maruti Suzuki (MSIL IN) Rating: Acc| CMP: Rs4,788 | TP: Rs6,356 | Mcap: Rs1,446.5bn / US$21,249.7m

With sustained performance from existing models, good acceptance of new models driving market share gains MSIL’s performance would remain healthy. Even after being a market leader, Maruti Suzuki has been able to gain market share. Benefits of operating leverage and favourable currency movement are additional positives.

Market share gains driven by newer model: MSIL is launching five new vehicles over FY16-17, (1) the S-Cross, (2) a light commercial vehicle powered by 800cc diesel engine, (3) Ignis (to be launched in 2HFY17), (4) the premium hatchback Baleno (launched in Oct ’15) and (5) Vitara Brezza. The trend has been that the newer models have been able to garner a good response (eg Celerio, Ertiga, Amaze, EcoSport, Kwid etc). We expect these newer models to drive market share gain for MSIL over FY16-18E.

Exports to provide an additional edge: Even as global majors are committing resources to India to gain a share of the domestic market and have a low-cost export base, Maruti has already achieved the same, and would be in a position to service export requirements both under its own brand and that of Suzuki’s.

Operating leverage benefits: Although concerns have arisen over the exchange rate, better operating leverage, steps to control costs would help sustain margins over FY16-18E, controlled lowering of discounts, a better product mix and sales promotion expenses would also help.

Our TP is Rs6,356 We value MSIL at 22.5x FY18E EPS to arrive at a target price of Rs6356/share. We rate MSIL an Accumulate.

11/22/2016 30 Rohan Korde – [email protected]; +91-22-6632 2235



Revenue (Rs bn) 438 498 577 687 813

Growth (%) 0.6 13.6 15.9 19.0 18.3

EBITDA (Rs bn) 52 65 90 110 131

PAT (Rs m) 28,917 37,112 45,875 71,709 85,329

EPS (Rs) 95.7 122.9 151.9 237.4 282.5

Growth (%) 24.6 28.3 23.6 56.3 19.0

Net DPS (Rs) 12.0 25.0 35.0 45.0 50.0




EBITDA margin (%) 11.9 13.0 15.6 16.1 16.0

RoE (%) 14.6 16.6 18.1 24.0 23.5

RoCE (%) 14.0 16.3 18.2 24.1 23.6

EV / sales (x) 3.3 2.9 2.5 2.1 1.7

EV / EBITDA (x) 28.0 22.3 16.1 13.0 10.8

PER (x) 50.0 39.0 31.5 20.2 17.0

P / BV (x) 6.9 6.1 5.4 4.4 3.6



Stock Performance

(%) 1M 6M 12M

Absolute (15.2) 21.3 1.1

Relative to Sensex (7.0) 19.5 1.5

Financials Maruti Suzuki

11/22/2016 31



Net Revenue 438,437 498,254 577,463 687,404 813,461

Direct Expenses 313,488 350,771 387,800 466,747 553,967

% of Net Sales 71.5 70.4 67.2 67.9 68.1

Employee Cost 13,681 16,066 19,657 22,999 26,448

% of Net Sales 3.1 3.2 3.4 3.3 3.3

SG&A Expenses 34,360 39,857 48,231 49,493 57,756

% of Net Sales 7.8 8.0 8.4 7.2 7.1

Other Expenses 24,861 26,574 31,760 37,807 44,740

% of Net Sales 5.7 5.3 5.5 5.5 5.5

EBITDA 52,046 64,986 90,015 110,358 130,550

Margin (%) 11.9 13.0 15.6 16.1 16.0

Depreciation 20,844 24,703 28,239 26,293 29,653

PBIT 31,202 40,283 61,776 84,065 100,897

Interest Expenses 1,416 1,369 815 748 649

PBT 36,585 48,681 65,350 98,231 116,889

Total tax 8,755 11,570 19,636 26,522 31,560


PAT 27,830 37,112 45,714 71,709 85,329

Extraordinary Gain/(Loss) - - - - -

Adjusted PAT 28,917 37,112 45,875 71,709 85,329




Share Capital 1,510 1,510 1,510 1,510 1,510




Total Debt 18,239 1,802 774 724 674

Other Liabilities(net) - - - - -

Deferred Tax Liability 5,866 4,810 4,741 4,741 4,741


Gross Block 227,018 264,617 293,010 333,010 373,010


Net Block 107,904 122,593 122,747 136,454 146,801





Net Current Assets (1,412) (22,553) (40,018) (30,660) (18,832)

Other Assets - - - - -

Total Assets 233,885 247,008 275,586 333,652 403,826


Indian Oil Corporation (IOCL IN) Rating: BUY | CMP: Rs292 | TP: Rs385 | Mcap: Rs1,417.2bn / US$20,819.7m

Well-diversified business: IOCL’s earnings are likely to grow at 24% CAGR over FY16-18E led by 1) firm petrochem earnings 2) healthy marketing margins 3) improved refining profitability post stabilization of highly complex Paradip refinery and 4) zero subsidy losses. Even as refining margins are likely to soften on weakening gasoline spreads, higher share of complex Paradip refinery will support margins. Also, benign crude price is likely to limit inventory losses.

Refining margins aided by lower fuel & oil loss to stay healthy: GRMs are likely to remain healthy led by healthy gasoline and gasoil spreads along with capacity addition trailing demand. Also higher contribution from high complexiParadip refinery will aid refining earnings.

Petrochemicals recovery gaining traction: Profitability of IOCL’s petrochemicals segment has improved sharply due to falling naphtha prices, in line with crude prices. Falling feedstock prices and firm product prices has meant that integrated Asian crackers’ profitability has improved sharply; IOCL’s H1FY17 petchem EBITDA were at Rs38.6bn (Rs60.7bn in FY16).

Marketing profits to remain firm; benign crude price outlook to cut inventory losses: IOCL, with India’s largest retail outlet network of ~25,000 units, will benefit from expanding marketing margins. We have factored in diesel and petrol margins of Rs2.4/litre and Rs2.6/litre, respectively, lower than recent margin trends. Also, benign crude price outlook will mean no inventory losses.

Valuation & Recommendation: IOCL with a well-diversified business portfolio is attractively valued at current prices. We have a “BUY” with a price target of Rs385, valued at PER of 11x FY18E. At our price target, it implies core PBV of 1.9xFY18E, with ROE of 17%.

11/22/2016 32



Revenue (Rs m) 4,883,449 4,495,087 3,559,266 3,685,072 3,810,177

Growth (%) 5.8 (8.0) (20.8) 3.5 3.4

EBITDA (Rs m) 170,565 105,359 231,967 313,535 294,806

PAT (Rs m) 68,475 48,315 106,280 179,638 163,890

EPS (Rs) 14.1 9.9 21.9 37.0 33.8

Growth (%) 53.9 (29.4) 120.0 69.0 (8.8)

Net DPS (Rs) 4.4 3.3 7.0 10.2 9.2




EBITDA margin (%) 3.5 2.3 6.5 8.5 7.7

RoE (%) 10.5 7.1 14.7 21.9 17.4

RoCE (%) 6.8 4.9 8.7 13.6 11.8

EV / sales (x) 0.5 0.4 0.5 0.5 0.4

EV / EBITDA (x) 13.2 18.8 8.3 5.3 5.7

PER (x) 20.7 29.3 13.3 7.9 8.6

P / BV (x) 2.1 2.1 1.9 1.6 1.4



Stock Performance

(%) 1M 6M 12M

Absolute 9.2 52.3 62.1


Avishek Datta – [email protected]; +91-22-6632 2254

Financials Indian Oil Corporation

11/22/2016 33



Net Revenue 4,883,449 4,495,087 3,559,266 3,685,072 3,810,177

Direct Expenses 4,712,884 4,389,727 3,327,299 3,371,537 3,515,371

% of Net Sales 96.5 97.7 93.5 91.5 92.3


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 170,565 105,359 231,967 313,535 294,806

Margin (%) 3.5 2.3 6.5 8.5 7.7

Depreciation 63,600 52,190 59,185 61,366 65,680

PBIT 106,965 53,169 172,782 252,169 229,126

Interest Expenses 59,079 41,746 36,300 36,117 35,644

PBT 99,778 70,144 158,943 244,975 222,838

Total tax 30,113 21,426 56,528 70,559 64,015


PAT 68,475 48,315 106,280 179,638 163,890


Adjusted PAT 68,475 48,315 106,280 179,638 163,890




Share Capital 24,280 24,280 24,280 48,559 48,559




Total Debt 1,026,241 736,084 688,695 553,010 612,381




Gross Block 1,263,476 1,401,010 1,707,672 1,805,262 2,032,778


Net Block 725,005 803,704 1,058,000 1,201,193 1,369,099



Total Current Assets 1,560,295 1,165,364 1,134,705 1,241,958 1,282,890



Other Assets 878 705 791 - -

Total Assets 1,781,644 1,503,495 1,558,936 1,575,910 1,775,025


Kotak Mahindra Bank (KMB IN) Rating: Acc| CMP: Rs763 | TP: Rs860 | Mcap: Rs1,398.7bn / US$20,548.2m

Strong earnings expected post integration: KMB continued to deliver on NII growth, stronger other income and strong cost control (C/I ratio dropped to 49.1% in Q2FY17), while loan growth gas remained soft but we believe KMB can pick up loan growth much faster because of alignment of loan book to seasonally stronger segments in H2. Management continued to guide loan growth of 18-20% in FY17. We expect earnings on track with CAGR of 25% from FY17-FY19E.

CASA growth continues to be strong: KMB continues to witness strong growth in CASA with average CASA growing at 39% YoY continuing to stay on course towards 40% target in medium term. Better CASA mix has been improving cost of funds has kept overall margins at 4.5% and above the guidance range of 4.2-4.3%.

Asset quality remains strong: Asset quality remains best among private banks with GNPLs/NNPLs at 2.5%/1.2% respectively. Also, O/s restructured assets was at 0.12% of net advances, while SMA-2 was Rs4.19bn (0.16% of loans) which is one of the lowest in the industry. Credit costs is expected to see gradual improvements. Maintain Accumulate with PT of 860 based on 3.7X Mar’18 ABV.

11/22/2016 34




Growth (%) 17.4 12.6 50.8 27.8 23.4


PAT 22,598 27,922 31,796 44,634 55,286

EPS (Rs) 14.4 17.9 17.2 24.2 30.0

Growth (%) 11.5 24.9 -4.1 40.6 24.0

Net DPS (Rs) 0.8 0.9 0.5 0.6 0.8




NIM (%) 4.6 4.6 4.8 4.6 4.9

RoAE (%) 13.1 13.7 11.6 12.7 13.7

RoAA (%) 2.0 2.3 1.8 1.8 2.0

P / BV (x) 6.4 5.5 4.3 3.8 3.3

P / ABV (x) 6.6 5.7 4.5 4.0 3.4

PE (x) 53.1 42.5 44.3 31.5 25.4



Stock Performance

(%) 1M 6M 12M

Absolute (2.4) 8.6 12.0



Financials Kotak Mahindra Bank

11/22/2016 35



Int. Earned from Adv. 93,617 104,744 157,799 195,005 227,893


Others - - - - -

Total Interest Income 114,540 127,256 196,937 235,565 271,965

Interest expense 65,834 72,432 114,237 129,866 141,488

NII 48,706 54,824 82,700 105,699 130,477

Growth (%) 17.4 12.6 50.8 27.8 23.4

Treasury Income 2,149 3,761 2,908 2,763 2,880

NTNII 21,717 30,094 39,090 45,495 52,513


Total Income 138,406 161,110 238,935 283,823 327,359

Growth (%) 10.8 16.4 48.3 18.8 15.3



Growth (%) 20.7 18.4 29.2 30.4 23.7

NPA Provisions 1,632 2,757 7,879 6,415 7,811

Investment Provisions 1,844 (1,072) 1,372 9 9


PBT 34,099 42,370 47,443 67,958 84,195

Tax Provisions 11,500 14,448 15,647 23,324 28,909


PAT 22,133 27,726 31,589 44,418 55,059

Growth (%) 15.0 25.3 13.9 40.6 24.0




Par Value 5 5 5 5 5


Equity 7,703 7,724 9,172 9,172 9,172

Networth 187,379 216,859 327,652 372,774 428,492

Adj. Networth 181,078 209,926 314,148 357,526 412,618

Deposits 590,723 748,603 1,386,430 1,663,716 1,963,185

Growth (%) 15.8 26.7 85.2 20.0 18.0

Low Cost deposits 188,279 272,174 527,764 644,963 780,688



Net Advances 735,028 907,792 1,466,245 1,741,271 2,068,866

Growth (%) 9.2 23.5 61.5 18.8 18.8

Investments 281,260 333,476 550,520 609,944 682,717

Total Assets 1,102,747 1,342,526 2,249,552 2,601,757 3,020,478


Larsen & Toubro* (LT IN) Rating: BUY | CMP: Rs1,348 | TP: Rs 1,850 | Mcap: Rs1,255.9bn / US$18,450.0m

Strong guidance: L&T has guided for sales growth of 12-15%, order inflow

growth of 15% and margin improvement of 50bps in FY17. It also expects

working capital to improve by 100-200bps in FY17 (23.5% of sales in

Q1FY17).

Strong order book gives visibility: Order book at the end of Q1FY17 stood

at Rs2.5trn, up 9% YoY (2.5xTTM sales). Current prospect pipeline is

Rs5trn. Out of prospect pipeline, Rs2.5trn is from infrastructure, ~Rs 1tn

from hydrocarbon, ~1tn from power and ~ Rs 500bn from defense and

other segments. The company expects to bag defense orders worth Rs

150bn in FY17 against ~ Rs 50-60bn in FY16. L&T highlighted that while low

oil prices have impacted capex in large order in Hydrocarbon space in

Middle East, smaller ticket size orders (less than US$1bn) in hydrocarbon

are still tendered. Order on social infrastructure (Road, Power, low cost

housing) in the Middle East are likely to continue due to fear of unrest.

Focusing on exiting non-core business: L&T will continue to focus on

raising capital by selling non-core business to make balance sheet light and

help improve RoE for the business. L&T IDPL will also have to generate its

own capital to fund its equity requirement by churning assets as parent is

unlikely to support subsidiary.

Outlook and Valuation: The stock is at a PER of 15.3x FY18E earnings. L&T

continues to be the best play in the Indian infrastructure space, given its

strong business model, diverse skill sets, strong execution capabilities and

relatively healthy/large balance sheet.

We continue to believe L&T as a strong long term play in the

infrastructure space. Our TP is for 18 months.

11/22/2016 36



Revenue (Rs m) 851,284 920,046 1,001,317 1,151,514 1,358,787

Growth (%) 14.3 8.1 8.8 15.0 18.0

EBITDA (Rs m) 107,543 113,356 110,427 132,076 160,889

PAT (Rs m) 49,291 44,171 39,955 49,045 64,560

EPS (Rs) 53.2 47.5 42.9 52.7 69.3

Growth (%) (36.2) (10.6) (9.7) 22.8 31.6

Net DPS (Rs) 14.3 13.6 13.7 14.2 17.6




EBITDA margin (%) 12.6 12.3 11.0 11.5 11.8

RoE (%) 13.1 10.8 9.1 10.4 12.5

RoCE (%) 6.5 5.0 4.5 4.8 5.6

EV / sales (x) 2.4 2.3 2.3 2.0 1.8

EV / EBITDA (x) 19.3 19.0 20.6 17.7 15.0

PER (x)* 17.0 19.1 21.1 17.2 13.1

P / BV (x) 3.3 3.1 2.9 2.7 2.4


Source: Company Data, PL Research * Core PE

Stock Performance

(%) 1M 6M 12M

Absolute (10.7) 7.2 (1.3)

Relative to Sensex (2.5) 5.4 (0.9)

Kunal Sheth – [email protected]; +91-22-6632 2257 / Samir Bendre – [email protected]; +91-22-6632 2256

Financials Larsen & Toubro

11/22/2016 37



Net Revenue 851,284 920,046 1,001,317 1,151,514 1,358,787

Direct Expenses 663,842 727,468 798,841 913,583 1,076,164

% of Net Sales 78.0 79.1 79.8 79.3 79.2

Employee Cost 80,276 79,222 92,048 105,856 121,734

% of Net Sales 9.4 8.6 9.2 9.2 9.0

SG&A Expenses (378) - - - -

% of Net Sales (0.0) 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 107,543 113,356 110,427 132,076 160,889

Margin (%) 12.6 12.3 11.0 11.5 11.8

Depreciation 14,458 26,225 27,560 29,765 32,146

PBIT 93,085 87,131 82,867 102,311 128,743


PBT 74,892 68,695 64,285 82,108 106,784

Total tax 26,076 22,532 25,487 27,917 36,307


PAT 49,020 47,648 37,955 49,045 64,560

Extraordinary Gain/(Loss) (271) 3,477 (2,000) - -

Adjusted PAT 49,291 44,171 39,955 49,045 64,560




Share Capital 1,854 1,859 1,863 1,863 1,863




Total Debt 862,988 955,700 1,080,754 1,165,871 1,251,755




Gross Block 401,773 437,842 543,403 571,653 587,477

Less: Depreciation - - - - -

Net Block 401,773 437,842 543,403 571,653 587,477



Total Current Assets 1,150,574 1,335,860 1,558,702 1,543,071 1,773,671


Net Current Assets 696,630 764,205 808,238 896,535 1,010,758

Other Assets 24,166 29,392 29,717 29,717 29,717

Total Assets 1,246,283 1,370,186 1,524,783 1,641,330 1,771,378


Aurobindo Pharma (ARBP IN) Rating: BUY | CMP: Rs712 | TP: Rs943 | Mcap: Rs416.5bn / US$6,119.4m

Natrol, ARV to maintain growth in FY17: With sales of US$27m, Aurobindo’s acquired OTC brand Natrol is expected to have annual sales of US$120m in FY17E vs US$110m in FY16. Natrol’s operating margin was higher than average margin of the company and expected to maintain the same in FY17E-18E. ARV tender business is expected to maintain 11% growth in FY17E-18E and margin profile to improve with better product mix of ARV drugs including in-license drug Dolutegravir in global and PEPFAR tender business.

US pipeline remain robust: With revenues from injectables at US$38.3m in Q2FY17, management expects more than 40% growth in revenues from US Injectables along with strong flow of approvals and launches resulting in strong earnings growth in H2FY17E. Currently, Aurobindo is ranked 7th in volume in US injectables and we expect US$170m injectable sales in FY17E and US$280m in FY18E on the back of key launches such as Pantoprazole, Vancomycin and Esomeprazole IV. Isosulfane Blue and Eptifibatide will also boost US injectable sales in H2FY17E post expansion of capacity in Unit-IV.

Valuation: The stock currently trades at 16.8x and 14.1x FY17E and FY18E. We expect growth in the valuation will be triggered with launches and approvals of key products and higher contribution from injectable in FY17E-18E. At the TP of Rs943, the stock trades at a PER of 18.5x of FY18E earnings. We maintain “BUY”.

11/22/2016 38



Revenue (Rs m) 80,998 121,205 138,961 159,035 176,579

Growth (%) 38.3 49.6 14.6 14.4 11.0

EBITDA (Rs m) 21,345 25,636 32,056 38,327 44,410

PAT (Rs m) 13,759 16,354 20,480 25,097 29,887

EPS (Rs) 23.5 27.9 35.0 42.9 51.1

Growth (%) 200.9 18.9 25.2 22.5 19.1

Net DPS (Rs) 1.5 2.2 4.5 4.5 4.5




EBITDA margin (%) 26.4 21.2 23.1 24.1 25.2

RoE (%) 43.3 36.7 33.5 31.5 29.4

RoCE (%) 21.2 19.6 19.6 20.5 21.7

EV / sales (x) 5.6 3.8 3.3 2.9 2.5

EV / EBITDA (x) 21.2 17.8 14.2 11.9 10.0

PER (x) 30.3 25.5 20.3 16.6 13.9

P / BV (x) 11.1 8.1 5.9 4.7 3.6



Stock Performance

(%) 1M 6M 12M

Absolute (13.6) (7.6) (14.5)


Surajit Pal – [email protected]; +91-22-6632 2259

Financials Aurobindo Pharma

11/22/2016 39



Net Revenue 80,998 121,205 138,961 159,035 176,579

Direct Expenses 43,234 63,674 71,651 80,790 87,495

% of Net Sales 53.4 52.5 51.6 50.8 49.6

Employee Cost 8,024 13,023 15,508 16,699 17,658

% of Net Sales 9.9 10.7 11.2 10.5 10.0

SG&A Expenses 8,395 18,873 19,746 23,219 27,017

% of Net Sales 10.4 15.6 14.2 14.6 15.3


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 21,345 25,636 32,056 38,327 44,410

Margin (%) 26.4 21.2 23.1 24.1 25.2

Depreciation 3,125 3,326 3,926 4,035 4,920

PBIT 18,220 22,310 28,130 34,293 39,490

Interest Expenses 1,079 843 927 677 448

PBT 17,356 22,275 27,885 34,339 39,809

Total tax 3,635 5,966 7,444 9,271 9,952


PAT 11,729 15,758 19,820 24,404 29,159

Extraordinary Gain/(Loss) (2,031) (596) (660) (693) (728)

Adjusted PAT 13,759 16,354 20,480 25,097 29,887




Share Capital 585 585 585 585 585




Total Debt 37,783 44,754 47,255 41,040 32,802

Other Liabilities(net) 257 258 596 566 536

Deferred Tax Liability 2,054 2,058 2,364 1,333 139


Gross Block 41,830 54,461 62,110 79,348 89,348


Net Block 27,217 37,056 42,398 55,601 60,681






Other Assets 8,074 4,855 4,341 5,176 6,470

Total Assets 77,595 98,629 120,782 131,539 148,155


Tech Mahindra (TECHM IN) Rating: BUY | CMP: Rs447 | TP: Rs525 | Mcap: Rs390.6bn / US$5,737.6m

Tech Mahindra’s (TECHM’s) Q2FY17 revenues and margins were ahead of estimates. Revenues grew 5% QoQ in CC terms and organic growth was 2.5%. Revenue growth was aided by recovery in Telecom vertical which grew 2.4%QoQ after a weak performance in the past few quarters. EBIT margins were largely inline with estimates. Company took a one‐time, restructuring charge of US$13m in the quarter which impacted margins by ~120bps. Management has indicated improved outlook in Telecom business and Enterprise business remains steady. TECHM signed three large deals in the quarter. We expect gradual recovery in the business, going forward. Stock is inexpensive at 11.5x FY18 EPS and improvement in performance should drive stock returns. Retain “BUY” with a TP of Rs525.

Core telecom growth recovers: Telecom business recovered in the quarter and grew 2.4% QoQ. While the core telecom business will be stable, LCC will recover in the next few quarters. Manufacturing, Retail and BFS led growth amongst verticals by growing at 10.3/8.8 and 5.8% QoQ respectively. Amongst geographies, growth was led by Europe which grew by 9.1% QoQ followed by North America which grew by 2.5% QoQ. Growth in Manufacturing, BFS and Europe was aided by acquisitions. Company also added seven new clients, increasing the total clients to 825 in Q2FY17.

11/22/2016 40



Revenue (Rs m) 188,314 226,213 264,941 286,639 307,048

Growth (%) 31.4 20.1 17.1 8.2 7.1

EBITDA (Rs m) 41,837 41,920 43,426 44,354 47,340

PAT (Rs m) 29,331 26,275 33,905 30,697 32,003

EPS (Rs) 31.4 30.0 38.8 35.1 36.6

Growth (%) 41.1 (4.3) 29.0 (9.5) 4.3

Net DPS (Rs) 5.0 6.6 7.5 8.8 8.8




EBITDA margin (%) 22.2 18.5 16.4 15.5 15.4

RoE (%) 40.2 24.6 24.9 19.0 17.2

RoCE (%) 32.7 20.7 21.7 17.3 15.7

EV / sales (x) 2.0 1.7 1.4 1.2 1.1

EV / EBITDA (x) 9.2 8.9 8.3 7.9 7.0

PER (x) 14.2 14.9 11.5 12.7 12.2

P / BV (x) 4.5 3.2 2.6 2.2 2.0



Stock Performance

(%) 1M 6M 12M

Absolute 2.9 (5.0) (15.4)

Relative to Sensex 11.1 (6.8) (15.0)

Financials Tech Mahindra

11/22/2016 41



Net Revenue 188,314 226,213 264,941 286,639 307,048

Direct Expenses 117,001 151,186 183,575 201,515 216,670

% of Net Sales 62.1 66.8 69.3 70.3 70.6


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 29,476 33,107 37,940 40,771 43,038

% of Net Sales 15.7 14.6 14.3 14.2 14.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 41,837 41,920 43,426 44,354 47,340

Margin (%) 22.2 18.5 16.4 15.5 15.4

Depreciation 5,222 6,114 7,620 8,257 9,043

PBIT 36,615 35,806 35,806 36,097 38,298


PBT 36,947 36,180 40,167 41,617 42,814

Total tax 7,524 9,596 5,864 9,780 10,061


PAT 30,287 26,275 33,905 30,697 32,003

Extraordinary Gain/(Loss) 956 - - - -

Adjusted PAT 29,331 26,275 33,905 30,697 32,003




Share Capital 4,670 4,373 4,373 4,373 4,373




Total Debt 524 6,746 6,746 6,746 6,746




Gross Block 48,960 60,191 70,789 85,121 100,473


Net Block 20,304 23,046 28,400 34,475 40,785






Other Assets 18,764 34,245 34,245 34,245 34,245

Total Assets 113,981 147,681 175,425 199,610 224,711


Britannia Industries (BRIT IN) Rating: BUY | CMP: Rs2,895 | TP: Rs3,850 | Mcap: Rs347.4bn / US$5,103.0m

BRIT would be amongst first companies to recover from the demonetization impact despite significant increase in demand and cost pressures in 3QFY17. BRIT has reported 280bps decline in gross margins led by sharp spike in the prices of key inputs (Sugar, Palmoil, Wheat and SMP) by 30-50% YoY. We believe that margin pressure will peak out in 3Q given 1) full impact of 6% price increase till now and another 1-1.5% in 3Q 2) benefit from lower import duty in wheat and Palmoil and stock restrictions in sugar 3) accelerated cost efficiency programs. We expect volume growth to remain strong given benefits from market share gain in Hindi heartland and distribution reach. BRIT plans to enter 1 new category every year and bridge the portfolio gap in existing categories which will support higher growth. We are cutting FY17 EPS by 2% but increasing FY18 EPS by 4% to factor in higher realisations and sustained volume growth.

Concall Takeaways: 1) Biscuit market growth has increased to mid single digit as various fiscal measures have started showing impact 2) 2QFY17 realisation is up 4% while exit price increase is 6% in Q2, another 1-1.5% price increase looks likely, given 12% inflation in commodity basket (Sugar 46%, Cashew 5%, Flour 15% and RPO 19%) 3) Input cost pressure has peaked out as import duty has been reduced by 15% in wheat and 5% in palmoil, sugar has seen stocking limits at wholesale level 4) weak states have grown sales at accelerating pace from the past 2 quarters 5) BRIT has increased its retail reach by 80k in 2Q while the gap with Parle has come down by 0.45mn in past 3 years 5) BRIT is targeting cost efficiencies of Rs1.75b in FY17 as against earlier target of Rs1.25b 6) BRIT has done a capex of Rs1.5b in 1H and the run rate of Rs3b will be sustained in coming 2 years 7) BRIT is looking entering a new product category every year as most of the product gaps in existing categories have corrected 8) Middle East business has suffered due to unrest in Yemen, Libya and Syria and currency fluctuations in entire region 9) Britannia Dairy had reported strong sales growth but profits are under pressure due to higher milk prices and full tax rate (MAT earlier), plans on dairy supply chain integration are yet to be finalised

Our TP is based on a 18 month price roll over.

11/22/2016 42



Revenue (Rs m) 63,074 71,760 79,479 90,125 104,959

Growth (%) 12.3 13.8 10.8 13.4 16.5

EBITDA (Rs m) 5,966 7,715 11,436 12,692 15,652

PAT (Rs m) 3,898 5,097 7,712 8,515 10,608

EPS (Rs) 32.4 42.5 64.3 71.0 88.4

Growth (%) 65.6 31.1 51.3 10.4 24.6

Net DPS (Rs) 12.0 16.0 20.0 25.0 30.0




EBITDA margin (%) 9.5 10.8 14.4 14.1 14.9

RoE (%) 51.9 48.6 52.4 43.7 42.4

RoCE (%) 44.1 48.2 52.0 43.5 42.2

EV / sales (x) 5.5 4.7 4.2 3.7 3.1

EV / EBITDA (x) 57.9 43.8 29.2 26.1 20.7

PER (x) 89.4 68.2 45.0 40.8 32.7

P / BV (x) 40.6 28.0 20.4 15.9 12.3



Stock Performance

(%) 1M 6M 12M

Absolute (7.9) 11.1 2.6

Relative to Sensex (5.0) 5.0 (1.7)

Amnish Aggarwal – [email protected]; +91-22-6632 2233 / Gaurav Jogani – [email protected]; +91-22-6632 2238

Financials Britannia Industries

11/22/2016 43



Net Revenue 63,074 71,760 79,479 90,125 104,959

Direct Expenses 44,595 50,348 53,242 62,027 70,501

% of Net Sales 70.7 70.2 67.0 68.8 67.2

Employee Cost 1,725 1,768 2,092 2,353 2,701

% of Net Sales 2.7 2.5 2.6 2.6 2.6

SG&A Expenses 6,790 7,513 8,279 8,613 10,909

% of Net Sales 10.8 10.5 10.4 9.6 10.4

Other Expenses 3,999 4,416 4,430 4,440 5,195

% of Net Sales 6.3 6.2 5.6 4.9 4.9

EBITDA 5,966 7,715 11,436 12,692 15,652

Margin (%) 9.5 10.8 14.4 14.1 14.9

Depreciation 634 1,173 869 1,071 1,294

PBIT 5,332 6,542 10,567 11,621 14,359


PBT 5,626 7,406 11,537 12,921 16,097

Total tax 1,728 2,309 3,825 4,406 5,489


PAT 3,698 6,224 7,609 8,515 10,608

Extraordinary Gain/(Loss) (200) 1,127 (103) - -

Adjusted PAT 3,898 5,097 7,712 8,515 10,608




Share Capital 241 240 240 240 240




Total Debt 56 139 120 116 116




Gross Block 9,393 10,007 11,941 15,691 17,691


Net Block 5,457 5,260 6,394 9,073 9,780

Capital Work in Progress 972 482 745 500 400




Net Current Assets 451 4,675 7,831 10,200 15,783

Other Assets (91) 211 227 292 372

Total Assets 8,634 12,531 17,150 22,018 28,288


Glenmark Pharmaceuticals (GNP IN) Rating: BUY | CMP: Rs883 | TP: Rs1,186 | Mcap: Rs249.3bn / US$3,661.9m

India, US drive sales: Glenmark reported 15% YoY growth in core sales to Rs21.9bn with major boost coming from US, and India formulations and API in Q2FY17. Lower revenues of US$20m (-25%) in LatAM were caused by absence of exports to Venezuela and tepid performance in Brazil, 40 Cash outflow on tax remain high at 32% due to chronic loss in emerging market subsidiaries.

US markets show new momentum: On the back of 11 approvals and 8 launches, Glenmark’s constant currency growth in US is 25% YoY. Price rise in gMupirocin (being sole generic) and launch of key approvals such as Lidocaine and Potassium Chloride were major contributors of US$115m sales in US. With four new approvals in derma, where Taro dominates with large market share and price rise, we expect Glenmark to gain benefits of limited competition in FY17E-18E. Management plans to launch gZetia on 12th Dec for 134-days of exclusivity.

High-cost debt to be replaced with FCCB, low-priced Senior notes: Glenmark received US$400m cash flow from issues of FCCB and forex bond, of which it replaced high costs debt of US$220m in Q2FY17 and in the process to replace another US$180m in Q3FY17E. The prepayment however draws penalty of 2-3% of outstanding loan. Also, 2% FCCB to be provisioned at 6% as per IND-AS. This has resulted in one-off rise in interest cost by 48% in Q2FY17

Valuation - Key drivers to maintain momentum, Maintain ‘BUY’, TP Rs 1,186: With guidance of strong traction in US generics in H2FY17E, we believe new products will boost current growth drivers such as Indian formulations, Asia and Africa markets. With Rs110m/month sales of Teneligliptin, the launch of anti-diabetic brand to compensate more than the loss of sales in Sitagliptin in FY17E. We believe that launch of gAdvair in Europe is likely to drive growth in Europe in FY17E-18E. The stock currently trades at 18.0x and 13.7x FY17E and FY18E. We maintain ‘BUY’ and retain TP at Rs1,186

bncv 44



Revenue (Rs m) 60,052 65,953 75,909 97,538 115,387

Growth (%) 20.3 9.8 15.1 28.5 18.3

EBITDA (Rs m) 13,179 11,751 13,741 22,558 28,267

PAT (Rs m) 5,423 4,753 7,021 13,830 18,225

EPS (Rs) 20.0 17.5 24.9 49.0 64.6

Growth (%) (9.9) (12.4) 42.0 97.0 31.8

Net DPS (Rs) 2.0 2.0 2.0 2.0 2.0




EBITDA margin (%) 21.9 17.8 18.1 23.1 24.5

RoE (%) 18.9 15.9 19.3 26.4 25.8

RoCE (%) 11.2 8.8 10.1 16.0 18.4

EV / sales (x) 4.4 4.2 3.8 2.9 2.3

EV / EBITDA (x) 20.1 23.4 20.8 12.4 9.6

PER (x) 44.2 50.4 35.5 18.0 13.7

P / BV (x) 8.0 8.0 5.8 4.0 3.1



Stock Performance

(%) 1M 6M 12M

Absolute (5.2) 2.5 (8.5)

Relative to Sensex 3.0 0.7 (8.1)

Surajit Pal – [email protected]; +91-22-6632 2259

Financials Glenmark Pharmaceuticals

11/22/2016 45



Net Revenue 60,052 65,953 75,909 97,538 115,387

Direct Expenses 22,240 23,199 26,650 31,634 37,920

% of Net Sales 37.0 35.2 35.1 32.4 32.9

Employee Cost 10,261 12,024 13,782 16,300 19,262

% of Net Sales 17.1 18.2 18.2 16.7 16.7

SG&A Expenses 14,371 18,978 21,736 27,047 29,938

% of Net Sales 23.9 28.8 28.6 27.7 25.9


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 13,179 11,751 13,741 22,558 28,267

Margin (%) 21.9 17.8 18.1 23.1 24.5

Depreciation 2,168 2,600 2,691 3,068 3,374

PBIT 11,011 9,151 11,050 19,491 24,893


PBT 9,240 7,814 10,047 18,440 24,300

Total tax 1,513 1,190 3,028 4,610 6,075


PAT 5,423 4,753 7,021 13,830 18,225


Adjusted PAT 5,423 4,753 7,021 13,830 18,225




Share Capital 271 271 282 282 282




Total Debt 32,670 42,849 44,731 37,238 28,582

Other Liabilities(net) 654 1,217 773 796 820

Deferred Tax Liability (5,142) (2,750) (3,484) (3,484) (3,484)


Gross Block 37,786 42,017 50,885 57,885 64,885


Net Block 30,357 32,704 39,075 43,007 46,633






Other Assets 602 580 575 632 696

Total Assets 58,015 71,320 84,723 96,566 105,064


Bharat Forge (BHFC IN) Rating: BUY | CMP: Rs858 | TP: Rs957 | Mcap: Rs199.8bn / US$2,934.9m

To benefit in the long-term from diversification forays: Strong local

operations: Bharat forge’s India CV business is on a very strong footing,

with the sector’s good performance expected to continue in the medium-

term, irrespective of near-term dips. The company’s strategy for

Aerospace, Defence and Auto transmission parts provides potential for

growth over the medium to long-term. In the near-term, benefits for India

CV recovery and increase in sales of the PV segment would be offset by

lower demand in the industrial segment and sluggish North American truck

demand.

Positive commentary: On the positive side, the management commentary

seems to indicate that the North American Class 8 truck market seems to

have bottomed out, while demand from the shale side is also at its lowest.

Destocking has impacted sales in North America in addition to demand

slowdown. Sales in Q1 indicate a level lower than what is required for

current industry demand levels. Channel inventory in North America is

now down to a normal level, and restocking when it takes place will result

in higher growth. Thus, we believe that H1FY17 is likely to be subdued for

BHFC with a better performance outlook from H2FY17 onwards.

Diversification and maximising capacity utilisation: BHFC’s focus ahead

would be on accelerating product development and mining existing

customers for additional business with new products and offerings. BHFC is

looking to utilise its available capacities for the Oil & Gas segment to

expand business in the aerospace segment. We note that in Q1FY17,

despite lower production and an adverse product mix, the company

maintained its EBITDA margin at 27%. A recovery in growth will help the

company improve its EBITDA margin rapidly ahead.

At the current market price, the stock is trading at 31.0x FY17e EPS and

22.7x FY18e. We maintain “BUY” with a price target of Rs946.

11/22/2016 46



Revenue (Rs m) 67,158 76,248 76,465 75,556 86,013

Growth (%) 17.8 13.5 0.3 (1.2) 13.8

EBITDA (Rs m) 10,268 14,408 14,213 13,561 16,940

PAT (Rs m) 4,257 7,366 6,563 6,442 8,813

EPS (Rs) 18.3 31.6 28.2 27.7 37.8

Growth (%) 82.1 73.1 (10.9) (1.9) 36.8

Net DPS (Rs) 4.5 7.5 7.5 7.5 10.0




EBITDA margin (%) 15.3 18.9 18.6 17.9 19.7

RoE (%) 17.2 24.0 18.7 17.0 20.4

RoCE (%) 10.2 14.7 12.4 11.9 15.4

EV / sales (x) 3.3 2.9 2.9 2.9 2.5

EV / EBITDA (x) 21.5 15.2 15.5 16.0 12.6

PER (x) 46.9 27.1 30.4 31.0 22.7

P / BV (x) 7.4 5.8 5.6 5.0 4.3



Stock Performance

(%) 1M 6M 12M

Absolute (3.7) 19.4 (1.2)


Rohan Korde – [email protected]; +91-22-6632 2235

Financials Bharat Forge

11/22/2016 47



Net Revenue 67,158 76,248 76,465 75,556 86,013

Direct Expenses 41,360 47,814 45,291 44,553 50,564

% of Net Sales 61.6 62.7 59.2 59.0 58.8

Employee Cost 7,901 9,051 9,456 9,636 10,234

% of Net Sales 11.8 11.9 12.4 12.8 11.9


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 7,629 4,975 7,506 7,806 8,275

% of Net Sales 11.4 6.5 9.8 10.3 9.6

EBITDA 10,268 14,408 14,213 13,561 16,940

Margin (%) 15.3 18.9 18.6 17.9 19.7

Depreciation 3,579 3,624 4,187 4,397 4,704

PBIT 6,690 10,784 10,026 9,164 12,236


PBT 7,284 11,223 9,904 9,404 12,680

Total tax 2,100 3,587 3,408 2,962 3,867


PAT 4,982 7,666 6,525 6,442 8,813

Extraordinary Gain/(Loss) 726 299 (38) - -

Adjusted PAT 4,257 7,366 6,563 6,442 8,813




Share Capital 466 466 466 466 466




Total Debt 25,613 25,464 25,179 20,179 17,179

Other Liabilities(net) 170 (20) (36) (36) (36)



Gross Block 53,888 56,446 75,512 79,512 84,512


Net Block 25,283 25,750 40,628 40,231 40,527

Capital Work in Progress 5,827 8,586 - - -





Other Assets 57 537 554 554 554

Total Assets 54,260 61,523 62,731 62,199 65,337


MID-CAP

11/22/2016 48

Indraprastha Gas (IGL IN) Rating: BUY | CMP: Rs818 | TP: Rs1,080 | Mcap: Rs114.5bn / US$1,682.8m

CGD’s in a sweet spot: CGDs earnings growth is to ride on 1) healthy

margins supported by affordable gas and 2) robust volume growth. Benign

domestic gas prices along with soft spot LNG prices are to support volume

growth over the medium term.

Volume momentum is back: IGL is expected to report healthy volume

growth over the medium term supported by steady private vehicle and

taxi conversion. Rising judicial activism in the light of increased pollution

will make CNG the preferred fuel of choice. Meanwhile, government focus

to increase PNG penetration will increase domestic PNG volumes going

forward. For H1FY17, while CNG volumes were up 10%YoY, PNG volume

was up 15%Yoy.

Margins to stay healthy: CGD’s margins are likely to remain healthy

supported by availability of affordable domestic gas. Global gas prices are

likely to remain tepid given abundant new supplies from US and Australia,

which in turn will keep domestic prices benign. CGD’s will also benefit

from cheaper spot LNG prices as it will support commercial volume

growth. For H1, IGL’s spreads were at Rs6.2/scm (Rs5.3 in FY16) despite

provision of Rs 167m towards higher rental lease.

Valuation & Recommendation: We value IGL on DCF basis and our 3 year

PT is Rs 1,080.

11/22/2016 49 Avishek Datta – [email protected]; +91-22-6632 2254



Revenue (Rs m) 39,222 36,810 36,858 41,475 46,044

Growth (%) 16.5 (6.1) 0.1 12.5 11.0

EBITDA (Rs m) 7,824 7,930 7,717 10,039 11,144

PAT (Rs m) 3,603 4,377 4,162 6,084 7,048

EPS (Rs) 25.7 31.3 29.7 43.5 50.3

Growth (%) 1.7 21.5 (4.9) 46.2 15.8

Net DPS (Rs) 6.4 6.4 6.4 10.2 11.8




EBITDA margin (%) 19.9 21.5 20.9 24.2 24.2

RoE (%) 22.1 22.7 18.5 23.0 22.4

RoCE (%) 19.9 21.2 18.1 23.0 22.4

EV / sales (x) 2.9 3.1 3.0 2.5 2.1

EV / EBITDA (x) 14.7 14.3 14.3 10.3 8.8

PER (x) 31.8 26.2 27.5 18.8 16.3

P / BV (x) 6.5 5.5 4.7 4.0 3.3



Stock Performance

(%) 1M 6M 12M

Absolute (5.3) 43.4 69.7


Financials Indraprastha Gas

11/22/2016 50



Net Revenue 39,222 36,810 36,858 41,475 46,044

Direct Expenses 28,934 26,175 26,220 26,995 29,979

% of Net Sales 73.8 71.1 71.1 65.1 65.1

Employee Cost 596 660 796 915 1,007

% of Net Sales 1.5 1.8 2.2 2.2 2.2

SG&A Expenses 1,869 2,044 2,125 3,525 3,914

% of Net Sales 4.8 5.6 5.8 8.5 8.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 7,824 7,930 7,717 10,039 11,144

Margin (%) 19.9 21.5 20.9 24.2 24.2

Depreciation 2,195 1,487 1,577 1,708 1,804

PBIT 5,629 6,443 6,140 8,331 9,340

Interest Expenses 441 298 91 - -

PBT 5,398 6,490 6,349 9,081 10,519

Total tax 1,795 2,113 2,187 2,997 3,471


PAT 3,603 4,377 4,162 6,084 7,048


Adjusted PAT 3,603 4,377 4,162 6,084 7,048




Share Capital 1,400 1,400 1,400 1,400 1,400




Total Debt 3,212 1,453 - - -


Deferred Tax Liability 963 1,272 1,647 2,101 2,627


Gross Block 29,733 31,761 34,302 36,302 38,302


Net Block 18,953 19,558 20,097 20,389 20,585





Net Current Assets (942) (1,300) 142 5,915 11,647


Total Assets 21,807 23,707 25,779 30,896 36,824


Jubilant Life Sciences (JUBILANT IN) Rating: BUY | CMP: Rs607 | TP: Rs740 | Mcap: Rs96.7bn / US$1,421.2m

Sales miss on lower LSI; EBITDA, PAT inline with lower input costs: The

company’s overall financial performance except LSI sales were in line with

our estimates as Jubilant has been benefitting from volume and price rise

in Radiopharma products. There was scheduled shutdown of three weeks

in Spokane plant, which led to marginal miss in CMO revenues in Q2FY17.

Global generics grew by 12% YoY on commissioning of new API capacity

and global launch of new formulations.

Ruby-Fill to be launched in Q3FY17E: Management plans to launch gRuby-

Fill in Q3FY17 in US post its approval in October 2016. While the current

market of the drug is US$70m, Jubilant expects its non-substitutable

gRubi-Fill to expand market size to US$250m by FY21E. With two ANDAs

pending for approval and development pipeline of seven more products,

Jubilant expects to launch one Radiology product every year.

Valuation-Price run-up by 116% reduce upside potential, downgrade to

‘Accumulate’, increase TP to Rs740: With sustainable limited competition

in Radiology products (unlike peers) in US and better visibility of utilisation

of CMO plants, Jubilant’s EBITDA margin (30-34%) in US generics is

currently highest among all Indian peers. Net Debt reduction of Rs7.6bn

decreased D/E ratio to 1.1 in Q2FY17 from 1.6 in FY16 and promised better

cash flow and return ratios in FY17E-18E. With improving financial metrics,

there was partial rerating in valuation as it ran up 116% in Aug-Oct 2016.

In our SOTP valuation, we increased EV/EBITDA to 12x from 10x in Pharma

and to 5x from 3x in LSI and derive new TP at Rs740 (previously Rs484).

The recent run up forces us to downgrade our recommendation to

‘Accumulate’ as upside potential reduced to 22% at current market price.

The stock still offers a good upside.

11/22/2016 51 Surajit Pal – [email protected]; +91-22-6632 2259



Revenue (Rs m) 57,216 57,761 57,005 60,580 64,951

Growth (%) 11.9 1.0 (1.3) 6.3 7.2

EBITDA (Rs m) 9,259 6,392 11,759 12,679 13,809

PAT (Rs m) 3,235 (97) 4,140 4,900 5,656

EPS (Rs) 20.9 (0.6) 26.0 31.5 36.4

Growth (%) (3.2) (102.9) NA NA 15.4

Net DPS (Rs) 3.0 3.0 3.0 3.1 3.1




EBITDA margin (%) 16.2 11.1 20.6 20.9 21.3

RoE (%) 12.7 (0.4) 15.4 15.7 15.7

RoCE (%) 8.1 3.4 9.1 9.7 10.3

EV / sales (x) 2.3 2.4 2.4 2.2 2.0

EV / EBITDA (x) 14.4 22.0 11.8 10.6 9.4

PER (x) 29.0 NA NA 19.3 16.7

P / BV (x) 3.6 3.9 3.3 2.8 2.5



Stock Performance

(%) 1M 6M 12M

Absolute (11.1) 63.5 50.4

Relative to Sensex (2.9) 61.7 50.8

Financials Jubilant Life Sciences

11/22/2016 52



Net Revenue 57,216 57,761 57,005 60,580 64,951

Direct Expenses 32,107 34,653 28,950 31,683 33,515

% of Net Sales 56.1 60.0 50.8 52.3 51.6

Employee Cost 11,052 10,903 11,267 11,510 12,341

% of Net Sales 19.3 18.9 19.8 19.0 19.0

SG&A Expenses 4,798 5,814 5,028 4,708 5,286

% of Net Sales 8.4 10.1 8.8 7.8 8.1


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 9,259 6,392 11,759 12,679 13,809

Margin (%) 16.2 11.1 20.6 20.9 21.3

Depreciation 2,812 2,880 3,460 3,874 4,227

PBIT 6,447 3,512 8,299 8,804 9,582


PBT 4,218 884 5,669 6,533 7,542

Total tax 696 805 1,529 1,633 1,885


PAT 1,090 (578) 4,315 4,900 5,656

Extraordinary Gain/(Loss) (2,145) (481) 175 - -

Adjusted PAT 3,235 (97) 4,140 4,900 5,656




Share Capital 154 159 159 156 156




Total Debt 43,953 47,931 45,167 42,432 39,713




Gross Block 73,306 73,621 78,291 84,127 87,627


Net Block 50,988 49,113 50,914 53,375 53,248






Other Assets 3,274 3,569 3,246 3,409 3,579

Total Assets 76,478 75,915 79,053 80,699 83,122


Hexaware Technologies (HEXW IN) Rating: Acc| CMP: Rs188 | TP: Rs260 | Mcap: Rs56.7bn / US$833.1m

Hexaware (HEXW) reported impressive 4.2% QoQ USD revenue growth, ~60 bps ahead of our expectations. Revenues in CC terms grew by 4.8/8.9% QoQ/YoY respectively. EBITDA came in 3% above our expectations growing at 16.5/7.9% QoQ/YoY, respectively. After reporting sluggish growth in Q4CY15 and Q1CY16, HEXW has come back strongly with robust growth in Q2 and Q3CY16. Company’s robust performance has largely been in line with management commentary. It has signed six new deals with new customer TCV of US$42m, which has almost doubled QoQ and provides good growth visibility.

HEXW has guided for better revenues and margin growth YoY in Q4CY16 aided by volume growth and robust deal pipeline. Its performance is particularly heartening against a backdrop of moderate or muted revenue/margin growth by most mid‐cap peers. HEXW has also announced a buyback (~2.4% payout) along with quarter dividend of Re1.

Revenues and margins ahead of our estimates: Q3CY16 revenues grew above our and street estimates with a growth of 4.8% in CC terms and 4.2% QoQ in USD terms at US$ 135.2m (4.9% volume growth). EBITDA margins increased 187bps QoQ to 17.4%. Growth in Margins was aided by lack of visa costs and increased utilization in the quarter. EPS for the quarter increased by 11.5% QoQ to Rs3.7

We have an “Accumulate” rating with TP of Rs260 based on 16x Sept CY17 EPS.

11/22/2016 53


Y/e Dec CY13 CY14 CY15 CY16E CY17E

Revenue (Rs m) 22,854 25,817 31,235 35,160 39,476

Growth (%) 17.3 13.0 21.0 12.6 12.3

EBITDA (Rs m) 5,124 4,776 5,357 5,788 6,420

PAT (Rs m) 3,792 3,251 3,932 4,149 4,480

EPS (Rs) 12.6 10.8 13.0 13.8 14.9

Growth (%) 14.5 (14.6) 20.7 5.5 8.0

Net DPS (Rs) 11.1 9.4 8.6 10.0 11.0




EBITDA margin (%) 22.4 18.5 17.2 16.5 16.3

RoE (%) 31.6 26.1 28.9 27.8 27.9

RoCE (%) 30.8 25.6 28.2 27.2 27.3

EV / sales (x) 2.3 2.1 1.7 1.6 1.4

EV / EBITDA (x) 10.4 11.2 9.9 9.7 8.7

PER (x) 14.9 17.4 14.4 13.7 12.7

P / BV (x) 4.7 4.4 4.0 3.7 3.4



Stock Performance

(%) 1M 6M 12M

Absolute (4.4) (10.0) (24.5)


Financials Hexaware Technologies

11/22/2016 54



Net Revenue 22,854 25,817 31,235 35,160 39,476

Direct Expenses 13,826 16,278 20,061 22,606 25,527

% of Net Sales 60.5 63.1 64.2 64.3 64.7


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 3,904 4,763 5,817 6,767 7,529

% of Net Sales 17.1 18.4 18.6 19.2 19.1


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 5,124 4,776 5,357 5,788 6,420

Margin (%) 22.4 18.5 17.2 16.5 16.3

Depreciation 386 440 482 575 643

PBIT 4,738 4,336 4,875 5,213 5,777


PBT 4,796 4,246 5,046 5,569 6,054

Total tax 1,004 980 1,114 1,420 1,574


PAT 3,792 3,200 3,932 4,149 4,480

Extraordinary Gain/(Loss) - (51) - - -

Adjusted PAT 3,792 3,251 3,932 4,149 4,480




Share Capital 600 602 603 603 603






Deferred Tax Liability 276 119 92 92 92


Gross Block 7,337 7,730 8,325 11,284 12,863


Net Block 5,150 5,138 5,328 7,641 8,577

Capital Work in Progress 220 350 1,160 1,160 1,160





Other Assets 1,695 2,021 2,357 2,357 2,357

Total Assets 12,482 13,344 14,777 15,511 16,675


Sadbhav Engineering (SADE IN) Rating: BUY | CMP: Rs273 | TP: Rs351 | Mcap: Rs46.9bn / US$688.7m

Strong order pipeline/Execution to recover: : Order book at the end of Q1FY17 stood at Rs68.3bn, down 19% YoY. The order book does not include HAM project recently won by SIPL (~EPC value Rs 31bn), including this, order book stand at healthy Rs99bn. SEL expects to bag orders worth Rs50-70bn in FY17 as against Rs29bn in FY16. In road sector bidding activity continues to be healthy, EPC project worth Rs100bn is expected to be up for bidding over next 2 months. Further DPR for 90 new project (~Rs700-800bn) are in advanced stage and are expected to be bid out in FY17. On mining side SEL has already bid for MDO bid of Dulanga mines by NTPC. SEL will also bid for 2 other large MDO bids (Chhattisgarh and Singrauli) thorough JV route. In Irrigation segment SEL has already bid for Rs4bn worth tenders in Telangana, and further nine tenders worth Rs100bn are up for bidding in Telangana over next few months. SEL expect pick up execution of road EPC projects and contribution for new HAM project to help pick up in execution over the course of the year. SEL expects to achieve sales growth of 15-16% and EBITDA margin of 10.5-11% for FY17

BOT projects; Healthy traffic growth: Sadbhav Infra project Ltd(SIPL) saw toll revenue for operational projects increase to Rs2.1bn up 27% YoY. SIPL saw traffic growth of ~6-7% across projects. SIPL has recently won 5 HAM project. The equity commitment for these five projects is ~Rs4.2bn which it expects to fund through internal accruals. SEL expect to receive zero date for HAM project between October-November 2016. SEL has recently won two lucrative Hybrid annuity contracts in the recently conducted bids: (1) Rampur Kathgodam Package-I (RK I) and (2) Rampur Kathgodam Package-II (RK II). Competition was very limited with only three to four bidders for each contract. The project has limited equity requirement of ~12-15% of project cost and company expects IRR of 16-17% on this project.

Outlook and valuation: The stock is trading at core PER of 12.5x FY18E earnings. We continue to believe SEL will be the key beneficiary of strong outlook in road sector and improving outlook in Mining and Irrigation sector. Healthy balance sheet and strong management gives us additional comfort. We expect company to deliver 26% earning CAGR over FY16-18E. We continue to rate the stock a “BUY” With revised TP of Rs351

11/22/2016 55



Revenue (Rs m) 23,581 29,698 31,863 36,498 44,368

Growth (%) 30.2 25.9 7.3 14.5 21.6

EBITDA (Rs m) 2,494 3,002 3,254 3,780 4,760

PAT (Rs m) 1,063 1,137 1,337 1,633 2,133

EPS (Rs) 7.0 6.7 7.8 9.6 12.6

Growth (%) 42.8 (4.3) 16.3 23.5 30.6

Net DPS (Rs) 0.7 0.7 0.7 0.7 0.7




EBITDA margin (%) 10.6 10.1 10.2 10.4 10.7

RoE (%) 11.9 9.8 9.4 10.6 12.4

RoCE (%) 10.3 8.4 7.9 9.0 10.5

EV / sales (x) 2.1 1.9 1.8 1.5 1.3

EV / EBITDA (x) 19.8 18.4 17.5 14.5 11.8

PER (x) 39.0 40.8 35.1 28.4 21.7

P / BV (x) 4.3 3.4 3.2 2.9 2.5



Stock Performance

(%) 1M 6M 12M

Absolute (1.9) 5.0 (13.1)


Kunal Sheth – [email protected]; +91-22-6632 2257 / Samir Bendre – [email protected]; +91-22-6632 2256

Financials Sadbhav Engineering

11/22/2016 56



Net Revenue 23,581 29,698 31,863 36,498 44,368

Direct Expenses 19,450 24,362 25,905 30,329 36,715

% of Net Sales 82.5 82.0 81.3 83.1 82.8

Employee Cost 602 974 1,222 929 1,119

% of Net Sales 2.6 3.3 3.8 2.5 2.5

SG&A Expenses 1,035 1,360 1,482 1,460 1,775

% of Net Sales 4.4 4.6 4.7 4.0 4.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 2,494 3,002 3,254 3,780 4,760

Margin (%) 10.6 10.1 10.2 10.4 10.7

Depreciation 474 817 849 912 1,109

PBIT 2,020 2,185 2,404 2,867 3,650

Interest Expenses 958 891 863 1,019 1,128

PBT 1,204 1,459 1,600 2,041 2,734

Total tax (242) 321 263 408 601

Effective Tax rate (%) (20.1) 22.0 16.5 20.0 22.0

PAT 1,063 1,137 1,337 1,633 2,133


Adjusted PAT 1,063 1,137 1,337 1,633 2,133




Share Capital 152 170 172 170 170




Total Debt 8,633 9,383 10,588 9,983 10,533




Gross Block 7,301 8,601 9,535 10,835 12,135


Net Block 4,982 5,465 5,550 5,937 6,128







Total Assets 18,562 23,255 25,534 26,422 28,966


Rallis India (RALI IN) Rating: Acc | CMP: Rs183 | TP: Rs236 | Mcap: Rs35.5bn / US$521.7m

Rallis India is currently in a sweet spot considering business bouncing back after a washout FY16. Good spatial distribution of rainfall & encouraging Rabi sowing data will help Rallis to get back on earnings growth track from FY17. Factoring in the cash‐flow of almost Rs1.2bn after taxes and regulatory charges on IKEA deal, Rallis now is a net cash company. Rallis is expected to deliver 21% earnings CAGR over FY16-FY18E, stable margins at ~16% and high RoEs in the range of 18%. With the capex cycle behind, Rallis is expected to generate Rs4bn free cash over FY16-FY18E. The stock is trading at a P/E of 17.4x FY18E earnings and an EV/EBITDA of 10.8xFY18E. Strong parentage, new product launches, diversification across Agriculture value chain and a lean balance sheet makes Rallis a compelling “BUY” for the long term. Option value in terms of any sizeable opportunity from the CRAM business is not factored in our earnings.

Seed business on an exponential growth path, operating levers to kick-in: With virtually insignificant revenues in FY11 from Seeds, Rallis is expected to clogged a turnover of Rs3bn in FY17. Rallis has ample scope for improving its margins from 12% vis-a-vis other seed companies where margin profile is 18-20%. Rallis’ learning curve in the seed business and better product awareness created amongst farmers over the last four seasons leaves significant room for operating leverage to kick in

Amongst few Agri input companies with net cash on books: Rallis after strong H1FY17 and sale proceeds received from IKEA, has ~Rs1.4bn cash on books. The proceeds from the sale deal shall be used to drive growth by expanding facilities at Dahej, inorganic acquisitions offering strategic fits and expanding in neighboring countries like Indonesia through the JV route. We have an Accumulate with TP of Rs236.

11/22/2016 57 Nishna Biyani – [email protected]; +91-22-6632 2259 / Keyur Pandya – [email protected]; +91-22-6632 2247



Revenue (Rs m) 17,474 17,896 15,817 17,090 19,265

Growth (%) 17.6 2.4 (11.6) 8.1 12.7

EBITDA (Rs m) 2,612 2,771 2,301 2,799 3,198

PAT (Rs m) 1,518 1,572 1,430 1,737 2,086

EPS (Rs) 7.8 8.1 7.4 8.9 10.7

Growth (%) 27.6 3.5 (9.0) 21.4 20.1

Net DPS (Rs) 2.4 2.5 2.5 3.0 3.5




EBITDA margin (%) 15.0 15.5 14.5 16.4 16.6

RoE (%) 22.7 20.5 16.7 17.2 17.6

RoCE (%) 29.6 26.5 19.5 22.1 22.4

EV / sales (x) 2.1 2.0 2.3 2.0 1.7

EV / EBITDA (x) 13.7 13.0 15.6 12.2 10.5

PER (x) 23.4 22.6 24.8 20.4 17.0

P / BV (x) 4.9 4.4 3.9 3.2 2.8



Stock Performance

(%) 1M 6M 12M

Absolute (22.2) (11.4) (4.1)


Financials Rallis India

11/22/2016 58



Net Revenue 17,474 17,896 15,817 17,090 19,265

Direct Expenses 10,085 9,946 8,385 9,029 10,225

% of Net Sales 57.7 55.6 53.0 52.8 53.1

Employee Cost 1,105 1,294 1,324 1,432 1,547

% of Net Sales 6.3 7.2 8.4 8.4 8.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 3,672 3,886 3,806 3,830 4,295

% of Net Sales 21.0 21.7 24.1 22.4 22.3

EBITDA 2,612 2,771 2,301 2,799 3,198

Margin (%) 15.0 15.5 14.5 16.4 16.6

Depreciation 407 496 446 500 570

PBIT 2,206 2,275 1,855 2,299 2,628


PBT 2,144 2,215 1,856 4,009 2,858

Total tax 617 618 390 1,087 772


PAT 1,518 1,572 1,430 2,922 2,086

Extraordinary Gain/(Loss) - - - 1,185 -

Adjusted PAT 1,518 1,572 1,430 1,737 2,086




Share Capital 194 194 194 194 194




Total Debt 406 452 432 337 362




Gross Block 6,508 6,764 7,342 8,114 8,814


Net Block 4,182 3,996 4,174 4,350 4,470


Cash & Cash Equivalent 344 314 358 1,897 2,722




Other Assets 1,874 1,958 2,591 2,511 2,431

Total Assets 8,055 9,093 9,895 12,114 13,361


SpiceJet (SJET IN) Rating: BUY | CMP: Rs59 | TP: Rs115 | Mcap: Rs35.4bn / US$520.0m

With strong growth in domestic air passengers and aviation companies performing better on both revenues and profitability, we believe Spicejet is in a strong position to provide the best profitability growth in the sector, coupled with cheaper valuations as compared to the industry leader, Interglobe Aviation. We expect revenue CAGR of 12.7% over FY15-18E and an EBITDAR CAGR of 87.6% over the same period.

The Indian aviation sector is in a sustained growth phase on the back of multiple levers like increasing load factor, sustained growth in passenger traffic and fall in jet fuel prices. Lower industry fleet size and the continued propensity of Indian travelers to gravitate towards Low Cost Airline Carriers (as against preferring alternative modes or Full Service Carriers) have led to higher Passenger Load Factor (PLF) for the airline companies. Our positive stance on the sector is further reinforced by YoY lower ATF price which leads to not only higher profitability, but eases up the working capital requirement.

In tune with the above, SJ offers the highest PLF in the industry after a striking return to profitability in FY16 post four years of being in the red. In addition to the aforementioned triggers, with its strategy to increase non-passenger related revenues, SJ is focusing on cargo services and other ancillary services like food and beverage and this foray is expected to result in increasing the share of cargo services revenues significantly from 2.9% of sales in FY15. Similarly, with its fleet size expected to increase on a steady basis from 43 in FY16 to 55 by FY18-end, there is ample scope to take advantage of the growing passenger traffic.

We have ‘BUY’ rating on SJ with a price target of Rs115 (based upon 10x Sep’17E EPS); at CMP it trades at 6.3x FY17e. At our price target, SJ trades at EV/EBITDAR of ~4x FY17E.

11/22/2016 59



Revenue (Rs m) 63,561 52,448 50,883 61,196 75,044

Growth (%) 11.2 (17.5) (3.0) 20.3 22.6

EBITDA (Rs m) (7,993) (6,149) 6,316 8,599 11,100

PAT (Rs m) (10,032) (7,810) 4,424 5,625 7,831

EPS (Rs) (18.7) (13.0) 7.4 9.4 13.1

Growth (%) NA NA NA 27.2 39.2

Net DPS (Rs) - - - - -




EBITDA margin (%) (12.6) (11.7) 12.4 14.1 14.8

RoE (%) 164.6 69.1 NM NM NM

RoCE (%) NM NM 188.6 94.4 65.4

EV / sales (x) 0.7 0.9 0.9 0.7 0.5

EV / EBITDA (x) NM NM 7.1 4.7 3.1

PER (x) NM NM 8.0 6.3 4.5

P / BV (x) (3.2) (2.8) (5.6) (51.2) 5.0

Net dividend yield (%) - - - - -


Stock Performance

(%) 1M 6M 12M

Absolute (12.6) (17.2) (5.2)


Rohan Korde – [email protected]; +91-22-6632 2235

Financials SpiceJet

11/22/2016 60



Net Revenue 63,561 52,448 50,883 61,196 75,044

Direct Expenses 55,266 44,579 31,584 37,868 47,091

% of Net Sales 86.9 85.0 62.1 61.9 62.8

Employee Cost 5,757 5,375 4,928 5,668 6,660

% of Net Sales 9.1 10.2 9.7 9.3 8.9


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 10,532 8,644 8,054 9,061 10,194

% of Net Sales 16.6 16.5 15.8 14.8 13.6

EBITDA (7,993) (6,149) 6,316 8,599 11,100

Margin (%) (12.6) (11.7) 12.4 14.1 14.8

Depreciation 1,483 1,266 1,176 1,199 1,259

PBIT (9,476) (7,416) 5,140 7,399 9,841

Interest Expenses 1,366 1,635 1,154 808 525

PBT (10,032) (6,871) 4,074 7,032 9,789

Total tax - - - 1,406 1,958


PAT (10,032) (6,871) 4,074 5,625 7,831

Extraordinary Gain/(Loss) - 939 (350) - -

Adjusted PAT (10,032) (7,810) 4,424 5,625 7,831




Share Capital 5,353 5,995 5,995 5,995 5,995

Reserves & Surplus (15,881) (22,145) (18,102) (12,476) (4,645)

Shareholder's Fund (9,945) (12,645) (6,316) (691) 7,141


Total Debt 15,163 14,185 10,287 9,787 8,787




Gross Block 21,726 21,138 21,196 24,196 27,196


Net Block 18,767 17,138 16,021 17,822 19,562

Capital Work in Progress 8 - - - -

Cash & Cash Equivalent 51 236 1,285 5,115 10,225



Net Current Assets (13,556) (15,599) (12,250) (9,225) (4,634)


Total Assets 5,218 1,539 3,971 9,096 15,928


Thyrocare Technologies Rating: BUY | CMP: Rs616 | TP: Rs1,067 | Mcap: Rs33.1bn / US$486.1m

Thyrocare operates in a segment which has strong growth potential as

preventive health checkups and health awareness will continue to drive

growth as the current penetration levels is low at 5%. While diagnostic

segment is dominated by the unorganised players with a share of 85%,

there is a consolidation and shift towards the organised sector resulting

in growth in the organised diagnostic segment. The sector is expected to

grow with a) improved healthcare services and awareness, b)

accessibility with rising income (per capita income: 7.6% CAGR in 2014-

19) and c) favourable demographic mix (elderly population to be 169m by

2026 from 98.9m in 2014). Being the smallest among the top-4

diagnostic players with core competency in costs, Thyrocare aspires to

grow at 30% till CY30. With purported increase in lifestyle diseases,

Thyrocare aims at 80% contribution from B-2-C segment and reaching

out to unorganised segment for drawing B-2-B revenues.

We expect 32% CAGR in revenues which includes 29% and 79% CAGR in

pathology and imaging respectively, in FY16-19E. While pathology

business offers growth through bio-chemistry tests to new Aarogyam

franchise (23% CAGR), corporate/insurance companies (1.15x CAGR) and

online/DSA (45% CAGR) clients, its imaging business expands through

partnership (PSP) model and vendor tie-ups. The daily PET-CT scans is

expected to grow to 120-140 in FY19E from 91 in FY16 due to addition of

5-10 new centres and new patients in existing centres.

With increased shift from unorganised to the organised sector with

strong growth potentials, the diagnostic business is a sunrise sector with

high free cash generation. With strong profit growth of 34%, 39% and

40% CAGR in Gross profit, EBITDA and PAT respectively in FY16-19E,

Thyrocare is in an enviable position. We value the company at an EV of

Rs57.3bn and initiate coverage of Thyrocare with a “BUY”

recommendation with a TP at Rs1,067.

11/22/2016 61 Surajit Pal – [email protected]; +91-22-6632 2259



Revenue (Rs m) 1,500 1,746 2,312 3,075 4,076

Growth (%) 11.7 16.4 32.4 33.0 32.6

EBITDA (Rs m) 687 640 838 1,238 1,649

PAT (Rs m) 462 452 518 758 1,024

EPS (Rs) 42.3 8.9 9.6 14.1 19.1

Growth (%) NA NA 7.8 46.4 35.0

Net DPS (Rs) 0.0 3.8 9.6 10.0 10.0




EBITDA margin (%) 45.8 36.7 36.2 40.3 40.5

RoE (%) 25.2 18.7 16.1 20.4 25.9

RoCE (%) 21.4 15.7 14.8 19.7 25.0

EV / sales (x) 4.6 17.8 14.3 10.7 8.1

EV / EBITDA (x) 10.0 48.6 39.4 26.7 19.9

PER (x) NA 68.8 63.9 43.6 32.3

P / BV (x) 3.3 11.3 9.0 8.8 8.0

Net dividend yield (%) - 0.6 1.6 1.6 1.6


Stock Performance

(%) 1M 6M 12M

Absolute (7.9) (5.3) -

Relative to Sensex (3.1) (7.1) -

Financials Thyrocare Technologies

11/22/2016 62



Net Revenue 1,500 1,746 2,312 3,075 4,076

Direct Expenses 464 640 815 986 1,286

% of Net Sales 31.0 36.6 35.2 32.1 31.5

Employee Cost 121 175 257 323 432

% of Net Sales 8.1 10.0 11.1 10.5 10.6

SG&A Expenses 228 291 403 529 709

% of Net Sales 15.2 16.7 17.4 17.2 17.4


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 687 640 838 1,238 1,649

Margin (%) 45.8 36.7 36.2 40.3 40.5

Depreciation 64 129 182 214 250

PBIT 623 512 655 1,023 1,399


PBT 689 676 818 1,204 1,600

Total tax 227 236 300 445 576


PAT 462 452 518 758 1,024


Adjusted PAT 462 452 518 758 1,024




Share Capital 109 505 537 537 537




Total Debt 265 32 68 75 83


Deferred Tax Liability 6 - - - -


Gross Block 873 1,917 2,113 2,413 2,763

Less: Depreciation - 411 591 805 1,055

Net Block 873 1,507 1,522 1,608 1,709


Cash & Cash Equivalent 1,133 894 1,019 1,159 1,438

Total Current Assets 274 264 428 501 743

Total Current Liabilities 64 73 314 331 351

Net Current Assets 210 191 114 170 393

Other Assets 232 623 1,216 1,090 1,045

Total Assets 2,393 3,219 3,783 3,901 4,285


Navneet Education (NELI IN) Rating: BUY | CMP: Rs105 | TP: Rs132 | Mcap: Rs24.9bn / US$366.0m

Navneet Education enjoys a strong foothold in the publication industry with a market share of ~65-70% in both Gujarat and Maharashtra. Navneet’s stint of more than five decades in the publication segment has not only enabled strong relationships with educational institutions, but has also created a strong brand recall and trust factor with teachers, parents and retailers. Traditional publishing business is growing @10-12% CAGR with margins north of 33%. Buoyed by its success, Navneet ventured into Stationery business which, though is not as profitable as Publishing (9-12% margins), but helps leverage distribution reach and branding of the entire portfolio. Off-late, Navneet is targeting the digital opportunity by offering B2B animated versions of syllabus to schools and other B2C products like Cloud (TOPSCORER),pen drives and APP based product. Navneet has been a value stock over the years with a payout ratio of ~48%. However, considering RoE of 23% and consistent earnings over FY16-FY18E period, Navneet is well-positioned to deliver superior returns. Strong management bandwidth with proven track record, high visibility on operating cash-flows, superior return ratios and strong balance sheet, makes Navneet a preferred ‘BUY’ in the Education space with a TP of Rs132.

Strong content portfolio helps steady cash generation in publishing: Navneet enjoys near monopoly position in the supplementary books segment in Western India and generates ~Rs1.9bn EBITDA/annum in the publishing segment. Regular capex of Rs250-300m and strong cash generation makes publishing segment a cash cow for funding future growth avenues.

EBI to contribute 6% to growth for FY18E: Enclyclopaedia Britannica India (EBI) acquisition will give Navneet a straight 6% growth boost in revenues for FY18 which is significant contribution considering the 11% CAGR growth experienced by the company for FY11‐FY16 period. We like the deal as Navneet is almost debt free currently and is expected to generate cash flows in excess of Rs1.5bn for FY17

11/22/2016 63



Revenue (Rs m) 8,821 9,795 9,498 11,158 13,305

Growth (%) 9.5 11.0 (3.0) 17.5 19.2

EBITDA (Rs m) 2,080 2,373 2,056 2,599 3,080

PAT (Rs m) 1,152 1,304 1,243 1,512 1,776

EPS (Rs) 4.8 5.5 5.2 6.5 7.6

Growth (%) 6.6 14.0 (4.7) 24.1 17.5

Net DPS (Rs) 2.0 2.2 2.2 1.6 3.0




EBITDA margin (%) 23.6 24.2 21.6 23.3 23.1

RoE (%) 25.7 25.5 22.1 24.9 26.3

RoCE (%) 18.2 19.1 16.5 20.0 21.2

EV / sales (x) 3.1 2.7 2.7 2.3 1.9

EV / EBITDA (x) 13.2 11.1 12.6 9.9 8.4

PER (x) 21.8 19.1 20.0 16.2 13.8

P / BV (x) 5.2 4.6 4.3 3.9 3.4



Stock Performance

(%) 1M 6M 12M

Absolute 3.9 17.9 21.3


Nishna Biyani – [email protected]; +91-22-6632 2259 / Keyur Pandya – [email protected]; +91-22-6632 2247

Financials Navneet Education

11/22/2016 64



Net Revenue 8,821 9,795 9,498 11,158 13,305

Direct Expenses 4,337 4,640 4,604 5,300 6,453

% of Net Sales 49.2 47.4 48.5 47.5 48.5

Employee Cost 736 875 1,006 1,105 1,271

% of Net Sales 8.3 8.9 10.6 9.9 9.6


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 1,668 1,907 1,832 2,153 2,501

% of Net Sales 18.9 19.5 19.3 19.3 18.8

EBITDA 2,080 2,373 2,056 2,599 3,080

Margin (%) 23.6 24.2 21.6 23.3 23.1

Depreciation 258 308 288 350 403

PBIT 1,822 2,065 1,768 2,249 2,678


PBT 1,757 1,996 1,902 2,329 2,691

Total tax 605 693 666 792 915


PAT 1,152 1,303 1,034 1,512 1,776


Adjusted PAT 1,152 1,304 1,243 1,512 1,776




Share Capital 480 476 476 467 467




Total Debt 2,337 1,436 1,035 1,450 1,500

Other Liabilities(net) 1 1 1 1 -



Gross Block 3,483 3,567 3,945 4,945 5,195


Net Block 1,840 1,673 1,763 2,413 2,261

Capital Work in Progress 79 66 - 52 45

Cash & Cash Equivalent 745 735 711 831 996


Total Current Liabilities 1,253 1,317 787 1,771 1,875



Total Assets 7,183 6,909 6,881 7,781 8,754


NIIT Technologies (NITEC IN) Rating: BUY | CMP: Rs397 | TP: Rs590 | Mcap: Rs24.3bn / US$356.4m

NIIT Technologies’ (NIIT Tech’s) Q2FY17 revenues and margins were better than expectations. Revenue growth was driven by growth in Travel & Transport vertical and the Insurance business. Company expects insurance product business (~7% of revenues), which is mostly UK based, to remain muted in FY17, as Brexit may cause delay in decision‐making. NIIT Tech has guided for a softer Q3 due to seasonality in the business. Barring insurance, all the services business has a steady outlook for FY17 and company has guided for a better H2FY17 on the back of strong order bookings. Order bookings were ahead of company’s average at US$143m and executable order book is at US$309m.

Revenue and Margin beat: NIIT Tech reported revenue growth of 3.5% QoQ in CC terms (PLe: 3%). In USD, revenues grew by 2.3% QoQ to US$103.4m. EBITDA margins increased by 139bps QoQ at 16.5% beating our estimates. EBITDA margins increased mainly due to increase in international revenues and decline in SG&A costs for the quarter. Adj. EPS for the quarter increased by 12.8% QoQ to Rs9.7

Strong order intake; Digital business continues to remain strong: Fresh order intake for NIIT Tech was at US$143m, highest in the last several quarters driven by large wins from USA and EMEA. Amongst verticals, BFSI and Travel & Transportation business gained traction and increased by 2.3/5.5%, respectively, QoQ. Digital business growth remained strong and grew 9% QoQ and represents 19% of the company’s revenue mix.

We have a ‘BUY’ with TP of Rs590 based on 12x FY18 EPS. Stock is inexpensive at 9.7x/8.7x FY17/FY18 EPS and expected revenue recovery in H2FY17 will drive stock performance. Company also expects EBITDA margins to improve from 15.7% in Q2FY17 to 17.5% in Q4FY17. Margin expansion can drive earnings upgrade for the stock.

11/22/2016 65



Revenue (Rs m) 23,050 23,724 26,824 27,836 29,808

Growth (%) 14.0 2.9 13.1 3.8 7.1

EBITDA (Rs m) 3,516 3,456 4,733 4,543 4,909

PAT (Rs m) 2,307 1,939 2,814 2,592 2,875

EPS (Rs) 38.0 31.8 46.1 42.5 47.1

Growth (%) 7.3 (16.4) 45.1 (7.9) 10.9

Net DPS (Rs) 9.0 9.5 15.0 18.0 18.0




EBITDA margin (%) 15.3 14.6 17.6 16.3 16.5

RoE (%) 19.1 14.5 19.3 15.7 15.7

RoCE (%) 18.9 14.4 19.7 16.3 16.2

EV / sales (x) 1.0 0.9 0.8 0.7 0.6

EV / EBITDA (x) 6.2 6.3 4.5 4.4 3.8

PER (x) 10.5 12.5 8.6 9.4 8.4

P / BV (x) 1.8 1.8 1.6 1.4 1.3



Stock Performance

(%) 1M 6M 12M

Absolute (7.0) (16.1) (32.1)


Financials NIIT Technologies

11/22/2016 66



Net Revenue 23,050 23,724 26,824 27,836 29,808

Direct Expenses 15,166 15,656 16,793 17,712 18,958

% of Net Sales 65.8 66.0 62.6 63.6 63.6


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 4,368 4,612 5,298 5,580 5,941

% of Net Sales 19.0 19.4 19.8 20.0 19.9


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 3,516 3,456 4,733 4,543 4,909

Margin (%) 15.3 14.6 17.6 16.3 16.5

Depreciation 619 916 1,101 1,207 1,288

PBIT 2,897 2,540 3,632 3,336 3,621


PBT 3,185 2,559 3,815 3,554 3,867

Total tax 803 541 834 782 812


PAT 2,307 1,139 2,801 2,592 2,875

Extraordinary Gain/(Loss) - (800) (13) - -

Adjusted PAT 2,307 1,939 2,814 2,592 2,875




Share Capital 607 610 610 610 610




Total Debt 53 49 49 49 49




Gross Block 7,508 9,336 10,677 12,069 13,560


Net Block 4,534 5,579 5,819 6,004 6,206






Other Assets 778 1,134 1,134 1,134 1,134

Total Assets 13,790 14,149 16,215 17,888 19,844


VRL Logistics (VRLL IN) Rating: BUY | CMP: Rs263 | TP: Rs338 | Mcap: Rs24.0bn / US$353.0m

VRL Logistics (VRL) is the largest pan-India surface logistics and parcel delivery service provider with an experience of four decades in the Indian markets. The company owns and operates Pan-India fleet of Commercial Vehicles (3904) in goods transportation (GT), while Bus operations (425 buses) are concentrated in Southern and Western regions of India. VRL is expected to have earnings CAGR of 17% over FY16-FY18E period led by strong performance in Goods and Bus Transport Segment. However, if reforms like New Road Transport and Safety Bill & GST Bill gets implemented by Apr-17, then VRL may emerge as a key beneficiary with almost double-digit volume growth as we anticipate 20% increased availability of GT vehicles which are currently having high idling times at border crossings and tax collection check posts. Further, VRL is much better placed to garner any volume shift from unorganized to organized segment. VRL trades at 17x FY18E PER and 7.9x EV/EBITDA FY18E. The valuations are attractive considering: 1) Strong management pedigree with proven track record 2) High visibility on operating cash-flows 3) Superior returns ratios (above 23% RoE) amidst listed logistics players 4) Steady margins on the back of lower fuel prices and efficient use of Bio-diesel 5) Strong balance sheet (Net D/E of 0.4x FY16) and 6) Strong recovery potential if economic activity perks up. We would like to highlight that volumes in the Goods Transport segment for FY17 are looking down due to the ongoing disruption which can hurt our earnings projections for FY17, however we are pretty confident of growth returning back from FY18 and recommend VRL as a portfolio stock with a TP of Rs338.

Renewed focus on BT segment: VRL is looking to add 60-70 Volvo buses in FY17 at a capex of Rs600m (16% addition to total fleet) on select profitable routes. It is growth ready in this segment ahead of the passage of the New Road Transport and Safety Bill.

11/22/2016 67



Revenue (Rs m) 14,938 16,704 17,225 18,572 21,080

Growth (%) 12.7 11.8 3.1 7.8 13.5

EBITDA (Rs m) 2,066 2,720 2,677 2,441 3,187

PAT (Rs m) 504 867 1,023 894 1,402

EPS (Rs) 5.9 10.1 11.2 9.8 15.4

Growth (%) 133.5 72.1 10.7 (12.6) 56.8

Net DPS (Rs) 4.0 4.0 5.0 3.7 5.8




EBITDA margin (%) 13.8 16.3 15.5 13.1 15.1

RoE (%) 19.1 27.3 23.8 16.6 23.3

RoCE (%) 12.0 15.7 15.6 13.6 18.8

EV / sales (x) 1.8 1.6 1.5 1.4 1.2

EV / EBITDA (x) 13.3 9.9 9.9 10.6 7.9

PER (x) 44.7 26.0 23.5 26.9 17.1

P / BV (x) 7.4 6.3 4.7 4.3 3.8



Stock Performance

(%) 1M 6M 12M

Absolute (17.9) (34.0) (35.8)


Nishna Biyani – [email protected]; +91-22-6632 2259 / Keyur Pandya – [email protected]; +91-22-6632 2247

Financials VRL Logistics

11/22/2016 68



Net Revenue 14,938 16,704 17,225 18,572 21,080

Direct Expenses 10,912 11,794 11,850 13,271 14,647

% of Net Sales 73.0 70.6 68.8 71.5 69.5

Employee Cost 1,745 1,980 2,455 2,600 2,951

% of Net Sales 11.7 11.9 14.3 14.0 14.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 216 211 243 260 295

% of Net Sales 1.4 1.3 1.4 1.4 1.4

EBITDA 2,066 2,720 2,677 2,441 3,187

Margin (%) 13.8 16.3 15.5 13.1 15.1

Depreciation 866 877 900 960 1,005

PBIT 1,200 1,843 1,778 1,481 2,182


PBT 768 1,371 1,540 1,296 2,062

Total tax 198 467 517 402 660


PAT 570 904 1,023 894 1,402


Adjusted PAT 504 867 1,023 894 1,402




Share Capital 855 855 912 912 912




Total Debt 5,055 4,432 2,623 2,500 2,000




Gross Block 12,102 12,414 13,375 14,075 14,775


Net Block 7,394 7,051 7,159 6,840 6,535


Cash & Cash Equivalent 1,085 1,012 758 1,364 1,592


Total Current Liabilities 736 566 694 445 255

Net Current Assets 563 960 842 1,359 1,920

Other Assets - - 1 - -

Total Assets 9,041 8,965 8,743 9,150 9,456


Disclaimer

11/22/2016 69

BUY : Over 15% Outperformance to Sensex over 12-months

Accumulate : Outperformance to Sensex over 12-months

Reduce : Underperformance to Sensex over 12-months

Sell : Over 15% underperformance to Sensex over 12-months

Trading Buy : Over 10% absolute upside in 1-month

Trading Sell : Over 10% absolute decline in 1-month

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

Prabhudas Lilladher Pvt. Ltd. - 3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai 400 018, India. Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209

Rating Distribution of Research Coverage PL’s Recommendation Nomenclature

25.6%

60.7%

13.7%

0.0%0%

10%

20%

30%

40%

50%

60%

70%

BUY Accumulate Reduce Sell

% o

f To

tal C

ove

rage

DISCLAIMER/DISCLOSURES ANALYST CERTIFICATION We/I, Mr. R Sreesankar (B.Sc), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: Prabhudas Lilladher Pvt. Ltd, Mumbai, India (hereinafter referred to as “PL”) is engaged in the business of Stock Broking, Portfolio Manager, Depository Participant and distribution for third party financial products. 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