INSTITUTIONAL EQUITY RESEARCH Consumer & Retail sector

INSTITUTIONAL EQUITY RESEARCH

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH Please see penultimate page for additional important disclosures. PhillipCapital (India) Private Limited. (“PHILLIPCAP”) is a foreign broker-dealer unregistered in the USA. PHILLIPCAP research is prepared by research analysts who are not registered in the USA. PHILLIPCAP research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities Inc, an SEC registered and FINRA-member broker-dealer.

Consumer & Retail sector

Tax-rate benefit to cloak weak operating performance

INDIA | CONSUMER & RETAIL| Q2FY20 Results Preview

9 October 2019

» The consumer sector’s volume trends are likely to decelerate sequentially. However,

most consumer companies will be able to manage mid-single-digit volume growth, despite weak macro trends, as they compel trade channels to stock up ahead of the festive season. Here are some reasons for the deceleration: Liquidity challenges for the trade channels persist; NBFCs are not yet out of the woods yet. Agri-distress (folding up of ‘unfit’ organizations) is leading to job losses. Consumer confidence in rural areas remains low, as benefits of government welfare schemes have not yet reached the masses. As per the Ministry of Agriculture, only 50% of the targeted beneficiaries (140mn rural households) have benefited from PMKSN (Pradhan Mantri Kisan Samman Nidhi) so far till Sept, 2019. Kindly note PMKSN guarantees payment of Rs 6000/ year (in three tranches of Rs 2000/- each). Amendments in the Motor Vehicles Act has impacted wholesale trade, since many small retailers who generally travel to and fro from villages using vehicles are now reluctant to do so because of lack of proper vehicle papers. Currency-related depreciation and geo-political uncertainty in some countries continues to hurt international businesses of some companies.

» Asian Paints will see better volume growth vs. staples companies due to up-stocking ahead of the festive season, and aggression to match competitor and unorganized sector’s pricing. Titan should see grammage declining by c.15% yoy due to a sharp surge in gold prices, which has led to customers deferring discretionary purchases.

» In our view, most companies will see modest EBITDA margins expansion despite weak sales growth. This is due to benign raw material environment (ex-agri commodities), usage of ad-spends as a lever to manage margins, and cost-efficiency measures.

» Most companies will see a healthy uptick in net income due to reduction in maximum marginal tax rate to 25.17% from 34% with effect from 1

st April 2019. Tax incidence for

most companies will reduce drastically for the balance nine months, as tax outgo was far higher than required until Q1FY20. We see sales/EBITDA/PAT growth (aggregate) at 8%/11%/20% in 2QFY20. Dabur, Emami, Bajaj Corp and Godrej Consumer are not likely to benefit from the tax rate cut.

Key themes Rural sales yet to recover: Rural vs. urban growth has significantly moderated from 1QFY20, and as per our channel checks, it has fallen to being at par with urban growth rates (historically 1.3-1.5x of urban) due to liquidity challenges, delayed payment from government schemes, and rural distress. We expect rural recovery to be back-ended – above-normal monsoons will ensure healthy rabi output, strong proceeds from kharif crop harvest are likely, and with time, government welfare scheme will reach every nook and corner of the country. Liquidity challenges – no signs of abating: The wholesale channel, which contributes c.34-40% of FMCG sales, continues to remain stressed due to NBFCs being very cautious in making disbursements and because of the increased focus of consumer companies on direct reach. Working capital intensity has increased across FMCG companies, as they have to offer higher credit periods to distributors in order to mitigate liquidity-related challenges. Modern trade / e–commerce is hurting traditional trade: Most FMCG companies have emphasised that their MT and e-com businesses continue to grow strong at +20% when GT is struggling. This is because of rapid expansion of MT in metros and tier-1 cities and higher discounts/consumer offers by modern trade vs. general trade. This might lead to acceleration in the off-take of premium products (since they have greater salience in MT) across categories while mass products (higher salience in general trade) might suffer. Raw-material index – mixed trends: Prices of most crude-related derivatives (LLP, HDPE) have cooled-off significantly in 2QFY20, which should aid margins of HPC companies. However, food companies may face margin pressure in Q2 because of inflationary pressure in milk, SMP, wheat, and barley. Nevertheless, FMCG companies always have the option of hiking prices to mitigate inflation-related challenges.

Our top picks / avoid recommendations based on 2QFY20 results: Top picks: Asian Paints and Marico Avoid: Titan, Emami, Bajaj Corp and ITC Vishal Gutka, Research Analyst (+ 9122 6246 4118) [email protected] Preeyam Tolia, Research Associate (+ 9122 6246 4129) [email protected]

mailto:[email protected]

mailto:[email protected]

Page | 2 | PHILLIPCAPITAL INDIA RESEARCH

FMCG Q2FY20 RESULTS PREVIEW

Quarterly snapshot

____________Q2FY20E____________ ____________Q2FY19____________ _________yoy change (%)_________

(Rs mn) Revenue EBITDA PAT Revenue EBITDA PAT Revenue EBITDA PAT

Large caps

ITC 1,20,137 46,519 37,072 1,10,949 42,059 29,546 8.3% 10.6% 25.5%

HUL 96,908 22,232 16,575 91,380 20,190 15,220 6.1% 10.1% 8.9%

Asian Paints 53,854 10,104 7,169 46,391 7,842 4,928 16.1% 28.9% 45.5%

Total 2,70,900 78,855 60,815 2,48,719 70,091 49,694 8.9% 12.5% 22.4%

Mid-caps

Colgate 12,419 3,426 2,350 11,606 3,296 1,963 7.0% 4.0% 19.7%

Marico 19,672 3,581 2,648 18,368 2,941 2,142 7.1% 21.8% 23.6%

Emami 6,437 1,885 843 6,280 1,894 827 2.5% -0.5% 1.9%

Dabur 22,868 4,881 4,058 21,250 4,508 3,766 7.6% 8.3% 7.7%

GCPL 27,660 5,213 3,410 26,418 4,865 3,580 4.7% 7.1% -4.7%

Total 89,057 18,986 13,309 83,922 17,504 12,279 6.1% 8.5% 8.4%

Food’s companies

Nestle 32,210 7,954 5,808 29,220 7,252 4,461 10.2% 9.7% 30.2%

GSK consumer 13,690 3,942 3,725 12,720 3,537 2,755 7.6% 11.5% 35.2%

Britannia 30,287 4,895 3,786 28,548 4,544 3,030 6.1% 7.7% 25.0%

Total 76,186 16,791 13,320 70,488 15,332 10,246 8.1% 9.5% 30.0%

Retail

Titan 44,675 4,300 3,184 44,068 4,671 3,144 1.4% -7.9% 1.3%

Jubilant Foods 9,608 1,603 1,038 8,814 1,475 777 9.0% 8.6% 33.6%

Thangamayil 4,352 218 117 3,627 172 70 20.0% 26.5% 66.6%

Total 58,635 6,120 4,339 56,509 6,318 3,991 3.8% -3.1% 8.7%

Small caps

Bajaj Corp 2,240 667 564 2,057 606 517 8.9% 10.1% 9.2%

Agro Tech Foods 2,140 189 116 2,108 178 91 1.5% 6.2% 28.0%

Total 4,380 856 680 4,165 784 607 5.2% 9.2% 12.0%

Total Consumer & Retail 4,99,158 1,21,609 92,462 4,63,804 1,10,029 76,816 7.6% 10.5% 20.4%

Source: PhillipCapital India Research



Commodity snapshot

Commodities Base Unit INR Unit Q2FY20 Q2FY19 yoy (%) Q1FY20 qoq (%)

HPC

Soda Ash INR/50kg INR/50kg 1,273 1,300 -2.1% 1,342 -5.1%

PFAD USD/mt INR/mt 398 486 -18.2% 421 -5.4%

Copra INR/qt INR/qt 13,156 16,533 -20.4% 13,663 -3.7%

Mentha oil INR/kg INR/kg 1,428 1,795 -20.4% 1,558 -8.3%

Corn (Sorbitol) USD/bu INR/bu 392 353 11.0% 390 0.4%

Palm oil (India) INR INR 528 607 -13.0% 520 1.6%

Food & Beverages

Barley INR/qt INR/qt 1,844 1,604 15.0% 1,814 1.7%

Maize USD/bu INR/bu 392 353 11.0% 390 0.4%

Cocoa USD/mt INR/mt 2,200 2,288 -3.9% 2,200 0.0%

Soyabean Oil INR/10 kg INR/10 kg 720 749 -3.9% 720 0.0%

Coffee Robusta USD/mt INR/mt 1,331 1,650 -19.3% 1,380 -3.6%

Coffee Arabica USD/lb INR/lb 99 104 -4.1% 95 4.9%

Skimmed Milk Powder EUR/mt INR/mt 2,127 1,579 34.7% 2,016 5.5%

Wheat INR/qt INR/qt 2,120 1,964 7.9% 1,970 7.6%

Milk Powder INR/ltr INR/ltr 47 33 43.2% 41 15.4%

Gur & Sugar INR/qt INR/qt 3,579 3,565 0.4% 3,533 1.3%

Sunflower INR/10kg INR/10kg 828 792 4.5% 763 8.6%

Safflower INR/10kg INR/10kg 1,565 1,271 23.1% 1,565 0.0%

Rice Bran INR/10kg INR/10kg 605 690 -12.3% 579 4.4%

Packing materials

HDPE INR INR 91 127 -28.3% 97 -6.5%

LLP INR INR 44 48 -7.7% 47 -5.8%

Other data

TiO2 INR/kg INR/kg 266 264 0.8% 274 -3.1%

Vinyl Acetate Monomor USD/mt INR/mt 6,404 8,554 -25.1% 7,010 -8.6%

Brent Crude USD/bbl INR/bbl 62 76 -18.1% 69 -9.3%

WTI Crude USD/bbl INR/bbl 57 70 -18.8% 60 -5.8%

Gold spot (MCX) INR/10g INR/10g 36,415 30,067 21.1% 32,128 13.3%

Gold USD/ounce INR/ounce 1,470 1,214 21.1% 1,309 12.3%

Diamond USD/carat INR/carat 118 120 -1.9% 121 -2.3%

Currency

USD INR INR – US Dollar

70.30 70.09 0.3% 69.57 1.1%

EUR INR INR - Euro

78.29 81.50 -3.9% 78.15 0.2%

CNY INR INR - China Yuan

10.04 10.30 -2.6% 10.20 -1.5%

INR BDT INR-Bangladesh

1.20 1.20 0.0% 1.21 -0.8%

INR BRL INR-Brazilian

0.06 0.06 -0.2% 0.06 -0.3%

INR EGP INR-Egyptian Pound

0.24 0.26 -7.9% 0.24 -3.7%

INR IDR INR-Indonesia

200.85 208.36 -3.6% 205.00 -2.0%

INR KES INR-Kenya shilling

1.47 1.44 2.3% 1.46 1.0%

INR NGN INR-Nigerian Naira

5.15 5.17 -0.3% 5.18 -0.5%

INR SAR INR-Saudi Riyal

0.21 0.20 3.8% 0.21 0.5%

INR AED INR-UAE Dirham

0.05 0.05 -0.4% 0.05 -1.0%

INR MYR INR-Malaysia Ringgit

16.89 17.13 -1.4% 16.77 0.7%

INR VND INR-Vietnam Dong

330.37 331.69 -0.4% 335.04 -1.4%

Source: PhillipCapital India Research



Valuation snapshot

Mcap

Target ______P/E (x)_____ _____EV/Ebitda______ __% Cagr ( FY18-FY22__ ROE

Large Caps (Rs bn) Rating P/E (x) FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 Rev Ebitda PAT FY22

Large Caps

ITC 3,083 BUY 25 25 20 18 16 17 15 14 12 10 11 15 25

HUL 4,219 BUY 50 69 59 48 42 46 42 32 29 14 17 22 26

Asian Paints 1,662 BUY 50 77 56 47 39 44 36 31 27 15 18 25 27

Food companies

Nestle 1,310 BUY 55 82 69 58 50 48 44 39 34 12 13 18 83

GSK consumer 348 BUY

36 27 24

27 24 17

-100 -100 -100 -

Britannia 716 NEU 40 61 53 42 36 41 38 32 27 12 15 20 30

Indian companies

Colgate ** 398 SELL 30 53 47 44 40 32 30 28 26 8 7 9 65

Marico 488 BUY 40 53 45 39 34 38 31 27 24 12 16 15 33

Emami 136 NEU 20 28 22 20 18 19 16 15 13 10 12 16 20

Dabur 765 BUY 45 53 49 43 38 44 39 35 31 10 12 12 24

GCPL 688 SELL 30 46 45 40 36 33 31 28 26 9 9 8 22

Retail & Discretionary

Titan 1,063 NEU 45 78 65 52 42 54 47 37 30 19 21 23 26

Jubilant Foods 174 NEU 22 53 41 34 29 27 25 21 18 14 15 22 24

Thangamayil 5 BUY 10 15 12 9 NA 8 7 6 NA 8 10 17 NA

Small - Caps

Bajaj Corp 36 NEU 15 16 14 13 12 12 11 10 9 9 10 10 59

Agro Tech Foods 12 SELL 20 35 31 26 21 18 17 15 13 8 12 18 11

Source: Company, PhillipCapital India Research * We value Jubilant Foodworks on EV / EBITDA basis ** Colgate is a MNC



Earnings Estimates

(Rs mn) Sep-19E Jun-19 qoq (%) Sep-18 yoy (%) Comments

ITC

Volume growth (est.) 2.0 3.0 7.0 Cigarette volume growth to taper due to unfavourable base, loss of

market share to GPI and VST

EBITDA margin to see slight improvement on price hikes in value

segment, improving portability from FMCG business, significant

improvement in cyclical and capex -intensive (hotels, paper) segments

due to the industry upturn

Net income growth to be higher because of lower tax rate

Revenues 1,20,137 1,13,614 5.7% 1,10,949 8.3%

Gross Profit 74,485 72,215 3.1% 68,152 9.3%

Gross margin (%) 62.0 63.6 -156bps 61.4 57bps

EBITDA 46,519 45,657 1.9% 42,059 10.6%

EBITDA margin (%) 38.7 40.2 -146bps 37.9 81bps

PAT 37,072 31,739 16.8% 29,546 25.5%

EPS (Rs) 3.0 2.6 16.8% 2.42 25.5%

Hindustan Unilever

Volume growth (est.) 5.0 5.0 10.0 Expect 5% vol growth owing to rural slowdown, liquidity challenges in

the trade channel and unemployment-related problems

Gross margin to see moderate expansion due to benign input costs

Ebitda margin expansion to continue yoy on stringent cost control,

premiumization agenda and benign RM environment

Net income growth to be moderate despite favourable tax rate due to

higher other income in base qtr

Revenues 96,908 99,840 -2.9% 91,380 6.1%

Gross Profit 50,341 53,360 -5.7% 47,030 7.0%


EBITDA 22,232 26,470 -16.0% 20,190 10.1%


PAT 16,575 17,510 -5.3% 15,220 8.9%

EPS (Rs) 7.7 8.1 -5.3% 7.0 8.9%

Asian Paints

Volume growth (est.) 12.0 17.0 12.5 Healthy volume growth on: 1) benefit of GST rate cut, 2) gradual roll

out of its newly launched Tractor Sparc, 3) renewed aggression in

matching competition’s price, and 4) channel filling ahead of festival

season

Gross margin to expand yoy due to benign input costs

EBITDA margin expected to see c.200 expansion yoy due to ramping

up of new facilities, cost-savings initiatives and operating leverage

Net income growth to top EBITDA growth due to lower tax rate

Revenues 53,854 51,306 5% 46,391 16%

Gross Profit 21,945 22,337 -2% 18,467 19%


EBITDA 10,104 11,563 -13% 7,842 29%


PAT 7,169 6,554 9% 4,928 45%

EPS (Rs) 7.5 6.8 9% 5.1 45%

Colgate

Volume growth 7.0 4.0 7.0 Volume growth to revive on market share gains, increased share of

LUP, and higher incentives given to trade

Gross margin to see pressure due to higher discounting

Distribution expansion initiatives, higher promotion, to weigh on

operating profitability

Net income growth to be better due to lower tax rate

Revenues 12419 10760 15% 11606 7%

Gross Profit 7948 7056 13% 7491 6%

Gross margin (%) 64.0 65.6 -158bps 64.5 -54bps

EBITDA 3426 2998 14% 3296 4%

EBITDA margin (%) 27.6 27.9 -28bps 28.4 -81bps

PAT 2350 1699 38% 1963 20%

EPS (Rs) 8.6 6.2 38% 7.2 20%

Marico Industries

Volume growth (est.) 5 6 6 Mid-single-digit volumes on moderation in overall demand

environment across key categories

Gross margin expansion to continue due to lower copra prices

EBITDA margin expansion to be tad lower than gross margins, as it

ploughs back major part of gross profit towards NPD

Net income growth to be lower than EBITDA growth due to lower tax

rate

Revenues 19,672 21,660 -9.2% 18,368 7.1%

Gross Profit 9,344 10,290 -9.2% 8,081 15.6%


EBITDA 3,581 4,610 -22.3% 2,941 21.8%


PAT 2,648 3,270 -19.0% 2,142 23.6%

EPS (Rs) 2.1 2.4 -14.0% 1.7 23.6%

Emami

Volume growth (est.) - - (4.0) Liquidity-related challenges in the trade channel and consumer

slowdown will lead to a weak quarter

Gross margins to remain under pressure despite lower mentha oil

prices due to high cost inventory

Net income growth to be higher than EBITDA growth due to higher

other income

Revenues 6,437 6,486 -1% 6,280 2%

Gross Profit 4,377 4,162 5% 4,308 2%

Gross margin (%) 68.0 64.2 383bps 68.6 -60bps

EBITDA 1,885 1,341 41% 1,894 0%

EBITDA margin (%) 29.3 20.7 860bps 30.2 -87bps

PAT 843 399 111% 827 2%

EPS (Rs) 1.8 0.9 114% 1.8 2%




Dabur India Ltd

Volume growth 6.0 9.6 8.1 Expect moderation in volume growth sequentially due to liquidity

challenges in trade channels, rural-related distress

EBITDA margin to remain flat yoy due to 1) investment behind

creation of distribution infrastructure and higher A&P spends and 2)

subdued volume growth

Revenues 22,868 22,733 0.6% 21,250 7.6%

Gross Profit 11,366 11,256 1.0% 10,491 8.3%

Gross margin (%) 49.7 49.5 19bps 49.4 33bps

EBITDA 4,881 4,576 6.7% 4,508 8.3%

EBITDA margin (%) 21.3 20.1 121bps 21.2 13bps

PAT 4,058 3,831 5.9% 3,766 7.7%

EPS (Rs) 2.3 2.1 11.8% 2.1 7.7%

Godrej Cons. Products

Revenues 27,660 23,306 18.7% 26,418 4.7% Domestic HI business and Indonesia are likely to be silver linings

Lower RM cost to improve gross margins

Gross Profit 14,798 13,236 11.8% 13,860 6.8%


EBITDA 5,213 4,589 13.6% 4,865 7.1%


PAT 3,410 2,910 17.2% 3,580 -4.7%

EPS (Rs) 5.0 4.3 17.2% 5.3 -4.7%

Nestle

Volume growth 7.0 Innovation in existing categories, entry in new categories, and

distribution revamp to drive volume growth; immune to rural

slowdown

EBITDA margin to decline c.10bps yoy due to gross-margin-related

headwinds

Revenues 32,210 29,828 8% 29220 10.2%

Gross Profit 18,843 17,307 8.9% 17379 8.4%

Gross margin (%) 58.5 58.0 48bps 59.5 -98bps

EBITDA 7954 6973 14.1% 7252 9.7%


PAT 5808 4378 33% 4461 30.2%

EPS (Rs) 60.2 45.4 32.7% 46.3 30.2%

Glaxo Smithkline Cons

Volume 5.0 5.4 13.7 Decent mid-single-digit volume growth, driven by sachets and high

science based portfolio

Gross margins to moderate despite price hikes of 2.5-3.0% in Jan 2019

due to inflationary pressure in barley, SMP and packaging costs

EBITDA margin to see moderation on higher RM index

PAT growth higher than EBITDA on account of lower tax rate

Revenues 13690 11943 14.6% 12720 7.6%

Gross Profit 9514 8355 13.9% 8861 7.4%


EBITDA 3942 2804 40.6% 3537 11.5%


PAT 3725 2481 50.2% 2755 35.2%

EPS (Rs) 88.6 59.0 50.2% 65.5 35.2%

Britannia

Volume growth (est.) 3.0 3.0 12.0 Volume growth in the slow lane due to liquidity crunch, rural

slowdown and increased competition. New categories will continue to

do well

Gross margin to decline moderately yoy due to higher RM costs,

particularly milk, however other RM indexes remained benign

EBITDA margin to remain flat yoy (despite RM pressure) due to cost

efficiencies drive

PAT growth higher on lower tax rate

Revenues 30,287 26,773 13.1% 28,548 6.1%

Gross Profit 11,963 10,682 12.0% 11,343 5.5%


EBITDA 4895 3947 24.0% 4544 7.7%


PAT 3786 2666 42.0% 3030 25.0%

EPS (Rs) 15.8 10.5 50.8% 12.6 25.0%

Titan

Revenues 44,675 49,397 -9.6% 44,068 1.4% We expect grammage decline of 10% yoy due to sharp surge in gold

price, which generally leads to deferment of purchases

EBTIDA margin to remain flat yoy due to negative operating leverage

Net income growth to be higher than EBITDA growth because of lower

tax rate

Gross Profit 11,916 11,916 0.0% 11,916 0.0%

Gross margin (%) 26.7 24.1 27.0

EBITDA 4,300 5,653 -23.9% 4,671 -7.9%

EBITDA margin (%) 9.6 11.4 10.6

PAT 3,184 3,707 -14.1% 3,144 1.3%

EPS (Rs) 3.6 4.2 -14.1% 3.5 1.3%

Jubilant Foodworks

SSSG 4.0 4.1 20.5 High base, economic slowdown and increased competition from

online food aggregators to weigh on SSS. Pencilling in 5% SSSG during

2QFY20

Ebitda margin to improve c80bps yoy on back of improved product

mix , lower A&P spends and removal of one-off costs

Net income to be higher than Ebitda growth due to lower tax rate

Revenues 9608 9401 2.2% 8814 9.0%

Gross Profit 7230 7093 1.9% 6575 10.0%


EBITDA 1603 1472 8.9% 1475 8.6%


PAT 1038 815 27.3% 777 33.6%

EPS (Rs) 10.8 8.7 24.5% 8.8 22.6%




Thangamayil

Revenues 4,352 4,912 -11.4% 3,627 20.0% Volatility in gold prices to weigh on volume growth

Operating margin to see improvement due to low-cost inventory and

operating leverage

Gross Profit 392 453 -13.5% 324 20.9%


EBITDA 218 263 -17.4% 172 26.5%


PAT 117 129 -9.2% 70 66.6%

EPS (Rs) 8.5 9.4 -9.2% 5.1 66.6%

Bajaj Corp

Volume growth 5.0 4.7 -2.8 Not expecting any meaningful revival in volumes due to increased

competition, channel-related challenges

Gross margin to expand c.120yoy due to price hikes of 3.7% and

benign RM costs

Net income growth to be lower than EBITDA due to marginally higher

taxation and interest costs

Revenues 2,240 2,325 -3.6% 2,057 8.9%

Gross Profit 1,511 1,550 -2.5% 1,362 10.9%


EBITDA 667 705 -5.4% 606 10.1%


PAT 564 587 -3.9% 517 9.2%

EPS (Rs) 4.0 4.1 -3.2% 3.6 9.1%

Agro Tech Foods

Revenues 2,140 1,972 8.5% 2,108 1.5% Edible oil continues to remain under pressure as competition

intensifies. Foods business to see volume-led mid teen growth

Gross margin expansion should moderate sequentially as benefits of

increasing salience of foods business are partially negated by higher

sunflower oil price

Net income growth to be higher than operating profit growth due to

lower tax rate

Gross Profit 714 644 10.9% 682 4.7%


EBITDA 189 146 29.5% 178 6.2%


PAT 116 70 65.5% 91 28.0%

EPS (Rs) 4.8 2.9 65.5% 3.7 28.0%

Source: Company, PhillipCapital India Research



Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.

Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL 15% > to < +15% Target price is less than +15% but more than 15%

SELL <= 15% Target price is less than or equal to 15%.

Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below:

The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in this report.

The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report.

The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this research report.

The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in this report, in the past twelve months.

The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for the company (ies) covered in this report.

PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in connection with the research report.

The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report.

The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report.

Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:

Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No

4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report

No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No



Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.

Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.

Kindly note that past performance is not necessarily a guide to future performance.

For Detailed Disclaimer: Please visit our website www.phillipcapital.in IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report is a product of PhillipCapital (India) Pvt. Ltd. which is the employer of the research analyst(s) who has prepared the research report. PhillipCapital (India) Pvt Ltd. is authorized to engage in securities activities in India. PHILLIPCAP is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor.

Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Rosenblatt Securities Inc, 40 Wall Street 59th Floor, New York NY 10005, a registered broker dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through PHILLIPCAP. Rosenblatt Securities Inc. accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor.

The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account. Ownership and Material Conflicts of Interest Rosenblatt Securities Inc. or its affiliates does not ‘beneficially own,’ as determined in accordance with Section 13(d) of the Exchange Act, 1% or more of any of the equity securities mentioned in the report. Rosenblatt Securities Inc, its affiliates and/or their respective officers, directors or employees may have interests, or long or short positions, and may at any time make purchases or sales as a principal or agent of the securities referred to herein. Rosenblatt Securities Inc. is not aware of any material conflict of interest as of the date of this publication Compensation and Investment Banking Activities Rosenblatt Securities Inc. or any affiliate has not managed or co-managed a public offering of securities for the subject company in the past 12 months, nor received compensation for investment banking services from the subject company in the past 12 months, neither does it or any affiliate expect to receive, or intends to seek compensation for investment banking services from the subject company in the next 3 months. Additional Disclosures This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. Neither PHILLIPCAP nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report.

http://www.phillipcapital.in/



PHILLIPCAP may rely on information barriers, such as “Chinese Walls” to control the flow of information within the areas, units, divisions, groups, or affiliates of PHILLIPCAP.

Investing in any non-U.S. securities or related financial instruments (including ADRs) discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on such non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect within the United States.

The value of any investment or income from any securities or related financial instruments discussed in this research report denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related financial instruments.

Past performance is not necessarily a guide to future performance and no representation or warranty, express or implied, is made by PHILLIPCAP with respect to future performance. Income from investments may fluctuate. The price or value of the investments to which this research report relates, either directly or indirectly, may fall or rise against the interest of investors. Any recommendation or opinion contained in this research report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein.

No part of the content of this research report may be copied, forwarded or duplicated in any form or by any means without the prior written consent of PHILLIPCAP and PHILLIPCAP accepts no liability whatsoever for the actions of third parties in this respect.

PhillipCapital (India) Pvt. Ltd. Registered office: 18th floor, Urmi Estate, Ganpatrao Kadam Marg, Lower Parel (West), Mumbai – 400013, India.

Documents

INSTITUTIONAL EQUITY RESEARCH Consumer & Retail sector