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11 May 2020
Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Research Team ([email protected])
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Today’s top research Idea Market snapshot
Chart of the Day: Consumer - Alcoholic Beverages (‘Lost year(s)’ for alcoholic beverages)
Consumer-Alcoholic Beverages: ‘Lost year(s)’ for alcoholic beverages The COVID-19 pandemic is likely to sharply impact the earnings of alcoholic
beverages companies for FY21 on account of (a) lost sales due to lockdown,
(b) revoking of permissions by local authorities due to overcrowding at shops,
(c) nil sales from on-trade channel, (d) sharp hikes in excise duties being
imposed by states, and (e) expected delay in payments by states.
We believe home delivery of alcohol is unlikely to create any large positive
impact. The current challenges would lead to undoing the past improvement
of ROEs of United Breweries (UBBL) and United Spirits (UNSP). Earnings
growth and ROE improvement, which were key drivers of rerating these
stocks, will now be under pressure.
The current valuations seem lofty for UBBL and fair for UNSP leading to downgrades to Sell and Neutral, respectively.
Cos/Sector Key Highlights
Consumer Alcoholic Beverages: ‘Lost year(s)’ for alcoholic beverages
Reliance Industries Another feather in Jio Platforms’ cap
ICICI Bank Stable operating performance; COVID-19 drags down earnings
Bajaj Finance Macros to weigh on valuations; Long term outlook positive
Shree Cement Margins remain strong led by better realization
ICICI Pru Life IPRU’s total APE plunges 54% YoY in Apr’20
P&G Hygiene Lockdown leads to sales decline; profits in-line
NMDC Lower demand leads to sharp price cut
Telecom Subscriber additions turn positive once again
EcoScope Government increases FY21 gross market borrowings to INR12t
Expert Speak (Power) Reduction in demand and lower collection impacts DISCOMs
Motilal Oswal DIGI Connect Conference
NASSCOM / Auto & Auto Finance / Automobile
ROEs would deteriorate for both UBBL and UNSP, but the former would be more impacted
Source: MOFSL, Company
Research covered
11 May 2020 2
Mega FDI plan to focus on faster pharma approvals The government has begun examining ways to shore up foreign investments, including a fast-track mechanism to clear applications of companies especially in the pharmaceutical sector that are looking at India with the US pushing its companies to relocate from China…
'U.K. lockdown to stay in place till June 1': Boris Johnson Britain's coronavirus lockdown will stay in place until at least June 1, Boris Johnson said on Sunday, as he unveiled cautious plans to lift restrictions imposed seven weeks ago. "This is not the time simply to end the lockdown this week," he said in a televised address but added that some primary school children could return and shops re-open from June 1…
Railways to gradually resume passenger train services from May 12 After a gap of over a month, Indian Railways on Sunday said it will resume passenger train services in a phased manner from May 12, with online bookings starting Monday. To begin with, the national transporter will run 15 pairs of trains, which will include 30 return journeys…
Finance Minister Nirmala Sitharama to meet PSU bank chiefs on Monday; to review credit flow Finance Minister Nirmala Sitharaman will hold a review meeting with CEOs of public sector banks (PSBs) on Monday to discuss various issues, including credit offtake, as part of efforts to prop up the economy hit by the COVID-19 crisis…
Dishwashers, refrigerators, trimmers, large screen TVs becoming preferred appliances Big screen TV sets, large volume refrigerators, home theatres and dishwashers are now gaining traction, thanks to COVID-19 induced lockdown, according to home appliances and consumer electronics manufacturers…
Govt ropes in Zydus Cadila to mass produce ELISA antibody test kits The government has roped in Zydus Cadila for mass production of the country’s first indigenous ELISA test kit for antibody detection of covid-19 which was developed by National Institute of Virology in Pune. “ELISA based testing is easily possible even at district level…
NFL's fertiliser sales jump 71% to 3.62 lakh tonnes in April State-owned NFL achieved 71 per cent growth in sales of fertilisers in April 2020 at 3.62 lakh tonnes on rising demand for nutrients from farmers despite the nationwide lockdown...
Kindly click on textbox for the detailed news link
In the news today
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11 May 2020 3
‘Lost year(s)’ for alcoholic beverages Downgrade UBBL and UNSP to Sell and Neutral, respectively
The COVID-19 pandemic has caused the convergence of unforeseen and
unprecedented events in FY21, which is likely to sharply impact the earnings of
alcoholic beverages companies for the year.
Even if significant recovery is witnessed off a low base in FY22 (which seems uncertain
as of now) the segment is likely to see negligible profit growth / decline in profits over
the next two years.
In capital-intensive businesses such as Alcobev (relative to FMCG peers), this means
most of the good work done in recent years on the return ratio could see a drastic
setback. For example, alcobev companies had improved their ROEs from levels well
below those of consumer peers (and even below their own cost-of-capital levels) in
the past. ROEs could now take an even bigger hit than earnings. United Breweries
(UBBL)’s RoE is likely to be a little lower than 12% even in FY22, way below 19.2%
witnessed in FY19. Although United Spirits (UNSP) in a relatively better position than
UBBL, its ROE is still likely to be well below the 20–22% trend seen in the past few
years.
Earnings growth and ROE improvement have been the key factors responsible for the
rerating of these stocks in recent years. However, with the uncertainty surrounding
these key components of late, the current valuations seem lofty.
We believe the home delivery of alcohol, as is being proposed by several states, is
unlikely to create any large positive impact in the interim given the logistical, social
distancing, and legal challenges that need to be addressed.
In our report in March 2019, we had changed our long-standing preference for UBBL
over UNSP by downgrading the former to Neutral from Buy and upgrading UNSP to
Buy from Neutral. On a relative basis, UNSP has outperformed UBBL by 25.4% since
the call, while on an absolute basis, both have declined 10.1% (in line with our
coverage universe) and 35.5%, respectively.
We have cut our FY21/FY22 earnings estimates sharply by 45%/32% for UBBL
(effective cut of 63%/43% including the preview note last month) and 36%/20% for
UNSP (effective cut of 51%/31% including the preview note last month). We have
further downgraded both stocks, UBBL from Neutral to Sell and UNSP from BUY to
Neutral, as a result of the ‘Lost year(s)’.
We have valued UBBL at 18x FY22E EV/EBITDA, with a TP of INR700, resulting in a 21%
downside on its CMP of INR890. Based on our DCF calculations, we have arrived at a
TP of INR515 for UNSP, implying a 3% upside on its CMP of INR501 (effective target
multiple of 37x Mar’22E EPS).
Risks to our call emerge from two key factors: (a) there is upside risk if the execution
of home delivery is extremely successful and if the spread of the epidemic after the
eventual repeal of lockdown restrictions is much slower than feared, (b) there is
downside risk if the extremely steep increase of 70% and 75% witnessed this week in
Delhi and Andhra Pradesh, respectively, is replicated by more states or if the delay in
payments by states gets extended by more than our current assumption of one
month, resulting in sharper cuts to our earnings forecasts.
Sector Update | 9 May 2020
Consumer - Alcoholic Beverages
UBBL - Financials Snapshot (INR b)
Y/E March 2020E 2021E 2022E
Net Sales 66.9 53.5 66.9
Net Sales Gr. (%) 3.3 -20.0 25.0
EBITDA 8.8 6.3 10.0
Margins (%) 13.2 11.7 14.9
Adj. PAT 4.3 2.5 4.6
Adj. EPS (INR) 16.3 9.6 17.5
EPS Gr. (%) -23.4 -41.2 82.5
BV/Sh. (INR) 134.5 142.6 153.6
Ratios RoE (%) 12.8 6.9 11.8
RoCE (%) 12.3 6.0 10.2
Valuations P/E (x) 54.6 92.8 50.8
P/BV (x) 6.6 6.2 5.8
EV/EBITDA (x) 26.7 36.7 24.5
EV/Sales (x) 3.5 4.3 3.7
UNSP - Financials Snapshot (INR b)
Y/E March 2020E 2021E 2022E
Sales 92.2 74.5 91.5
Sales Gr. (%) 2.7 -19.2 22.7
EBITDA 14.9 10.4 15.6
Margins (%) 16.2 14.0 17.1
PAT 8.3 5.5 10.0
EPS (INR) 11.4 7.6 13.8
EPS Gr. (%) 22.9 -33.5 80.6
BV/Sh.(INR) 52.2 59.8 73.6
Ratios RoE (%) 21.9 12.7 18.7
RoCE (%) 17.8 18.1 24.4
Payout (%) 0.0 0.0 0.0
Valuations P/E (x) 43.8 65.8 36.4
P/BV (x) 9.6 8.4 6.8
EV/EBITDA (x) 25.2 35.1 23.1
11 May 2020 4
BSE SENSEX S&P CNX CMP: INR1,562 TP: INR1,713 (+10%) Buy 31,643 9,252
Stock Info
Bloomberg RIL IN
Equity Shares (m) 6,339
M.Cap.(INRb)/(USDb) 9900.8 / 126.5
52-Week Range (INR) 1618 / 876
1, 6, 12 Rel. Per (%) 25/30/36
12M Avg Val (INR M) 16594
Free float (%) 51.1
Financials Snapshot (INR b)
Y/E March 2020E 2021E 2022E
Net Sales 5,957 5,358 6,873
EBITDA 879 902 1,197
Net Profit 432 421 622 Adj. EPS (INR) 68.1 66.4 98.1
EPS Gr. (%) 8.4 -2.5 47.8
BV/Sh. (INR) 715.1 776.7 867.2
Ratios
Net D:E 0.6 0.5 0.3
RoE (%) 10.3 8.9 11.9
RoCE (%) 8.5 7.7 9.9
Payout (%) 11.6 7.3 7.8 Valuations
P/E (x) 22.9 23.5 15.9
P/BV (x) 2.2 2.0 1.8
EV/EBITDA(x) 14.2 13.9 9.9
EV/Sales (x) 2.1 2.3 1.7
Div. Yield (%) 0.4 0.3 0.4
Shareholding pattern (%)
As On Dec-19 Sep-19 Dec-18
Promoter 48.9 48.9 46.2
DII 13.6 14.2 12.2
FII 26.3 25.6 25.7
Others 11.2 11.4 16.0
FII Includes depository receipts
Stock Performance (1-year)
Another feather in Jio Platforms’ cap Global investor Vista Equity Partners picks 2.32% stake for INR113.7b
Reliance Industries’ (RIL) Jio Platforms appears to be the new darling of the
global investing community. In less than three weeks, on 8th May’20, RIL has
announced a third equity stake sale in Jio Platforms to US-based investment
firm Vista Equity Partners. Vista would invest INR113.7b in Jio Platforms for
2.32% equity stake at post-money equity value of INR4.91t (in-line).
Once again, this deal reiterates global investors’ interest in Jio Platforms.
Moreover, Jio Platforms is in a sweet spot currently. With investments coming
from Facebook (FB) (see report), Silver Lake (see report) and now Vista, the
company would be better-abled to crystalize its digital plans.
Further, Jio Platforms has turned virtually debt free through the recent capital
reorganization, InvIT structure and now the stake sales.
We value Jio Platforms assigning EV/EBITDA multiple of 13x on FY22E to arrive
at a target price of INR855/share.
Contours of the deal
RIL’s announcement states that Vista Equity Partners would invest INR113.7b
in Jio Platforms for 2.32% equity stake at post-money equity value of INR4.91t
and at enterprise value of INR5.2t.
Jio Platforms’ valuation in this deal is in line with the Silver Lake investment
(INR4.9t post-money equity) and is at 12.7% premium to the FB deal (INR4.4t).
This is the third high-profile investment in RIL’s Jio Platforms in less than three
weeks; overall RIL has raised INR606b for 13.5% equity stake through the three
deals.
Strong conviction on Jio Platforms’ valuation
The third high-profile investment in Jio Platforms in less than three weeks
reiterates the company’s global demand and reaffirms its valuation.
Vista Equity Partners is a 20-year old global investment firm with USD57b in
cumulative capital commitments and its global network of companies
represents the fifth largest enterprise software in the world.
Thus, the deal is significant from the perspective of RJio’s valuation and
demand with the global investor community. Also, Jio Platforms will be able to
leverage the experience of Vista’s expertise to fulfill its digital plans.
RJio virtually a debt-free company
Also, RJio has turned virtually debt free due to (a) the creation of the InvIT
structure of INR707b in FY20 wherein the company has transferred its tower and
fiber assets, (b) capital reorganization in which INR1.08t was transferred to the
parent company, and (c) stake sales – INR147b from the FB deal (rest transferred
to RIL), INR55.8b from Silverlake deal and INR113.7b from the current Vista deal.
8 May 2020
Update | Sector: Oil & Gas
Reliance Industries
11 May 2020 5
With all these transactions, RJio’s net debt has reduced from INR1.4t in FY19 to
INR5b currently (net debt to EBITDA reduced from 9.7x to virtually nil in FY21E) and
has enabled RJio to create a healthy balance sheet. These transactions along with
EBITDA hike opportunity (either through ARPU hike or market share gains) could
provide potential RoCE of 15.2% in FY21E.
Valuation and view
RJio should garner revenue/EBITDA CAGR of 22%/44% over FY20-22E along with
strong EBITDA margin expansion. Although the company has witnessed subdued
ARPU growth in 4QFY20, we believe this could be due to longer validity plans and
full benefit of the price hike should accrue in FY21. Further, the favorable
competitive landscape in the Indian telecom industry could offer healthy
incremental EBITDA gain through a combination of ARPU increase and market share
gains. Due to RJio’s lower debt and market leadership position, the company should
garner premium valuations as compared to competitors. Thus, we have valued RJio
at INR855/share (v/s INR760/share earlier) assigning 13x EV/EBITDA on FY22E (v/s
Bharti’s 11x on India business). Subsequently, we have increased target price of RIL
to INR1,713/share from INR1,618 earlier. RJio – DCF Valuation (INR b)
Source: MOFSL, Company
267
1,713
350 33
500
855 292
Refining Petchem E&P RelianceRetail
RJio Net debt /(cash)
Target price
INR/share
6.0x FY22 EBITDA Equity value Standalone
11 May 2020 6
Estimate change TP change Rating change Bloomberg ICICIBC IN
Equity Shares (m) 6,470
M.Cap.(INRb)/(USDb) 2180.2 / 29.2
52-Week Range (INR) 552 / 269
1, 6, 12 Rel. Per (%) -1/-7/5
12M Avg Val (INR M) 11312
Financials & valuations (INR b)
Y/E March FY20 FY21E FY22E
NII 332.7 376.6 424.7
OP 281.0 312.6 347.4
NP 79.3 122.2 163.5
NIM (%) 3.7 3.7 3.7
EPS (INR) 12.3 18.9 25.3
EPS Gr (%) 135.0 53.8 33.8
ABV/Sh. (INR) 152.1 167.0 193.0
Cons. BV/Sh. (INR) 191.3 211.0 234.4
Ratios
RoE (%) 7.2 10.3 12.4
RoA (%) 0.8 1.1 1.3
Valuations
P/BV (x) (Cons) 1.8 1.6 1.4
P/ABV (x) 1.5 1.4 1.2
P/E (x) 19.2 12.5 9.3
Div. Yield (%) 0.0 0.5 0.6
*Adjusted for Investment in Subs
Shareholding pattern (%) As On Mar-20 Dec-19 Mar-19
Promoter 0.0 0.0 0.0
DII 36.4 34.4 34.4
FII 54.5 57.2 57.2
Others 9.1 8.4 8.4
FII Includes depository receipts
CMP: INR338 TP: INR475 (+41%) Buy
Stable operating performance; COVID-19 drags down earnings, tempers growth outlook High moratorium places asset quality as key monitorable The bank has created higher than the required provisions toward COVID-
19 which affected earnings. On the other hand, operating performance
remains strong, supported by robust NII at 17% YoY, despite higher tax
refunds in 4QFY19. On the asset quality front, slippages remain elevated,
led by one healthcare and one oil trading account, although higher write-
offs have led to GNPA improvement. ~30% of the loan book has availed
moratorium, with a higher incidence of the CV, 2-Wheeler, and Rural
portfolios.
We cut our FY21/22 PAT estimate by 8%/3% as we factor in higher credit
cost and moderation in fee growth. Maintain Buy.
COVID-19 provisions drag down earnings; Slippages stand elevated
due to select corporate accounts PAT grew 26% YoY to INR12.2b (71% QoQ decline; MOSLe: INR26.7b),
affected by higher provisions (INR59.7b), as the bank made COVID-19
provisions of INR27.25b, higher than the requirement as per RBI
guidelines.
NII grew 17% YoY to INR89.3b, led by ~16% YoY growth in retail loans and
10bp QoQ expansion in margins to 3.87%. In FY20, NII/PPoP/PAT grew at
23%/20%/136% YoY.
Other income rose 18% YoY, with core fees growing 13% YoY to ~INR36b
(retail forms 75% of the total fees). Opex grew 16% YoY to INR57.9b,
resulting in PPoP growth of 19% YoY to INR73.9b (8% beat).
Advances grew 10% YoY, with the domestic book growing at 13% YoY
(~16% YoY growth in retail), while the overseas loan mix declined to
8.4%. Deposit growth came in strong at 18% YoY, led by term deposits
growing ~29% YoY. The avg. CASA mix stood at 42.3% v/s 42.8% in
3QFY20.
Fresh slippages increased to INR53.1b, led by one healthcare and one oil
trading account, resulting in corporate and SME slippages of INR40.1b,
and retail slippages at INR12.9b. Overdue loans (90+ dpd) worth
INR13.1b were not classified as GNPA as the bank availed RBI relaxation,
which otherwise would have impacted GNPA by 18bp. Higher write-offs
(INR54.5b) led to improvement in the GNPA/NNPA ratio by 42bp/8bp
QoQ to 5.5%/1.4%. PCR stood largely stable at 75.6%.
The BB and below book declined to INR166.7b (v/s INR174b in 3QFY20).
Downgrades in the BB and below pool have come from certain accounts
in the CRE sector.
10 May 2020 4QFY20 Results Update | Sector: Financials
ICICI Bank
11 May 2020 7
Highlights from management commentary COVID-19 impact: As of April’20, ~30% of the portfolio had availed moratorium.
High moratorium was availed in the CV, 2-Wheeler, and Rural portfolios.
COVID-19 provisions were predominantly toward retail loans. INR12b (10%
provisions) was towards overdue accounts, as per RBI guidelines.
Valuation and view We expect loan growth to moderate given the weak macro environment,
weighed by the COVID-19 outbreak. The BB and below pool is likely to increase,
while a high share of loans under moratorium would result in elevated slippages
over FY21E. As a prudent measure, the bank has made additional provisions of
INR27.2b toward COVID-19-related stress; furthermore, lower exposure to the
SME segment (3.5% of loans) and high granularity in the BB and below book
provides some comfort. Nevertheless, we increase our credit cost estimate to
2.2% in FY21E and cut FY21/22E earnings by 8%/3%. We thus estimate ICICIBC
to deliver RoA/RoE of 1.3%/12.4% in FY22. Maintain Buy, with an SOTP-based
target price of INR475 (1.9x FY22 ABV for the bank).
Quarterly performance (INR b)
FY19 FY20 FY19 FY20 FY20 v/s
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4QE Est
Net Interest Income 61.0 64.2 68.8 76.2 77.4 80.6 85.5 89.3 270.1 332.7 81.4 10%
% Change (YoY) 9.2 12.4 20.5 26.5 26.8 25.6 24.3 17.1 17.3 23.1 6.9 Other Income 38.5 31.6 38.8 36.2 34.3 41.9 45.7 42.5 145.1 164.5 42.1 1%
Total Income 99.5 95.7 107.6 112.4 111.6 122.5 131.2 131.8 415.3 497.2 123.5 7%
Operating Expenses 41.5 43.2 46.1 50.1 48.7 53.8 55.7 57.9 180.9 216.1 53.6 8%
Operating Profit 58.1 52.5 61.5 62.3 62.9 68.7 75.5 73.9 234.4 281.0 69.8 6%
% Change (YoY) 12.1 -24.9 21.5 -17.0 8.3 30.9 22.8 18.6 -5.3 19.9 12.0 Provisions 59.7 39.9 42.4 54.5 35.0 25.1 20.8 59.7 196.6 140.5 34.2 74%
Profit before Tax -1.6 12.6 19.0 7.8 27.9 43.7 54.7 14.2 37.8 140.5 35.6 -60%
Tax -0.4 3.5 3.0 -1.9 8.8 37.1 13.2 2.0 4.1 61.2 8.9 -77%
Net Profit -1.2 9.1 16.0 9.7 19.1 6.5 41.5 12.2 33.6 79.3 26.7 -54%
% Change (YoY) NM -55.8 -2.7 -5.0 NM -27.9 158.4 26.0 -50.4 135.8 175.8 Operating Parameters Deposit 5,469 5,587 6,068 6,529 6,607 6,963 7,163 7,710 6,529 7,710 7,378 4%
Loan 5,163 5,445 5,643 5,866 5,924 6,134 6,357 6,453 5,866 6,453 6,541 -1%
Deposit Growth (%) 12.5 12.0 17.3 16.4 20.8 24.6 18.1 18.1 16.4 18.1 13.0 508
Loan Growth (%) 11.3 12.8 11.7 14.5 14.7 12.6 12.6 10.0 14.5 10.0 11.5 (150)
Asset Quality Gross NPA (%) 8.8 8.5 7.8 6.7 6.5 6.4 6.0 5.5 6.7 5.5 6.3 (73)
Net NPA (%) 4.2 3.7 2.6 2.1 1.8 1.6 1.5 1.4 2.1 1.4 1.7 (29)
PCR (%) 54.8 59.5 68.5 70.7 74.1 76.1 76.1 75.6 70.7 75.6 74.2 140
E:MOFSL Estimates
11 May 2020 8
BSE SENSEX S&P CNX
31,643 9,252
Bloomberg BAF IN
Equity Shares (m) 577
M.Cap.(INRb)/(USDb) 1218.3 / 16.4
52-Week Range (INR) 4923 / 1916
1, 6, 12 Rel. Per (%) -19/-30/-14
12M Avg Val (INR M) 8654
Financials & Valuations (INR b)
Y/E March 2020E 2021E 2022E
Net Income 168.2 177.2 202.1
PPP 110.8 124.4 140.3
PAT 56.3 44.6 64.8
EPS (INR) 94.1 74.5 108.2
EPS Gr. (%) 35.8 -20.8 45.2
BV/Sh. (INR) 554 619 715
Ratios
NIM (%) 10.4 10.1 10.3
C/I ratio (%) 34.1 29.8 30.6
RoA (%) 3.9 2.6 3.5
RoE (%) 21.3 12.7 16.2
Payout (%) 10.0 10.0 10.0
Valuations
P/E (x) 21.5 27.2 18.7
P/BV (x) 3.7 3.3 2.8
Div. Yield (%) 0.5 0.4 0.6
Shareholding pattern (%) As Of Mar-20 Dec-19 Mar-19
Promoter 56.2 56.2 55.2
DII 10.9 10.5 8.5
FII 21.5 22.5 20.9
Others 11.5 10.9 15.5
FII Includes depository receipts
CMP: INR2,025 TP: INR 2,300 (+14%) Neutral
Macros to weigh on valuations; Long term outlook positive Scenario analysis suggest credit cost of 5.3-8%
Over the past decade, Bajaj Finance (BAF) has had nothing but a dream run; the
company delivered AUM/PAT/MCAP CAGR of 44%/55%/48% and GNPL ratio has
declined from 8% to 1.6%. However, given the current environment, FY21 would
be a year of consolidation. BAF would face real big challenges on (a) risk
management, (b) trimming flab created in the upcycle, and (c) fine-tuning the
business model.
BAF is well placed amongst all large NBFCs to counter the near-term challenges of
liquidity (sitting on 11-12% of AUM), ALM dislocation caused by moratorium and
capitalization (CAR of ~27%, leverage of just ~4x). Even in case of ~50% AUM
being under moratorium, the company would comfortably meet all its debt
obligations for the next three months and still have liquidity of ~INR90b
remaining on its balance sheet (refer Exhibit 3).
We conducted a sensitivity analysis on credit costs in FY21 by factoring in
different slippage rates based on expected moratorium across product segments,
20% relapse rate and 35% recovery/upgrades from relapse. According to our
conservative calculations, in the base case/case 1, net slippages may spike to
~6.7% in FY21 (v/s run-rate of sub-2%), credit costs would jump to ~5.3%. While
the situation is still evolving, we derive comfort from the company having 65% of
its customers with 750+ CIBIL score.
Considering the changed lockdown guidelines and extension of period, we have
further increased credit cost by 25bp/10bp each to 4.3%/3.3% for FY21/22E and
have built in gradual growth recovery (~12% in FY22E v/s ~20% earlier). We have
cut earnings estimates by 6-7% for FY21/22E.
While we remain convinced of the strength of BAF’s business model to deliver
better than sector returns over the medium-to-long term and get comfortable on
multiples, an immediate significant re-rating is unlikely due to (a) near-term
macro volatility caused by COVID-19, and (b) lack of any specific catalyst. We cut
our TP to INR2,300 (3.2x FY22 BVPS) to factor in EPS cuts and moderation in
growth. Maintain Neutral.
Key Risks: (a) Extension of the lockdown and moratorium period, (b) Higher share
of riskier/unsecured products in portfolio, (c) Competitive pressures from banks
on housing loans, (d) Continued funding challenges for NBFCs, although we
believe BAF would be less impacted.
Well placed to counter near-term challenges
Apart from managing asset quality, key challenges for any lending institution in
the near term would be (a) managing liquidity and ALM, and (b) maintaining
adequate capital for comfort of the rating agencies as well as depositors. BAF
scores well on all fronts with (a) strong liquidity on the balance sheet of
INR160b (11-12% of AUM), and (b) healthy ALM situation – ~40% of its loans
are of less than one year duration. Our ‘adjusted’ ALM analysis reveals that
even if ~50% customers avail the moratorium, BAF would be able to meet its
debt obligations (but not disburse any fresh loans) and sit on excess liquidity of
~INR90b (this does not factor in any new borrowings), (c) capitalization – BAF
has the least leverage (~4x) among large NBFCs – it has recently raised INR85b
(~40% of net worth), which stands it in good stead v/s other NBFCs.
9 May 2020 Company Update | Sector: Financials
Bajaj Finance
Please note all the calculation/assumptions in the note are based on our judgement on each product class related to a) Repayment rate b) Moratorium expected c) worst case expected LGDs under stress scenario – BAF does not disclose specifics regarding the same. Hence actuals may vary significantly to estimates/Assumptions
11 May 2020 9
Building in adequate buffer for credit cost and growth We conducted product-wise scenario analysis of credit costs depending on the net
slippage ratio. We assume three scenarios with weighted average net slippages ratio
ranging from 6.7% to 10% (run-rate is sub-2%) based on expected moratorium of
each product class, 20% relapse rate and 35% recovery/upgrade from relapse. We
also assume write-offs (benchmarking reported PCR to each product) based on each
product class and keep PCR levels constant (for rest of the portfolio), which leads us
to 5.3-8% credit cost under various scenarios. In our view, part of this is likely to be
up-fronted in 4QFY20 earnings and a part would be deferred to FY22E. We have
increased our credit cost by 25bp/10bp for FY21/22E to 4.3%/3.3% to factor in the
revised lockdown scenario and have modelled in gradual growth recovery in FY22E
(12.5% v/s 20% earlier). We must state that the situation remains extremely volatile
and this is our best case judgement based on product /customer profile.
Liability diversification to gain traction
Post the IL&FS crisis, the company aggressively moved to ECB and deposit
mobilization (share now at 20% v/s 14% pre-Sep’18) to diversify the liability side.
Risk aversion by banks and volatile bond markets would continue to weigh on the
funding cost of NBFCs in the near-to-medium term, but BAF is better placed than
peers due to strong parentage, healthy capitalization and a proven business model.
BAF has demonstrated strong execution on the deposit front too – starting from
scratch in FY14, it has scaled up the deposit base to INR207b as of 9MFY20 with over
200k depositors. Performance on this front would be the key monitorable in the
ensuing quarters. Note that public deposit rates are competitive with those of other
NBFCs (Exhibit 16).
Long-term drivers in place; Macro uncertainty to weigh on valuations
We believe BAF’s long-term thesis remains intact; the company has (a) strong
customer acquisition helped by large distribution network, (b) an ability to create a
profitable business model in an already crowded market, (c) created a niche in few
product/customer segments, (d) a disciplined liability and ALM approach, (e) an
ability to monetize customer base and improve asset-light income streams, and (f)
high flexibility on opex. While multiples are getting comfortable, any significant re-
rating is unlikely due to near/medium-term challenges caused by COVID-19 and lack
of specific catalysts. Maintain Neutral with TP of INR2,300 (3.2x FY22E BVPS).
Stock Performance (1-year)
11 May 2020 10
Estimate change TP change Rating change
Bloomberg SRCM IN
Equity Shares (m) 36
M.Cap.(INRb)/(USDb) 676.2 / 8.8
52-Week Range (INR) 25300 / 15500
1, 6, 12 Rel. Per (%) 11/16/11
12M Avg Val (INR M) 765
Financials & Valuations (INR b)
Y/E Mar 2020 2021E 2022E
Sales 119.0 104.8 128.7
EBITDA 36.7 30.0 39.5
Adj. PAT 15.7 10.8 18.8
EBITDA Margin (%) 30.9 28.6 30.7
Cons. Adj. EPS (INR) 435 299 521
EPS Gr. (%) 34.3 -31.4 74.3
BV/Sh. (INR) 3,585 3,764 4,176
Ratios
Net D:E -0.3 -0.4 -0.7
RoE (%) 13.9 8.1 13.1
RoCE (%) 13.0 8.1 12.2
Payout (%) 6.9 13.4 9.6
Valuations
P/E (x) 43.1 62.7 36.0
P/BV (x) 5.2 5.0 4.5
EV/EBITDA(x) 17.0 20.3 14.4
EV/ton (USD) 204 174 162
Div. Yield (%) 0.2 0.2 0.3
FCF Yield (%) 3.6 3.1 3.0
Shareholding pattern (%)
As On Mar-20 Dec-19 Mar-19
Promoter 62.6 62.6 64.8
DII 11.2 9.9 6.2
FII 11.9 13.2 13.0
Others 14.3 14.4 16.0
FII Includes depository receipts
CMP: INR 18,741 TP: INR 19,500 (+4%) Neutral
Margins remain strong led by better realization Net cash balance sheet a key strength in current times Shree Cement’s (SRCM) 4QFY20 results reflect the benefit of improved
pricing as EBITDA/t has improved sharply as expected with decline in costs.
A strong balance sheet (~INR45b net cash) and limited capex provides
comfort in the current environment of weak demand due to COVID-19. We,
however, believe this is factored in at the current valuation (15x FY22E
EV/EBITDA), and hence, maintain Neutral rating.
In-line operational results; lower tax rate leads to PAT beat
SRCM’s 4QFY20 volumes declined 5.4% YoY to 6.9mt. This was much lower
than the 10-12% YoY decline reported by peers ACC and Ambuja.
Blended realization (incl. power) was up ~3.5% YoY (+2% QoQ) to INR4,659/t
(5% lower than est. INR4,881/t), which could be due to external sale of
power (not disclosed from this quarter).
Total revenue declined 2% YoY to INR32.2b (4% lower than est.).
Blended cost/t declined 7% YoY (-3% QoQ) to INR3,097/t. Employee cost
dropped 9% QoQ due to INR125m cut in remuneration by top management.
EBITDA/t rose 34% YoY (15% QoQ) to INR1,562/t (in-line).
Total EBITDA grew 27% YoY to INR10.8b (v/s est. INR10.7b) with margin at
33.5% (+7.7pp YoY).
Tax rate was lower than expected at 11.9% for 4QFY20 (v/s 24% in 4QFY19
and est. 24%). As a result, PAT was up 83% YoY to INR5.9b (v/s est. INR4.9b).
The company has stopped reporting power segment details from 4QFY20.
FY20 operating cash flows (OCF) have nearly doubled YoY to INR38.5b due to
stronger EBITDA (+32% YoY) and working capital release of INR6.9b (v/s
increase of INR6.5b last year).
FCF has also improved substantially to INR24.6b (v/s INR1.7b in FY19) due to
lower capex of INR12.9b (v/s INR18.9b in FY19).
Net cash has accordingly risen to ~INR45b (v/s debt of INR2b in FY19).
Valuation and view
While SRCM’s home market of North India remains better placed (due to
consolidated market structure and lower capacity additions), its increasing
exposure to the East is expected to result in blended margin declining. The
East region is likely to witness ~30% capacity expansion by various players
(including SRCM) over the next 18 months, which would likely create a fight
for market share in a weak demand environment.
A strong balance sheet (~INR45b net cash) and limited capex provides
comfort in the current environment of weak demand due to COVID-19.
We value SRCM at 15x FY22E EV/EBITDA and add value of the UAE
operations at USD70/t to arrive at a target price of INR19,500. The stock
trades at 14.4x FY22E EV/EBITDA, which does not offer much upside in our
view. Maintain Neutral.
8 May 2020 4QFY20 Results Update | Sector: Cement
Shree Cement
11 May 2020 11
Quarterly Performance (S/A)
(INR Million)
FY19 FY20 FY19 FY20 FY20 Var.
Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
4QE (%)
Net Sales 30,699 25,866 27,806 32,849 30,364 28,017 28,483 32,175 1,17,599 1,19,040 33,568 -4
YoY Change (%) 21.0 21.0 21.1 16.9 -1.1 8.3 2.4 -2.0 18.9 1.2 2.2
Total Expenditure 24,247 19,829 20,906 24,370 21,342 19,576 19,990 21,387 89,731 82,295 22,891 -7
EBITDA 6,452 6,037 6,901 8,478 9,022 8,442 8,493 10,789 27,869 36,745 10,677 1
Margins (%) 21.0 23.3 24.8 25.8 29.7 30.1 29.8 33.5 23.7 30.9 31.8
Depreciation 3,055 3,295 3,361 4,206 4,027 4,283 4,322 4,362 13,917 16,994 4,409
Interest 1,262 1,458 393 697 680 717 741 726 3,810 2,865 732
Other Income 936 514 553 451 511 578 649 978 2,454 2,716 900
PBT before EO Exp 3,071 1,798 3,700 4,026 4,826 4,018 4,079 6,678 12,596 19,602 6,435 4
Extra-Ord Expense 0 1,781 0 0 0 0 0 0 1,781 0 0
PBT 3,071 17 3,700 4,026 4,826 4,018 4,079 6,678 10,814 19,602 6,435 4
Tax 276 -476 687 817 1,196 928 980 797 2,177 5,248 1,543
Rate (%) 9.0 -2,784.8 18.6 20.3 24.8 23.1 24.0 11.9 12.1 19.9 24.0
Reported PAT 2,795 493 3,013 3,210 3,630 3,091 3,100 5,882 9,510 15,702 4,893 20
Adj PAT 2,795 2,275 3,013 3,210 3,630 3,091 3,100 5,882 11,292 15,702 4,893 20
YoY Change (%) -36.5 7.5 -9.6 -19.6 29.9 35.9 2.9 83.3 -18.4 39.1 52.4
E:MOSL Estimates
Quarterly performance (INR/t)
Sales volume (m ton) 6.99 5.64 5.93 7.30 6.06 5.72 6.25 6.91 25.86 24.92 6.20 1
YoY Change (%) 18.7 15.6 11.4 13.3 -13.3 1.4 5.3 -5.4 14.8 -3.6 4.5
Blended Realization 4,394 4,585 4,688 4,500 5,013 4,898 4,561 4,659 4,237 4,642 4,881 -7
YoY Change (%) 6.0 10.0 13.8 8.2 14.1 6.8 -2.7 3.5 1.0 9.6 4.6
Expenditure
RM Cost 345 298 346 343 306 264 401 263 334 327 333 -21
Staff Cost 244 301 281 234 316 323 297 245 245 293 287 -15
Power & Fuel 1,014 1,089 1,111 1,046 1,070 1,046 768 900 868 773 928 -3
Freight 1,219 1,039 1,098 1,061 1,103 1,013 1,031 1,034 1,107 1,041 1,018 2
Other Expenses 648 787 689 656 728 776 705 654 675 742 763 -14
Total Op cost 3,470 3,515 3,524 3,338 3,524 3,422 3,201 3,097 3,230 3,177 3,328 -7
EBITDA 923 1,070 1,163 1,161 1,489 1,476 1,360 1,562 1,007 1,466 1,552 1
YoY Change (%) -20.2 -5.5 15.8 21.6 61.3 37.9 16.9 34.5 -7.7 45.5
11 May 2020 12
BSE SENSEX S&P CNX CMP: INR400 TP: INR430 (+8%) Buy 31,443 9,199
Financials & Valuations (INR b)
Y/E MARCH FY20 FY21E FY22E
Net Premiums 328.8 355.6 390.8
Surplus / Deficit 21.9 13.5 15.4
Sh. holder's PAT 10.7 11.4 12.3
NBP growth unwtd (%) 20.5 8.0 11.5
APE gr. - (%) -2.9 8.1 13.4
Tot. Premium gr.(%) 8.1 7.7 9.9
VNB margin (%) 21.7 22.9 23.0
RoE (%) 15.0 14.9 14.5
RoEV (%) 6.5 14.3 15.7
Total AUMs 1530 1726 2019
VNB (INRb) 16.0 17.6 20.1
EV per share 160 183 212
Valuations
P/EV (x) 2.5 2.2 1.9
P/EPS (x) 53.7 42.5 39.4
IPRU’s total APE plunges 54% YoY in Apr’20
IPRU Life has reported 54% YoY decline in total APE to INR1.9b during Apr’20
(64% MoM decline) v/s a decline of 47% YoY in Mar’20.
Individual WRP declined 55% YoY to INR1.5b during Apr’20 (~68% MoM
decline) v/s a decline of 49% YoY in Mar’20.
FY20 VNB growth remained steady at 21% YoY led by improvement in asset
mix (protection/annuity segment). VNB margins, thus, improved to 21.7%
during FY20 (470bp YoY increase).
We expect business growth to remain under pressure over the near term,
especially for the saving business, given the reduced economic activity and
extension in lockdown across several key cities. Also, sluggishness in the
capital market and lower earnings visibility should lead to tepid demand for
ULIPs over the next few quarters. Term and annuity business is, however,
likely to do well; also, they are relatively simpler to buy through digital
channels. We, thus, expect their share to increase further in the overall
premium mix and support further margin expansion.
Valuation and view: ULIP demand is likely to remain muted amidst
challenging macros due to the COVID-19 pandemic. Thus, it is expected to
pressurize overall premium growth. Protection/annuity segments though are
likely to see healthy growth and should help drive steady margins (23% by
FY22E). We, estimate IPRU Life to deliver ~12% VNB CAGR over FY20-22E led
by 11% new business APE while operating RoEV should sustain at ~16% (for
FY22E). Maintain Buy with target price of INR430 (2.0x FY22E EV). APE trends over the last few years
INRb FY18 FY19 FY20 4QFY20 April’20
Total APE 77.91 77.99 73.81 19.74 1.90
Growth (YoY, %) 17.6% 0.1% -5.4% -19.7% -54.0%
RWRP 74.61 70.95 66.43 16.88 1.55
Growth (YoY, %) 16.4% -4.9% -6.4% -25.9% -55.1%
Source: Company, MOFSL
11 May 2020
Update | Sector: Financials - Insurance
ICICI Prudential Life Insurance
11 May 2020 13
Estimate changes CMP: INR10,034 TP: INR9,995 Neutral
TP change Rating change
Bloomberg PG IN
Equity Shares (m) 32
M.Cap.(INRb)/(USDb) 325.7 / 4.4
52-Week Range (INR) 12700 / 8500
1, 6, 12 Rel. Per (%) -15/10/13
12M Avg Val (INR M) 77
Financials & valuations (INR b)
Y/E March 2019 2020E 2021E 2022E
Sales 29.5 30.0 31.7 36.4
Sales Gr. (%) 20.0 1.7 5.7 14.8
EBITDA 6.1 6.1 7.0 8.3
Margins (%) 20.7 20.4 22.0 22.9
Adj. PAT 4.1 4.5 5.1 6.2
Adj. EPS (INR) 126.3 138.1 158.1 189.6
EPS Gr. (%) 7.3 9.3 14.4 19.9
BV/Sh.(INR) 280.1 322.9 372.0 430.8
Ratios
RoE (%) 47.9 45.9 45.6 47.3
RoCE (%) 50.4 48.3 47.7 49.4
Valuations
P/E (x) 79.4 72.6 63.5 52.9
P/BV (x) 35.8 31.1 27.0 23.3
EV/EBITDA (x) 52.6 51.7 45.0 37.3
Div. Yield (%) 1.0 1.0 1.1 1.3
Shareholding pattern (%) As On Mar-20 Dec-19 Mar-19
Promoter 70.6 70.6 70.6
DII 12.9 12.2 10.8
FII 2.8 3.3 3.4
Others 13.7 13.8 15.1
FII Includes depository receipts
Lockdown leads to sales decline; profits in-line While P&G Hygiene and Healthcare (P&GHH)’s operations in 3QFY20 were
affected by the COVID-19-led lockdown, its ability to arrest decline in
profitability is encouraging.
We believe the company’s portfolio is highly resilient and would bounce
back once normalcy returns.
Long-term prospects remain attractive on account of strong moats.
Maintain Neutral.
Sales below expectations; EBITDA in-line P&GHH’s 3QFY20 sales declined 6.2% YoY to INR6.6b (est. INR7.1b), with
EBITDA decreasing 3.6% YoY to INR1.4b (est. INR1.4b) and PBT coming in
flat YoY at INR1.4b (est. INR1.3b).
Adj. PAT grew 12.8% YoY to INR1b (est. INR990m), supported by a lower
corporate tax rate. Reported PAT came in at INR911m, which has been
adjusted for exceptional expenses.
Ad spends grew 6.4% YoY to INR747m, employee expenses 45.2% YoY to
INR502m, and other expenses 12.3% YoY to INR1.7b.
Gross margins expanded 900bp YoY to 66.6%. As a percentage of sales, ad
spends rose 130bp YoY to 11.4%, employee costs 270bp YoY to 7.7%, and
other expenses 440bp YoY to 26.5%. This resulted in a 60bp expansion in
EBITDA margins to 21.1% (est. 19%) in 3QFY20.
The company reported impairment loss of INR139m on certain items in
Property, Plant, Equipment that had been classified as “Held for Sale”. We
have adjusted our 3QFY20 tax and PAT numbers for this exceptional expense.
9MFY20 sales/EBITDA/PAT grew +2.5%/-6.8%/+4.5% YoY.
Highlights from management commentary The management had forecast high single-digit sales growth for the quarter
before the lockdown. However, the company’s operations have been
severely disrupted due to the lockdown.
The management further indicated in the near term, the company would
focus on scaling up its operations to maximize the availability of its products
to meet consumer needs, while following the health and safety guidelines
imposed by government authorities.
Valuation and view While near-term sales are likely to be impacted, P&GHH has a more
resilient portfolio, than that of peers, to withstand the COVID-19-related
disruption in the post lockdown phase. We maintain sales forecasts in FY21
and FY22 and sustained profitability improvement in recent quarters, with
normalizing ad-spends over the next couple of years resulting in an ~10%
EPS upgrade.
Although valuations are expensive at 52.9x FY22E EPS, implying near-term
upside is limited, two factors make P&GHH an attractive long-term core
holding: (a) huge category growth potential in the Feminine Hygiene
segment (~70% of sales) and potential for market share gains owing to its
considerable moats, and (b) potentially massive margin gains from
premiumization in Feminine Hygiene over the long term. Maintain Neutral.
8 May 2020 3QFY20 Results Update | Sector: Consumer
P&G Hygiene and Healthcare
11 May 2020 14
Standalone – Quarterly earnings-15% -9% 1% -24% -4% (INR m)
Y/E June FY19 FY20 FY19 FY20E FY20 Var.
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE 3QE (%)
Net Sales 7,918 8,181 6,993 6,373 8,521 8,593 6,561 6,297 29,465 29,972 7,133 -8.0% YoY Change (%) 20.4 16.2 22.9 21.5 7.6 5.0 -6.2 -1.2 20.0 1.7 2.0 Gross profit 4,766 4,542 4,032 3,776 5,146 5,381 4,371 3,983 17,116 18,882 4,280.0
Margin (%) 60.2 55.5 57.7 59.3 60.4 62.6 66.6 63.3 58.1 63.0 60.0
EBITDA 2,096 1,912 1,437 648 1,822 1,867 1,384 1,042 6,093 6,114 1,357 2.0% Growth 11.8 -9.0 -1.9 -22.8 -13.1 -2.4 -3.6 60.7 -3.0 0.4 -5.6 Margins (%) 26.5 23.4 20.5 10.2 21.4 21.7 21.1 16.5 20.7 20.4 19.0
Depreciation 121 123 126 128 115 115 118 145 498 491 141 Interest 4 5 5 40 4 22 24 20 55 70 7 Other Income 104 117 84 97 110 90 145 100 402 446 114
PBT 2,160 1,901 1,390 577 1,814 1,820 1,388 977 6,027 5,999 1,323 4.9% Tax 719 660 489 -31 445 461 371 232 1,836 1,510 333 Rate (%) 33.3 34.7 35.2 -5.4 24.6 25.3 26.8 23.8 30.5 25.2 25.2
Adj PAT 1,356 1,241 901 608 1,368 1,359 1,016 711 4,106 4,489 990 2.7% YoY Change (%) 17.3 -5.4 -1.4 36.5 0.9 9.5 12.8 17.0 7.3 9.3 9.8 Margins (%) 18.2 15.2 12.9 9.5 16.1 15.8 15.5 11.3 13.9 15.0 13.9
E: MOFSL Estimates
Y/E June FY19 FY20
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE
2Y average growth (%)
Sales 15.0 12.8 11.0 12.9 14.0 10.6 8.4 10.1 EBITDA 17.9 -8.5 -3.3 -29.4 -0.6 -5.7 -2.8 19.0
PAT 14.0 -9.1 -4.8 -3.2 9.1 2.0 5.7 26.7
% of Sales
COGS 39.8 44.5 42.3 40.7 39.6 37.4 33.4 36.7
Employee Expenses 4.5 4.5 4.9 3.9 4.9 5.0 7.7 5.2
A&P Expenses 10.5 11.0 10.0 11.0 12.3 12.6 11.4 10.2
Other Expenses 18.7 16.7 22.1 34.1 21.8 23.3 26.5 31.4 Depreciation 1.5 1.5 1.8 2.0 1.3 1.3 1.8 2.3
YoY change (%)
COGS 13.7 29.7 44.6 39.6 7.1 -11.7 -26.1 -10.9
Employee Expenses 22.8 27.2 5.9 2.8 17.5 16.3 45.2 30.2
A&P Expenses 57.7 32.9 -3.2 3.6 25.6 20.4 6.4 -8.7
Other Expenses 33.4 16.8 37.6 33.8 25.6 47.0 12.3 -9.2
Other Income 194.9 64.5 27.5 41.9 5.6 -22.6 72.2 3.4
EBIT 13.1 -9.1 -1.2 -27.4 -13.6 -2.1 -3.4 72.5 E: MOFSL Estimates
11 May 2020 15
BSE SENSEX S&P CNX CMP: INR73 TP: INR123(+68%) Buy 31,643 9,252
Stock Info
Bloomberg NMDC IN
Equity Shares (m) 3,062
M.Cap.(INRb)/(USDb) 224.1 / 3
52-Week Range (INR) 140 / 62
1, 6, 12 Rel. Per (%) -9/-8/-7
12M Avg Val (INR M) 733
Free float (%) 30.4
Financials Snapshot (INR b)
Y/E March 2020E 2021E 2022E
EBITDA 65.2 39.4 50.0
Adj. PAT 47.6 30.6 38.4
Adj. EPS (INR) 15.6 10.0 12.5
EPS Gr(%) -0.3 -35.7 25.3
BV/Sh. (INR) 93.5 97.1 103.3
RoE (%) 17.5 10.5 12.5
RoCE (%) 16.8 10.1 12.1
P/E (x) 4.6 7.2 5.7
P/BV 0.8 0.7 0.7 Shareholding pattern (%)
As On Mar-20 Dec-19 Mar-19
Promoter 69.7 72.3 72.3
DII 20.1 17.7 18.9
FII 6.0 6.0 3.9
Others 4.3 4.0 4.9
FII Includes depository receipts Stock Performance (1-year)
Lower demand leads to sharp price cut Near-term outlook muted; Maintain Buy on attractive valuation
According to industry sources, NMDC has sharply reduced prices for iron ore
fines and lumps by INR400/t (~17%) starting 9th May’20.
Weak iron ore demand leads to consecutive price cuts: During Apr’20, NMDC’s
volumes declined 49% YoY to 1.38mt amid weak demand, which has led to the
company cutting prices for both fines and lumps by INR400/t (~17%). Thus,
prices of NMDC’s iron ore fines/lumps now stand at INR1,960/INR2,250 per ton.
This price reduction follows NMDC’s earlier price cut of INR500/t in Apr’20.
Expect prices to recover in 2HFY21: We believe iron ore prices would remain
subdued in 1HFY21 due to weak demand as most steel plants are operating at
lower utilizations. However, we expect a recovery in iron ore prices in 2HFY21 in
line with demand improvement and due to closure of the 6-month window for
iron ore liquidation for Odisha merchant miners who lost their mines in the
recent iron ore mine auction. As a result, we have factored in an increase of
INR350/t (~15%) for 2HFY21, implying ~10% higher prices in FY21E over current
prices. We further expect ~12% higher prices in FY22E over FY21E.
Expect volumes to decline ~9% YoY in FY21 to 28.5mt: During Apr’20, NMDC’s
volumes declined 49% YoY to 1.38mt due to lower demand. This in turn was due
to lower utilization level of large steel plants and shutdown taken by secondary
steel producers. Most secondary steel producers resumed operations in May’20
and large steel players have also indicated higher utilizations for the month. As a
result, we expect lower volume decline in May-Jun’20 and factor in decline of
~35% YoY for 1QFY21. We have factored in ~9% decline in NMDC’s volumes for
FY21E to 28.5mt (Chhattisgarh – 22mt, down ~10% YoY; Karnataka – 6.5mt, down
~7% YoY). However, we expect volumes to recover ~11% YoY to 31.5mt in FY22E.
Lower volumes and prices to lead EBITDA decline of ~40% YoY: Due to lower
iron ore prices, we expect NMDC’s EBITDA/t to decline ~33% YoY to INR1,383/t.
This coupled with ~9% lower volumes should lower NMDC’s FY21E EBITDA by
~40% YoY to INR39.4b. We have cut our FY21E/FY22E estimates by 31%/29% to
INR39.4b/INR50b.
Valuation and view: NMDC’s aggressive price cut indicates weakness in iron ore
demand. However, we expect NMDC to increase prices once demand normalizes.
A favorable decision on Donimalai mine would increase NMDC’s volumes by
~20%. The company has spent ~INR16.5b on the greenfield Nagarnar steel plant
with guided commissioning in FY21E. We, however, remain skeptical on the
commissioning of this plant, and thus, have not factored it into our earnings. We
value the stock at INR123/share on SOTP basis – 5x FY22E EV/EBITDA for its core
iron ore mining business and 50% book value for the Nagarnar plant
(INR34/share). At CMP of INR72/share, the stock is ascribing only INR31/share
(net of cash of INR8/share and 50% investment in steel plant of INR34/share to
steel business) to its core business, implying 2x FY22E EV/EBITDA. Also, the stock
provides dividend yield of ~9% at current prices. Reiterate Buy.
50
80
110
140
Feb
-19
May
-19
Au
g-1
9
No
v-1
9
Feb
-20
NMDC
Sensex - Rebased
9 May 2020
Update | Sector: Metals
NMDC
11 May 2020 16
Subscriber additions turn positive once again Bharti/RJio see healthy MBB adds, VIL still losing
The Telecom Regulatory Authority of India (TRAI) has released subscriber data for Jan’20.
Here are the key insights:
After last month’s decline in subscribers across the industry, driven by ARPU hikes,
subscriber adds turned positive once again. The gross subscriber base increased by
4.9m (v/s a 3.2m drop in Dec’19) to 1,156m, led by the addition of 0.9m/6.6m by
Bharti/RJio, partially offset by decline of 3.6m in VIL’s subscriber base. Furthermore,
the active subscriber base increased by 3.8m (v/s 3.5m in Dec’19) to 986.3m, led by
the healthy addition of 4.9m customers by RJio. On the contrary, both Bharti/VIL lost
1.7m/0.3m of their active subscriber base.
Bharti gained 0.9m gross subscribers (328m in total), while it lost 1.7m of its active
subscriber base (313m in total). Despite losing active subscribers, Bharti has continued
to maintain its top spot in terms of active subscriber market share with 31.7%.
VIL’s gross/active subscriber base continued to decline by 3.6m/0.3m to 329m/297m;
however, the pace of decline in the active subscriber base slowed significantly (3.1m in
Nov’19 and 1.1m in Dec’19). Subsequently, VIL’s gross/active subscriber market share
fell to 28.5%/30.1% (v/s 28.9%/30.3% in Dec’19).
RJio continued to add the most subscribers, with 6.6m gross and 4.9m active
subscriber additions (v/s 3m in Dec’19). However, the pace of subscriber adds is
gradually slowing from the peak of 12–14m and average of 8–10m earlier. It reached
32.6% of gross market share, retaining its top position.
Industry MBB subscriber adds returned to a healthy 10.4m (v/s 0.9m decline in Dec’19)
to 637m, after witnessing the impact of a price hike during the month. Currently, MBB
subscribers account for 64.6% (+80bp MoM) of the total active subscribers in the
market.
Bharti/RJio added 4.4m/6.6m MBB subscribers (v/s 0.5m/0.1m in Dec’19), while VIL
lost 0.5m (v/s 1.4m in Dec’19), indicating both Bharti and RJio continued their previous
trend of MBB subscriber adds. Bharti/RJio’s MBB subscriber market share improved
30bp/10bp MoM to 22.3%/59.1%, whereas that of VIL further declined to 18.5% (-
40bp MoM). Of the 6.6m MBB adds by RJio, we believe a higher proportion would be
for Jiophone; thus, excluding Jiophone, Bharti would lead in MBB adds.
Subscriber additions turn positive After last month’s decline in subscribers across the industry, driven by ARPU hikes,
subscriber adds turned positive once again. The gross subscriber base increased by
4.9m to 1,156m, thus returning to the previous trend of 3–4m subscriber additions
monthly. Bharti/RJio’s gross subscriber base increased 0.9m/6.6m (v/s 0m/0.1m) to
328m/377m, while VIL lost 3.6m of its gross subscribers.
Active subscriber additions rose 3.8m in Jan’20 (v/s 3.5m in Dec’19) to 986m.
Growth in active subscribers has been driven single-handedly by RJio, which
reported subscriber additions of 4.9m, partially offset by Bharti/VIL’s subscriber loss
of 1.7m/0.3m. The loss of Bharti’s subscriber base came as a surprise to us as the
company’s focus is on adding quality customers. Although VIL has continued to
Sector Update | 9 May 2020
Telecom
Our earlier telecom update
11 May 2020 17
witness loss in its active subscriber base, the pace of decline has slowed (3.1m in
Nov’19 and 1.1m in Dec’19).
Bharti loses active subscriber base
While the Telecom industry added 3.8m active subscribers, Bharti surprisingly lost
1.7m subscribers, which may be attributed to SIM consolidation post the price hike
taken in Dec’19. Despite the loss in its active subscriber base, Bharti has been able
to maintain its top position in the active subscriber base market with 31.7% share (-
30bp MoM), followed by RJio with 31.4% share, and VIL with 30.1% share.
With 0.9m gross subscriber additions witnessed in Jan’20, Bharti’s gross subscriber
base has reached 328m, with the company maintaining its market share of 28.4%.
Furthermore, Bharti remained in the third spot (slightly behind VIL) in terms of gross
subscriber market share.
RJio continues to gain active subscribers
RJio’s gross subscribers increased 6.6m to 377m, taking its market share to 32.6%
(+50bp MoM). Although RJio has continued to add the most gross subscribers (with
the top position in terms of market share), its pace has reduced from the peak of
12–14m subscriber adds monthly and average of 8–10m in the recent past. In terms
of active subscriber base, the company gained 4.9m subscribers, along with market
share gains of 40bp MoM to 31.4%. With this, RJio has inched closer to Bharti in
gaining the top position in terms of market share. We believe the active subscriber
additions are attributed to low ARPU for Jiophone customers.
VIL continues losing subscribers
VIL lost 3.6m gross subscribers (v/s 3.6m in Dec’19) to reach 329m; it lost 0.3m
active subscribers (v/s 1.1m in Nov’19), taking its total active subscriber base to
297m; its active market share fell to 30.1%, v/s 30.3% in Dec’19. In terms of gross
subscribers, market share stands at 28.5% (-40bp MoM). VIL continues to lose
subscribers, attributed to sub-par network capabilities. Additionally, its survival
hinges on the Supreme Court’s decision on DoT’s plea to defer the AGR liability with
government support.
Broadband subs data – MBB returns to healthy adds of 10.4m Industry MBB subscribers increase by 10.4m: Industry MBB subscriber adds
returned to a healthy 10.4m in Jan’20 (-0.9m in Dec’19) to 637m, after the
impact of the price hike taken in Dec’19. Currently, MBB subscribers account for
64.6% (+80bp MoM) of the total active subscribers in the market. These healthy
subscriber additions are attributed to 4.4m/6.6m additions reported in
Bharti/RJio.
Bharti – Continues with healthy MBB subscriber adds: Bharti added 4.4m MBB
subscribers (0.5m in Dec’19) to reach a total subscriber base of 142m. With this,
Bharti’s subscriber market share improved 30bp to reach 22.3%, with the
company gaining 42% incremental market share. Of the 6.6m MBB adds by RJio,
we believe a higher proportion may be attributable to Jiophone. Thus, with the
exclusion of Jiophone, Bharti would lead in MBB adds.
11 May 2020 18
RJio – Sees most MBB additions: RJio registered 6.6m MBB subscriber adds (v/s
+0.1m in Dec’19), taking the company’s total subscriber base to 377m. Its
market share stood at 59.1% (+10bp MoM). We believe a higher proportion of
these adds would be attributable to low ARPU for Jiophone customers; thus,
with the exclusion of Jiophone, RJio may not lead the pack.
Vodafone-Idea – Loses MBB subscribers: VIL lost 0.5m net MBB subscribers
during the month (v/s 1.4m in Dec’19), taking the total subscriber base to 118m.
The company’s market share also declined by 40bp MoM to 18.5%.
Active subscriber base — Bharti has highest active subscribers (m) Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20
Bharti 328 328 324 320 316 312 306 303 310 313 315 313
Vodafone Idea 377 368 342 334 322 311 308 302 302 299 298 297 RJio 250 258 265 268 278 282 289 290 304 302 305 310
Top three players 955 954 931 922 916 905 904 895 916 914 917 920
Other players 67 68 68 68 68 67 66 66 66 65 66 66
Total 1,023 1,022 1,000 989.6 983.8 972.4 970.2 960.9 981.2 979.1 982.6 986.3
Source: TRAI, MOFSL
Active subscriber net adds – RJio leads (m) Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20
Bharti -3.2 -0.2 -3.7 -4.2 -4.4 -3.6 -5.7 -3.5 6.8 3.7 1.4 -1.7 Vodafone Idea -7.2 -9.1 -26.0 -8.6 -11.2 -11.1 -2.9 -5.9 -0.7 -3.1 -1.1 -0.3
RJio 9.3 8.0 7.2 3.1 10.2 4.0 7.2 0.5 14.3 -2.4 3.0 4.9
Top 3 players -1.1 -1.3 -22.5 -9.7 -5.4 -10.8 -1.5 -8.9 20.4 -1.7 3.2 2.9
Other players 1.1 0.4 0.5 -0.3 -0.4 -0.7 -0.8 -0.4 -0.1 -0.4 0.2 0.8
Total 0.0 -0.9 -22.1 -10.1 -5.8 -11.4 -2.2 -9.3 20.3 -2.1 3.5 3.8
Source: TRAI, MOFSL
Active subscriber market share —Bharti in top position (%) Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20
Bharti 32.1 32.1 32.4 32.3 32.1 32.1 31.6 31.5 31.5 32.0 32.0 31.7
Vodafone Idea 36.9 36.0 34.2 33.7 32.8 32.0 31.8 31.5 30.8 30.5 30.3 30.1 RJio 24.4 25.2 26.5 27.1 28.3 29.0 29.8 30.2 31.0 30.8 31.0 31.4
Top 3 players 93.4 93.4 93.2 93.1 93.1 93.1 93.2 93.2 93.3 93.3 93.3 93.3
Other players 6.6 6.6 6.8 6.9 6.9 6.9 6.8 6.8 6.7 6.7 6.7 6.7
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: TRAI, MOFSL
Trend in gross subscriber base (m)
Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20
Bharti 340 325 322 320 320 329 328 326 326 327 327 328
Vodafone Idea 409 395 393 388 383 380 375 372 373 336 333 329
RJio 297 307 315 323 331 340 348 355 364 369.9 370.0 376.6 Top 3 players 1047 1027 1030 1031 1035 1048 1051 1053 1063 1033 1030 1034
Other players 137 135 132 131 130 120 120 120 121 121 122 123
Total 1,184 1,162 1,162 1,162 1,165 1,168 1,171 1,174 1,183 1,155 1,151 1,156
Source: TRAI, MOFSL
11 May 2020 19
9 May 2020
ECOSCOPE The Economy Observer
Government increases FY21 gross market borrowings to INR12t
Imminent fiscal stimulus could be 0.8-1.0% of GDP
As against the budgeted amount of INR7.8t, the government now plans to borrow INR12.0t in FY21 on a gross basis. This
implies the government would now borrow INR6.8t in 1HFY21 (including INR810b already borrowed in the fiscal year
thus far) v/s the earlier notified amount of INR4.9t. This indicates the government would borrow 56.8% of the full-year
budgeted amount in 1HFY21 (Exhibits 1 and 2). Therefore, 2HFY21 borrowings would now be INR5.2t, assuming the latest
calendar is not revised any further.
Consequently, the net market borrowings (NMB) expected in FY21 now stand at INR9.6t, as against the earlier budgeted
amount of INR5.4t (Exhibits 3 and 4). Additionally, the government had estimated extra borrowings of INR2.5t through
other sources such as National Small Savings Fund, Provident Fund, treasury-bills, and cash drawdowns. This implies the
government’s total net market borrowing could be INR12.1t in FY21, instead of the budgeted INR8.0t.
Assuming flat nominal GDP in FY21, this INR12.1t worth of net market borrowing translates into 6.0% of GDP.
In our recent report on expected fiscal deficit, we had estimated that even if the government does not announce any
additional stimulus package, India’s reported fiscal deficit could be ~5.6% of GDP in FY21, compared with the targeted
3.5% of GDP, on account of three reasons: lower tax collections, lower denominator (nominal GDP), and the welfare
package worth INR1.9t (0.9% of GDP).
This ~2% of GDP increase in expected fiscal deficit in FY21 would be partly offset by the bounty the government is likely
to receive in light of a hike in excise duty on lower international crude oil prices. After incorporating ~40 basis points
worth of additional revenue on this front, we now expect FY21 fiscal deficit to be ~5.2% of GDP (Exhibit 5). If so, the
imminent fiscal stimulus could be 0.8-1.0% of GDP, lower than our expectations.
As for the likely scenario of bond yield in the short term, as we had mentioned in our report earlier, even if NMB was
close to ~11t , weaker economic activity (led by lower-than-expected additional government spending) would lead to
even higher surplus with banks, led by lower credit off-take and our expectation of higher household financial savings.
Therefore, we continue to believe this higher supply of bonds in the market would still be absorbed by banks.
Consequently, our assumption of a likely fall in bond yield to ~5.5% over the next few months still stands (Exhibit 6).
Center plans to borrow INR6.8t of total gross market
borrowings in 1HFY21 (INR t)…
…implying 57% of the total targeted amount in the first half of
FY21 (%)
Source: CEIC, MOFSL
2.4 2.9 2.5 3.7 3.5 3.7 3.6 3.6 3.7 2.9 4.4 6.8 1.2 1.6 2.2
2.0 2.4 2.4 2.3 2.3 2.1 2.5 2.7
5.2
3.6 4.5 4.7
5.7 5.8 6.1 5.9 5.8 5.8 5.4 7.1
12.0
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0
FY21
E
2H (Oct-Mar) 1H (Apr-Sep) Total gross market borrowing
61 63 60 65 60 61 60 59 64 50 62 57
31 36 53 35 41 40 39 38 36 43
38 43
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0
FY21
E
1H (Apr-Sep) 2H (Oct-Mar)
(% of BE/Actual)
11 May 2020 20
Gross market borrowings have been revised to INR12t…
…leading to revised net market borrowing of INR9.6t in FY21
Source: CEIC, MOFSL
While we expect the central government’s fiscal deficit at
5.2% of GDP in FY21 (without fiscal stimulus)…
FY20 and FY21 are MOFSL forecasts
…we still believe bond yield would continue to fall and break
the 6% mark in the foreseeable future (%)
Source: CEIC, MOFSL
7.8
12.0
-
4.0
8.0
12.0
16.0
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0
FY21
E
Gross Market Borrowing Revised borrowing
(INR t)
5.4
9.6
-
3.0
6.0
9.0
12.0
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0
FY21
E
Net Market Borrowing Revised borrowing
(INR t)
6.6
4.9 5.9
4.9
4.5 4.1 3.9
3.5 3.5 3.4 4.2
5.2
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
FY20
F
FY21
F
Fiscal Deficit (% of GDP)
6.0
5.6
6.0
6.3
6.7
7.0
09-J
an
19-J
an
29-J
an
08-F
eb
18-F
eb
28-F
eb
09
-Mar
19
-Mar
29
-Mar
08-A
pr
18-A
pr
28-A
pr
08-M
ay
10 year G-Sec
11 May 2020 21
Dr. Arun Kumar Verma, Former Joint Secretary
(Distribution), Ministry of Power
Dr. Arun Kumar Verma served as Joint Secretary of the Ministry of Power during
2014-19 and was responsible for key developmental
reforms in India’s Power Sector. He has steered
comprehensive Power sector reforms such as the financial
turnaround of DISCOMs under UDAY and rural
electrification through the Saubhagya scheme. Dr.
Verma has also served as Managing Director of Uttar
Gujarat Vij Company Limited (UGVCL), a state distribution
company with more than 10m connected consumers and ~15BU in power sales.
Reduction in demand and lower collection impacts DISCOMs
To understand the impact of the lockdown on the Power sector, we interacted with Dr. Arun
Kumar Verma, Former Joint Secretary (Distribution) of the Ministry of Power. Key insights
highlighted below:
The nationwide lockdown from end-Mar'20 has led to a decline in power consumption
from Industries and Commercial customers. Power load has decreased to 120GW from
170GW earlier. Thus, the lockdown has impacted DISCOMs to the tune of an estimated
~INR500b.
Given the infrastructure in India, AT&C losses cannot go below 10%. AT&C losses currently
have declined to ~18-19%. Some measures, such as smart meters, need to be implemented
to bring this down further. However, this would take considerable time and investment.
Measures like payment of state government department dues and funding from NBFCs
(such as PFC and REC) would also help address liquidity issues at distribution companies.
Lower demand and collections impact DISCOMs Due to reduced economic and industrial/commercial activity, power load has declined
to 120GW from 170GW. However, load has increased after 3rd May'20 due to some
concessions provided in certain zones and uptick in residential/agriculture load. The
impact of the lockdown on DISCOMs is estimated at ~INR500b on account of low
volumes from high paying industrial/commercial consumers and delay in collections.
Collections for Mar'20 have reduced 20-30%. Current dues to generators stand at
~INR900b, which is equivalent to two months of receivables. While uncertainty exists
due to COVID-19, Dr. Verma believes that the government would take measures to
address these issues
Measures to address the situation If the current dues pending from government departments are paid, it would relieve some cash crunch issues for
DISCOMs. These dues are almost half of the dues to be paid by DISCOMs to generators. NBFCs such as PFC and REC
could also provide required stimulus to allay the burden faced by DISCOMs. RoEs of many CPSEs are currently high,
and thus, Dr. Verma believes that CPSEs could voluntarily cut fixed charges. However, this would impact their RoEs
for a certain period.
DISCOMs - reducing AT&C losses and privatization Given the infrastructure in the country, AT&C losses cannot go below 10%. Current AT&C losses stand at ~18-
19% (v/s 22% during 2015-16). Thus, Dr. Verma believes that some measures, such as smart meters, need to be
implemented to bring this down further. However, this would take considerable time and investment.
Privatization of DISCOMs - Dr. Verma believes that private players are selective and want to operate in areas
where they could make some profits. Also, pubic DISCOMs tend to have high ambitions from private players; for
instance, they would want quick and sharp reduction in AT&C losses, which is difficult to achieve.
Other highlights On Renewable Energy front, the commitment of 175GW capacities up to 2022E remains and no amendments
would be done given the international commitment and rising costs of fuel. Of the 369GW capacities, 23% is
contributed by RE capacity and 9% by energy, hence, it needs to improve.
While cost of power is increasing every year, Dr. Verma believes that it cannot be transferred to tariff as that
would burden the end consumer. In India, cross subsidization is high. However, in a country where there are
many poor people, removal of cross subsidization would only create a huge burden. Thus, other methods like
open access could be done, which would be more efficient, he opines.
9 May 2020 Power
Expert Speak
11 May 2020 22
IT industry to emerge stronger from COVID-19 Digital to see accelerated traction over medium term
In our first edition of Motilal Oswal Virtual Conference Series – Opportunities and
Challenges in the COVID-19 Era, we hosted a call with Mr. Achyuta Ghosh, Head of
Research at NASSCOM. Mr. Ghosh shed much light on the current IT industry and the need
for changes in the future. Key insights highlighted below:
Government could become biggest technology spender: Trade wars and new
caveats are expected as the current supply chains have got disrupted. Mr. Ghosh
expects the government to become the biggest technology spender as
technology has played a vital role during the current COVID-19 pandemic. He
further expects offices to adopt the work from home (WFH) model for a
significant share of employees even after the pandemic ends.
Disruption in Tech spending: While hardware and tech consulting services
would be greatly affected, NASSCOM expects software and tech outsourcing to
see relatively less impact. Among verticals, Travel, Retail and Hospitality are
expected to be the worst hit while Industrial Manufacturing and Telecom should
see medium impact. Mr. Ghosh expects Healthcare, Ecommerce and Technology
to see low/positive impact due to the ongoing situation.
Learnings from 2009: Historical data suggests that IT spending growth lagged
GDP growth in FY09 and FY10 but picked up FY11 onwards. Further, Indian IT
export growth reported a spike in FY11 (18.5% v/s 5.9% in FY10). Mr. Ghosh
suggests that these trends can be expected in the current situation as well.
Post the global financial crisis (GFC) the IT industry saw a rise in fixed price (FP)
projects and local hirings, which led to an increase in onsite revenues.
Utilizations across companies improved meaningfully (from 70% to 85%). While
Telecom/Hi-tech slowed down, Retail and Healthcare picked up. Also, small and
medium businesses (SMB) as a customer segment picked up. Thus, it may be
interesting to see if any such structural shifts play out post the COVID-19
pandemic too, he concurs.
Imperatives for Indian IT: Indian IT players have demonstrated immense speed
and flexibility in enabling WFH for ~90% employees in 4 weeks time. But, it is
imperative for Indian IT companies to manage pricing, stay in the game and
remain close to clients by providing solutions and co-investing. Mr. Ghosh
believes that the industry should get ready for the new normal, which involves
uncertainty, agility, emergence of new technologies and increased governance.
NASSCOM’s 5 point Government Stimulus agenda:
1. 1-year extension of SEZ/SEIS schemes to maintain export competitiveness.
2. Salary support to employees and access to working capital for SMEs.
3. Measures for cost optimization via GST exemptions and PF/ESI opt-out options.
4. Extend WFH policy till Jul’20 with cross utilization of assets and locations.
5. Accelerate funding for start-ups as ~90% are undergoing revenue losses and
~70% have a runway of less than three months.
NASSCOM
Mr. Achyuta Ghosh
Head Research, NASSCOM
NASSCOM, a trade association, is the apex
body for the USD180b IT BPM industry in India, an industry that has made
phenomenal contribution to India's GDP, exports,
employment, infrastructure and global visibility. In India,
the IT BPM industry provides the highest
employment in the private sector.
11 May 2020 23
Valuation and view Despite the uncertainty in the environment, we continue to prefer TCS, Infosys and
HCLT among the large-caps and Mindtree, LTI and Persistent among Tier-II
companies. This is attributable to their historical track record of adapting to multiple
business challenges/technology change cycles. Moreover, recent
results/commentaries offer us some comfort on the new business wins, ramp-ups,
cost optimization and margin management capabilities of these companies.
Exhibit 1: Massive disruption in tech spending to create new tech opportunities Current Priority Tech Current Priority Tech Application Areas Future Tech Areas
Cloud Smart Cities Quantum computing
Cyber security Electric & Autonomous 6G
Analytics E-commerce Hyperloop
Artifical Intelligence Virtual Gaming and eSports Space tourism
Internet of Things Connectivity 3D bioprinting
5G Agritech Floating farms
Data centers Edutech Nano technology
Immersive Media Healthtech Edge computing
Robotics & Automation Data Platforms Behavioural biometrics
Blockchain Smart manufacturing Natural language generation
Security and Insurance Robotics-as-a-Service
Source: NASSCOM, MOFSL
IT spending growth lagged but picked up in FY11…
Source: NASSCOM, MOFSL
…together with a spike in export revenue growth
Source: NASSCOM, MOFSL
-1.7
4.3 3.1
-2.9
3.8
5.4
FY09 FY10 FY11
GDP growth (%) IT spending growth (%)32.3
29.5
16.5
5.9
18.5 16.5
FY07 FY08 FY09 FY10 FY11 FY12
Indian IT Export Revenue growth (%)
11 May 2020 24
Recovery to take at least 6-12 months Dealers stressed; Delinquencies increasing for financiers
In our second edition of Motilal Oswal Virtual Conference Series – Opportunities and
Challenges in the COVID-19 Era, we hosted a call with Mr. Ashok Khanna, former Group
Head – Vehicle Loans, HDFC Bank. Mr. Khanna shared his views on the expected growth in
various segments, delinquencies and impact of the proposed scrappage policy.
Recovery in 2Ws/PVs 6-12 months away; M&HCV recovery to be further
prolonged: Recovery in 2Ws could be delayed due to increased cost of
ownership post BS6. In PVs, premium cars should see faster recovery (3-4
months) while used cars could see better demand. Rural and semi-urban
markets are expected to be relatively better placed. M&HCV recovery could
get further prolonged due to lower capacity utilization. Even before the Covid-
19 outbreak, ~35% of trucks remained unutilized. Mr. Khanna expects tractor
recovery to be the fastest on the back of rural economy revival, but the same
would also depend on rainfall.
Delinquencies to rise meaningfully; Credit underwriting to be tightened: Due
to lack of freight demand as well as acute driver shortage, fleet utilization in the
CV segment has been minimal. Cheque bounce rates in this segment could be
as high as 45-50% (compared to 30-40% in PVs/2Ws). More importantly, losses
given the default (LGD) could widen as compared to historical run-rate levels,
leading to higher eventual credit losses for financiers. Given this backdrop,
financiers are likely to take a cautious stance on lending, resulting in lower LTVs
(75-80% going forward v/s 85-90% currently). Also, the space vacated by
NBFCs would not necessarily be taken up by banks. Captive financiers (who had
3-4% dealer pay-outs) are likely to face challenges; they would have to re-
examine policies and tweak accordingly.
Auto dealers stressed: Over the past three years, over 200 dealers (across
spectrum) have shut shop in India. Dealers are facing several challenges that are
affecting margins such as high product fatigue, inventory and discounts, thus
impacting inventory clearance. Also, rapid expansion, renovation and reckless
financing resulted in over-leveraging of dealers, which in turn, has affected
dealer viability. For long-term sustainability, dealers need to cut cost and
manage inventory better (possibly have just in-time inventory management at
dealer’s end).
Recovery to be divergent across customer profile/geography: The driver-cum-
operator segment would be the fastest to recover while the Small Road
Transport Operator (SRTO) segment would remain stressed. Large fleet
operators would have to incentivize drivers to return from villages. Given the
lower impact of COVID-19 in rural and semi-urban areas, recovery for
automobiles in these geographies is likely to be faster than that in urban areas.
Widening the scope of PSL assets could spur lending: According to Mr. Khanna,
lending to the auto sector could be given an impetus if more products are
included in it. For example, if 2Ws and small-ticket cars (under INR0.6m) are
included in the PSL basket, it would help improve credit flow to the sector. In
Auto & Auto Finance
Mr. Ashok Khanna
Former Group Head, Vehicle Finance, HDFC Bank
Mr. Ashok Khanna is a
veteran with over 40 years of direct/indirect
experience in the auto industry. He has worked with auto OEMs such as
Toyota and Kinetic Honda. Over the last 21 years, he has been associated with
vehicle finance in the banking business.
11 May 2020 25
addition, Mr. Khanna believes that GST on 2Ws should be reduced to 15% as 2W
buyers have a different profile compared to car buyers. Also, road tax by the
state governments should be uniform and brought down.
Scrappage policy to be a key positive: Scrappage policy should be a relief to the
auto sector as it would spur new vehicle demand. At the same time, it would
reduce cost of production due to recycling of materials like steel and plastic.
Moratorium rates to vary across financiers: According to Mr. Khanna, prudent
financiers would witness 15-17% of their car finance customers avail
moratorium, while for others, the number could be as high as 30-35%. He
expects extension in the moratorium on EMIs to be extended further.
11 May 2020 26
Transportation industry limping back slowly Freight and driver availability remain key to recovery
In our second edition of the Motilal Oswal Virtual Conference Series, Opportunities
and Challenges in the COVID-19 Era, we hosted an interaction with Mr Pradeep
Singhal, Chairman of the All India Transporter Welfare Association (AITWA), to
shed light on the current supply chain situation, along with other factors such as
transporters’ viability, drivers’ availability, and risk of default. Here are the key
highlights:
Of the total 8m commercial vehicles (CVs) in India, 130–140k trucks ply on the
national highway. Currently, the country is reporting just 25–30% of normal
freight movement.
While the movement of goods is improving sequentially, it is still substantially
weak. Based on e-way bills data, the average daily e-way bills in May (up to 4th
May)/April/March stood at 261k/284k/1350k per day, against over 1700k e-way
bills per day in the pre-COVID-19 era.
Driver shortage: This is currently a concern; AITWA expects them to be back
four to six weeks after the lockdown is lifted (assuming the pandemic is under
control by then).
Revival only in essential goods industry: The Pharma and FMCG supply chain
has recovered as these industries were on the essential goods list; movement
has also been witnessed in Agriculture. Metals and Capital Goods are also seeing
some movement as unfulfilled orders are finally being transported.
Freight increased by 10–25%, but does not add to profit: This is due to most
trucks having to return with empty loads and the higher compensation being
given to drivers. Freight rates are currently at optimal levels as freight moves in
tandem with the demand and supply equation; however, both supply and
demand are currently running low.
Truck operator viability is in bad shape: 70% of truck operators are single-
/small-fleet operators, and for most of them, their trucks are the only source of
income. Over 50% of these operators are expected to default on their EMIs in
the absence of any relief package.
Used CV market: Used CV would not see any demand due to a high unutilized
fleet capacity (35% in the pre-COVID-19 era), and freight demand is expected to
fall ~30% in FY21.
FTL (Full Truck Load) shipping is still managing to operate for essential goods,
but LTL (Less than Truck Load) shipping is facing a challenge in terms of viability
due to the lack of warehousing as warehouses are either closed, at full capacity,
or short of man power.
Scrappage policy: This policy would help modernize the fleet, but it would be
viable only if the price is not raised. Currently, all trucks with a national permit
are less than 15 years old.
Automobile
Mr Pradeep Singhal, Chairman, AITWA
Mr Abhishek Gupta, Joint General Secretary,
AITWA
All India Transporters
Welfare Association
(AITWA) represents
nearly 65% of the
organized road
transport business in
India.
Mr Mahendra Arya, National President,
AITWA
11 May 2020 27
Competition from Indian Railways: The new plan by the Indian Railways to
move parcels could take away some of the business of road transporters;
however, it is not likely to have a high impact as railways usually do not have
much spare capacity after bulk bookings.
The Dedicated Freight Corridor: This would impact the industry, mostly long-
route trucks. For example, a 30k trailer that plies on the Western Corridor would
be affected.
Story in charts
Number of e-way bills generated
Source: Company, MOFSL
Truck movement analysis through multiple sets of data sourced as of 30th April 2020
Source: Company, MOFSL
11 May 2020 28
SBI : ADDITIONAL FUNDRAISING BY YES BANK IS NOT A PIECE OF NEWS FOR US; Rajnish Kumar, Chairman Additional fundraising by YES Bank is not a piece of news for the bank, as this is
a conscious decision.
All banks are sitting on a surplus liquidity and company is supporting the NBFCs
or microfinance institutions (MFIs) anyway whether it is bank’s money or
borrowed money from RBI, this is purely a commercial call and the money,
which bank is getting by way of deposits is much cheaper than the cost of
borrowing from the RBI.
(Will SBI will be one of the providers of capital for YES Bank’s capital raising
plans) It all depends on what structure, what price and whether it is a rights
issue or an FPO – all those details are not known.
When this decision was taken, even at that time it was estimated that the
requirement of the capital is in the range of Rs 20,000-22,000 crore and that
was only the first step.
Even at that time the issue was whether the bank was able to raise the entire
capital in one go but it was a conscious decision taken at that time that it will be
a two-stage process.
In the first stage, only the domestic banks will contribute and the second stage,
as far as bank is concerned – there are two boundaries, one is it cannot have
stake more than 49 percent and second is stake cannot go below 26 percent for
the next three years. So will operate within that boundary and ensure
compliance with the scheme which was formulated.
In conversation
11 May 2020 29
LOCKED DOWN WITH A FIRM HAND: WHERE IS THE HEALING TOUCH? The draconian nationwide lockdown, perhaps the most stringent in the world,
which completed 40 days on 3 May, has been extended further until 17 May,
with some relaxations in some districts. It could continue for longer. This has
helped flatten the curve, although there is no downturn yet. But it did shut
down almost two-thirds of all economic activity, imposing massive hardships on
migrants in cities and the poor everywhere. The impact on micro, small and
medium enterprises (MSMEs) has been devastating. And, ironically enough,
state governments, at the front lines of the battle against covid-19, have
experienced a collapse in their finances, seriously curbing their capacity to do
what is necessary. In this situation, it is surprising that the Central government,
so strict in implementing the lockdown, has provided barely any support or
relief to help cope with the enormous collateral damage of the lockdown. The
focus on migrants, poor households and MSMEs, for whom survival is the issue,
or state governments that can help them survive, is simply illustrative of a much
larger problem. There are around 50-55 million migrants who work in cities—
one half in construction and the other in manufacturing or transport, delivery,
security, restaurants, domestic and other services—who return to their villages
mostly at harvest time. It is estimated that about 25 million migrants (intra-state
or bordering-states) managed to get home. The lockdown stranded the
remaining 25-30 million migrants in cities far away from their homes, deprived
of their work and dignity, at the mercy of shelters and food provided by state
governments or charities, often hungry and homeless. Governments—Centre or
states—provided no cash support, while most received no wages from their
employers. This was an unprecedented humanitarian crisis. The decision to
allow them to return home was announced six weeks later. It will be another
month before all migrants get home.
From the think tank
11 May 2020 30
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Automobiles
Amara Raja Buy 544 630 16 28.3 37.7 34.6 2.6 33.3 -8.3 14.4 15.7 2.5 2.2 18.1 14.8
Ashok Ley. Buy 47 70 49 6.9 1.1 0.9 16.4 -84.2 -18.0 43.2 52.7 1.6 1.7 3.8 3.1
Bajaj Auto Neutral 2417 2382 -1 165.4 178.2 167.2 9.3 7.7 -6.2 13.6 14.5 3.1 2.9 23.3 20.6
Bharat Forge Buy 280 342 22 22.2 15.2 12.8 20.3 -31.6 -15.8 18.4 21.9 2.3 2.2 12.7 10.2
Bosch Neutral 9794 10607 8 542.4 403.1 350.6 15.5 -25.7 -13.0 24.3 27.9 3.8 3.5 14.3 13.0
CEAT Buy 730 903 24 66.9 47.6 51.9 4.6 -29.0 9.1 15.3 14.1 1.0 1.0 6.8 7.0
Eicher Mot. Buy 13860 17200 24 813.9 703 680 1.8 -13.6 -3.3 19.7 20.4 3.6 3.2 19.8 16.6
Endurance Tech. Buy 612 810 32 36.2 39.7 32.7 24.5 9.8 -17.8 15.4 18.7 2.9 2.6 20.3 14.7
Escorts Neutral 741 654 -12 53.2 53.5 50.1 34.7 0.4 -6.3 13.9 14.8 2.1 1.6 16.4 13.1
Exide Ind Buy 147 177 21 9.1 9.6 9.2 10.6 5.8 -3.9 15.3 15.9 1.9 1.8 12.6 11.3
Hero Moto Neutral 1962 2072 6 169.5 154.1 126.0 -8.5 -9.1 -18.2 12.7 15.6 2.9 2.8 23.2 18.2
M&M Buy 386 513 33 42.7 33.2 33.8 4.1 -22.3 1.9 11.6 11.4 1.2 1.2 10.1 8.0
Mahindra CIE Buy 100 116 16 14.1 9.4 3.2 44.7 -33.2 -66.0 10.6 31.1 0.8 0.8 8.0 2.6
Maruti Suzuki Buy 4658 6280 35 247.7 191.8 166.9 -7.1 -22.6 -13.0 24.3 27.9 2.9 2.8 11.5 9.6
Motherson Sumi Buy 77 84 9 5.1 3.7 3.1 -5.2 -27.1 -17.2 20.7 25.0 2.0 1.9 10.1 7.8
Tata Motors Buy 81 90 11 -4.4 -14.9 -23.3 -119.0 Loss Loss NM NM 0.5 0.6 -9.0 -15.4
TVS Motor Neutral 314 297 -5 14.1 12.8 11.5 1.1 -9.2 -10.1 24.5 27.2 4.0 3.7 17.2 14.0
Aggregate -31.4 -25.9 111.3 31.7 15.0 2.0 1.8 6.2 12.2
Banks - Private
AU Small Finance Buy 421 675 60 13.2 22.6 21.7 28.9 71 -4.3 18.6 19.4 3.0 2.6 18.0 14.2
Axis Bank Buy 382 620 62 18.2 6.0 26.0 1,538.1 -67 331.5 63.3 14.7 1.3 1.2 2.1 8.3
Bandhan Bank Buy 240 350 46 16.4 22.3 20.1 39.1 37 -10.0 10.7 11.9 2.5 2.1 23.2 19.1
DCB Bank Neutral 68 105 55 10.5 10.9 10.3 32.0 3.7 -5.1 6.2 6.5 0.6 0.6 11.1 9.6
Equitas Hold. Buy 49 85 72 5.2 8.0 8.6 1,186.6 54.6 7.7 6.2 5.7 0.6 0.6 10.6 10.4
Federal Bank Buy 43 75 76 6.3 8.2 7.1 32.2 31.0 -13.7 5.2 6.0 0.6 0.5 11.8 9.4
HDFC Bank Buy 929 1200 29 39.6 48.0 55.2 16.9 21.2 14.9 19.3 16.8 3.0 2.6 16.4 16.5
ICICI Bank Buy 338 475 41 5.2 12.3 18.9 -52.8 135.0 53.8 19.2 12.5 1.8 1.6 7.2 10.3
IndusInd Buy 440 700 59 54.9 68.8 71.0 -8.8 25.3 3.2 6.4 6.2 0.9 0.8 14.7 13.3
Kotak Mah. Bk Neutral 1219 1450 19 37.7 45.4 50.5 16.0 20.4 11.2 26.8 24.1 3.5 3.1 13.7 13.2
RBL Bank Buy 119 180 51 20.3 9.9 11.2 34.3 -51.1 12.2 12.0 10.7 0.6 0.5 5.6 5.2
Aggregate 24.4 28.0 27.2 16.4 12.9 2.1 1.8 12.5 14.0
Banks - PSU
BOB Buy 41 70 70 1.6 -3.3 6.6 -116.7 PL LP NM 6.2 0.3 0.3 -2.0 4.4
PNB Neutral 29 35 19 -27.1 -5.8 3.4 -46.1 Loss LP NM 8.5 0.4 0.3 -6.4 4.0
SBI Buy 167 300 80 2.6 18.7 22.2 -148.2 627 18.3 8.9 7.5 0.6 0.6 7.4 8.1
Aggregate LP 105 46 7 5.1 0.5 0.5 6.6 8.9
NBFCs
Aditya Birla Cap Buy 43 125 190 4.0 4.3 5.1 25.7 8.3 20.2 10.1 8.4 1.0 0.8 10.2 10.8
Bajaj Fin. Neutral 2025 2300 14 69.3 94.1 74.5 59.6 35.8 -20.8 21.5 27.2 3.7 3.3 21.3 12.7
Cholaman.Inv.&Fn
Buy 144 225 56 15.2 16.8 15.6 29.1 10.8 -7.1 8.6 9.2 1.4 1.2 18.9 14.1
HDFC Buy 1690 2050 21 44.4 50.4 52.5 28.7 13.6 4.2 33.5 32.2 3.3 3.1 14.2 13.1
HDFC Life Insur. Neutral 520 525 1 6.3 6.4 6.4 14.6 1.3 -0.4 81.0 81.3 5.1 4.2 12.9 21.4
ICICI Pru Life Buy 400 430 8 8.0 7.4 7.9 -29.5 -6.3 6.4 53.7 50.5 2.5 2.2 6.5 14.3
IIFL Wealth Mgt Buy 895 1525 70 44.2 32.2 42.8 -4.1 -27.3 33.0 27.8 20.9 2.5 2.5 9.3 11.9
L&T Fin Holdings Buy 57 75 32 11.2 11.4 10.3 74.3 2.1 -9.2 5.0 5.5 0.8 0.7 16.1 13.1
LIC Hsg Fin Buy 263 350 33 48.1 49.7 45.6 21.4 3.2 -8.3 5.3 5.8 0.7 0.7 14.6 12.0
MAS Financial Buy 563 690 22 27.8 29.9 30.8 47.1 7.6 2.8 18.8 18.3 3.2 2.8 18.1 16.2
M&M Fin. Buy 165 200 21 25.3 17.1 10.3 53.9 -32.3 -40.1 9.6 16.1 0.9 0.9 9.7 5.5
Muthoot Fin Neutral 810 765 -6 49.2 75.0 80.0 10.8 52.3 6.7 10.8 10.1 2.9 2.4 29.3 25.8
PNB Housing Neutral 179 190 6 71.1 67.5 50.9 40.9 -5.1 -24.6 2.7 3.5 0.4 0.3 14.1 9.6
Repco Home Buy 121 150 24 37.5 48.9 44.8 16.7 30.5 -8.5 2.5 2.7 0.4 0.4 18.3 14.4
Shriram City Union
Buy 719 950 32 149.8 168.6 134.0 48.7 12.5 -20.5 4.3 5.4 0.6 0.6 16.1 11.4
Valuation snapshot
Click excel icon for detailed
valuation guide
11 May 2020 31
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Shriram Trans. Buy 744 975 31 113.0 128.9 75.0 4.2 14.1 -41.8 5.8 9.9 0.9 0.9 17.3 9.0
Aggregate 14.5 -6.5 22.6 17.5 14.3 2.1 1.9 11.9 13.2
Capital Goods
ABB Buy 848 1255 48 12.0 16.6 15.7 12.7 38.1 -5.4 51.2 54.1 5.1 4.8 10.0 8.8
Bharat Elec. Buy 60 86 44 7.9 6.5 7.2 37.7 -17.9 10.3 9.2 8.3 1.5 1.3 15.9 16.1
BHEL Neutral 22 22 -1 3.5 1.9 1.9 58.9 -44.4 -1.1 11.4 11.6 0.2 0.2 2.1 2.1
Blue Star Neutral 478 515 8 19.5 20.2 15.2 34.7 3.7 -24.4 23.7 31.4 4.9 4.6 20.5 14.6
CG Cons. Elec. Buy 203 270 33 6.0 7.5 7.7 15.5 24.9 3.6 27.3 26.3 8.9 7.5 32.8 28.3
Cummins Neutral 358 360 1 26.1 22.9 17.3 10.8 -12.0 -24.4 15.6 20.7 2.3 2.2 14.5 10.5
Engineers India Buy 63 100 59 5.9 6.7 7.6 -8.4 14.5 12.7 9.4 8.3 1.8 1.7 17.9 19.3
Havells Neutral 487 590 21 12.7 12.3 11.0 12.9 -3.0 -10.6 39.7 44.4 6.4 5.9 16.2 13.3
K E C Intl Buy 197 255 29 18.9 23.1 24.0 6.1 22.3 3.6 8.5 8.2 1.7 1.5 20.2 17.7
L&T Buy 816 1200 47 63.5 70.5 61.6 22.8 11.0 -12.6 11.6 13.2 1.7 1.5 14.0 11.0
Siemens Neutral 1043 1450 39 25.1 30.5 29.4 27.1 21.6 -3.6 34.2 35.4 4.1 3.8 12.0 10.7
Thermax Neutral 701 865 23 27.2 24.9 29.1 32.4 -8.4 17.0 28.2 24.1 2.5 2.3 8.8 9.6
Voltas Buy 457 620 36 15.7 15.4 14.8 -9.1 -1.8 -3.7 29.6 30.8 3.4 3.2 11.5 10.3
Aggregate 4.1 -7.9 31.8 18.3 13.9 1.8 1.6 9.8 11.8
Cement
Ambuja Cem. Neutral 169 190 12 6.1 7.7 5.1 -3.2 26.4 -33.2 22.0 32.9 1.5 1.5 7.1 4.5
ACC Buy 1154 1430 24 53.5 72.3 40.6 9.9 35.1 -43.8 16.0 28.4 1.9 1.8 12.3 6.5
Birla Corp. Buy 381 735 93 33.2 61.8 40.5 53.6 86.2 -34.5 6.2 9.4 0.6 0.6 10.2 6.2
Dalmia Bhar. Buy 505 685 36 15.8 11.4 -15.3 4.3 -27.5 PL 44.1 NM 0.9 0.9 2.1 -2.8
Grasim Inds. Neutral 486 575 18 66.1 35.8 46.6 39.7 -45.8 30.0 13.6 10.4 0.7 0.7 3.2 1.4
India Cem Neutral 98 96 -2 2.3 3.6 2.1 -31.0 61.1 -41.9 27.0 46.4 0.6 0.6 2.1 1.2
J K Cements Buy 1095 1355 24 34.1 59.0 35.9 -19.8 72.8 -39.1 18.6 30.5 2.8 2.6 15.9 8.9
JK Lakshmi Ce Buy 192 320 66 6.8 22.1 9.8 -8.7 227.6 -55.6 8.7 19.6 1.3 1.2 16.0 6.5
Ramco Cem Neutral 519 560 8 21.9 23.8 15.1 -8.7 8.7 -36.4 21.8 34.3 2.5 2.3 11.9 7.0
Shree Cem Neutral 18741 19500 4 324.1 435.2 298.7 -18.2 34.3 -31.4 43.1 62.7 5.2 5.0 13.9 8.1
Ultratech Buy 3308 4160 26 90.3 132.6 98.5 1.0 46.8 -25.7 25.0 33.6 2.5 2.3 10.8 7.4
Aggregate 9.1 -24.6 61.1 29.0 18.0 1.7 1.6 5.9 9.0
Consumer
Asian Paints Sell 1578 1380 -13 23.1 29.7 27.3 9.1 29.0 -8.2 53.1 57.8 14.2 13.3 28.3 23.8
Britannia Neutral 2992 3010 1 48.1 57.4 58.0 15.1 19.3 1.0 52.1 51.6 15.8 15.4 31.3 30.2
Colgate Buy 1359 1620 19 27.4 29.1 30.7 8.8 6.3 5.3 46.7 44.3 26.7 28.7 55.9 62.4
Dabur Neutral 447 450 1 8.5 9.0 9.5 9.5 5.6 6.2 49.7 46.8 12.4 11.5 26.4 25.4
Emami Buy 182 270 48 12.2 12.5 12.4 0.2 3.1 -0.7 14.6 14.7 3.6 3.6 25.9 24.5
Godrej Cons. Neutral 499 622 25 15.1 14.3 14.8 7.2 -5.5 3.9 35.0 33.7 6.8 6.9 19.7 20.2
GSK Cons. Neutral 10754 10874 1 216.1 277.0 290.9 29.8 28.2 5.0 38.8 37.0 9.7 8.7 26.6 24.7
HUL Buy 2088 2420 16 28.1 31.2 32.7 14.7 11.1 4.7 66.9 63.9 56.2 55.9 86.0 87.7
ITC Neutral 158 192 21 10.2 12.8 12.8 14.8 25.5 0.6 12.4 12.3 3.1 2.9 26.1 24.7
Jyothy Lab Neutral 106 122 15 5.4 4.7 4.8 10.5 -12.9 3.2 22.7 21.9 2.9 2.9 12.9 13.2
Marico Buy 300 350 17 7.2 8.1 8.1 13.8 13.4 -0.7 36.9 37.1 12.8 9.9 34.9 30.1
Nestle Neutral 17798 15115 -15 178.6 206.8 226.9 27.5 15.8 9.7 86.0 78.4 88.8 83.0 71.2 109.4
Page Inds Neutral 16969 17565 4 353.2 334.5 326.8 13.5 -5.3 -2.3 50.7 51.9 21.8 20.1 42.9 38.7
Pidilite Ind. Neutral 1367 1365 0 18.6 25.3 23.1 -2.0 36.2 -8.5 54.1 59.1 13.7 12.0 27.8 21.6
P&G Hygiene Neutral 10034 9995 0 126.3 137.9 158.1 7.3 9.1 14.6 72.8 63.5 31.2 27.1 45.9 45.7
Tata Consumer Buy 349 417 20 7.0 8.0 9.1 -14.6 14.2 14.1 43.7 38.3 2.9 2.3 6.8 7.9
United Brew Sell 890 700 -21 21.3 16.3 9.6 42.8 -23.4 -41.2 54.6 92.8 6.6 6.2 12.8 d
United Spirits Neutral 501 515 3 9.3 11.4 7.6 38.1 22.9 -33.5 43.8 65.8 9.6 8.4 21.9 12.7
Aggregate 17.5 1.2 14.8 37.9 33.1 10.0 9.5 26.5 28.7
Healthcare
Alembic Phar Neutral 770 705 -8 31.1 45.9 37.9 41.8 47.7 -17.4 16.8 20.3 4.5 3.9 30.1 21.4
Alkem Lab Buy 2589 3135 21 63.8 92.3 109.9 8.4 44.6 19.1 28.1 23.6 4.9 4.2 18.8 19.3
Ajanta Pharma Buy 1455 1635 12 44.4 50.6 60.6 -16.1 13.9 19.7 28.8 24.0 4.9 4.2 18.4 18.9
Aurobindo Buy 653 745 14 43.2 46.3 51.0 1.1 7.3 10.0 14.1 12.8 2.3 2.0 17.9 16.7
Valuation snapshot
Click excel icon for detailed
valuation guide
11 May 2020 32
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Biocon Neutral 359 320 -11 6.2 7.2 9.9 99.6 16.9 36.2 49.6 36.4 6.4 5.7 13.5 16.5
Cadila Buy 321 410 28 18.3 14.6 17.6 4.3 -20.2 20.3 22.0 18.3 2.9 2.6 11.4 15.1
Cipla Neutral 592 550 -7 18.7 20.7 26.0 -3.1 10.6 25.7 28.6 22.7 2.8 2.6 9.9 11.2
Divis Lab Neutral 2301 2215 -4 50.0 51.3 65.7 55.0 2.5 28.1 44.9 35.0 7.6 6.5 18.2 20.0
Dr Reddy’s Neutral 3983 3490 -12 105.2 123.6 150.7 62.6 17.5 21.9 32.2 26.4 4.3 3.8 13.9 15.1
Glenmark Neutral 334 295 -12 25.9 23.6 26.4 -9.0 -9.0 12.2 14.2 12.6 1.5 1.4 11.3 11.4
GSK Pharma Neutral 1438 1320 -8 24.6 27.0 33.7 25.2 9.6 24.9 53.3 42.7 13.5 12.2 25.2 28.7
IPCA Labs Buy 1552 1855 20 36.3 54.5 70.7 91.3 50.2 29.6 28.5 22.0 5.3 4.4 20.1 21.8
Jubilant Life Buy 389 415 7 56.9 58.0 57.4 26.7 1.9 -1.1 6.7 6.8 1.1 0.9 17.4 14.9
Laurus Labs Buy 441 615 40 10.4 24.1 29.3 -34.5 132.6 21.6 18.2 15.0 2.6 2.2 15.1 15.8
Lupin Buy 835 940 13 23.3 23.0 34.5 -27.1 -1.5 50.3 36.4 24.2 3.6 3.3 8.6 14.4
Strides Pharma Buy 421 405 -4 6.9 26.0 37.3 -39.2 279.4 43.4 16.2 11.3 1.4 1.4 8.7 12.2
Sun Pharma Buy 469 535 14 15.1 17.6 21.2 12.2 16.6 20.4 26.6 22.1 2.5 2.3 9.8 10.8
Torrent Pharma Neutral 2442 2215 -9 42.7 57.9 76.8 -7.1 35.6 32.7 42.2 31.8 7.7 6.7 19.4 22.5
Aggregate 12.7 20.7 14.1 22.8 20.0 3.2 2.8 13.9 14.1
Infrastructure
Ashoka Buildcon Buy 60 92 54 11.5 10.8 6.0 35.8 -5.7 -44.2 5.5 9.9 0.7 0.6 12.9 6.6
IRB Infra Neutral 64 80 24 24.2 19.7 7.1 1.2 -18.5 -63.9 3.3 9.1 0.3 0.3 10.5 3.6
KNR Constructions
Buy 194 270 39 17.7 15.3 15.9 -8.2 -13.7 3.6 12.7 12.2 1.7 1.5 14.1 12.8
Aggregate 10.4 8.4 0.6 0.5 5.6 6.5
Media
PVR Buy 894 1605 80 37.9 21.9 10.2 41.9 -42.2 -53.5 40.9 87.8 2.8 2.7 7.6 3.1
Sun TV Buy 379 436 15 35.4 36.6 34.9 27.6 3.5 -4.6 10.3 10.8 2.4 2.1 24.6 20.5
Zee Ent. Neutral 151 165 10 16.4 16.9 19.4 12.7 2.9 14.7 8.9 7.8 1.4 1.2 18.1 17.0
Aggregate 4.0 0.2 18.4 10.2 8.6 1.6 1.4 16.1 16.6
Metals
Hindalco Buy 117 179 53 24.7 20.2 9.6 30.9 -18.4 -52.6 5.8 12.2 0.6 0.7 11.2 5.4
Hind. Zinc Neutral 175 190 8 18.8 16.4 13.6 -10.8 -12.7 -17.2 10.7 12.9 1.8 1.9 18.7 14.4
JSPL Buy 89 150 68 3.3 -6.5 8.3 -138.7 PL LP NM 10.8 0.3 0.3 -2.0 2.6
JSW Steel Buy 169 213 26 31.8 15.7 2.7 32.4 -50.8 -83.1 10.8 63.6 1.1 1.1 10.3 1.7
Nalco Buy 28 41 44 9.2 0.3 0.3 79.9 -96.8 -9.9 96.2 106.7 0.6 0.6 0.6 0.5
NMDC Buy 73 123 68 15.6 15.6 10.0 19.2 -0.3 -35.7 4.6 7.2 0.8 0.7 17.5 10.5
SAIL Neutral 28 29 2 6.3 -0.7 -4.4 2,344.1 PL Loss NM NM 0.3 0.3 -0.7 -4.8
Vedanta Neutral 77 85 10 18.1 13.1 4.7 -11.0 -27.7 -64.2 5.9 16.5 0.5 0.5 7.7 3.0
Tata Steel Neutral 273 322 18 88.6 33.6 -16.6 27.3 -62.0 PL 8.1 NM 0.5 0.5 6.0 -3.0
Aggregate -41.4 -62.2 225.9 23.8 7.3 0.7 0.7 2.9 9.1
Oil & Gas
Aegis Logistics Buy 176 237 35 6.6 4.2 10.5 11.9 -36.6 149.6 41.9 16.8 4.0 3.4 10.0 22.1
BPCL Neutral 324 491 51 43.4 17.0 33.6 -12.9 -60.8 98.1 19.1 9.6 1.6 1.4 8.4 15.4
Castrol India Buy 125 200 59 7.2 8.4 9.6 2.4 16.8 14.6 15.0 13.1 9.1 8.2 65.3 65.7
GAIL Buy 91 140 53 14.0 10.4 9.8 38.4 -25.6 -6.3 8.7 9.3 0.9 0.9 10.6 9.5
Gujarat Gas Buy 244 340 39 6.2 17.1 12.3 46.9 173.4 -28.2 14.3 19.9 5.4 4.5 44.2 24.5
Gujarat St. Pet. Buy 192 290 51 14.1 19.6 17.1 18.9 39.3 -13.0 9.8 11.3 1.6 1.4 17.7 13.5
HPCL Buy 197 326 66 43.9 9.5 37.4 -7.3 -78.4 294.0 20.7 5.3 1.0 0.9 4.7 17.4
IOC Buy 74 168 126 18.8 3.3 12.5 -23.7 -82.2 273.8 22.2 5.9 0.6 0.6 2.7 9.8
IGL Neutral 472 515 9 11.2 17.2 16.4 19.1 53.3 -4.7 27.4 28.8 6.5 5.5 26.2 20.7
Mahanagar Gas Neutral 860 1115 30 55.3 82.4 64.3 14.3 49.0 -22.0 10.4 13.4 3.0 2.6 31.0 20.9
MRPL Neutral 30 49 65 1.9 -13.3 5.5 -84.8 PL LP NM 5.5 0.6 0.6 -24.4 10.9
Oil India Buy 89 127 43 32.0 17.5 10.4 35.6 -45.3 -40.6 5.1 8.5 0.3 0.3 7.0 4.0
ONGC Buy 76 105 38 27.1 17.1 11.3 34.4 -37.0 -33.9 4.4 6.7 0.4 0.4 9.8 6.2
PLNG Buy 225 333 48 14.4 21.0 19.1 3.7 45.8 -8.9 10.7 11.8 3.1 2.8 29.9 25.1
Reliance Ind. Buy 1562 1713 10 62.8 68.1 66.4 10.4 8.4 -2.5 22.9 23.5 2.2 2.0 10.3 8.9
Aggregate -30.6 10.4 47.7 15.1 10.2 1.3 1.2 8.9 12.0
Retail
Valuation snapshot
Click excel icon for detailed
valuation guide
11 May 2020 33
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Avenue Supermarts
Sell 2249 1750 -22 14.5 22.1 25.2 11.9 52.6 14.1 101.9 89.3 20.2 16.4 21.9 20.3
Aditya Birla Fashion
Buy 107 240 125 1.6 2.0 1.2 156.7 20.1 -38.7 54.1 88.2 5.7 5.4 10.6 6.3
Future Lifestyle Under Review
156 - 8.6 5.5 -1.5 30.1 -35.6 PL 28.1 NM 1.3 1.4 5.2 -1.3
Future Retail Under Review
81 - 14.6 10.7 3.7 19.1 -27.0 -65.2 7.6 21.8 0.6 0.6 10.4 2.9
Jubilant Food. Buy 1567 1715 9 24.1 24.8 24.2 62.0 2.9 -2.2 63.2 64.6 14.3 13.0 22.7 20.1
Shoppers Stop Neutral 163 260 60 7.8 -1.8 0.6 -36.3 PL LP NM 267.4 1.5 1.5 -1.7 0.6
Titan Company Neutral 833 1085 30 15.7 16.8 17.0 24.0 7.4 1.1 49.5 49.0 12.3 10.8 24.7 23.4
Trent Buy 460 575 25 2.9 2.6 2.4 11.6 -10.1 -6.7 175.2 187.9 5.7 5.5 4.3 3.2
V-Mart Retail Buy 1644 2060 25 39.5 44.0 33.5 -8.0 11.4 -23.8 37.4 49.0 6.1 5.4 17.7 11.7
Aggregate 7.2 -8.2 57.7 70.9 45.0 8.6 7.5 12.1 16.6
Technology
Cyient Neutral 209 260 25 43.4 33.8 22.5 13.4 -22.2 -33.2 6.2 9.3 0.8 0.8 13.5 8.6
HCL Tech. Buy 518 615 19 36.8 41.0 40.5 -41.1 11.3 -1.1 12.7 12.8 2.9 2.3 24.5 20.2
Hexaware Neutral 236 306 30 19.3 21.8 18.4 17.6 12.6 -15.6 10.8 12.8 2.6 2.3 24.9 18.8
Infosys Buy 675 775 15 37.1 39.0 36.8 3.9 5.3 -5.7 17.3 18.3 4.7 4.0 25.3 21.8
L & T Infotech Buy 1584 1783 13 86.6 84.2 92.4 30.6 -2.8 9.7 18.8 17.1 4.7 3.9 27.2 24.9
Mindtree Buy 891 960 8 45.8 38.3 45.1 33.6 -16.4 17.8 23.2 19.7 4.6 4.0 20.0 20.4
Mphasis Neutral 739 682 -8 56.1 58.5 52.2 27.4 4.2 -10.8 12.6 14.2 2.7 2.4 21.7 18.9
NIIT Tech Neutral 1401 1370 -2 66.2 73.5 71.0 45.3 11.0 -3.3 19.1 19.7 3.6 3.3 20.5 17.5
Persistent Sys Buy 528 730 38 44.0 44.4 45.5 8.9 0.9 2.4 11.9 11.6 1.7 1.6 14.3 13.1
TCS Neutral 1894 1900 0 83.1 86.2 82.3 23.3 3.7 -4.5 22.0 23.0 8.2 7.1 36.4 33.1
Tech Mah Neutral 536 590 10 48.8 45.9 34.4 14.2 -5.9 -25.1 11.7 15.6 2.3 2.0 18.5 12.7
Wipro Neutral 184 188 2 15.3 16.6 15.4 21.6 8.5 -7.3 11.1 11.9 1.9 1.7 17.5 15.0
Zensar Tech Neutral 84 99 18 14.4 11.5 8.8 40.4 -19.7 -23.6 7.3 9.5 0.9 0.8 12.7 8.9
Aggregate 3.0 -5.9 18.8 18.7 15.7 4.0 3.5 21.5 22.3
Telecom
Bharti Airtel Buy 530 620 17 -8.7 -7.3 3.7 -350.3 Loss LP NM 141.7 3.5 3.4 -5.1 2.4
Bharti Infratel Neutral 174 170 -3 13.6 17.0 15.6 -0.3 25.0 -8.4 10.3 11.2 2.2 2.3 21.7 20.2
Vodafone Idea 4 -18.5 -7.2 -5.2 93.3 Loss Loss NM NM 0.7 4.0 -53.4 -143.0
Tata Comm Neutral 412 375 -9 -2.2 11.9 25.5 -288.6 LP 114.8 34.7 16.1 79.6 13.4 -1,974 142.3
Aggregate Loss Loss Loss -37 -45.6 3.3 3.7 -9.0 -8.2
Utiltites
Coal India Buy 129 202 57 28.3 23.2 18.0 47.9 -18.1 -22.6 5.6 7.2 2.5 2.2 44.5 30.3
CESC Buy 618 761 23 88.9 94.2 84.5 43.1 6.0 -10.3 6.6 7.3 0.8 0.8 13.3 10.9
JSW Energy Buy 41 65 60 4.2 4.1 3.6 40.2 -2.9 -11.7 9.9 11.2 0.5 0.5 5.6 4.8
NHPC Neutral 20 23 15 2.6 3.0 2.9 5.9 17.0 -3.9 6.6 6.9 0.6 0.6 9.6 8.8
NTPC Buy 87 148 70 11.6 13.2 14.5 30.3 13.7 10.3 6.6 6.0 0.7 0.7 11.4 11.8
Power Grid Buy 159 225 41 19.2 20.4 22.1 16.0 6.5 7.9 7.8 7.2 1.3 1.2 17.3 17.0
Torrent Power Buy 302 342 13 18.7 23.8 25.8 -4.6 27.0 8.5 12.7 11.7 1.5 1.3 12.1 12.0
Tata Power Neutral 28 58 104 2.1 3.8 4.1 -60.5 77.8 9.1 7.6 6.9 0.5 0.4 6.0 6.4
Aggregate -1.0 -3.2 25.4 6.8 5.5 1.0 0.9 14.3 16.5
Others
Brigade Enterpr. Buy 106 231 118 11.7 8.1 6.0 63.2 -31.2 -25.9 13.1 17.7 0.9 0.9 7.4 5.2
BSE Buy 384 647 69 38.1 24.9 30.4 -12.4 -34.7 22.5 15.4 12.6 0.8 0.9 5.4 6.8
Concor Buy 359 518 44 19.9 16.4 14.4 14.9 -17.7 -12.5 21.9 25.0 2.1 2.0 9.6 8.1
Coromandel Intl Buy 609 719 18 25.4 34.9 38.3 7.6 37.0 9.8 17.5 15.9 4.3 3.6 27.2 24.5
Essel Propack Buy 174 210 21 6.0 7.2 9.0 7.3 20.6 23.9 24.0 19.4 3.5 3.1 15.6 17.1
Indian Hotels Buy 68 106 57 2.4 2.6 -3.3 257.4 10.7 PL 25.9 NM 1.8 2.0 7.0 -9.1
Interglobe Neutral 929 1300 40 4.1 -5.2 -75.1 -93.0 PL Loss NM NM 5.3 7.8 -2.9 -50.7
Info Edge Neutral 2692 2400 -11 23.0 20.3 25.9 54.2 -11.5 27.5 132.6 103.9 13.2 12.2 13.9 12.3
Godrej Agrovet Buy 398 423 6 12.5 11.4 10.5 10.9 -8.7 -7.8 34.7 37.7 4.3 4.1 12.9 11.2
Kaveri Seed Buy 364 427 17 34.4 38.4 34.0 7.7 11.5 -11.4 9.5 10.7 2.4 2.4 24.3 22.5
Valuation snapshot
Click excel icon for detailed
valuation guide
11 May 2020 34
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Lemon Tree Hotel Buy 17 23 35 0.7 0.0 -2.0 271.9 -98.8 PL 2,083.9 NM 1.0 1.2 0.1 -12.8
MCX Buy 1120 1400 25 28.7 46.7 44.0 35.2 63.0 -5.7 24.0 25.4 4.2 3.8 18.2 15.7
Oberoi Realty Buy 325 535 65 22.5 16.0 16.2 78.1 -29.0 1.3 20.4 20.1 1.4 1.3 7.0 6.7
Phoenix Mills Buy 526 808 54 25.0 22.6 17.1 57.8 -9.3 -24.3 23.2 30.7 2.1 2.0 9.6 6.8
Quess Corp Neutral 183 410 124 17.5 17.8 21.0 -19.8 1.5 17.9 10.3 8.7 0.7 0.6 9.1 9.8
PI Inds. Buy 1532 1680 10 29.7 35.7 48.0 11.6 19.9 34.5 42.9 31.9 7.9 6.6 19.9 22.5
SRF Buy 3597 4236 18 113.7 158.0 158.7 60.0 38.9 0.4 22.8 22.7 4.2 3.7 20.4 17.3
S H Kelkar Buy 54 119 122 6.1 5.2 7.4 -13.4 -14.3 41.3 10.2 7.2 0.9 0.8 8.8 12.2
Tata Chemicals Buy 289 296 2 42.9 32.4 35.1 -10.8 -24.6 8.3 8.9 8.2 0.6 0.6 8.5 9.0
Team Lease Serv. Buy 1558 2300 48 57.3 50.8 47.1 33.4 -11.4 -7.4 30.7 33.1 4.3 3.8 14.9 12.1
Trident Buy 5 6 18 0.9 0.8 0.7 87.3 -11.1 -16.7 6.0 7.2 0.7 0.7 12.7 10.0
UPL Neutral 365 366 0 31.6 39.3 39.3 9.2 24.2 -0.1 9.3 9.3 1.7 1.5 19.6 17.5
Valuation snapshot
Click excel icon for detailed
valuation guide
11 May 2020 35
Index 1 Day (%) 1M (%) 12M (%) Index 1 Day (%) 1M (%) 12M (%)
Sensex 0.6 5.8 -16.3 Nifty 500 0.4 5.5 -19.1
Nifty-50 0.6 5.7 -18.6 Nifty Midcap 100 -0.3 5.3 -24.6
Nifty Next 50 0.9 3.7 -14.0 Nifty Smallcap 100 -0.8 6.3 -37.6
Nifty 100 0.6 5.5 -18.0 Nifty Midcap 150 -0.4 5.7 -19.6
Nifty 200 0.5 5.4 -18.7 Nifty Smallcap 250 -0.8 4.7 -33.1 Company 1 Day (%) 1M (%) 12M (%) Company 1 Day (%) 1M (%) 12M (%)
Automobiles -1.3 8.0 -32.7 Capital Goods -0.7 1.1 -37.3
Amara Raja Batt. -2.3 8.5 -14.5 ABB -1.3 -8.7 -35.0
Ashok Leyland 2.0 7.4 -45.2 Bharat Elec. -4.8 -10.1 -30.9
Bajaj Auto 0.4 7.6 -18.4 BHEL -3.9 4.5 -64.1
Bharat Forge 0.6 19.6 -39.4 Blue Star -3.4 1.5 -37.3
Bosch -0.9 1.8 -43.6 CG Cons. Elec. -2.0 -4.3 -9.7 CEAT -2.4 -1.7 -31.0 Cummins -0.5 8.6 -48.7
Eicher Motors -1.0 5.3 -31.6 Engineers India -0.8 -1.1 -41.2
Endurance Tech. 0.8 3.2 -46.1 Havells 0.0 -8.4 -33.6
Escorts -1.3 15.3 17.8 K E C Intl -0.4 25.2 -32.8
Exide Inds. -0.1 4.9 -29.7 L&T -0.8 1.0 -40.0
Hero Motocorp -1.8 7.9 -21.5 Siemens -1.2 -5.7 -4.2
M & M -3.6 18.3 -38.0 Thermax -0.1 -1.8 -26.1 Mahindra CIE -3.9 38.4 -54.8 Voltas 3.4 -5.3 -20.6
Maruti Suzuki -1.9 -0.8 -29.8 Cement -0.2 7.3 -28.3
Motherson Sumi 2.5 37.1 -41.0 Ambuja Cem. 0.5 13.1 -20.7
Tata Motors -1.8 19.9 -56.3 ACC 0.2 20.6 -27.5
TVS Motor Co. -2.3 9.7 -36.1 Birla Corp. 1.8 -7.2 -30.8
Banks-Private -0.7 4.5 -35.1 Dalmia Bhar. -0.8 9.3 -54.2
AU Small Fin. Bank -5.0 -12.3 -34.1 Grasim Inds. 0.2 -5.2 -44.2 Axis Bank -3.8 -2.3 -48.0 India Cem -1.2 -4.1 -1.4
Bandhan Bank -4.8 23.9 -58.1 J K Cements 0.6 14.3 30.2
DCB Bank -1.5 -17.2 -68.0 JK Lakshmi Ce -1.1 3.9 -45.3
Equitas Holdings -2.0 32.1 -60.6 Ramco Cem -1.9 12.0 -30.9
Federal Bank -1.3 4.5 -56.7 Shree Cem 1.9 17.0 -5.1
HDFC Bank 0.4 4.5 -19.5 Ultratech 1.7 1.5 -26.7
ICICI Bank 0.3 5.9 -11.5 Consumer 1.9 -7.2 -9.0 IndusInd Bank -3.0 10.4 -70.4 Asian Paints -1.0 -2.0 13.7
Kotak Mah. Bank 1.6 2.6 -13.2 Britannia 2.6 7.8 12.8
RBL Bank -7.4 -1.4 -81.7 Colgate 4.5 1.4 18.7
Banks-PSU -2.0 -7.1 -60.1 Dabur 1.1 -8.5 21.6
BOB -3.2 -14.8 -62.9 Emami 3.1 -18.0 -50.8
PNB -1.3 -3.9 -65.1 Godrej Cons. 2.6 -16.6 -21.6
SBI -2.3 -8.9 -44.1 GSK Cons. 0.0 1.3 53.4 NBFCs -0.2 3.4 -21.7 HUL 4.8 -15.1 23.9
Aditya Birla Cap -1.7 -5.5 -56.2 ITC -1.7 -11.4 -47.4
Bajaj Fin. -1.7 -13.2 -30.7 Jyothy Lab -2.3 5.8 -34.6
Cholaman.Inv.&Fn -3.1 -4.5 -43.8 Marico 0.4 3.6 -15.5
HDFC -0.8 8.5 -12.5 Nestle 3.9 5.6 72.7
HDFC Life Insur. 5.2 9.2 26.9 Page Inds -0.4 1.4 -20.6
L&T Fin.Holdings -2.8 3.0 -52.2 Pidilite Ind. 1.1 5.0 17.5 LIC Hsg Fin 1.3 17.7 -45.0 P&G Hygiene -1.3 -8.8 -3.7
M&M Fin. -3.0 3.9 -56.3 Tata Consumer 2.0 18.4 74.8
Muthoot Fin -1.2 17.7 44.6 United Brew 1.8 -2.8 -34.6
MAS Financial Serv. 0.2 1.7 0.8 United Spirits -0.8 -4.6 -5.0
ICICI Pru Life 0.5 17.4 12.1 Healthcare 2.1 11.1 3.8
IIFL Wealth Mgt 0.6 -14.1 Alembic Phar -3.9 20.2 39.5
PNB Housing 0.6 8.9 -74.1 Alkem Lab 1.1 -3.4 53.6 Company 1 Day (%) 1M (%) 12M (%) Ajanta Pharma -0.6 6.6 37.3
Repco Home -2.1 11.9 -69.8 Aurobindo 0.6 48.9 -14.5
Shriram City Union 0.4 -2.9 -52.5 Biocon 2.7 9.7 31.6
Shriram Trans. -1.4 24.8 -27.6 Cadila -0.2 -8.3 11.8
Note: Sectoral performance are of NSE/BSE Indices
Index and MOFSL Universe stock performance
11 May 2020 36
Company 1 Day (%) 1M (%) 12M (%) Company 1 Day (%) 1M (%) 12M (%)
Cipla 0.4 15.4 6.1 HCL Tech. 1.3 12.0 -8.4
Divis Lab 1.9 6.2 37.9 Hexaware -3.4 -5.4 -30.8
Dr Reddy’s 3.9 8.2 37.2 Infosys 1.4 6.8 -6.1
Glenmark -0.7 42.9 -44.6 L&T Infotech -0.6 16.7 -6.6
GSK Pharma -0.9 15.0 13.5 Mindtree 1.5 21.7 -9.1 IPCA Labs 0.2 -4.0 62.7 Mphasis -2.1 10.0 -22.5
Jubilant Life 1.3 19.8 -36.9 NIIT Tech 2.0 27.3 13.4
Laurus Labs -9.9 12.4 15.9 Persistent Sys -0.1 3.1 -13.5
Lupin 2.7 18.4 -1.9 TCS 0.1 11.0 -12.0
Strides Pharma -1.0 29.9 -13.8 Tech Mah 3.9 -4.2 -33.2
Sun Pharma 3.7 7.4 6.9 Wipro -0.1 -4.7 -36.7
Torrent Pharma 3.7 -3.5 44.1 Zensar Tech 0.4 -7.1 -66.1 Infrastructure 0.8 10.6 -12.3 Telecom 0.5 14.1 19.0
Ashoka Buildcon 0.3 39.8 -48.1 Bharti Airtel 0.4 14.8 63.7
IRB Infra.Devl. -0.4 6.3 -43.5 Bharti Infra. 0.9 4.7 -34.4
KNR Construct. -0.4 3.4 -16.0 Idea Cellular 0.2 30.3 -70.9
Media 0.7 3.8 -48.2 Tata Comm 2.0 57.3 21.0
PVR -1.8 -10.7 -48.9 Utiltites -2.4 0.7 -26.9
Sun TV -1.1 17.3 -28.3 Coal India -1.4 -6.1 -48.2 Zee Ent. 2.1 5.5 -54.8 CESC -2.9 36.7 -7.8
Metals -1.1 3.2 -43.4 JSW Energy 0.7 -3.4 -40.1
Hindalco -0.4 15.9 -41.7 NHPC Ltd -1.5 -8.0 -12.7
Hind. Zinc -0.5 5.6 -34.1 NTPC -3.8 2.2 -33.5
JSPL -1.8 5.0 -47.6 Power Grid -1.6 0.4 -16.1
JSW Steel -2.0 9.1 -41.7 Tata Power -1.9 -20.2 -55.9
Nalco -1.6 -4.2 -42.7 Torrent Power -6.6 3.4 19.8 NMDC 0.2 -2.7 -23.6 Others
SAIL 0.0 11.8 -46.3 Brigade Enterpr. -3.8 -26.8 -30.3
Vedanta -1.5 10.0 -51.4 BSE -0.6 21.6 -37.6
Tata Steel -1.1 -0.7 -47.9 Coromandel Intl 0.1 19.1 45.8
Oil & Gas 0.3 6.8 -22.6 Concor -0.1 7.2 -24.6
Aegis Logistics 3.9 12.6 -9.9 Essel Propack -0.8 2.0 30.4
BPCL -1.6 -5.3 -14.0 Godrej Agrovet -0.8 2.6 -21.7 Castrol India 1.7 11.2 -16.2 Indian Hotels -3.5 -10.1 -54.1
GAIL -0.2 6.6 -45.9 Interglobe 1.6 -6.1 -41.0
Gujarat Gas 4.3 6.2 52.8 Info Edge 3.8 19.6 37.4
Gujarat St. Pet. -2.1 1.3 10.0 Kaveri Seed -1.1 18.0 -18.6
HPCL -2.1 -1.2 -30.2 Lemon Tree Hotel 1.2 -4.7 -76.3
IOC -1.9 -9.2 -51.1 MCX 1.2 10.7 35.1
IGL 0.8 8.4 53.1 Oberoi Realty -4.1 6.2 -34.2 Mahanagar Gas -1.5 -3.4 -7.3 Phoenix Mills -2.9 -2.8 -13.2
MRPL -2.3 22.2 -55.8 PI Inds. 0.0 10.5 49.1
Oil India -2.6 -0.8 -50.4 Quess Corp -1.7 -12.3 -71.9
ONGC 0.4 2.3 -55.0 SRF 0.0 20.1 47.0
PLNG -1.2 4.1 -4.6 S H Kelkar -3.0 -28.8 -63.0
Reliance Ind. 3.6 31.0 20.2 Tata Chemicals 0.9 26.4 11.0
Aditya Bir. Fas. -3.7 -28.4 -48.2 Team Lease Serv. -0.4 1.6 -46.1 Retail Trident -1.1 9.6 -29.0
Avenue Super. 2.3 -2.2 79.6 UPL -0.9 13.9 -43.2
Future Lifestyle 5.0 62.1 -67.5
Future Retail 4.9 25.4 -80.2
Jubilant Food 1.5 11.4 24.0
Shoppers St. -1.0 -17.8 -63.9
Titan Co. -1.9 -8.8 -23.5 Trent -1.1 -0.5 21.0
V-Mart Retail -0.4 3.4 -36.9
Technology 0.8 7.3 -16.5
Cyient -10.0 -4.7 -63.2
Index and MOFSL Universe stock performance
11 May 2020 37
N O T E S
11 May 2020 38
Explanation of Investment Rating
Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL > - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures: The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOFSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE)
and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products. Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
MOFSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOFSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject company in the past 12 months. MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to
such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report. Research Analyst may have served as director/officer, etc. in the subject company in the past 12 months. MOFSL and/or its associates may have received any compensation from the subject company in the past 12 months.
In the past 12 months , MOFSL or any of its associates may have: a) managed or co-managed public offering of securities from subject company of this research report, b) received compensation for investment banking or merchant banking or brokerage services from subject company of this research report, c) received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d) Subject Company may have been a client of MOFSL or its associates in the past 12 months. MOFSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOFSL has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients
of this report should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income
from clients which are not considered in above disclosures. Terms & Conditions: This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part or in
whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for
securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report. Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securit ies or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement Companies where there is interest Analyst ownership of the stock No A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOFSL or its
associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views. Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions. For Hong Kong: This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities and
Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian
Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong. For U.S: Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOFSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major 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") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD
rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. For Singapore: In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Disclaimer: The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report
may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the info rmation and opinions contained
in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit i nvestment banking or other business from, any
company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees
responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website www.motilaloswal.com. CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.Registration Nos.: Motilal Oswal Financial Services Limited
(MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate
Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: [email protected], Contact No.:022-71881085.* MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Ben
