Bulls & Bears - Motilal Oswal

September 2014

Highlights of August edition Nifty hits life-time high of 7,954;

closes month with 3% return

3 out of top 5 performers in month of August are Autos

Oil, Auto outperform; Cyclical trades at discount

BEST PERFORMERS MOM (%) WORST PERFORMERS MOM (%)

About the productAs the tagline suggests, BULLS & BEARS is a handbook on valuations in India. Every month it will cover: Valuations of Indian

markets vis-à-vis global markets

Current valuation of companies in various sectors

Sectors which are currently valued at premium/discount to their historical long-period averages

2

Summary

Research & Database Teams ([email protected])

BULLS & BEARS | September 2014

Indian Equities: Nifty makes new high in August; with 3% return MoM– Nifty continue to make its new high to close at 7,954 with 3% return during the month. – Auto and Healthcare turned out to be top performer for the month of August. – Media, Real Estate and Metals were top under performers during August. – Mid-caps continue its underperformance for second consecutive month over Nifty.

Stock performance: 3 out of top 5 performers in month of August are Autos– Top Nifty performers for August: BPCL (+20%), Tata Motors (+17%), M&M (+17%), Cipla (+13%)

and Maruti (+10%). – JSPL (-15%), Tata Power (-11%), Hindalco (-11%), DLF (-10%) and Tata Steel (-7%) were the

worst performer for the month of August.– All Metal companies in Nifty gave negative return during the month of August.

Sector valuations: Oil, Auto outperform; Cyclical trades at discount– Oil & Gas sector after giving negative returns in month of July (-4%); posted 4% positive return

during month of August. The sector now trades at PB of 1.5x at 12% discount to its historic average. PE valuations stands at 11.4x, which is close to its historic average of 11.1x.

– Auto sector PE trades at premium of 3% to its average PE, it was also top performing sector during August giving 12% return on MoM basis.

Nifty-50 highlights: Cyclicals trade at discount on PB; Auto premium rises– In Auto, except Tata Motors all companies are at a premium to its historic average. With recent

outperformance the premium to its historic average has risen significantly.

NOTES: Prices as on 28 Aug 2014

BULL icon:Sectors trading at premium to historic averages

BEAR icon:Sectors trading at discount to historic averages

Valuations are on 12-month forward basis unless otherwise mentioned

Sector valuations are based on MOSL coverage companies

Global equities data sourced from Bloomberg. Sensex valuations based on MOSL estimates

3

Contents Global Equities: Performance and valuation snapshot

Indian Equities: Key valuation metrics

Nifty and Sector performance

Nifty companies valuations

Mid-cap companies valuations

Sector highlights: Overview and specific sector valuations AUTO BANKS / FINANCIALS CAPITAL GOODS CEMENT CONSUMER HEALTHCARE MEDIA METALS OIL & GAS REAL ESTATE RETAIL TECHNOLOGY TELECOM UTILITIES


4

Global equities: India top performing markets, with Sensex up 26% CY14YTD

Sensex v/s Other Markets

Sensex outperformed its EM peers, both in local currency and USD terms. It currently trades at 17.4x FY15Eearnings; at a premium to all other EMs.

India’s RoE remains superior to most EMs (except Indonesia) - an important differentiator for valuation premium.

Source: Bloomberg/MOSL


Index Value

Mkt Cap (USD T)

Local Currency

In USDCY14 / FY15

CY15 / FY16

CY14 / FY15

CY15 / FY16

CY14 / FY15

CY15 / FY16

CY14 / FY15

CY15 / FY16

India 26,638 1.5 26 28 17.4 14.4 2.8 2.5 16.1 17.1

Brazil 61,288 1.2 19 26 13.1 11.5 -25 -20 1.5 1.4 11.5 12.1

Indonesia 5,137 0.4 20 26 16.6 14.1 -5 -2 2.9 2.6 17.6 18.2

Taiwan 9,436 1.0 10 9 15.2 14.1 -13 -2 1.8 1.8 11.9 12.4

MSCI EM 1,088 8.6 8 8 12.1 10.8 -30 -25 1.5 1.4 12.4 12.8

US 2,003 23.9 8 8 16.8 15.1 -3 5 2.6 2.4 15.5 15.9

Korea 2,069 1.3 3 7 11.6 10.2 -34 -29 1.1 1.0 9.4 9.8

China 2,217 3.7 5 3 8.8 7.8 -49 -46 1.2 1.1 13.8 14.0

UK 6,820 4.0 1 1 14.2 13.1 -19 -9 1.9 1.8 13.2 13.6

Japan 15,425 4.6 -5 -4 17.2 15.5 -1 8 1.6 1.5 9.1 9.7

Russia 3,022 0.6 -7 -18 4.6 4.6 -73 -68 0.6 0.5 12.3 11.4

YTD Chg (%) PE (x)Prem / Disc to India

PE (%)PB (x) RoE (%)

5

Global equities: India contributes 10% of increase in World Market cap CY14YTD

In CY14 YTD World market cap increased by USD3.9T, of which India contributed 10%.

India’s contribution to World market cap is at 2.3% above its long period average of 2.1%.

Trend in India's contribution to world market cap (%)


Market cap change and contribution to world CY14YTD

3.03.3

1.6

2.3

0.50

1.25

2.00

2.75

3.50

Aug

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India's Contribution to World Mcap (%)

Average of 2.1%

Contribution to

Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 June-14 July-14 Aug-14 Chg YTD World Chg YTD (%)

United States 22.3 21.7 22.6 22.7 22.6 23.0 23.6 23.1 23.9 1.6 41India 1.1 1.1 1.1 1.2 1.2 1.4 1.5 1.5 1.5 0.4 10China 3.4 3.4 3.3 3.2 3.2 3.2 3.3 3.6 3.7 0.3 8Brazil 1.0 0.9 0.9 1.0 1.0 1.0 1.0 1.0 1.2 0.2 5South Korea 1.2 1.1 1.2 1.2 1.2 1.3 1.3 1.3 1.3 0.1 3Taiwan 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0 1.0 0.1 2Indonesia 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.1 2Japan 4.6 4.5 4.4 4.4 4.3 4.4 4.7 4.7 4.6 0.0 1United Kingdom 4.0 3.9 4.0 3.9 4.0 4.1 4.1 4.1 4.0 0.0 0Russia 0.8 0.7 0.7 0.7 0.6 0.7 0.7 0.6 0.6 -0.2 -4World 62.1 60.1 62.5 62.7 62.9 64.0 65.2 64.8 66.0 3.9

Market Cap (Tril USD)

6

Indian Equities: Markets at new highs; Valuations are still at historic average

BSE Sensex trades at a PE of 16x which is just a premium of 3% to its historic averages; PB at 2.6x is at 2%discount to its averages. Sensex RoE at 16.6% is below the long period average of 19%.

Valuation of Indian equities remain attractive with market cap-to-GDP at its long period average of 72%.12-month forward Sensex P/E (x) 12-month forward Sensex P/B (x)

12-month forward Sensex RoE (%) India’s market cap to GDP (%)


24.6

10.7

16.0

7

12

17

22

27

Aug

-04

Aug

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Aug

-06

Aug

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Aug

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Aug

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Aug

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Aug

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Aug

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Aug

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10 Year Avg: 15.5x

4.2

1.6

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Aug

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Aug

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Aug

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Aug

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Aug

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Aug

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Aug

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Aug

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Aug

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Aug

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Aug

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10 Year Avg: 2.7x

24.2

15.8

16.6

15.0

17.5

20.0

22.5

25.0

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-04

Aug

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Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

10 Year Avg: 19.0%

4252

82 83

103

55

9588

69

63 6572

FY04

FY05

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FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

Average of 72% for the period

7

Indian Equities: Auto, Healthcare top performers for August

Sectoral performance absolute and relative to Nifty (%)

Nifty continue to make its new high to close at 7,954 with 3% return during the month.

Auto and Healthcare turned out to be top performer for the month of August.

Media, Real Estate and Metals were top under performers during August.

Mid-caps continues its underperformance for second consecutive month over Nifty.


CY14 YTD CY14 YTDSector Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Chg (%) Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Chg (%)Auto -6 9 5 1 8 5 2 12 41 -2 6 -1 1 0 0 0 9 15Health Care 1 7 -7 7 -4 11 8 8 34 5 4 -14 7 -12 6 6 5 8Cement -7 5 19 -6 15 8 -6 5 34 -3 2 13 -6 7 2 -8 2 8Oil -4 0 13 1 14 3 -4 4 27 -1 -3 6 1 6 -3 -5 1 0Banks - Pvt -9 7 15 -1 13 2 3 4 38 -5 4 8 0 5 -3 2 1 12Technology 4 3 -10 0 -3 11 4 4 11 8 0 -17 0 -11 5 3 1 -15Consumer -1 -1 8 -3 1 -3 7 3 13 3 -4 1 -3 -6 -8 6 0 -13Capital Goods -8 9 16 1 21 10 -10 2 45 -4 6 9 1 13 5 -11 -1 19Mid-Cap (BSE) -6 3 9 3 16 11 -2 1 39 -3 0 2 4 8 5 -3 -2 12Banks - PSU -14 4 28 8 22 5 -8 0 45 -10 1 21 9 14 0 -9 -3 19NBFC -7 3 12 0 13 9 0 -1 32 -3 0 6 0 5 3 -2 -4 5Telecom -7 -9 10 1 5 0 12 -2 9 -4 -12 4 1 -3 -5 11 -5 -17Util ities -10 0 13 -2 28 7 -8 -4 20 -7 -3 6 -2 20 2 -9 -7 -6Metal -8 -5 16 -1 23 7 0 -6 23 -5 -8 9 -1 15 1 -2 -9 -3Real Estate -15 -1 22 -5 36 10 -9 -9 21 -12 -4 15 -5 28 4 -10 -12 -6Media -5 2 5 -4 7 10 -4 -9 0 -1 -1 -2 -4 -1 5 -6 -12 -26Nifty Abs Chg (%) -3 3 7 0 8 5 1 3 26

MoM Abs. Performance (%) Relative to Nifty MoM Performance (%)

8

Stock performance: 3 out of top 5 performers in month of August are Autos

Best & worst performers in Nifty CY14YTD (%)

Market breadth the bestfor CY14YTD

47 Nifty companies delivered positive returns

JSPL, UNSP and Tata Power only three company to give negative return

Best & worst performers in Nifty MoM Aug-14 (%)


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Nifty best and worstperformers for August

3 out of top 5 performers in month of August are Autos

All metal companies in Nifty gave negative return in month of August

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SENSEX GROWTH & VALUATIONSWeight Mcap

Sector (%) (USD b) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17EAuto 11.4 76 30 28 19 12.8 10.0 8.4 3.1 2.5 2.0 24 25 23Banking & Financial 28.1 137 22 26 25 15.4 12.2 9.7 2.4 2.1 1.8 15 17 19Capital Goods 6.4 33 -18 47 34 32.1 21.9 16.3 2.8 2.5 2.3 9 12 14Consumer 10.8 72 15 15 14 31.1 27.1 23.8 15.3 14.1 12.9 49 52 54Healthcare 5.7 44 8 20 18 29.8 24.9 21.0 5.8 4.8 4.0 19 19 19Metals 3.8 28 14 11 11 13.2 11.8 10.7 1.0 0.9 0.9 7 8 8Oil & Gas 12.4 124 8 18 14 13.2 11.2 9.8 1.7 1.5 1.4 13 14 14Technology 15.5 139 12 13 10 19.9 17.6 16.1 5.3 4.5 3.8 27 25 24Telecom 2.2 24 86 36 30 28.7 21.1 16.2 2.2 2.0 1.8 8 10 11Utilties 3.6 60 4 13 14 13.1 11.7 10.3 2.3 2.1 2.0 18 18 19Sensex 100 737 14 21 19 16.9 14.0 11.7 2.7 2.4 2.1 16 17 18 # for Sensex we have taken EPS Growth; Sensex numbers are free float adjusted.

PAT Growth (%) # PE (x) PB (x) ROE (%)

9

Indian Equities: Growth to rebound to 21% in FY16 led by domestic cyclicals

Post 1QFY15 earnings, FY16 Sensex EPS was raised by 1% and now stands at INR1,854 (growth of 21%). FY15 Sensex EPSraised by 0.5% at INR1,532 (growth of 14%). FY16 earnings growth to be driven by Financials, Capital Goods and Energy.

Our bottom-up estimates of earnings of Sensex constituents indicate Sensex EPS CAGR of 18% during FY14-17. This issignificantly higher than 8% CAGR witnessed during FY08-14.

For FY15, Healthcare, Oil & Gas and Utilities PAT growth to be in single digits. Capital Goods earnings will bottom-out (aftertwo consecutive years of negative growth) in FY15 to record double-digit growth in FY16.

Domestic plays to outperform global plays in terms of PAT growth. Capital Goods, Financials, Auto, Telecom have healthyPAT growth for FY16 in the Sensex universe.


10

Nifty: Cyclicals continue to trade at discount on PB; Auto premium rises

In Auto, except Tata Motors all companies are at a premium to its historic average. With recent outperformance thepremium to its historic average has risen significantly.

All Private Banks except Axis Bank are trading at a premium to its historic averages on PB basis. On the other hand all PSUnow trades at big discount due to recent under performance.

In Healthcare, all companies except Dr Reddy’s trades at premium to its average PE. Bharti now trades at 4% discount to itslong period average of 26x PE.


Name Sector Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBajaj Auto Auto 17.0 12.9 31 6 -17 5.4 5.5 -2 103 103Hero MotoCorp Auto 16.9 14.9 13 6 -4 7.0 6.8 4 166 152Mahindra & Mahind Auto 16.3 11.5 41 2 -26 4.0 3.1 27 50 16Maruti Suzuki Auto 19.2 14.9 29 20 -4 3.2 2.5 29 22 -7Tata Motors Auto 7.2 10.6 -32 -55 -31 1.7 2.7 -35 -34 0Axis Bank Banks - Private 12.3 12.5 -2 -23 -20 2.0 2.1 -4 -25 -24HDFC Bank Banks - Private 17.3 20.9 -17 8 35 3.6 3.4 7 37 26ICICI Bank Banks - Private 14.7 17.1 -14 -8 10 2.2 1.8 20 -19 -33IndusInd Bank Banks - Private 15.5 17.5 -12 -3 13 2.8 2.0 43 6 -27Kotak Mahindra Ban Banks - Private 24.7 18.5 33 54 20 3.5 2.7 31 34 0Bank of Baroda Banks - PSU 6.0 6.5 -7 -62 -58 0.9 1.0 -8 -64 -62Punjab National Ban Banks - PSU 5.7 6.8 -16 -64 -56 0.8 1.2 -31 -69 -56State Bank Banks - PSU 8.5 8.9 -5 -47 -42 1.1 1.2 -10 -58 -54HDFC Banks - NBFC 25.6 22.6 13 60 46 5.2 4.6 13 97 71IDFC Banks - NBFC 11.1 15.1 -27 -31 -3 1.3 2.0 -36 -52 -26BHEL Capital Goods 19.7 17.8 11 23 15 1.7 4.2 -60 -38 54Larsen & Toubro Capital Goods 31.7 21.6 46 98 39 3.6 4.2 -15 36 58ACC Cement 21.5 15.7 37 35 1 3.3 3.0 11 25 11Ambuja Cements Cement 23.8 16.1 47 49 4 2.2 2.8 -23 -18 4Grasim Industries Cement 11.7 8.2 43 -27 -47 1.3 1.4 -12 -53 -47Ultratech Cement Cement 26.3 14.5 82 65 -7 3.4 2.9 18 30 9Asian Paints Consumer 37.0 23.9 55 131 54 11.9 8.5 40 348 213Hind. Unilever Consumer 38.2 26.9 42 139 74 40.9 25.1 63 1447 830ITC Consumer 25.9 22.3 16 62 44 10.8 6.9 56 309 157United Spirits Consumer 49.8 51.0 -2 211 229 3.9 3.5 13 49 29

PE (x) Relative to Sensex P/E (%) PB (x) Relative to Sensex P/B (%)

11

Nifty: Healthcare trades at a premium; outperforms for third month in a row

Companies with significant premium to their averages are: Sesa Sterlite (+82%), Ultratech (+82%), Hindalco (+72%), AsianPaints (+55%) , Lupin (+48%) and Ambuja Cement (+47%).

Companies with significant discount to their averages are: Cairn India (-55%), NMDC (-39%), Tata Motors (-32%), NTPC(+26%), and Tata Power (-20%).


Name Sector Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgCipla Healthcare 27.4 21.9 25 72 41 3.5 3.7 -6 32 38Dr Reddy’ s Labs Healthcare 21.0 23.2 -10 32 50 4.2 3.3 28 60 22Lupin Healthcare 26.0 17.5 48 62 13 6.0 4.1 46 126 52Sun Pharma Healthcare 30.2 20.6 46 89 33 6.6 4.4 52 151 62Hindalco Metals 15.4 9.0 72 -4 -42 1.3 1.7 -21 -49 -37JSPL Metals 8.7 10.5 -17 -46 -32 0.8 3.2 -74 -69 18NMDC Metals 9.2 15.1 -39 -42 -3 2.0 4.8 -59 -25 79Sesa Sterlite Metals 13.1 7.2 82 -18 -54 1.9 2.5 -27 -30 -6Tata Steel Metals 11.8 11.3 4 -26 -27 1.4 2.3 -38 -45 -14BPCL Oil & Gas 16.1 12.6 28 1 -19 2.3 1.3 78 -14 -52Cairn India Oil & Gas 6.0 13.5 -55 -62 -13 0.9 1.2 -24 -66 -56GAIL Oil & Gas 14.9 11.7 28 -7 -25 1.8 2.1 -11 -31 -24ONGC Oil & Gas 11.5 9.8 17 -28 -37 1.9 2.0 -7 -29 -25Reliance Inds. Oil & Gas 11.8 12.7 -7 -26 -18 1.3 1.7 -23 -51 -38DLF Real Estate 36.8 37.0 0 130 138 1.1 2.2 -50 -58 -18HCL Technologies Technology 15.9 14.4 10 -1 -7 4.2 3.1 37 60 15Infosys Technology 16.6 19.2 -13 4 24 3.7 5.5 -32 41 105TCS Technology 21.5 18.3 18 34 18 6.5 6.3 3 144 132Tech Mahindra Technology 16.2 16.2 0 1 4 3.8 4.3 -11 46 61Wipro Technology 15.4 16.6 -7 -4 7 3.2 4.0 -19 20 47Bharti Airtel Telecom 24.9 26.0 -4 56 68 2.0 3.5 -43 -24 31Coal India Util ities 12.4 12.4 0 -22 -20 4.3 4.6 -7 62 71NTPC Util ities 12.1 16.4 -26 -24 5 1.2 2.0 -40 -54 -24Power Grid Corp. Util ities 12.2 14.2 -14 -24 -9 1.7 1.9 -11 -35 -29Tata Power Util ities 15.4 19.3 -20 -4 24 1.5 2.1 -27 -43 -23Sensex 16.0 15.5 3 2.6 2.7 -2

PE (x) Relative to Sensex P/E (%) PB (x) Relative to Sensex P/B (%)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg MoM YTDBirla Corpn. 11.6 7.3 59 -28 -53 1.4 1.6 -10 -45 -40 43 115TVS Motor Co. 17.2 12.0 44 8 -23 4.5 1.5 196 71 -43 27 145Kaveri Seed 18.2 9.5 91 14 -39 6.6 2.7 145 151 0 24 145Arvind 14.0 19.1 -27 -13 23 2.3 0.9 146 -12 -65 24 109Amara Raja Batt. 26.1 31.0 -16 63 100 5.4 3.8 41 103 41 13 64Atul Auto 20.3 9.7 109 27 -38 5.8 1.5 290 119 -45 11 141Monsanto India 23.6 19.4 21 48 25 8.0 4.0 98 202 50 11 170Symphony 30.1 8.0 275 88 -48 11.5 3.2 261 333 18 9 188PVR 30.5 45.3 -33 91 192 5.6 2.5 123 110 -8 9 5India Cements 16.8 15.1 11 5 -3 0.9 1.2 -29 -67 -54 9 88CESC 11.8 9.3 28 -26 -40 1.3 1.1 13 -51 -57 8 49Alembic Pharma 19.5 9.5 105 22 -39 6.6 3.3 104 151 21 7 76Ipca Labs. 17.5 12.9 36 9 -17 3.6 2.7 35 37 0 5 4PTC India 7.9 17.0 -54 -51 10 1.0 1.5 -34 -63 -45 5 32Sanofi India 27.5 21.5 28 72 38 4.7 4.2 14 79 55 2 10Indraprastha Gas 11.2 11.3 -1 -30 -27 2.3 2.9 -20 -12 8 1 41Federal Bank 10.4 7.6 37 -35 -51 1.3 1.0 35 -51 -65 1 44Sobha Developers 15.6 18.2 -14 -3 17 1.7 2.2 -22 -34 -17 0 46Bajaj Electricals 18.7 12.1 55 17 -22 3.4 2.4 40 28 -10 -1 27Biocon 19.0 16.3 17 19 5 2.7 2.3 14 0 -13 -1 1Gujarat Pipavav 18.2 26.3 -31 14 70 3.8 2.4 62 45 -13 -1 127H T Media 11.9 27.3 -56 -25 76 1.1 2.6 -58 -59 -5 -2 33Thermax 33.1 20.1 64 107 30 4.4 4.7 -5 68 73 -2 21MphasiS 9.3 16.2 -43 -42 5 1.9 3.7 -50 -29 38 -2 2Guj.St.Petronet 9.9 14.0 -30 -38 -10 1.2 2.0 -38 -53 -26 -4 40Oriental Bank 5.3 6.4 -17 -67 -59 0.5 0.9 -37 -79 -68 -6 15South Ind.Bank 7.2 5.9 23 -55 -62 1.0 0.9 14 -63 -68 -8 37Mahindra Life. 10.1 25.2 -60 -37 63 1.4 1.8 -21 -47 -34 -9 39Phoenix Mills 24.5 43.6 -44 53 181 2.4 3.1 -23 -9 16 -10 41

PE (x) Relative to Sensex P/E (%) PB (x) Relative to Sensex P/B (%) Price Chg (%)

12

Midcap: Continues its underperformance for second consecutive month

During Aug-14, Mid-caps underperformed the market delivering 1% returns against 3% return of Nifty.

Top mid-cap performers in Aug-14 were Birla Corp (43%), TVS Motor (27%), Kaveri Seeds (24%), Arvind (24%).


13

Sector valuations: Oil, Auto outperform; Cyclical trades at discount

Oil & Gas sector after giving negative returns in month of July (-4%); posted 4% positive return during month of August. Thesector now trades at PB of 1.5x at 12% discount to its historic average. PE valuations stands at 11.4x, which is close to itshistoric average of 11.1x.

Auto sector PE trades at premium of 3% to its average PE, it was also top performing sector during August giving 12% returnon MoM basis. Recovery accelerates in 2Ws & PVs, MHCVs poised for sharp turnaround.

Healthcare sector outperformed the benchmark for the third consecutive month. Healthcare sector premium has moved to22% to its historic averages, which now trades at PE of 27x.

Technology sector now trades at 18.2x, which is at 6% premium to its historic averages. The sector also outperformed thebenchmark for third consecutive month.

Cyclical continues to trade at discount on PB basis and also underperformed Nifty for the month of August. PSU Banks is at22% discount to its historic average P/B, while Capital Goods is at 25% and Metals are at 36% discount.


Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAuto 12.4 12.1 2.5 -22 -23 2.9 2.9 0.6 11 8Banks - Private 15.2 15.2 -0.2 -5 -3 2.7 2.3 17.9 3 -14Banks - PSU 6.9 7.0 -0.8 -57 -55 0.9 1.1 -21.9 -66 -58NBFC 11.7 11.5 1.7 -27 -27 2.3 2.2 5.7 -12 -18Capital Goods 29.1 20.9 39.5 82 33 3.3 4.4 -25.3 25 59Cement 20.0 13.9 44.0 25 -9 2.1 2.4 -9.9 -19 -13Consumer 32.3 24.5 31.5 102 61 12.1 8.6 40.9 356 227Healthcare 26.9 22.0 22.2 68 45 5.4 4.2 27.9 104 59Media 19.4 21.8 -11.0 21 38 4.5 3.8 18.0 71 42Metals 10.6 9.6 10.2 -34 -39 1.2 1.9 -36.0 -55 -33Oil & Gas 11.4 11.1 3.1 -28 -29 1.5 1.7 -12.5 -43 -36Real Estate 25.0 21.6 16.0 56 36 1.1 1.4 -23.3 -60 -51Retail 27.4 29.5 -7.1 71 88 6.4 4.4 46.4 142 62Technology 18.2 17.2 6.1 14 12 4.7 5.1 -8.7 78 90Telecom 21.5 22.5 -4.6 35 47 1.8 2.4 -25.3 -31 -11Util ities 12.3 14.8 -16.5 -23 -6 1.3 1.7 -26.1 -51 -35

PB (x)Sector

Relative to Sensex P/E (%)

Relative to Sensex P/B (%)

PE (x)

-22-23

-50

-25

0

25

50

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Relative to Sensex PE (%)

14

Auto: Recovery accelerates in 2Ws & PVs, MHCVs poised for sharp turnaround

Auto sector PE trades at premium of 3% toits average PE.

Tata Motors (TTMT) trade at a 32%discount to its historic average PE; duringthe month the stock appreciated 17% onMoM basis. Post 1QFY15 we have upgradeour FY15E/16E EPS by 26%/23% on strongJLR outlook .

Bajaj Auto is trading at 31% premium to itsaverage, 1QFY15 margins disappoints.

Auto was top performing sector duringAugust giving 12% return on MoM basis.

Sector Performance CY14 YTD

Auto +41%


12.412.1

3

10

17

24

31

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Auto Sector P/E (x) 10 Yr Avg (x)

2.92.9

1.0

2.0

3.0

4.0

5.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

- 12

Aug

-13

Aug

-14

Auto Sector P/B (x) 10 Yr Avg (x)

118

-20

-5

10

25

40

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Relative to Sensex PB (%)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAmara Raja Batt. 26.1 31.0 -16 63 100 5.4 3.8 41 103 41Ashok Leyland 27.3 14.4 90 71 -7 1.9 2.9 -34 -27 7Bajaj Auto 17.0 12.9 31 6 -17 5.4 5.5 -2 103 103Bharat Forge 20.2 7.7 161 27 -50 5.1 1.9 170 94 -30Eicher Motors 30.4 13.0 134 90 -16 8.8 2.3 283 234 -15Exide Inds. 19.3 16.6 16 21 7 3.1 3.2 -2 18 18Hero Motocorp 16.9 14.9 13 6 -4 7.0 6.8 4 166 152M & M 16.3 11.5 41 2 -26 4.0 3.1 27 50 16Maruti Suzuki 19.2 14.9 29 20 -4 3.2 2.5 29 22 -7Tata Motors 7.2 10.6 -32 -55 -31 1.7 2.7 -35 -34 0TVS Motor Co. 17.2 12.0 44 8 -23 4.5 1.5 196 71 -43

Relative to Sensex P/E (%) Relative to Sensex P/B (%)PE (x) PB (x)

-5-3

-40

-20

0

20

40

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


15

Banks – Private: Stable on NIMs/asset quality; trades above average P/B

Private banks are trading at 18%premium to their historical average PBand just 3% premium to market PB.

Indusind Bank is top stock to trade at apremium of 43% to its historic average.

Yes Bank and Axis Bank are only stocks totrade at discount to historic averages.

For 1QFY15 private banks reportedhealthy NII growth driven by in-line/better than expected NIMs and loangrowth.


Private Banks +38%


15.215.2

5

12

19

26

33

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Private Banks P/E (x) 10 Yr Avg (x)

2.72.3

1.0

1.8

2.5

3.3

4.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Private Banks P/B (x) 10 Yr Avg (x)

3-14

-40

-26

-12

2

16

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAxis Bank 12.3 12.5 -2 -23 -20 2.0 2.1 -4 -25 -24Federal Bank 10.4 7.6 37 -35 -51 1.3 1.0 35 -51 -65HDFC Bank 17.3 20.9 -17 8 35 3.6 3.4 7 37 26ICICI Bank 14.7 17.1 -14 -8 10 2.2 1.8 20 -19 -33IndusInd Bank 15.5 17.5 -12 -3 13 2.8 2.0 43 6 -27ING Vysya Bank 15.1 13.1 15 -6 -15 1.5 1.4 12 -43 -50J & K Bank 5.6 6.3 -11 -65 -59 1.0 1.0 2 -61 -63Kotak Mah. Bank 24.7 18.5 33 54 20 3.5 2.7 31 34 0South Ind.Bank 7.2 5.9 23 -55 -62 1.0 0.9 14 -63 -68Yes Bank 11.0 13.9 -21 -31 -11 1.9 2.4 -19 -28 -13


-57

-55

-75

-65

-55

-45

-35

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


16

Banks – PSU: Valuations below historic average; underperforms in August

PSU Banks continued its underperformance for second consecutivemonth in a row.

The sector now trades below its historicaverage at a 22% discount on PB. All PSUbanks trades at a discount to historicalaverage PB.

With capital and strong branchexpansion, PSBs are best paced toleverage on improving macro-economicenvironment to drive re-rating.


PSU Banks +45%


6.9

7.0

3

5

7

9

11

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

PSU Banks P/E (x) 10 Yr Avg (x)

0.91.1

0.3

0.8

1.3

1.8

2.3

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

PSU Banks P/B (x) 10 Yr Avg (x)

-66

-58

-80

-70

-60

-50

-40

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAndhra Bank 6.2 6.5 -4 -61 -58 0.5 1.0 -54 -83 -64Bank of Baroda 6.0 6.5 -7 -62 -58 0.9 1.0 -8 -64 -62Bank of India 5.2 6.6 -22 -68 -57 0.6 1.1 -41 -77 -61Canara Bank 5.4 5.8 -8 -66 -63 0.6 1.0 -34 -76 -64Corporation Bank 6.3 6.7 -6 -61 -57 0.5 0.9 -47 -81 -65Dena Bank 4.1 5.1 -19 -74 -67 0.4 0.7 -39 -83 -73IDBI Bank 8.3 9.0 -8 -48 -42 0.5 0.9 -40 -80 -68Indian Bank 5.4 5.1 5 -66 -67 0.5 0.9 -44 -81 -67Oriental Bank 5.3 6.4 -17 -67 -59 0.5 0.9 -37 -79 -68Punjab Natl.Bank 5.7 6.8 -16 -64 -56 0.8 1.2 -31 -69 -56St Bk of India 8.5 8.9 -5 -47 -42 1.1 1.2 -10 -58 -54Union Bank (I) 5.3 6.2 -15 -67 -60 0.7 1.1 -37 -75 -61


-27

-27

-70

-50

-30

-10

10

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


17

NBFC: Trades near its avg. at 2.3x PB; Infra finance continues to trade at discount

NBFCs now trades at 2.3x (historicaverage of 2.2x) at 6% premium.

Bajaj Finance 1QFY15 performance wasabove our estimates, driven by strongAUM growth and stable asset quality, it isonly stock to trade at a huge premium of112% to historical average.

HDFC trade at premium to market PB of97%.

Infrastructure Finance companies IDFC,PFC trades at 36% and 31% discount to itsaverage PB.


NBFC +32%


11.7

11.5

3

8

13

18

23

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

NBFC P/E (x) 10 Yr Avg (x)

2.32.2

0.0

1.0

2.0

3.0

4.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

NBFC P/B (x) 10 Yr Avg (x)

-12-18

-75

-50

-25

0

25

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBajaj Finance 13.4 16.6 -19 -16 7 2.4 1.2 112 -8 -57H D F C 25.6 22.6 13 60 46 5.2 4.6 13 97 71I D F C 11.1 15.1 -27 -31 -3 1.3 2.0 -36 -52 -26LIC Housing Fin. 10.2 7.9 30 -36 -49 1.7 1.4 16 -37 -47M & M Financial 16.2 11.5 41 1 -26 2.6 2.0 32 -2 -27Power Fin.Corpn. 4.7 8.4 -44 -71 -46 0.9 1.4 -31 -65 -50Rural Elec.Corp. 4.5 6.3 -29 -72 -59 1.0 1.3 -23 -62 -52Shriram Trans. 11.5 9.4 23 -28 -40 1.9 1.9 0 -27 -28


8233

-40

0

40

80

120

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


18

Capital Goods: Awaits pick up in order inflows; PBs at 25% discount to average

Capital Goods after underperforming inmonth of July (10% negative return)posted a 2% positive return for the monthof August.

The sector trades at 25% discount to itshistorical PB average, however it trades at40% premium to its historical PE average.

ABB is only stock to trade at a discount toits historic PE average.

For 1QFY15, performance of sectorcontinued to remain constrained as thepace of project execution failed to pick up.


Capital Goods +45%


29.120.9

7

17

27

37

47

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Capital Goods P/E (x) 10 Yr Avg (x)

3.3

4.4

0.0

3.0

6.0

9.0

12.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Capital Goods P/B (x) 10 Yr Avg (x)

25

59

-50

15

80

145

210

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgA B B 56.9 67.7 -16 256 336 7.0 6.9 1 165 158B H E L 19.7 17.8 11 23 15 1.7 4.2 -60 -38 54Crompton Greaves 22.5 21.9 3 41 41 3.4 4.5 -23 30 65Cummins India 26.4 18.2 45 65 17 6.4 4.8 33 142 78Havells India 5.7 3.7 54 -64 -76 1.6 0.9 85 -38 -67Larsen & Toubro 31.7 21.6 46 98 39 3.6 4.2 -15 36 58Siemens 59.5 47.3 26 272 205 6.4 8.4 -25 141 213Thermax 33.1 20.1 64 107 30 4.4 4.7 -5 68 73Voltas 23.3 18.7 24 46 21 3.8 3.9 -5 42 46


25-9

-75

-40

-5

30

65

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


19

Cement: EV/EBITDA premium drops to 20%

Cement EV/EBITDA valuations is at 20%premium to its historical average.Expansions largely on track, demandsustainability key.


Cement +34%


20.013.9

3

9

15

21

27

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Cement P/E (x) 10 Yr Avg (x)

2.12.4

0.5

1.8

3.0

4.3

5.5

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Cement P/B (x) 10 Yr Avg (x)

-19

-13

-50

-25

0

25

50

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


9.88.2

3.0

5.5

8.0

10.5

13.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Cement EV/EBDITA (x) 10 Yr Avg (x)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgACC 21.5 15.7 37 35 1 3.3 3.0 11 25 11Ambuja Cem. 23.8 16.1 47 49 4 2.2 2.8 -23 -18 4Birla Corpn. 11.6 7.3 59 -28 -53 1.4 1.6 -10 -45 -40Grasim Inds 11.7 8.2 43 -27 -47 1.3 1.4 -12 -53 -47India Cements 16.8 15.1 11 5 -3 0.9 1.2 -29 -67 -54JP Associates 19.4 35.3 -45 21 128 0.7 1.8 -60 -72 -33Shree Cement 22.9 14.8 55 44 -5 4.6 3.4 33 72 27UltraTech Cem. 26.3 14.5 82 65 -7 3.4 2.9 18 30 9


102

61

-10

28

66

104

142

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


20

Consumer: Trades at 32% premium; earnings to see moderation

Consumer sector PE continues to tradeabove its historical average of 24x.

Companies with significant premium toits historic avg PE are Pidilite at 83%, GSKConsumer at 73% and Emami at 62%.

Radico and UNSP are only two stocks totrade at discount to its historic averages.

1QFY15 saw further moderation involume growth however slowdown iscompany/category specific and notbroad-based.


Consumer +13%


32.3

24.5

10

17

24

31

38

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Consumer P/E (x) 10 Yr Avg (x)

12.1

8.6

4.0

6.5

9.0

11.5

14.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Consumer P/B (x) 10 Yr Avg (x)

356

227

80

170

260

350

440

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAsian Paints 37.0 23.9 55 131 54 11.9 8.5 40 348 213Britannia Inds. 30.1 22.1 36 88 42 12.5 6.9 81 374 156Colgate-Palm. 33.0 25.4 30 107 64 29.5 24.1 22 1014 794Dabur India 34.9 24.7 42 119 59 11.7 9.1 28 342 238Emami 30.9 19.0 62 93 23 13.3 6.9 92 401 156GlaxoSmith C H L 33.9 19.6 73 112 27 10.5 5.9 77 296 119Godrej Consumer 34.1 23.0 49 113 48 7.8 13.3 -42 194 394Hind. Unilever 38.2 26.9 42 139 74 40.9 25.1 63 1447 830ITC 25.9 22.3 16 62 44 10.8 6.9 56 309 157Marico 28.9 22.3 29 81 44 7.3 7.6 -3 177 181Nestle India 41.7 29.8 40 161 92 21.3 23.0 -8 704 753Pidil ite Inds. 35.8 19.6 83 124 26 8.2 4.9 70 212 80Radico Khaitan 12.1 27.5 -56 -25 77 1.1 3.4 -68 -58 28United Spirits 49.8 51.0 -2 211 229 3.9 3.5 13 49 29


68

45

0

30

60

90

120

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


21

Healthcare: Third consecutive month of outperformance; trades above average

Healthcare sector premium has moved to22% to its historic averages, which nowtrades at PE of 27x.

Healthcare sector outperformed thebenchmark for third consecutive month.

For 1QFY15, sector operational performance were inline despite sales miss. US formulations continued to drive growth for sector aided by new launches.

Torrent, Lupin & Sun Pharma trades at significant premium to its averages.


Healthcare +34%


26.9

22.0

14

18

22

26

30

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Healthcare P/E (x) 10 Yr Avg (x)

5.4

4.2

2.0

3.0

4.0

5.0

6.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Healthcare P/B (x) 10 Yr Avg (x)

104

59

-20

20

60

100

140

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBiocon 19.0 16.3 17 19 5 2.7 2.3 14 0 -13Cadila Health. 22.4 17.5 28 40 13 5.4 4.3 24 103 61Cipla 27.4 21.9 25 72 41 3.5 3.7 -6 32 38Divi's Lab. 22.2 17.4 27 39 12 5.7 4.8 19 114 77Dr Reddy's Labs 21.0 23.2 -10 32 50 4.2 3.3 28 60 22Glaxosmit Pharma 33.6 27.2 24 110 75 10.5 7.9 33 298 194Glenmark Pharma. 22.7 35.4 -36 42 128 4.7 4.7 1 78 73Ipca Labs. 17.5 12.9 36 9 -17 3.6 2.7 35 37 0Lupin 26.0 17.5 48 62 13 6.0 4.1 46 126 52Ranbaxy Labs. 52.8 45.0 17 230 190 6.0 5.1 18 127 89Sanofi India 27.5 21.5 28 72 38 4.7 4.2 14 79 55Sun Pharma.Inds. 30.2 20.6 46 89 33 6.6 4.4 52 151 62Torrent Pharma. 20.1 12.7 59 26 -18 5.3 3.3 59 100 23


21

38

-50

0

50

100

150

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


22

Media: Slips below average; Ad growth to rebound in 2HFY15

Media now trades at 19.4x which is nowat 11% discount to its historic PE averageof 21.8x.

During 1QFY15, sector saw a Healthysubscription/circulation growth excludingZee. Ad growth is expected to benefitfrom economic recovery in 2HFY15.Digitization remains a strong theme inbroadcasting but challenges persist.

Zee is the only stock trading at premiumof 6% to its historic average and 46%premium to market PE.

HT Media and Sun TV is at significantdiscount to its historical PE average.


Media +0%


19.4

21.8

7

17

27

37

47

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Media P/E (x) 10 Yr Avg (x)

4.53.8

1.2

2.7

4.2

5.7

7.2

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Media P/B (x) 10 Yr Avg (x)

7142

-60

0

60

120

180

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

- 08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgH T Media 11.9 27.3 -56 -25 76 1.1 2.6 -58 -59 -5Jagran Prakashan 14.3 19.4 -26 -10 25 3.3 4.0 -18 25 50PVR 30.5 45.3 -33 91 192 5.6 2.5 123 110 -8Sun TV Network 16.0 24.2 -34 0 56 4.0 5.8 -31 50 114Zee Entertainmen 23.4 22.1 6 46 42 7.0 4.0 76 164 47


-34

-39

-80

-60

-40

-20

0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


23

Metals: PB at discount to average; marginal improvement in demand

Metals trade at 1.2x PB which is 36%discount to its historical PB average.Indian steel demand improved marginallyduring 1QFY15.

EV/EBIDTA valuations is at 5.4x, which is4% discount to its historical average.


Metals +23%


10.6

9.6

0

5

10

15

20

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Metals P/E (x) 10 Yr Avg (x)

1.2

1.9

0.0

1.3

2.5

3.8

5.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Metals P/B (x) 10 Yr Avg (x)

-55

-33

-80

-55

-30

-5

20

45

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Relative to Sensex PB (%)5.45.7

0.0

3.0

6.0

9.0

12.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Metal Sector EV/EBDITA (x)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgHind.Zinc 9.2 7.2 27 -42 -53 1.5 1.9 -18 -42 -31Hindalco Inds. 15.4 9.0 72 -4 -42 1.3 1.7 -21 -49 -37Jindal Steel 8.7 10.5 -17 -46 -32 0.8 3.2 -74 -69 18JSW Steel 9.0 11.0 -18 -44 -29 1.2 1.2 -4 -56 -56Natl. Aluminium 12.2 16.2 -24 -23 4 1.1 1.7 -36 -59 -37NMDC 9.2 15.1 -39 -42 -3 2.0 4.8 -59 -25 79S A I L 10.8 10.8 0 -32 -31 0.7 1.6 -55 -73 -40Sesa Sterlite 13.1 7.2 82 -18 -54 1.9 2.5 -27 -30 -6Tata Steel 11.8 11.3 4 -26 -27 1.4 2.3 -38 -45 -14


-28

-29

-45

-37

-29

-21

-13

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


24

Oil & Gas: Trades near to its average PE; outperforms in August

Oil & Gas sector after giving negativereturns in month of July (-4%); posted 4%positive return during month of August.

The sector now trades at PB of 1.5x at 12%discount to its historic average. PEvaluations stands at 11.4x, which is close toits historic average of 11.1x.

GAIL (India) is trading at a premium of 28%to its historic PE averages.

Cairn India is trading at a discount of 55%to its historic average.


Oil & Gas +27%


11.4

11.1

5

9

13

17

21

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Oil & Gas P/E (x) 10 Yr Avg (x)

1.51.7

1.0

1.5

2.0

2.5

3.0

Aug

-04

Aug

-05

Aug

-06

Aug

- 07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Oil & Gas P/B (x) 10 Yr Avg (x)

-43-36

-55

-45

-35

-25

-15

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgB P C L 16.1 12.6 28 1 -19 2.3 1.3 78 -14 -52C P C L 7.2 6.6 9 -55 -57 0.7 1.0 -32 -74 -62Cairn India 6.0 13.5 -55 -62 -13 0.9 1.2 -24 -66 -56GAIL (India) 14.9 11.7 28 -7 -25 1.8 2.1 -11 -31 -24Guj.St.Petronet 9.9 14.0 -30 -38 -10 1.2 2.0 -38 -53 -26H P C L 13.3 11.1 20 -17 -29 1.0 0.9 8 -63 -67I O C L 9.9 9.9 0 -38 -36 1.1 1.3 -9 -57 -53Indraprastha Gas 11.2 11.3 -1 -30 -27 2.3 2.9 -20 -12 8M R P L 10.6 12.5 -15 -34 -19 1.3 2.1 -37 -50 -21O N G C 11.5 9.8 17 -28 -37 1.9 2.0 -7 -29 -25Petronet LNG 17.2 10.7 61 8 -31 2.3 2.5 -7 -12 -6Reliance Inds. 11.8 12.7 -7 -26 -18 1.3 1.7 -23 -51 -38


5636

-100

0

100

200

300

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


25

Real Estate: Trades at 1.1x BV; considerable discount to market PB

Real estate trades at 60% discount tomarket PB. The sector trades at 1.1x PB.

DLF now trades at its historic PE average;rest trade at discount to PE average.

Most companies deferred launch planstrategically or due to pending approvals,which impacted overall presales in1QFY15.


Real Estate +21%


25.021.6

0

13

26

39

52

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Real Estate P/E (x) 10 Yr Avg (x)

1.11.4

0.0

2.0

4.0

6.0

8.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Real Estate P/B (x) 10 Yr Avg (x)

-60-51

-100

-50

0

50

100

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgDLF 36.8 37.0 0 130 138 1.1 2.2 -50 -58 -18Indbull.RealEst. 9.9 19.8 -50 -38 28 0.4 0.8 -48 -84 -70Mahindra Life. 10.1 25.2 -60 -37 63 1.4 1.8 -21 -47 -34Sobha Developers 15.6 18.2 -14 -3 17 1.7 2.2 -22 -34 -17Phoenix Mills 24.5 43.6 -44 53 181 2.4 3.1 -23 -9 16


7188

-50

25

100

175

250

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


26

Retail: Expected improvement in consumer sentiments in 2HFY15

Retail sector trades at 7% discount to itshistorical PE average. However it is at46% premium on PB basis.

Retail sector is expected to seeimprovement in consumer sentiments in2HFY15, backed by macro recovery, coulddrive discretionary consumption.

Titan trades at 40% premium to itshistoric average PE.


Retail +58%


27.4

29.5

0

17

34

51

68

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Retail P/E (x) 10 Yr Avg (x)

6.4

4.4

1.0

3.0

5.0

7.0

9.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Retail P/B (x) 10 Yr Avg (x)142

62

-50

0

50

100

150

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgFuture Retail - 27.1 75 0.8 1.5 -49 -71 -44Titan Inds. 33.9 24.2 40 112 56 9.6 8.7 11 265 223


1412

-40

-5

30

65

100

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


27

Technology: Valuation above average; outperforms for 3rd consecutive month

Technology sector now trades at 18.2x,which is at 6% premium to its historicaverages. The sector continues tooutperform for 3rd consecutive month.

HCL Tech and TCS are trading at apremium to its historic PE average. TechMahindra is trading at its historicaverage. Rest all stocks are trading atdiscount to its historic average.

For 1QFY15, Tech Mahindra surprisedpositively with revenue traction intelecom vertical beating our revenueestimates by a healthy 1.8%, rest of theTier-I IT players reported revenues in linewith our estimates.


Technology +11%


18.217.2

7

12

17

22

27

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Technology P/E (x) 10 Yr Avg (x)

4.75.1

2.0

4.0

6.0

8.0

10.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Technology P/B (x) 10 Yr Avg (x)

78

90

0

60

120

180

240

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgHCL Technologies 15.9 14.4 10 -1 -7 4.2 3.1 37 60 15Infosys 16.6 19.2 -13 4 24 3.7 5.5 -32 41 105MphasiS 9.3 16.2 -43 -42 5 1.9 3.7 -50 -29 38TCS 21.5 18.3 18 34 18 6.5 6.3 3 144 132Tech Mahindra 16.2 16.2 0 1 4 3.8 4.3 -11 46 61Wipro 15.4 16.6 -7 -4 7 3.2 4.0 -19 20 47


35

47

-100

0

100

200

300

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


28

Telecom: Trades at 26% discount to EV/EBITDATelecom sector posted a negative returnof 2% for the month of August post a 12%positive return in July on MoM basis.

On EV/EBITDA basis, the sector trades at6.3x moving up from its all-time low of5.5x and is at 26% discount to itshistorical average. Telecom PE nowtrades below its historical averages at21.5x.


Telecom +9%


21.5

22.5

0

14

28

42

56

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Telecom P/E (x) 10 Yr Avg (x)

1.82.4

0.5

2.0

3.5

5.0

6.5

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Telecom P/B (x) 10 Yr Avg (x)

-31

-11

-50

-15

20

55

90

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

- 13

Aug

-14


6.3

8.5

5.0

8.0

11.0

14.0

17.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Telecom Sector EV/EBDITA (x)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBharti Airtel 24.9 26.0 -4 56 68 2.0 3.5 -43 -24 31Idea Cellular 18.8 25.6 -26 18 65 2.4 2.4 1 -9 -12Rel. Comm. 15.5 23.0 -33 -3 48 0.8 1.5 -48 -70 -43


-23

-6

-100

-60

-20

20

60

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


29

Utilities: Valuation slips below average; trades at 26% discount on PBs

Utilities trade at 1.3x PB, which is 26%discount to its historic average and 51%discount to market.

CESC is only stock to trade at premium toits historic average PB.

NTPC and Reliance Infra are trading at40% discount to its historic PB averages.

NTPC’s operating performance wasimpacted due to adoption of newregulation, despite robust PLFs in1QFY15.


Utilities +20%


12.314.8

0

8

16

24

32

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Utilities P/E (x) 10 Yr Avg (x)

1.31.7

0.0

1.0

2.0

3.0

4.0

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14

Utilities P/B (x) 10 Yr Avg (x)

-51-35

-100

-65

-30

5

40

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

Aug

-11

Aug

-12

Aug

-13

Aug

-14


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgCESC 11.8 9.3 28 -26 -40 1.3 1.1 13 -51 -57Coal India 12.4 12.4 0 -22 -20 4.3 4.6 -7 62 71NTPC 12.1 16.4 -26 -24 5 1.2 2.0 -40 -54 -24Power Grid Corpn 12.2 14.2 -14 -24 -9 1.7 1.9 -11 -35 -29PTC India 7.9 17.0 -54 -51 10 1.0 1.5 -34 -63 -45Reliance Infra. 12.3 17.4 -30 -23 12 0.8 1.3 -40 -70 -50Tata Power Co. 15.4 19.3 -20 -4 24 1.5 2.1 -27 -43 -23


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Quant Research & India Strategy Gallery


http://institution.motilaloswal.com/emailer/Research/INDIA STRATEGY-20140519-MOSL-SU-PG044.pdf�

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http://institution.motilaloswal.com/emailer/Research/BULLS & BEARS - India Valuations Handbook - 20140804-MOSL.pdf�

http://institution.motilaloswal.com/emailer/Research/Flowmeter - India Holdings and Flows - 20140811.pdf�

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Economy & Finance

Bulls & Bears - Motilal Oswal