first call 05aug21
TRANSCRIPT
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ESG Way - Sector Update - Expert speak: SEBI’s BRSR ESG principles We hosted Mr. Chaitanya Kalia, National Leader, Climate Change & Sustainability
Services at EY India on SEBI’s new ESG regulation, BRSR.
Hindalco - Company Update - Good performance sustains Novelis beat our Q1FY22 estimates. Key points: i) Robust shipments (down merely
1% QoQ) and record EBITDA/t (USD522; up 2%QoQ). ii) Net debt/EBITDA at targeted
level of 2.5x. iii) Plans afoot to fully integrate China operations. iv) Receivables
pertaining to the Duffel divestment marked down to EUR45mn. Going ahead,
management expects a benign demand tailwind and favourable metal-scrap spread
to sustain EBITDA/t above USD500.
Titan Company - Result Update - Margins surprise; recovery again resilient The key highlight of Titan’s Q1FY22 result is that its Jewellery margins beat our and
consensus forecasts on the back of better gross margin (improved product mix) and
cost control. Besides, recovery trends remain robust, and Titan highlighted: i)
Jewellery: July is clocking good demand and the segment is gaining traction among
new customers. Besides, weddings are likely to support demand in H2FY22. ii)
Watches and eyewear recovery is much faster than last year.
State Bank of India - Result Update - Standing tall amid uncertainties SBI Q1FY22 PAT of INR65bn topped estimates on higher other income. Slippages
were admittedly high at 2.5%—mostly from retail and SMEs (a consequence of
mobility restrictions). A fair share of this has been recouped. A lower SMA pool with
controlled restructuring (90bps) is notable—asset quality performance outshone
even private peers. But softer business traction and lower NIM cannot detract from
that.
Transport Corporation - Result Update - Holding up in rough environment
Transport Corporation of India (TCI) delivered Q1FY22 revenue – down 23% QoQ –
along expected lines given lockdowns. Margin surprised positively, up 90bps QoQ,
due to the higher Seaways contribution. The 14% QoQ slide in PAT is lower than our
estimate, highlighting the strength of TCI’s moderate asset ownership model.
India Equity Research August 5, 2021
FIRST CALL DAILY REPORT
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Sectoral Movements %Change Ticker 4-Aug-21 1 D 1 M 3 M 1 Y
Nifty 16,259 0.8 2.7 11.2 46.5
Banking 41,015 2.6 2.8 9.8 67.9
IT 30,977 -0.6 7.0 20.1 73.3
Pharmaceuticals 26,373 -0.6 1.2 9.7 41.7
Oil 15,777 -0.5 -2.3 4.3 20.2
Power
2,645 0.0 -1.1 4.8 72.8
Auto 22,962 -0.8 -4.5 6.1 35.4
Metals 20,970 -0.2 12.1 15.4 153.3
Real Estate
3,287 -1.7 16.4 36.5 106.6
FMCG 13,622 -0.9 -0.3 7.7 19.0
Capital Goods 23,850 -0.8 4.3 16.4 84.2
MARKETS Change in % 04-Aug-
21 1D 1M 1Y
Nifty 50 16,259 0.8 2.7 46.5 Nifty 200 8,607 0.3 2.7 50.0 Nifty 500 13,969 0.2 2.8 53.7
INDIA STOCK PERFORMANCE
GLOBAL 04-Aug-21 1D 1M 1Y
Dow 34,793 -0.9 0.0 27.9
China 3,483 0.2 -1.5 3.1
EM Index 1,304 0.8 -3.7 18.2
UPCOMING EVENTS CALENDER
MACRO Change in %
04-Aug-21 1D 1M 1Y
Fx (INR/USD)
74.2 0.1 0.2 1.2
!0-yr G-sec 6.2 0.0 2.2 7.4 Oil (USD) 70.5 0.2 -8.6 56.1
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Sales Traders Says Currency Conversations
Bond Vectors Valuation Vista
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50,000
60,000
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7,000
8,500
10,000
11,500
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14,500
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Jul 20 Oct 20 Jan 21 Apr 21 Jul 21
(x)
(x)
Nifty Index MSCI EM Index - Local Currency (RHS)
Chambal chemicals results05-08-21
05-08-21 Bajaj consumer results
Cipla results05-08-21
Tata Chemicals results06-08-21
Date Event
FIRST CALL
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Bharti Airtel - Result Update - Well-prepared to fill vacuum Bharti Airtel (Bharti) posted Q1FY22 results ahead of expectations. The second wave
affected subscriber additions, leading to meagre 1.6% QoQ growth for the India
Mobility business, but strong execution in other businesses drove up overall growth
by 4.8% QoQ.
Tata Consumer Products - Result Update - Robust sequential margin
improvement Tata Consumer Products’ (TCPL) Q1FY22 revenue (up 10.9% YoY) came in line with
our estimate, but EBITDA (down 17% YoY) surpassed it. India beverages business (up
28.2% YoY) was impacted, to some extent, by second wave. India foods grew 19.6%
YoY despite a high base and Tata salt gained market share. International business
(down 12.7% YoY) slowed due to pantry loading in the base quarter last year. Tata
Sampann portfolio grew 12% YoY due to pantry loading in the base quarter, bringing
the two-year CAGR to ~30%.
Parag Milk Foods - Result Update - Sustainable uptick awaited
Parag Milk Foods’ (Parag) Q1FY22 revenue grew in line--1% YoY on a low base of
31% decline--as milk sales picked up, while out-of-home (OOH) and HORECA
remained slow. EBITDA grew 51% YoY (25% above estimate) with a dip in
procurement prices as gross margin expanded.
CARE Ratings - Result Update - Healthy sales across the board CARE Ratings (CARE) reported a 32% YoY uptick in Q1FY22 sales on the back of 28%
ratings growth and 72% subsidiaries’ growth. Sales contracted 32% QoQ led by
seasonality in surveillance. The company outperformed peers amid marginally weak
credit growth. EBITDA shot up 71% YoY, but undershot by 12% due to inferior mix
and staff cost.
Kalpataru Power - Result Update - Soft quarter; JMC outlook encouraging Kalpataru Power’s (KPP) Q1FY22 headline numbers were impacted by execution
challenges (supply chain issues) coupled with commodity price headwinds. Key
highlights: 1) Strong ordering pipeline at INR400-450bn and KPP is targeting INR90bn
plus intake (including L1 of INR25bn) in FY22. 2) INR4.5bn spike in debt due to vendor
support, which is temporary. 3) JMC’s strong execution and margin to sustain riding
4x revenue visibility. 4) Management confident of clocking double-digit margin in
FY22.
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Edelweiss ESG report repository
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UK-India ESG Forum – Mind the gap
ESG Disclosures levels: Lagging but catching up
Tobacco vs Alcohol: Is ESG reshaping valuations?
CARO 2020: Tightening the governance grip
COVID-19: Testing Corp India’s Social quotient
Impact Investing: A humane approach
Customize your ESG India basket (Index)
ESG disclosure requirements gets a leg up
ESG CXO e-series: Sustainable tomorrow
Launching Edelweiss ESG Scorecard
ESG CXO e-series: New era of disclosures
Companies hosted at ESG CXO e-
series
Tata Power: Upping the ESG quotient
Adani Group: Embracing ESG with open arms
Hindalco: Sustainability at core
Vedanta: Sustainability focus laudable
BRSR expert speak: The next level
L&T: Nurturing an ambitious ESG journey
Expert speak: SEBI’s BRSR ESG principles
We hosted Mr. Chaitanya Kalia, National Leader, Climate Change & Sustainability Services at EY India on SEBI’s new ESG regulation, BRSR.
1) BRSR integrates major global reporting standards into a standalone compliance requirements for top 1000 Indian listed companies. It is mandatory from FY23. 2) It is built on NGRBC’s 9 guiding principles
with different set of addressable questions categorized as Essential or Leadership. 3) BRSR provides more quantitative disclosures than BRR, with 140 questions and 300+ quantitative indicators. 4) Adopting BRSR is likely to enhance innovative and responsible investments, make meaningful decisions to attain distinct market position and enhance stakeholder relationship, thereby creating long-term value.
BRSR attempts to incorporate major global reporting standards
Multiple reporting standards are available across geographies namely Global GRI,
ISO 26000, CDP (prevalent in UK) and SASB. We understand that multiple reporting
standards lead to less uniformity. This raises the need for detailed and
comprehensive reporting practices as exemplified by BRSR. Imbibing BRSR practices
is likely to enhance stakeholder relationships, thereby creating long-term value for
the business. Additionally, such practices would assist in making meaningful
decisions and attain distinct market position. Complying with regulatory norms
would thereby enhance innovative and responsible investments.
NGRBCs 9 principles provide backbone for enhanced granularity
In our report, “BRSR expert speak: The next level”, we had mentioned that BRSR is
built on NGRBC’s 9 strong principles; this report discusses them in more granularity.
These principles form part of section C of BRSR structure and detail parameters
ranging from ethical nature of business to environmental restoration. Each principle
has its own significance with different addressable questions categorized either
under Essential or Leadership categories. Objective is to have a simple format
(mindful of burden of compliance cost), thereby creating a single comprehensive
source of non-financial and sustainability information. (Details on pages 5-13).
Headwinds to BRSR adaptation; India’s ESG disclosure score rising
Implementing new BRSR framework is likely to face some headwinds initially. In
addition to detailed quantitative KPIs, a number of questions under BRSR have risen
2.5x to 140 (98 Essential, 42 leadership). This may require updating the processes
and policies for implementing BRSR requirements, resulting in extra costs. Further,
the BRSR framework would require different departments such as HR, IT, R&D,
operations, etc., to manage and consolidate data more effectively, which is likely to
be more time consuming. Moreover, stakeholders’ ESG expectations may move
from “doing no harm” to “contributing proactively for change.”
We demonstrate India’s ESG disclosure scores are on a rising trajectory and that the
gap with global benchmarks is narrowing. We believe adoption of BRSR is the right
step towards enhancing sustainability (refer to Exhibit 19).
India Equity Research ESG August 5, 2021
Edelweiss ‘ESG Way’ Series ESG CXO e-Series
Jal Irani Alok Deshpande Aditya Narain Iqbal Khan +91 (22) 6620 3087 +91 (22) 6620 3163 +91 (22 )6620 3061 [email protected] [email protected] [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 443 12 month price target (INR) 475 Market cap (INR bn/USD bn) 995/13.4 Free float/Foreign ownership (%) 65.3/21.2
What’s Changed
Target Price ⚊
Rating/Risk Rating ⚊
INVESTMENT METRICS
Good performance sustains
Novelis beat our Q1FY22 estimates. Key points: i) Robust shipments (down merely 1% QoQ) and record EBITDA/t (USD522; up 2%QoQ). ii) Net debt/EBITDA at targeted level of 2.5x. iii) Plans afoot to fully integrate China operations. iv) Receivables pertaining to the Duffel divestment marked down to EUR45mn. Going ahead, management expects a benign demand tailwind and favourable metal-scrap spread
to sustain EBITDA/t above USD500.
In our view, Novelis is expected to generate >USD2bn EBITDA/year due to stronger shipments/spreads sustaining much higher than USD500/t, thereby propelling Hindalco’s earnings and cash flow. Maintain ‘BUY’ on Hindalco with an unchanged TP of INR475 at 6.3x Q2FY23E EBITDA.
FINANCIALS (INR bn)
Year to March FY21A FY22E FY23E FY24E
Revenue 1,319.9 1,808.4 1,735.8 1,696.7
EBITDA 176.5 258.1 235.1 224.5
Adjusted profit 49.2 120.9 121.8 122.1
Diluted EPS (INR) 22.1 54.3 54.7 54.8
EPS growth (%) 24.6 145.7 0.7 0.3
RoAE (%) 5.6 16.7 14.5 12.8
P/E (x) 17.6 7.2 7.1 7.1
EV/EBITDA (x) 7.7 5.2 4.6 4.2
Dividend yield (%) 0.3 0.8 0.8 0.8
PRICE PERFORMANCE
Third successive quarter of >USD500/t EBITDA; better times ahead
Novelis’s Q1FY22 EBITDA, adjusted for one-off tax gains in Brazil, stood at
USD508mn—the highest ever. Key points: i) Shipments down merely 1% QoQ to
973kt given robust demand from all end-sectors, except aerospace. ii) EBITDA/t at
USD522 gains from benign metal-scrap spreads. iii) Achieved USD100mn of
combination synergies with Aleris. iv) Plans afoot to fully integrate the automotive
business in Asia by expanding the Zhenjiang plant to cold-rolled coils, resulting in
strategic synergies of >USD100mn with Aleris (earlier pegged at USD65mn). v) Global
automotive capacity to increase to ~1mtpa, resulting in better margins. In our view,
Novelis’s EBITDA/t is likely to sustain at USD530–550/t (management’s guidance:
>USD500/t) due to: i) strong demand tailwinds; and ii) better metal-scrap spreads.
Robust balance sheet to aid pursuit of growth opportunities
Novelis has achieved the targeted net debt/EBITDA of 2.5x. Despite higher working
capital requirement owing to higher LME Al price, management expects free cash
flow of USD740mn—similar to FY21. Furthermore, the company repaid USD124mn
of debt in Q1FY22 and refinanced USD1.5bn of senior unsecured notes due CY26 at
a lower interest rate. This extends maturity profile of debt and reduces interest cost
by USD35mn p.a. We believe the balance sheet has enough room to bankroll growth.
Explore:
Outlook and valuation: Breaching new frontiers; maintain ‘BUY’
We anticipate Novelis turning in progressively stronger performance. The company
has posted a third successive quarter of >USD500/t in EBITDA. Going ahead, we see
ramp-up of automotive lines, integrated automotive business in Asia and new
recycling capacity in Brazil to enhance shipments and profitability further.
That said, we see the ongoing semiconductor crisis and higher working capital
requirements as key risks. The partial write-down of receivables pertaining to the
Duffel divestment are likely to be a one-off, and we expect enhanced strategic
synergies to offset this ‘one-time’ loss. All in all, we continue to see Novelis
propelling Hindalco’s earnings further owing to stable cash flow and enhanced
profitability. Retain ‘BUY/SO’ on Hindalco with an unchanged TP of INR475 at 6.3x
Q2FY23E EBITDA.
5
35
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Sales Growth(%)
EPS Growth(%)
RoE(%)
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Metals & Mining HNDL IN Equity
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215
280
345
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475
Aug-20 Nov-20 Feb-21 May-21 Aug-21
HNDL IN Equity Sensex
India Equity Research Metals & Mining August 5, 2021
HINDALCO COMPANY UPDATE
Amit Dixit Meera Midha +91 (22) 6620 3160 +91 (22) 4088 5804 [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 1,800 12 month price target (INR) 2,071 Market cap (INR bn/USD bn) 1,598/21.6 Free float/Foreign ownership (%) 47.1/18.1
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Margins surprise; recovery again resilient
The key highlight of Titan’s Q1FY22 result is that its Jewellery margins beat our and consensus forecasts on the back of better gross margin (improved product mix) and cost control. Besides, recovery trends remain robust, and Titan highlighted: i) Jewellery: July is clocking good demand and the segment is gaining traction among new customers. Besides, weddings are likely to support demand in H2FY22. ii) Watches
and eyewear recovery is much faster than last year.
Titan’s recovery once again testifies to the resilience of its model to any potential covid disruption. Plans on store addition remain robust (34–35 Tanishq stores) with margins also expected to normalize. Retain ‘BUY’ with a TP of INR2,071 (at 55x Dec-22E EBITDA).
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 2,16,440 2,49,025 2,90,790 3,19,869
EBITDA 17,240 28,962 35,476 38,704
Adjusted profit 9,740 18,676 23,777 26,252
Diluted EPS (INR) 11.0 21.0 26.7 29.5
EPS growth (%) (34.7) 91.3 27.3 10.4
RoAE (%) 21.1 12.0 19.4 20.9
P/E (x) 164.0 85.8 67.4 61.0
EV/EBITDA (x) 65.2 93.1 55.3 44.9
Dividend yield (%) 0.2 0.3 0.4 0.4
PRICE PERFORMANCE
Jewellery margins clock a positive beat; rapid recovery trends
Titan reported revenue of INR28.3bn (excluding bullion), up 122% YoY with a 50%,
10% and 40% mix in April, May and June, respectively. The Jewellery division
reported a 109% YoY surge in sales (excluding bullion sale current and base quarter)
and most of it is driven by grammage as gold prices were flat YoY. The better
performance this quarter than Q1FY21 was driven by traction till the third week of
April and the performance in the end of June, which has continued into Q2FY22.
Jewellery’s margin beat expectation owing to an improved product mix as studded
share was higher (22% versus. 18%) along with a lower share of gold coins (7% versus
14%). Watches/eyewear also reported growth of 291%/120% YoY with Titan
mentioning that recovery thereof has been faster than last year.
Q1FY22 conference call: Key takeaways
i) The company believes it will go back to pre covid margins once the situation
normalizes. ii) Hallmarking: Anticipating lot of competitive discounting, but there has
been no incremental activity. Also, it expects the unorganized channel to face supply
chain disruptions during festive season, which could benefit Titan. iii) Targeting 34–
35 Tanishq stores in FY22. iv) Titan has aggressive expansions plans for Taneira. v)
July store operational days: Jewellery: 80–90%; Watches: 75–80%.
Explore:
Outlook and valuation: Insulated play; maintain ‘BUY’
Titan’s recovery has once again proven the resilience of the model to any potential
covid disruption. We maintain the target at 55x EV/EBITDA and roll forward the
valuation to Dec-22E EBITDA, which yields a TP of INR2,071 (INR1,890 earlier). Retain
‘BUY/SO’. The stock is trading at 45x FY23E EV/EBITDA.
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 32,490 18,620 74.5 71,350 (54.5)
EBITDA 1,440 ( 2,460) NM 7,950 (81.9)
Adjusted Profit 610 ( 2,700) NM 5,290 (88.5)
Diluted EPS (INR) 0.7 ( 3.0) NM 6.0 (88.5)
Above In line Below
Profit
Margins
Revenue Growth
Overall
36,000
39,800
43,600
47,400
51,200
55,000
1,050
1,210
1,370
1,530
1,690
1,850
Aug-20 Nov-20 Feb-21 May-21 Aug-21
TTAN IN Equity Sensex
India Equity Research Retail August 5, 2021
TITAN COMPANY RESULT UPDATE
Nihal Mahesh Jham Abneesh Roy +91 (22) 6623 3352 +91 (22) 6620 3141 [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 457 12 month price target (INR) 530 Market cap (INR bn/USD bn) 4,078/55.0 Free float/Foreign ownership (%) 43.1/7.7
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Above In line Below
Profit
Margins
Revenue Growth
Overall
Standing tall amid uncertainties
SBI Q1FY22 PAT of INR65bn topped estimates on higher other income. Slippages were admittedly high at 2.5%—mostly from retail and SMEs (a consequence of mobility restrictions). A fair share of this has been recouped. A lower SMA pool with controlled restructuring (90bps) is notable—asset quality performance outshone even private peers. But softer business traction and lower NIM cannot detract from that.
Uncertainty over subsequent covid waves and a relatively low provisioning buffer (sub-40bps) still temper our enthusiasm on credit cost for FY22. Rolling over to Dec-22E (with updated subsidiary values) yields a revised TP of INR530 (earlier INR500). Maintain ‘BUY’.
FINANCIALS (INR mn)
Year to March FY20A FY21A FY22E FY23E
Revenue 1433063 1542064 1677757 1887437
PPoP 681327 715542 805471 920870
Adjusted profit 144882 204105 263640 422419
Diluted EPS (INR) 16.2 22.9 29.5 47.3
EPS growth (%) 1580.2 40.9 29.2 60.2
RoAE (%) 7.2 9.3 10.9 15.6
P/E (x) 28.1 19.9 15.4 9.6
P/ABV (x) 2.4 2.0 1.8 1.5
Dividend yield (%) 0 0.9 0.9 0.9
PRICE PERFORMANCE
Asset quality obviously impacted, but recovery remains strong
Slippages stood at INR163bn (2.5%)—retail and business banking made up >75% of
this. Management highlighted that a fair share of these have been already recouped
in July, and that it expects further recoveries henceforth. Restructuring of INR200bn
(0.9% of loans, including pipeline) is well within the guidance range. The SMA pool
(1 & 2, for exposure above INR50mn) also was steady at INR113bn (46bps of loans).
The only fly in the ointment is total discretionary provisions stock at only 40bps,
which is below most private banks. Its sufficiency remains questionable, recent show
of asset quality strength notwithstanding. Repayments trajectory, therefore,
remains critical and credit costs will not shrink materially in the near term. Continued
improvements on overdue status remain key to our investment thesis.
Operationally soft; well placed to capitalise on opportunities
SBI’s operating profit was impacted by lower NIMs (partially impacted by higher
interest income reversals of INR8bn). From a business momentum standpoint, things
were steady with 5.8% YoY/ flat QoQ loan growth—largely from the retail segment
and well supported by steady deposit traction (up> 1% QoQ). Armed with a strong
franchise, not to mention slackened competition, SBI expects significant credit
market share gains. Growth pickup remains imperative for a sustainable re-rating.
Explore:
Outlook and valuation: Recovery play; maintain ‘BUY’
SBI still trades at temptingly low valuations and remains well positioned as a recovery
play. We see risk-on gaining momentum and potential dwindling of social costs. A
discount to private peers is nevertheless warranted on account of lower credit cost
elasticity (low provisioning) and structural limitations. Maintain ‘BUY/SO’.
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 3,94,412 3,45,990 14.0 4,32,923 (8.9)
Pre-provisioning Profits 1,89,798 1,65,214 14.9 1,97,002 (3.7)
Reported Profits 65,040 41,893 55.3 64,507 0.8
EPS 7.3 4.7 7.2
36,000
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175
235
295
355
415
475
Aug-20 Nov-20 Feb-21 May-21 Aug-21
SBIN IN Equity Sensex
India Equity Research Banks August 5, 2021
STATE BANK OF INDIA RESULT UPDATE
Santanu Chakrabarti Prakhar Agarwal Parth Sanghvi +91 (22) 4342 8680 +91 (22) 6620 3076 [email protected] [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Neutral Price (INR) 446 12 month price target (INR) 530 Market cap (INR bn/USD bn) 34/0.5 Free float/Foreign ownership (%) 33.3/1.6
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Holding up in rough environment
Transport Corporation of India (TCI) delivered Q1FY22 revenue – down 23% QoQ – along expected lines given lockdowns. Margin surprised positively, up 90bps QoQ, due to the higher Seaways contribution. The 14% QoQ slide in PAT is lower than our estimate, highlighting the strength of TCI’s moderate asset ownership model.
All in all, we are bullish on TCI; its improving business mix should lift margins and returns profile over the next three–four years, which can drive a re-rating. Factoring in the strong performance, we are revising up the TP to INR530 (up from INR450), implying 19x one-year PE (up from 17x). At 15x PE, the margin of safety is ample. Retain ‘BUY’.
FINANCIALS (INR mn)
Year to March FY20A FY21E FY22E FY23E
Revenue 27,178 28,024 32,158 37,896
EBITDA 2,405 2,612 3,167 3,898
Adjusted profit 1,531 1,586 2,036 2,543
Diluted EPS (INR) 19.8 20.1 25.8 32.2
EPS growth (%) 5.4 1.5 28.4 24.9
RoAE (%) 14.9 13.7 16.5 18.2
P/E (x) 22.5 22.2 17.3 13.8
EV/EBITDA (x) 15.8 14.0 11.9 9.4
Dividend yield (%) 0.4 0.5 0.6 0.7
PRICE PERFORMANCE
Strong performance in another lockdown-hit quarter
TCI’s Q1FY22 revenue slid 23% QoQ—in line with estimates given the lockdowns in
April and May. However, margin surprised positively and expanded 90bps QoQ due
to a change in business mix (higher contribution from shipping) and better sequential
margins in the shipping business. PAT decreased by only 14% QoQ—better than our
estimate. The freight division’s revenue dipped 26% QoQ while its margin came in at
4% (4.5% in Q4FY21). Supply chain revenue, given the segment’s dependence on the
auto sector (~80%), plunged 27% QoQ. The Seaways division’s Q1FY22 revenue
ebbed only 9% QoQ, but its margin surged 70bps QoQ.
Business mix change to drive re-rating
Our investment rationale for TCI is premised on improvement in its underlying
business mix over the next three–four years. The company is targeting a higher-
margin LTL mix of 40% in the freight division. The supply chain’s division operates in
the fast-growing 3PL category, which is expected to log a CAGR of 15%-plus over the
next five–seven years. TCI also plans to add capacity in Seaways (in Q4FY22), which
should aid margin improvement and RoCE. Overall, the company’s focus on
establishing multi-modal capabilities would show up in its growth in four–five years.
Explore:
Outlook and valuation: Improving business mix; Retain ‘BUY’
Factoring in a strong Q1FY22 performance and an improving business mix (better
margin and RoCE profile), we are revising up the SoTP-based TP to INR530 (up from
INR450), implying a one-year forward PE of 19x (from 17x, while tweaking up our
estimates. The stock at 15x PE provides ample margin of safety in our view.
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 6,108 3,280 86.2 7,966 (23.3)
EBITDA 711 279 155.2 856 (16.9)
Adjusted Profit 484 99 390.8 560 (13.6)
Diluted EPS (INR) 6.3 1.3 390.8 7.3 (13.6)
Above In line Below
Profit
Margins
Revenue Growth
Overall
36,000
39,800
43,600
47,400
51,200
55,000
150
220
290
360
430
500
Aug-20 Nov-20 Feb-21 May-21 Aug-21
TRPC IN Equity Sensex
India Equity Research Logistics August 5, 2021
TRANSPORT CORPORATION RESULT UPDATE
Alok P. Deshpande Sameer Chuglani +91 (22) 6620 3163 +91 (22) 4040 7415 [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 580 12 month price target (INR) 705 Market cap (INR bn/USD bn) 3,186/42.9 Free float/Foreign ownership (%) 43.8/20.1
What’s Changed
Target Price ⚊
Rating/Risk Rating ⚊
QUICK TAKE
Above In line Below
Profit
Margins
Revenue Growth
Overall
Well-prepared to fill vacuum
Bharti Airtel (Bharti) posted Q1FY22 results ahead of expectations. The second wave affected subscriber additions, leading to meagre 1.6% QoQ growth for the India Mobility business, but strong execution in other businesses drove up overall growth by 4.8% QoQ.
We believe the Indian telecom industry structure can move towards a
duopoly in the wake of Vodafone Idea’s inability to raise capital. The government may provide the latter sops, but we reckon the situation cannot be salvaged without a significant tariff hike. Bharti, with its superior network and strong balance sheet, is well placed to capture market share in our view. We keep our estimates broadly unchanged and retain ‘BUY’ with a DCF-based TP of INR705.
FINANCIALS (INR bn)
Year to March FY20A FY21E FY22E FY23E
Revenue 879 1,023 1,118 1,278
EBITDA 369 468 549 6,56
Adjusted profit (41) 43 45 132
Diluted EPS (INR) (7.8) 0.8 8.2 24.2
EPS growth (%) (8.7) nm 939.7 193.4
RoAE (%) (43.3) (22.2) 7.2 18.1
P/E (x) nm 732.1 70.4 24.0
EV/EBITDA (x) 11.9 10.0 8.6 6.9
Dividend yield (%) 0 0 0 0
PRICE PERFORMANCE
Pandemic impacts India Mobility business
Bharti’s Q1FY22 revenue grew 4.8% QoQ (Street expectation: 1.6% QoQ) to
INR270.6bn, with a weak India Mobility performance (up 1.6% QoQ) more than
offset by a strong showing in other businesses. The second set of lockdowns eroded
subscriber base by 0.1mn to 321.2mn. APRU inched up though 0.6% QoQ to INR146
as low ARPU subscribers declined. 4G subscriber addition at 5.1mn (13.7mn in
Q4FY21) is robust considering smartphone shipments were impacted in the quarter.
Overall EBITDA margin further improved to 48.7%, up 60bps QoQ, due to a decline
in network operating and sales & marketing expenses.
VI’s fate to determine future path
VI’s cash flows are insufficient to fulfil its upcoming debt obligation; the company
will need external funding to remain a going concern. In absence of any funding,
Bharti and Reliance Jio (RJio) will have an opportunity to grab market share. With its
network and spectrum investments, Bharti is well placed to exploit this potential
opportunity. Considering a 60–70% incremental EBITDA margin in this business,
incremental revenue would significantly boost bottom line, thereby shoring up the
ability to invest in network. We have not yet built this in our numbers, but it can
potentially drive a steep jump in revenue and profits.
Explore:
Outlook and valuation: Market share gain to continue; retain ‘BUY’
We believe Bharti’s investments in the network and strong balance sheet will help it
garner higher quality subscribers, thereby also driving up its market share gains.
Considering significant market share gain possibilities, the stock at 6.9x FY23E
EV/EBITDA is attractive. Maintain ‘BUY/SO’ with a DCF-based TP of INR705.
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 2,70,634 2,40,129 12.7 2,58,312 4.8
EBITDA 1,31,901 1,04,821 25.8 1,24,158 6.2
Adjusted Profit 2,835 ( 1,59,331) (101.8) 7,592 (62.7)
Diluted EPS (INR) 0.5 ( 29.2) (101.8) 1.4 (62.7)
36,000
39,600
43,200
46,800
50,400
54,000
375
425
475
525
575
625
Aug-20 Nov-20 Feb-21 May-21 Aug-21
BHARTI IN Equity Sensex
India Equity Research Telecom August 5, 2021
BHARTI AIRTEL RESULT UPDATE
Pranav Kshatriya Sandip Agarwal Pulkit Chawla +91 (22) 4040 7495 +91 (22) 6623 3474 [email protected] [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 768 12 month price target (INR) 880 Market cap (INR bn/USD bn) 707/9.5 Free float/Foreign ownership (%) 65.3/19.5
What’s Changed
Target Price ⚊
Rating/Risk Rating ⚊
QUICK TAKE
Robust sequential margin improvement
Tata Consumer Products’ (TCPL) Q1FY22 revenue (up 10.9% YoY) came in line with our estimate, but EBITDA (down 17% YoY) surpassed it. India beverages business (up 28.2% YoY) was impacted, to some extent, by second wave. India foods grew 19.6% YoY despite a high base and Tata salt gained market share. International business (down 12.7% YoY) slowed due to pantry loading in the base quarter last year.
Tata Sampann portfolio grew 12% YoY due to pantry loading in the base quarter, bringing the two-year CAGR to ~30%.
The new leadership has infused vigour in execution. And, on the whole, we remain positive on the stock over the medium to long term. Maintain ‘BUY’ with TP of INR880.
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 1,16,020 1,33,392 1,49,548 1,66,213
EBITDA 15,438 19,342 23,329 27,591
Adjusted profit 8,873 12,548 15,580 18,742
Diluted EPS (INR) 9.6 13.6 16.9 20.3
EPS growth (%) 20.8 41.4 24.2 20.3
RoAE (%) 6.3 7.9 9.3 10.6
P/E (x) 79.7 56.4 45.4 37.7
EV/EBITDA (x) 44.1 35.3 29.1 24.3
Dividend yield (%) 0.5 0.8 1.0 1.2
PRICE PERFORMANCE
Robust domestic revenue growth; margin improves QoQ
What we liked: India beverages and food businesses recorded strong double-digit
growth and tea and salt made market share gains of 170bps and 370bps,
respectively. On two-year basis, revenue and EBITDA grew 25.7% and 13.8%,
respectively. E-commerce recorded significant growth of 153% YoY and contributed
7.3% to domestic sales. India foods business registered 19.6% YoY revenue growth
and 17% YoY volume growth despite a high base. The company is witnessing V
shaped recovery since the later part of June. Consolidated gross and EBITDA margin,
though down YoY, improved 153bps and 339bps, respectively, QoQ; possibly worst
is now behind, in our opinion.
What we did not like: International business dipped (down 12.7% YoY), reverting to
pre-covid demand trends in tea and coffee as there is no more pent-up demand or
pantry loading.
Q1FY22 conference call: Key takeaways
Tea prices have further come off INR20-30 since June end hence margin should
continue to improve QoQ. Demand in July has come back stronger than June. In
terms of Sampann, biggest traction is in poha, followed by Pulses and then spices.
Explore:
Outlook and valuations: Favourable tide’s brewing; maintain ‘BUY’
TCPL’s base businesses of salt and tea should provide steady revenue momentum,
while new businesses—pulses & spices—should provide the additional revenue fillip,
in our view. We maintain ‘BUY/SO’ with a TP of INR880. The stock is trading at 45.4x
FY23E EPS.
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 30,085 27,139 10.9 30,372 (0.9)
EBITDA 3,995 4,827 (17.2) 3,002 33.1
Adjusted Profit 1,891 2,822 (33.0) 1,178 60.5
Diluted EPS (INR) 2.1 3.1 (33.0) 1.3 60.5
Above In line Below
Profit
Margins
Revenue Growth
Overall
36,000
39,600
43,200
46,800
50,400
54,000
425
500
575
650
725
800
Aug-20 Nov-20 Feb-21 May-21 Aug-21
TATACONS IN EQUITY Sensex
India Equity Research Consumer Staples August 5, 2021
TATA CONSUMER PRODUCTS RESULT UPDATE
Abneesh Roy Tushar Sundrani +91 (22) 6620 3141 +91 (22) 6620 3004 [email protected] [email protected]
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KEY DATA
Rating REDUCE Sector relative Underperformer Price (INR) 135 12 month price target (INR) 127 Market cap (INR bn/USD bn) 13/0.2 Free float/Foreign ownership (%) 54.0/17.7
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Sustainable uptick awaited
Parag Milk Foods’ (Parag) Q1FY22 revenue grew in line--1% YoY on a low base of 31% decline--as milk sales picked up, while out-of-home (OOH) and HORECA remained slow. EBITDA grew 51% YoY (25% above estimate) with a dip in procurement prices as gross margin expanded.
While opening of lockdowns should prompt an increase in OOH
consumption and HORECA, procurement prices are also likely to rise. Hence, we maintain earnings despite beat and await uptick in value-added sales. Debt reduction of INR1.5bn is on the anvil from the capital raise of INR3.8bn; however, the equity dilution of 25-37% remains a near-term concern. The stock seems fairly valued, maintain ‘REDUCE’ with revised TP of INR127, valuing it at 15x Q3FY23E.
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 18,418 21,196 24,453 27,457
EBITDA 1,248 1,561 2,065 2,393
Adjusted profit 207 543 989 1,258
Diluted EPS (INR) 2.5 5.7 9.4 10.9
EPS growth (%) (77.9) 131.3 64.8 16.2
RoAE (%) 2.3 5.7 9.5 10.9
P/E (x) 54.5 19.0 11.5 9.9
EV/EBITDA (x) 11.7 8.0 5.3 4.4
Dividend yield (%) 0.4 0.4 0.4 0.4
PRICE PERFORMANCE
Dip in procurement prices spurs profitability
Sales were largely flat (1% YoY) on a base quarter decline of 31%. This was led by
growth of 4% YoY and 56% YoY in sales of milk and skimmed milk powder,
respectively, while value-added products dipped 9% YoY on a base quarter decline
of 24%. While milk prices softened during Q1FY22, realisation largely remained the
same, leading to gross margin expansion of 563bps YoY and 727bps QoQ. Owing to
the same, EBITDA grew 51% YoY and 144% QoQ and margin for Q1FY22 expanded
to 10.2%. Parag estimates 8% EBITDA margin in FY22 as procurement prices pick up.
FY22 to see an uptick on a low base
While Q1FY22 remained challenging owing to the severity of the second wave, sales
have picked up in July with rise in OOH consumption and HORECA opening up post
localised lockdowns. However, as procurement prices bottomed out at INR27, we
expect some pressure on gross margin as it is expected at INR30 for FY22. Parag had
raised INR3.8bn during April 2021 via a variety of instruments, which will be utilised
for working capital debt and to limit reduction. With debt reduction underway,
interest costs dip is awaited. Management estimates revenue growth of 15-18% in
FY22. Post 41% decline in EBITDA in FY21, we estimate 25% EBITDA growth in FY22,
29% CAGR over FY21-23E.
Explore:
Outlook and valuations: Uptick awaited; maintain ‘REDUCE’
Despite a challenging Q1FY22, Parag has seen benefits of dip in procurement prices
flow through to profitability. We await sustainable uptick in sales and maintain
‘REDUCE’ with revised TP of INR127 (INR114 earlier) valuing the stock at 15x as we
roll over to Q3FY23E. The stock trades at 24x/14x FY22/23E and seems fairly valued.
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 4,384 4,356 0.7 4,344 0.9
EBITDA 449 297 51.2 184 143.5
Adjusted Profit 175 32 440.9 ( 96) (281.8)
Diluted EPS (INR) 2.1 0.4 440.9 ( 1.1) (281.8)
Above In line Below
Profit
Margins
Revenue Growth
Overall
36,000
39,800
43,600
47,400
51,200
55,000
75
90
105
120
135
150
Aug-20 Nov-20 Feb-21 May-21 Aug-21
PARAG IN Equity Sensex
India Equity Research Dairy August 5, 2021
PARAG MILK FOODS RESULT UPDATE
Shradha Sheth Meera Midha +91 (22) 6623 3308 +91 (22) 4088 5804 [email protected] [email protected]
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KEY DATA
Rating BUY Sector relative Outperformer Price (INR) 710 12 month price target (INR) 846 Market cap (INR bn/USD bn) 21/0.3 Free float/Foreign ownership (%) 100.0/29.2
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Healthy sales across the board
CARE Ratings (CARE) reported a 32% YoY uptick in Q1FY22 sales on the back of 28% ratings growth and 72% subsidiaries’ growth. Sales contracted 32% QoQ led by seasonality in surveillance. The company outperformed peers amid marginally weak credit growth. EBITDA shot up 71% YoY, but undershot by 12% due to inferior mix and staff cost.
CARE has been focusing on recouping market share and accelerating revenue growth across other businesses: risk solutions and analytics (CART). It expects other segments to grow by 35% ahead. With efforts underway in technology and HR, we expect margins to stabilise. Taking note of a gradual improvement in its market share, we keep ‘BUY’, valuing to stock at 25x Q3FY23 with a TP of INR846 (INR825 earlier).
FINANCIALS (INR mn)
Year to March FY21A FY22E FY23E FY24E
Revenue 2,484 2,707 3,065 3,447
EBITDA 958 1,039 1,203 1,389
Adjusted profit 895 915 1,025 1,183
Diluted EPS (INR) 30.4 31.0 34.8 40.1
EPS growth (%) 8.7 2.2 12.0 15.4
RoAE (%) 16.0 15.2 16.2 17.6
P/E (x) 23.4 22.9 20.4 17.7
EV/EBITDA (x) 16.8 15.4 13.0 10.9
Dividend yield (%) 2.4 2.7 2.8 3.1
PRICE PERFORMANCE
Outperformance vis-à-vis peers continues
CARE’s Q1FY22 overall revenue grew 32% YoY (15% ahead of estimates) on a low
base of 25% decline. Rating sales jumped 28% YoY outperforming peers (CRISIL with
overall ratings dip of 5% YoY and ICRA’s ratings growth of 10% YoY). This was amidst
credit contraction of 1% (-1.2% in Q1FY21) as industry credit growth slipped to -1.7%
(-1% in Q1FY21), while services recouped to -1.1% (from -2.6%). Long-term bond
issuances plunged 60% YoY for the industry owing to no TLTROs unlike Q1FY21.
EBITDA rose 71% YoY (12% below estimates) on a low base of 58% decline. Going
forward, management expects a pick up as the pipeline remains strong for FY22.
New ratings and other segments gain well
The transformation is underway to regain lost market share in ratings by way of
focusing on aggressively growing new ratings, new streams like REITS and InVITs,
securitisation and overhauling ratings models and refining the culture and
technology. Efforts on other subsidiaries have resulted in improving revenues as
Others segment rose 74% YoY in Q1FY22 and should grow 35% ahead. CARE is
focussing on garnering new business for initial ratings, which should do well as the
economy improves. While Q1 is slow seasonally, the company sees a lot of pipeline
work that should materialize in coming quarters for surveillance (~70% of ratings).
Explore:
Outlook and valuation: Well placed; retain ‘BUY’
We expect CARE to perform well, particularly as its new management team gradually
regains market share and lifts the contribution of other businesses. Maintain ‘BUY’
at 25x Q3FY23, in line with its five-year average; it yields a TP of INR846 (INR825
earlier). The company is trading at a deep discount – 40%-plus – to peers.
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 492 374 31.6 796 (38.2)
EBITDA 86 50 71.1 305 (71.7)
Adjusted Profit 110 93 18.1 261 (57.6)
Diluted EPS (INR) 3.7 3.2 18.1 8.8 (57.6)
Above In line Below
Profit
Margins
Revenue Growth
Overall
36,000
39,800
43,600
47,400
51,200
55,000
275
375
475
575
675
775
Aug-20 Nov-20 Feb-21 May-21 Aug-21
CARE IN Equity Sensex
India Equity Research Credit Rating August 5, 2021
CARE RATINGS RESULT UPDATE
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KEY DATA
Rating HOLD Sector relative Neutral Price (INR) 476 12 month price target (INR) 440 Market cap (INR bn/USD bn) 71/1.0 Free float/Foreign ownership (%) 45.6/7.1
What’s Changed Target Price
Rating/Risk Rating ⚊
QUICK TAKE
Soft quarter; JMC outlook encouraging
Kalpataru Power’s (KPP) Q1FY22 headline numbers were impacted by execution challenges (supply chain issues) coupled with commodity price headwinds. Key highlights: 1) Strong ordering pipeline at INR400-450bn and KPP is targeting INR90bn plus intake (including L1 of INR25bn) in FY22. 2) INR4.5bn spike in debt due to vendor support, which is temporary. 3) JMC’s strong execution and margin to sustain
riding 4x revenue visibility. 4) Management confident of clocking double-digit margin in FY22.
While KPP’s outlook is stable, JMC’s prospects have improved significantly. Promoter pledge (45%) is dipping gradually, but not meaningfully. Maintain ‘HOLD’ with revised TP of INR440.
FINANCIALS (INR mn)
Year to March FY20A FY21A FY22E FY23E
Revenue 79,040 76,710 88,368 1,01,428
EBITDA 8,600 8,080 9,361 10,744
Adjusted profit 4,390 4,380 5,698 6,559
Diluted EPS (INR) 28.6 29.2 38.0 43.7
EPS growth (%) 4.1 2.1 30.1 15.1
RoAE (%) 13.8 16.4 13.9 14.2
P/E (x) 16.7 16.3 12.5 10.9
EV/EBITDA (x) 9.2 9.6 7.9 6.8
Dividend yield (%) 0.7 2.1 1.5 1.5
PRICE PERFORMANCE
Good show in challenging commodity pressure environment
KPP’s 9% revenue growth came 7% below consensus on account of execution
challenges in a couple of sites. Commendably, the company posted double-digit
margin in spite of commodity price pressures and higher freight cost in international
projects (USD3mn impact). It has already made provisions of INR1.3bn for higher
commodity prices. Q1 intake was weak at INR8.5bn, but KPP is confident of INR90bn
plus order intake (INR50bn from TLT and INR40bn from Railways & Pipeline) in FY22
riding INR450bn ordering pipeline in which domestic TLT opportunity is INR150bn
(TBCB+HVDC). Net debt rose 50% QoQ due to vendor support at the beginning of the
year, which we believe will recede gradually.
JMC: Strong show on all counts; restructuring gathering pace
JMC’s (SA) EBITDA doubled led by execution ramp up in B&F and urban infra
segments and margin expanded 130bps. With 150% plus order intake growth in FY21
/Q1FY22, JMC’s revenue visibility has improved substantially to 4x and it’s on track
to comfortably clock 20% plus growth. In road BOOT projects, while toll collection
took a hit (KEP–famers agitation, second wave), KEP and WEP are at advance level
of restructuring. Kohima transmission deal closure in 2-3 months and cash flow from
Indore real estate likely to reduce consolidated debt by 50% to ~INR13-14bn.
Explore:
Outlook and valuations: JMC on strong footing ; maintain ‘HOLD’
KPP is on growth track with operational and deleveraging parameters both at SA and
JMC. While meaningful reduction in promoter pledge is awaited, we revise up P/E
multiple to 9x (earlier 7.5x) factoring in improving JMC outlook. We maintain
‘HOLD/SN’ with revised TP of INR440 (earlier INR365).
Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change
Net Revenue 15,860 14,590 8.7 23,370 (32.1)
EBITDA 1,620 1,560 3.8 2,430 (33.3)
Adjusted Profit 760 690 10.1 1,300 (41.5)
Diluted EPS (INR) 5.1 4.6 10.1 8.7 (41.5)
Above In line Below
Profit
Margins
Revenue Growth
Overall
36,000
39,600
43,200
46,800
50,400
54,000
225
280
335
390
445
500
Aug-20 Nov-20 Feb-21 May-21 Aug-21
KPP IN Equity Sensex
India Equity Research Engineering and capital goods August 5, 2021
KALPATARU POWER RESULT UPDATE
Swarnim Maheshwari Amit Mahawar Manoj Kumar K V Angad Saluja +91 (22) 4040 7418 +91 (22) 4040 7451 [email protected] [email protected] [email protected] [email protected]
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Research analyst has served as an officer, director or employee of subject Company: No
ESL has financial interest in the subject companies: No
ESL’s Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report.
Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No
ESL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No
Subject company may have been client during twelve months preceding the date of distribution of the research report.
There were no instances of non-compliance by ESL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years except that ESL had submitted an offer of settlement with Securities and Exchange commission, USA (SEC) and the same has been accepted by SEC without admitting or denying the findings in relation to their charges of non registration as a broker dealer.
A graph of daily closing prices of the securities is also available at www.nseindia.com
Analyst Certification:
The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
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Additional Disclaimers
Disclaimer for U.S. Persons
This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.
This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.
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Disclaimer for U.K. Persons
The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Disclaimer for Canadian Persons
This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.
This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103")) who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person.
ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv) there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada.
Disclaimer for Singapore Persons
In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors.
Disclaimer for Hong Kong persons
This report is distributed in Hong Kong by Edelweiss Securities (Hong Kong) Private Limited (ESHK), a licensed corporation (BOM -874) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to Section 116(1) of the Securities and Futures Ordinance “SFO”. 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 report also does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual recipients. The Indian Analyst(s) who compile this report is/are not located in Hong Kong and is/are not licensed to carry on regulated activities in Hong Kong and does not / do not hold themselves out as being able to do so. Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved.
Aditya Narain
Head of Research