india daily ideas - phillipcapitalbackoffice.phillipcapital.in/backoffice/researchfiles/pc...2...

Please refer to Disclosures and Disclaimers at the end of the Research Report.

India Daily Ideas

INSTITUTIONAL USE ONLY 5 August 2013

PhillipCapital (India) Pvt. Ltd.

Contents Super Sector Stock / Ideas

1 Consumer GSKConsumer, JUBI, Bajaj Corp, GCPL, SunTV, Berger Paints, Trent, Trader Comments

2 Cyclicals PI Industries, GSFC, BHEL, Siemens India, Cummins India & Trader Comments

3 Defensives Idea Cellular, RCom, Telecom Sector

4 Financials Canara Bank, OBC

1D 1W 1M 3M 12M BEST 1D 1W 1M 3M 6M 12M PER WORST 1D 1W 1M 3M 6M 12M PERSENSEX -0.8 -3.0 -1.7 -2.1 11.4 BSE100NIFTY -0.9 -2.6 -3.2 -4.5 8.9 GCPL 4.7 -0.8 5.2 1.6 15.1 34.7 N/A PGCIL -11.6 -16.0 -15.3 -18.7 -17.0 -23.1 9.1BANKEX -1.4 -4.4 -12.4 -19.5 -3.5 Shriram Transport 4.1 -2.4 -9.1 -17.5 -17.7 9.3 8.6 Adani Ports and Speci -10.8 -12.5 -15.6 -19.2 -16.6 3.6 13.8BSE AUTO -0.6 -2.9 -4.4 -4.5 14.7 Ranbaxy Labs 3.9 -10.2 -20.1 -39.3 -37.9 -46.4 11.2 Adani Ports and Speci -10.8 -12.5 -15.6 -19.2 -16.6 3.6 13.8BSE METALS -3.6 -6.7 -14.9 -25.9 -36.2 Tata Chemicals 3.5 -2.6 -4.0 -18.6 -26.4 -14.5 7.5 Adani Enterprises -10.5 -17.5 -22.5 -28.9 -34.9 -12.1 7.6BSE OIL 0.1 -5.7 -6.2 -4.0 3.2 Nestle India 3.4 -0.6 5.2 10.3 14.5 23.4 N/A Jaiprakash Associates -8.5 -28.9 -45.4 -60.5 -61.0 -59.5 10.5BSE POWER -3.8 -10.5 -12.5 -19.9 -26.4 Cairn India 2.4 -2.3 1.9 -2.2 -7.3 -11.4 5.2 Union Bank of India -7.6 -12.8 -32.8 -51.3 -51.5 -31.8 2.4BSE REALTY -4.0 -14.6 -19.8 -36.2 -25.9 ACC 2.4 -2.9 -5.1 -4.4 -11.1 -10.1 17.4 JSPL -7.3 -1.7 -16.5 -41.3 -54.7 -52.9 5.5BSE IT 1.0 3.8 20.7 27.8 40.4 Ambuja Cements 2.2 -4.3 -9.9 -9.1 -15.1 -6.2 15.9 DLF -6.9 -25.4 -27.8 -44.6 -52.9 -38.0 23.8BSE CONSUMER DU 5.4 3.0 5.7 -12.3 2.0 United Breweries Ltd 2.0 -2.4 -19.9 -10.6 -11.7 19.7 65.6 Adani Power Limited -6.7 -20.2 -20.8 -34.4 -43.6 -25.6 -38.6BSE CAPITAL GOOD -1.5 -4.3 -12.2 -19.6 -17.7 Lupin 2.0 4.0 6.5 26.0 49.4 53.1 25.6 Canara Bank Ltd. -6.3 -10.2 -31.0 -38.8 -46.6 -33.1 N/ABSETECK 0.6 2.4 16.8 20.7 36.1 AXIS Bank 1.8 -0.3 -14.1 -25.1 -24.4 6.1 8.1 Reliance Comm -5.9 -8.0 -8.8 12.2 60.1 121.3 20.6BSE Healthcare -0.6 -2.0 -0.9 2.7 23.7 Zee Entertainment 1.7 -4.0 1.4 2.1 2.7 48.5 27.5 Siemens -5.9 -15.8 -15.6 -19.4 -29.1 -32.8 33.6BSE FMCG -1.4 -8.2 -2.4 1.6 31.5 Hindustan Zinc Ltd 1.7 -2.1 -1.9 -17.2 -21.1 -15.1 N/A Yes Bank -5.9 -16.0 -33.7 -38.1 -40.0 -16.2 7.2BSE PSU -2.6 -9.4 -14.4 -24.2 -27.0 TCS 1.7 4.1 20.8 30.1 35.7 49.1 N/A Coal India Ltd -5.8 -9.9 -14.3 -19.9 -27.2 -26.0 8.8BSE 100 -0.9 -3.9 -3.7 -5.7 7.7 Bharat Forge 1.6 -4.2 -7.7 -13.2 -10.3 -32.3 15.5 Reliance Infra -5.5 -16.0 -13.5 -20.3 -39.7 -38.2 5.1BSE 500 -0.9 -4.2 -4.6 -7.2 4.0 Infosys Technologies 1.0 3.1 22.5 30.3 9.0 36.1 17.5 Bank of Baroda -5.5 -14.8 -12.6 -30.2 -37.8 -25.1 N/AEurope & US Reliance Industries 0.8 -3.6 -2.6 7.0 -2.2 15.4 12.0 Idea Cellular -5.3 -3.4 15.2 17.7 42.5 95.5 30.3Dow Jones 0.2 0.6 3.5 4.6 19.6 Federal Bank Ltd 0.8 1.0 -12.0 -21.8 -31.2 -13.7 N/A Reliance Power -5.2 -16.6 -3.9 -11.2 -27.3 -27.5 18.6S&P 500 0.2 1.1 4.8 5.9 22.9 Divi's Laboratories 0.8 -1.9 -4.8 -13.5 -9.3 -17.0 16.8 GMR Infrastructure -5.2 -23.0 -32.1 -42.8 -38.1 -47.8 -22.9NASDAQ 0.4 2.1 6.0 9.2 24.3 HCL Technologies 0.7 3.5 17.8 24.8 39.4 79.3 13.9 Bank Of India -5.0 -7.6 -24.6 -48.1 -50.4 -41.3 N/AS&P Europe 0.4 1.5 4.4 -1.1 8.1 Exide Industries Ltd 0.7 -6.4 -1.4 -10.3 -0.3 -4.9 16.4 Reliance Capital -4.7 -15.8 -13.4 -15.8 -32.4 -5.8 12.3Brazil Bovespa -1.4 -1.9 7.2 -12.6 -15.3 Wipro 0.6 14.6 25.1 23.4 21.2 41.8 15.7 Bharat Petroleum Corp -4.7 -17.4 -20.8 -28.1 -29.6 -17.8 9.8Asia Tata Motors 0.4 0.2 -1.9 1.8 1.2 31.5 ##### Unitech -4.4 -15.3 -27.4 -47.0 -56.8 -28.5 9.8Nikkei 225 3.3 5.9 1.1 5.6 69.1 Bharti Airtel 0.3 2.2 16.6 8.5 6.2 16.3 31.5 SAIL -4.4 -9.4 -17.8 -38.1 -54.4 -53.3 6.1Hang Seng 0.5 1.6 6.4 -2.2 12.8 Ashok Leyland 0.2 -11.9 -31.0 -43.5 -49.2 -43.9 30.1 Tata Power Co. -3.9 -5.2 -1.5 -10.0 -14.6 -13.3 16.0S&P Asia 200 1.1 1.4 5.7 -0.2 21.2 Asian Paints 0.2 -2.0 6.8 6.0 7.4 32.7 38.4 Sterlite Industries -3.9 -5.6 -13.9 -25.2 -32.9 -29.2 4.1Straits 0.3 0.5 2.7 -3.4 6.6 Dabur India Ltd. 0.1 -6.6 1.7 -0.5 20.0 31.7 30.0 JSW Steel -3.9 -3.6 -13.9 -25.1 -36.7 -23.9 7.7TWSE 0.5 0.2 1.2 -0.4 12.2 NHPC 0.0 -11.9 -18.4 -26.5 -44.3 -13.6 7.8 United Spirits -3.7 -11.0 -9.1 1.5 21.4 166.9 49.0Kospi 0.1 1.2 4.9 -2.2 4.0 Satyam Computer Ser 0.0 0.0 0.0 2.8 2.3 29.6 9.9 Tata Steel -3.7 -7.6 -23.6 -35.0 -48.8 -49.0 8.2Baltic Dry Index -0.1 -1.6 -9.0 22.0 23.7 United Phosphorus -0.1 -11.8 -6.0 -13.4 -3.8 4.0 6.0 PNB -3.7 -12.1 -16.2 -29.8 -40.5 -29.3 N/AVIX Index -7.4 -5.8 -19.5 -6.8 -23.4 SBI -0.1 -4.7 -11.3 -24.1 -28.9 -16.2 5.7 HPCL -3.7 -17.1 -22.3 -36.6 -41.8 -42.4 5.6Aluminium -0.4 0.5 -1.3 -1.8 -2.8 Gail (India) -0.1 -4.5 -6.8 -9.4 -11.6 -14.6 8.6 IDBI -3.6 -12.2 -16.3 -32.8 -41.2 -31.0 N/ABrent 0.0 0.4 1.3 4.8 -0.5 HDFC Bank -0.2 -2.1 -5.2 -7.3 -1.9 7.3 17.7 Suzlon Energy -3.4 -11.0 -25.7 -52.6 -73.6 -62.6 -2.0Coal N/A 0.5 -5.0 -10.1 -7.4 Maruti Suzuki India -0.2 -2.7 -14.0 -19.7 -16.4 19.4 13.7 Hindustan Unilever -2.9 -7.2 1.0 7.5 33.1 33.7 37.0Copper 0.0 2.1 1.0 2.5 -4.5 Crompton Greaves -0.4 -3.7 -5.0 -12.3 -21.0 -29.0 13.0 ICICI Bank -2.8 -4.9 -15.6 -21.5 -24.0 -5.6 10.5Crude Oil (WTI) 0.0 2.3 3.8 12.1 14.9 REC -0.5 -10.9 -23.7 -30.7 -39.3 -22.9 3.9 Cummins India Ltd. -2.8 -5.1 -10.7 -23.1 -20.4 -14.6 14.5Iron Ore 0.0 -1.5 9.1 -0.4 5.6 Tata Global Beverages -0.6 -6.4 1.0 -0.3 3.4 12.1 18.9 Sesa Goa -2.7 -5.7 -13.7 -23.1 -30.4 -31.8 4.7Lead 0.7 3.3 2.0 9.7 14.5 IndusInd Bank Ltd -0.8 -7.0 -17.6 -16.6 -10.0 20.9 14.8 LIC Housing -2.6 -13.4 -29.7 -32.1 -41.0 -36.6 5.9Nickel 0.8 1.1 -0.3 -4.7 -8.3 Hero Honda Motors -0.8 -3.7 9.1 11.6 0.2 -8.3 N/A Grasim Industries -2.4 -4.8 -8.5 -13.2 -14.9 -12.0 8.3Steel N/A N/A N/A N/A N/A Hindalco Industries -0.8 -8.1 -13.1 -11.5 -23.6 -25.7 6.4 Glenmark Pharma -2.4 -5.7 -4.3 11.9 9.4 36.7 20.0Tin 1.0 8.7 4.8 7.7 21.4 BHEL -0.8 -5.9 -16.3 -22.0 -29.6 -33.5 7.0 UltraTech Cement -2.3 -4.7 -7.3 -5.7 -7.3 8.6 17.0Zinc 0.6 0.4 -2.0 2.4 1.5 NTPC -0.9 -8.0 -9.4 -18.4 -16.5 -21.9 9.7 Kotak Mahindra Bank -2.1 -4.0 -7.0 -9.8 -3.8 19.3 30.9USD : INR 1.1 3.5 2.4 13.5 9.4 Cipla -0.9 -3.7 0.1 -0.4 -1.9 14.2 20.6 Sun Pharma -2.1 -0.7 7.3 12.8 48.5 68.2 29.9EUR : INR 0.8 3.0 3.9 13.9 17.8 ONGC -1.1 -8.8 -12.1 -14.5 -14.7 -1.2 9.2 Dr Reddy's Laboratorie -2.0 -2.7 0.0 11.8 18.0 33.8 N/AGBP : INR 0.5 1.7 2.2 10.5 6.5 HDFC -1.1 0.3 -5.0 -5.5 1.2 15.6 22.8 ABB -2.0 -10.2 -19.2 -8.0 -26.6 -38.1 38.2CHF : INR 0.3 2.4 3.5 12.4 14.3 Bajaj Auto -1.3 -5.9 1.9 5.3 -8.8 18.3 15.6 Colgate Palmolive(Ind -1.9 -9.8 -6.3 -14.0 -4.2 9.7 31.7JPY : INR 0.2 2.0 3.1 13.5 -12.4 Indian Oil Corporation -1.5 -13.7 -14.3 -34.0 -41.8 -26.6 6.7 M&M -1.9 -4.3 -11.6 -10.8 -3.4 24.8 11.3Dollar index 0.1 0.4 -2.9 -0.2 -0.5 ITC -1.6 -9.6 -2.6 0.7 10.3 28.4 29.5 HDIL -1.8 -18.6 -21.2 -43.2 -59.1 -62.8 2.2USD: AUD -0.5 -3.7 -2.2 -13.6 -16.1 IDFC -1.6 -10.8 -20.5 -31.8 -34.7 -20.9 7.6 PFC -1.7 -19.1 -28.8 -48.5 -53.7 -44.2 2.6USD: CNY -0.1 -0.1 -0.1 -0.7 -3.9 NMDC -1.6 -6.9 -6.6 -23.3 -34.7 -47.5 N/A Larsen & Toubro -1.7 -1.8 -11.7 -20.6 -18.8 -9.9 14.3USD:EURO 0.0 0.1 3.5 1.6 7.1USD:YEN -0.2 0.8 -2.5 -0.6 26.1 Source: Bloomberg

Super‐sector description: Consumer: FMCG, Media, Retail, Automobiles, Auto Ancillaries, Aviation, Hotels & Leisure Cyclicals: Metals, Oil & Gas, Fertilisers, Capital Goods, Engineering, Cement, Infrastructure Defensives: Pharmaceuticals, Telecom, IT Services Financials: Financial, Real Estate & Economy


Consumer Daily Ideas Stocks Featured: GSKConsumer, JUBI, Bajaj Corp, GCPL, SunTV, Berger Paints, Trent, Trader Comments INSTITUTIONAL USE ONLY 5 August 2013


Contents Stock/Sector Ticker Reco News/Analysis

1 GSKConsumer SKB IN SELL GSKConsumer Q2CY13 Result Update – Maintain SELL recommendation

2 Jubilant

Foodworks JUBI IN NEUTRAL Jubilant Foodworks Q1FY14 Result Update: Same Store sales growth slips further to 6.3%

3 Bajaj Corp BJCOR IN BUY Bajaj Corp Q1FY14 Result Update: Estimate sustenance of ahead–of‐sector robust operating performance. Maintain BUY

recommendation

4 Godrej Consumer GCPL IN UR GCPL Q1FY14 Result Review: Significant disappointment on earnings on account of sharp increase in Ad

spends and lower margins in International business

5 Sun TV SUNTV IN BUY Sun TV Q1FY14 results review – positive surprise on advertising and subscription revenue

6 Berger Paints BRGR IN NEUTRAL Berger Paints Q1FY14 result First Cut ‐ Results marginally better than estimates

7 Trent Ltd. TRENT IN BUY Trent Ltd. – AGM Key takeaways: ‐ 2nd August, 2013

8 Trader Comments

% CNG 1D 1W 1M 3M 12M BEST 1D 1W 1M 3M 6M 12M PER WORST 1D 1W 1M 3M 6M 12M PERSENSEX -0.8 -3.0 -1.7 -2.1 11.4 CONSUMER/ MEDIA/ RETAILNIFTY -0.9 -2.6 -3.2 -4.5 8.9 DCHL 9.0 -15.9 -19.0 -40.1 -52.1 -84.0 N/A Cox & Kings -5.9 -11.9 -19.7 -22.5 -26.8 -30.9 5.0BSE FMCG -1.4 -8.2 -2.4 1.6 31.5 Titan Ind. 8.6 8.0 21.7 4.1 1.6 23.7 29.5 Jet Airways -5.4 -17.3 -26.6 -46.0 -44.9 -12.6 21.1BSE AUTO -0.6 -2.9 -4.4 -4.5 14.7 Future Retail 5.1 -5.7 -19.0 -47.4 -58.1 -38.0 16.4 Indian Hotels Co. -5.4 -15.7 -17.3 -28.7 -34.1 -32.4 38.4BSE 100 -0.9 -3.9 -3.7 -5.7 7.7 GCPL 4.7 -0.8 5.2 1.6 15.1 34.7 N/A Rel Broadcast -5.0 -22.5 1.5 11.8 -8.1 -15.1 N/ABSE 500 -0.9 -4.2 -4.6 -7.2 4.0 Sun TV 4.3 12.3 10.2 0.4 -10.4 56.9 20.3 King Air -5.0 -11.9 -23.0 -44.4 -68.6 -58.0 N/AEurope & US Jubl Foodworks 3.5 -0.7 1.0 1.8 9.6 0.8 43.6 Network 18 Media & In -4.9 -9.7 -20.2 -21.2 -28.6 -16.4 N/ADow Jones Ind 0.2 0.6 3.5 4.6 19.6 Nestle India 3.4 -0.6 5.2 10.3 14.5 23.4 N/A Akzo Nobel India -4.8 -18.6 -10.9 -1.0 1.4 11.4 N/AS&P 500 0.2 1.1 4.8 5.9 22.9 Bajaj Corp 3.3 -2.0 -1.2 -2.3 3.9 56.6 18.4 TV Today -4.7 -15.7 -22.3 -20.6 -27.5 -15.8 7.4NASDAQ 0.4 2.1 6.0 9.2 24.3 Berger Paints 3.0 -11.3 -12.9 4.4 6.5 42.8 27.0 NDTV -4.5 -11.9 -12.4 10.3 24.9 45.9 N/AS&P Europe 0.4 1.5 4.4 -1.1 8.1 Info Edge 3.0 0.3 9.8 -6.9 -7.1 0.2 29.8 Tilaknagar Ind -4.2 -11.3 -8.5 -31.1 -38.6 -9.4 8.6Brazil Bovespa -1.4 -1.9 7.2 -12.6 -15.3 United Breweries 2.0 -2.4 -19.9 -10.6 -11.7 19.7 65.6 Spice Jet -4.1 2.4 -6.4 -36.4 -43.2 -18.9 17.0Asia Raymond 1.8 -9.1 -20.7 -35.7 -46.7 -46.7 10.3 Hathway -4.0 -7.2 -9.0 1.1 1.9 38.4 54.8Nikkei 225 3.3 5.9 1.1 5.6 69.1 Marico 1.7 -3.0 0.5 -3.0 -4.2 11.5 26.0 EIH -4.0 -12.5 -15.0 -25.6 -35.8 -43.8 27.9Hang Seng 0.5 1.6 6.4 -2.2 12.8 Zee Ent. 1.7 -4.0 1.4 2.1 2.7 48.5 27.5 ENIL -3.8 -10.1 -5.8 -18.6 -8.7 -5.0 12.4S&P Asia 200 1.1 1.4 5.7 -0.2 21.2 Pidilite Ind. 1.5 -1.7 2.9 10.6 14.0 59.1 27.7 United Spirits -3.7 -11.0 -9.1 1.5 21.4 166.9 49.0Straits 0.3 0.5 2.7 -3.4 6.6 HMVL 1.1 -2.0 -0.8 -13.5 -13.5 5.4 N/A GSKConsumer -3.2 -11.0 -20.3 9.4 19.0 63.1 36.3TWSE 0.5 0.2 1.2 -0.4 12.2 Balrampur Chini 1.1 -5.0 -8.4 -26.3 -19.5 -38.4 7.9 Mah. Holidays -3.2 -10.4 -5.3 -8.9 -20.3 -16.1 17.2KOSPI 0.1 1.2 4.9 -2.2 4.0 P&G Hyg.&H 0.9 -4.4 -5.3 4.9 11.1 24.2 N/A Shoppers Stop -3.0 -2.4 -8.9 -6.9 -17.8 0.0 112.2Baltic Dry -0.1 -1.6 -9.0 22.0 23.7 Provogue 0.8 -4.8 -19.5 -40.9 -53.6 -62.6 N/A HUL -2.9 -7.2 1.0 7.5 33.1 33.7 37.0Coffee 0.5 -2.2 -2.6 -17.6 -38.5 Britannia 0.4 -1.3 5.2 22.8 50.8 48.8 29.9 Shree Renuka Sug -2.8 -15.3 -9.1 -36.0 -45.5 -53.3 5.4Cotton 0.1 -2.5 -1.7 -0.8 12.6 Asian Paints 0.2 -2.0 6.8 6.0 7.4 32.7 38.4 Jag Prakashan -2.8 -0.2 8.3 -3.7 -15.6 -3.5 12.8Crude Oil, WTI 0.0 2.3 3.8 12.1 14.9 Jyothy Lab. 0.2 -8.1 -13.5 -10.3 10.6 20.4 28.9 Bata India -2.7 -0.7 3.0 16.6 18.2 -1.9 25.9Gold 0.7 -0.6 8.0 -10.2 -17.6 Kewal Kiran 0.1 -0.2 -4.4 1.5 0.7 43.3 N/A Triveni Eng. -2.5 -11.3 -20.1 -20.4 -30.2 -43.1 N/ANewsprint N/A 0.0 -0.4 -2.1 -4.8 Dabur 0.1 -6.6 1.7 -0.5 20.0 31.7 30.0 Hotel Leela Venture -2.4 -11.2 -6.9 -21.9 -39.2 -47.3 -2.1Palm Oil 0.8 2.4 -2.2 1.7 -21.1 Radico Khaitan 0.1 -0.5 -3.4 -26.1 -35.5 -12.7 N/A DB Corp. -2.3 -7.8 2.3 -0.5 1.2 14.4 15.7Soyabean Oil 1.4 1.4 -3.0 -5.2 -14.1 Page Ind. -0.3 -1.8 2.2 16.6 32.6 43.8 N/A Gillette India -2.2 -4.3 -5.8 1.2 -9.2 -12.1 N/ASugar 0.0 0.0 -0.4 -8.3 -25.5 Emami -0.4 -5.9 -2.5 6.2 19.8 40.1 28.6 HT Media -2.2 -2.3 1.2 -5.7 -3.7 10.8 11.5Tea 0.0 0.0 2.0 28.2 66.7 Zydus Wellness -0.5 -7.9 -8.8 34.4 20.9 43.3 20.8 Colgate India -1.9 -9.8 -6.3 -14.0 -4.2 9.7 31.7Wool 0.6 -0.4 -4.3 0.8 -5.8 Tata Global Bev. -0.6 -6.4 1.0 -0.3 3.4 12.1 18.9 Bajaj Hind. -1.9 -10.6 -17.7 -37.3 -44.5 -62.1 N/ASteel N/A N/A N/A N/A N/A Eros Intnal. -0.6 -7.7 -7.7 -29.9 -38.8 -32.0 5.9 VIP Ind. -1.9 -12.8 -15.3 -33.3 -46.9 -44.1 N/AAluminium -0.4 0.5 -1.3 -1.8 -2.8 Kansai Nerolac -0.6 -1.4 1.7 -4.7 1.0 28.6 26.7 Dish TV -1.8 -6.4 -18.8 -26.8 -33.2 -30.3 #####Rubber 1.5 4.0 -1.2 20.8 3.2 DEN -0.7 -5.9 -5.6 -25.0 -25.4 40.1 28.8 Rel Mediawaorks -1.8 -11.0 -23.2 -17.4 -40.3 -22.3 N/AUSD : INR 1.1 3.5 2.4 13.5 9.4 Navneet Pub. -0.8 -6.8 -4.7 -2.2 -11.9 2.7 10.3 Simbhaoli Sugar -1.6 -16.4 -16.7 -21.1 -34.8 -53.1 N/AEUR : INR 1.1 3.5 2.4 13.5 9.4 Agro Tech Foods -1.1 -5.5 -1.2 -1.4 2.9 6.4 25.3GBP : INR 0.8 3.0 3.9 13.9 17.8 ITC -1.6 -9.6 -2.6 0.7 10.3 28.4 29.5CHF : INR 0.5 1.7 2.2 10.5 6.5 AUTOSJPY : INR 0.3 2.4 3.5 12.4 14.3 Motherson Sumi 2.2 2.1 1.5 9.9 9.7 99.8 15.1 Escorts -11.0 -14.6 -6.0 13.3 -0.1 19.4 6.9MYR : INR 0.2 2.0 3.1 13.5 -12.4 TVS Motor 1.8 -0.3 -4.6 -20.7 -24.6 -17.2 9.1 Ceat -6.5 -8.4 3.8 0.7 9.3 10.7 N/A

Greaves Cotton 1.6 -0.5 0.9 -14.8 -26.0 -8.1 8.7 JK Tyre & Ind. -3.5 -13.3 -15.5 -20.8 -22.6 -4.6 2.0Bharat Forge 1.6 -4.2 -7.7 -13.2 -10.3 -32.3 15.5 Sona Koyo Steering -2.3 -13.9 -11.3 -3.5 -17.2 -20.3 N/AApollo Tyres 1.4 -3.7 7.2 -33.5 -22.7 -17.1 5.0 Mahindra & Mahindra -1.9 -4.3 -11.6 -10.8 -3.4 24.8 11.3Amtek Auto 1.2 -6.0 -9.6 -17.3 -14.8 -37.4 N/A MRF -1.3 -7.9 3.7 -6.1 -3.2 22.9 7.2Amara Raja Batteries 1.0 -5.4 -9.5 -7.5 -20.1 57.6 N/A Bajaj Auto -1.3 -5.9 1.9 5.3 -8.8 18.3 15.6Exide Ind. 0.7 -6.4 -1.4 -10.3 -0.3 -4.9 16.4 Banco Products -1.0 2.3 -1.0 -12.4 -38.1 -41.6 N/ATata Motors 0.4 0.2 -1.9 1.8 1.2 31.5 11618.0 Hero Motocorp Ltd -0.8 -3.7 9.1 11.6 0.2 -8.3 N/AAshok Leyland 0.2 -11.9 -31.0 -43.5 -49.2 -43.9 30.1 Maruti Suzuki -0.2 -2.7 -14.0 -19.7 -16.4 19.4 13.7Eicher Motors -0.1 -6.6 -4.3 10.5 20.2 73.5 23.2

5 August 2013 / INDIA EQUITY RESEARCH / CONSUMER DAILY IDEAS

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CONSUMER Naveen Kulkarni (+9122 6667 9947 / [email protected]) Ennette Fernandes (+9122 6667 9764 / [email protected])

GSKConsumer (SKB IN: SELL, TP: Rs. 4050, CMP: Rs. 4450) Q2CY13 Result Update – Maintain SELL recommendation GSKConsumer Q2CY13 results disappointed estimates primarily on earnings on account of certain one off expenses. GSK has demonstrated ability to sustain value growth at 16 – 17% YoY inspite of change in volume price mix. We expect the financial performance to improve for GSK in the forthcoming quarters as operating performance sustains. However, with largely in‐line with sector operating performance we believe that the rich valuations of 36x CY13E (down from 41x post the recent stock price correction) remains unjustified. We maintain our SELL recommendation. Malted Food Drinks (MFD) volume growth sustains at 8% YoY: MFD business reported value growth of 18% YoY. MFD volume growth at ~8% YoY was largely in line with our expectations. Key brand Horlicks reported value growth of 19% YoY led by pricing growth of 10% YoY and volume growth of 9% YoY. With similar pricing growth of 10% YoY, Boost reported lower volume growth at 5% YoY on account of high base effect. Export business remained muted at 4% YoY. Biscuits reported growth of 19% YoY primarily led by volume growth of 17% Horlicks Oats gained market share to 17% in South India becoming the 2nd largest player and reported growth of 42% YoY in Q2CY13. Key drivers being GSK’s distribution strength, strong brand equity of Horlicks in South and new variant launches. The management has guided for 7 to 8% YoY volume growth and has upped pricing guidance to 7 – 9% YoY in CY13E from the earlier 6 – 7%. We expect company volume growth at 8% YoY and pricing growth at 7.5% YoY (8% YoY in MFD business) for CY13E. Benefits from distribution gains, increase in market presence, premiumisation of MFD portfolio persists: GSK has been investing in the key growth drivers for the MFD category namely region wise distribution, market penetration and premiumisation. GSK is aggressively targeting to expand retail outlet reach by 40k to 8 lakh outlets in the next 6 months. On account of continued distribution expansion particularly in North and West region (wherein brand presence has been inherently weak) GSK reported 27% YoY growth from these regions in Q2CY13. Also LUP contribution increased to 5.2% from 4% in CY12, growth of 46% YoY. Horlicks premium portfolio revenue contribution has increased to 20% contributing to 1.5% of the pricing growth of 10% YoY in Q2CY13. Gross margins guided to sustain at ~65%, recent uptrend in input inflation is a rising concern: Gross margins expanded by 200 bps YoY at 65% with robust Gross Profit growth of 21% YoY. Management has guided that margins are estimated to sustain at ~65% in H2CY13. However, input prices have increased recently particularly in key input of Skimmed Milk Powder. Hence the management has increased guidance on input basket inflation from 5% to 8% in the near term. We expect the company to undertake a pricing action in Q3CY13 of 3 – 4% to sustain gross margin expansion in H2CY13. Muted EBITDA growth at 6% YoY, impacted by certain one off items: EBITDA margins contracted by 130 bps YoY on account of higher staff costs (+140 bps YoY) and other operating costs (+170 bps YoY). These two cost items were impacted by certain one off items related to actuarial adjustments, higher conversion charges and capitalization of expenses. We expect EBITDA margins to improve in H2CY13. Maintain estimates and SELL recommendation, revise target price: We roll forward our target price to CY14 valuing the company at 27x (~10% discount to sector valuations at 29x FY15E) CY14E EPS. Our revised target price stands at Rs. 4050 (earlier Rs. 3700). Considering the significant downside we maintain our SELL recommendation Jubilant Foodworks (JUBI IN: NEUTRAL, TP: Rs. 1020, CMP: Rs. 1139) Q1FY14 Result Update: Same Store sales growth slips further to 6.3% Jubilant Foodworks (JFL) Q1FY14 results were largely in‐line with our expectations but slower‐than‐expected same stores sales (SSS) growth continued to disappoint at 6.3% YoY. As the slowdown is primarily attributed to macroeconomic factors, we believe the slowdown will be protracted and it will also impact the store additions rate over the medium to long term. We maintain our Neutral recommendation on the stock with a price target of Rs 1020 which implies a downside of 10% from the current levels.


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SSS growth continues to remain sluggish; Upgrades in store additions unlikely: Same Store Sales growth trend has been flagging for a few quarters and had sharply declined in Q4FY13 to mere 7.7% YoY. The SSS growth declined further to 6.3% YoY in Q1FY13. The company had added 26 new stores in the quarter against the full year target of 125 new stores. The management has indicated the slowdown in same store sales growth can largely be attributed to macroeconomic factors but the company will meet the full year store additions target. Jubilant in the recent history has been upping the store additions target but considering the slowdown we believe the company will find it challenging meeting this fiscal year’s target. We also note that there are no immediate triggers for a macroeconomic revival; we believe the slowdown is likely to be protracted over the medium to long‐term but contrary to our expectations the management has guided for 8‐10% SSS growth for FY14 which will entail a significantly higher growth in the forthcoming quarters. The management has contended that they have seen improvement from June 2013 and expect to close the year at a better rate. Gross margins expand marginally but rent and employee expenses continue to grow sharply; EBIDTA margins will continue to remain to remain under pressure: Gross margins expanded by 70bps YoY and 20bps QoQ notwithstanding the slowdown in SSS growth and increase in promotional offers. The management also indicated that set off of service tax credit has positively impacted margins to some extent. EBIDTA margins expanded QoQ by 10bps but declined by 140bps YoY. Rental expenses increased sharply by 40% YoY to 8.8% of the sales while employee expenses and other expenditure increased by 29.8% YoY and 28.9% YoY respectively. We expect EBIDTA margins to decline from current levels as store additions will increase in the forthcoming quarters while the uninspiring SSS growth is unlikely to improve the EBIDTA margin profile. The management has guided for a capex of Rs 2bn for FY14E which will also include developing commissaries. All these factors will put EBIDTA and operating margins under pressure in FY14E. Maintain Estimates; Maintain recommendation: We have largely maintained our earnings estimates for FY14E and FY15E. We believe the company will see continued pressure on EBIDTA margins. We value the company on DCF based methodology at Rs 1020. We maintain our Neutral recommendation on the stock. Bajaj Corp (BJCOR IN: BUY, TP: Rs. 335, CMP: Rs. 247) Q1FY14 Result Update: Estimate sustenance of ahead–of‐sector robust operating performance. Maintain BUY recommendation Bajaj Corp (BJCorp) reported robust results in Q1FY14, in line with estimates. The company delivered significantly ahead of sector volume growth and maintained strong profitability inspite of sharp increase in brand investment. We continue to believe that BJCorp is well placed to deliver sustenance in operating performance and is expected to stay ahead of the sector on key fundamentals of volume and earnings growth in the near to medium term. On Valuations, within the FMCG sector pack the stock remains the most attractively placed at 18x FY14E against sector valuations of 33x FY14E. We maintain our stance of expected multiple re‐rating in BJCorp with target price of Rs. 335, offering an upside of 35% from current levels. BJCorp is our top pick in the FMCG sector. Volume growth at 20% YoY significantly ahead of estimates driven by traction in low unit price (LUP) packs: Revenue growth at 23% YoY was largely in line with our estimates. Company reported volume growth at 20% YoY, ahead of our estimates of 17% YoY, key driver being traction in the LUP packs primarily in rural markets. On account of change in product mix with higher contribution from LUP’s the pricing growth was lower at 2.5% YoY against expectation of 6% YoY. We expect value growth to sustain in the forthcoming quarters with 18% YoY volume growth and ~5% YoY pricing growth. We believe, that on the key parameter of volume growth, BJCorp will continue to outperform the sector in the near to medium term considering the high growth potential in light hair oil category and continued market share gains. Gross margins expand by 400 bps YoY despite higher contribution from LUP’s, input prices soften further: Gross profit reported growth of 33% YoY with margin expansion by 400 bps YoY to 60%. It is to be noted that inspite of higher contribution from LUP’s the Gross margin expansion has been sharp. Indicative that margins in the LUP are better than the higher grammage SKU’s, a point we have highlighted before. BJCorp largely would be the only company in the FMCG space that has higher margins in the LUP portfolio. Hence change in mix does not hold any negative impact for BJCorp. Deflation persists in input LLP (c. 36 to the RM cost), however Refined edible oil (c. 11) prices also corrected by ‐10% YoY. With soft inflation persisting and product prices expected to be maintained, gross margin expansion is estimated to sustain. BJCorp increases brand investments sharply, is expected to support volume growth momentum in the near term: AdPro spends were up by 64% YoY, +420 bps YoY to 16.8%, of which Ad spends were up by 53% YoY and promotional spends increased by 80%


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YoY. Utilisation of input cost savings to increase brand investments was guided for by the management. As volume growth follows step up in Ad spends with a lag, we expect volume growth momentum to find support going ahead. Robust PAT growth at 25% YoY, significantly ahead of the sector: Inspite of aggressive brand investments, BJCorp sustained robust earnings growth at 25% YoY. We expect profitable growth trend to sustain at ~23% YoY in the near term. Key drivers being sustenance of operating performance and better flow through of input cost savings with lower pace of AdPro spends growth going ahead. Maintain estimates and BUY recommendation: We maintain our estimates for FY14E and FY15E. We continue to value the company at 24x FY14 (26%+ discount to the sector valuations at 33x taking into account single product company business risk). We maintain our target price at Rs. 335 and BUY recommendation. GCPL (GCPL IN: UR, CMP: Rs. 862) Q1FY14 Result Review: Significant disappointment on earnings on account of sharp increase in Ad spends and lower margins in International business GCPL reported Q1FY14 revenue in line with ours and consensus estimates but disappointed earnings estimates by a significant margin of 20%+. Disappointment was largely on account of sharp increase in advertising spends and margin contraction in the International business. Following are the key highlights: Revenue growth in line with estimates at 24% YoY, estimate organic revenue growth at 18% YoY: GCPL reported consolidated constant currency growth at 27% YoY. However reported consolidated revenue growth was lower at 24% YoY on account of depreciation in Indonesia Rupiah, Rand and Peso relative to USD. We estimate consolidated organic revenue growth at 18% YoY lower than expectations. Household Insecticide (HI) growth trends lower to 21% YoY, as Megasari business growth loses momentum: HI business reported robust growth of 21% YoY albeit at a slower pace than the 25% YoY reported in Q4FY13. Megasari business growth was lower at 21% YoY against 35% YoY in Q4FY13. Domestic HI business growth was strong at 24% YoY with continued market share gains across formats. Soaps reported growth of 13% YoY, Hair colour business growth gains traction to 32% YoY: Soaps business reported volume and pricing growth of 7% YoY and 6% YoY respectively. Positive pricing growth in Soaps is on account of carrying over effect. Hair colour business growth has improved at 32% YoY, significantly ahead of the category growth. Gross Margin expansion of 220 bps YoY led by deflation in Palm oil prices, input cost savings to be limited going ahead: Gross profit reported growth of 29% YoY. Higher realizations in Soaps and continued deflation in Palm oil were the key drivers. Going ahead, rupee depreciation is expected to reduce benefit of deflation in Palm oil. Also GCPL has initiated 10% free grammage offer on Godrej No.1 Rs. 10 SKU following lower volume growth for 2 consistent quarters than the market leader HUL. EBITDA growth muted at 11% YoY as Advertising expenses increase sharply by 54% YoY and higher employee costs in International business: EBITDA margins contracted by 150 bps YoY on account of sharp increase in Advertising cost by 270 bps YoY to 13.9% also reflecting one time impact of IPL. Also Staff costs increased by 110 bps YoY particularly due to steep hike in wage rates in Indonesia. GCPL has taken corrective actions by way of product price hikes which should mitigate the impact in the near term Margin contraction in International business continues to weigh pressure on consolidated operating performance: International business margins contracted by 230 bps YoY to 10%. Megasari, Africa and UK reported margin contraction of 260 bps YoY, 570 bps YoY and 340 bps YoY respectively. Divestment of food business in Megasari impacted margins by 140 bps LatAm margins were muted at 3%, however reported expansion of 570 bps YoY on account of low base effect. Adjusted PAT growth sluggish at 7% YoY, 3rd consequent quarter of disappointment on earnings: PAT at Rs. 1.39 bn is significantly lower than street and our estimates of Rs. 1.7 ‐ 1.8 bn. Higher interest costs and tax rate led to further pressure on earnings. GCPL has consistently been disappointing estimates on earnings since the past 3 quarters by a sharp margin. Conference Call to be held on 6th August at 12 pm IST. Call in numbers – (022) – 30650178/66290389

MEDIA Naveen Kulkarni (+9122 6667 9947 / [email protected]) Vivekanand Subbaraman (+9122 6667 9766 / [email protected])


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Sun TV (SUNTV IN, BUY, CMP: Rs 425, TP: Rs 490) Q1FY14 results review – positive surprise on advertising and subscription revenue Sun TV's Q1FY14 results were ahead of expectations, when adjusted for IPL income and costs on account of advertising as well as subscription income surprising positively. Despite no yield improvements, the company saw a 15% YoY ad revenue growth and a robust improvement in subscription growth trends. We maintain our buy rating on the backdrop of strong operating trends and tepid valuations. Revenue trends stronger than expected; ad revenue grows 15% YoY: Sun TV's total revenue stood at Rs 6bn, including Rs 985mn of IPL revenue, adjusting for which, the revenue growth was 18% YoY and 7% QoQ ‐ ahead of estimates. Advertising revenue grew 15% YoY on account of robust spends by FMCG, telecom, autos and local advertisers. Notwithstanding the strong Q1 performance, the management has maintained its 12% YoY ad revenue growth guidance for FY14, which will be facilitated by the 19% prime‐time ad rate increase the company has effected from 15th July 2013 in the flagship channel (Sun TV). The company also added that it will be increasing ad rates to incorporate the decline in inventory (in select channels) to meet the TRAI 10+2 ad guidelines (which will be in force from Oct 2013). Subscription growth also surprises positively: The company's domestic subscription revenue grew 24% YoY and 7% QoQ driven by cable, which grew 40% YoY and 11% QoQ on account of digital revenues coming from the Bangalore market, while DTH saw a continuation of past trends growing 19% YoY and 6% QoQ. The management expects monetisation of Hyderabad and other non‐tamil markets in the next quarter. For Tamil Nadu's markets, management mentioned that DTH is doing well and there could be a potential increase in revenue from Arasu. However, as of now there is no clarity on digitisation of Chennai and Coimbatore. IPL business losses at Rs 308mn; costs and revenue incorporated in Q1 numbers: The company recorded IPL income of Rs 985mn from while incurring an operating loss of Rs 308mn, greater than expectations. The company mentioned that a large part of the IPL related expenses have been incurred in Q1 itself and has guided for an operating breakeven in FY15. Broadcast business EBIDTA margins improve: the Company’s EBITDA from the broadcast business stood at Rs 3.8, improving 10% QoQ and 19% YoY. EBITDA margins improved 50bps YoY and 270bps QoQ to 76.4%. PAT stood at Rs 1.6bn, flat YoY while declining 7% QoQ ‐ lower on account of IPL losses. The company mentioned that movie amortisation during the current quarter was Rs 0.9bn, in line with the full year guidance of Rs 3.6bn. Maintain estimates and rating: We maintain our estimates and our target price. We continued to value the company at 25x FY14 EPS implying a target price of Rs 490/share, implying an upside of 15%. Maintain BUY. Other highlights: • The company also recorded Rs 95mn income from movie distribution during the quarter. FY14 will see 3 movies distributed

through SunTV implying a potential revenue of ~Rs 350‐400mn. • Movie acquisition capex guidance for FY14 maintained at Rs 4bn MIDCAP Vibhor Singhal (+9122 6667 9949 / [email protected]) Kapil Bagaria (+9122 6667 9965 / [email protected])

Berger Paints (BRGR IN: NEUTRAL, CMP: Rs. 205) Q1FY14 result First Cut ‐ Results marginally better than estimates The Q1FY14 results of Berger Paints are marginally better than estimates on consolidated basis. The key highlights of the result are as follows: • Consolidated Top line for the quarter increased by 12.6% YoY to Rs 9.1bn. The standalone revenues for the quarter stood at Rs

8.2bn, YoY growth of 8.9%. The higher growth in the consolidated revenues indicate better growth in the overseas subsidiaries for the company.

• Consolidated EBIDTA for the quarter stood at Rs 897mn, YoY growth of 17.1%. The consolidated margins for the quarter increased by 40bps YoY to 9.9%. The increase in the margins was due to the impact of lower raw material prices during the


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quarter and change in the product mix. The standalone EBIDTA for the quarter stood at Rs 901mn, YoY increase of 18.5% as the margins expanded by 90bps YoY to 11%.

• The company registered consolidated PAT of Rs 491mn YoY growth of 10.6% during the quarter. The growth in PAT is lower as compared to the EBIDTA growth largely due to increase in the tax rate. The tax rate as a percentage of PBT increased by 390bps YoY to 33.4% leading to a drag on the PAT.

Outlook The current quarter performance of the company is marginally above our estimates on a consolidated basis. At CMP of 205, the stock trades at ~28x our FY14E EPS. Although we are positive on the long term growth prospects of the company we believe that the current valuations factor in the growth for the next 2 years. We currently have a Neutral rating on the stock.

Standalone Consolidated

Q1FY14 Q1FY13 Q1FY14 Q1FY13

Net sales 8,184 7,516 9,078 8,064

Growth YoY 8.9 12.6 Total income 8,184 7,516 9,078 8,064Operating expenses 7,283 6,756 8,181 7,298

EBITDA 901 760 897 766

Growth YoY 18.5 17.1 Margin 11.0 10.1 9.9 9.5

Depreciation 124 107 152 131

EBIT 776 653 745 635

Margin 9.5 8.7 8.2 7.9Interest paid 67 67 94 89Other Income 75 69 86 84

Pre‐tax profit 784 655 737 630Tax provided 233 178 247 186

Profit after tax 552 477 491 444

Reported PAT 552 477 491 444

Growth YoY 15.6 10.6 Margin 6.7 6.3 5.4 5.5

Adj EPS, Rs 1.6 1.4 1.4 1.3 Unadj. shares (m) 346.3 346.3 346.3 346.3Wtd avg shares (m) 346.3 346.3 346.3 346.3 Standalone Consolidated

Q1FY14 Q1FY13 Q1FY14 Q1FY13

RM % to Sales 60.9 63.7 61.2 63.6Staff Cost % of Sales 5.2 4.9 6.3 5.9OE % of Sales 22.9 21.3 22.6 21.1 EBIDTA Margin 11.0 10.1 9.9 9.5 Interest as % of Sales 0.8 0.9 1.0 1.1Depreciation % of Sales 1.5 1.4 1.7 1.6 Tax % of Sales 29.7 27.2 33.4 29.5


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PAT Margin 6.7 6.3 5.4 5.5

RETAIL Abhishek Ranganathan (+9122 6667 9952 / [email protected]) Neha Garg (+9122 6667 9992 / [email protected])

Trent (TRENT IN: BUY: CMP: Rs 1000: PT: Rs 1250) Ltd. – AGM Key takeaways: ‐ 2nd August, 2013 • Current formats Particulars No. of stores Cities Total Area (mn sq ft)

West side 70 45 1.5 Star Bazaar 15 8 0.75 Landmark 19 10 0.25 Total 116 46 2.5

• Trent as a Company as whole has more focus towards Western and Southern part of India. • FY13 impacted due to :‐

o Muted Off take o Inflation across the inputs o Policy and economic uncertainty

• However, Q1FY14 o Witnessed improved off take o Recovering operating profitability o Specially lifestyle format doing well. o Margins improved on account of complied with the cost pressures.

• In FY13, in Westside 7 new stores are opened and simultaneously 4 closed, primarily stores in malls are closed. • Westside:‐ key changes made

o Expansion of gourmet west‐5 locations o Exciting range of destination brands o Refreshing offerings o Focus on refurbishment of stores. o Enhancing customer experience o Presence across the country; gradually increasing presence in East India as well.

• Star Bazaar o Food and grocery‐ substantial opportunity exits o Key challenges‐ low margins o Ongoing strategies with Tesco o Focused on South and West India

• Landmark o Focus on new anchor categories o Emphasis on toys, gaming and tech accessories. o Re configuration of store layout, look and feel. o Improving online presence‐ landmarkonthenet.com o Focused on South and West India o On FDI in Retail‐

o Some of the conditions were not clear and foreign retailers want more clarity. o Saw no foreign investments in Retail due to lack of clarity and poor investment climate. o Will study the recent amendments in FDI policy ; they seem to have addressed some of the concerns. o Dearth of real estate and multiple approvals will mean that sector cant grow too rapidly even after FDI

comes in the sector. • Consumer sentiments for Q1FY14 are encouraging and lifestyle formats saw recovery, same store sales growth in Westside

is over 15%. • Outlook for FY14:


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o Plans to open Westside‐ 8 stores Star Bazaar‐ 3 stores Landmark‐2 Stores Zara – 2/3 stores

o Target growth of 15‐20% in FY14 for the consolidated entity o Plan to take Westside and Star Bazaar on the online platform in the near future.

Trader Comments • Foreign retailers like Walmart,Tesco and Carrefour are unlikely to enter the supermarket business in India before the 2014

general elections even though the government has partly addressed their concerns and relaxed the norms. • Maruti Suzuki India Ltd (MSIL) is all set to follow Tata Motors, Mahindra & Mahindra and Hero MotoCorp to Africa, by setting up

a manufacturing facility there. Africa was one of the largest export markets for the company, so it made sense to set up a manufacturing facility there. Also, with the company planning to launch its light commercial vehicle (LCV) in the next two years, it may start with the production of LCVs first in South Africa.

• Force Motors has set its ambitions high. After rolling out an SUV that has taken on high end vehicles by Indian auto majors Mahindra & Mahindra and Tata Motors, Force has begun work on premium to compete with the likes of Optra, Endeavour, Fortuner, X‐Trail, Koleos and Outlander etc from global auto giants GM, Ford, Toyota, Nissan, Renault and Mitsubishi.

• Maruti Suzuki on Sunday said it will expand its presence in rural and remote parts of north east as it expects "rapid growth" in this region over the next 3‐4 years.

Upcoming results & Events calendar Sector Date Company Name Results/ Events

7th August 2013 Emami Ltd. Q1FY14 Earnings Release

7th August 2013 Zydus Wellness Ltd. Annual General Meeting

8th August 2013 Jubilant Foodworks Ltd. Annual General Meeting

12th August 2013 Marico Annual General Meeting

Consumer

12th August 2013 Britannia Industries Ltd. Q1FY14 Earnings Release

12th August 2013 Hathway Cable and Datacom Ltd. Q1FY14 Earnings Release Media 13th August 2013 Den Networks Ltd. Q1FY14 Earnings Release

Auto & Auto Anc 7th Aug 2013 Apollo Tyres Q1FY14 Earnings Release

13th Aug 2013 M&M Q1FY14 Earnings Release


Cyclicals Daily Ideas Stocks Featured: PI Industries, GSFC, BHEL, Siemens India, Cummins India & Trader Comments INSTITUTIONAL USE ONLY 5 August 2013



1 PI Industries PI IN Buy Q1FY14 Results a significant beat

2 GSFC GSFC IN NR Q1FY14 Results

3 BHEL BHEL IN Neutral Negative operating leverage hits margins

4 Siemens India SIEM IN Neutral Another quarter of weak earnings

5 Cummins India KKC IN Sell Weak macros to continue to hurt growth

6 Trader Comments

% C N G C lo se 1D 1W 1M 3M 12M B EST 1D 1W 1M 3M 6M 12M P ER WOR ST 1D 1W 1M 3M 12M P ERSENSEX 19164 -0.8 -3.0 -1.7 -2.1 11.4 C apital Go o dsNIFTY 5678 -0.9 -2.6 -3.2 -4.5 8.9 Emco 6.4 -12.7 -28.4 -38.6 -53.1 -57.6 N/A Elecon Eng -10.8 -23.2 -29.9 -42.2 -59.2 3.4BSE Cap Goods 8012 -1.5 -4.3 -12.2 -19.6 -17.7 Thermax 1.0 0.8 -3.7 2.6 2.4 21.0 20.2 Tecpro Systems -9.3 -26.7 -42.5 -69.3 -81.9 1.4BSE M ETAL 6510 -3.6 -6.7 -14.9 -25.9 -36.2 Blue Star 0.8 -2.6 -5.0 -5.8 -11.7 -20.0 16.9 Siemens India -5.9 -15.8 -15.6 -19.4 -32.8 33.6BSE OIL 8362 0.1 -5.7 -6.2 -4.0 3.2 BGR Energy 0.4 -24.0 -35.0 -59.9 -66.3 -71.7 3.5 Bharat B ijlee -3.9 -15.7 -22.1 -37.4 -53.0 N/ABSE 100 5626 -0.9 -3.9 -3.7 -5.7 7.7 KEC Intl. 0.2 -10.5 -16.4 -48.1 -53.5 -51.8 4.5 Jyoti Structures -3.5 -16.3 -25.1 -52.0 -59.1 1.9BSE 500 6880 -0.9 -4.2 -4.6 -7.2 4.0 Crompton Greaves -0.4 -3.7 -5.0 -12.3 -21.0 -29.0 13.0 TRIL -3.4 -15.5 -7.7 -39.3 -49.7 4.9Euro pe & US BHEL -0.8 -5.9 -16.3 -22.0 -29.6 -33.5 7.0 TRF -3.0 -17.9 -24.4 -50.8 -63.5 -872.5Dow Jones Ind 15658 0.2 0.6 3.5 4.6 19.6 L&T -1.7 -1.8 -11.7 -20.6 -18.8 -9.9 14.3 Voltamp Trans. -2.4 -8.6 -8.1 -6.3 -24.2 N/AS&P 500 1710 0.2 1.1 4.8 5.9 22.9 M cNally Bharat Eng -1.9 -11.4 -19.8 -47.6 -53.8 -57.2 2.3 Alstom T&D India Ltd -2.1 -3.7 -6.5 -7.3 -18.0 11.9NASDAQ 3690 0.4 2.1 6.0 9.2 24.3 ABB -2.0 -10.2 -19.2 -8.0 -26.6 -38.1 38.2 Voltas -2.0 -10.7 -6.3 -13.1 -29.1 10.0S&P Europe 2735 0.4 1.5 4.4 -1.1 8.1 C ementBrazil Bovespa 48474 -1.4 -1.9 7.2 -12.6 -15.3 ACC 2.4 -2.9 -5.1 -4.4 -11.1 -10.1 17.4 M angalam Cem -7.6 -14.1 -27.1 -29.1 -35.2 N/AA sia Ambuja Cements 2.2 -4.3 -9.9 -9.1 -15.1 -6.2 15.9 Kesoram Ind. -6.6 -12.7 -26.0 -39.2 -56.4 N/ANikkei 225 14466 3.3 5.9 1.1 5.6 69.1 M adras Cement -1.8 -13.0 -29.1 -37.0 -35.0 -12.0 N/A OCL India -6.3 -23.4 -26.2 -28.0 2.6 N/AHang Seng 22191 0.5 1.6 6.4 -2.2 12.8 Shree Cement -1.9 -4.6 -9.1 -10.3 -6.3 35.3 N/A India Cements -5.5 -13.2 -18.2 -45.7 -46.7 5.3S&P Asia 200 5117 1.1 1.4 5.7 -0.2 21.2 Dalmia Bharat -2.1 -2.2 -4.8 -3.5 -23.2 N/A N/A Orient Paper & Ind. -4.8 -24.3 -32.5 -32.9 -92.8 0.5Straits 3254 0.3 0.5 2.7 -3.4 6.6 Birla Corp -2.2 0.3 -5.7 -14.4 -23.6 -3.6 N/A Prism Cement -4.7 -18.7 -27.1 -44.6 -52.9 N/ATWSE 8100 0.5 0.2 1.2 -0.4 12.2 Ultratech Cem -2.3 -4.7 -7.3 -5.7 -7.3 8.6 17.0 Century Textile -3.9 -14.8 -20.7 -29.6 -33.8 42.7KOSPI 1923 0.1 1.2 4.9 -2.2 4.0 JK Lakshmi Cem -2.3 -21.5 -39.7 -41.9 -60.0 -41.0 N/ABaltic Dry Index 1065 -0.1 -1.6 -9.0 22.0 23.7 JK Cement -3.3 -21.9 -29.3 -37.8 -49.9 -31.0 4.9Baltic dirty tanker 618 0.0 -5.4 2.5 N/A -1.3 F ert ilizersVIX Index 12 -7.4 -5.8 -19.5 -6.8 -23.4 Tata Chem 3.5 -2.6 -4.0 -18.6 -26.4 -14.5 7.5 National Fertilizers -14.4 -27.0 -34.3 -53.4 -70.4 N/AAluminium 1770 -0.4 0.5 -1.3 -1.8 -2.8 Chambal Fertilizers 1.9 -3.0 -5.4 -30.0 -47.5 -51.5 5.0 Nagarjuna Agri -4.1 -7.7 12.5 -7.7 -21.5 N/ABrent 109 0.0 0.4 1.3 4.8 -0.5 Deepak Fertilizers 0.6 -8.3 -13.1 -18.9 -24.0 -36.1 3.9 Zuari Ind. -3.9 -13.6 -25.3 -42.5 -69.9 N/ACoal 77 N/A 0.5 -5.0 -10.1 -7.4 Coromandel Intl. 0.4 -0.8 -6.4 -10.3 -25.0 -33.0 9.5 Rashtriya Chemicals -1.6 -10.6 -19.6 -29.3 -49.3 5.1Copper 6990 0.0 2.1 1.0 2.5 -4.5 Rallis India 0.3 -15.0 -2.9 -0.8 6.9 8.9 17.2 Dhanuka Agritech -1.5 -6.0 0.3 10.1 43.0 N/ACrude Oil 107 0.0 2.3 3.8 12.1 14.9 GSFC -1.1 1.2 -12.8 1.1 -15.6 -22.9 N/AIron Ore 132 0.0 -1.5 9.1 -0.4 5.6 M etalsLead 2110 0.7 3.3 2.0 9.7 14.5 Hindustan Zinc 1.7 -2.1 -1.9 -17.2 -21.1 -15.1 N/A PSL/India -9.2 -24.7 -25.2 -46.3 -69.5 N/ANickel 13930 0.8 1.1 -0.3 -4.7 -8.3 M OIL 1.4 -2.7 -4.4 -14.8 -25.0 -28.7 N/A Orissa M inerals -8.3 -12.2 -23.4 -34.6 -68.5 N/ATin 21133 1.0 8.7 4.8 7.7 21.4 M an Ind. 1.1 -4.0 -14.4 -14.5 -30.7 -17.5 N/A JSPL -7.3 -1.7 -16.5 -41.3 -52.9 5.5Zinc 1828 0.6 0.4 -2.0 2.4 1.5 Bhushan Steel 0.3 0.1 -0.3 1.1 1.1 -0.4 7.7 Uttam Galva Steels -6.1 -18.6 -28.1 -41.7 -35.7 N/AUSD : INR 61.10 1.1 3.5 2.4 13.5 9.4 Jayaswal NECO 0.0 -14.8 -17.7 -32.8 -54.2 -53.8 N/A Coal India -5.8 -9.9 -14.3 -19.9 -26.0 8.8EUR : INR 80.69 0.8 3.0 3.9 13.9 17.8 Godawari Power -0.2 -8.2 -14.5 -24.9 -36.9 -46.3 1.7 Hindustan Copper -4.8 -19.2 -31.2 -54.7 -81.6 N/AGBP : INR 92.58 0.5 1.7 2.2 10.5 6.5 Jindal Saw -0.6 -14.5 -31.1 -50.0 -62.4 -66.9 4.5 Sandur M anganese -4.6 -5.7 14.7 44.5 -10.5 N/ACHF : INR 65.13 0.3 2.4 3.5 12.4 14.3 M aha. Seamless -0.7 -2.2 -2.1 -11.4 -18.7 -42.1 N/A NALCO -4.6 -14.4 -16.0 -28.6 -53.1 N/AJPY : INR 0.62 0.2 2.0 3.1 13.5 -12.4 Hindalco -0.8 -8.1 -13.1 -11.5 -23.6 -25.7 6.4 SAIL -4.4 -9.4 -17.8 -38.1 -53.3 6.1Dollar index 81.97 0.1 0.4 -2.9 -0.2 -0.5 Usha M artin -1.1 -1.3 -2.6 -10.5 -25.2 -18.8 11.3 Tata Sponge Iron -4.2 -5.2 -13.3 -19.4 -30.3 N/AUSD: CNY 6.13 -0.1 -0.1 -0.1 -0.7 -3.9 Ratnamani M etals -1.3 -6.9 -13.0 1.7 -7.1 7.8 N/A Jai Balaji Ind. -4.1 -21.7 -13.0 -17.8 -47.7 N/AUSD:EURO 1.33 0.0 0.1 3.5 1.6 7.1 Adhunik M etaliks -1.5 -12.7 -16.8 -34.2 -51.5 -36.3 2.1 Sterlite Ind. -3.9 -5.6 -13.9 -25.2 -29.2 4.1USD:YEN 98.71 -0.2 0.8 -2.5 -0.6 26.1 NM DC -1.6 -6.9 -6.6 -23.3 -34.7 -47.5 N/A JSW Steel -3.9 -3.6 -13.9 -25.1 -23.9 7.7

Guj. NRE Coke -1.7 -5.4 -6.6 -19.3 -32.7 -24.5 11.0 Tata Steel -3.7 -7.6 -23.6 -35.0 -49.0 8.2GM DC -1.7 -18.0 -28.8 -46.9 -57.5 -58.3 4.2 M onnet Ispat -3.5 -7.9 -16.8 -46.0 -66.9 N/ASarda Energy -1.9 -17.8 -20.0 -29.4 -40.7 -39.6 1.9 Sesa Goa -2.7 -5.7 -13.7 -23.1 -31.8 4.7Indian M etals & Ferro -2.2 -13.4 -18.5 -32.0 -46.2 -43.0 6.0Oil & GasCairn India 2.4 -2.3 1.9 -2.2 -7.3 -11.4 5.2 BPCL -4.7 -17.4 -20.8 -28.1 -17.8 9.8RIL 0.8 -3.6 -2.6 7.0 -2.2 15.4 12.0 HPCL -3.7 -17.1 -22.3 -36.6 -42.4 5.6Indraprastha Gas -0.6 -8.7 -5.9 -15.1 2.4 12.9 N/A Oil India -2.8 -8.6 -14.3 -12.6 0.0 7.5Petronet LNG -0.7 -3.5 -7.0 -16.5 -22.2 -20.8 9.3 GSPL -1.7 -5.3 -13.2 -24.1 -30.1 5.9ONGC -1.1 -8.8 -12.1 -14.5 -14.7 -1.2 9.2 IOC -1.5 -13.7 -14.3 -34.0 -26.6 6.7

Source: Bloomberg

5 August 2013 / INDIA EQUITY RESEARCH / CYCLICALS DAILY IDEAS

– 11 of 25 –

Agri Inputs Gauri Anand (+9122 6667 9943 / [email protected]) Saurabh Rathi (+9122 6667 9951 / [email protected])

PI Industries (PI IN, Buy, CMP Rs 122, TP Rs 150) ‐ Q1FY14 Results a significant beat • Revenues at Rs ~4bn have been way ahead of our estimates of Rs 3.2 bn (up +70% yoy & +23% qoq). The superior growth is

aided by domestic agri inputs (grew 38% yoy) as also custom synthesis exports (116% yoy, Jambusar facility stabilised) that showed remarkable enhancement

• EBIDTA at Rs 785 mn (+86% yoy & +60% qoq) has also been ahead of our estimates led by improved product mix and savings in other overheads. OPMs improved 438 bps qoq to 19.3%

• Higher EBIDTA and lower interest cost led a significant beat in adj PAT of Rs 439 mn (up 46% qoq and 87% yoy). The reported PAT of Rs 485 mn has been adjusted for the forex gain of Rs 670 mn

• PI results have been exceptionally strong and ahead of the sector performance and valuations at 12x FY14PER and 1.4x PBR remain undemanding in our view

• Management to host conference call on Tuesday, 6th August at 11 AM. (Dial in 22 3065 0122 )

GSFC (GSFC IN, NR, CMP RS 54) ‐ Q1FY14 Results • Sales came at Rs ~10 bn (‐28% yoy). Fall in sales has been mainly attributed to lower fertiliser division sales at Rs ~ 5.2 bn (‐42%

yoy), as a result of higher channel inventory which led to poor fertiliser volumes offtake. However, Industrial products division have revenues were flat qoq to Rs ~5 bn

• EBIDTA at Rs ~ 4 bn declined by 83% yoy as a consequence of lower sales and inventory write down. EBIDTA margins at 4.1% have declined by 12.7%

• Fertiliser division EBIT has declined yoy by 73% to Rs 273 mn due to rupee depreciation making raw material costlier and higher discounts offered to clear inventory. EBIDTA/mt came at Rs 1037/Mt (‐64% yoy)

• Industrial division EBIT to declined by 91% qoq to Rs 65 mn, as a result of falling caprolactum spreads qoq by 2% and rupee depreciation

• PAT at Rs 55 mn has declined by 97% as lower EBIDTA and higher interest cost (+48% yoy) and lower other income (‐75% yoy) pulled down the profits

CAPITAL GOODS & ENGINEERING Ankur Sharma (+9122 6667 9759 / [email protected]) Jishar Thoombath (+9122 6667 9986 / [email protected])

BHEL (BHEL IN: Neutral: CMP‐ Rs 150, TP‐ Rs 145): Negative operating leverage hits margins BHEL results miss estimates on lower than expected execution and margins. Given the continued uncertainty in the power sector we continue to retain our cautious stance on the stock. We cut our target price to Rs145 (earlier Rs180) and maintain our Neutral rating. Q114 results highlights • Sales at Rs 64bn (‐24% YoY) were below our expectation of Rs 75bn. Lower sales was on account of delays in execution due to

lack of clearances and funding at the developers front. Management has cited delays in projects of Baja Hindustan, Monnet Ispat, Surana Power and Abhijeet Power.

• EBITDA margins stood at 4.5% (against our estimate of 13%) down 860 bps YoY on account of higher fixed costs (employee costs and SG&A) as a % of sales on lower volumes. EBITDA stood at Rs 2.8bn (‐74% YoY). Note that gross margins were up 110bps YoY to 43% on lower raw material costs.

• Power division reported sales of Rs54bn which fell by 21% YoY while Industrial business de grew by 34% YoY to report sales of Rs 13bn.

• Power division reported a fall in EBIT margins to 14.1% (17.8% in Q113) while Industrial division margins fell to 10.1% (21% in Q113). The fall in margins on account of lower volumes and pricing pressures in the market.

• PAT at Rs 4.7bn (‐50% YoY) was below our estimate of Rs 6.7bn on lower than expected sales and weak margins which was partially offset by higher other income of Rs 6.4bn which was up 34% YoY; there was a treasury gain of Rs3.25bn in other income.


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• Orders won in the quarter stood at Rs 15bn (‐74% YoY); orders from Power segment (including international) were at Rs8.5bn and orders from Industry segment at Rs 6.5bn. Order book stood at Rs1, 086bn (‐18% YoY) of which Rs 977bn is in power segment (incl. exports) and Rs 109bn is in the industrial segment. Book to bill at 2.4x. An order worth Rs 12bn in Iraq was cancelled from the order book during the quarter.

• Industry wide BTG orders seen at 15GW in FY14 (11GW in FY13) and management expects to bag 11‐12GW. We model in 5GW of orders.

• Net working capital of the company went up to Rs 250bn in Q114 on account of higher inventory, debtors and lower advances from customers. Debtors at Rs410bn. Elevated debtors because of delays in ongoing projects and payment collection from customers.

• Management guides to flat sales for FY14, which appears to be very difficult given the tough conditions in the power sector. We model a 15% decline in sales with EBITDA margins falling 375bps to 16% in FY14; the fall in margins to reflect negative operating leverage and pricing pressure on orders.

For detailed report on BHEL Click here Siemens India (SIEM IN: Neutral: CMP‐ Rs 451, TP‐ Rs 400): Another quarter of weak earnings Q313 results missed ours and consensus estimates primarily on weak execution and margins. Orders down 3% in Q313, were remarkably strong in a very weak capex cycle. We retain our Neutral rating but revise our target price to Rs 400 (earlier Rs470). Q313 results highlights • Sales for Q313 at Rs26bn (‐13% YoY) were below our estimate of Rs30bn and consensus of Rs28bn. This was on account of

lower‐than‐expected sales, primarily at the energy (‐22% YoY) and industry (‐16% YoY) segments. Short cycle (product) businesses have also started witnessing a decline as dealers cut down inventories while the project businesses (longer cycle) continue to witness delays in off take by the customer.

• EBITDA adjusted for provision for delays in projects (Rs1.4bn) stood at Rs 0.75bn was down 14%. EBITDA margins remained extremely weak at 2.9% (flat YoY) against our expectation of 6%. Weak margins are on account of weak sales leading to lower fixed costs recovery, low capacity utilisation, pricing pressures and MTM losses on forex and commodity hedges.

• Adj. PAT at Rs 0.46bn (‐24% YoY) was below estimates of Rs1bn and consensus of Rs0.8bn. Lower interest costs (‐68% YoY) were more than offset by higher depreciation and tax.

• Energy segment had sales of Rs 9.4bn (‐22% YoY). The negative growth is on back of a sharp fall in orders in FY12 (‐46% YoY in FY12) and despite the merger of Siemens Power Engineering; Adjusted for a provision of Rs 1.4bn, EBIT margins stood at 10.9% (2.4% in Q312).

• Industry segment had sales of Rs 9.1bn (‐16% YoY) and EBIT loss of Rs0.32bn (‐3.5% margin). The decline in revenues in this segment is reflective of the weak industrial capex cycle in the country.

• Infrastructure and Cities had sales of Rs 6.9bn (‐1% YoY) and EBIT of Rs 0.07bn (1% margin). Healthcare reported revenues of Rs2.6bn (‐6% YoY) and a loss at the EBIT level of Rs 0.04bn (‐1.5% margin) against a profit of Rs 0.07bn in Q312.

• Orders were flat at Rs 26bn (‐3% YoY and ‐7% QoQ) in Q313. 9MFY13 orders were up 8%YoY. However, order book has shrunk to Rs 109bn and a book to bill of 1. The company had cited deferrals of orders to lack of fuel, land and environmental clearances, high interest rates, tight liquidity and fall in investments in the infrastructure sector.

Estimates and Valuations: We retain our Neutral rating on Siemens, but cut our earnings estimates for FY13 by 31% and FY14 by 7% to factor in the miss in revenue and margins. Our revised target price is at Rs 400 (earlier 470) which is derived using a target PE of 25x (earlier 27x). We expect any recovery in the capex cycle to be gradual and likely post the general election in CY14; concerns on margins and orders to weigh on the stock which should cap any significant upside from these levels. Cummins India (KKC IN: Sell: CMP‐ Rs 390,TP‐ Rs 370): Weak macros to continue to hurt growth Cummins India Q114 results were a miss at the topline and operating level; however, in line with our estimates at the PAT on higher other income. We retain our sell rating on Cummins and cut our target price to Rs 370 (earlier Rs 440) as we cut our estimates for FY14 and FY15 to factor in lower sales. Q114 highlights • Sales for Q114 at Rs 10.3bn (‐17% YoY) were below with our estimate of Rs 12bn; domestic business fell by 8 % YoY while exports

revenue fell by 35% YoY during the quarter. The high base of last year has exacerbated the fall in revenues in Q114.


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• Power generation (31% of sales) fell by 25% YoY (‐25% QoQ) on lower deficits in Southern India and hence weaker demand. Exports at Rs2.8bn (‐35% YoY) were impacted by the weak demand environment in Europe, Russia, Middle East and Asia. The industrial segment was up 26% YoY while the auto segment remained flat YoY in Q114. Distribution business in Q114 grew by 5% YoY which was markedly lower than the 10‐15% YoY growth seen historically.

• EBITDA margins at 15.1% (17.3% in Q113 and 14.9% in Q413) were below our estimate of 16%. EBITDA was at Rs1.6bn (‐28% YoY). The margin decline was on account of higher other expenses (13.3% in Q114 against 11.6% in Q113 as a % of sales) and higher employee cost (8.1% in Q114 against 6.8% in Q113 as a % of sales). Cross charges to the parent at Rs0.15bn at 1.4% of sales.

• PAT, stood at Rs 1.66bn (‐8% YoY) which was in line with our estimate helped by higher other income (Rs 663mn, +72% YoY) which included dividend from Cummins ‐ Valvoline of Rs 130mn and forex gain of Rs 70mn.

• Management has cut guidance for the full year to a flat growth (earlier +10% YoY) with domestic business growing flat to 5% and export revenue declining by 5%. The cut in guidance is driven by the worsening demand environment coupled with lower deficits in South India.

• Margins will remain at the current level for the full year at 15%. Pricing pressures remain in the DG market which could potentially lower margins by another 50bps.

• The management does not see a material impact on demand on account of the rise in diesel price by 18‐20% for the bulk users. Any growth will be driven by GDP generated expansion projects in the country. Power deficit in Southern India which was the key driver for growth in FY13, has come down significantly which has impacted the overall demand.

• Competition continues to remain intense in the DG set market with ; the rupee fall has not lead to any reduction in the competitive intensity from imports

Estimates and target price: We cut our estimates for FY14 and FY15 by 9% and 10% respectively as there is no visibility of any recovery and macros continue to weaken. We assign 15x FY15E EPS to get a target price of Rs 370 (earlier Rs 440) and retain our SELL rating on the stock. Key concerns remain on slow down in demand, lower power deficits in the south, increased competition from Perkins and weak exports.

TRADER COMMENTS • As per media reports, Essar Steel has raised prices for all its products by Rs 1,000‐1,200 per tonne w.e.f August 2013. JSW Steel is

also planning to hike prices of all its flat products and some of its long products. Jump in flat steel prices internationally and cost push on account of rupee depreciation led to steel players to increase prices.

• Jindal Power (a subsidiary of JSPL) is exploring the opportunities for setting up hydro power plants in Tajikstan. The country has potential of 60,000 MW hydro power plant and is keen on Indian companies setting up plants there.


Metals & Mining 7th August 2013 NMDC Q1FY14 results

12th August 2013 Hindustan Copper Q1FY14 results

12th August 2013 Novelis Q1FY14 results

13th August 2013 Tata Steel Q1FY14 results

13th August 2013 Hindalco Q1FY14 results

14th August 2013 SAIL Q1FY14 results

14th August 2013 Nalco Q1FY14 results

Oil&Gas and Agri Inputs 5th August 2013 Tata Chemicals Q1FY14 results

12th August 2013 ONGC Q1FY14 results

12th August 2013 IGL Q1FY14 results

Capital Goods 6th August 2013 Crompton Greaves Q1FY14 results


– 14 of 25 –

9th August 2013 ABB India Q2CY13 results

Infrastructure 7th Aug 2013 NCC Q1FY14 results

8th Aug 2013 IRB Infrastructure Q1FY14 results

8th Aug 2013 ITNL Q1FY14 results

13th Aug 2013 GMR Infrastructure Q1FY14 results


Defensive Daily Ideas Stocks Featured: Idea Cellular, RCom, Telecom Sector




1 Idea Cellular IDEA IN BUY Idea Cellular Q1FY14 results – Stellar quarter

2 Reliance

Communications RCOM IN Neutral Reliance Communications Q1FY14 results – trends weaker than incumbents, but RPM improves

3 Telecom industry ‐ ‐ Comments made by the TRAI chairman; 3G ICR should be allowed, spectrum pricing should reflect financial duress

faced by telcos – positive for incumbents

4 Trader Comments

% C N G 1D 1W 1M 3M 12M B EST 1D 1W 1M 3M 6M 12M P ER WOR ST 1D 1W 1M 3M 6M 12M P ERSENSEX -0.1 -2.5 -0.8 -2.1 12.2 P harma/ H ealthcareNIFTY -0.2 -2.7 -2.2 -4.5 9.6 Strides Arco lab 5.7 -12.2 -28.5 -29.1 -42.3 -15.0 15.2 Ranbaxy Labs -8.0 -15.3 -23.8 -42.1 -41.4 -47.6 10.8BSET Healthcare -0.2 -1.2 0.6 3.6 25.2 Vivimed Labs 5.0 -38.7 -58.8 -64.7 -68.3 -72.7 N/A Hiran Orgochem -7.9 -21.6 -26.6 -24.7 -36.3 -65.1 N/ABSETECK -0.4 1.7 17.3 20.6 35.7 Aarti Drugs 4.0 -9.8 5.8 18.0 -6.2 67.9 N/A Lotus Eye Care -7.8 -13.8 -10.5 -21.5 -34.0 -39.0 N/ABSE IT -0.2 2.7 21.7 27.1 39.8 Indoco Remedies 4.0 -2.1 1.4 0.6 1.5 12.0 N/A Jubilant Life Science -7.6 -3.9 -37.0 -54.2 -60.9 -49.7 2.9BSE 100 -0.5 -3.5 -2.9 -5.5 8.4 Torrent Pharma 2.8 3.9 7.2 29.4 28.3 30.8 15.2 Opto Circuits India -7.3 -18.5 -3.3 -63.5 -72.3 -85.9 1.2BSE 500 -0.6 -3.9 -4.0 -7.0 4.7 Cadila Healthcare 2.0 1.6 -3.0 -4.1 -12.5 -16.1 18.8 Nectar Lifes -6.6 -17.2 -21.7 -21.8 -34.9 -38.9 N/AEuro pe & US Sanofi India Ltd 1.9 2.1 -2.5 -5.1 5.1 9.7 N/A M arksans Pharma -5.0 -12.8 6.6 122.0 141.2 454.3 N/ADow Jones 0.8 0.5 4.7 5.4 21.3 Hikal Ltd 1.3 4.9 0.9 1.3 -10.0 19.7 N/A Ankur Drugs -4.9 -16.6 -29.6 -34.8 -56.3 -66.6 N/AS&P 500 1.3 1.0 5.7 6.8 25.0 FDC/India 1.2 -0.4 -0.5 -0.3 -3.6 8.7 N/A Bal Pharma -4.8 -3.7 15.9 -3.1 -32.5 -16.5 N/ANASDAQ 1.4 2.0 7.1 10.0 26.3 Shasun Pharma 1.1 -13.4 -5.6 -21.6 -45.9 -53.9 6.0 Elder Pharma -4.6 -14.3 -15.3 -21.9 -23.9 -3.8 6.6S&P Europe 0.9 0.9 4.1 -0.6 10.2 Orchid Chem 1.1 -18.2 -24.2 -41.3 -56.6 -66.7 N/A Dishman Pharma -4.4 -23.0 -27.6 -41.2 -62.7 -45.5 N/ABrazil Bovespa 1.9 0.2 8.6 -11.2 -11.5 Suven Life Science 0.9 -5.1 -3.3 -13.5 -12.5 45.3 N/A IND Swift -4.2 -16.2 -13.4 -46.9 -59.4 -70.5 N/AA sia Biocon 0.8 6.1 12.2 12.5 13.9 32.5 16.5 Twilight Litaka -3.7 -6.0 -27.4 -44.7 -70.9 -82.8 N/ANikkei 225 2.5 -0.9 -0.7 2.3 61.9 Cipla/India 0.6 -1.6 1.5 -1.4 -2.5 15.4 20.8 Aurobindo Pharma -3.4 -8.7 -12.1 -18.1 -14.9 45.8 8.1Hang Seng 0.9 0.5 6.9 -2.6 12.2 Sun Pharm 0.5 3.6 12.5 17.3 57.5 72.7 30.6 Wyeth -2.8 -9.9 -16.2 -19.3 -23.9 -26.4 N/AS&P Asia 200 0.2 0.4 4.7 -1.3 18.5 Apollo Hospitals 0.0 -3.0 -5.1 14.0 16.0 50.8 35.4 Ajanta Pharma -2.4 -13.1 -1.7 16.4 52.5 139.7 13.9Straits 0.7 0.2 2.2 -4.7 6.8 Lupin 0.0 0.8 8.8 24.9 43.1 47.3 25.1 AstraZeneca Pharma -2.3 3.5 -2.8 -9.8 -50.0 -58.0 N/ATWSE -0.6 -1.1 0.5 -0.9 10.8 Jupiter B ioscience 0.0 0.0 0.0 0.0 0.0 -42.5 N/A Natco Pharma -1.7 18.5 31.9 35.9 30.5 73.5 21.8KOSPI 0.4 0.5 3.5 -1.9 2.7 Ipca Labs 0.0 0.9 -1.2 24.0 34.6 62.4 18.2 Divi's Lab -1.6 -2.0 -6.0 -15.1 -13.7 -16.9 16.6Baltic Dry 0.4 -2.4 -9.6 23.7 21.4 Dr Reddy's Labs 0.0 -1.7 0.8 13.5 17.2 38.7 N/A GlaxoSmithKline Pha -1.5 -3.5 -5.3 3.3 14.7 10.3 27.9USD : INR 0.1 2.3 1.5 12.3 9.0 Pfizer/India -0.4 0.6 -0.9 -0.2 -8.0 -12.7 N/A Abbott India -1.4 -2.3 -5.5 -3.0 -3.5 -7.9 N/AEUR : INR -0.2 2.6 3.1 13.7 17.2 Glenmark Pharma -0.8 -2.0 -0.5 16.0 11.4 47.7 20.3 Unichem Lab -1.4 -1.6 -2.8 -4.3 -13.0 9.0 9.9GBP : INR 0.3 1.9 1.7 9.9 6.2 Fortis Healthcare -1.0 -2.2 10.6 -5.6 -11.0 -3.1 N/A Granules India -1.1 -7.4 22.7 0.8 6.2 -10.8 N/ACHF : INR -0.1 3.0 3.2 11.9 14.3 Vimta Labs -1.0 -5.4 7.5 19.0 25.7 0.8 N/AJPY : INR 0.1 1.1 2.2 10.6 -15.1 T eleco mDollar 0.0 0.8 -1.4 0.1 -1.2 OnM obile Global 9.9 -23.5 -28.0 -45.3 -46.9 -43.3 4.3 Reliance Comm -5.9 -4.3 0.3 25.1 61.7 133.8 21.8USD: AUD -0.2 -3.8 -2.6 -13.1 -14.9 Tulip Telecom 1.1 -13.0 -5.1 -65.3 -60.2 -92.2 N/A GTL -4.2 -15.3 -20.2 -28.0 -48.7 -62.2 N/AUSD: CNY 0.0 0.0 0.0 -0.4 -3.7 Bharti Infratel Ltd 0.6 -0.4 -2.4 -15.6 -28.0 N/A 20.5 M TNL -1.4 -8.0 -24.0 -31.6 -44.1 -56.6 N/AUSD:EURO 0.0 -0.5 1.8 1.1 8.5 Tata Comm -0.2 -11.4 -14.3 -35.7 -36.0 -39.8 -17.4 Idea Cellular -1.0 4.9 17.4 23.7 49.6 104.6 33.4USD:YEN -0.1 1.3 -1.2 1.5 27.1 Bharti A irtel -0.3 2.1 13.5 8.5 4.0 15.1 31.2

ITPolaris Software Lab 6.2 -4.6 -11.2 -2.7 -7.8 -7.0 4.7 Everonn Education L -4.9 -21.3 -30.5 -55.6 -73.8 -82.6 N/A3i Info tech 2.1 -12.1 -20.1 -28.9 -50.5 -62.1 N/A Educomp Solutions L -4.8 -22.2 -37.1 -64.6 -81.3 -85.3 N/APersistent Systems 1.5 -2.2 4.7 1.1 -2.0 40.9 9.5 Allied Digital -3.3 3.0 24.5 8.0 -34.6 -53.6 N/AInfo Edge India 1.1 1.2 7.9 -8.8 -7.9 -1.4 29.0 Firstsource Solutions -2.5 -10.0 13.0 8.8 -0.6 26.0 4.2Oracle Financial Sevi 1.0 4.6 11.1 14.0 -5.1 13.8 20.7 Info tech Enterprises -2.2 -2.2 1.4 -0.9 3.6 1.7 N/AM indTree 0.8 0.9 15.5 16.9 20.7 50.3 10.4 Sasken Communicat -1.6 -5.3 -2.8 -12.0 -10.5 -11.5 9.2NIIT Tech 0.6 -2.0 -11.5 -7.1 -5.1 -14.5 6.6 Rolta India -1.5 -4.6 -11.5 -10.0 -12.5 -20.0 3.3Tech M ahindra 0.4 6.2 24.8 29.9 24.5 73.8 12.4 Hexaware Tech -1.5 1.2 31.3 37.7 49.1 -0.9 9.5NIIT Ltd 0.3 -10.4 -21.8 -36.8 -43.8 -58.3 4.6 Zensar Technologies -1.0 -10.6 -15.8 -11.1 -12.8 -20.9 4.4Infosys Technologies 0.3 2.1 23.7 30.1 7.4 34.9 17.3 KPIT Cummins -1.0 -5.8 3.7 18.3 12.3 4.1 N/AM phasis 0.0 2.3 7.5 6.6 8.2 -2.2 11.1 Infinite Computer -1.0 4.4 4.4 -20.9 -17.8 -17.2 3.1Tata Consultancy 0.0 1.2 21.0 27.0 34.8 47.3 N/A M astek -1.0 -9.6 -10.0 -16.5 -31.1 -7.4 5.5Wipro -0.3 15.9 23.6 23.8 19.9 43.8 15.6 eClerx Services Ltd -0.9 0.0 -2.8 18.3 15.6 2.5 N/AHCL Tech -0.9 3.0 21.2 26.0 35.1 77.1 13.9A D RWipro 2.0 6.7 20.2 12.0 3.2 28.8 0.3 Dr Reddy's Lab 0.0 -5.5 -2.5 0.1 1.9 26.2 0.3Tata Comm 1.6 -15.1 -16.3 -44.2 -45.7 -45.2 N/A Infosys Tech 0.3 -0.3 23.0 17.0 -5.7 27.0 N/A

Source: Bloomberg

5 August 2013 / INDIA EQUITY RESEARCH / DEFENSIVE DAILY IDEAS

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TELECOM Naveen Kulkarni (+9122 6667 9947 / [email protected]) Vivekanand Subbaraman (+9122 6667 9766 / [email protected])

Idea Cellular (IDEA IN, CMP: Rs 158, TP: Rs 195) Q1FY14 results – Stellar quarter Idea Cellular reported another stellar quarter with robust revenue growth accompanied by sharp margin expansion driven by the dual benefits of pricing improvement and cost structure rationalisation. While the company has taken an enabling resolution to raise Rs 37.5bn over the next 12 months which includes preferential allotment of Rs 7.5bn to Axiata and the balance Rs 30bn through QIP, the management clarified during the conference call that it is very conscious of dilution and will only invest in projects that generate significant RoE. We continue to rate Idea Cellular as our top sector pick (as highlighted in our detailed sector report – click here to view) with an upgraded price target of Rs 195 implying an upside of 23% from the current levels. The key takeaways of the results and conference call are as follows: Revenue growth picks up; significant surprise on RPM; Minutes growth partially impacted by seasonality: Consolidated revenues grew by 7.9% QoQ and 19% YoY (highest in the past four quarters) to Rs 65.5bn. Contrary to our expectations, Idea Cellular reported the Indian telecom sector’s sharpest improvement in RPM improvement of 6% QoQ and 6% YoY to 43.7p driven by voice RPM improvement of 5% QoQ and 4% YoY. The company continues to see strong growth trends in data revenue; up 19% QoQ & 91% YoY. Minutes grew by 3% QoQ & 12.5% YoY; implying a minutes addition of 4bn QoQ; slower than our expectations on account of high base of Q4FY13 and early onset of the monsoon season. Idea Cellular has the highest proportion of rural subscribers in the industry and monsoon season entails tepid minutes growth of rural customers. The management indicated that the impact of pricing on elasticity will be tested in Q3FY14 as Q2 is seasonally the weakest quarter. Strong growth in non‐voice revenues: Non‐voice revenues increased by 15% QoQ and 32% YoY & stood at 16% of sales as compared to 15.2% in Q4FY13. 3G subscribers grew slower than expectations to 5.5mn from 5.1mn in Q4FY13 impacted by Delhi High Court ban on addition of new 3G subscriber in 3G roaming circles under the ICR. 3G revenues for the quarter stood at Rs 1.7bn growing 20% QoQ and 130% YoY, driven by subscriber as well as ARPU improvement. Sharpest sequential EBIDTA growth in the reporting history: EBIDTA grew by 24% QoQ & 45% YoY at Rs 20.76bn notwithstanding the one‐off exceptional of Rs 250mn in licence & WPC charges, leading to an EBIDTA margin expansion of 560bps YoY and 415 bps to 31.8%. The sales and marketing costs declined by Rs 608mn QoQ translating to a 170bps QoQ operating leverage. Access charges also grew slower on account of lower ILD minutes leading to 110bps QoQ margin improvements. Upgrade estimates; retain conviction Buy: We have upgraded our estimates taking into account the higher‐than‐expected improvement in RPM. We value the company using DCF based methodology at Rs 195. We maintain our conviction Buy rating on the stock.

Reliance Communications (RCOM IN, Neutral, CMP: Rs 124, TP: Rs 160) Q1FY14 results – trends weaker than incumbents, but RPM improves Reliance Communications’ reported Q1FY14 numbers were weaker than expected on account of absence of volume growth. The company continues to reiterate its commitment to asset monetisation, with the real estate hive off being the first of several initiatives. The key takeaways of the results and conference call are as follows: Wireless revenue improves 4% QoQ: Wireless revenues improved by 4% QoQ and 6% YoY to Rs 48.2bn, led by RPM improvement of 4% QoQ and 6% YoY to 45.7p and minutes which were flat QoQ at 105.5bn while growing 0.5% YoY. The company mentioned that the contribution of the GSM business has increased from 64% last quarter to 67% in Q1FY14, growing faster than the market, while the CDMA business continues to decline. RCom’s non‐voice revenue continues to improve and now contributes 21.3% of the total revenues; significantly higher than the industry average. In an attempt to grow 3G subscriber base, the company has slashed 3G data rates and brought them in parity with 2G data rates; RCom's 3G subscriber base currently stands at 7.7mn. Global and Other business segments decline sequentially: The Global and Enterprise business unit reported a QoQ and YoY revenue decline of 7% QoQ and 6% YoY. Management attributed this decline to seasonality of collections as revenue in this segment


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is booked on collection. The Others business segment which includes technology and digital retail businesses reported revenue decline of 19% YoY and 13% QoQ (adjusted for Q4FY13 one‐off income booked on reversal of provisions). Wireless EBIDTA margins improve: Owing to pricing improvements, RCom's wireless business EBITDA margins have improved by 60 bps QoQ & YoY each to 27.3%. However, overall business EBITDA margins declined 580bps owing to Q4FY14 results including one‐off income of Rs 5.5bn on account of reversal of provisions. The GEBU business EBITDA margins declined 50bps QoQ and 160bps YoY to 22.5%. PAT below estimates dragged by higher interest costs: PAT stood at Rs 1.1bn below estimates despite lower interest costs, depreciation and negligible tax provisions made by the company. Depreciation was lower QoQ by Rs 2bn on account of one‐offs in Q4FY14 results. Interest cost too was lower by Rs 605mn QoQ as Q4FY13 interest cost included finance charges on loan refinancing. Maintain estimates and rating: We maintain our estimates, rating and target price for the company. While the company has managed to improve its wireless business performance, the key trigger for the company remains its asset monetisation program.

Comments made by the TRAI chairman; 3G ICR should be allowed, spectrum pricing should reflect financial duress faced by telcos – positive for incumbents The TRAI chairman, Mr. Rahul Khullar has commented on matters concerning the Indian telecom sector. Below are Mr Rahul Khullar's comments: • 3G ICR should be allowed as there isn't enough 3G spectrum available – The TRAI chairman believes that 3G intra circle

roaming arrangements should be permitted as there isn’t enough 3G spectrum available. • Spectrum pricing should reflect the financial duress faced by telcos – Mr. Khullar mentioned that spectrum pricing needs to be

"balanced" going forward, adding that most companies are already facing "financial duress" and huge debt. His statement is as follows "The entire paradigm on spectrum pricing has to be revisited," adding that spectrum should neither be priced "for a song" nor at astronomical rates.

• Telcos desperately need cash, regulatory uncertainties prevent benefits of 100% FDI in the sector – Mr. Khullar acknowledged that that telcos are desperately in need of cash, which won't be forthcoming even with 100% FDI in the sector, due to regulatory uncertainties.

• Bats for spectrum trading, while highlighting market limitations – While acknowledging that the market isn't mature enough for spectrum trading, Mr. Khullar has endorsed spectrum trading.

• Comments positive for the industry; TRAI could suggest spectrum price cuts – The TRAI has acknowledged the dire financial condition of the telecom industry. The TRAI has launched a consultative paper on pricing of spectrum and would soon be providing a recommended spectrum pricing to the DoT. We believe that such a stance by the TRAI chairman could actually translate to a reduce spectrum reserve price; a positive for the telecom industry, including incumbents.

Trader Comments • The telecom minister, Mr. Kapil Sibal, has mentioned that the Unified License will be ratified today and guidelines

on M&A will be in place by September. He also mentioned that telcos are reeling under excessive penalties and the telecom department's mindset towards levies should change. He believes that this must be facilitated by the TRAI.


IT Services 5th Aug 2013 Firstsource solutions Q1FY14 results

12th Aug 2013 Tech Mahindra Q1FY14 results

13th Aug 2013 Infinite Computer Solutions Q1FY14 results

14th Aug 2013 Subex Limited Q1FY14 results


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Financial Daily Ideas Stocks Featured: Canara Bank, OBC




1 Canara Bank CBK IN Buy Canara Bank Q1FY14 Results – Asset quality woes

2 OBC OBC IN Buy OBC Q1FY14 Results – Strong performance amidst turbulence

% CNG 1D 1W 1M 3M 12M BEST 1D 1W 1M 3M 6M 12M PER WORST 1D 1W 1M 3M 12M PERSENSEX -0.8 -3.0 -1.7 -2.1 11.4 BankingNIFTY -0.9 -2.6 -3.2 -4.5 8.9 Dewan Housing Finan 5.0 -9.4 -10.9 -23.5 -34.7 -13.4 3.4 Syndicate Bank -9.8 -20.0 -31.4 -41.9 -22.2 2.5

BSE BANKEX -1.4 -4.4 -12.4 -19.5 -3.5 Shriram Transport Fina 4.1 -2.4 -9.1 -17.5 -17.7 9.3 8.6 Indian Bank -7.7 -27.2 -34.8 -56.9 -59.3 N/A

BSE PSU -2.6 -9.4 -14.4 -24.2 -27.0 Mahindra & Mahindra 1.9 7.3 -10.6 6.1 16.9 67.6 13.0 Union Bank of India -7.6 -12.8 -32.8 -51.3 -31.8 2.4

BSE REALTY -4.0 -14.6 -19.8 -36.2 -25.9 Axis Bank Ltd 1.8 -0.3 -14.1 -25.1 -24.4 6.1 8.1 Canara Bank -6.3 -10.2 -31.0 -38.8 -33.1 N/A

BSE 100 -0.9 -3.9 -3.7 -5.7 7.7 SKS Microfinance Ltd 1.3 11.6 7.0 -6.3 -22.1 29.2 28.6 Dhanlaxmi Bank Ltd -5.9 -20.1 -29.8 -45.5 -52.5 N/A

BSE 500 -0.9 -4.2 -4.6 -7.2 4.0 Bajaj Finserv Ltd 1.3 -4.5 -7.3 -19.5 -30.0 -19.8 11.1 Yes Bank Ltd -5.9 -16.0 -33.7 -38.1 -16.2 7.2

Europe & America Manappuram General 1.0 -17.6 14.3 -27.8 -71.0 -63.3 N/A Dena Bank -5.7 -21.5 -31.7 -48.7 -48.8 1.9

Dow Jones Industrial A 0.2 0.6 3.5 4.6 19.6 Federal Bank Ltd 0.8 1.0 -12.0 -21.8 -31.2 -13.7 N/A Bank of Baroda -5.5 -14.8 -12.6 -30.2 -25.1 N/A

S&P 500 0.2 1.1 4.8 5.9 22.9 Central Bank Of India -0.1 4.4 -7.3 -18.0 -27.9 -19.6 N/A Bank of India -5.0 -7.6 -24.6 -48.1 -41.3 N/A

NASDAQ Composite 0.4 2.1 6.0 9.2 24.3 State Bank of India -0.1 -4.7 -11.3 -24.1 -28.9 -16.2 5.7 Reliance Capital Ltd -4.7 -15.8 -13.4 -15.8 -5.8 12.3

S&P Europe 0.4 1.5 4.4 -1.1 8.1 HDFC Bank Ltd -0.2 -2.1 -5.2 -7.3 -1.9 7.3 17.7 Oriental Bank of Comm -4.4 -12.6 -31.1 -46.4 -41.2 N/A

Brazil Bovespa -1.4 -1.9 7.2 -12.6 -15.3 Jammu & Kashmir Ban -0.2 -2.6 -10.4 -17.2 -20.9 19.6 4.8 United Bank of India -3.9 -23.2 -28.5 -44.5 -41.6 N/A

Asia Corp Bank -0.4 -7.7 -19.9 -25.7 -33.6 -30.1 2.1 Punjab National Bank -3.7 -12.1 -16.2 -29.8 -29.3 N/A

Nikkei 225 3.3 5.9 1.1 5.6 69.1 Rural Electrification Co -0.5 -10.9 -23.7 -30.7 -39.3 -22.9 3.9 IDBI Bank Ltd -3.6 -12.2 -16.3 -32.8 -31.0 N/A

Hang Seng 0.5 1.6 6.4 -2.2 12.8 ING Vysya Bank Ltd -0.8 -5.2 -17.2 -12.8 -11.8 39.1 N/A Andhra Bank -3.3 -22.2 -31.6 -37.0 -42.9 N/A

S&P Asia 200 1.1 1.4 5.7 -0.2 21.2 IndusInd Bank Ltd -0.8 -7.0 -17.6 -16.6 -10.0 20.9 14.8 ICICI Bank Ltd -2.8 -4.9 -15.6 -21.5 -5.6 10.5

Straits 0.3 0.5 2.7 -3.4 6.6 Housing Development -1.1 0.3 -5.0 -5.5 1.2 15.6 22.8 Development Credit Ba -2.7 -7.0 -10.5 -6.6 5.4 6.7

TWSE 0.5 0.2 1.2 -0.4 12.2 South Indian Bank Ltd -1.4 -6.5 -10.3 -12.7 -22.6 -10.1 N/A City Union Bank Ltd -2.6 0.1 -15.5 -13.7 0.3 7.1

KOSPI 0.1 1.2 4.9 -2.2 4.0 Infrastructure Develop -1.6 -10.8 -20.5 -31.8 -34.7 -20.9 7.6 LIC Housing Finance L -2.6 -13.4 -29.7 -32.1 -36.6 5.9

Baltic Dry Index -0.1 -1.6 -9.0 22.0 23.7 Power Finance Corp L -1.7 -19.1 -28.8 -48.5 -53.7 -44.2 2.6 Vijaya Bank -2.5 -9.9 -15.3 -27.1 -29.4 3.7

USD : INR 1.1 3.5 2.4 13.5 9.4 UCO Bank -2.0 -7.7 -11.7 -19.8 -15.1 -17.9 3.9 Indian Overseas Bank -2.2 -11.7 -18.9 -36.5 -45.8 N/A

EUR : INR 0.8 3.0 3.9 13.9 17.8 Karnataka Bank Ltd -2.1 -24.2 -33.1 -49.8 -52.9 -22.4 3.3 Allahabad Bank -2.1 -11.3 -24.4 -49.0 -48.9 2.1

GBP : INR 0.5 1.7 2.2 10.5 6.5 Kotak Mahindra Bank -2.1 -4.0 -7.0 -9.8 -3.8 19.3 30.9

CHF : INR 0.3 2.4 3.5 12.4 14.3 Real EstateJPY : INR 0.2 2.0 3.1 13.5 -12.4 Phoenix Mills Ltd -1.5 -0.6 -3.6 -10.3 -10.9 30.1 19.7 DLF Ltd -6.9 -25.4 -27.8 -44.6 -38.0 23.8

Dollar index 0.1 0.4 -2.9 -0.2 -0.5 HDIL -1.8 -18.6 -21.2 -43.2 -59.1 -62.8 2.2 Orbit Corp Ltd -6.3 -16.1 -23.0 -43.0 -72.6 6.3

USD: AUD -0.5 -3.7 -2.2 -13.6 -16.1 Godrej Properties Ltd -2.9 -8.2 -9.5 -23.7 -22.8 -8.1 16.7 Unitech Ltd -4.4 -15.3 -27.4 -47.0 -28.5 9.8

USD: CNY -0.1 -0.1 -0.1 -0.7 -3.9USD:EURO 0.0 0.1 3.5 1.6 7.1USD:YEN -0.2 0.8 -2.5 -0.6 26.1 Source: Bloomberg

5 August 2013 / INDIA EQUITY RESEARCH / FINANCIAL DAILY IDEAS

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KEY ECONOMIC INDICATORS Latest 1M-Ago 3M-Ago 6M-Ago 12M-Ago KEY BANKING STATISTICS Latest 1M-Ago 3M-Ago 6M-Ago 12M-Ago

Policy rates Business growthRepo,% 7.3 7.3 7.5 7.8 8.0 Credit Growth (%) yoy 17.0 16.0 NA NA NAReverse Repo,% 6.3 6.3 6.5 6.8 7.0 Deposit Growth (%) yoy 17.4 13.1 NA NA NACRR,% 4.0 4.0 4.0 4.0 4.8 CD Ratio (%) 78.1 77.4 NA NA NASLR,% 23.0 23.0 23.0 23.0 24.0 Certificate of deposit outstanding Rs bn 3248 3719 3321 3276 2286Daily data Commercial paper outstanding Rs bn 1037 989 1231 1273 962Call Rate, % 5.8 6.5 7.4 7.5 8.1 Deposits rates91 day T-Bill, % 11.3 7.5 7.6 7.9 8.1 1yr Deposit rate (SBI) 8.75 8.75 8.75 8.50 9.001-Yr Bond Yield, % 9.2 7.6 7.5 7.7 8.0 Lending rates5-Yr Bond Yield, % 8.7 7.8 7.6 7.9 8.2 BPLR, % (SBI) 14.8 14.8 14.8 12.310-Yr Bond Yield,% 8.5 7.8 7.8 8.0 8.4 Mortgage rate, (HDFC Floating rate) 10.5 10.5 9.5 9.3 8.8USD : INR 61.1 59.7 53.8 53.3 55.8 BASE RATE, % (SBI) 9.7 8.2 8.5 9.0 9.2EUR : INR 80.7 77.7 70.8 72.3 68.5 Gsec yield (1yr) 11.3 7.5 7.6 7.9 8.1GBP : INR 92.6 90.6 83.8 83.8 86.9 Corporate Bond Yield (1yr AAA) 9.2 7.6 7.5 7.7 8.0CHF : INR 65.1 62.9 57.9 58.5 57.0 Corporate Bond Spread -2.0 0.1 -0.2 -0.2 -0.1JPY : INR 0.6 0.6 0.5 0.6 0.7 6M LIBOR 0.4 0.4 0.4 0.5 0.7Dollar index 82.0 84.4 82.1 79.5 82.4 Sector wise credit growthEURO:USD 1.3 1.3 1.3 1.4 1.2 AGRI 15.9 12.9 21.8 24.4 8.1USD:YEN 98.7 101.2 99.3 93.6 78.3 Retail 18.4 17.3 17.2 19.1 11.4Weekly data Housing 19.9 18.5 19.1 17.4 11.2Forex Reserves, $Bn 280 288 296 296 289 Credit Card 20.1 21.9 23.7 25.7 10.7Government Borrowing, Rs Bn 2100 1350 450 5220 2340 Personal Loan 32.2 32.8 28.4 31.4 11.2Monthly data SERVICES 9.4 11.2 11.1 13.2 15.2Inflation Commercial real estate 5.2 4.6 4.0 2.9 11.6 WPI,% 4.9 4.7 5.7 7.3 7.6 NBFC 8.5 15.8 16.5 30.3 30.9 CPI,% 11.1 10.7 11.4 11.2 10.1 Trade 26.1 24.9 27.6 25.7 15.7Index of Industrial Production,% -1.6 1.9 0.6 -1.0 2.5 INDUSTRY 14.5 13.4 16.0 17.7 19.18-core Industry,% 0.1 2.3 3.2 2.9 5.1 Iron and steel 24.3 22.7 24.0 23.2 17.9Exports, $ Bn 23.8 24.5 30.7 25.5 24.9 Chemicals 39.5 41.5 37.3 22.0 13.6Imports, $ Bn 36.0 44.6 40.5 43.4 36.2 Textile 16.1 14.8 14.6 9.5 10.1Trade Deficit, $ bn -12.2 -20.1 -9.8 -17.8 -11.2 Food processing 21.8 14.6 17.3 25.0 19.1Quarterly data Telecom -4.0 -6.2 0.7 0.9 -6.0GDP,% 4.5 - 5.3 5.5 6.0 Power 33.3 26.5 30.4 23.5 23.0 Agriculture,% 1.1 - 1.2 2.9 4.1 Roads 17.4 14.8 17.7 19.5 25.8 Industry,% 2.3 - 1.1 0.8 0.9 Valuation (1yr forward P/ABV) Services,% 6.0 - 7.1 7.4 8.1 PSB 1.4 1.7 1.6 1.8 1.5Exports, $ Bn 84.8 - 74.2 72.6 80.0 Private 2.4 2.6 2.6 2.8 2.3Imports, $ Bn 130.4 - 132.6 120.4 131.7 Premium (Private-PSB) 1.0 0.9 1.0 1.0 0.8Trade Deficit, $ Bn -45.6 - -58.4 -47.8 -51.6 SBI 1.6 2.0 2.2 2.6 1.9Invisibles, $ Bn 27.5 - 26.6 26.7 17.7 ICICI Bank 2.0 2.0 2.3 2.3 2.1Current Account Deficit, $ Bn -18.2 - -31.8 -21.1 -34.0 AGRI 3.7 3.4 3.8 4.4 3.5Net capital flows, $ Bn 23.9 - 16.1 16.6 17.2 Source: Bloomberg


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FINANCIAL Manish Agarwalla (+9122 6667 9962 / [email protected]) Sachit Motwani, FRM (+9122 6667 9953 / [email protected])

Canara Bank Q1FY14 Results – Asset quality woes Canara Bank’s Q1FY13 PAT of Rs 7.92 bn (+2.2% YoY) was driven by higher other income (on the back of treasury gains). Slippages were higher than expected at Rs27bn driven by NPA in corporate accounts like (Winsome Rs6.3bn, Pradeep overseas Rs2.5bn, Allied steel Rs2.8). Restructuring remained high at Rs 16.8bn taking the outstanding restructured book to Rs180bn. Key highlights • Net Interest Income growth remained subdued at 8% YoY due to 19 bps YoY decline in NIM to 2.21%. On a QoQ

basis, NIM declined by 18 bps due to decline in CD ratio from 68% to 65.5% & decline in yield on funds due to decline in lending rate. The spread also declined by 21bps QoQ to 1.89%.

• Advances have witnessed some pick up with YoY growth of 10.8% whereas on a sequential basis it registered a growth of 3.2% driven by retail, agriculture and SEB loans. Deposits increased by 7.3% QoQ driven by a sharp increase in term deposits. CASA stood at 24.2%.

• Non‐interest income grew by 79% YoY on the back of higher treasury gains. Lower credit offtake resulted in a lower fee income growth.

• Provisions increased by 119% YoY and 22% QoQ on the back of higher provisions on NPA. • GNPAs increased by 34 bps QoQ to 2.91%. Slippages increased to Rs 27 bn (1.08% slippage ratio) driven by one

account corporate accounts. Also, restructuring increased significantly to Rs 17bn. The standard outstanding restructured book now stands at Rs 180 bn (7.2% of advances).

Outlook and Valuation The bank to kick start the growth momentum which will improve its subdued (65%) CD ratio, translating to improvement in NII growth. However NIMs may remained suppressed at 2.4% owing to factors like 30bps base rate cut undertaken in current environment were deposit rate are on rise and higher contribution from overseas business where NIMs are 1%. The management has guided for NIM of ~2.5%+ in FY14E against an earlier guidance of ~2.75% reflecting a strategy of compromise on margin to accommodate advance growth. Fee income is also likely to gain traction over FY13‐15E on the back of some pick up in credit growth, higher volumes of third party product distribution and continued higher recoveries from w/off accounts. Asset quality will remain under stress but its impact is expected to be reduced by on the back of higher recoveries. The bank has guided that slippage would be matched with equivalent amount of recovery & upgrade which we believe would be difficult given the scenario. The fresh restructuring to remain around Rs15‐20bn per quarter for next few quarters. The other challenge is the high amount of AFS book (50% of investment book) and its duration (3.15yrs), which is sitting at significant of MTM loss. Given the challenges, we expect the stock to underperform in the short term. At CMP Rs 243, the stock trades at 0.45x FY15E Adj BV. OBC (OBC IN) Q1FY14 Results – Strong performance amidst turbulence OBC delivered a strong Q1FY14 on all parameters relative to other PSU banks amidst a challenging environment. Stable topline growth, strong other income and moderate opex growth enabled OBC to deliver a strong Pre‐provision profit growth of 21.4% YoY to Rs 10.9 bn. However, provisions were higher owing to incremental provisioning on restructuring pool and ageing of NPAs, while tax outgo was high (effective tax rate of 36.4%) resulting in a PAT decline of 9.7% YoY to Rs 3.5 bn. Asset quality was maintained well with lower fresh NPA formation (Rs 7.6 bn) and fresh restructuring (Rs 4.2 bn) in Q1FY14 Key highlights for Q1FY14 • Stable NIMs at 2.9% (+8 bps QoQ/+11 bps YoY) and advances growth enabled OBC to deliver a 16.1% NII growth. NIM expansion

was driven by decline in cost of deposits (‐8 bps QoQ) and improvement in yield on advances (+5 bps QoQ).


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• Advances growth of 12.4% YoY was driven by strong growth in retail advances. Deposits growth moderated to 11.5% YoY driven by continued shedding to high cost deposits + CDs (17.7% of total deposits). CASA ratio stood at 23.7%.

• Non‐interest income grew by 31.7 % YoY to Rs 5.4 bn driven strong treasury profits on the back of favorable G‐sec yield movement.

• Provisions remained high driven by higher loan loss provision at Rs 3.5 bn and higher provisions on restructured pool. Additionally, the bank made Rs 200 mn towards impending wage revision.

• GNPAs increased by 15 bps QoQ to 3.36%, while NNPAs increased by 7 bps QoQ to 2.34%. PCR marginally increased to 63.88%. Slippages for Q1FY14 stood at Rs 7.6 bn. The bank also restructured loans worth Rs 4.2 bn in Q1FY14.

We await further details from the management during the call today at 12 pm. We will come out with a detailed note post the earnings call. At the CMP, OBC trades at 0.4x FY15E Adj BV. Result Update (Rs mn) Q1FY14 Q1FY13 YoY Growth

Interest earned 47,177 42,872 10.0Interest expended 34,106 31,613 7.9Net interest income 13,070 11,258 16.1Net interest margins 2.90 2.79 0.1Non interest income 5,381 4,084 31.7Total Income 18,451 15,343 20.3Total operating expenses 7,568 6,377 18.7Payroll costs 4,504 3,762 19.7Others 3,064 2,615 17.2Pre‐provision Profit 10,883 8,965 21.4Provisions & Contingencies 5327 3321 60.4% Operating income 49.0 37.0 PBT 5,555 5,644 ‐1.6Provision for Taxes 2,022 1,730 16.8% of PBT 36.4 30.7 Net Profit 3,534 3,914 ‐9.7Equity 2,918 2,918 0.0EPS, Rs 12.1 13.4 ‐9.7

Advances 1,279,950 1,138,963 12.4Deposits 1,762,750 1,581,519 11.5Advances / Deposits (%) 72.6 72.0 0.6Gross NPAs 43029 33776 27.4Gross NPAs (%) 3.4 3.0 0.4Net NPAs 29364 23061 27.3Net NPAs (%) 2.3 2.1 0.3CAR – Total 11.0 12.3 ‐1.3

Source: Company, PhillipCapital India Research


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Economic Calendar Date Time Event Survey ECO IN Prior Revised

08/05/2013 05:00 AU AiG Perf of Services Index Jul ‐‐ 39.4 41.5 ‐‐

08/05/2013 06:00 AU TD Securities Inflation MoM Jul ‐‐ 0.50% 0.00% ‐‐

08/05/2013 06:00 AU TD Securities Inflation YoY Jul ‐‐ 2.70% 2.40% ‐‐

08/05/2013 07:00 AU Retail Sales MoM Jun 0.40% 0.00% 0.10% 0.20%

08/05/2013 07:00 AU Retail Sales Ex Inflation QoQ 2Q ‐0.10% 0.00% 2.20% 2.00%

08/05/2013 07:15 CH HSBC/Markit Services PMI Jul ‐‐ 51.3 51.3 ‐‐

08/05/2013 10:30 IN HSBC/Markit Services PMI Jul ‐‐ ‐‐ 51.7 ‐‐

08/05/2013 13:25 GE PMI Services Jul F 52.5 ‐‐ 52.5 ‐‐

08/05/2013 14:00 UK PMI Services Jul 57.4 ‐‐ 56.9 ‐‐

08/05/2013 14:00 UK Official Reserves Changes Jul ‐‐ ‐‐ ‐$1871M ‐‐

08/05/2013 19:30 US ISM Non‐Manf. Composite Jul 53.1 ‐‐ 52.2 ‐‐

05‐08 AUG UK Halifax House Prices MoM Jul 0.50% ‐‐ 0.60% ‐‐

05‐08 AUG UK Halifax House Price 3Mths/Year Jul 4.30% ‐‐ 3.70% ‐‐

05‐10 AUG US Mortgage Delinquencies 2Q ‐‐ ‐‐ 7.25% ‐‐

05‐10 AUG US MBA Mortgage Foreclosures 2Q ‐‐ ‐‐ 3.55% ‐‐

08/06/2013 04:31 UK BRC Sales Like‐For‐Like YoY Jul 2.00% ‐‐ 1.40% ‐‐

08/06/2013 07:00 AU Trade Balance Jun 800M ‐‐ 670M ‐‐

08/06/2013 07:00 AU House Price Index QoQ 2Q 1.00% ‐‐ 0.10% ‐‐

08/06/2013 07:00 AU House Price Index YoY 2Q 3.00% ‐‐ 2.60% ‐‐

08/06/2013 07:00 AU ANZ Job Advertisements MoM Jul ‐‐ ‐‐ ‐1.80% ‐‐

08/06/2013 10:00 AU RBA Cash Rate Target 6‐Aug 2.50% ‐‐ 2.75% ‐‐

08/06/2013 10:30 JN Leading Index CI Jun P 107.3 ‐‐ 110.7 ‐‐

08/06/2013 10:30 JN Coincident Index Jun P 105.1 ‐‐ 106 ‐‐

08/06/2013 14:00 UK Industrial Production MoM Jun 0.70% ‐‐ 0.00% ‐‐

08/06/2013 14:00 UK Industrial Production YoY Jun 0.80% ‐‐ ‐2.30% ‐‐

08/06/2013 14:00 UK Manufacturing Production MoM Jun 1.00% ‐‐ ‐0.80% ‐‐

08/06/2013 14:00 UK Manufacturing Production YoY Jun 1.00% ‐‐ ‐2.90% ‐‐

08/06/2013 15:30 GE Factory Orders MoM Jun 1.00% ‐‐ ‐1.30% ‐‐

08/06/2013 15:30 GE Factory Orders WDA YoY Jun 0.30% ‐‐ ‐2.00% ‐‐

08/06/2013 18:00 US Trade Balance Jun ‐$43.0B ‐‐ ‐$45.0B ‐‐

08/06/2013 19:30 UK NIESR GDP Estimate Jul ‐‐ ‐‐ 0.60% ‐‐

08/06/2013 19:30 US IBD/TIPP Economic Optimism Aug 47.5 ‐‐ 47.1 ‐‐

08/06/2013 19:30 US JOLTs Job Openings Jun 3900 ‐‐ 3828 ‐‐

08/06/2013 UK New Car Registrations YoY Jul ‐‐ ‐‐ 13.40% ‐‐


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Management Vineet Bhatnagar (Managing Director) (91 22) 2300 2999 Sajid Khalid (Head – Institutional Equities) (91 22) 6667 9972 Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735

Research Automobiles Deepak Jain (9122) 6667 9758 Banking, NBFCs Manish Agarwalla (9122) 6667 9962 Sachit Motwani, CFA, FRM (9122) 6667 9953 Consumer, Media, Telecom Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Ennette Fernandes (9122) 6667 9764 Vivekanand Subbaraman (9122) 6667 9766 Cement Vaibhav Agarwal (9122) 6667 9967 Economics Anjali Verma (9122) 6667 9969

Engineering, Capital Goods Ankur Sharma (9122) 6667 9759 Jishar Thoombath (9122) 6667 9986 Metals Dhawal Doshi (9122) 6667 9769 Dharmesh Shah (9122) 6667 9974 Infrastructure & IT Services Vibhor Singhal (9122) 6667 9949 Varun Vijayan (9122) 6667 9992 Raheel Arathodi (9122) 6667 9768 Oil&Gas, Agri Inputs Gauri Anand (9122) 6667 9943 Saurabh Rathi (9122) 6667 9951

Retail, Real Estate Abhishek Ranganathan, CFA (9122) 6667 9952 Neha Garg (9122) 6667 9996 Mid‐caps Kapil Bagaria (9122) 6667 9965 Raheel Arathodi (9122) 6667 9768 Technicals & Quant Neppolian Pillai (9122) 6667 9989 Shikha Khurana (9122) 6667 9948 Sr. Manager – Equities Support Rosie Ferns (9122) 6667 9971

Sales & Distribution Kinshuk Tiwari (9122) 6667 9946 Ashvin Patil (9122) 6667 9991 Shubhangi Agrawal (9122) 6667 9964 Kishor Binwal (9122) 6667 9989 Dipesh Sohani (9122) 6667 9756

Dilesh Doshi (Sales Trader) (9122) 6667 9747 Rajesh Ashar (Sales Trader) (9122) 6667 9746

Mayur Shah (Execution) (9122) 6667 9945

c Contact Information (Regional Member Companies)

SINGAPORE

Phillip Securities Pte Ltd 250 North Bridge Road, #06‐00 Raffles City Tower,

Singapore 179101 Tel : (65) 6533 6001 Fax: (65) 6535 3834

www.phillip.com.sg

MALAYSIA Phillip Capital Management Sdn Bhd B‐3‐6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG Phillip Securities (HK) Ltd

11/F United Centre 95 Queensway Hong Kong Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN Phillip Securities Japan, Ltd

4‐2 Nihonbashi Kabutocho, Chuo‐ku Tokyo 103‐0026

Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141 www.phillip.co.jp

INDONESIA PT Phillip Securities Indonesia

ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A, Jakarta 10220, Indonesia

Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809 www.phillip.co.id

CHINA Phillip Financial Advisory (Shanghai) Co. Ltd.

No 550 Yan An East Road, Ocean Tower Unit 2318 Shanghai 200 001

Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940 www.phillip.com.cn

THAILAND Phillip Securities (Thailand) Public Co. Ltd.

15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 www.phillip.co.th

FRANCE King & Shaxson Capital Ltd.

3rd Floor, 35 Rue de la Bienfaisance 75008 Paris France

Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017 www.kingandshaxson.com

UNITED KINGDOM King & Shaxson Ltd.

6th Floor, Candlewick House, 120 Cannon Street London, EC4N 6AS

Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835 www.kingandshaxson.com

UNITED STATES Phillip Futures Inc.

141 W Jackson Blvd Ste 3050 The Chicago Board of Trade Building

Chicago, IL 60604 USA Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA PhillipCapital Australia

Level 37, 530 Collins Street Melbourne, Victoria 3000, Australia

Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309 www.phillipcapital.com.au

SRI LANKA Asha Phillip Securities Limited

Level 4, Millennium House, 46/58 Navam Mawatha, Colombo 2, Sri Lanka

Tel: (94) 11 2429 100 Fax: (94) 11 2429 199 www.ashaphillip.net/home.htm

INDIA PhillipCapital (India) Private Limited

No. 1, C‐Block, 2nd Floor, Modern Center , Jacob Circle, K. K. Marg, Mahalaxmi Mumbai 400011 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in


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Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may or may not match or may be contrary at times with the views, estimates, rating, target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd. which is regulated by SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only and neither the information contained herein nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment or derivatives. The information and opinions contained in the Report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication to future performance. This report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax and financial advisors and reach their own regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. In no circumstances it be used or considered as an offer to sell or a solicitation of any offer to buy or sell the Securities mentioned in it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which we believe are reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request. Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst have no known conflict of interest and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific views or recommendations contained in this research report. The Research Analyst certifies that he /she or his / her family members does not own the stock(s) covered in this research report. Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it or its affiliates may hold either long or short positions in such securities. PhillipCapital (India) Pvt. Ltd does not hold more than 1% of the shares of the company(ies) covered in this report. Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic or political factors. Past performance is not necessarily indicative of future performance or results. Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorized use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety. Caution: Risk of loss in trading in can be substantial. You should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd. which is the employer of the research analyst(s) who has prepared the research report. 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 PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities andExchange 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. In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Marco Polo Securities Inc. ("Marco Polo").Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer PhillipCapital (India) Pvt. Ltd. Registered office: 2nd Floor, C‐Block, Modern Centre, Mahalaxmi, Mumbai – 400011

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