india strategy: all eyes on growth - prabhudas lilladher

India Strategy & Top Ideas

Feel good factor good - When will this lead to corporate performance?

R Sreesankar [email protected]

+91-22-66322214

Click to edit Master title style LilladherPrabhudas August 2014

Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.

Please refer to important disclosures and disclaimers at the end of the report.

LilladherPrabhudas Contents

8/18/2014 2

Page No.

Large Caps

Infosys 21

HDFC Bank 23

State Bank of India 25

Wipro 27

Larsen & Toubro 29

Axis Bank 32

Maruti Suzuki 34

Tech Mahindra 37

Dr.Reddy's Laboratories 39

Bank of Baroda 41

Motherson Sumi Systems 43

ACC 45

Zee Entertainment Enterprises 47

Mid-Caps

Aurobindo Pharma 50

Cummins India 52

UPL 54

Federal Bank 56

Tata Chemicals 58

The Ramco Cements 60

Dish TV India 62

P.I. Industries 64

JK Lakshmi Cement 66

KPIT Technologies 68

Page No.

All eyes on growth 3

Global growth, Key Driver 4

CAD – under control, but till when? 5

Monsoon- Delayed and Sowing gathers momentum 6

Inflation, still running ahead of comfort zone 7

Markets

Global Equity – Expectations mellowing down 8

Defensives do better in last one month- Fatigue catching up with cyclical 9

Small and mid caps underperforms 10

Global Currencies- Weak Russian Ruble 11

India: Strong FII Equity Flows continues 12

Global Agricultural Commodities 13

Global Industrial Commodities 14

Global growth – The key catalyst 15

Nifty Valuations: Historic Trends 16

Indian Market – Valuation and Strategy 17

Nifty Valuation 18

Top Pick Summary 19

(Prices as on August 18, 2014)

LilladherPrabhudas All eyes on growth

• Feel good factor back, When will it turn into numbers? The feel good factor has resulted the stock indices reaching a new high, typical of any run up in stock markets before the economic recovery is reflected in numbers. While the feel good factor continues to remain buoyant, implementation of stalled is going to be the key. With the recent changes in the budget and the RBI actions, infrastructure is expected to get a renewed interest.

• Automobiles, on the way up? If the automobile numbers is taken as any indication, the business activities have improved and this should feed into the corporate performance towards Q3FY15. We expect the benefit of these to reflect from 3QFY15 onwards.

• Is the markets running ahead of fundamentals? While the markets have been on a roll with the exception of IT, Pharma and FMCG, automobiles have been the star performer for the last one month. We believe that automobiles are the first to see the benefit of an improvement in the economic realties on the ground. While we continue to be optimistic on the domestic staples, the high valuations may come as a resistance for the immediate gains. We remain cautious on the global commodity plays like steel, aluminum and copper due to the slow down in China as China continues to dominate the prices of global commodities.

• Remain Overweight Financials and automobiles: The worry on the financials have been the overhang of stressed assets coupled with the huge requirement of capital for the banks to meet the Basel III norms. The recent budget permitting banks to raise long term bonds for funding the infra projects and the RBI policies relaxing SLR requirements have ensured availability of long dated funds at cheaper cost to infrastructure. These measures are expected to reduce the stress on the infrastructure assets. Given this scenario, we remain with overweight position in the financials, and automobiles while the run up and steep valuations in the capital goods space have forced us to go to a neutral weight. We continue to like good quality infrastructure and mid cap stocks as we are likely to see an expansion in the valuation multiples across the mid cap spectrum as well.

• Our preferred picks are HDFC Bank, SBI, Axis Bank, and among the financials, L&T among Eng& capital goods and PI Industries and UPL among agro chemicals. We maintain our overweight sector weighting in Financials, capital goods and engineering and automobiles, underweight in FMCG and neutral in Healthcare and IT.

8/18/2014 3

LilladherPrabhudas Global growth, Key Driver

• Economic indicators: Global economy is expected to grow at a higher pace in 2014 . While the economic data in the US is good, the economic scenario in Europe continue to be challenging. With the US growth estimated at 2.4% in CY14 and at 3.1% in CY15 and the global growth looks optimistic .

• US Economic indicators: Job openings in the US in June increased to the highest level in last 13 years indicating a firm US labour market for the second half of the year. The non farm payroll numbers in the US have continued to remain positive. In the week ending August 2, 289,000 Americans filed claims for unemployment benefits, a decrease of 14,000 from the previous week's revised level. The 4-week moving average was 293,500, the lowest level since February 25, 2006 when it was 290,750. This indicates a strong revival in the US economy and we view this as more favorable for the Indian IRT sector as the demand environment continues to remain firm.

• Europe and International Markets: Improved global growth estimates continue to have a bullish sentiment to the equity markets around the world. However, the growth estimates in Europe seems to have taken a reversal with the heightened political risks affecting the region’s economic recovery. The largest economy of the region, Germany is facing challenges as the German investor confidence fell to their lowest since 2012, as the crisis in Ukraine and the sluggish Euro area recovery mute the outlook for Europe’s largest economy.

• Middle East crisis and Crude oil Prices: The crisis in the Middle East had had little effect on crude prices in the current period. With the exception of a spike to US$114, crude prices have remained steady despite the heightened tension in the middle east. This should augur well for a country like India as the crude imports is the single most item in the widening CAD for India.

• Emerging Markets, increasing Risk premium, Key to flows: The CBOE VIX volatility index, a measure of the cost of equity portfolio protection, had seen an increase in on the increased tension in the Middle East. However, the same has been within the trading range. The Indian VIX too has remained at the lower end of the range after the high volatility saw during the election period.

8/18/2014 4

LilladherPrabhudas CAD – under control, but till when?

8/18/2014 5

• CAD continues to remain under control due to the continued restrictions on gold imports and low economic growth.

We continue to believe that though CAD is under control, in the event of a stronger economic growth, we expect to

see an increase in crude oil and other non oil imports from the current levels which could pose a problem for

managing the CAD. We remain cautious on the CAD front.

External debt break-up between ST and LT

Source: RBI, PL Research * Data revised on exchange rate fluctuation

US $ m Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14 May'14 Jun'14 YTD YTD YoY

Exports 26,182 27,679 27,270 24,613 26,346 26,752 25,689 29,578 25,634 27,999 26,480 80,112 48,880

Imports 36,715 34,440 37,820 33,833 36,486 36,666 33,819 40,086 35,720 39,233 38,243 113,196 88,958

- Oil 15,095 13,197 15,131 12,965 13,900 13,186 13,697 15,784 12,978 14,465 13,343 40,786 28,113

- Gold 1,004 803 1,300 1,050 1,700 1,720 1,630 3,136 1,750 2,600 3,120 7,470 15,163

- Non Oil Non Gold/Silver 20,616 20,440 21,390 19,818 20,887 21,760 18,492 21,166 20,992 22,168 21,780 64,941 45,681

Trade Deficit (10,534) (6,760) (10,550) (9,220) (10,140) (9,914) (8,130) (10,507) (10,086) (11,235) (11,763) (33,084) (40,078)

Trade Deficit

Source: RBI, PL Research

3.6 2.8 4.7 4.4 17.7 19.5 28.1 45.8 43.3 52.4 64.9 78.2 98.9 98.3 95.4 92.9 89.4

97.7 96.0 100.2 108.2 116.3 119.6

144.3 178.6 181.2

208.5 241.0

267.6 301.4 304.5 307.0 333.1 351.2

0

100

200

300

400

500

2000

-01

2001

-02

20

02

-03

20

03

-04

20

04

-05

2005

-06

2006

-07

20

07

-08

20

08

-09

20

09

-10

2010

-11

2011

-12

20

12

-13

Jun

-13

Sep

-13

Dec

-13

Mar

-14

(US$

bn

)

Short Term Debt Long Term Debt

LilladherPrabhudas Monsoon- Delayed, and Sowing gathers

momentum

Source: IMD

Monsoon Deficiency now at 18%...down from 43% last month

8/18/2014 6

• Though the rainfall was deficient in June, rains picked up smartly in July and the sowing has improved considerably. Overall sowing is down by only 7-8% YoY. When compared to 9th August, 2013 sowing is more or less on similar lines.

• The sowing of cotton has seen an improvement when compared to the last two years, as the farmers seemed to have shifted to cotton as it requires less water.

• Monsoon deficiency is now down to 18% YoY. Rainfall momentum has been strong in the last 20-25 days and overall deficiency which was 43% last month is now down to 18% YoY. North India (Punjab, Haryana, UP) and parts of Maharashtra still remain deficient. Note that even if rains are lower, Punjab & Haryana won’t be impacted much as they are less dependent on monsoon.

Source: Ministry of Agriculture

Crop Acreages

Crops 8-Aug-14 2-Aug-14 YoY 16-Aug-13 9-Aug-12

Rice 267.30 238.90 11.90% 304.60 264.40

Pulses 76.10 79.50 -4.30% 93.30 74.50

Coarse cereals 140.20 163.10 -14.10% 181.50 140.90

Oilseeds 152.20 173.20 -12.10% 183.40 151.80

Sugarcane 47.20 48.50 -2.80% 48.50 52.90

Cotton 112.20 108.50 3.40% 110.90 109.20

Jute/Mesta 7.80 8.30 -6.00% 8.30 8.40

Total sown area 803.00 820.00 -2.10% 930.50 802.10

LilladherPrabhudas Inflation, still running ahead of comfort zone

• CPI Inflation, though corrected at 7.96%, still continues to remain above the comfort zone. The same has increased in the last one month. The higher prices of Increase in prices of cereals and vegetables have been one of the key factor for increasing CPI.

• 10yr. G-Sec Yield trading at 8.56% off from the high levels earlier.

• GDP growth continued to lag at 4.6% in Q4FY14 and we expect an improvement in GDP growth to 5.4% in FY15.

Source: Bloomberg, PL Research


CPI Inflation

GDP Growth YoY (Quarterly)


10yr. G-Sec Yield & Liquidity

8/18/2014 7

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

Jan

-12

Feb

-12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-

12A

ug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan

-13

Feb

-13

Mar

-13

Apr

-13

Ma

y-1

3Ju

n-1

3Ju

l-13

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan

-14

Feb

-14

Ma

r-1

4A

pr-1

4M

ay-1

4Ju

n-1

4Ju

l-14

(%)

-

2.0

4.0

6.0

8.0

10.0 (2,500)(2,000)(1,500)(1,000)

(500)-

500 1,000 1,500 2,000

Mar

-09

Aug

-09

Jan

-10

Jun

-10

Nov

-10

Apr

-11

Sep

-11

Feb

-12

Jul-

12

Dec

-12

May

-13

Oct

-13

Mar

-14

Au

g-1

4Liquidity (Rs bn) 10yr. G-Sec Yield (%) (RHS)

0

2

4

6

8

10

12

Jun

-05

Sep

-05

Dec

-05

Mar

-06

Jun

-06

Sep

-06

De

c-0

6M

ar-

07

Jun

-07

Sep

-07

Dec

-07

Mar

-08

Jun

-08

Sep

-08

De

c-0

8M

ar-

09

Jun

-09

Sep

-09

Dec

-09

Mar

-10

Jun

-10

Sep

-10

De

c-1

0M

ar-

11

Jun

-11

Sep

-11

Dec

-11

Mar

-12

Jun

-12

Sep

-12

Dec

-12

Ma

r-1

3Ju

n-1

3Se

p-1

3D

ec-1

3M

ar-1

4Ju

n-1

4

(%)

LilladherPrabhudas Global Equity – Expectations mellowing down

• MoM: Indian market continue to perform well and has been in the positive territory in the last one month. In the calendar YTD, most markets except Europe and Japan have given positive returns. The worries on the Russian – Ukraine stand off have resulted in the sharp fall in the Russian market, while the Japanese economic performance continues to pull down the Japanese market.

• YoY: India still continue to be the star performer of the year on a YoY basis, on the back of strong election mandate and expectations of a revival in the global economy.



Month-on-Month

Year-on-Year


Calendar Year-to-date

8/18/2014 8

8.7

6.1

2.8 2.5 2.0 1.6

(0.2) (0.5) (0.8) (1.3) (2.1)

(5.0)

(8.5)(10.0)(8.0)(6.0)(4.0)(2.0)

-2.0 4.0 6.0 8.0

10.0

Ch

ina

Hon

g Ko

ng

Bra

zil

S.Ko

rea

Ind

ia

Ind

on

esi

a

Japa

n

Aus

tral

ia

FTSE

S&

P

USA

Ger

man

y

Rus

sia

(%)

5.1 5.7 9.4

1.4

20.5 19.6

(7.1)

2.0

(1.7)

5.1

0.1

(3.9)

(8.8)(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

Chin

a

Hon

g Ko

ng

Bra

zil

S.Ko

rea

Ind

ia

Ind

on

esi

a

Japa

n

Aus

tral

ia

FTSE

S&

P

USA

Ger

man

y

Rus

sia

(%)

8.4

13.0 13.0 8.4

35.8

10.2 11.1 7.9

0.8

14.8

7.6 10.1

(0.7)(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Ch

ina

Hon

g Ko

ng

Bra

zil

S.Ko

rea

Ind

ia

Ind

on

esi

a

Japa

n

Aus

tral

ia

FTSE

S&

P

USA

Ger

man

y

Rus

sia

(%)

LilladherPrabhudas Defensives do better in last one month- Fatigue

catching up with cyclical • MoM: Autos, IT, Healthcare and Bankex were the

biggest gainers in the last one month, while capital goods, power and realty underperformed. A level of fatigue is slowly getting into some of the capital goods and cyclical on account of the strong stock performance while the corporate performance heave left much to be desired.

• YoY: On a YoY basis, Autos, Bankex, Metals and Capital goods have been the best performers, while FMCG was the biggest underperformer.



Month-on-Month

Year-on-Year



8/18/2014 9

5.3 4.4

3.4 2.7 2.4 2.3

1.0

(0.8)

(2.6)(3.7)

(4.6)(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

(%)

56.2

31.2 37.7

51.7

8.5

37.8

83.5

25.9

48.6 44.7

89.9

-10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

100.0

(%)

30.2

7.9

21.7

30.7

7.9

46.7

26.2

19.0

29.5

20.5

39.2

-5.0

10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

(%)

LilladherPrabhudas Small and mid caps underperforms

• MoM: The huge run up in the small and mid caps in the first seven months of the year has started getting out of steam. The volatility in the small caps have increased and so has been the case with many in the cyclicals.

• YoY: The volatility in the small and mid caps have increased and we believe many have run ahead of the fundamentals. There is a need to exercise caution in many of the small caps.



Month-on-Month

Year-on-Year



8/18/2014 10

2.2 2.2 2.1

1.5

-

0.5

1.0

1.5

2.0

2.5

BSE100 Index BSESMCAP Index BSE500 Index BSEMDCAP Index

(%)

39.0

89.2

43.0

66.6

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0


(%)

21.7

51.2

24.0

34.4

-

10.0

20.0

30.0

40.0

50.0

60.0


(%)

LilladherPrabhudas Global Currencies- Weak Russian Ruble

• MoM: Ruble has been the biggest loser during the month as well as from Calendar year till date.

• YoY: On YoY basis, CAD affected economies like Turkey and Indonesia continues to be the bigger losers.



Month-on-Month

Year-on-Year



8/18/2014 11

0.8 0.5 0.2

(0.2)(0.4)(0.7)(0.8)(0.8)(1.1)(1.4)(1.6)(1.6)(1.6)(1.9)(1.9)(2.0)

(2.5)

(4.9)(6.0)

(5.0)

(4.0)

(3.0)

(2.0)

(1.0)

-

1.0

2.0

(%)

(1.6)(1.5)

1.9

(0.7)

2.5 1.2

4.2 3.1

1.8

3.9

(1.5)(0.2)

(2.6)

1.4

(2.9)

1.0

3.7

(8.7)(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

(%)

(0.5)

(7.2)

(2.6)(0.2)

1.6

(0.4)

(11.9)

(5.1)

8.0

1.3 2.2

(10.6)

0.7

8.6

(5.8)

0.2 0.4

(8.3)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

(%)

LilladherPrabhudas India: Strong FII Equity Flows continues

• FIIs have continued to pump in money reflected by the strong inflows reflected in the INR116.14bn inflows in May 2014.

• DIIs have seen the selling reduce considerably.

8/18/2014 12

(200.00)

(100.00)

-

100.00

200.00

300.00 Ja

n-1

2Fe

b-1

2M

ar-1

2A

pr-1

2M

ay-1

2Ju

n-1

2Ju

l-12

Aug

-12

Sep

-12

Oct

-12

Nov

-12

De

c-1

2Ja

n-1

3Fe

b-1

3M

ar-1

3A

pr-1

3M

ay-1

3Ju

n-1

3Ju

l-13

Aug

-13

Sep

-13

Oct

-13

No

v-1

3D

ec-

13

Jan

-14

Feb

-14

Mar

-14

Apr

-14

Ma

y-1

4Ju

n-1

4Ju

l-14

DII Net Cash Market FII Net Cash Market

CY13 - Total FII buying Rs1,112.77bn against DII net

selling at Rs-734.64bn

YTD CY14

FII Rs711.34bn

DII Rs-337.98bn

LilladherPrabhudas Global Agricultural Commodities

• Wheat prices increased last month due to concerns over crops in Europe and Ukraine.

• Corn prices declined post the release of USDA world agricultural supply and demand estimates which projected higher ending stocks for corn, both from higher production and yields.

• Rice prices declined due to expectations on higher supplies

• Higher production coupled with lower consumption have resulted into decline in palm oil prices.


Source: Bloomberg, PL Research *Price in US$

Performance of Global Agricultural Commodities

Year-on-Year Performance


Month-on-Month Performance

8/18/2014 13

60

70

80

90

100

110

120

130

140

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Apr

-14

Ma

y-1

4

Jun-

14

Jul-

14

Aug

-14

Rice Wheat Corn Soya Plam Oil Sugar

5.2

1.0

(4.3)(4.7) (4.9) (5.1)(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

Wheat Soya Rice Corn Sugar Palm Oil

(%)

(17.8)

(6.6)

(17.8)

(25.2)

(7.6)

2.2

(30.0)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

Wheat Soya Rice Corn Sugar Palm Oil

(%)

LilladherPrabhudas Global Industrial Commodities

• Aluminium remained best performer of the month on the back of strong demand from the US and steep production cut, while Nickel has corrected.

• CYTD: Nickel continues to be the best performer both from YTD and CYTD.



Month-on-Month

Year-on-Year



8/18/2014 14

5.6

2.2

0.4

(1.3) (1.8) (1.9)

(6.2)(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

Aluminium Lead Zinc Brent

crude

Copper Thermal

Coal

Nickel

(%)

12.5

5.2

24.9

(3.1) (2.1)

(9.5)

29.6

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Aluminium Lead Zinc Brent crude

Copper Thermal Coal

Nickel

(%)

15.1

2.1

10.5

(5.8) (4.9)

(18.6)

33.6

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

Aluminium Lead Zinc Brent crude

Copper Thermal Coal

Nickel

(%)

LilladherPrabhudas Global growth – The key catalyst

Sources : Bloomberg

• Improved growth estimates in the US and challenging times in the Euro area are the key. Strong job openings in the US, the highest in the last 13 years has spelt good for the economic environment in the second half. The US is expected to have a GDP growth of around 2.2% for CY14.

• The Euro zone is seeing increased challenges with the German investment confidence at their lowest levels since 2012. The geo political concerns between Russia and Ukraine continue to create ripples across some of the markets,

• El Niño, the weather pattern which causes floods in some parts of the world and drought in other parts is expected to return in mid-2014. Though initially it was envisaged to be a rare possibility, weather forecasters are expecting that there is a 75% chance that El Nino may return.

• The Chinese GDP growth is expected to remain subdued at 7.5%. This has resulted in the global commodity prices remaining subdued. The base commodities have seen a fall across the spectrum, however, this could augur well for a low global inflation.

• The equity markets continue to be in a bullish tone with the Indian markets reaching an all-time high thanks to a strong electoral mandate and the feel good factor and the business confidence is back. The businesses have started seeing the benefit of the improvement in confidence. However, we believe that we may start to see the benefit only towards the end of Q3FY15. With the global liquidity continuing to remain easy, the flows into emerging markets may depend more on risk premia.

World Equity Indices:

8/18/2014 15

Index Country Value YTD (%) 1 Week (%) 1 Mth (%) 3 Mth (%)

Dow Jones USA 16,663 0.52 0.66 (2.56) 1.04

S&P 500 USA 1,955 5.77 1.22 (1.17) 4.11

Nasdaq USA 4,465 6.90 2.15 0.74 9.15

FTSE 100 LONDON 6,734 (0.22) 1.53 (0.22) (1.77)

DAX GERMANY 9,222 (3.45) 0.45 (5.12) (4.23)

CAC 40 FRANCE 4,220 (1.76) 0.53 (2.66) (5.30)

Nikkei JAPAN 15,323 (5.95) 1.27 0.70 8.70

TSX CANADA 15,304 12.35 0.71 0.25 5.44

MICEX RUSSIA 1,421 (5.51) 3.55 (0.09) 2.08

JSE SA 46,366 11.77 (0.02) (0.41) 5.19

SGX SA 7,874 24.91 4.04 4.62 10.54

TING TURKEY 94,059 14.08 (0.91) (7.26) 2.23

IBOV BRAZIL 56,964 10.59 2.50 (0.09) 5.54

Jakarta Comp INDONESIA 5,157 20.65 0.85 1.37 2.49

PSEI Phill ipine PHILIPPINES 7,028 19.32 1.02 2.55 3.08

SE THAI 50 THAILAND 1,036 17.22 1.35 0.52 8.37

Euro Stoxx EUROZONE 3,066 (1.38) 0.61 (3.10) (3.36)

IBEX 35 SPAIN 10,325 4.11 1.29 (1.92) (1.47)

Hang Seng HONG KONG 24,955 7.08 1.26 6.40 9.87

AS30 AUSTRALIA 5,581 4.25 2.41 1.11 2.23

Shanghai CHINA 2,239 5.84 0.67 8.76 10.51

Taiwan TAIWAN 9,141 6.15 (0.34) (2.76) 2.84

Kospi KOREA 2,053 2.08 1.08 2.01 2.14

CNX Nifty INDIA 7,874 24.91 4.04 4.62 10.54

BSE Sensex INDIA 26,391 24.66 4.19 4.61 10.40

KLCI MALAYSIA 1,862 (0.28) 0.67 (0.60) (1.15)

NZX 50 NEWZEALAND 5,071 7.05 0.43 (0.74) (2.22)

MEXBOL MEXICO 44,629 4.45 1.19 0.79 6.52

LilladherPrabhudas Nifty Valuations: Historic Trends


Nifty 1-year forward P/E


MSCI India Premium to MSCI Asia (Ex‐Japan)

8/18/2014 16

15.5

5.0

10.0

15.0

20.0

25.0

30.0

Aug

-04

Nov

-04

Feb

-05

May

-05

Aug

-05

Nov

-05

Feb

-06

May

-06

Aug

-06

Nov

-06

Feb

-07

May

-07

Aug

-07

Nov

-07

Feb

-08

May

-08

Au

g-0

8

No

v-0

8

Feb

-09

Ma

y-0

9

Au

g-0

9

No

v-0

9

Feb

-10

Ma

y-1

0

Au

g-1

0

No

v-1

0

Feb

-11

Ma

y-1

1

Au

g-1

1

No

v-1

1

Feb

-12

Ma

y-1

2

Au

g-1

2

No

v-1

2

Feb

-13

Ma

y-1

3

Au

g-1

3

No

v-1

3

Feb

-14

Ma

y-1

4

Au

g-1

4

Average

14.8

20%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Au

g-0

4

No

v-0

4

Feb

-05

May

-05

Au

g-0

5

Nov

-05

Feb

-06

May

-06

Aug

-06

Nov

-06

Feb

-07

May

-07

Au

g-0

7

No

v-0

7

Feb

-08

May

-08

Au

g-0

8

No

v-0

8

Feb

-09

May

-09

Aug

-09

Nov

-09

Feb

-10

May

-10

Au

g-1

0

No

v-1

0

Feb

-11

May

-11

Au

g-1

1

No

v-1

1

Feb

-12

May

-12

Au

g-1

2

Nov

-12

Feb

-13

May

-13

Aug

-13

Nov

-13

Feb

-14

May

-14

Au

g-1

4

10 year Avg.23%

LilladherPrabhudas Indian Market – Valuation and Strategy

• NIFTY valuations: We estimate the free-float EPS for NIFTY companies in FY15 and FY16 at Rs460.2 and Rs542.6 respectively,

representing a YoY growth of 16.3% and 17.9% respectively. Auto 20.1% and 15.8%, FMCG at 19.1% and 20.5%, Banking &

Financial Services at 21.6% and 24.3% is expected to lead the growth in earnings in FY15 and FY16.

• NIFTY at 7,874 is currently trading at 16.3x FY15E and 17.9x FY16E estimated free-float earnings. The last ten-year average for

NIFTY’s one-year forward PE is at 14.8x. Thus, NIFTY is currently trading at 15.5x one-year forward earnings (EPS for year-ending

March 2015 is Rs460.2) i.e. at a slight premium to its last 10-years average of one-year forward multiple.

• The chart on Page 16 indicates MSCI India’s premium to MSCI Asia (excluding Japan) over the last ten years. The average of the last

10-year’s premium is at 23% and the current premium is at 20%, indicating a that the markets valuations and outperformance

reflect the optimism seen. We expect to see a revision in earnings estimate to be effected towards the 3QFY15.

• The business confidence is back and we expect this to result in strong earnings growth going forward. Accordingly we had added,

quality cyclical companies in our top picks in our report dated 19 May 2014. The stocks have had a huge out performance and we

feel that some have already priced ahead of the fundamentals. However, we continue to believe that given the optimism in the

economy, the financials will have a good run. Given this, we recommend that we continue the overweight position in the Financial

Services, Autos and Capital goods and Engineering, while remaining Neutral in IT and remaining underweight in Healthcare and

FMCG sectors.

• We have made a few changes in our top picks. While we have removed ITC ( continued pressure from taxes on cigarettes affecting

the bottom-line) , Britannia (recent strong outperformance), ING Vysya (asset quality issues) and Engineers India (Delayed order

flow from Barmer) from the top picks, we have added Tata Chemicals, Tech Mahindra and Bank of Baroda in the top picks.

• In our report dated July 08, 2014, we had revised our trading range for the market to be between 7100-8200 levels for the next

three months and we continue to believe that the market is likely to trade in this range for the next three months as well. We

maintain our Nifty trading range at 7100-8200 levels. We believe that the effect of all the policy initiatives will start to reflect in the

corporate performance towards the end of Q2FY15 onwards and the market will start its new direction only from then on and to

anew high. We also maintain our sector weights recommended in our report dated May 19, 2014. Our view is that there is a

deluge of capital raising and this could cap the upside in the near term.

8/18/2014 17

LilladherPrabhudas Nifty Valuation

8/18/2014 18

Note: Telecom Nos. are Bloomberg Consensus / Sector Weightages are updated as on August 18, 2014

Weight-

age (%)FY13 FY14 FY15E FY16E

Weight-

age (%)FY13 FY14 FY15E FY16E

Banking & Fin. 28.5% Cement 3.0%

PER (x) 17.6 17.5 14.4 11.5 PER (x) 20.4 24.1 24.3 18.9

PAT Growth (%) 15.0 0.8 21.6 24.3 PAT Growth (%) 29.2 (15.5) (0.5) 28.5

Technology 15.9% Telecom 2.0%

PER (x) 28.3 21.7 18.2 15.9 PER (x) 65.2 53.5 27.8 21.6

PAT Growth (%) 24.3 30.2 19.3 14.9 PAT Growth (%) (46.6) 21.8 92.5 28.9

Oil & Gas 11.0% Real Estate 0.3%

PER (x) 12.8 11.6 10.8 9.7 PER (x) 49.9 55.0 39.6 27.2

PAT Growth (%) 3.9 10.6 7.9 10.4 PAT Growth (%) (40.7) (9.2) 39.0 45.4

FMCG 11.0% Nifty as on Aug 18 7,874

PER (x) 44.2 38.9 32.7 27.1

PAT Growth (%) 18.5 13.5 19.1 20.5 EPS (Rs) - Free Float 355.7 395.6 460.2 542.6

Growth (%) 1.3 11.2 16.3 17.9

Auto 9.2% PER (x) 22.1 19.9 17.1 14.5

PER (x) 19.7 15.5 12.9 11.2

PAT Growth (%) (7.1) 27.0 20.1 15.8 EPS (Rs) - Free Float

Nifty Cons. 355.7 395.6 465.2 546.7

Pharma 5.5% Var. (PLe v/s Cons.) (%) - - (1.1) (0.8)

PER (x) 36.4 26.3 25.7 22.5

PAT Growth (%) 1.6 38.5 2.0 14.5

Sensex as on Aug 18 26,391

Metals 5.4%

PER (x) 14.8 14.1 12.0 10.0 EPS (Rs) - Free Float 1,126.0 1,241.6 1,459.0 1,709.0

PAT Growth (%) (2.1) 5.5 17.4 19.4 Growth (%) (1.8) 10.3 17.5 17.1

PER (x) 23.4 21.3 18.1 15.4

Eng. & Power 8.3%

PER (x) 14.5 16.7 16.1 14.3 Sensex Cons. 1,126.0 1,241.6 1,445.4 1,697.5

PAT Growth (%) 17.5 (12.9) 3.6 12.2 Var. (PLe v/s Cons.) (%) - - 0.9 0.7

LilladherPrabhudas Top Pick Summary

8/18/2014 19

2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E

Large Cap

Infosys 3,560 4,040 13.5% 2,036.2 7.4 12.7 14.8 11.4 22.4 24.4 23.5 22.3 16.7 14.9 4.3 3.6

HDFC Bank 832 925 11.1% 1,996.8 21.7 17.9 24.4 23.6 23.0 21.3 2.0 2.1 18.9 15.3 4.6 3.9

State Bank of India 2,421 3,000 23.9% 1,807.8 14.0 14.9 35.1 33.6 14.3 10.1 0.7 0.8 9.7 7.3 1.2 1.1

Larsen & Toubro 1,516 1,813 19.6% 1,392.5 12.2 15.0 4.8 18.4 15.5 15.7 12.7 13.7 27.1 22.9 4.2 3.7

Wipro 548 680 24.2% 1,350.5 12.6 11.7 13.2 16.1 22.9 25.0 22.6 22.1 15.2 13.1 3.9 3.3

Axis Bank 395 440 11.5% 927.2 13.9 15.9 13.7 20.2 17.9 17.4 1.7 1.7 13.1 10.9 2.4 2.1

Maruti Suzuki 2,704 2,816 4.2% 816.7 13.3 19.4 23.1 34.2 14.4 15.7 15.1 14.9 23.8 17.8 3.9 3.3

Tech Mahindra 2,203 2,350 6.7% 517.6 16.2 13.6 7.3 17.7 28.0 42.2 26.3 24.6 15.6 13.3 5.6 4.3

Dr.Reddy's Laboratories 2,774 3,023 9.0% 471.9 10.1 8.2 1.8 12.6 21.5 27.8 16.8 17.5 20.3 18.0 5.2 4.3

Bank of Baroda 886 1,000 12.8% 381.7 21.2 15.2 15.0 24.3 15.7 13.8 0.7 0.8 7.3 5.9 1.1 1.0

Motherson Sumi Systems 351 372 5.9% 309.6 18.2 18.0 21.6 42.7 37.0 36.2 19.3 23.9 26.7 18.7 10.5 8.1

ACC 1,509 1,653 9.5% 283.6 7.0 16.7 16.8 46.4 18.0 11.9 13.5 18.5 27.0 18.4 3.6 3.5

Zee Entertainment Enterprises 280 330 17.7% 269.2 12.1 16.0 9.1 23.6 21.1 20.6 24.8 27.6 27.7 22.4 5.7 5.1

Mid Caps

Aurobindo Pharma 776 874 12.5% 226.3 46.0 14.4 34.4 12.4 33.3 43.3 24.3 23.6 12.2 10.9 6.0 4.3

Cummins India 684 745 9.0% 189.6 10.9 17.0 11.9 20.3 27.5 24.3 25.2 27.2 28.1 23.4 7.4 6.9

UPL 325 400 23.2% 139.2 12.3 12.1 14.2 18.0 21.1 21.5 15.5 16.3 11.5 9.7 2.7 2.2

Federal Bank 119 140 17.7% 101.7 8.5 16.5 12.1 20.5 14.0 12.6 1.2 1.2 10.8 9.0 1.5 1.3

Tata Chemicals 374 430 14.9% 95.3 3.5 6.1 64.1 21.9 14.3 7.5 7.8 8.8 12.9 10.6 1.7 1.6

The Ramco Cements 299 350 16.8% 71.2 17.7 18.5 205.0 73.7 18.0 4.1 7.6 11.1 23.3 13.4 2.9 2.6

Dish TV India 58 72 23.5% 62.1 10.5 14.2 NA NA NA 67.3 10.5 26.0 NA 42.6 NA NA

P.I. Industries 415 460 11.0% 56.4 19.8 22.2 29.4 30.4 30.5 30.3 35.5 36.9 23.5 18.0 8.1 6.3

JK Lakshmi Cement 277 322 16.3% 32.6 23.6 31.4 82.9 32.4 18.4 9.1 8.7 11.2 15.2 11.4 2.5 2.2

KPIT Technologies 153 200 30.4% 28.5 9.9 13.3 5.2 26.4 20.2 21.5 17.8 18.9 10.9 8.6 2.2 1.9

RoE (%)Upside

Mcap

(Rs bn)

RoCE (%)CMP (Rs.) TP (Rs)

Revenue Growth (%) Earnings Growth (%) PER (x) P/BV (x)

LilladherPrabhudas

LARGE CAP

8/18/2014 20

LilladherPrabhudas Infosys

CMP: Rs3,560 TP: Rs4,040 Rating: BUY MCap: Rs2,036.2bn

Margin upgrades likely, Revenue to stay put: Revenue growth of 2% (1.5%@cc) QoQ was just short of expectation (Cons.: 2.2%, PLe: 2.5%). The beat to the EBIT margin was ahead of expectation even after adjusting for change in depreciation. Management continues to expect flattish margin for FY15 (YoY). We expect cost optimization to drive earnings upside in FY15.

Attrition high – Efforts to bear fruit with a lag: Infosys is seeing high attrition in the 0-3yrs experience bucket in-line with our expectation (Ref: “Attrition: HR faux-pas or Stumbling growth?”, May 23, 2014). Management has taken efforts to curb rising attrition by taking the following steps: 1) Improving compensation predictability i.e. returning to regular wage cycle 2) Awarding quarterly promotion to retain talent 3) Fast track career progression for high performers 4) Reducing variable pay for 0-3 yrs experience. We see these efforts as a move in the right direction; however, attrition is likely to spiral down with a lag. We anticipate attrition to spiral down in H2FY15.

Efforts to sharpen sales team: Infosys continues with their effort to sharpen the sales team. According to the management, the count declined due to involuntary attrition in H2FY14. The company is likely to hire 300 (172 joined) sales professionals from top 41 universities across the world. Moreover, they have shifted 150 professionals to account management role from production roles. We see more new strategic initiatives to prioritize investments in “Sales & Marketing” under the new leadership of Dr. Vishal Sikka.

Valuation & Recommendation – Retain ‘BUY’, revise TP to Rs4,040: We expect new strategic initiatives to be announced by Infosys under the new leadership of Dr. Vishal Sikka. However, in the near term, we see more tailwinds for margins to be played out in FY15. We see no downside risks to our estimates. We revise our target price to Rs4,040 (from: Rs 3,920), 17x FY16e earnings estimate.

8/18/2014 21

Key Financials (Rs m)

Y/e March FY12 FY13 FY14E FY15E FY16E

Revenue (Rs m) 337,340 403,520 501,330 538,365 606,727

Growth (%) 22.7 19.6 24.2 7.4 12.7

EBITDA (Rs m) 107,160 115,580 134,150 148,033 164,344

PAT (Rs m) 83,160 94,210 106,480 122,265 136,236

EPS (Rs) 145.4 164.7 186.2 213.7 238.2

Growth (%) 21.9 13.3 13.0 14.8 11.4

Net DPS (Rs) 40.7 54.6 54.9 64.9 69.9

Source: Company Data, PL Research

Profitability & valuation


EBITDA margin (%) 31.8 28.6 26.8 27.5 27.1

RoE (%) 27.4 25.7 24.4 23.6 22.4

RoCE (%) 27.2 25.6 24.3 23.5 22.3

EV / sales (x) 5.4 4.5 3.5 3.2 2.7

EV / EBITDA (x) 17.1 15.7 13.2 11.7 10.1

PER (x) 24.5 21.6 19.1 16.7 14.9

P / BV (x) 6.1 5.1 4.3 3.6 3.1

Net dividend yield (%) 1.1 1.5 1.5 1.8 2.0


Stock Performance

(%) 1M 6M 12M

Absolute 9.5 (3.3) 19.5

Relative to Sensex 4.9 (32.9) (16.7)

LilladherPrabhudas Financials

Infosys

8/18/2014 22

Income Statement (Rs m)


Net Revenue 337,340 403,520 501,330 538,365 606,727

Direct Expenses 188,710 241,510 307,670 324,928 368,905

% of Net Sales 55.9 59.9 61.4 60.4 60.8

Employee Cost - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 41,470 46,430 59,510 65,404 73,478

% of Net Sales 12.3 11.5 11.9 12.1 12.1

Other Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 107,160 115,580 134,150 148,033 164,344

Margin (%) 31.8 28.6 26.8 27.5 27.1

Depreciation 9,370 11,290 13,740 9,762 10,864

PBIT 97,790 104,290 120,410 138,271 153,480

Interest Expenses - - - - -

PBT 116,830 127,880 147,100 168,641 186,625

Total tax 33,670 33,670 40,620 46,376 50,389

Effective Tax rate (%) 28.8 26.3 27.6 27.5 27.0

PAT 83,160 94,210 106,480 122,265 136,236

Extraordinary Gain/(Loss) - - - - -

Adjusted PAT 83,160 94,210 106,480 122,265 136,236


Balance Sheet (Rs m)


Share Capital 2,860 2,860 2,860 2,860 2,860

Reserves & Surplus 300,860 364,210 441,540 526,678 622,932

Shareholder's Fund 334,610 397,970 475,300 560,438 656,692

Preference Share Capital - - - - -

Total Debt - - - - -

Other Liabilities(net) 1,090 1,490 3,230 3,230 3,230

Deferred Tax Liability 120 1,190 640 640 640

Total Liabilities 335,820 400,650 479,170 564,308 660,562

Gross Block 90,300 106,760 134,120 156,193 181,069

Less: Depreciation 36,210 42,080 55,250 65,012 75,876

Net Block 54,090 64,680 78,870 91,181 105,193

Capital Work in Progress - - - - -

Cash & Cash Equivalent 209,680 235,710 292,210 335,124 403,612

Total Current Assets 298,690 335,740 397,480 472,036 562,062

Total Current Liabilities 47,660 62,860 91,380 93,109 100,893

Net Current Assets 251,030 272,880 306,100 378,927 461,169

Other Assets 26,930 45,700 61,490 61,490 61,490

Total Assets 335,820 400,650 479,170 564,308 660,562


LilladherPrabhudas HDFC Bank

CMP: Rs832 TP: Rs925 Rating: BUY MCap: Rs1,996.8bn

Underlying macros remain challenging impacting financials but we see

limited risks to earnings growth as the bank sweats out its branches

further and credit costs will get cushioned by floating buffer. Improving

growth prospects with intended capital raising to strengthen balance

sheet and will improve revenue momentum, going ahead, which more

than justifies assigning historic premium multiple (3.6x Mar-16 book).

PPOP performance still better among peers: HDFCB in Q1FY15 delivered

~16% PPOP growth on sluggish other income but offset by stable margins

and lower opex growth. Fee income suffered from cut in fees-margins on

discontinued products from regulatory front or structural front but

management believes fee income should be supported from other retail

products. Opex growth at 5% YoY has been on tactical cost control and

with operating leverage from branches kicking in. PPOP performance will

be in some pressure in FY15 but will be still better among peers.

Some asset quality disappointment but not worried: On absolute basis,

slippages increased in Q1FY15 slightly contributed from Agri (some

seasonality), SME and CV/CE & other retail book. Credit costs were at 63

bps v/s 38 bps in Q4FY14 on provision to un-hedged forex exposures.

Despite drawdown of Rs750m for specific provisions, floating provisions of

Rs17.6bn provides certainty of low credit costs even in FY15/16.

Intended capital raise to strengthen B/s and improve ratios: Though

profit growth levels have moderated, RORWAs have inched to an all-time

high of +2.6% on improved operating leverage. With intended capital raise,

balance sheet will strengthen and improve RoAs further as revenue

momentum will start picking up and opex costs increase will be gradual.

Hence, higher RORWAs/ROEs will help sustain premium valuations. We

maintain ‘BUY’ with PT of Rs925/share. Risk to our call is an overhang on

FIPB approval for further FII share purchase which has been pending for

long time now.

8/18/2014 23


Y/e March FY12 FY13 FY14 FY15E FY16E

Net interest income 128,846 158,111 184,826 224,953 265,254

Growth (%) 22.2 22.7 16.9 21.7 17.9

Operating profit 93,906 114,276 143,601 180,818 218,226

PAT 51,671 64,749 84,784 105,431 130,338

EPS (Rs) 22.0 27.2 35.3 43.9 54.3

Growth (%) 30.4 23.6 29.9 24.4 23.6

Net DPS (Rs) 4.3 5.5 6.9 8.5 10.5




NIM (%) 72.9 72.3 77.7 80.4 82.3

RoAE (%) 18.7 19.6 21.3 22.2 23.0

RoAA (%) 1.7 1.8 1.9 2.0 2.1

P / BV (x) 6.5 5.5 4.6 3.9 3.2

P / ABV (x) 6.6 5.5 4.7 3.9 3.3

PE (x) 37.8 30.6 23.6 18.9 15.3



Stock Performance

(%) 1M 6M 12M

Absolute (0.0) 26.0 41.6

Relative to Sensex (4.6) (3.5) 5.3


HDFC Bank

8/18/2014 24



Int. Earned from Adv. 211,244 268,224 316,869 397,440 475,478

Int. Earned from Invt. 65,046 78,203 90,368 100,330 115,851

Others - - - - -

Total Interest Income 278,742 350,649 411,355 501,999 595,692

Interest expense 149,896 192,538 226,529 277,046 330,438

NII 128,846 158,111 184,826 224,953 265,254

Growth (%) 22.2 22.7 16.9 21.7 17.9

Treasury Income (1,944) 1,602 1,138 2,500 2,800

NTNII 59,780 66,924 78,059 91,281 110,480

Non Interest Income 57,836 68,526 79,196 93,781 113,280

Total Income 336,578 419,175 490,552 595,780 708,972

Growth (%) 38.7 24.5 17.0 21.5 19.0

Operating Expense 92,776 112,361 120,422 137,916 160,308

Operating Profit 93,906 114,276 143,601 180,818 218,226

Growth (%) 21.6 21.7 25.7 25.9 20.7

NPA Provisions 12,428 13,579 18,539 20,258 19,490

Investment Provisions - 522 (41) - -

Total Provisions 18,774 16,764 15,873 21,985 21,870

PBT 75,132 97,512 127,728 158,833 196,356

Tax Provisions 23,461 32,764 42,944 53,402 66,018

Effective Tax Rate (%) 31.2 33.6 33.6 33.6 33.6

PAT 51,671 64,749 84,784 105,431 130,338

Growth (%) 31.6 25.3 30.9 24.4 23.6




Par Value 2 2 2 2 3

No. of equity shares 2,347 2,379 2,399 2,399 1,599

Equity 4,693 4,759 4,798 4,798 4,798

Networth 299,244 362,141 434,786 516,307 617,087

Adj. Networth 295,720 357,452 426,586 506,177 606,799

Deposits 2,467,064 2,962,470 3,673,375 4,316,636 5,277,582

Growth (%) 18.3 20.1 24.0 17.5 22.3

Low Cost deposits 1,194,059 1,405,215 1,646,214 1,924,180 2,378,918

% of total deposits 48.4 47.4 44.8 44.6 45.1

Total Liabilities 3,379,093 4,003,320 4,915,996 5,764,739 6,941,851

Net Advances 1,954,200 2,397,206 3,030,003 3,605,703 4,398,958

Growth (%) 22.2 22.7 26.4 19.0 22.0

Investments 974,829 1,116,136 1,209,511 1,383,324 1,634,079

Total Assets 3,379,098 4,003,325 4,916,001 5,764,739 6,941,851


LilladherPrabhudas State Bank of India

CMP: Rs2,421 TP: 3,000 Rating: BUY MCap: Rs1,807.8bn

SBI’s asset quality has improved on some ARC sales and better

recoveries, though slippages are still high but overall stress seems to be

diminishing bringing stability to asset quality. Opex efficiencies are now

kicking in on measures of correction in overheads and also is best placed

on pension and wage provisions which will keep Opex growth lowest

among peers.

Opex efficiency supported PPOP performance: SBI’s PPOP grew ~16% YoY

in Q1FY15 on better opex efficiency as Bank made corrective adjustments

to overheads, and employee expenses remained flattish even after

providing additional pension provisions and wage hike provisions. Margins

dipped marginally by 4bps QoQ due to lower overseas margins (down

34bps QoQ) as recent bond raising was deployed in short-term yielding

loans. Management indicated improvement in international NIMs and with

lower interest reversals in FY15, indicating that maintaining margins at

current level will not be a challenge.

Asset quality – Some ARC sales but also better recovery: Slippages did

inch up to 3.2% in Q1FY15 from 2.7% seen in Q4FY14 on stress from mid-

corporate segment and Agri segment. Management has indicated overall

stress to be diminishing. ARC sales of Rs67bn were indeed large, of which,

Rs56bn were from NPAs. The Bank has also provided Rs0.9bn on

provisions shortfall on consideration of sale to ARC. The Bank restructured

loans of Rs57bn in Q1FY15.

Stabilizing asset quality and Opex efficiency leads to upgrade in rating

from ‘Accumulate’ to ‘BUY’: Asset quality has stabilized with better

recovery & upgrade trends though slippages have been high but we expect

them to move down in H2FY15. We have been maintaining our view that

SBI is best placed on provisions and less net additions to staff will keep

employee expenses under check which will result in lowest Opex growth

among peers in FY15. We have upgraded our rating from Accumulate to

‘BUY’ with TP of Rs3,000.

8/18/2014 25




Growth (%) 27.1 5.7 10.5 14.0 14.9


PAT 152,734 177,008 137,495 185,695 248,054

EPS (Rs) 227.6 258.8 184.1 248.7 332.2

Growth (%) 33.7 13.7 -28.8 35.1 33.6

Net DPS (Rs) 35.0 41.5 30.0 36.6 43.9




NIM (%) 69.4 65.9 61.2 65.2 65.6

RoAE (%) 16.1 15.3 10.1 12.0 14.3

RoAA (%) 0.9 0.9 0.6 0.7 0.8

P / BV (x) 1.5 1.3 1.2 1.1 1.0

P / ABV (x) 1.6 1.4 1.4 1.2 1.1

PE (x) 10.6 9.4 13.1 9.7 7.3



Stock Performance

(%) 1M 6M 12M

Absolute (5.5) 61.3 54.2

Relative to Sensex (10.1) 31.7 17.9


State Bank of India

8/18/2014 26



Int. Earned from Adv. 1,113,415 1,264,422 1,413,826 1,634,753 1,887,024


Others - - - - -

Total Interest Income 1,471,974 1,679,781 1,890,624 2,168,545 2,480,782

Interest expense 893,196 1,068,179 1,214,790 1,397,994 1,595,603

NII 578,778 611,602 675,834 770,551 885,179

Growth (%) 27.1 5.7 10.5 14.0 14.9

Treasury Income 22,394 14,162 20,904 22,500 20,000

NTNII 159,671 187,155 210,531 240,005 276,006


Total Income 1,654,039 1,881,098 2,122,060 2,431,051 2,776,789

Growth (%) 24.3 13.7 12.8 14.6 14.2



Growth (%) 22.2 0.4 2.6 21.4 15.7

NPA Provisions 155,147 159,973 199,062 225,059 210,761

Investment Provisions 8,556 (9,501) 8,763 - -


PBT 239,129 252,597 205,855 277,156 370,229

Tax Provisions 86,395 75,588 68,361 91,462 122,176


PAT 152,734 177,008 137,495 185,695 248,054

Growth (%) 41.2 15.9 (22.3) 35.1 33.6




Par Value 10 10 10 10 11

No. of equity shares 671 684 747 747 679

Equity 6,710 6,840 7,467 7,467 7,467

Networth 1,062,300 1,250,330 1,473,706 1,627,431 1,837,121

Adj. Networth 851,349 962,506 1,088,384 1,180,035 1,317,489

Deposits 14,146,894 16,274,026 18,388,524 21,498,598 25,044,894

Growth (%) 12.7 15.0 13.0 16.9 16.5




Net Advances 11,636,702 13,926,080 15,782,767 18,465,837 21,605,030

Growth (%) 15.6 19.7 13.3 17.0 17.0

Investments 4,609,491 5,193,932 5,787,931 6,372,783 7,252,612

Total Assets 18,262,305 21,289,045 23,910,725 28,198,553 32,812,368


LilladherPrabhudas Larsen & Toubro

CMP: Rs1,516 TP: Rs1,813 Rating: BUY MCap: Rs1,392.5bn

Guidance maintained: L&T has maintained its guidance given for the consolidated entity at the start of the year of 15% revenue growth and 20% order inflow growth in FY15. L&T had also guided that it will maintain margin at FY14 levels with variation of plus/minus 50-100bps. However, currently L&T believes the variation in margins over FY14 levels could be in the range of 100-150bps due to losses in hydrocarbon businesses. Management expects ordering in domestic market to pick up in H2FY15. They expect the strong momentum in inflow from export market to continue in FY15.

Infrastructure to dominate inflows: L&T is looking at overall inflow of ~US$25bn in the current year out of prospects worth US$100bn. The company expects ~US$11bn orders from infrastructure (US$45bn prospects), US$5bn from Power (US$15bn prospects), US$1bn from Metal & Mining (US$4bn prospects), US$3bn from Hydrocarbon (US$15bn prospects) and US$5bn from Others segment.

IDPL - Fund-raising to ease burden on parent’s balance sheet: IDPL has a current portfolio of 28 projects; with total project cost of Rs613bn. IDPL has invested equity worth Rs70bn and has balance equity commitment of Rs65bn for current portfolio of projects. IDPL has recently raised from Canadian Pension Fund and from Dhamra port stake sale. The fund-raising will help reduce burden on standalone balance sheet and help improve RoEs.

Outlook and Valuation: The stock is trading at core PE of 16.5x FY16E earnings. L&T continues to be the best play in the Indian infrastructure space, given its strong business model, diverse skill sets, strong execution capabilities and relatively healthy/large balance sheet. Maintain ‘BUY’.

8/18/2014 27



Revenue (Rs m) 531,705 516,110 565,989 634,937 730,228

Growth (%) 21.1 (2.9) 9.7 12.2 15.0

EBITDA (Rs m) 62,687 54,731 66,671 70,708 82,577

PAT (Rs m) 43,855 41,366 49,047 51,421 60,877

EPS (Rs) 48.0 45.0 53.4 56.0 66.3

Growth (%) 19.1 (6.1) 18.6 4.8 18.4

Net DPS (Rs) 10.9 12.1 14.4 15.1 17.9




EBITDA margin (%) 11.8 10.6 11.8 11.1 11.3

RoE (%) 18.6 15.3 15.7 14.6 15.5

RoCE (%) 15.1 13.1 13.6 12.7 13.7

EV / sales (x) 2.8 2.8 2.6 2.3 2.0

EV / EBITDA (x) 23.4 26.8 22.3 20.8 17.6

PER (x)* 22.7 24.2 20.4 19.5 16.5

P / BV (x) 5.5 4.8 4.2 3.7 3.3


Source: Company Data, PL Research * Core PE

Stock Performance

(%) 1M 6M 12M

Absolute (10.1) 49.0 100.1


LilladherPrabhudas SOTP

8/18/2014 28

Fair Value (Rs) Basis

L&T Core business 1,388 21x March'16 EPS

L&T Hydrocarbon business 30 10x March '16EPS

L&T IDPL 146 2x P/B

L&T InfoTech 88 11x PE FY15E

L&T Finance Holding 87 83% stake; 20% Hold co discount on current market cap

L&T's equity investment in BTG 4 2x equity investment

Other businesses 70 Manufacturing, urban Infra,

Target price 1,813


Larsen & Toubro

8/18/2014 29



Net Revenue 531,705 516,110 565,989 634,937 730,228

Direct Expenses 446,836 440,658 480,088 545,960 628,468

% of Net Sales 84.0 85.4 84.8 86.0 86.1


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 22,182 20,721 19,231 18,269 19,183

% of Net Sales 4.2 4.0 3.4 2.9 2.6


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 62,687 54,731 66,671 70,708 82,577

Margin (%) 11.8 10.6 11.8 11.1 11.3

Depreciation 7,014 7,277 7,924 7,644 8,135

PBIT 55,673 47,454 58,746 63,064 74,442

Interest Expenses 6,661 9,548 10,761 10,959 9,959

PBT 62,394 56,779 66,794 71,418 84,552

Total tax 18,538 15,413 17,748 19,997 23,675


PAT 44,565 43,845 54,932 51,421 60,877

Extraordinary Gain/(Loss) 710 2,479 5,885 - -

Adjusted PAT 43,855 41,366 49,047 51,421 60,877




Share Capital 1,225 1,231 1,231 1,231 1,231




Total Debt 98,958 88,342 114,589 104,589 94,590

Other Liabilities(net) - - - - -

Deferred Tax Liability 1,333 2,422 4,099 4,099 4,099


Gross Block 105,064 117,783 114,036 121,154 129,153


Net Block 76,661 82,065 75,488 74,962 74,826

Capital Work in Progress 6,975 4,911 4,119 5,000 5,001





Other Assets - - - - -

Total Assets 352,520 380,088 452,540 480,229 514,704


LilladherPrabhudas Wipro

CMP: Rs548 TP: Rs680 Rating: BUY MCap: Rs1,350.5bn

Largely in-line quarter: Wipro reported Q1FY15 results in line with expectation. IT Services (USD) revenue grew by 1.2% QoQ (0.3% @cc) to US$1,740m (PLe: US$1,746m, Cons: US$1,745m). Overall revenue declined by 3.5% QoQ to Rs112.5bn (PLe: Rs113.9bn, Cons.: Rs113.8bn). Operating margins eroded by 135bps to 20.4% (PLe: 20.5%, Cons: 21.2) due to wage hike (one-month impact), RSU costs and currency appreciation. EPS declined by 6% QoQ to Rs8.55 (PLe: Rs8.64, Cons: Rs8.72).

H2FY15 likely to be stronger compared to H1FY15: Management asserted for stronger H2FY15 than H1FY15 on the back of large deal wins over the last six months. Weakness in Q2FY15 guidance was attributed to ramp-down, project closure and delay in ramp-up of the new project. Wipro has announced ~US$2bn TCV of deal closures over the last four months. We expect revenue growth to accelerate in Q3FY15 yielding stronger FY15 exit rate.

Margin to track better – Tailwinds outscores headwinds: Wipro is likely to face margin headwinds in Q2FY15 due to remainder impact of wage hike and project ramp-up from large deals. However, the management highlighted room for utilization improvement, non-recurral of cost associated with RSU and retirement benefit that increased due to wage hike in Q1FY15 as key tailwinds. We see margin tailwinds outscoring headwinds for remainder of FY15.

Valuation & Recommendation – Retain ‘BUY’, with target price of Rs680: We see improvement in the win rate to drive revenue momentum in H2FY15, along with available margin levers that would accelerate earnings momentum. We see Wipro in an early stage of re-rating cycle as visibility for growth improves. Retain “BUY” rating, with a target price of Rs680, 16x FY16E earnings estimate.

8/18/2014 30



Revenue (Rs m) 318,747 374,256 434,269 488,922 545,933

Growth (%) 2.6 17.4 16.0 12.6 11.7

EBITDA (Rs m) 66,713 78,181 97,101 112,036 125,903

PAT (Rs m) 52,568 61,684 78,394 88,718 103,034

EPS (Rs) 21.4 25.0 31.8 36.0 41.8

Growth (%) (1.0) 17.1 26.9 13.2 16.1

Net DPS (Rs) 7.0 6.9 9.0 9.0 9.0




EBITDA margin (%) 20.9 20.9 22.4 22.9 23.1

RoE (%) 20.0 21.7 25.0 23.5 22.9

RoCE (%) 18.2 20.5 24.2 22.6 22.1

EV / sales (x) 4.1 3.4 2.9 2.4 2.0

EV / EBITDA (x) 19.4 16.2 12.8 10.5 8.7

PER (x) 25.6 21.9 17.2 15.2 13.1

P / BV (x) 4.7 4.8 3.9 3.3 2.8



Stock Performance

(%) 1M 6M 12M

Absolute 0.1 (1.7) 20.0

Relative to Sensex (4.5) (31.3) (16.3)


Wipro

8/18/2014 31



Net Revenue 318,747 374,256 434,269 488,922 545,933

Direct Expenses 225,794 260,665 295,488 331,108 368,523

% of Net Sales 70.8 69.6 68.0 67.7 67.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 26,240 35,410 41,680 45,778 51,508

% of Net Sales 8.2 9.5 9.6 9.4 9.4


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 66,713 78,181 97,101 112,036 125,903

Margin (%) 20.9 20.9 22.4 22.9 23.1

Depreciation 10,129 10,835 11,106 12,814 13,006

PBIT 56,584 67,346 85,995 99,223 112,896

Interest Expenses - - 52 - -

PBT 65,523 78,596 101,057 113,998 132,224

Total tax 12,955 16,912 22,601 25,079 29,089


PAT 52,568 61,684 78,394 88,718 103,034


Adjusted PAT 52,568 61,684 78,394 88,718 103,034




Share Capital 4,917 4,926 4,932 4,932 4,932




Total Debt 22,510 854 10,909 10,909 10,909




Gross Block 109,736 101,685 113,471 128,139 144,517


Net Block 53,529 44,589 46,763 48,617 51,988






Other Assets 105,698 89,159 105,657 105,657 105,657

Total Assets 318,316 294,990 365,848 432,473 513,414


LilladherPrabhudas Axis Bank

CMP: Rs395 TP: Rs440 Rating: BUY MCap: Rs927.2bn

Axis bank’s Q1FY15 performance has been in line with expectations barring for sluggish other income which has de-grown by 5% YoY. Asset quality showed a slight blip but was well within guidance. FY15 PPOP growth challenges remain on fees and margins sustainability, but we believe Axis bank’s valuations at 1.7x Mar-16 book are still favourable considering well diversified asset book now, best-in-class liability franchise and better underwriting standards.

Fees will be a challenge but opex growth to be only gradual: Axis bank’s PPOP performance was almost flat on sluggish fees driven down by slowdown in large corporate loan book resulting in lower fee growth. NII growth of 15% YoY has been up to expectations as NIMs held up well at ~3.9% in Q1FY15. Margins sustainability now looks questionable but management has guided NIMs to remain above 3.5%, going ahead and expected fees recovery to only come at the end of FY15 which creates challenge for higher PPOP growth in FY15. We expect PPOP growth of 16% in FY15.

Asset quality – Some blips but well within guidance: Bank’s Gross slippages and restructuring at ~Rs11bn was well within guidance (~Rs16bn per quarter guidance which remains unchanged) leading to ~70bps of specific credit losses. Mid corporate still remains under stress but have been factored in the guidance. It has provided about Rs470m for un-hedged forex exposures and SMA accounts, while it has ~Rs8.0bn of specific provisions buffer on its books (not included in credit costs) which provides comfort on credit losses. As highlighted from our previous updates, we have been buoyant on Axis Bank’s asset quality and continue to do so on better underwriting and now tilt towards secured assets..

Axis has been able to successfully diverse its business mix from ~25% to 38% retail (after reclassification of agri book) in the last two years which has offset the corporate book slowdown. Upbeat liability franchise, better underwriting and stable asset quality makes it our preferred sector pick with PT of Rs2200.

8/18/2014 32




Growth (%) 22.2 20.6 23.6 13.9 15.9


PAT 42,422 51,794 62,177 70,688 85,002

EPS (Rs) 20.5 22.1 26.5 30.1 36.2

Growth (%) 24.4 7.8 19.6 13.7 20.2

Net DPS (Rs) 3.2 3.6 4.0 4.6 5.3




NIM (%) 92.7 96.2 95.9 97.6 97.6

RoAE (%) 20.3 18.5 17.4 17.2 17.9

RoAA (%) 1.6 1.7 1.7 1.7 1.7

P / BV (x) 3.6 2.8 2.4 2.1 1.8

P / ABV (x) 3.6 2.8 2.4 2.1 1.8

PE (x) 19.2 17.8 14.9 13.1 10.9



Stock Performance

(%) 1M 6M 12M

Absolute (1.1) 69.3 88.1



Axis Bank

8/18/2014 33





Others - - - - -



NII 80,177 96,663 119,516 136,138 157,739

Growth (%) 22.2 20.6 23.6 13.9 15.9

Treasury Income 931 5,818 3,133 6,000 6,000

NTNII 53,271 59,693 70,919 80,890 93,520


Total Income 274,149 337,337 380,464 436,995 502,159

Growth (%) 38.6 23.0 12.8 14.9 14.9



Growth (%) 15.8 25.2 23.1 16.0 15.8

NPA Provisions 10,996 14,799 17,810 27,398 27,066

Investment Provisions 581 (1,039) (1,003) - -


PBT 62,878 75,531 93,490 105,505 126,869

Tax Provisions 20,456 23,736 31,313 34,817 41,867


PAT 42,422 51,794 62,177 70,688 85,002

Growth (%) 25.2 22.1 20.0 13.7 20.2




Par Value 2 2 2 2 2

No. of equity shares 2,066 2,340 2,349 2,349 2,349

Equity 4,132 4,680 4,698 4,698 4,698

Networth 228,085 331,079 382,205 440,250 510,712

Adj. Networth 223,359 324,037 371,959 424,297 489,878

Deposits 2,201,043 2,526,136 2,809,446 3,278,077 3,951,677

Growth (%) 16.3 14.8 11.2 16.7 20.5

Low Cost deposits 914,220 1,120,998 1,264,623 1,490,321 1,814,344



Net Advances 1,697,595 1,969,660 2,300,668 2,691,781 3,230,137

Growth (%) 19.2 16.0 16.8 17.0 20.0

Investments 931,921 1,137,375 1,135,484 1,290,492 1,508,690

Total Assets 2,856,278 3,405,607 3,832,449 4,582,717 5,456,212


LilladherPrabhudas Maruti Suzuki

CMP: Rs2,704 TP: Rs2,816 Rating: Accumulate MCap: Rs816.7bn

Best play on Macroeconomic recovery: Given the last three years of flat volumes in the Passenger Car segment (expected latent demand) and new launches, we expect volumes to grow at 14.6% CAGR over FY14-FY16E period. MSIL has gained market share to the tune of 220bps in the small car segment, given the strong product portfolio (volumes declined by 2.7% CAGR v/s segment volume decline of 4.8%).

Celerio seeing encouraging response: Dealers indicate that the demand is likely to pick up post election. Including ‘Celerio’ (which has received good response), the management indicated couple of new launches in FY15E. Celerio is likely to deliver 5-6,000 units/month, which itself would lead to 7% growth for MSIL in FY15E, assuming other segments remain flat. As per Sewells Group Automotive Dealer Confidence Index for the January-March 2014 quarter, overall 62% dealers surveyed expected volumes to increase over the next six months.

EBITDA margins likely to sustain at 12%+ levels: With an uptick in volumes and lower discounting, we expect EBITDA margins to remain healthy at 12.5-13% levels. Management indicated that the imported content of raw material has been brought down to ~16-17% currently from 20% in FY13.

Our volume estimates: Given the fact that the Passenger car industry has been flattish for the last three years, any improvement in macroeconomic scenario could lead to recovery in sales for MSIL. Given its strong product portfolio, we have built in 12.7% volume growth for FY15E at 1.3m units (led by new launches) and a 16.6% YoY in FY16E (on account of strong recovery in economy) at 1.5m units.

Earnings to grow at ~28% CAGR: Given estimated earnings CAGR of ~28.5%, the current valuations of 24.0x FY15E EPS and 18.0x FY16E EPS seem attractive. We reiterate that MSIL is the best play on the recovery in the macroeconomic situation. Our TP is based on 19.0x FY16E EPS (@ 20% premium to its average multiple).

8/18/2014 34



Revenue (Rs m) 355,871 435,879 437,006 493,740 587,193

Growth (%) (2.8) 22.5 0.3 13.3 19.4

EBITDA (Rs m) 25,130 42,297 50,899 60,123 76,014

PAT (Rs m) 16,352 23,921 27,830 34,073 45,407

EPS (Rs) 56.6 79.2 92.1 112.8 150.3

Growth (%) (30.5) 39.9 16.3 22.4 33.3

Net DPS (Rs) 7.5 8.0 12.0 13.5 15.0




EBITDA margin (%) 7.1 9.7 11.6 12.2 12.9

RoE (%) 10.6 13.0 15.7 14.5 14.2

RoCE (%) 11.1 13.5 16.3 15.1 14.7

EV / sales (x) 2.2 1.9 1.9 1.7 1.4

EV / EBITDA (x) 30.6 19.5 16.3 13.8 10.8

PER (x) 47.8 34.1 29.3 24.0 18.0

P / BV (x) 5.1 4.4 3.9 3.3 2.9



Stock Performance

(%) 1M 6M 12M

Absolute 7.1 58.2 104.0

Relative to Sensex 2.5 28.7 67.8

LilladherPrabhudas Operating Metrics

Maruti Suzuki

8/18/2014 35

Y/e March FY10 FY11 FY12 FY13 FY14 FY15E FY16E

A2 segment volumes (nos) 633,190 808,552 709,430 673,009 678,240 779,976 889,173

A3 segment volumes (nos) 99,315 131,410 128,587 176,467 201,715 199,698 229,653

Domestic Volumes (nos) 870,790 1,132,739 1,006,316 1,051,047 1,054,072 1,185,170 1,365,346

Export Volumes (nos) 147,575 138,266 127,379 120,388 99,816 110,000 140,000

Volumes (nos) 1,018,365 1,271,005 1,133,695 1,171,435 1,153,888 1,295,170 1,505,346

Growth (%) 28.6 24.8 (10.8) 3.3 (1.5) 12.2 16.2

Av. Real. / Veh. (Rs) 290,887 288,106 313,904 367,909 380,133 379,264 388,370

Growth (%) 10.5 (1.0) 9.0 17.2 3.3 (0.2) 2.4

RM cost / veh. (Rs) 220,092 222,959 247,559 286,508 271,340 271,464 277,444

Growth (%) 7.3 1.3 11.0 15.7 (5.3) 0.0 2.2

Contr. / Veh. (Rs) 70,795 65,147 66,345 81,402 108,793 107,800 110,926

Selling expenses (Rs mn) 9,160 11,029 10,136 11,823 13,894 15,067 16,975

Selling exp. / Veh. (Rs) 8,995 8,677 8,941 10,093 12,041 11,634 11,276

Growth (%) (3.5) (3.5) 3.0 12.9 19.3 (3.4) (3.1)

Other exp. / Veh. (Rs) 26,393 30,472 36,736 42,635 51,418 50,680 50,104

Growth (%) (3.8) 15.5 20.6 16.1 20.6 (1.4) (1.1)

EBITDA / Veh. (Rs) 39,044 29,140 22,166 30,368 46,075 43,310 41,154

Growth (%) (4.4) (25.4) (23.9) 37.0 51.7 (6.0) (5.0)

Net Profit / Veh. (Rs) 24,526 18,006 14,195 19,634 28,766 27,137 25,941



Maruti Suzuki

8/18/2014 36



Net Revenue 355,871 435,879 437,006 493,740 587,193

Direct Expenses 280,656 325,149 313,096 351,592 417,649

% of Net Sales 78.9 74.6 71.6 71.2 71.1

Employee Cost 8,438 10,696 13,681 16,386 18,106

% of Net Sales 2.4 2.5 3.1 3.3 3.1

SG&A Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 41,647 57,738 59,330 65,640 75,425

% of Net Sales 11.7 13.2 13.6 13.3 12.8

EBITDA 25,130 42,297 50,899 60,123 76,014

Margin (%) 7.1 9.7 11.6 12.2 12.9

Depreciation 11,384 18,612 20,844 23,487 25,491

PBIT 13,746 23,685 30,055 36,636 50,522

Interest Expenses 552 1,898 1,759 1,610 1,650

PBT 21,203 29,910 36,585 45,359 60,890

Total tax 5,111 5,989 8,755 11,057 14,735


PAT 16,092 23,921 27,830 34,073 45,407

Extraordinary Gain/(Loss) (260) - - - -

Adjusted PAT 16,352 23,921 27,830 34,073 45,407




Share Capital 1,445 1,510 1,510 1,510 1,510




Total Debt 10,784 13,892 16,851 17,151 17,451

Other Liabilities(net) 2,648 2,364 - 16 85



Gross Block 147,347 198,007 237,429 279,433 321,887


Net Block 75,207 97,992 122,114 146,345 169,480





Net Current Assets 21,968 22,812 (2,799) (3,675) (7,153)


Total Assets 168,329 206,133 232,498 272,580 307,745


LilladherPrabhudas Tech Mahindra

CMP: Rs2,203 TP: Rs2,350 Rating: BUY MCap: Rs517.6bn

Revenue growth healthy, EBITDA miss due to BT adjustment: TECHM’s Q1FY15 results were in-line with expectation. Revenue grew by 1.3% QoQ to Rs51,215m (PLe: Rs50,907m, Cons.: Rs50,783m) and 3.7% QoQ in USD terms to US$855m (PLe: US$852m, Cons.: $850m). EBITDA margins eroded by 306bps QoQ to 18.1% (PLe: 19.9%, Cons: 19.8%) due to lower utilization (50bps), currency appreciation (50bps), visa expense (100bps), and large deal transition drag (80bps). EPS grew by 1.7% QoQ to Rs26.15 (PLe: Rs29.03, Cons: Rs29.75) due to higher other income of Rs893m (Q4FY14: - Rs867m).

Large deal transition – A growth in waiting: The company continues to see margin headwinds due to large deal transition for second quarter in succession. We expect the growth rate to improve as large Network Services deal starts ramping-up. Moreover, the deal closure continues to be healthy. We expect revenue momentum to accelerate during FY15 as BASF and MES (inorganic) contribution pour-in. We expect TechM to grow ahead of NASSCOM guidance

Margin levers – Short-term and long-term tailwinds: The company will have near-term margin tailwinds from non-recurring visa cost, utilization improvement and deal ramp-up. Moreover, the management is working on improving employee pyramid (28% at 0-3yrs experience) to industry average of ~40%. We expect both tactical and strategic margin lever to push margin higher from Q1FY15 level. We are factoring in steady margin improvement during FY15.

Improving cash flow: Cash flow from Operation to EBITDA ratio improved to 68% from 59% in the previous quarter despite worsening DSO to 102 days (Q4FY14: 96 days). We expect further improvement in free cash flow during CY14-15.

Valuation & Recommendation: We expect high-teen revenue growth in FY15 with steady improvement in margin at constant currency during FY15. We retain ‘BUY’ rating, with a revised TP of Rs2,350, 14x FY16e earnings estimate.

8/18/2014 37



Revenue (Rs m) 117,024 143,320 187,132 217,359 246,826

Growth (%) 127.7 22.5 30.6 16.2 13.6

EBITDA (Rs m) 19,518 30,631 41,730 46,732 54,302

PAT (Rs m) 17,526 23,356 30,852 33,101 38,944

EPS (Rs) 137.5 181.9 131.3 140.9 165.7

Growth (%) 168.9 32.3 (27.8) 7.3 17.7

Net DPS (Rs) 4.6 12.2 10.3 11.0 13.0




EBITDA margin (%) 16.7 21.4 22.3 21.5 22.0

RoE (%) 47.4 49.3 42.2 31.0 28.0

RoCE (%) 35.9 38.0 34.8 26.3 24.6

EV / sales (x) 2.5 2.0 2.6 2.2 1.8

EV / EBITDA (x) 14.8 9.4 11.6 10.1 8.3

PER (x) 16.0 12.1 16.8 15.6 13.3

P / BV (x) 6.9 5.2 5.6 4.3 3.3



Stock Performance

(%) 1M 6M 12M

Absolute 3.8 20.9 66.3

Relative to Sensex (0.8) (8.7) 30.0


Tech Mahindra

8/18/2014 38



Net Revenue 117,024 143,320 187,132 217,359 246,826

Direct Expenses 75,405 90,007 117,001 134,328 153,772

% of Net Sales 64.4 62.8 62.5 61.8 62.3


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 22,101 22,682 28,400 36,299 38,752

% of Net Sales 18.9 15.8 15.2 16.7 15.7


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 19,518 30,631 41,730 46,732 54,302

Margin (%) 16.7 21.4 22.3 21.5 22.0

Depreciation 3,190 3,896 5,222 5,765 6,415

PBIT 16,328 26,735 36,508 40,967 47,887

Interest Expenses 1,073 922 798 39 39

PBT 20,268 27,934 36,840 43,686 51,477

Total tax 2,289 6,479 7,524 10,922 12,869


PAT 17,526 23,356 30,852 33,101 38,944


Adjusted PAT 17,526 23,356 30,852 33,101 38,944




Share Capital 1,275 1,284 2,350 2,350 2,350




Total Debt 11,266 10,804 524 524 524


Deferred Tax Liability - - - - -


Gross Block 14,471 20,083 48,960 57,654 67,527


Net Block 6,792 9,039 20,304 23,233 26,691

Capital Work in Progress 1,671 343 2,662 2,662 2,662





Other Assets 4,415 10,308 18,764 18,764 18,764

Total Assets 56,070 68,404 109,843 139,677 174,887


LilladherPrabhudas Dr. Reddy’s Laboratories

CMP: Rs2,774 TP: Rs3,023 Rating: Accumulate MCap: Rs471.9bn

Dr. Reddy’s is one of the best play on global generic space: Dr. Reddy’s has built a very strong global generic business and has emerged as one of the leading Indian companies in the large generic markets like US, Europe and Russia/CIS. Apart from strong formulation business, the company is one of the largest suppliers of APIs to global generic companies. We believe that the company will be a key beneficiary of large patent expiries taking place in US and Europe and strong growth movement in branded generic markets like Russia, LatAm and India.

US remains a key performance driver for the company: Dr. Reddy’s has built a sizable US business on the back of strong product pipeline of niche and limited competition products like Geodon, Depakote ER, Toprol XL, Arixtra, Tacrolimus etc. The company has also developed a strong OTC franchise in US market with revenue of US$130m (25% of US revenue). US market remains a key revenue and profit contributor to the company in the medium term. We expect 21% CAGR for US business over FY14E-16E.

Branded formulation continues to grow in double digits: Dr. Reddy will continue to report strong growth in branded formulation business, going forward, led by strong franchise in Russia/CIS markets, reviving growth in Indian markets and ramping up revenue from its alliance with GSK for emerging markets. Further, the launch of biologics will be a key growth driver in emerging markets. We expect 21% and 10% revenue CAGR for International branded formulations and India formulations over FY14E-16E.

Outlook and Valuations: We expect earnings CAGR of 16% over FY14E-16E led by top-line growth of 12% over the same period. All the key business segments, excluding Europe, are likely to contribute to the performance. Further, the company will benefit from the operating leverage, going forward. Concerns over FY15E Revenue and PAT growth are overdone as we expect 12% YoY earnings growth in FY15E despite a high base. The stock currently trades at 10% discount to leading peers, which we feel is unjustified. At the current price, the stock trades at 20.3x FY15E and 18.0x FY16E earnings. We maintain ‘Accumulate’ with target price of Rs3,023.

8/18/2014 39



Revenue (Rs m) 96,737 116,266 133,473 146,919 158,998

Growth (%) 29.5 20.2 14.8 10.1 8.2

EBITDA (Rs m) 23,741 24,762 32,517 35,261 38,955

PAT (Rs m) 14,262 16,776 22,815 23,217 26,153

EPS (Rs) 84.1 98.8 134.1 136.5 153.8

Growth (%) 28.9 17.5 35.8 1.8 12.6

Net DPS (Rs) 13.7 15.0 15.0 15.0 0.0




EBITDA margin (%) 24.5 21.3 24.4 24.0 24.5

RoE (%) 27.6 25.7 27.8 23.1 21.5

RoCE (%) 18.6 17.3 18.2 16.8 17.5

EV / sales (x) 5.1 4.3 3.8 3.4 3.1

EV / EBITDA (x) 20.9 20.3 15.8 14.1 12.6

PER (x) 33.0 28.1 20.7 20.3 18.0

P / BV (x) 8.2 6.4 5.2 4.3 3.5



Stock Performance

(%) 1M 6M 12M

Absolute 4.6 4.6 28.1



Dr. Reddy’s Laboratories

8/18/2014 40



Net Revenue 96,737 116,266 133,473 146,919 158,998

Direct Expenses 26,504 35,274 31,432 38,199 41,022

% of Net Sales 27.4 30.3 23.5 26.0 25.8

Employee Cost 16,928 20,413 24,936 24,976 25,440

% of Net Sales 17.5 17.6 18.7 17.0 16.0

SG&A Expenses 29,565 35,817 44,587 48,483 53,582

% of Net Sales 30.6 30.8 33.4 33.0 33.7


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 23,741 24,762 32,517 35,261 38,955

Margin (%) 24.5 21.3 24.4 24.0 24.5

Depreciation 3,628 3,859 4,804 4,848 5,142

PBIT 18,528 19,213 25,919 27,727 30,947

Interest Expenses 1,067 1,018 24 1,046 973

PBT 18,764 20,675 27,734 29,179 32,677

Total tax 4,205 4,900 5,094 6,128 6,699


PAT 14,262 16,776 22,815 23,217 26,153


Adjusted PAT 14,262 16,776 22,815 23,217 26,153




Share Capital 848 849 851 851 851




Total Debt 33,316 37,688 49,362 32,309 29,261

Other Liabilities(net) - 20 - 20 20

Deferred Tax Liability (833) (1,669) - (3,512) (4,072)


Gross Block 46,775 51,835 59,121 64,635 70,435

Less: Depreciation - - - - -

Net Block 46,775 51,835 59,121 64,635 70,435

Capital Work in Progress 417 487 6,549 555 565






Total Assets 89,927 109,124 140,162 138,960 158,524


LilladherPrabhudas Bank of Baroda

CMP: Rs886 TP: Rs1,000 Rating: BUY MCap: Rs381.7bn

BOB’s Q1FY15 performance was better on NII beat, lower provisions and investment write back (Rs3.3bn). Asset quality remained stable on better recoveries & upgrades despite slightly higher slippages. Asset quality has remained stable and we believe new management change would not impact asset quality materially as underwriting remains superior compared to peers. Valuations at 0.9x Mar-16 book are undemanding and hence we maintain ‘BUY’ with a PT of Rs1000/share.

Core PPOP performance has been mixed but B/S growth comforting: In Q1FY15, core PPOP performance was better with slight beat on NII as overall margins improved by 6bps QoQ as some low-yielding bulky loans from Q4FY14 moved out, which also makes loan growth at ~18% YoY a little comforting. Lower other income resulted in flattish PPOP growth as income from recovery from written-off accounts was subdued. Opex growth was at ~12% YoY on higher employee additions. Provisions remain adequate for BOB on mortality and wage settlement which is unlikely to have large spikes in opex for FY15.

Stable Asset Quality on better Upgrades; enhanced provisions: Stressed asset accretion of ~3.1% was higher than expected of ~2.2% on slightly high slippages (2.1% slippages & 1% restructuring). Slippages of Rs20bn were largely from mid corporate and only two a/c of Rs1bn+ from large corporate. Asset quality held up on better upgrades in the quarter (No ARC sale was there). Coverage ratio also improved by ~120bps in Q1FY15 as BOB used its write-back of Rs3.3bn MTM provisions from investment (mainly equities) for specific NPA provisions.

Superior underwriting to keep asset quality stable: BOB’s asset quality has held up much better than peers indicating better underwriting and is displayed in superior RORWAs of 1.35% v/s <1% for large peers. With improving ROE profile and comfortable capital levels valuations are undemanding at 0.9x FY16 Book. We thus maintain ‘BUY’ with PT of Rs1000/share.

8/18/2014 41




Growth (%) 17.2 9.7 5.7 21.2 15.2


PAT 50,070 44,807 45,411 52,209 64,908

EPS (Rs) 121.4 106.0 105.4 121.2 150.7

Growth (%) 12.1 -12.7 -0.6 15.0 24.3

Net DPS (Rs) 16.5 21.5 21.5 24.7 30.7




NIM (%) 83.2 79.5 77.6 76.9 77.9

RoAE (%) 21.7 15.7 13.8 14.1 15.7

RoAA (%) 1.2 0.9 0.8 0.7 0.8

P / BV (x) 1.4 1.2 1.1 1.0 0.9

P / ABV (x) 1.4 1.3 1.2 1.0 0.9

PE (x) 7.3 8.4 8.4 7.3 5.9



Stock Performance

(%) 1M 6M 12M

Absolute 5.9 64.8 84.9



Bank of Baroda

8/18/2014 42





Others - - - - -



NII 103,170 113,153 119,653 145,063 167,075

Growth (%) 17.2 9.7 5.7 21.2 15.2

Treasury Income 6,075 6,165 7,440 6,000 7,000

NTNII 28,148 30,141 37,188 40,712 46,818


Total Income 330,961 388,273 434,025 503,039 589,839

Growth (%) 34.0 17.3 11.8 15.9 17.3



Growth (%) 22.9 4.9 3.2 20.1 16.7

NPA Provisions 23,134 38,432 34,702 41,059 42,509

Investment Provisions 2,363 2,255 1,986 - -


PBT 60,258 48,312 54,973 70,553 87,713

Tax Provisions 10,188 3,505 9,562 18,344 22,805


PAT 50,070 44,807 45,411 52,209 64,908

Growth (%) 18.0 (10.5) 1.3 15.0 24.3




Par Value 10 10 10 10 11


Equity 4,124 4,225 4,307 4,307 4,307

Networth 263,032 308,652 349,331 389,084 438,506

Adj. Networth 247,595 266,732 288,983 324,765 365,472

Deposits 3,848,711 4,738,833 5,688,944 6,729,029 8,082,663

Growth (%) 26.0 23.1 20.0 18.3 20.1




Net Advances 2,873,773 3,281,858 3,970,058 4,684,669 5,574,756

Growth (%) 25.7 14.2 21.0 18.0 19.0

Investments 832,094 1,213,937 1,161,127 1,345,482 1,578,812

Total Assets 4,461,478 5,460,312 6,584,519 7,695,867 9,148,328


LilladherPrabhudas Motherson Sumi Systems

CMP: Rs351 TP: Rs372 Rating: Accumulate MCap: Rs309.6bn

New orders increase visibility: MSSL has won orders to the tune of €1.8bn at SMP and €842m at SMR. This lends visibility as this is in addition to the ~€4.3bn orders already with them. New orders would start contributing in the next 1.5 years time frame. New capacities are being added for wiring harnesses in Mexico, Thailand and India. In rear-view mirrors, MSSL is expanding capacities in China to support the requirement of our existing customers. Two plants have started operations in India and MSSL is also adding capacities in Mexico. For Polymers, MSSL is coming up with plants in India and China. In addition, a Greenfield plant was started in Puebla, Mexico which replaced two existing smaller plants.

SMR’s revenues to grow at 16% CAGR in Euro terms: We estimate a 16.0% CAGR in revenues in Euro terms at SMR, given the new orders over FY14-FY16E period. In Rupee terms, growth could be 22.0%. At the same time, on account of increased utilization, we expect margins to improve to 11.0% by FY16E from 9.0% currently.

SMP’s revenues to grow at 17.0% CAGR in Euro terms: We estimate a 17% CAGR in revenues in Euro terms at SMP, given the new orders over FY14-FY16E period. At the same time, on account of increased utilization and reduction of losses in Spain, the margins are likely to increase to 9.0% in FY16E from 5.5% currently. A 1% change in Peguform margins impacts earnings by ~14%.

Valuations attractive; Maintain ‘Accumulate’: We expect better times ahead for MSS, with the execution of new order book at SMR and improvement in margins at Peguform over the next one year. At the CMP, the stock is trading 26.7x FY15E and 18.7x FY16E earnings, which in our view, is attractive, given the ~33.5% CAGR in earnings for FY14-FY16E. We reiterate our ‘Accumulate’ call on the stock with a SOTP-based target price of Rs389. We value standalone business at Rs294 based on 25x FY16E EPS and subsidiaries/acquisitions valued at Rs95 based on 6x FY16E EV/EBITDA.

8/18/2014 43



Revenue (Rs m) 149,076 256,170 307,210 363,022 428,195

Growth (%) 78.1 71.8 19.9 18.2 18.0

EBITDA (Rs m) 10,745 19,441 28,781 34,997 44,425

PAT (Rs m) 3,915 6,074 9,542 11,602 16,559

EPS (Rs) 6.7 6.9 10.8 13.2 18.8

Growth (%) 16.1 3.4 57.1 21.6 42.7

Net DPS (Rs) 0.9 1.3 2.5 2.8 3.0




EBITDA margin (%) 7.2 7.6 9.4 9.6 10.4

RoE (%) 22.5 29.0 36.2 34.3 37.0

RoCE (%) 8.7 10.7 18.3 19.3 23.9

EV / sales (x) 1.7 1.4 1.1 0.9 0.8

EV / EBITDA (x) 23.1 18.1 12.1 9.7 7.3

PER (x) 52.7 51.0 32.4 26.7 18.7

P / BV (x) 11.0 13.4 10.5 8.1 6.0



Stock Performance

(%) 1M 6M 12M

Absolute (6.7) 61.6 129.4



Motherson Sumi Systems

8/18/2014 44



Net Revenue 149,076 256,170 307,210 363,022 428,195

Direct Expenses 95,434 164,838 193,615 229,612 270,833

% of Net Sales 64.0 64.3 63.0 63.3 63.3

Employee Cost 23,170 42,827 51,065 61,023 69,261

% of Net Sales 15.5 16.7 16.6 16.8 16.2


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 19,727 29,064 33,749 37,391 43,676

% of Net Sales 13.2 11.3 11.0 10.3 10.2

EBITDA 10,745 19,441 28,781 34,997 44,425

Margin (%) 7.2 7.6 9.4 9.6 10.4

Depreciation 3,796 7,145 8,172 9,614 10,279

PBIT 6,949 12,296 20,609 25,383 34,147


PBT 4,117 8,343 15,961 22,517 31,937

Total tax 2,153 3,835 4,995 7,881 11,178


PAT 2,597 4,446 7,650 11,136 16,559

Extraordinary Gain/(Loss) (1,318) (1,628) (1,892) (466) -

Adjusted PAT 3,915 6,074 9,542 11,602 16,559




Share Capital 587 881 881 881 881




Total Debt 46,023 49,040 48,397 40,847 39,669


Deferred Tax Liability 602 602 - - -


Gross Block 94,323 107,425 126,336 137,336 146,836


Net Block 46,922 52,770 59,189 61,575 59,797







Total Assets 70,369 76,850 85,885 89,859 98,396


LilladherPrabhudas ACC

CMP: Rs1,509 TP: Rs1,653 Rating: BUY MCap: Rs283.6bn

ACC would be the biggest beneficiary of an increase in All-India cement demand due to its Pan-India presence and have one of the cheapest valuations compared to its peers. The recent modernization of Wadi and Chanda and upcoming commissioning of modernized Jamul plant should see improved efficiencies kicking in. Stock trades at EV/T of US$120 CY15E capacity, significantly lower compared to US$156 and US$160 of UTCEM and ACEM, respectively. We maintain our BUY rating with TP of Rs1,653 at EV/T of US$140 CY15E capacity of 34m tonnes.

Key beneficiary of recovery in South and Maharashtra: From seeing a contraction in demand, we expect to see a strong revival in Andhra Pradesh’s (AP’s) demand, led by an end to the political uncertainty and bifurcation of the state. Hence, stabilization of AP, strong IT sector and improved competitiveness of southern industries with the connectivity to national electricity grid, would drive demand in the South. Stronger demand in South, in turn, would keep prices in Maharashtra firm. We see ACC as a big beneficiary of all these as they sell 40% of volumes in these two regions.

Cost likely to reduce by Rs150/t with newer facilities: ACC replaced outdated capacity of ~5m tonnes at Wadi (Karnataka) and Chanda (Maharashtra) and also added 6m tonnes of new capacity at these locations. However, due to weak market conditions in these markets, ACC was unable to realise the benefit of lower operating costs from the new facilities. We expect costs to be lower by Rs90/t on an aggregate level in CY15, led by higher utilization at these units. We expect savings of additional Rs60/t in CY16 with the upcoming modernized plant of 3.7mtpa in Jamul. We see only an upward risk to our estimates due to cost savings, primarily on account of increased usage of pet coke and commissioning of captive coal mines.

8/18/2014 45


Y/e Dec CY11 CY12 CY13 CY14E CY15E

Revenue (Rs m) 100,021 111,306 109,084 116,736 136,175

Growth (%) 21.1 11.3 (2.0) 7.0 16.7

EBITDA (Rs m) 16,861 19,690 14,027 14,470 22,679

PAT (Rs m) 10,209 13,305 9,002 10,514 15,396

EPS (Rs) 54.3 70.8 47.9 55.9 81.9

Growth (%) 4.3 30.3 (32.3) 16.8 46.4

Net DPS (Rs) 28.0 30.0 30.0 24.9 40.9




EBITDA margin (%) 16.9 17.7 12.9 12.4 16.7

RoE (%) 15.4 18.5 11.9 13.1 18.0

RoCE (%) 15.2 18.7 12.2 13.5 18.5

EV / sales (x) 2.6 2.3 2.4 2.3 1.9

EV / EBITDA (x) 15.4 12.9 18.4 18.3 11.3

PER (x) 27.8 21.3 31.5 27.0 18.4

P / BV (x) 4.1 3.8 3.6 3.5 3.2



Stock Performance

(%) 1M 6M 12M

Absolute 3.2 47.9 30.2

Relative to Sensex (1.4) 18.3 (6.1)


ACC

8/18/2014 46



Net Revenue 100,021 111,306 109,084 116,736 136,175

Direct Expenses 37,708 41,146 42,453 44,798 49,668

% of Net Sales 37.7 37.0 38.9 38.4 36.5

Employee Cost 5,743 6,179 6,630 7,212 7,861

% of Net Sales 5.7 5.6 6.1 6.2 5.8

SG&A Expenses 19,400 22,063 22,992 25,571 29,151

% of Net Sales 19.4 19.8 21.1 21.9 21.4

Other Expenses 20,308 22,228 22,983 24,685 26,816

% of Net Sales 20.3 20.0 21.1 21.1 19.7

EBITDA 16,861 19,690 14,027 14,470 22,679

Margin (%) 16.9 17.7 12.9 12.4 16.7

Depreciation 5,100 5,689 5,838 5,939 5,988

PBIT 11,761 14,001 8,189 8,531 16,692

Interest Expenses 969 1,147 517 488 545

PBT 15,053 14,410 12,136 12,840 21,166

Total tax 2,155 3,911 1,319 3,595 5,927


PAT 13,008 10,593 10,947 9,386 15,396

Extraordinary Gain/(Loss) 520 (2,460) (223) - -

Adjusted PAT 10,209 13,305 9,002 10,514 15,396




Share Capital 1,880 1,880 1,880 1,880 1,880




Total Debt 5,107 1,631 350 - -

Other Liabilities(net) 25 26 27 29 31



Gross Block 100,322 103,994 105,867 108,976 142,867


Net Block 64,065 59,314 55,700 52,870 80,773

Capital Work in Progress 4,408 5,083 12,236 25,977 -






Total Assets 80,161 80,606 83,640 87,743 95,262


LilladherPrabhudas Zee Entertainment Enterprises


Paradigm shift in business model from cyclicality to annuity: Broadcasting industry is likely to witness a paradigm shift in its business model. With the implementation of digitization, subscription revenues will increase, while the reliance of broadcasters on advertising will come down. Subscription revenues for the industry are likely to increase at a CAGR of 26% from Rs69bn in CY13 to Rs220bn in CY18E. We expect Zee’s domestic subscription revenues to increase at a CAGR of 17.7% over FY14-16E.

Digitization - Soon to become a reality: Though implementation of digitization has encountered several hurdles leading to a considerable delay, we believe, digitization is bound to happen sooner than later. With TRAI upping the ante lately, gross billing has finally kicked off in Phase-I. In Phase-II, ~80-90% of seeding of set top boxes has been completed and Customer Acquisition Form (CAF) is being collected. We assume gross billing to pick up in H2FY15E. Delay in implementation of digitization is one of the reasons why stock has underperformed over the last 12 months. However, strong subscription trajectory and cash flows should result in a strong performance, going forward.

Earnings likely to compound at a CAGR of 16%; RoE/RoCEs to inch up by 50bps/120bps by FY16E: With strong advertising growth and implementation of digitization, we expect Zee’s top-line to increase at a CAGR of 14% over FY14-16E. EBITDA margins are likely to increase by 180bps to 29.0% by FY16E. PAT is likely to increase at a CAGR of 16% over FY14-16E, with EPS likely to be Rs12.5 in FY16E. Consequently, Zee’s RoEs/ROCEs are likely to increase to 21.1%/27.6% by FY16E.

Strong FCFF generation to further strengthen b/s: Going forward, improved profitability, coupled with limited capex, is likely to translate into strong FCFF generation for Zee. We expect Zee to generate FCFF of Rs10.5bn/9.5bn in FY15E/16E, translating into cumulative FCFF of Rs20bn. Debt-free status, coupled with robust FCFF generation, would further strengthen B/S and enable it to invest in niche content during the post-digitization era. With strong earnings growth, debt-free b/s, limited capex, robust FCFF generation, improvement in return ratios, we believe Zee would continue to trade at premium valuations.

8/18/2014 47



Revenue (Rs m) 30,405 36,996 44,217 49,560 57,505

Growth (%) 1.1 21.7 19.5 12.1 16.0

EBITDA (Rs m) 7,395 9,543 12,043 13,421 16,685

PAT (Rs m) 5,891 7,196 8,921 9,727 12,018

EPS (Rs) 6.1 7.5 9.3 10.1 12.5

Growth (%) (2.7) 22.8 23.1 9.1 23.6

Net DPS (Rs) 1.5 2.0 2.0 2.4 2.7




EBITDA margin (%) 24.3 25.8 27.2 27.1 29.0

RoE (%) 18.0 19.6 20.6 19.3 21.1

RoCE (%) 21.6 24.9 26.4 24.8 27.6

EV / sales (x) 8.7 7.1 6.0 5.2 4.4

EV / EBITDA (x) 35.9 27.5 21.9 19.2 15.2

PER (x) 45.6 37.2 30.2 27.7 22.4

P / BV (x) 7.8 6.8 5.7 5.1 4.4



Stock Performance

(%) 1M 6M 12M

Absolute (4.9) 5.1 12.7



Zee Entertainment Enterprises

8/18/2014 48



Net Revenue 30,405 36,996 44,217 49,560 57,505

Direct Expenses 14,311 17,401 20,688 23,303 26,501

% of Net Sales 47.1 47.0 46.8 47.0 46.1

Employee Cost 2,925 3,491 3,905 4,361 5,060

% of Net Sales 9.6 9.4 8.8 8.8 8.8


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 5,774 6,561 7,581 8,475 9,258

% of Net Sales 19.0 17.7 17.1 17.1 16.1

EBITDA 7,395 9,543 12,043 13,421 16,685

Margin (%) 24.3 25.8 27.2 27.1 29.0

Depreciation 323 399 501 760 731

PBIT 7,072 9,144 11,541 12,661 15,955

Interest Expenses 50 86 158 50 50

PBT 8,406 10,519 13,190 14,411 17,805

Total tax 2,500 3,337 4,291 4,683 5,786


PAT 5,891 7,196 8,921 9,727 12,018


Adjusted PAT 5,891 7,196 8,921 9,727 12,018




Share Capital 959 954 21,130 21,130 21,130




Total Debt 12 17 17 17 17

Other Liabilities(net) (32) 33 719 658 658



Gross Block 11,205 12,306 14,564 15,258 16,005


Net Block 9,199 9,906 11,663 11,596 11,613

Capital Work in Progress 201 69 69 69 69





Other Assets 337 288 298 298 298

Total Assets 34,335 39,166 48,115 53,875 61,650


LilladherPrabhudas

MID-CAP

8/18/2014 49

LilladherPrabhudas Aurobindo Pharma


Diversified portfolio strategy to be a winner : The strategy to leverage on its manufacturing and strong product filings capability is likely to result in strong earnings growth. Unlocking Injectable Portfolio with launches of more products from Unit IV would accelerate growth and margin expansion in US. We believe that main drivers for Aurobindo are a) Business mix improvement with more formulation sales, b) Scaling up of Aurolife’s control substances sales c) Scale‐up of injectable business and d) Higher operating cash flow to reduce debt.

US remains mainstay for growth: Formulation growth will be driven by injectables and orals. It has filed 22 products from Unit IV (NPNC injectable/ophthalmic) and expects approval of 3-5 products to start with. It is targeting US$25-30m sales from this unit in FY14E. The company plans to file 100 products from this facility, addressing brand size of US$40bn and hopes to achieve sales of US$200-300m in 3-5 years. One-off opportunities in Cymbalta and Avelox (March 2014) would provide boost for growth, margin and operating cash flow in FY14E-16E.

Maintainable margins revised: Management revised maintainable operating margins to 22-24% in FY14E-16E. Core EU formulation sales of US$100m are from six key markets – UK, Netherlands, Italy, Spain, Germany and Portugal. It expects to turn profitable in EU in FY15E, while FY14E is earmarked for operation break-even. The company’s EU acquisition would include additional sales of US$430m in FY15E, while we expect improvement in EBITDA margin in FY16E.

Strong candidate for valuation re-rating: The stock currently trades at PE 12.2x and 10.9x of FY15E and FY16E, which is at a significant (20%) discount to mid-cap peers (average PE 14-16x for mid‐caps). Better cash flow from launches of high margin and limited competition drugs to further reduce capital gearing ratio and narrow valuation differential with peers in the industry. Our SOTP valuation of Aurobindo’s set target price at Rs874, implies 21% upside at current valuation. We maintain ‘BUY’.

8/18/2014 50



Revenue (Rs m) 46,274 58,553 80,385 117,377 134,274

Growth (%) 5.6 26.5 37.3 46.0 14.4

EBITDA (Rs m) 6,138 8,610 20,715 26,762 30,883

PAT (Rs m) 4,210 4,292 13,759 18,493 20,793

EPS (Rs) 14.5 14.7 47.2 63.4 71.3

Growth (%) (20.0) 1.9 220.3 34.4 12.4

Net DPS (Rs) 1.0 1.5 1.3 1.3 1.3




EBITDA margin (%) 13.3 14.7 25.8 22.8 23.0

RoE (%) 17.6 17.4 43.3 41.0 33.3

RoCE (%) 9.5 8.9 21.4 24.3 23.6

EV / sales (x) 5.5 4.4 3.2 2.2 1.9

EV / EBITDA (x) 41.8 30.0 12.6 9.5 8.1

PER (x) 53.7 52.7 16.4 12.2 10.9

P / BV (x) 9.7 8.7 6.0 4.3 3.1



Stock Performance

(%) 1M 6M 12M

Absolute 5.4 54.7 317.2



Aurobindo Pharma

8/18/2014 51



Net Revenue 46,274 58,553 80,385 117,377 134,274

Direct Expenses 30,311 35,980 42,290 61,858 71,165

% of Net Sales 65.5 61.4 52.6 52.7 53.0

Employee Cost 5,357 6,633 8,319 14,085 15,442

% of Net Sales 11.6 11.3 10.3 12.0 11.5

SG&A Expenses 4,468 7,331 9,060 14,672 16,784

% of Net Sales 9.7 12.5 11.3 12.5 12.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 6,138 8,610 20,715 26,762 30,883

Margin (%) 13.3 14.7 25.8 22.8 23.0

Depreciation 2,005 2,487 3,125 3,777 4,510

PBIT 4,132 6,122 17,590 22,985 26,373

Interest Expenses 1,028 1,313 1,079 779 732

PBT 3,315 5,094 17,356 22,498 25,935

Total tax (888) 827 3,635 4,050 5,187

Effective Tax rate (%) (26.8) 16.2 20.9 18.0 20.0

PAT (1,235) 2,939 11,729 18,493 20,793

Extraordinary Gain/(Loss) (5,445) (1,353) (2,031) - -

Adjusted PAT 4,210 4,292 13,759 18,493 20,793




Share Capital 291 291 292 292 292




Total Debt 31,002 34,445 36,431 28,953 26,281

Other Liabilities(net) 102 110 257 27 (18)

Deferred Tax Liability (16) 680 2,054 317 (202)


Gross Block 30,863 37,635 43,671 47,671 57,171


Net Block 21,947 26,389 29,550 29,719 34,709

Capital Work in Progress 6,454 2,185 764 2,185 2,185





Other Assets 1,082 2,615 8,075 3,431 4,094

Total Assets 54,485 61,292 76,243 81,958 98,290


LilladherPrabhudas Cummins India


Technology edge in new CPCB-2 Norms: Central Pollution Control Board (CPCB) has notified CPCB-2 norms for implementation w.e.f July 1, 2014 or Diesel gensets up to 800kw (~1000hp). We expect KKC to benefit most, as stringent norms would lead to increased consolidation, given the technology requirements

Guidance revised upwards on strong exports and bottoming of domestic markets: Management believes that the domestic business has bottomed out and expects recovery to be visible from H2FY15. Also, management has increased overall guidance to 10-15% for FY15 against earlier guidance of 5-10%. They expect domestic business to grow by 0-5% in FY15 and exports to grow by 30% in FY15 due to strong ramp-up in LHP (~Rs7bn in FY15 against Rs3.8bn in FY14) and 10% growth in HHP exports. Management expects margins in FY15 to remain at FY14 levels. The current utilization levels are at ~50-60%.

Outlook and Valuation: The stock is trading at 23.4xFY16E earnings. We have upgraded our earnings by ~5% for FY15 to factor in revised guidance. Cummins continues to be the best franchise in the Capital goods space. Outlook for Cummins continues to be positive, given the strong ramp-up in exports and likely improvement in market position, post changes in emission norms. Low capitalization utilization of 50-60% also leaves upside surprise on margin once volumes improve.

8/18/2014 52



Revenue (Rs m) 41,172 45,894 39,786 44,137 51,623

Growth (%) 1.8 11.5 (13.3) 10.9 17.0

EBITDA (Rs m) 6,972 8,349 6,986 7,768 9,550

PAT (Rs m) 5,398 6,846 6,019 6,736 8,101

EPS (Rs) 19.5 24.7 21.7 24.3 29.2

Growth (%) (8.7) 26.8 (12.1) 11.9 20.3

Net DPS (Rs) 11.0 13.0 13.0 14.0 13.6




EBITDA margin (%) 16.9 18.2 17.6 17.6 18.5

RoE (%) 28.0 30.9 24.3 25.3 27.5

RoCE (%) 28.0 30.8 24.3 25.2 27.2

EV / sales (x) 4.6 4.1 4.7 4.3 3.6

EV / EBITDA (x) 26.9 22.4 27.0 24.2 19.6

PER (x) 35.1 27.7 31.5 28.1 23.4

P / BV (x) 9.3 7.9 7.4 6.9 6.0



Stock Performance

(%) 1M 6M 12M

Absolute 2.8 48.4 76.6



Cummins India

8/18/2014 53



Net Revenue 41,172 45,894 39,786 44,137 51,623

Direct Expenses 26,454 28,874 24,241 28,248 33,039

% of Net Sales 64.3 62.9 60.9 64.0 64.0

Employee Cost 3,039 3,386 3,396 2,869 3,355

% of Net Sales 7.4 7.4 8.5 6.5 6.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 4,706 5,285 5,162 5,252 5,678

% of Net Sales 11.4 11.5 13.0 11.9 11.0

EBITDA 6,972 8,349 6,986 7,768 9,550

Margin (%) 16.9 18.2 17.6 17.6 18.5

Depreciation 420 473 528 742 806

PBIT 6,553 7,876 6,459 7,026 8,744

Interest Expenses 54 46 42 6 -

PBT 8,246 10,492 8,194 8,748 10,660

Total tax 2,334 2,872 2,175 2,012 2,558


PAT 5,912 6,846 6,019 6,736 8,101


Adjusted PAT 5,398 6,846 6,019 6,736 8,101




Share Capital 554 554 554 554 554




Total Debt 147 150 - 200 400

Other Liabilities(net) - - - - -



Gross Block 9,703 11,703 16,203 21,203 25,203


Net Block 4,649 6,177 10,149 14,407 17,600

Capital Work in Progress 497 1,208 - - -





Other Assets 70 (328) (465) (465) (465)

Total Assets 20,579 24,017 25,652 27,827 31,796


LilladherPrabhudas UPL


Sustained organic earnings growth: UPL’s higher exposure to emerging markets, which are growing @10-12% p.a. compared to global agrochem market growth of 4-5% p.a. promises sustained top-line growth over the medium term. We expect UPL’s EBITDA margins to improve by 60bps over the next two years to 19.4% driven by shift in product mix, rationalization of costs and turnaround of DVA.

Working Capital remains stable: Despite increasing contribution of Brazil, UPL has been able to maintain net working capital at 93 days. Management has guided for net working capital to be in the range of 90-100 days for FY15E. We believe this guidance is achievable, given the fact that there is room for improvement in working capital across geographies and efficient management of debtors and inventory. Also, company is working on crop diversification towards shorter crops which will be instrumental in bringing down receivable days.

UPL’s focus on consolidation/integration and reduction of debt: FY13/14 marked a change in strategy for UPL as company diverted its energies towards consolidating operations. It undertook multiple initiatives (new product launches, entering newer geographies) related to strengthening its market presence, while at the same time, targeting for profitable growth (reduction in overheads, consolidation of the global supply chain). Gross debt has been reduced to Rs34bn (Rs42bn in Mar’13).

Outlook & Valuation: Stock is currently trading at 9.7x FY16E earnings which is at a discount of 20-25% to industry average. We believe sustained earnings growth combined with improved management of working capital will trigger re-rating. Focus on gross debt reduction and maximizing shareholders’ returns (through increasing dividend, further buyback) remains a top priority for UPL.

8/18/2014 54



Revenue (Rs m) 76,936 91,866 107,736 120,944 135,575

Growth (%) 33.6 19.4 17.3 12.3 12.1

EBITDA (Rs m) 14,054 16,539 20,203 23,100 26,302

PAT (Rs m) 6,735 8,469 10,642 12,149 14,336

EPS (Rs) 14.6 19.1 24.8 28.3 33.4

Growth (%) 9.0 31.2 29.6 14.2 18.0

Net DPS (Rs) 2.5 2.5 4.0 5.0 6.0




EBITDA margin (%) 18.3 18.0 18.8 19.1 19.4

RoE (%) 17.1 19.2 21.5 21.2 21.1

RoCE (%) 13.5 12.5 14.3 15.5 16.3

EV / sales (x) 2.3 1.9 1.5 1.3 1.2

EV / EBITDA (x) 12.4 10.3 8.1 7.0 5.9

PER (x) 22.3 17.0 13.1 11.5 9.7

P / BV (x) 3.6 3.1 2.7 2.2 1.9



Stock Performance

(%) 1M 6M 12M

Absolute (5.0) 72.9 136.0



UPL

8/18/2014 55



Net Revenue 76,936 91,866 107,736 120,944 135,575

Direct Expenses 41,421 46,874 54,408 61,198 68,601

% of Net Sales 53.8 51.0 50.5 50.6 50.6

Employee Cost 6,856 8,646 9,469 11,006 12,202

% of Net Sales 8.9 9.4 8.8 9.1 9.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 14,605 19,807 23,656 25,640 28,471

% of Net Sales 19.0 21.6 22.0 21.2 21.0

EBITDA 14,054 16,539 20,203 23,100 26,302

Margin (%) 18.3 18.0 18.8 19.1 19.4

Depreciation 2,924 3,537 4,069 4,206 4,756

PBIT 11,131 13,002 16,134 18,894 21,545


PBT 8,654 10,162 12,679 15,383 18,316

Total tax 1,514 2,032 2,270 3,384 4,029


PAT 5,555 7,747 9,502 12,149 14,336

Extraordinary Gain/(Loss) (1,179) (722) (1,140) - -

Adjusted PAT 6,735 8,469 10,642 12,149 14,336




Share Capital 924 885 858 858 858




Total Debt 31,475 42,450 35,600 32,600 30,100


Deferred Tax Liability 940 1,170 1,807 1,807 1,807


Gross Block 27,325 29,851 35,740 40,740 45,740


Net Block 12,613 13,217 15,036 15,829 16,073






Other Assets 22,331 24,301 23,994 23,994 23,994

Total Assets 80,162 96,874 95,241 101,897 110,742


LilladherPrabhudas Federal Bank


Management’s focus on B/S growth is back and is well positioned to grow with granular improvement in its asset and liability franchise. High RORWAs provide comfort on FB’s ability to leverage. Valuations re-rated to 1.25x Mar-16 book factoring in ROA improvement over FY15-17, led by improving PPOP and stable credit costs.

Focus on B/s growth back; robust liability franchise: (1) Loan growth of 3.6% sequentially was mainly from pick-up in corporate loan book (grew 6.2% QoQ). (2) Liability franchise improved further with ~31% CASA v/s 29% in Q1FY14 on better SA book and negligible bulk deposit now. Management guided for pick up in loan growth to 20% YoY in FY15 and improvement in CASA to 33-35% in next 1-1.5 years. Driven by better granular asset/liability franchise, FB’s B/s is well positioned to outpace system growth in FY15 and workout its excess capital.

Fees a hurdle for PPOP improvement, but will be the focus area: Core fees has been tepid in the last few quarters on contraction in corporate fees, negligible FX and low third party & branch banking fees. However, management assured focus on fee income with increased efficiency from branches, growth pick-up in corporate loan book and new retail products for fees from branch banking. PPOP growth in last 3/5 years has been a dismal 1%/3% which is set to reverse on expected loan growth improvement, better mix of assets with better yields and further CASA improvement. With visible slowdown in network expansion (5% in FY15) and improvement in revenue growth, we expect cost income to moderate to ~45-47% from ~50% in next two years.

Improved asset quality but on back of ARC sale: Asset quality improved on back of sale to ARC of Rs1.4bn from fresh slippages and restructured NPAs. Bank has high SR book of Rs5bn+ which it will start providing for in Q3FY15. With improved PPOP growth outlook coupled with better liability franchise and stable asset quality, valuations at 1.25x FY16 book remains attractive. We maintain BUY with a PT of Rs140/share on 1.4x P/ABV FY16E.

8/18/2014 56


Y/e March FY12 FY13E FY14 FY15E FY16E


Growth (%) 11.8 1.1 12.9 8.5 16.5


PAT 7,768 8,382 8,389 9,406 11,335

EPS (Rs) 9.1 9.8 9.8 11.0 13.3

Growth (%) 32.3 7.9 0.1 12.1 20.5

Net DPS (Rs) 1.8 1.8 2.0 2.2 2.7




NIM (%) 3.5 3.0 3.1 3.1 3.1

RoAE (%) 14.4 13.9 12.6 12.9 14.0

RoAA (%) 1.4 1.3 1.2 1.2 1.2

P / BV (x) 1.8 1.6 1.5 1.3 1.2

P / ABV (x) 1.8 1.6 1.5 1.3 1.2

PE (x) 13.1 12.1 12.1 10.8 9.0



Stock Performance

(%) 1M 6M 12M

Absolute (5.7) 60.0 91.7



Federal Bank

8/18/2014 57





Others - - - - -



NII 19,534 19,747 22,286 24,187 28,174

Growth (%) 11.8 1.1 12.9 8.5 16.5

Treasury Income 824 2,059 1,500 1,500 1,500

NTNII 4,499 4,585 5,439 6,435 7,722


Total Income 60,907 68,320 76,399 81,452 92,499

Growth (%) 33.3 12.2 11.8 6.6 13.6



Growth (%) 5.6 (3.1) 1.4 13.9 20.7

NPA Provisions 2,582 2,386 2,584 3,274 3,973

Investment Provisions 349 (368) 100 - -


PBT 11,695 11,938 12,120 13,590 16,376

Tax Provisions 3,927 3,556 3,731 4,183 5,041


PAT 7,768 8,382 8,389 9,406 11,335

Growth (%) 32.3 7.9 0.1 12.1 20.5




Par Value 2 2 2 2 2


Equity 1,710 1,711 1,711 1,711 1,711

Networth 57,009 63,595 69,501 76,663 85,293

Adj. Networth 54,554 59,275 66,285 72,598 80,143

Deposits 489,371 576,149 597,313 663,606 793,891

Growth (%) 13.8 17.7 3.7 11.1 19.6

Low Cost deposits 134,759 156,521 184,010 211,149 253,397



Net Advances 377,560 440,967 434,361 514,718 622,809

Growth (%) 18.2 16.8 (1.5) 18.5 21.0

Investments 174,025 211,546 241,179 243,058 279,535

Total Assets 606,214 710,444 745,936 835,148 994,808


LilladherPrabhudas Tata Chemicals


North America and India business units continue to deliver consistently: Domestic soda ash demand continues to be robust and management indicated that chemicals margins would continue to remain in 20‐23% range. Urea volumes continue to be on track. Global soda ash demand as well as realizations remain robust (prices increased by $5‐8/mt) and US business will continue to deliver healthy performance.

Europe/Kenya turnaround on track: European/Kenyan restructuring is underway and company expects to see operations turnaround gradually over the next two years. Undergoing restructuring at Europe/Africa bodes well for longer‐term as company plans to focus on profitable ventures and has shut down loss-making units. Management articulated a clear strategy for turnaround in these businesses over next two years. While Kenya is likely to see steady state performance from Q3FY15E, UK business will see steady state performance from Q3FY16E once the steam turbine is implemented.

UK/Kenya business can swing from EBITDA loss of 260m in FY14 to profit of Rs3.4bn: UK business is likely to generate £25 - 30m collectively from European soda ash, bicarbonate and salt business in FY16E. In FY15E, it is expected to generate £19m which includes British salt EBITDA of £14‐15m and EBITDA of £4m from soda ash and bicarbonate this year. Steam turbine is likely to have a positive impact of £0.5m/month. Restructuring exercise in Kenya is complete during Q2. Kenyan business can annually generate $15m.

Obvious re-rating candidate: With the worst over and clarity on restructuring emerging in UK/Kenya, we believe TCL is due for re‐rating. We have been negative on TCL from last several quarters, however, with improved visibility for overseas operations, we turn constructive on the stock. Recently, we have upgraded the stock one-notch from “Accumulate” to “BUY”. We assign a higher target multiple of 12x(previous 10x) resulting into target price of Rs430 .

8/18/2014 58



Revenue (Rs m) 137,998 148,061 159,311 164,867 174,959

Growth (%) 24.8 7.3 7.6 3.5 6.1

EBITDA (Rs m) 22,974 21,180 18,094 22,001 24,708

PAT (Rs m) 9,144 7,735 4,507 7,395 9,015

EPS (Rs) 35.9 30.4 17.7 29.0 35.4

Growth (%) 30.1 (15.4) (41.7) 64.1 21.9

Net DPS (Rs) 10.0 10.0 10.0 10.0 10.0




EBITDA margin (%) 16.6 14.3 11.4 13.3 14.1

RoE (%) 15.4 12.1 7.5 12.8 14.3

RoCE (%) 10.6 8.3 6.0 7.8 8.8

EV / sales (x) 1.0 1.1 1.0 1.0 0.9

EV / EBITDA (x) 6.0 7.6 9.0 7.2 6.2

PER (x) 10.4 12.3 21.2 12.9 10.6

P / BV (x) 1.5 1.5 1.7 1.6 1.4



Stock Performance

(%) 1M 6M 12M

Absolute 6.5 46.4 48.6



Tata Chemicals

8/18/2014 59



Net Revenue 137,998 148,061 159,311 164,867 174,959

Direct Expenses 85,559 74,236 85,938 84,825 89,307

% of Net Sales 62.0 50.1 53.9 51.5 51.0

Employee Cost 11,454 11,255 11,818 12,409 13,029

% of Net Sales 8.3 7.6 7.4 7.5 7.4


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 18,012 41,390 43,460 45,633 47,914

% of Net Sales 13.1 28.0 27.3 27.7 27.4

EBITDA 22,974 21,180 18,094 22,001 24,708

Margin (%) 16.6 14.3 11.4 13.3 14.1

Depreciation 5,087 5,339 4,712 4,848 4,979

PBIT 17,887 15,841 13,382 17,153 19,729


PBT 14,845 12,929 9,571 13,861 16,349

Total tax 3,439 3,025 2,888 4,091 4,696


PAT 9,436 7,864 4,507 7,395 9,015


Adjusted PAT 9,144 7,735 4,507 7,395 9,015




Share Capital 2,548 2,548 2,548 2,548 2,548




Total Debt 59,461 84,506 83,696 81,696 79,696


Deferred Tax Liability (325) (56) (56) (56) (56)


Gross Block 99,532 102,585 108,114 113,114 118,114


Net Block 43,747 41,461 42,277 42,430 42,451






Other Assets 64,034 66,270 67,226 67,226 67,225

Total Assets 141,920 169,816 162,228 164,662 168,715


LilladherPrabhudas The Ramco Cements


Ramco Cement (TRCL) is expected to see a strong rebound from H2FY15 after their dismal performance in FY14. Underpinned by highly competitive operations, attractive valuations and high quality management, we rate TRCL as the best investment play on recovery in the South. We maintain our ‘BUY’ rating and TP of Rs350, an EV/T of US$130 FY16E capacity of 12.5m tonnes.

Dominant play on southern recovery: TRCL sells 86%/~7.5mt of its total volumes in the Southern region. Hence, outlook on this region, especially AP, would remain key for TRCL. We expect a strong revival in AP’s demand, led by an end to the Telangana issues and the surcharged political climate. Stabilization of AP, strong IT sector and improved competitiveness of south-based industries with the connectivity to national electricity grid, would drive strength in region’s demand. We expect region’s utilization rates to rise to the highest levels in FY16, factoring conservative growth assumptions despite strong pent-up demand and improved environment.

Strong management quality: Consistently superior RoEs, judicious capital allocation, high quality balance sheet and cash flow generation clearly vindicates the strong quality of TRCL’s management which is the most missing element in south-based listed cement companies.

TRCL offers the best blend with low risk and attractive valuations: Stock trades at US$109/t FY16E capacity, discount to an up-cycle average of US$130/t (FY2005-10). TRCL’s attractive valuations, coupled with best play on Southern region’s recovery, endorses our positive recommendation on the stock with low downside risk, given the bottomed-out earnings.

8/18/2014 60



Revenue (Rs m) 32,030 37,884 36,321 42,748 50,646

Growth (%) 25.8 18.3 (4.1) 17.7 18.5

EBITDA (Rs m) 9,163 9,631 5,117 8,399 11,110

PAT (Rs m) 3,852 4,037 1,001 3,052 5,301

EPS (Rs) 16.2 17.0 4.2 12.8 22.3

Growth (%) 82.6 4.8 (75.2) 205.0 73.7

Net DPS (Rs) 5.2 6.1 2.5 2.4 3.1




EBITDA margin (%) 28.6 25.4 14.1 19.6 21.9

RoE (%) 20.4 18.3 4.1 11.7 18.0

RoCE (%) 9.9 10.0 4.0 7.6 11.1

EV / sales (x) 3.1 2.6 2.8 2.3 1.8

EV / EBITDA (x) 10.7 10.1 19.6 11.6 8.3

PER (x) 18.5 17.7 71.2 23.3 13.4

P / BV (x) 3.5 3.0 2.9 2.6 2.3



Stock Performance

(%) 1M 6M 12M

Absolute (9.4) 72.3 81.4



The Ramco Cements

8/18/2014 61



Net Revenue 32,030 37,884 36,321 42,748 50,646

Direct Expenses 11,360 13,398 15,221 16,108 18,619

% of Net Sales 35.5 35.4 41.9 37.7 36.8

Employee Cost 1,712 1,957 2,218 2,507 2,833

% of Net Sales 5.3 5.2 6.1 5.9 5.6

SG&A Expenses 5,615 7,693 8,257 9,348 10,797

% of Net Sales 17.5 20.3 22.7 21.9 21.3

Other Expenses 4,181 5,205 5,509 6,387 7,288

% of Net Sales 13.1 13.7 15.2 14.9 14.4

EBITDA 9,163 9,631 5,117 8,399 11,110

Margin (%) 28.6 25.4 14.1 19.6 21.9

Depreciation 2,539 2,806 3,063 3,245 3,407

PBIT 6,624 6,825 2,054 5,154 7,703


PBT 5,574 5,882 1,543 4,169 7,068

Total tax 1,723 1,846 166 1,117 1,767


PAT 3,851 4,037 1,377 3,052 5,301

Extraordinary Gain/(Loss) (1) - 230 - -

Adjusted PAT 3,852 4,037 1,001 3,052 5,301




Share Capital 238 238 238 238 238




Total Debt 27,104 26,671 29,288 26,788 21,788




Gross Block 56,704 64,329 66,754 72,204 73,604


Net Block 41,152 45,936 46,411 48,616 46,609

Capital Work in Progress 5,395 1,882 3,861 766 766






Total Assets 57,297 60,926 65,317 66,066 66,262


LilladherPrabhudas Dish TV India


Phase-III/IV provides a significant opportunity to the DTH industry: Digital Cable has emerged as a clear winner in Phase-I/II due to their last mile connectivity. However, Phase-III/IV is likely to favor DTH . Phase-III/IV collectively consists of 80m households compared to 35m households in Phase-I/II. Assuming that DTH garners 55% of the market share, of which Dish TV (DITV) is able to capture 25% incremental subscribers, DITV’s potential gross additions can amount to 11.0m. Since digitization might get delayed beyond FY16E, we have assumed only partial benefits.

Focus on profitable growth: Over the last couple of years, there has been a concerted effort from the industry to hike STB prices as well as ARPU. Consequently, Subscriber Acquisition Costs (SAC) have declined from Rs2,273 in Q2FY13 to Rs1,800. Reduction in cash burn on new subscriber acquisition would help to improve balance sheet and improve cash flow position. Through reduction in SAC, DITV has also been able to reduce its payback period. Further increase in package prices by 10-12% is also a step in that direction.

Focus on improving Balance Sheet/Cash Flow: DITV became FCFF positive in FY13, while in FY14, it generated FCFF of Rs3.1bn. In Q1FY15, company generated FCFF of Rs210m. Over the next two years, we expect DITV to generate cumulative FCFF of Rs4.2bn despite significant capex lined up. Debt reduction remains a top priority and with improvement in internal cash flows, we expect DITV to repay Rs1.3bn each in FY15E/16E, respectively. As per the company, FY15E end gross debt is likely to be around Rs11‐12bn. Net debt which stood at Rs9bn in Q4FY14 is likely to decline to Rs7.5bn by FY15E end.

Recommend “BUY” with target price of Rs72: We expect DITV to be a key beneficiary of the ongoing digitization process in Phase‐III/IV. With DITV’s leadership position, pick‐up in subscriber additions, focus on improving margins, reduction in subsidy, improvement in FCFF generation and reduction in debt, DITV is bound to get re‐rated. We value DITV at 10x FY16E EV/EBITDA (close to its 2yr‐range), resulting in target price of Rs72.

8/18/2014 62



Revenue (Rs m) 19,579 21,668 25,090 27,731 31,682

Growth (%) 36.3 10.7 15.8 10.5 14.2

EBITDA (Rs m) 4,960 5,794 6,241 7,145 8,671

PAT (Rs m) (1,331) (660) (411) (51) 1,456

EPS (Rs) (1.3) (0.6) (0.4) (0.0) 1.4

Growth (%) NA NA NA NA NA

Net DPS (Rs) 0.0 0.0 0.0 0.0 0.0




EBITDA margin (%) 25.3 26.7 24.9 25.8 27.4

RoE (%) NA NA 67.3 1.6 NA

RoCE (%) NA NA 2.0 10.5 26.0

EV / sales (x) 3.7 3.5 2.8 2.6 2.2

EV / EBITDA (x) 14.5 12.9 11.3 9.9 8.1

PER (x) NA NA NA NA 42.6

P / BV (x) 3.7 NA NA NA NA



Stock Performance

(%) 1M 6M 12M

Absolute 7.7 16.9 3.6

Relative to Sensex 4.1 (5.1) (25.5)


Dish TV India

8/18/2014 63



Net Revenue 19,579 21,668 25,090 27,731 31,682

Direct Expenses 10,021 11,155 13,358 14,515 16,333

% of Net Sales 51.2 51.5 53.2 52.3 51.6

Employee Cost 748 822 891 998 1,141

% of Net Sales 3.8 3.8 3.6 3.6 3.6

SG&A Expenses 3,851 3,897 4,600 5,073 5,537

% of Net Sales 19.7 18.0 18.3 18.3 17.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 4,960 5,794 6,241 7,145 8,671

Margin (%) 25.3 26.7 24.9 25.8 27.4

Depreciation 5,219 6,276 5,973 6,190 6,457

PBIT (259) (482) 268 955 2,214


PBT (1,331) (1,254) (410) (51) 1,456

Total tax - 0 1 - -

Effective Tax rate (%) 0.0 (0.0) (0.1) 0.0 0.0

PAT (1,331) (660) (411) (51) 1,456


Adjusted PAT (1,331) (660) (411) (51) 1,456




Share Capital 1,063 1,065 1,065 1,065 1,065

Reserves & Surplus 15,521 (2,621) (4,191) (4,238) (2,782)

Shareholder's Fund 16,584 (1,556) (3,126) (3,173) (1,717)


Total Debt 14,003 16,330 11,849 10,549 9,249

Other Liabilities(net) - 1,632 1,060 1,060 1,060



Gross Block 29,267 35,790 40,327 46,613 53,669


Net Block 14,204 14,340 12,905 13,000 13,599





Net Current Assets (6,516) (7,995) (10,968) (14,764) (16,806)

Other Assets 17,515 - - - -

Total Assets 30,587 16,404 9,783 8,436 8,592


LilladherPrabhudas P.I. Industries


Custom synthesis order book implies visibility for next 2‐2.5 years: Though PI entered the custom synthesis space in mid-1990s, this business gained traction only from FY08 due to high gestation period of this business. In CSM, around 25-27 products are in the pipeline currently, while 15-16 products have been commercialized as of now. Current order book at US$435m implies visibility for the next 2-2.5 years of company’s increased capacities. Notably, order book is understated, as it only includes multi-year orders, while expected annual renewals (40% of CS revenues) are not accounted in the order book.

Leading player in domestic agri: PI has emerged as a leading player in the domestic agrochemicals industry through its wide distribution network and strengthening product portfolio. Company’s clear-cut strategy is to focus on increasing the share of in-licensed molecules. Consequently, share of in-licensing as a % of domestic agri-inputs revenues has increased to 65% in FY14 from 20% in FY09. PI currently has 8-10 novel products in pipeline and plans to launch two products annually over the next few years.

Expect earnings to compound at a CAGR of 30% over FY14‐16E: We expect PI’s revenues to grow at a CAGR of 21.0% during FY14-16E (expect PI’s domestic business to grow at a CAGR of 17.2% during FY14-16E, while custom synthesis is expected to grow at a CAGR of 24% over FY14-15E). Margins are likely to improve by 70bps annually to reach 20.0% by FY16E. We expect PI’s earnings to increase at a CAGR of 30%, with EPS likely to increase to Rs23.0 in FY16E.

Re-rating candidate: Company continues to deliver consistently far superior earnings growth due to its unique business model. PI remains our top pick in the agri-inputs coverage universe. With increased visibility of earnings growth/FCF generation/reduction of debt, PI is an obvious re-rating candidate.

8/18/2014 64



Revenue (Rs m) 8,791 11,514 15,949 19,112 23,358

Growth (%) 22.1 31.0 38.5 19.8 22.2

EBITDA (Rs m) 1,434 1,809 2,966 3,689 4,669

PAT (Rs m) 715 976 1,855 2,400 3,129

EPS (Rs) 5.7 7.2 13.6 17.6 23.0

Growth (%) 63.9 26.2 89.1 29.4 30.4

Net DPS (Rs) 1.0 1.0 2.0 2.6 3.2




EBITDA margin (%) 16.3 15.7 18.6 19.3 20.0

RoE (%) 26.5 22.8 30.3 30.2 30.5

RoCE (%) 23.5 23.0 32.6 35.5 36.9

EV / sales (x) 6.2 5.0 3.6 3.0 2.4

EV / EBITDA (x) 37.7 32.0 19.2 15.3 11.8

PER (x) 72.6 57.5 30.4 23.5 18.0

P / BV (x) 16.0 10.6 8.1 6.3 4.9



Stock Performance

(%) 1M 6M 12M

Absolute 19.7 69.1 207.4



P.I. Industries

8/18/2014 65



Net Revenue 8,791 11,514 15,949 19,112 23,358

Direct Expenses 4,923 6,745 9,191 11,276 13,781

% of Net Sales 56.0 58.6 57.6 59.0 59.0

Employee Cost 719 886 1,089 1,491 1,822

% of Net Sales 8.2 7.7 6.8 7.8 7.8


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 1,715 2,074 2,703 2,656 3,086

% of Net Sales 19.5 18.0 16.9 13.9 13.2

EBITDA 1,434 1,809 2,966 3,689 4,669

Margin (%) 16.3 15.7 18.6 19.3 20.0

Depreciation 173 220 314 398 468

PBIT 1,261 1,589 2,652 3,291 4,201


PBT 1,113 1,453 2,690 3,380 4,346

Total tax 398 477 835 980 1,217


PAT 1,035 973 1,837 2,400 3,129

Extraordinary Gain/(Loss) 321 (3) (18) - -

Adjusted PAT 715 976 1,855 2,400 3,129




Share Capital 125 135 136 136 136




Total Debt 2,296 1,873 860 550 450


Deferred Tax Liability 329 483 437 437 437


Gross Block 4,120 5,941 6,560 7,960 9,360


Net Block 2,957 4,558 4,864 5,866 6,798


Cash & Cash Equivalent 308 277 574 687 1,777


Total Current Liabilities 958 2,396 2,916 3,404 4,160


Other Assets 50 50 50 50 50

Total Assets 7,058 8,952 10,261 11,940 14,463


LilladherPrabhudas JK Lakshmi Cement


JK Lakshmi cement (JKLC) is the 5th largest cement producer in the North India with a ~7% market share of the region and a capacity of 6.6mtpa. This backed by 1) one of the most efficient operations in the sector, 2) entry in the most attractive eastern region with a capacity of 2.7mtpa, scheduled to get commissioned by Dec-14 and 3) increasing consolidation in Gujarat (~40% of its total volumes) ranks JKLC as one of our top pick in the sector. JKLC stands as one of the top pick in the sector with PT of Rs322 at EV/T of US$90 FY16E capacity of 11m tonnes.

Efficient and focused producer: JKLC is the second lowest cost producer in the region on the back of 100% pet-coke usage (one of the first mover), thermal and waste heat recovery based CPP, balanced rail/road mix and low fixed overheads. We expect the trend to continue at its upcoming green field plant in Durg on the back of proximity to both slag source and end markets and well laid logistics.

Greenfield expansion in Durg to drive the next round of volume growth: JKLC is putting up 2.7mtpa cement plant in Durg, Chhattisgarh at a cost of Rs17.4bn. Thanks to better market dynamics of the region on the front of consolidation and demand outlook, the addition would improve the earnings profile of JKLC.

Consolidation in Gujarat, JKLC the key beneficiary: The recent consolidation in Gujarat due to acquisition of JPA’s 4.8mtpa plants by UTCEM leads to a 15% increase in share of Top 2 (UTCEM+Holcim)’s combined production in the state from 55% to 70%, is expected to result in the prices stabilizing. In addition, the structural supply disruptions at Binani’s plant holding ~10% market share in Gujarat and weak balance sheet of other participants is expected to result in JKLC being the primary beneficiary since Gujarat constitutes 1/3rd of its total volumes.

8/18/2014 66



Revenue (Rs m) 17,181 20,550 20,566 25,422 33,414

Growth (%) 29.9 19.6 0.1 23.6 31.4

EBITDA (Rs m) 3,357 4,287 3,120 4,700 7,049

PAT (Rs m) 1,387 1,879 1,176 2,152 2,850

EPS (Rs) 11.3 16.0 10.0 18.3 24.2

Growth (%) 132.1 40.9 (37.4) 82.9 32.4

Net DPS (Rs) 1.9 2.5 2.0 4.6 6.1




EBITDA margin (%) 19.5 20.9 15.2 18.5 21.1

RoE (%) 12.5 15.4 9.1 15.6 18.4

RoCE (%) 9.1 9.9 5.9 8.7 11.2

EV / sales (x) 2.3 2.0 2.3 1.9 1.4

EV / EBITDA (x) 11.7 9.8 14.9 10.5 6.8

PER (x) 24.5 17.4 27.7 15.2 11.4

P / BV (x) 2.9 2.6 2.5 2.2 2.0



Stock Performance

(%) 1M 6M 12M

Absolute 17.0 264.9 245.7



JK Lakshmi Cements

8/18/2014 67



Net Revenue 17,181 20,550 20,566 25,422 33,414

Direct Expenses 7,811 8,926 9,662 11,294 14,100

% of Net Sales 45.5 43.4 47.0 44.4 42.2

Employee Cost 984 1,132 1,230 1,598 1,998

% of Net Sales 5.7 5.5 6.0 6.3 6.0

SG&A Expenses 3,313 4,215 4,568 5,447 6,995

% of Net Sales 19.3 20.5 22.2 21.4 20.9

Other Expenses 1,715 1,989 1,986 2,384 3,271

% of Net Sales 10.0 9.7 9.7 9.4 9.8

EBITDA 3,357 4,287 3,120 4,700 7,049

Margin (%) 19.5 20.9 15.2 18.5 21.1

Depreciation 1,297 1,489 1,352 1,380 1,962

PBIT 2,060 2,798 1,769 3,320 5,087

Interest Expenses 874 835 772 1,180 1,859

PBT 1,427 2,354 1,254 2,593 3,701

Total tax 340 596 229 441 851


PAT 1,088 1,757 1,025 2,152 2,850

Extraordinary Gain/(Loss) (299) (122) (151) - -

Adjusted PAT 1,387 1,879 1,176 2,152 2,850




Share Capital 612 589 589 589 589




Total Debt 10,696 13,370 17,870 21,370 19,870

Other Liabilities(net) 308 364 414 438 569



Gross Block 24,500 26,782 30,122 45,662 48,572


Net Block 13,293 14,346 16,134 30,132 31,081

Capital Work in Progress 4,929 7,832 10,672 992 840






Total Assets 23,989 27,466 32,663 37,833 38,887


LilladherPrabhudas KPIT Technologies


Missed expectation – margin headwinds made it worse: Revenue grew by 1.5% QoQ to US$115.2m (PLe: US$117.8m, Cons.: US$118.m), whereas in INR terms, revenue declined by 1.5% QoQ to Rs6,897m (PLe: Rs7,060m, Cons: Rs7,034m). EBITDA margins eroded by 408bps QoQ to 12.1% (PLe/Cons: 14%) due to wage hike (240bps), visa cost (25bps), currency appreciation (60bps) and I-Cubed acquisition (30bps). EPS declined by 17% QoQ to Rs2.54 (PLe: Rs3.01, Cons: Rs3.20), due to higher tax (Q1FY15: 30%, Q4FY14: 27.7%).

Likely to deliver low-double digit growth: We expect revenue momentum to improve in Q2FY15 (second consecutive quarter of strong onsite revenue growth). We are factoring in 10.5% QoQ growth for FY15 in USD terms lower than their guided revenue growth of 12-14% YoY.

Improving operating metrics – SAP profitability and free cash flow: Management efforts to restructure SAP portfolio resulted in SBU moving back to positive EBITDA including wage hike in line with our expectation. Moreover, the quarter witnessed improving DSO (82 days from 87 days QoQ), resulting in improved “Cash from Operation” for the quarter. We see improved operating metrics as key positives alleviating some of the streets’ concerns.

Why retain “BUY”? KPIT continues with its investment in S&M, which has translated into improved deal pipeline. The management was confident of strong improvement in revenue momentum from Q2FY15. We believe that persistent margin erosion has troughed and will see improvement.

Valuation and Recommendation – BUY, with a TP of Rs200: We expect revenue momentum to get better as project ramp-up accelerates. Moreover, higher offshoring, absorption of cost and improved profitability in SAP SBU would result in accelerated earnings momentum.

8/18/2014 68



Revenue (Rs m) 15,000 22,386 26,940 29,606 33,547

Growth (%) 46.6 49.2 20.3 9.9 13.3

EBITDA (Rs m) 2,181 3,655 4,233 4,137 5,220

PAT (Rs m) 1,454 1,991 2,490 2,620 3,312

EPS (Rs) 8.2 10.3 13.4 14.1 17.9

Growth (%) (24.1) 26.4 30.0 5.2 26.4

Net DPS (Rs) 0.4 0.8 1.9 2.2 2.5




EBITDA margin (%) 14.5 16.3 15.7 14.0 15.6

RoE (%) 22.1 22.8 21.5 18.9 20.2

RoCE (%) 19.5 20.9 20.2 17.8 18.9

EV / sales (x) 1.8 1.3 1.0 1.0 0.8

EV / EBITDA (x) 12.4 8.0 6.6 6.8 5.0

PER (x) 18.8 14.9 11.4 10.9 8.6

P / BV (x) 3.8 2.9 2.2 1.9 1.6



Stock Performance

(%) 1M 6M 12M

Absolute 5.8 (4.9) 33.4

Relative to Sensex 2.1 (26.9) 4.3


KPIT Technologies

8/18/2014 69



Net Revenue 15,000 22,386 26,940 29,606 33,547

Direct Expenses 9,934 14,640 18,180 20,443 23,144

% of Net Sales 66.2 65.4 67.5 69.1 69.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 2,885 4,091 4,528 5,026 5,184

% of Net Sales 19.2 18.3 16.8 17.0 15.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 2,181 3,655 4,233 4,137 5,220

Margin (%) 14.5 16.3 15.7 14.0 15.6

Depreciation 445 472 540 667 707

PBIT 1,736 3,184 3,693 3,469 4,513


PBT 1,786 2,860 3,430 3,589 4,537

Total tax 437 765 941 969 1,225


PAT 1,454 1,991 2,490 2,620 3,312


Adjusted PAT 1,454 1,991 2,490 2,620 3,312




Share Capital 356 386 371 371 371




Total Debt 1,189 1,602 1,534 1,534 1,534

Other Liabilities(net) 326 270 - - -

Deferred Tax Liability 8 - - - -


Gross Block 3,822 4,335 5,179 6,067 7,074


Net Block 1,668 1,762 2,138 2,359 2,658






Other Assets 4,309 5,668 7,058 7,058 7,058

Total Assets 8,649 12,235 14,251 16,359 19,209


LilladherPrabhudas Disclaimer

8/18/2014 70

BUY : Over 15% Outperformance to Sensex over 12-months Accumulate : Outperformance to Sensex over 12-months

Reduce : Underperformance to Sensex over 12-months Sell : Over 15% underperformance to Sensex over 12-months

Trading Buy : Over 10% absolute upside in 1-month Trading Sell : Over 10% absolute decline in 1-month

Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly

This document has been prepared by the Research Division of Prabhudas Lilladher Pvt. Ltd. Mumbai, India (PL) and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security.

The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accept any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein.

Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor.

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