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April 2019

India Strategy

Investors are advised to refer through important disclosures made at the last page of the Research Report.Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Research Team ([email protected])

Votefor Vote

for

FY18-20E:15.5% CAGR

606486

455423394413406369

NIFTY EPS

FY13

FY14

FY15

FY16

FY17

FY18

FY19

E

FY20

E

Contents India Strategy – India's PE movement: Politics to Economy 3-304QFY19 Highlights & Ready Reckoner 31-44Sectors & Companies 45-305Automobiles ...................................... 45-69 Amara Raja Batt. ............................................. 49 Ashok Leyland ................................................. 50 Bajaj Auto ..................................................... 51 Bharat Forge ................................................... 52 Bosch .............................................................. 53 CEAT ................................................................ 54 Eicher Motors ................................................. 55 Endurance Tech. ............................................. 56 Escorts ............................................................ 57 Exide Inds. ....................................................... 58 Hero Motocorp ............................................... 59 Mahindra & Mahindra .................................. 60 Maruti Suzuki .................................................. 61 Motherson Sumi ............................................. 62 Tata Motors .................................................. 63 TVS Motor ....................................................... 64

Capital Goods.......................................... 65-86 ABB ............................................................... 69 Bharat Electronics ........................................... 70 BHEL ............................................................. 71 Blue Star .......................................................... 72 CG Consumer Elect.......................................... 73 Cummins India .............................................. 74 Engineers India................................................ 75 GE T&D India ................................................... 76 Havells India .................................................... 77 Larsen & Toubro ........................................... 78 Siemens........................................................... 79 Thermax ....................................................... 80 Voltas .............................................................. 81

Cement ................................................... 82-96 ACC ............................................................... 87 Ambuja Cements ............................................. 88 Birla Corporation ............................................. 89 Grasim Industries ......................................... 90 India Cements ................................................. 91 J K Cements ..................................................... 92 Ramco Cements .............................................. 93 Sanghi Inds. ..................................................... 94 Shree Cement ................................................. 95 Ultratech Cement............................................ 96

Consumer .............................................. 97-119 Asian Paints ............................................... 101 Britannia ....................................................... 102 Colgate .......................................................... 103 Dabur ............................................................ 104 Emami ........................................................... 105 Future Consumer .......................................... 106 Godrej Consumer .......................................... 107 GSK Consumer .............................................. 108 Hind. Unilever ............................................... 109 ITC ................................................................. 110 Jyothy Labs .................................................... 111 Marico ........................................................... 112 Nestle ............................................................ 113 P&G Hygiene ................................................. 114 Page Industries.............................................. 115 Parag Milk Foods ........................................... 116 Pidilite Inds. .................................................. 117 United Breweries .......................................... 118 United Spirits ................................................ 119

Financials-Banks .................................. 119-147 AU Small Finance .......................................... 125 Axis Bank ....................................................... 126 Bank of Baroda ........................................... 127 DCB Bank....................................................... 128 Equitas Holdings............................................ 129 Federal Bank ................................................. 130 HDFC Bank .................................................. 131 ICICI Bank ................................................... 132 Indian Bank ................................................... 133 IndusInd Bank ............................................... 134

Kotak Mahindra Bank .................................... 135 Punjab National Bank .................................. 136 RBL Bank ........................................................ 137 State Bank ..................................................... 138 Yes Bank ........................................................ 139 HDFC Stand. Life ............................................ 140 ICICI Pru Life .................................................. 141

Financials-NBFC ................................... 142-157 Bajaj Finance.................................................. 145 Chola. Inv & Fin. ............................................. 146 HDFC .............................................................. 147 Indiabulls Housing ......................................... 148 L&T Fin.Holdings ............................................ 149 LIC Housing Fin .............................................. 150 M & M Financial ............................................ 151 MAS Financial ................................................ 152 Muthoot Finance ........................................... 153 PNB Housing .................................................. 154 Repco Home Fin ............................................ 155 Shriram City Union......................................... 156 Shriram Transport Fin. ................................... 157

Healthcare ........................................... 158-180 Alembic Pharma ............................................ 161 Alkem Lab ...................................................... 162 Ajanta Pharma ............................................... 163 Aurobindo Pharma ........................................ 164 Biocon ............................................................ 165 Cadila Health ................................................. 166 Cipla ........................................................... 167 Divis Labs ....................................................... 168 Dr Reddy’ s Labs ......................................... 169 Glenmark Pharma .......................................... 170 Granules India ............................................... 171 GSK Pharma ............................................... 172 IPCA Labs. ...................................................... 173 Jubilant Life ................................................... 174 Lupin .............................................................. 175 Sanofi India .................................................... 176 Shilpa Medicare ............................................. 177 Strides Pharma .............................................. 178 Sun Pharma ................................................... 179 Torrent Pharma ............................................. 180

Infrastructure ...................................... 181-186 Ashoka Buildcon ............................................ 183 IRB Infra ......................................................... 184 KNR Constructions ......................................... 185 Sadbhav Engineering ..................................... 186

Logistics .............................................. 187-191 Allcargo Logistics ........................................... 190 Concor ........................................................... 191

Media .................................................. 192-203 D B Corp ......................................................... 197 Ent.Network .................................................. 198 Jagran Prakashan ........................................... 199 Music Broadcast ............................................ 200 PVR ................................................................ 201 Sun TV............................................................ 202 Zee Entertainment ......................................... 203

Metals ................................................. 204-219 Hindalco ...................................................... 210 Hindustan Zinc ............................................... 211 JSPL ................................................................ 212 JSW Steel ....................................................... 213 Nalco ............................................................. 214 NMDC ............................................................ 215 Rain Industries ............................................... 216 SAIL ................................................................ 217 Tata Steel ....................................................... 218 Vedanta ......................................................... 219

Oil & Gas .............................................. 220-239 Aegis Logistics ............................................... 226 BPCL ........................................................... 227 GAIL ........................................................... 228 Gujarat Gas ................................................... 229 Gujarat State Petronet .................................. 230 HPCL .......................................................... 231 IOC ............................................................. 232 Indraprastha Gas ........................................... 233 Mahanagar Gas ............................................. 234 MRPL ............................................................. 235 Oil India ......................................................... 236 ONGC ......................................................... 237 Petronet LNG ................................................ 238 Reliance Inds. ................................................ 239

Retail ................................................... 240-244 Jubilant Foodworks ....................................... 243 Titan Company .............................................. 244

Technology .......................................... 245-263 Cyient ............................................................ 250 HCL Technologies .......................................... 251 Hexaware Tech. ............................................. 252 Infosys ........................................................ 253 L&T Infotech .................................................. 254 Mindtree ....................................................... 255 MphasiS ........................................................ 256 NIIT Tech. ...................................................... 257 Persistent Systems ........................................ 258 Tata Elxsi ....................................................... 259 TCS ................................................................ 260 Tech Mahindra .............................................. 261 Wipro .......................................................... 262 Zensar Tech ................................................... 263

Telecom ............................................... 264-272 Bharti Airtel ................................................... 269 Bharti Infratel ................................................ 270 Tata Comm .................................................... 271 Vodafone Idea ............................................... 272

Utilities ................................................ 273-290 CESC .............................................................. 275 Coal India ...................................................... 276 JSW Energy .................................................... 277 NHPC ............................................................. 278 NTPC ............................................................. 279 Power Grid Corp. ........................................... 280 Tata Power ................................................ 281 Torrent Power ............................................... 282

Others.................................................. 283-305 Avenue Supermarts ....................................... 283 Brigade Enterpr. ............................................ 284 BSE ................................................................ 285 Castrol India .................................................. 286 Coromandel International ............................. 287 Delta Corp ..................................................... 288 Godrej Agrovet .............................................. 289 Indian Hotels ................................................. 290 Info Edge ....................................................... 291 Interglobe Aviation........................................ 292 Kaveri Seed.................................................... 293 MCX ............................................................... 294 Navneet Education ........................................ 295 Oberoi Realty ................................................ 296 P I Industries.................................................. 297 Phoenix Mills ................................................. 298 Quess Corp .................................................... 299 S H Kelkar ...................................................... 300 SRF ................................................................ 301 Tata Chemicals .............................................. 302 Team Lease Serv. ........................................... 303 Trident .......................................................... 304 UPL ................................................................ 305

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India Strategy | India's PE movement: Politics to Economy

India's PE movement: Politics to Economy Banks dominate the earnings revival

Politics to dominate 1QFY20 narrative; Ex-Banking 4QFY19 earnings expected to be weak As we step into the new fiscal FY20, the backdrop for markets is dominated by

politics. The previous five years have seen the first government with fullmajority after 1989. India votes over the next 50 days and high-decibel politicalnoise will occupy the market’s attention as it struggles to figure out if the 17th

Lok Sabha will have another majority government or a coalition governmentwith one of the two national parties as a dominant partner or a coalitiongovernment of regional parties backed by one of the national party. Once thedust settles on politics in 1QFY20, we expect the market’s focus to revert tofundamentals. Narratives like earnings revival led by banking, global growth andcentral bank policies, rural consumption trends given the predictions of below-normal monsoons, and the inter-play of crude and currency will dominate thediscourse, in our view.

The market’s performance has been impressive so far in CY19, with the Niftyand the Nifty Mid-cap 100 delivering 7.4% and 2.1% returns, respectively. Thesharp underperformance of mid- and small-caps over Dec’17-Feb’19 has alsobeen arrested in Mar’19, with USD4.8b of FII inflows in the month. What isrelatively more comforting is the participation of broader markets in the rally, asagainst a very narrow nature of consolidation seen in Nifty over Dec’17-Feb’19,a point discussed in greater detail in one of our previous note.

The 4QFY19 earnings-report season will be a repeat of 3QFY19, with Financialsdriving the performance singlehandedly. Global Cyclicals – the driver of earningsgrowth over the last few quarters – have decelerated sharply.

Corporate banks will account for entire growth in the Nifty and the broaderMOFSL Universe’s earnings performance. PSU Banks will benefit from a benignYoY comparison due to a loss of INR241b in 4QFY18, even as profits stay flatsequentially. IT is likely to post the fifth straight quarter of double-digit profitgrowth, aided by momentum in deal activity. NBFCs might face significantdeceleration in profit growth, but still post a respectable double-digit number.

We expect MOFSL Universe PAT to grow 29% YoY, led by Financials and draggedby Metals. Global Cyclicals are likely to post a decline of 14% in profit, whileDefensives are expected to post flat profits YoY. Domestic Cyclicals will post 4xYoY jump in PAT. MOFSL ex-OMC and PSU Banks PAT growth is estimated at 2%.

We expect Nifty sales, EBITDA and PAT to increase by 11%, 2% and 15% on abase of 16%, 22% and 8% growth, respectively. Ex-Corporate Banks, Nifty profitsare expected to decline 2.7% YoY. Our Nifty EPS estimates for FY19/20 havebeen cut by 2.1%/3.6% to INR486/INR606 (prior: INR496/INR629). We are nowbuilding in EPS growth of 6.8%/24.8% for the Nifty for FY19/20. Excludingcorporate banks, FY20 Nifty profits are expected to grow 14%.

India Strategy BSE Sensex: 39,057 S&P CNX: 11,713

Sources of exhibits in this report include RBI, CMIE, Bloomberg, IMF, Industry, Companies, and MOFSL database

http://ftp.motilaloswal.com/emailer/Research/MID-CAP-STRATEGY-20190306-MOSL-SU-PG018.pdf

April 2019 4


Top Picks Large-Caps: ICICI Bank, SBI, Maruti, Titan, Coal India, Bharti Airtel, L&T, Infosys, ACC. Mid-Caps: Federal Bank, Shriram Transport, Godrej Agrovet, Indian Hotels, Marico, IGL, Exide, Jindal Steel, Alkem Labs. Key sectoral trends/highlights Auto Universe is expected to report a 28% YoY PAT decline on a modest base

(6% YoY growth in base quarter) – a fourth consecutive quarter of double-digit PAT decline. Even after excluding Tata Motors, the Auto Universe is expected to post PAT decline of 16% YoY. We expect EBITDA margin to shrink by 180bp YoY to 11.4%, impacted by weak operating leverage (volumes continue softening across the board in 4QFY19) and higher variable marketing spend.

Technology will post another healthy set of numbers, with sales/EBITDA/PAT growth of 17.7%/18.1%/12.6%. This will be the fifth consecutive quarter of double-digit PAT growth. There is significant revenue acceleration amid strong momentum in deal activity; however, INR appreciation can act as a headwind. TCS is expected to account for 43% of incremental PAT of our Technology Universe.

Private Banks are expected to report a strong set of numbers (79% PAT growth – a multi quarter high), driving 20% of the entire PAT delta of our universe. Entire universe, barring IndusInd Bank (-45% YoY) and Yes Bank (-18% YoY), is expected to report double-digit earnings growth, with Axis Bank (loss to profit), Federal Bank (143% YoY) and ICICI Bank (112% YoY) leading the pack.

NBFCs are likely to post another quarter of double-digit growth (13% YoY), slowest since Mar’17. In recent times, 4QFY19 was one of the toughest quarters for most NBFCs under our coverage. While liquidity started improving toward end-3QFY19, a number of events (Cobrapost, Essel Group related, etc.) led to it tightening once again. Bajaj Finance is expected to post another strong quarter, with 40%+ profit growth. SHTF (81%), LTFH (46%), LIC HF (25%) and PNB HF (26%) are expected to deliver healthy profit growth, while MMFS, Chola, Indiabulls Housing Finance and Repco are expected to post subdued growth in profitability.

PSU Banks are expected to report second consecutive quarter of profit (led by lower slippages and a decline in provisioning requirement) after four consecutive quarters of losses, while Telecom is expected to report a loss for the seventh straight quarter. PSU Banks had posted a loss of INR241b in 4QFY18, and are now accounting for the entire profit growth of MOFSL Universe in 4QFY19.

Consumer Universe profits are expected to grow 7.8% YoY on a strong base (base quarter profits grew by 17% YoY), with United Spirits (-21% YoY), Pidilite (-6% YoY) and Godrej Consumer (-6% YoY) expected to post de-growth. United Breweries (24%), Marico (23%), Asian Paints (18%) and Britannia (13%) are expected to post a strong set of numbers. Management commentaries suggest a slight moderation in the demand environment. In Retail, Titan is expected to deliver another solid quarter (25% YoY).

Metals are expected to post PAT de-growth (-34% YoY) for the first time after eight quarters. Within our coverage universe, barring Hindalco, every other

April 2019 5


company is expected to report an earnings decline. Metals had a stellar run in the last three years and profitability of our Metals Universe has more than tripled from INR135b in FY16 to INR459b in FY19.

Oil & Gas is expected to report a flattish profit, driven by a significant YoY decline at OMCs owing to lower GRM. ONGC is expected to report 26% PAT growth. Ex-OMCs, we expect 15% YoY growth in O&G profits.

Cement is expected to post 9% YoY profit growth on a strong base (24% YoY growth in 4QFY18), after delivering 18% growth in 3QFY19, with ACC (44%), JK Cement (39%) and Ramco Cements (19%) likely to lead the pack.

Capital Goods are expected to report sales/EBITDA/PAT growth of 9.6%/9.3%/9.3%, with Bluestar/Thermax/BHEL expected to lead the pack delivering 82%/29%/27 PAT growth. ABB, Bharat Electronics and Voltas are expected to post 40%/15%/9% PAT decline YoY.

Utilities sector is expected to report (-5%) PAT de-growth. Utilities ex Coal India is expected to post growth (1.6% YoY), with NHPC posting the biggest decline (53%) in our universe. Coal India is expected to post PAT de-growth after five quarters, dragging growth of the entire universe, whereas JSW Energy is expected to post a loss.

Healthcare is expected to deliver 15.8% PAT growth in 4QFY19 on a low base (5% YoY decline in 4QFY18). Large cap Cipla is expected to post flat YoY profit, while Dr. Reddy, Lupin and Sun are expected to report 36%, 19% and 7% YoY profit growth.

Model portfolio Improvement in the market sentiment led by strong FII flows in Feb-Mar’19 has

corrected the underperformance of beaten-down ‘value ’stocks to an extent. While the macro environment remains stable, the recent up-move in markets has made valuations somewhat expensive. Weak high frequency data and election risk ahead keep us calibrated in our portfolio stance. Our model portfolio continues to reflect our bias for earnings visibility and growth. Overall, we continue favoring Private Financials (with more emphasis on Corporate Banks), Consumer Discretionary, Industrials and select quality Mid-caps. We had highlighted the divergence of mid-caps v/s large-caps in our recent strategy report, and have turned incrementally more positive on mid-caps since then.

BFSI: We stay overweight on corporate banks and remain positive on ICICI Bank and Axis Bank. As a reflection of our confidence in the credit cycle having turned, we raise further weights in SBI. Credit cycle is showing clear recovery signs, as evident in the declining NPL formation (SBIN’s 3QFY19 slippage was the lowest in the past 13 quarters). The size of SMA-1&2 accounts at INR170.5b (<1% of advances) and the steady trends in core portfolio will drive a further improvement in asset quality over FY20/21, and hence, earnings. Amongst mid-size banks, our preferred picks are Ratnakar Bank and Federal Bank.

In NBFC, we replace LIC Housing Finance with Shriram Transport after the former’s sharp run-up. SHTF’s growth and return ratios have rebounded after three years of regulatory pain (due to NPL migration) and some impact of demonetization and GST. The company has managed its margins and asset quality well. It has navigated the stressed liquidity situation comfortably. Bulk of the loans generated is eligible for priority-sector lending, and hence, the




April 2019 6


company should be able to generate liquidity through sell-downs. ROEs have already improved to ~17% v/s the average of 12% over the past three years.

Consumer: We retain HUL and Titan in the model portfolio, given our structural positive view on both the names. We also maintain our positive view on Marico.

Information Technology: In IT, we maintain our positions in Infosys and Tech Mahindra. Valuations remain reasonable given the underlying cash return policy to shareholders. It also serves as defensive bastion in volatile markets.

Cement and Capital Goods: We are replacing Shree Cements with ACC. The profitability gap between ACC and its peers has narrowed significantly over the last few quarters. The company has also done well to manage costs through efforts such as increasing the proportion of linkage coal, reducing the lead distance and route optimization. The stock trades at an attractive valuation of 7.7x CY 20 EV/EBITDA. We are replacing Thermax with Siemens as increasing share of product business offers scope for margin improvement over the next five years. Valuations provide comfort as SIEM trades at a discount to its historical trading average as well as peers – 30% discount to its LTA.

Metals & Utilities: In Utilities, we are adding Coal India and replacing Power Grid with NTPC. Coal India has delivered 35% average earnings growth over FY17-19, driven by price hike, annual volume growth of 5% and operating leverage. Quality and wage hike related issues are now behind. Volume growth of 5-6%, operating leverage due to natural attrition and an increase in the share of e-auction volumes will drive up earnings over the next few years. Valuations are compelling at EV/EBITDA of 4x and P/E of 8x xFY20E, which is at a discount of ~40% to its historical trend. Dividend yield of 8% is quite attractive too. For NTPC, the CERC regulations 2019-24 have been very constructive and provide visibility for the next five years. Most of the issues that dragged the stock performance in the last 2-3 years have been addressed. Strong pipelines of projects provide visibility for earnings growth. We expect earnings CAGR of 19-20% along with 300bp improvement in RoE to 13% over FY19-21. The stock trades at attractive P/BV of 1.1x and P/E of 9.8x FY20.

Mid-caps: We are introducing Godrej Agrovet, Torrent Pharma and Alkem Labs in our model portfolio. In Torrent Power, we expect EBITDA CAGR of ~12% over FY19-21, led by Renewables and DF business. Torrent Power’s balance sheet position is comfortable (net debt: equity: ~1x) and it is well poised to capitalize on opportunities stemming from distribution privatization, thrust on RE, and consolidation in the conventional generation sector. Godrej Agrovet sights holistic growth going forward, driven by (a) crop protection – 10 expected product launches over 3-5 years and capacity expansion in triazole chemistry, (b) palm oil – to tap the opportunity arising out of GoI’s focus on promoting cultivation and (c) animal feed – low compound feed penetration and a decline in fodder availability to drive industry growth. Alkem Labs is in the process of ramping-up business from the chronic portfolio in the domestic formulation market. We expect ALKEM to deliver 15% CAGR in sales over FY19-21 in domestic branded business. With US business having reached breakeven, new launches would enable improved operating leverage, driving better profitability from the US business.

April 2019 7


It’s all about Banks! Earnings headwinds emerging for FY20

CY19 has seen a change in market sentiment. Dovish global central bank action and commentary have aided emerging market trade. That, coupled with improving sentiment on politics post the Balakot air strike by Indian Air Force, has resulted in inflow of USD4.8b dollars in the month of Mar’19 alone. The significant underperformance of mid- and small-caps v/s large-caps since Dec’17 has been arrested in the last one month. The RBI, in its April’10 monetary policy, cut the repo rate by another 25bp and further lowered its inflation forecasts for 2HFY19 and 1HFY20. However, two key concerns in the near term are: [A] Weak high frequency indicators (IIP, auto numbers, core sector growth), which points toward growth risk ahead, and the outcome of general elections in May’19. A stable government with majority will ensure continuance of policy reforms and decision making and shift the focus back toward fundamentals. At the same time, emergence of third front coalition without either of the two national parties in the driver’s seat will muddy the waters as far as policy reform initiatives and decision making are concerned and result in elevated market volatility and pose macro risks (currency, twin deficits, yields), in our view.

Overall, as far as 4QFY19 earnings season is concerned, Financials will dominate the narrative, with Banking alone accounting for more than 100% of incremental YoY earnings in 4QFY19. The baton has well and truly shifted from Global Cyclicals to Domestic Cyclicals, as highlighted by us in our earlier Strategy previews. Autos remain weak, while Telecom is still posting losses.

Financials to drive earnings in 4QFY19 MOFSL Universe is expected to deliver earnings growth of 29% in 4QFY19, led by

Financials, even as Global Cyclicals (led by commodity price correction, Metals expected to post profit decline after eight quarters of stupendous performance) and Defensives are likely to drag the performance.

Approximately 33% of MOFSL Universe is expected to post a YoY decline in PAT, while 41% of the MOFSL Universe is expected to post >15% growth.

In 4QFY19, Domestic Cyclicals are likely to contribute 37% of the profit pool, followed by Global Cyclicals (35%) and Defensives (28%).

We expect MOFSL Universe revenue to grow 11% YoY in the quarter (revenue grew 15% YoY in the base quarter) – lower than 21% growth in 3QFY19, largely due to (a) moderation in commodity prices, which is leading Metals to post nine-quarter low YoY top-line growth and (b) across-the-board slowdown in Automobiles, which is expected to post flat revenue growth.

MOFSL Universe EBITDA growth is estimated at 4% YoY, with the operating margin ex-Financials and OMCs compressing by 150bp YoY to 18.7%.

Global Cyclicals are expected to post second consecutive quarter of PAT de-growth (-14% YoY) after five consecutive quarters of double-digit growth. Global Cyclicals were driving a lion’s share of MOFSL Universe PAT delta in the previous quarters. As we highlighted in our 3QFY19 Strategy preview report, the baton of earnings growth has shifted to Domestic Cyclicals and predominantly Financials, as Automobiles performance remains subdued (expect third consecutive quarter of 20%+ YoY earnings decline for MOFSL Auto universe).

4QFY19 PREVIEW 4QFY19 PREVIEW

April 2019 8


Defensives are expected to post flattish set of numbers (-1% YoY PAT), as Telecom universe is expected to post another quarter of losses, offsetting the healthy performance by IT (13% PAT growth, fourth consecutive quarter of double-digit growth) and Consumer (8% YoY profit growth).

For 4QFY19, Domestic Cyclicals’ EBITDA and PAT are expected to grow by 13% and ~4x YoY, respectively, driven by Financials. Domestic Cyclicals had posted a decline of 62% YoY in profit in 4QFY18.

Earnings breadth remains weak; Domestic Cyclicals to drive earnings Earnings breadth is expected to remain similar to 3QFY19, with 33% of MOFSL

Universe likely posting a YoY decline in PAT. The number of companies expected to report growth (>30%) has declined from 30% to 23%, while that of companies expected to report growth (0-15%) is expected to increase to 26%.

Global Cyclicals (Metals and Oil & Gas) have taken backstage in 4QFY19 and have paved way for Domestic Cyclicals and in particular Financials to drive earnings growth.

Apart from Financials, IT and FMCG are expected to contribute to incremental earnings in 4QFY19. Autos will post a 28% YoY decline in earnings, while Telecom will post another quarter of elevated losses, dragging the aggregate performance.

Snapshot of sector performance Auto Universe is expected to report a 28% YoY PAT decline on a modest base

(6% YoY growth in base quarter) – a fourth consecutive quarter of double-digit PAT decline. Even after excluding Tata Motors, the Auto Universe is expected to post PAT decline of 16% YoY. We expect EBITDA margin to shrink by 180bp YoY to 11.4%, impacted by weak operating leverage (volumes continue softening across the board in 4QFY19) and higher variable marketing spend.

Technology will post another healthy set of numbers, with sales/EBITDA/PAT growth of 17.7%/18.1%/12.6%. This will be the fifth consecutive quarter of double-digit PAT growth. There is significant revenue acceleration amid strong momentum in deal activity; however the INR appreciation can act as a headwind. TCS is expected to account for 43% of incremental PAT of our Technology Universe.

Private Banks are expected to report a strong set of numbers (79% PAT growth-multi quarter high), driving 20% of the entire PAT delta of our universe. Entire universe barring IndusInd Bank (-45% YoY) and Yes Bank (-18% YoY) is expected to report double-digit earnings growth, with Axis Bank (loss to profit), Federal Bank(143% YoY) and ICICI Bank (112% YoY) leading the pack.

NBFCs are likely to post another quarter of double-digit growth (13% YoY), slowest since Mar’17. In recent times, 4QFY19 was one of the toughest quarters for most NBFCs under our coverage. While liquidity started improving toward end-3QFY19, a number of events (Cobrapost, Essel Group related, etc.) led to it tightening once again. Bajaj Finance is expected to post another strong quarter, with 40%+ profit growth. SHTF (81%), LTFH (46%), LIC HF (25%) and PNB HF (26%) are expected to deliver healthy profit growth, while MMFS, Chola, Indiabulls Housing Finance and Repco are expected to post subdued growth in profitability.

April 2019 9


PSU Banks are expected to report second consecutive quarter of profit (led by lower slippages and a decline in provisioning requirement) after four consecutive quarters of losses, while Telecom is expected to report a loss for the seventh straight quarter. PSU Banks had posted a loss of INR241b in 4QFY18, and are now accounting for the entire profit growth of MOFSL Universe in 4QFY19.

Consumer Universe profits are expected to grow 7.8% YoY on a strong base (base quarter profits grew by 17% YoY), with United Spirits (-21% YoY), Pidilite (-6% YoY) and Godrej Consumer (-6% YoY) expected to post de-growth. United Breweries (24%), Marico (23%), Asian Paints (18%) and Britannia (13%) are expected to post a strong set of numbers. Management commentaries suggest a slight moderation in the demand environment. In Retail, Titan is expected to deliver another solid quarter (25% YoY).

Metals are expected to post PAT de-growth (-34% YoY) for the first time after eight quarters. Within our coverage universe, barring Hindalco, every other company is expected to report an earnings decline. Metals had a stellar run in the last three years and profitability of our Metals Universe has more than tripled from INR135b in FY16 to INR459b in FY19.

Oil & Gas is expected to report a flattish profit, driven by a significant YoY decline at OMCs owing to lower GRM. ONGC is expected to report 26% PAT growth. Ex-OMCs, we expect 15% YoY growth in O&G profits.

Cement is expected to post 9% YoY profit growth on a strong base (24% YoY growth in 4QFY18), after delivering 18% growth in 3QFY19, with ACC (44%), JK Cement (39%) and Ramco Cements (19%) likely to lead the pack.

Capital Goods are expected to report sales/EBITDA/PAT growth of 9.6%/9.3%/9.3%, with Bluestar/Thermax/BHEL expected to lead the pack delivering 82%/29%/27 PAT growth. ABB, Bharat Electronics and Voltas are expected to post 40%/15%/9% PAT decline YoY.

Utilities sector is expected to report (-5%) PAT de-growth. Utilities ex Coal India is expected to post growth (1.6% YoY), with NHPC posting the biggest decline (53%) in our universe. Coal India is expected to post PAT de-growth after five quarters, dragging growth of the entire universe, whereas JSW Energy is expected to post a loss.

Healthcare is expected to deliver 15.8% PAT growth in 4QFY19 on a low base (5% YoY decline in 4QFY18). Large cap Cipla is expected to post flat YoY profit, while Dr. Reddy, Lupin and Sun are expected to report 36%, 19% and 7% YoY profit growth.

Domestic Cyclicals’ share in MOFSL Universe earnings would be at 37%, while Global Cyclicals/Defensives would account for 31%/29% respectively.

Nifty sales/EBITDA/PAT are expected to grow by 11%/2%/15% in 4QFY19. Nifty EPS cut 2.1%/3.6% for FY19/20: Our FY19/20 Nifty EPS estimates have

been cut by 2.1%/3.6% to INR486/INR606 (prior: INR496/INR629). We are now building in EPS growth of 6.8%/24.8% for the Nifty for FY19/20. Excluding corporate banks, FY20 Nifty profits are expected to grow 14%. For FY20, major earnings upgrades are in BPCL (15%), IOC (12%), Yes Bank (9%), Bharti Infratel (7%) and Grasim Industries (5%), while the major earnings downgrades are in Tata Motors (-29%), Vedanta (-19%), Eicher Motors (12%), Cipla (-12%) and Sun Pharma (-12%).

April 2019 10


Exhibit 1: Profit growth led by Financials, whereas Automobiles will post third consecutive quarter of 20%+ profit decline

Sector Sales EBITDA Net profit PAT Delta EBITDA Margins

PAT Margins

(No of Companies) Mar-19

Var % YoY

Var % QoQ

Mar-19

Var % YoY

Var % QoQ

Mar-19

Var % YoY

Var % QoQ

PAT Delta

Share %

Share %

Chg bp YoY

Chg bp YoY

High growth sectors 1,702 18 1 741 19 6 284 -449 2 365 22 128 38 2,233 PSU Banks (4) 340 19 2 239 24 17 49 LP 2 290 4 101 300 9,853 Private Banks (11) 369 21 3 309 13 2 132 79 2 58 10 20 -597 1,157 Media (7) 49 13 -10 16 11 -19 8 45 -23 3 1 1 -69 375 Retail (2) 56 15 -18 7 22 -10 5 23 -8 1 0 0 71 57 Others (23) 394 22 3 71 31 13 31 20 10 5 2 2 112 -18 Healthcare (20) 458 14 0 95 24 -2 54 16 1 7 4 3 168 19 Logistics (2) 36 17 8 5 19 12 4 15 16 0 0 0 18 -21 Med/Low growth sectors 2,130 14 2 585 15 3 390 11 3 39 30 14 13 -52 Technology (14) 1,120 18 1 264 18 1 195 13 -1 22 15 8 9 -79 NBFC (13) 171 9 -1 134 11 0 82 13 6 9 6 3 158 173 Cement (10) 319 11 9 60 18 24 29 9 37 2 2 1 121 -17 Consumer (19) 519 12 2 127 11 5 85 8 0 6 7 2 -9 -60 PAT de-growth sectors 10,671 10 1 1,519 -5 10 615 -16 22 -118 48 -41 -224 -177 Oil & Gas (14) 5,057 17 -5 533 -1 17 289 2 20 4 22 2 -191 -88 Life Insurance (2) 199 14 39 8 14 40 7 -2 24 0 1 0 2 -54 Capital Goods (13) 782 10 27 100 9 50 59 9 51 5 5 2 -5 -2 Utilities (8) 704 -4 -5 258 -1 1 115 -5 14 -6 9 -2 112 -12 Infrastructure (4) 46 20 8 11 11 -2 4 -18 -2 -1 0 0 -197 -408 Auto (16) 1,854 0 10 212 -13 24 84 -28 33 -33 7 -11 -179 -177 Metals (10) 1,623 3 2 298 -14 -5 97 -34 -17 -49 8 -17 -368 -335 Telecom (4) 406 21 1 99 -6 2 -41 Loss Loss -39 -3 -13 -701 -939 MOFSL (196) 14,504 11.3 1.3 2,845 4.1 7.7 1,289 28.5 10.7 286 100 100 -135 119 MOFSL Ex Metals, Oil & PSU Banks (168) 7,483 9.0 6.0 1,775 7.1 6.5 854 5.0 12.5 -42 -43 MOFSL Excl. OMCs, Metals & PSU Banks (179) 9,876 12.9 4.2 2,169 7.9 3.1 1,070 6.8 8.6 -103 -62 Sensex (30) 6,819 11.4 3.7 1,737 2.5 3.1 795 22.4 3.5 -220 105 Nifty (50) 10,401 10.9 0.6 2,250 2.4 7.2 1,018 15.4 7.3 -178 39

MOFSL Universe: Double-digit sales growth trajectory intact, PAT growth at a 19-quarter high of 29%, Defensives’ PAT to stay flat YoY

Exhibit 2: Double-digit sales growth for MOFSL Universe but lowest in seven quarters

3

Exhibit 3: Sales growth of Defensives stays strong at 12%

Exhibit 4: Earnings growth to come in at 29% for MOFSL Universe (base quarter earnings de-growth of 7%)

Exhibit 5: Earnings to stay flat for Defensives on a weak base (growth of 4% in the base quarter)

16 19

10 8 7

12 12 11

14 5

0 -11 -4 -5 -5

3

-2

4 8 15

11 12

15 15 23

25 21 11

Jun-

12Se

p-12

Dec-

12M

ar-1

3Ju

n-13

Sep-

13De

c-13

Mar

-14

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

Jun-

16Se

p-16

Dec-

16M

ar-1

7Ju

ne-1

7Se

p-17

Dec-

17M

ar-1

8Ju

ne-1

8Se

p-18

Dec-

18M

ar-1

9E

17

12 10 8 9 10 8

12 9

6 4

1

-1

2 3 5

9 11

16 12

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

Jun-

16Se

p-16

Dec-

16M

ar-1

7Ju

ne-1

7Se

p-17

Dec-

17M

ar-1

8Ju

ne-1

8Se

p-18

Dec-

18M

ar-1

9E

-38

67

-4

4

93

-10

6

0

34 6

-6 -10

8 2 5

-7

2 7 16 16

-6

14 17

-7

14 3 2 29

Jun-

12Se

p-12

Dec-

12M

ar-1

3Ju

n-13

Sep-

13De

c-13

Mar

-14

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

Jun-

16Se

p-16

Dec-

16M

ar-1

7Ju

ne-1

7Se

p-17

Dec-

17M

ar-1

8Ju

ne-1

8Se

p-18

Dec-

18M

ar-1

9E

23 17

-4

10 7 12 14 10 13

7

-2 -4 -13

-5

0 4 11

0

-7 -1

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

Jun-

16Se

p-16

Dec-

16M

ar-1

7Ju

ne-1

7Se

p-17

Dec-

17M

ar-1

8Ju

ne-1

8Se

p-18

Dec-

18M

ar-1

9E

April 2019 11


Exhibit 6: EBITDA margin to shrink by 150bp in 4QFY19

Source: MOFSL

Exhibit 7: PAT margin to shrink by 150bp in 4QFY19

Source: MOFSL

With 29% growth, MOFSL Universe absolute PAT to be at all-time high 4QFY19 earnings are expected to be driven by Domestic Cyclicals, which are

likely to post 4x growth in YoY PAT, led by depressed base owing to Financials. The share of Defensives, Domestic Cyclicals and Global Cyclicals in the profit pool stands at 28%, 37% and 35%, respectively.

Global Cyclicals are expected to post de-growth, whereas Defensives are expected to post flattish growth (-0.6% YoY).

Exhibit 8: Sectoral quarterly PAT trend (INR b) Sector FY16 FY17 FY18 FY19 Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar (E) Auto 102 72 88 123 82 88 57 109 71 110 83 115 61 82 62 83 Capital Goods 14 16 6 45 16 24 24 54 21 32 29 53 31 38 38 58 Cement 14 16 16 23 27 22 17 21 27 20 18 26 28 21 21 29 Consumer 57 58 64 60 65 65 64 67 65 72 75 79 78 83 84 85 Financials 194 198 126 61 153 156 174 131 186 191 151 -94 115 153 253 263 Private Banks 91 98 106 83 94 94 97 102 102 98 104 71 88 101 126 128 PSU Banks 65 59 -23 -72 14 9 27 -27 29 29 -18 -241 -51 -30 48 49 NBFC 36 40 41 47 43 50 49 53 51 61 63 72 74 79 77 81 Healthcare 55 56 55 55 60 61 55 48 32 49 48 46 44 52 52 52 Infrastructure 3 3 3 2 3 3 3 4 4 3 4 5 5 3 4 4 Logistics 3 3 3 4 2 2 2 3 3 3 3 3 3 4 3 4 Media 7 7 7 5 7 7 8 8 8 8 9 6 10 9 11 8 Metals 48 57 -13 30 34 38 54 99 69 79 113 146 125 124 118 97 Oil & Gas 233 119 185 204 270 200 224 236 198 245 303 283 298 272 237 287 Oil & Gas Ex OMCs 136 120 132 149 140 148 146 163 155 167 183 187 189 217 223 213 Retail 2 2 3 2 2 2 3 2 3 3 3 4 4 4 5 5 Technology 140 151 153 157 152 157 163 155 152 162 165 170 171 191 194 192 Telecom 13 23 27 29 29 24 9 13 3 0 -3 -2 -12 -48 -66 -41 Utilities 91 89 92 93 86 73 82 84 87 75 92 121 106 107 101 115 Others 15 11 14 15 17 15 16 21 18 17 23 22 23 22 22 23 MOFSL Universe 989 877 826 908 1,004 935 954 1,052 943 1,065 1,114 980 1,085 1,112 1,139 1,259

18.6

18

.2

18.0

18

.8

18.2

18

.4

18.5

18

.5

18.9

18

.4

18.2

18

.9

20.0

18

.6

18.9

20

.3

21.3

20

.0

20.1

19

.3

19.4

20

.2

20.5

20

.2

20.2

19

.6

19.0

18

.7

June

-12

Sep-

12De

c-12

Mar

-13

June

-13

Sep-

13De

c-13

Mar

-14

June

-14

Sep-

14De

c-14

Mar

-15

June

-15

Sep-

15De

c-15

Mar

-16

June

-16

Sep-

16De

c-16

Mar

-17

June

-17

Sep-

17De

c-17

Mar

-18

June

-18

Sep-

18De

c-18

Mar

-19E

MOSL Universe EBITDA Margin LPA: 19.2%

10.3

9.

8 9.

4 10

.2

9.2

9.4

10.3

10

.0

10.0

9.

6 9.

0 9.

7 10

.0

9.7

9.3

10.8

10

.4

10.0

9.

5 10

.3

9.5

9.9

10.0

10

.3

9.3

9.1

8.6

8.8

June

-12

Sep-

12De

c-12

Mar

-13

June

-13

Sep-

13De

c-13

Mar

-14

June

-14

Sep-

14De

c-14

Mar

-15

June

-15

Sep-

15De

c-15

Mar

-16

June

-16

Sep-

16De

c-16

Mar

-17

June

-17

Sep-

17De

c-17

Mar

-18

June

-18

Sep-

18De

c-18

Mar

-19E

MOSL Universe PAT Margin LPA: 9.8%

April 2019 12


Exhibit 9: Sectoral quarterly PAT growth trend (%) Sector FY16 FY17 FY18 FY19 Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec MarE Auto 8 -10 10 92 -20 22 -35 -12 -14 25 46 6 -13 -26 -25 -28 Capital Goods -23 -18 -72 1 19 54 308 19 29 31 22 -2 50 21 33 9 Cement -27 10 64 45 98 40 3 -9 2 -9 6 24 1 5 18 9 Consumer 9 4 8 7 13 13 1 11 0 10 16 17 20 15 13 8 Financials 4 12 -30 -70 -21 -21 38 116 21 23 -13 PL -38 -20 67 LP Private Banks 10 14 12 -16 3 -3 -9 22 9 4 8 -30 -14 2 21 81 PSU Banks -7 2 PL PL -78 -84 LP Loss 107 211 PL Loss PL PL LP LP NBFC 4 16 16 8 19 24 18 14 19 22 28 36 44 30 22 12 Health Care 17 8 53 39 8 10 2 -13 -46 -21 -14 -4 37 6 9 13 Infrastructure 16 60 27 -14 10 -8 27 70 43 8 33 26 8 18 -2 -18 Logistics -8 12 -31 6 -17 -24 -11 -28 27 31 33 21 0 36 3 15 Media 23 27 -1 -3 5 6 1 51 14 8 17 -28 26 15 22 45 Metals -45 -38 PL -28 -29 -33 LP 237 102 108 108 47 82 58 4 -34 Oil & Gas 46 -9 218 -16 16 68 21 16 -27 22 35 20 50 11 -22 1 Oil & Gas Ex OMCs 11 -5 61 15 3 24 10 9 10 12 26 15 22 30 21 14 Retail -13 -37 13 -13 33 13 -1 -9 15 71 38 94 48 16 46 23 Technology 7 11 7 12 9 4 7 -2 0 3 1 10 12 18 18 13 Telecom -47 -21 -12 -3 123 7 -65 -55 -90 PL PL PL PL Loss Loss Loss Utilities 5 32 20 -6 -6 -18 -11 -10 1 2 12 45 22 43 10 -5 Others 8 -7 4 203 14 39 16 44 3 14 39 3 29 29 -2 6 MOFSL Universe 6 0 3 -9 1 7 16 16 -6 14 17 -7 15 4 2 28

Source: MOFSL Note: Comparable Universe, excludes Alkem Lab, Avenue Supermarts, CG Consumer Elect, Endurance Tech, AU Small Finance Bank, Equitas Holdings, Gujarat Gas, HDFC Stand. Life, ICICI Pru Life, Interglobe Aviation, Mahanagar Gas, MAS Financial, Music Broadcast, Quess Corp, RBL Bank, S H Kelkar, L&T Infotech,Team Lease and Godrej Agrovet.

Exhibit 10: Key assumptions Macro 1QFY19 2QFY19 3QFY19 4QFY19E FY18 FY19E FY20E FY21E

GDP Growth (%) 8.0 7.0 6.6 6.2 7.2 6.9 6.7 6.8 IIP Growth (%) 5.1 5.3 3.6 3.7 4.4 4.4 5.0 4.6 Inflation CPI-RU (%) 4.8 3.9 2.6 3.1 3.6 3.4 3.1 3.5 Currency: USD/INR 67.1 70.1 72.1 70.6 64.5 70.0 72.7 73.8 Repo Rate (%) 6.25 6.50 6.50 6.25 6.00 6.25 6.25 6.25 Interest Rate (%): 1Year CP Rate (Avg) 8.00 8.30 8.73 8.51 7.34 8.39 8.16 8.00 10Year G Sec (Avg) 7.73 7.90 7.70 7.37 6.93 7.68 7.26 7.10 Sectoral

Auto: CV Volume growth (%) 61.8 27.7 -2.5 -4.0 17.7 14.7 17.5 -6.8 Car Volume growth (%) 25.9 -1.5 -0.6 0.5 13.4 5.0 9.0 7.9 Banking: Loan Growth (%) 12.4 12.4 14.5 13.8 9.8 13.8 15.2 16.0 Cement: Volume growth (%) 13.0 10.0 9.5 7.5 6.3 10.0 7.5 7.5 Capital Goods: L&T order Intake (INRb) 361 419 422 555 1,529 1,757 1,964 2,218 Capital Goods: L&T order Intake (% YoY) 36.7 45.5 -12.3 11.9 6.9 14.9 11.8 12.9 Metal: Steel (USD/Tonne) 726 685 678 625 631 675 606 615 Aluminum (USD/Tonne) 2,259 2,058 1,973 1,950 2,045 2,060 2,000 2,000 Zinc (USD/Tonne) 3,124 2,541 2,631 2,600 3,048 2,724 2,700 2,500 Oil: Brent (USD/bbl) 74.6 75.3 67.7 63.4 57.6 70.3 70.0 70.0 Oil & Gas: Under Recoveries (INRb) 81 123 143 139 236 486 545 554 Singapore GRM (USD/bbl) 6.1 6.0 4.3 2.9 7.2 4.8 6.0 6.0 Technology: $Revenue growth (%) 0.8 3.3 1.9 2.0 8.4 8.2 10.2 9.6

' * CV volume for Tata Motors and Ashok Leyland; PV Volume for Maruti Suzuki (total volume growth)

April 2019 13


Exhibit 11: Sectoral PAT growth YoY in 4QFY19 (%)

Exhibit 12: Sectoral PAT growth QoQ in 4QFY19 (%)

Exhibit 13: Approximately 33% of the companies are likely to report PAT decline, while 23% of the companies are expected to post >30% PAT growth

41% of the companies would grow at >15% YoY, and 23% of the Universe would report >30% PAT growth. 33% of the Universe would report PAT de-growth.

Banks to account for more than 100% of 4QFY19 incremental earnings YoY Domestic Cyclicals are expected to post multi-quarter-high earnings growth of

295% YoY, led by Financials, even as Auto universe posts its fourth consecutive quarter YoY PAT decline.

Global Cyclicals are expected to post an earnings decline of 14% YoY after five consecutive quarters of double-digit growth, as commodity price correction impacts the profit pool of Metals. Metals Universe is expected to post de-growth after eight consecutive quarters of PAT growth.

Defensives are expected to post flattish PAT numbers (-0.6% YoY), with Telecom expected to post continued elevated losses (loss of INR 41b expected in 4QFY19e), offsetting the performance by the IT (13% PAT growth, fifth consecutive quarter of double-digit growth) and Consumer (8% growth).

LP 79

45 29 23 16 15 15 13 13 9 9 8 2

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Loss

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35 30 26 27 32 41 43 51

38 32 39 35 21 21 24 25 25 28 26 24 19 26 24 19 20 26 18 21 22 21 26 26 28 30 29 23 19 25 31 36 41

31 30 23

18 18

10 14 22 10

17 13

22 21

18 23

24 25 18 22 17 17 19 16 18 18 14 20 22

20 23

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26 13 19 20 18 14

12 17

18 22 15 19

17 17 18

24 26

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24 19 16 13 27 17 16 17 22

19 24 16 22

27 25 25

18

17 22 18 16 20 23

20 18 25

16 17 19

19 22 26

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32 35 31 27

30 27

25 24 31 34 42 40 31 38 39 42 40 37 38 45

36 26 35 38 47

36 39 37 35 32 34 45 47

32 31 31 22

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-8 -15

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24 9

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6 0

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-7 -9

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8 6

12

34

June

08

Sep

08De

c 08

Mar

09

June

09

Sep

09De

c 09

Mar

10

June

10

Sep

10De

c 10

Mar

11

June

11

Sep

11De

c 11

Mar

12

June

12

Sep

12De

c 12

Mar

13

June

13

Sep

13De

c 13

Mar

14

June

14

Sep

14De

c 14

Mar

15

June

15

Sep

15De

c 15

Mar

16

June

16

Sep

16De

c 16

Mar

17

June

17

Sep

17De

c 17

Mar

18

June

18

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c 18

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19E

>30% >15-30% >0-15% <0% Ex OMCs (%)

% o

f MO

SL U

nive

rse

com

pani

es

Earnings Gr.

PAT Growth Ex OMCs (%)

April 2019 14


Exhibit 14: Domestic Cyclicals taking over from Global Cyclicals in 2HFY19

Source: MOFSL

Exhibit 15: Global Cyclicals growth significantly exceeds MOFSL Universe in 1HFY19, with Domestic Cyclicals leading the pack in 2HFY19

Source: MOFSL

Source: MOFSL

Exhibit 16: Banks contribute majority of the earnings delta in 4QFY19

Source: MOFSL

73 58

29 28 23 13 10 8 2 1 1 1 0

-1 -5 -6 -21

-35

-80

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mob

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Bank

s-PS

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Contribution to 1HFY19 PAT growth (%) 116

27 17 8 5 5 4 2 2 1 1 0

0 0 0 -15 -16 -20

-33

Bank

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Contribution to 2HFY19 PAT growth (%)

69

36 32 32 31 28 20 18 17 17 15 12 8 2

-5 -10 -16 -21

PL PL

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1HFY19 PAT growth (%) LP

45 34 31

17 17 15 14 13 12 10 9 1

-2 -10 -10 -11 -17 -20 Loss

Bank

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2HFY19 PAT growth (%)

1,28

9

1,00

3

290

58 22 9 7 6 5 5 4 3 2 1 0

-0 -1 -6 -33 -39 -49

MO

SL 4

QFY

18 P

AT (I

NRb

)

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AT (I

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)

April 2019 15


Share of Global Cyclicals in earnings moderate QoQ Domestic Cyclicals appear to be the key drivers of PAT growth in 2HFY19, with

their share rising to 34% of aggregate PAT in FY19 (v/s 26% of FY18) and accounting for 91% of incremental PAT growth.

Consequently, we expect the share of Cyclicals to increase to 71% in FY19 from 67% in FY18.

Share of Domestic Cyclicals in MOFSL Universe (Excl OMCs) earnings at 40%

Exhibit 17: PAT share of Domestic Cyclicals will be at 40%, up from 13% in 4QFY18

Defensives includes Consumer, Healthcare, Technology, Telecom and Utilities Global cyclicals includes Metals, Oil & Gas and JLR Domestic cyclicals includes Automobiles, Banks, Capital Goods, Infrastructure, Cement, Media, NBFCs, Real Estate and Retail

Nifty expected to post 15% profit growth, aided by corporate banks, but dragged by Automobiles Nifty PAT is likely to grow at 15% in 4QFY19 on a moderate base (8% growth in

the base quarter). Excluding OMCs, Nifty PAT growth is expected at 19%. Corporate banks are singularly driving the Nifty profit growth. Excluding

corporate banks – SBI, ICICI, Axis Bank – the Nifty is expected to post a 2.7% YoY PAT decline for 4QFY19.

Sales is expected to grow 11% YoY (16% YoY growth in base quarter), a sharp moderation v/s 23% in 3QFY19. This is largely owing to deceleration in top-line growth in commodities like Metals and O&G and broad-based demand deceleration in Automobiles.

Nifty EBITDA is expected to grow 2%. Excluding OMCs, Nifty EBITDA is expected to increase 5% YoY.

16 Nifty companies are expected to report a YoY decline in PAT. Bharti Airtel is the only company expected to post a loss in 4QFY19.

40 35 32 32 35 36 33 38 36

34 36 36 32

38 37 32 13

31 32

39 40

26 33 41 42 38 34 34 26 24 25 22 25 33

28 27 33 47

34 34 33

31

34 28 26 29 37 40 41 42 39 34 34 35 34 39

35 33 28

29

0%

25%

50%

75%

100%

Mar

-09

June

-09

Sep-

09De

c-09

Mar

-10

June

-10

Sep-

10De

c-10

Mar

-11

June

-11

Sep-

11De

c-11

Mar

-12

June

-12

Sep-

12De

c-12

Mar

-13

June

-13

Sep-

13De

c-13

Mar

-14

June

-14

Sep-

14De

c-14

Mar

-15

June

-15

Sep-

15De

c-15

Mar

-16

June

-16

Sep-

16De

c-16

Mar

-17

June

-17

Sep-

17De

c-17

Mar

-18

June

-18

Sep-

18De

c-18

Mar

-19E

Defensives

Global cyclicals

Domestic cyclicals

Excl OMCs

April 2019 16


Exhibit 18: Nifty sales to grow 11% in 4QFY19, lowest in seven quarters

Exhibit 19: 4QFY19 Nifty PAT to increase by 15%, led by Corporate Banks

Exhibit 20: Nifty EBITDA to grow at 2%, slowest in seven quarters

Exhibit 21: Nifty sectoral 4QFY19 PAT change YoY (%)

Source: MOFSL

16

5

-2 -12 -6 -8 -6

1

-2

4 8

16 11 12 14 16

24 25 22

11

June

-14

Sep-

14

Dec-

14

Mar

-15

June

-15

Sep-

15

Dec-

15

Mar

-16

June

-16

Sep-

16

Dec-

16

Mar

-17

June

-17

Sep-

17

Dec-

17

Mar

-18

June

-18

Sep-

18

Dec-

18

Mar

-19E

36

5

-3 -10

8 3 11

2 2 5 8 4

-5

14 16 8 11 12 9

15

June

-14

Sep-

14

Dec-

14

Mar

-15

June

-15

Sep-

15

Dec-

15

Mar

-16

June

-16

Sep-

16

Dec-

16

Mar

-17

June

-17

Sep-

17

Dec-

17

Mar

-18

June

-18

Sep-

18

Dec-

18

Mar

-19E

18

3 4

-4

14

3

12 15 12

18 17

5

-5

18 14

22

31

14

7 2

June

-14

Sep-

14

Dec-

14

Mar

-15

June

-15

Sep-

15

Dec-

15

Mar

-16

June

-16

Sep-

16

Dec-

16

Mar

-17

June

-17

Sep-

17

Dec-

17

Mar

-18

June

-18

Sep-

18

Dec-

18

Mar

-19E

LP 121 80

25 25 15 13 11 11 10 8 5 4 3

-4 -35 -39 PL

Bank

s-PS

U

Med

ia

Bank

s-Pv

t

Infr

a

Reta

il

Nift

y

Tech

nolo

gy

Heal

thca

re

Cons

umer

Cap

Goo

ds

NBF

C

Cem

ent

Agro

Che

m

Oil

& G

as

Util

ities

Auto

Met

als

Tele

com

Banks and Media to outperform; Telecom,

Metals and Auto to underperform

April 2019 17


Nifty companies’ 4QFY19 performance (INR b) Company Sales EBITDA PAT PAT Contbn EBITDA margin

Mar-19 Var % YoY Mar-19 Var % YoY Mar-19 Var % YoY (%) Grw. (%) Mar-19 Var (bp) High PAT Growth 1,594 15 818 15 337 187 33 161 51 -1 State Bank 229 15 156 -2 36 LP 4 84 68 -1161 Axis Bank 56 19 46 24 15 LP 1 27 81 376 Zee Entertainment 19 11 5 1 3 121 0 1 27 -253 ICICI Bank 68 14 62 -17 22 112 2 8 91 -3365 GAIL 179 16 28 65 18 77 2 6 16 462 Bajaj Finserv 112 24 112 24 10 54 1 3 100 -1 Bajaj Finance 33 44 21 55 11 42 1 2 65 432 Dr Reddy’ s Labs 39 10 8 40 4 36 0 1 20 418 ONGC 249 4 136 19 75 26 7 11 54 700 Adani Ports 31 -4 23 35 12 25 1 2 75 2157 Titan Company 47 15 5 24 4 25 0 1 11 74 Kotak Mahindra Bank 31 21 25 23 14 23 1 2 79 102 Wipro 153 11 33 26 25 23 2 3 22 244 HDFC Bank 132 24 110 25 58 21 6 7 83 48 Asian Paints 52 17 10 17 6 18 1 1 19 4 HCL Technologies 160 22 37 21 26 16 3 3 23 -6 Med/Low PAT Growth 3,865 18 763 10 420 8 41 22 20 -138 TCS 378 18 103 19 78 14 8 7 27 25 Britannia 27 8 4 12 3 13 0 0 16 48 Hind. Unilever 100 10 23 14 16 12 2 1 24 100 Bharti Infratel 37 2 15 -3 7 11 1 1 41 -212 Hindalco 327 6 36 1 13 10 1 1 11 -63 Grasim Industries 54 16 11 27 7 10 1 0 20 165 Larsen & Toubro 453 11 63 17 35 10 3 2 14 68 ITC 120 14 47 13 32 9 3 2 39 -15 Infosys 216 19 53 8 40 9 4 2 25 -260 Power Grid Corp. 74 -7 73 9 25 8 2 1 99 1480 Sun Pharma 74 10 17 19 10 7 1 0 23 164 Indiabulls Housing 16 0 14 15 11 5 1 0 90 1233 UPL 66 15 14 19 8 4 1 0 22 62 Reliance Inds. 1,610 38 192 4 98 3 10 2 12 -389 NTPC 176 -25 71 14 28 1 3 0 40 1382 Cipla 41 11 7 30 3 1 0 0 18 256 Ultratech Cement 97 8 18 6 7 1 1 0 19 -31 Negative PAT Growth 4,942 5 669 -16 261 -30 26 -83 14 -326 Tech Mahindra 91 13 17 23 12 -1 1 0 19 159 Bajaj Auto 71 6 11 -12 10 -6 1 0 16 -324 HDFC 29 -10 26 -15 24 -11 2 -2 89 -531 Coal India 284 5 79 -22 55 -12 5 -5 28 -964 Eicher Motors 25 -3 7 -11 5 -16 1 -1 29 -263 BPCL 733 12 37 0 22 -17 2 -3 5 -61 Yes Bank 28 28 25 17 10 -18 1 -2 91 -857 Maruti Suzuki 208 -2 25 -17 16 -22 2 -3 12 -219 Tata Steel 433 20 68 5 24 -25 2 -6 16 -227 Hero MotoCorp 78 -9 11 -23 7 -27 1 -2 14 -243 IOC 1,275 9 76 -35 37 -28 4 -11 6 -400 Mahindra & Mahindra 131 -1 15 -25 8 -33 1 -3 11 -364 IndusInd Bank 24 20 23 28 5 -45 1 -3 94 579 JSW Steel 212 4 40 -18 13 -53 1 -10 19 -507 Tata Motors 898 -2 91 -17 12 -61 1 -14 10 -185 Vedanta 214 -23 55 -29 8 -66 1 -11 26 -244 Bharti Airtel 208 6 63 -9 -7 PL -1 -6 30 -508 Nifty (50) 10,401 11 2,250 2 1,018 15 100 100 22 -178

Note: For Financials, Sales represents Net Interest Income, and EBITDA represents Operating Profit; Consensus estimates are used for Adani Ports and Bajaj Finserv

April 2019 18


Intra-sector 4QFY19 earnings divergence (%)

Sectors Sector gr.

+30% growth

15-30% growth

0-15% growth

-Ve earnings growth

Earnings momentum

HIGH GROWTH SECTORS

Banks - PSU LP INBK: 37, BOB, PNB & SBI: LP

Banks - Private 79

FB: 143, ICICIBC: 112,EQUITAS: 102, DCBB: 45,RBK: 35,AXSB:LP

AUBANK: 27, KMB: 23,HDFCB: 21 YES: -18,

IIB: -45

Media 45 Z: 121, ENIL: 74

JAGP: 27, SUNTV:26,

RADIOCIT: 21 PVRL: 13 DBCL: -2

Retail 23 TTAN: 25 JUBI: 16

Healthcare 16 STR: 506,GRAN: 234,ALKEM:

166,BIOS: 74,DIVI: 54, GNP: 52,IPCA: 49,DRRD: 36

SLPA: 29, LPC & JUBILANT:

19,ARBP: 18

SUNP: 7, CIPLA: 1, SANL: 0

TRP: -2, ALPM: -3,GLXO: -9, AJP: -15,CDH: -34

Logistics 15 AGLL: 170 CCRI: 6

MEDIUM/LOW GROWTH SECTORS

Technology 13 NITEC: 27,WPRO:

23,ZENT: 18, HCLT: 16

TCS: 14,MTCL: 13, CYL: 9,INFO: 9, LTI: 8,HEXW: 7

MPHL & TECHM: -1,PSYS: -2,TELX: -5

NBFC 13 SCUF: 351,SHTF: 82, LTFH: 46,MASFIN: 45,BAF: 42

PNBHOUSI: 26,LICHF: 25

MUTH: 11,IHFL: 5, CIFC: 2,REPCO: 1

HDFC: -11, MMFS: -14

Cement 9 ICEM: 73, ACC: 44, JKCE: 39

TRCL: 19 ACEM & GRASIM: 10,UTCEM: 1

BCORP: -4, SRCM: -11, SNGI: -78

Consumer 8 UBBL: 23,MRCO: 23,APNT: 18

BRIT: 13,HUVR: 12,PG: 11,PAG & ITC: 9,

SKB: 8,PARAG: 5,HMN & NEST: 4,CLGT: 3, DABUR: 1,JYL: 0

GCPL & PIDI:-6,UNSP: -21, FCON: Loss

PAT DE-GROWTH SECTORS

Oil & Gas (Ex OMCs) -15

GAIL: 77,MAHGL: 50, GUJS: 48,AGIS: 46, GUJGA: 40, IGL: 34

ONGC: 26 OINL: 14, PLNG: 7,

RIL: 3

BPCL: -17, HPCL:-21, IOCL: -28,

MRPL: -49

Capital Goods 9 GETD: 118, BLSTR: 82, ENGR: 35

TMX: 29, BHEL: 27,

HAVL: 21,SIEM: 16

CROMPTON: 11, LT: 10,KKC: 3

VOLT: -9, BHE: -15, ABB: -40

Utilities -5 TPWR: 9,PWGR: 8, NTPC: 1, CESC: 0

COAL: -12, TPW: -17,NHPC: -

53, JSW: Loss

Auto -28 BHFC: 46 ESC: 15,

AMRJ: 14, ENDU: 4

AL: -1,EXID: -2,BJAUT: -6,BOS: -12,MSS: -15,EIM: -

16,TVSL: -20,MSIL: -22,HMCL: -27,MM:

-33,CEAT:-45, TTMT: -61

Metals -33.7 HNDL: 10

SAIL: -3,NMDC: -10,TATA: -25,

HZ: -26,NACL: -42,JSTL: -53,VEDL: -

66,RINDL: -68, JSP: PL

Telecom Loss TCOM: 79 BHIN: 11 BHARTI: PL, IDEA: Loss

April 2019 19


Banks to decide Nifty earnings trajectory in FY20 Auto emerging as new headwind for earnings MOFSL FY19 earnings growth at 13%; FY20 growth estimated at 26% led by

Financials: We expect FY19 revenue growth for our MOFSL Universe to come in at 20% (v/s 5.2% CAGR over FY15-18). This will be the third consecutive year of double-digit revenue growth. The top-line performance is likely to be driven by broad-based growth across sectors. We expect EBITDA margin for the MOFSL Universe (ex-OMCs, Financials) to contract by 70bp to 18.3% in FY19. We expect profits to grow 13% YoY for the MOFSL Universe, aided by a low base (flat earnings in FY18 due to losses in PSU Banks). Ex-PSU banks, MOFSL Universe is likely to deliver 5% profit growth in FY19. Financials alone account for 82% of incremental profits (60% is contributed by PSU Banks, 13% by Private Banks), while Metals, and Technology are expected to post 16% and 14% PAT growth, respectively. As far as FY20 is concerned, we expect MOFSL Universe to post sales/EBITDA /PAT growth of 11%/15%/26%. Deceleration in sales growth in FY20 is owing to moderation in top-line growth of commodities like Metals and O&G. Financials are expected to contribute 55% of incremental earnings in FY20. Ex-Financials, earnings growth for FY20 for MOFSL Universe is expected to be 14%.

Nifty profits to grow 9.8% in FY19; Corporate banks to drive Nifty profit growth of 22% in FY20: Nifty sales are expected to deliver healthy 21% YoY growth in FY19. Nifty EBITDA and PAT are expected to grow 11.4% and 9.8% in FY19, with an estimated CAGR (FY18-20) of 13% and 16%, respectively. In FY19, 44% of incremental profit growth in the Nifty is expected to be contributed by corporate lenders like Axis Bank and SBI. These banks, along with ONGC and TCS, contribute 84% of the PAT delta for FY19. FY20 Nifty sales/EBITDA/PAT are expected to grow 10%/14%/22%. Ex-Corporate Banks (ICICI, SBI, AXIS), we expect Nifty FY20 profits to grow 14%. Banks and Autos are expected to account for 57% and 11%, respectively, of incremental Nifty earnings in FY20.

Exhibit 22: Expect Nifty PAT CAGR of 16% over FY18-20

Sector Sales Gr. / CAGR (%)

EBIDTA Margin (%)

EBIDTA CAGR (%)

EBITDA margin change (bp) PAT Gr. / CAGR (%) PAT delta

Share (%) (No of Companies) (FY18-20) FY19E (FY18-20) FY18-20 FY19E FY20E FY21E (FY18-20) FY18-20 High PAT CAGR (>20%) 17 45.3 16 -63 76 67 29 71 71 Financials (35) 18 66.2 15 -311 134 85 32 108 63 PSU Banks (7) 16 67.5 11 -660 LP 17270 54 LP 39 Private Banks (12) 21 83.3 20 -204 18 54 29 35 18 Life Insurance (2) 17 4.0 4 -102 -10 17 19 3 0 NBFC (14) 18 82.6 17 -72 23 19 17 21 6 Retail (2) 20 11.6 26 104 34 25 23 29 0 Media (7) 15 34.2 18 183 25 19 17 22 1 Healthcare (20) 14 20.6 20 203 15 25 15 20 4 Cement (13) 16 17.0 15 -18 11 30 24 20 3 Medium PAT CAGR (15-20%) 14 22.3 18 157 15 20 16 17 19 Capital Goods (16) 13 11.3 19 115 20 17 19 19 3 Utilities (8) 8 33.8 16 507 21 16 9 18 8 Others (24) 26 17.2 24 -48 -8 48 29 17 3 Logistics (2) 14 14.0 21 159 13 18 13 16 0 Consumer (19) 13 24.2 15 88 15 16 16 16 5 Low PAT CAGR (up to 15%) 16 14.0 10 -150 -3 10 11 3 10 Technology (14) 14 23.5 15 45 14 7 13 10 8 Oil & Gas (14) 22 10.6 13 -188 2 11 3 6 8

EARNINGS FY19-20

April 2019 20


Sector Sales Gr. / CAGR (%)

EBIDTA Margin (%)

EBIDTA CAGR (%)

EBITDA margin change (bp) PAT Gr. / CAGR (%) PAT delta

Share (%) Excl. OMCs (11) 24 15.3 19 -135 18 7 2 12 11 Metals (10) 3 19.4 7 140 16 -7 20 4 2 Auto (16) 9 12.0 7 -42 -26 37 13 1 0 Infrastructure (4) 23 26.5 11 -532 7 -5 -13 1 0 Telecom (4) 8 25.3 -2 -518 Loss Loss Loss Loss -8 MOFSL (208) 15 19.3 13 -83 13 26 18 20 100 MOFSL Excl. OMCs (205) 14 22.4 14 -7 18 27 19 22 NA Sensex (30) 13 24.3 14 9 9 29 18 18 NA Nifty (50) 15 21.5 13 -58 9 25 18 16 NA

Exhibit 23: Expect Nifty ex corporate lenders PAT CAGR of 10% over FY18-20

MOFSL Universe to post 13% earnings growth in FY19 aided by a low base For MOFSL Universe, we estimate FY19 PAT growth of 13% (on a flat base of

FY18), led by a recovery in Financials in 2HFY19. All sectors – barring Telecom, Infrastructure, Oil & Gas and Autos – are expected

to post double-digit PAT growth.

Exhibit 24: Nifty EPS – expect 16% CAGR over FY18-20, significantly higher than the 5% CAGR over FY08-18

Nifty EPS cut 2.1%/3.6% for FY19/20 Our FY19/20 Nifty EPS estimates have been cut by 2.1%/3.6% to INR486/INR606

(prior: INR496/INR629). We are now building in EPS growth of 6.8%/24.8% for the Nifty for FY19/20. Excluding corporate banks, we are expecting 14% profit growth for the Nifty in FY20.

3.4

15.2

1.4

9.3

16.4

10.3

6.2

13.7 12.7

5.4

12.8

3.2 6.2

9.3 6.5

9.8

21.7

15.5

FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E

Nifty Ex Corp Lenders Nifty-50PAT Growth (%)

73 78 92 131

169 184 236

281 251 247 315

348 369 406 413 394

423 455 486

606

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

E

FY20

E

FY01-08: 21% CAGR

FY08-18: 5% CAGR

FY18-20E: 15.5% CAGR

8%

7%

25%

April 2019 21


For FY20, major earnings upgrades are in BPCL (15%), IOC(12%), Yes Bank (9%), Bharti Infratel (7%) and Grasim Industries (5%), while the major earnings downgrades are in Tata Motors (-29%), Vedanta (-19%), Eicher Motors (-12%), Cipla (-12%) and Sun Pharma (-12%).

Exhibit 25: Top Nifty companies’ EPS upgrades/downgrades since 3QFY19 review (%) Companies FY20 BPCL 14.8 IOC 12.0 Yes Bank 9.2 Bharti Infratel 6.8 Grasim Industries 5.3 Sun Pharma -12.0 Cipla -12.0 Eicher Motors -12.2 Vedanta -18.8 Tata Motors -29.4

Exhibit 26: Nifty stock absolute FY19E PAT change (INR b)

Exhibit 27: Nifty stock absolute FY20E PAT change (INR b)

3,82

2

3480

10

6 83

54

50

44

35

31

22

22

21

17

15

15

14

14

14

12

10

9 9 8 7 7 6 6 4 3 3 3 3 3 2 1 1 1 1 0 0 0

1 2 2 3 8 21

22

27

44

80

102

NIF

TY F

Y18

SBI

ON

GC TCS

Coal

Indi

aAx

is Ba

nkHD

FC B

ank

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Tata

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GAIL

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TBa

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in ITC

HCL

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4,64

9

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2 86

66

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26

26

25

22

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17

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15

15

14

14

13

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12

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10

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9 9 9 8 7 6 5 4 4 4 4 4 3 3 3 2 2 1 1 1 0 3 19

24

NIF

TY F

Y19E SB

IIC

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ank

Tata

Mot

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Axis

Bank

HDFC

Ban

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nd B

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BPCL

Veda

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Yes B

ank

KMB

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HDFC

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FY2

0E

April 2019 22


Exhibit 28: Nifty performance - expect PAT CAGR (FY18-20) of 16% Sales (INR b) Sales EBIDTA Margin (%) EBITDA PAT (INR b) PAT YoY (%) PAT Contbn to

Company FY18 FY19E FY20E CAGR %18-20 FY18 FY19 FY20 CAGR

%18-20 FY18 FY19E FY20E FY18 FY19 FY20 CAGR %18-20 Delta %

High PAT Gr. (20%+) 4,325 4,984 5,635 14 48 46 50 17 592 881 1,372 -12 49 56 52 67 State Bank 749 883 1,039 18 80 61 68 9 -46 61 242 PL LP 300 LP 25 Axis Bank 186 216 254 17 84 86 89 20 3 47 104 -93 1,601 122 514 9 Dr Reddy’ s Labs 142 153 182 13 16 20 22 31 11 19 21 -11 73 16 41 1 Bajaj Finance 72 105 135 37 68 72 73 42 25 39 50 36 55 28 41 2 ICICI Bank 230 262 310 16 107 89 90 6 68 46 131 -31 -33 188 39 5 IndusInd Bank 75 90 136 34 89 92 93 37 36 35 69 26 -4 100 39 3 Grasim Industries 158 206 219 18 20 21 21 22 31 44 56 -2 40 28 34 2 Titan Company 161 196 235 21 10 11 11 26 11 14 18 40 28 27 27 1 Bajaj Finserv 87 98 111 13 84 87 92 18 27 34 44 21 25 28 27 1 Zee Entertainment 67 78 88 15 31 32 32 16 12 16 18 -23 35 16 25 1 NTPC 878 928 1,024 8 26 29 32 19 88 110 136 -11 25 24 24 4 Sun Pharma 261 290 322 11 20 22 24 23 32 39 49 -49 21 26 23 1 Coal India 859 994 993 8 20 24 26 24 119 169 179 26 42 6 23 5 HDFC Bank 401 484 587 21 81 83 84 23 175 210 254 20 20 21 21 7

Med. PAT Gr. (10-20%) 10,563 12,742 14,057 15 23 23 23 17 1,318 1,573 1,746 6 19 11 15 37 Britannia 99 110 129 14 15 16 16 19 10 12 14 14 16 22 19 0 ONGC 3,622 4,621 4,932 17 18 18 18 18 259 342 365 -10 32 7 19 9 Larsen & Toubro 1,197 1,413 1,556 14 11 12 13 21 72 87 102 22 21 16 18 2 Kotak Mahindra

Bank 95 113 138 20 75 75 77 22 62 72 87 26 17 20 18 2

Hind. Unilever 345 382 436 12 21 23 24 19 53 62 74 25 18 19 18 2 Hindalco 1,152 1,281 1,484 14 12 12 12 16 42 57 59 121 36 2 18 1 GAIL 537 743 756 19 14 14 13 15 46 66 64 20 45 -4 18 2 Yes Bank 77 101 126 28 100 93 90 21 42 42 57 27 -1 36 16 1 Asian Paints 168 196 228 17 19 19 19 17 20 23 27 2 14 18 16 1 Ultratech Cement 294 350 444 23 20 17 18 15 24 22 31 -11 -8 42 14 1 TCS 1,231 1,463 1,603 14 26 27 27 15 258 312 331 -2 21 6 13 6 ITC 406 450 507 12 38 39 39 13 108 122 137 6 13 12 12 2 HCL Technologies 506 605 698 18 23 23 24 21 88 101 111 4 16 9 12 2 Tech Mahindra 308 349 376 10 15 18 18 21 38 44 48 38 16 8 12 1 Power Grid Corp. 299 335 380 13 88 89 90 14 87 95 109 16 10 14 12 2 HDFC 113 120 141 12 93 89 90 10 71 73 87 12 4 18 11 1 Adani Ports 113 109 122 4 62 63 65 6 38 39 46 -3 2 19 10 1

Low PAT Gr. (<10%) 21,371 26,181 28,666 16 16 13 13 7 1,569 1,368 1,531 16 -13 12 -1 -3 Indiabulls Housing 54 61 66 11 113 100 99 4 38 42 46 32 8 11 9 1 Bajaj Auto 252 300 332 15 19 16 17 9 44 47 52 7 7 12 9 1 Wipro 545 589 634 8 20 20 21 10 85 91 100 2 7 9 8 1 Reliance Inds. 3,917 5,895 6,917 33 16 14 14 22 361 392 417 21 9 6 7 5 Eicher Motors 89 97 105 8 31 30 29 5 22 22 24 27 2 8 5 0 UPL 174 199 362 44 20 21 21 47 22 23 24 6 5 4 5 0 Mahindra &

Mahindra 921 1,022 1,121 10 14 14 15 11 49 48 52 50 -1 8 4 0

Maruti Suzuki 798 860 949 9 15 13 13 3 81 73 86 7 -9 18 3 0 Bharti Infratel 145 147 151 2 44 41 39 -4 25 26 26 -8 4 1 2 0 Cipla 152 161 179 8 19 18 19 9 16 14 17 31 -14 21 2 0 Infosys 705 827 913 14 27 25 25 9 161 162 168 12 0 4 2 1 Tata Steel 1,322 1,659 911 -17 17 17 24 0 80 102 82 116 28 -19 2 0 BPCL 2,358 2,959 3,206 17 6 5 5 4 98 77 94 3 -21 21 -2 0 Hero MotoCorp 322 336 362 6 16 15 14 -1 37 34 35 9 -9 4 -3 0 JSW Steel 701 836 805 7 21 22 20 4 56 74 50 58 31 -32 -6 -1 Vedanta 919 900 923 0 22 21 25 6 76 49 65 35 -35 32 -7 -1 IOC 4,215 5,458 6,574 25 10 6 5 -7 226 147 173 11 -35 18 -13 -5 Tata Motors 2,946 3,056 3,298 6 13 10 12 4 78 -25 41 16 PL LP -27 -3 Bharti Airtel 837 818 856 1 36 31 31 -6 14 -30 -22 -69 PL Loss PL -3

Nifty (PAT free float) 36,259 43,907 48,358 15 21 20 20 13 1,791 1,947 2,431 8 9 25 16 100

April 2019 23


SECTOR WEIGHT / PORTFOLIO PICKS

BSE 100

MOST WEIGHT

WEIGHT RELATIVE

TO BSE100

EFFECTIVE SECTOR STANCE

Financials 35.9 36.0 0.1 Overweight Private 22.3 21.0 -1.3 Neutral HDFC Bank 9.2 8.0 -1.2 Buy ICICI Bank 4.7 5.0 0.3 Buy Axis Bank 2.5 4.0 1.5 Buy Federal Bank 0.4 2.0 1.6 Buy RBL 0.0 2.0 2.0 Buy PSU 2.7 6.0 3.3 Overweight SBI 2.3 4.0 1.7 Buy PNB 0.2 2.0 1.8 Neutral NBFCs 10.9 9.0 -1.9 Underweight HDFC 6.4 5.0 -1.4 Buy Shriram Transport Fin. 0.3 2.0 1.7 Buy ICICI Prudential Life 0.0 2.0 2.0 Buy Technology / Telecom / Media 13.7 10.0 -3.7 Underweight Infosys 5.3 6.0 0.7 Buy Tech Mahindra 0.9 2.0 1.1 Buy Bharti Airtel 0.9 2.0 1.1 Buy Consumption / Retail 12.7 10.0 -2.7 Underweight Titan 0.9 3.0 2.1 Buy HUL 2.2 3.0 0.8 Buy United Spirits 0.0 2.0 2.0 Buy Marico 0.3 2.0 1.7 Buy Cap Goods, Infra & Cement 7.4 9.0 1.6 Overweight Larsen & Toubro 3.2 5.0 1.8 Buy ACC 0.3 2.0 1.7 Buy SEIMENS 0.2 2.0 1.8 Neutral Utilities / Metals 5.3 9.0 3.7 Overweight Power Grid Corp. 0.9 3.0 2.1 Buy Hindalco 0.6 2.0 1.4 Buy Coal India 0.6 2.0 1.4 Buy Jindal Steel 0.0 2.0 2.0 Buy Auto 7.2 7.0 -0.2 Neutral Maruti 1.7 3.0 1.3 Buy M&M 1.2 2.0 0.8 Buy Motherson Sumi 0.3 2.0 1.7 Buy Energy 11.6 7.0 -4.6 Underweight Reliance Inds 8.3 5.0 -3.3 Neutral Petronet LNG 0.3 2.0 1.7 Buy Healthcare 4.4 2.0 -2.4 Underweight Lupin 0.3 2.0 1.7 Buy Midcaps 1.5 10.0 8.5 Overweight Indian Hotels 0.0 1.0 1.0 Buy IGL 0.0 1.0 1.0 Buy Godrej Agrovet 0.0 1.0 1.0 Buy Torrent Power 0.0 1.0 1.0 Buy Alkem Lab 0.0 1.0 1.0 Buy Teamlease 0.0 1.0 1.0 Buy Oberoi Realty 0.0 1.0 1.0 Buy UPL 0.6 1.0 0.4 Buy Exide Inds. 0.2 1.0 0.8 Buy Tata Chemicals 0.2 1.0 0.8 Buy Cash 0.0 0.0 0.00 Total 100.0 100.0

MOSL model portfolio

April 2019 24


Markets bid adieu to FY19 in style India top performer among global markets; FII flows weakest in three years

There couldn’t have been a better finish to FY19 as the Nifty rallied by an impressive 7.7% in March to close at 11,624 (+15% YoY), within a whisker of an all-time high. The last time the benchmark did this well in a month was way back three years ago.

In FY19, the Nifty Midcap100 (-2.7% YoY) underperformed the Nifty (+14.9% YoY) significantly, largely due to the unsustainable valuation premium of mid-caps to large-caps and the lack of pick-up in earnings growth.

In FY19, India-Nifty (+15%), Brazil (+12%), the US (+7%) and the UK (+3%) were the key global markets to close higher in local currency terms. On the other hand, Korea (-12%), MSCI EM (-10%), China-HSCIE (-5%), Taiwan (-2) and Japan (-1%) ended lower.

India’s share in the world market cap is at 2.8%, above its historical average of 2.5%. In FY19, the world’s market cap decreased 3.5% (USD2.8t), while India’s market cap was down 1.6%.

In the sectoral space, Private Banks (+34%), PSU Banks (+28%), Technology (+26%), Consumer (+14%) and Healthcare (+10%) were the top performers for FY19. Media (-25%), Autos (-22%), Metals (-15%) and Real Estate (-7%) were the key laggards.

Market breadth remained mixed in FY19, with 28 Nifty stocks closing higher. Bajaj Finance (+71%), Reliance Industries (+54%), Axis Bank (+52%), ICICI Bank (+43%) and TCS (+40%) were the top performers. Tata Motors (-47%), Vedanta (-34%), Indiabulls Hsg (-31%), Hero Moto (-28%) and Eicher (-28%) were the top laggards.

FII flows were muted at USD0.2b in FY19 – weakest in three years. Notably, at USD4.8b, FII inflows in March were the highest since Mar’17.

DII inflows were at USD10.3b (domestic MF inflows of USD12.5b and DII (ex-MFs) outflows of USD2.2b).

Nifty P/E is valued at 19x, above its historical average of 17.7x. At 2.8x, the Nifty P/B is also above its historical average. Market-cap-to-GDP at 81% (FY19E GDP) is also above its long-term average.

Exhibit 29: Markets gain strength toward end-FY19; Indian markets recorded a CAGR of 14.4% over FY09-19

Exhibit 30: Nifty QoQ change (%) — Rallied impressively in the last month of the year

3,02

1 5,24

9

5,83

4

5,29

6

5,68

3

6,70

4 8,49

1

7,73

8

9,17

4

10,1

14

11,6

24

-36 74 11 -9 7 18 27 -9 19 10 15

-50 96 12 -21 0 7 22 -14 21 10 8

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Trend in Nifty

Annual Return in INR (%)

CAGR in INR: 14.4% CAGR in USD: 10.9%

Annual Return in USD (%)

6

14

5 4 3

-1

-5

0 -3

7

4

-5

12

4 3

8

-4

6

2

-1

7

Mar

-14

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

Jun-

16Se

p-16

Dec-

16M

ar-1

7Ju

n-17

Sep-

17De

c-17

Mar

-18

June

-18

Sep-

18De

c-18

Mar

-19

QoQ Return (%)

MARKETS & FLOWS

April 2019 25


India top performer among global markets Among the key global markets, India-Nifty (+15%), Brazil (+12%), the US (+7%)

and the UK (+3%) were the key global markets to close higher in local currency terms. On the other hand, Korea (-12%), MSCI EM (-10%), China-HSCIE (-5%), Taiwan (-2) and Japan (-1%) ended lower.

Exhibit 31: World equity indices (FY19) – local currency (%)

Exhibit 32: World equity indices (FY19) – USD (%)

India’s share in world market cap above historical average India’s share in the world market cap is at 2.8%, above its historical average of

2.5%. In FY19, the world’s market cap decreased by 3.5% (USD2.8t), while India’s market cap was down by 1.6%.

Exhibit 33: Trend in India's contribution to world market cap

Exhibit 34: Market cap change in FY19 (%)

-12

-10

-5

-2

-1

0

3

7

12

15

South Korea

MSCI EM

China (HSCEI)

Taiwan

Japan

Russia MICEX

UK

S&P 500

Brazil

India - Nifty

-18

-13

-10

-8

-5

-5

-5

-4

7

8

South Korea

Russia MICEX

MSCI EM

Taiwan

Brazil

Japan

China (HSCEI)

UK

S&P 500

India - Nifty

3.3

1.6

2.8

1.5

2.0

2.5

3.0

3.5

Mar

-09

Sep-

09Fe

b-10

Jul-1

0De

c-10

May

-11

Nov

-11

Apr-

12Se

p-12

Feb-

13Ju

l-13

Jan-

14Ju

n-14

Nov

-14

Apr-

15Se

p-15

Mar

-16

Aug-

16Ja

n-17

Jun-

17N

ov-1

7M

ay-1

8O

ct-1

8M

ar-1

9

India's Contribution to World Mcap (%)

Average of 2.5%

4 3

-2

-6 -7 -9 -10 -10 -11

-18

0.5 30.4 2.2 7.2 0.6 1.2 0.9 3.3 5.7 1.4

Indo

nesia U

S

Indi

a

Chin

a

Russ

ia

Taiw

an

Braz

il

UK

Japa

n

Kore

a

Mkt cap chg 12M (%) Curr Mcap (USD Tr)

April 2019 26


Sector performance: Banks, Technology outperform the market In the sectoral space, Private Banks (+34%), PSU Banks (+28%), Technology

(+26%), Consumer (+14%) and Healthcare (+10%) were the top performers for FY19.

Private Banks delivered positive returns in 8 out of the 12 months, while PSU Banks and Technology delivered positive returns in 7 months.

Media (-25%), Autos (-22%) and Metals (-15%) were the biggest underperformers in FY19 – these sectors delivered 8, 6 and 8 months of negative returns, respectively.

Exhibit 35: Trend in sector performance YoY (%) — Banks and Technology top outperformers MoM Abs. Performance (%) FY19 MoM Relative Performance (%) FY19

Sector Apr-18

May-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-19

Feb-19

Mar-19

Chg (%)

Apr-18

May-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-19

Feb-19

Mar-19

Chg (%)

Banks-Pvt 5 8 -2 4 3 -6 -1 8 1 1 -2 11 34 -1 8 -2 -2 0 0 4 3 1 2 -1 4 19 Banks-PSU 0 4 -6 15 4 -18 9 1 7 -2 -5 22 28 -7 4 -6 9 1 -12 14 -3 7 -1 -5 15 13 Tech.y 12 -1 3 4 7 1 -7 -2 -1 8 0 0 26 6 -1 4 -2 4 7 -2 -6 -1 9 0 -8 11 Consumer 10 0 -1 7 6 -10 -3 5 2 -2 -2 3 14 4 0 0 1 3 -4 2 0 2 -2 -2 -4 -1 Healthcare 8 -8 8 1 12 -6 -2 -3 -3 0 -1 5 10 1 -8 8 -5 9 1 3 -7 -3 0 -1 -3 -5 NBFC 5 -5 1 6 -3 -11 4 9 3 -4 -1 8 9 -1 -5 1 0 -5 -5 8 4 3 -4 -1 0 -6 Oil -1 0 -5 10 0 -1 -11 0 4 -1 1 11 4 -7 0 -5 4 -2 5 -6 -5 4 -1 2 3 -10 Cap. Gds 6 -4 -7 5 4 -10 2 7 1 -8 -1 8 0 0 -4 -7 -1 1 -4 7 2 1 -8 -1 0 -15 Nifty Midcap100 8 -7 -4 4 6 -14 0 2 2 -5 -1 9 -3 2 -7 -4 -2 3 -7 5 -3 2 -5 -1 1 -18 Cement 5 -10 0 8 6 -8 -14 10 0 -11 6 9 -4 -2 -10 0 2 3 -1 -9 5 0 -10 6 1 -19 Utilities 5 -5 -9 1 8 -10 1 -2 5 -6 -3 11 -4 -1 -5 -8 -5 6 -3 6 -7 5 -6 -2 4 -19 Telecom 0 -8 0 1 -2 -4 -11 4 1 -6 2 20 -6 -6 -8 0 -5 -5 2 -6 -1 1 -6 2 13 -21 Real Estate 9 -8 -7 1 2 -20 -1 7 0 -1 1 16 -7 3 -8 -7 -5 -1 -14 4 2 0 -1 2 8 -22 Metal 7 -5 -4 -3 9 -4 -6 -6 0 -7 -2 5 -15 1 -5 -4 -9 6 2 -1 -10 0 -7 -1 -2 -30 Auto 7 -5 -3 3 1 -13 -7 5 0 -11 2 0 -22 1 -5 -2 -3 -2 -7 -2 0 0 -11 2 -8 -37 Media 3 -2 -8 -3 -3 -15 3 2 -1 -17 18 -1 -25 -4 -2 -8 -9 -6 -8 8 -3 0 -17 18 -8 -40 Nifty-50 6 0 0 6 3 -6 -5 5 0 0 0 8 15

Breadth mixed in FY19 – 28 Nifty stocks close higher Bajaj Finance (+71%), Reliance Industries (+54%), Axis Bank (+52%), ICICI Bank

(+43%) and TCS (+40%) were the top performers. Tata Motors (-47%), Vedanta (-34%), Indiabulls Hsg (-31%), Hero Moto (-28%)

and Eicher (-28%) were the top laggards.

Exhibit 36: Best and worst Nifty performers for FY19 (%)—28 companies in Nifty delivered positive returns

71 54 52 43 40 36 33 33 31 31 28 28 27 24 22 22 21 21 16

15 12 8 7 6 6 5 2 2 1

-1 -3 -3 -4 -4 -7 -7 -8 -9 -9 -10

-10 -16 -17 -19

-23 -25 -28

-28 -31 -34 -47

Baja

j Fin

.Re

lianc

e In

d.Ax

is Ba

nkIC

ICI B

ank

TCS

Baja

j Fin

serv

Dr R

eddy

'sAs

ian

Pain

tsU

PLIn

fosy

sSB

IHU

LKo

tak

Mah

.Bk

Brita

nnia

HDFC

Ban

kTe

ch M

ah.

Tita

n Co

Wip

ro ITC

Nift

yHC

L Te

chHD

FCAd

ani P

orts

Baja

j Aut

oGA

ILL&

TPo

wer

Grid

JSW

Ste

elU

ltraT

ech

Indu

sInd

Bk

Cipl

aSu

n Ph

arm

aHi

ndal

coN

TPC

Bhar

ti In

frat

elBP

CL IOC

Tata

Ste

elM

&M

Yes B

ank

ON

GCCo

al In

dia

Bhar

ti Ai

rtel

Gras

im In

dZe

e En

tM

arut

iEi

cher

Mot

ors

Hero

Mot

oIn

diab

ulls

Hsg

Veda

nta

Tata

Mot

ors

April 2019 27


Institutional flows: FII flows weakest in three years FII flows were muted at USD0.2b in FY19 – weakest in three years. Notably, at

USD4.8b, FII inflows in March were the highest since Mar’17. DII inflows were at USD10.3b (domestic MF inflows of USD12.5b and DII (ex-

MFs) outflows of USD2.2b).

Exhibit 37: Yearly domestic MF flows in equities (USD b)

Exhibit 38: Quarterly domestic MF flows in equities (USD b)

Exhibit 39: Yearly FII flows in equities (USD b)

Exhibit 40: Quarterly FII flows in equities (USD b)

Exhibit 41: Yearly DII ex-MF flows in equity (USD b)

Exhibit 42: Quarterly DII ex-MF flows in equity (USD b)

1.5

-2.3 -4.4

-0.2

-4.2 -3.6

6.6 10.1 8.4

22.0

12.5

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

-1.3

0.1

2.7 2.4 1.5

3.7 3.9

2.1

0.4 1.0 1.0

4.7

1.7

4.6

7.3

4.7 5.3 5.0

2.8

4.4

0.3

Mar

-14

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

June

-16

Sep-

16De

c-16

Mar

-17

June

-17

Sep-

17De

c-17

Mar

-18

Jun-

18Se

p-18

Dec-

18M

ar-1

9

-10.4

23.4 25.0

8.5

25.8

13.7 18.1

-1.5

8.3

3.2 0.2

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

4.1

6.2

3.5 2.3

6.0

0.2

-2.6

-0.3

1.2 1.7

4.6

-4.6

6.6

1.8

-3.2

2.5 2.1

-2.7

-1.4 -2.6

6.8

Mar

-14

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

June

-16

Sep-

16De

c-16

Mar

-17

June

-17

Sep-

17De

c-17

Mar

-18

Jun-

18Se

p-18

Dec-

18M

ar-1

9

11.6

7.4

0.3

-0.7

-8.5

-5.3

-10.3

2.0

-3.9 -4.3 -2.2

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

-0.9

-2.8 -3.0

-2.0 -2.4

1.3

0.3

-0.1

0.5

-0.6

-2.2

0.5

-1.5 -1.5 -0.8

-0.5

-1.5

0.6

0.0 -0.7

-2.1

Mar

-14

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

June

-16

Sep-

16De

c-16

Mar

-17

June

-17

Sep-

17De

c-17

Mar

-18

Jun-

18Se

p-18

Dec-

18M

ar-1

9

April 2019 28


Valuations above long-period averages Nifty P/E is valued at 19x, above its historical average of 17.7x. At 2.8x, the Nifty P/B is also above its historical average. Market-cap-to-GDP at

81% (FY19E GDP) is also above its long-term average.

Exhibit 43: 12-month forward Nifty P/E (x)

Exhibit 44: 12-month forward Nifty P/B (x)

Exhibit 45: 12-month forward Nifty RoE (%)

Exhibit 46: India’s market cap to GDP (%)

Mid-caps underperform large-caps; premium v/s large-caps comes off In FY19, the Nifty Midcap100 (-2.7% YoY) underperformed the Nifty (+14.9%

YoY) significantly, largely due to the unsustainable valuation premium of mid-caps to large-caps and the lack of pick-up in earnings growth. Currently, valuation premium of mid-caps versus large-caps stands at 3%.

Exhibit 47: Mid-caps underperformed large-caps in FY19

12.7

22.5

19.0

9

13

17

21

25

Apr-

09

Apr-

10

Apr-

11

Apr-

12

Apr-

13

Apr-

14

Apr-

15

Apr-

16

Apr-

17

Apr-

18

Apr-

19

10 Year Avg: 17.7x

3.1

2.0

2.8

1.5

2.0

2.5

3.0

3.5

Apr-

09

Apr-

10

Apr-

11

Apr-

12

Apr-

13

Apr-

14

Apr-

15

Apr-

16

Apr-

17

Apr-

18

Apr-

19

10 Year Avg: 2.6x

14.9

12.5

13.9

15.3

16.7

18.1

Apr-

09

Apr-

10

Apr-

11

Apr-

12

Apr-

13

Apr-

14

Apr-

15

Apr-

16

Apr-

17

Apr-

18

Apr-

19

10 Year Avg: 14.8%

103

55

95 88

71 64 66

81

69 80 85 81

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

E

Average of 78% for the period

115

97

80

90

100

110

120

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Nifty Rebased Nifty Midcap 100 Rebased

April 2019 29


Exhibit 48: Midcaps v/s Nifty P/E (x) – 12-month forward

Exhibit 49: Midcaps trading at 3% premium to Nifty

Sector valuations: Banks, Technology outperform; Autos underperform Elevated valuations, coupled with challenging macros and a busy political

calendar, kept the market range-bound in FY19. PSBs are trading at a P/B of 1.0x, in line with the historical average of 0.9x.

Valuations for PSBs have recovered gradually on the back of the recent capital infusion by the government and the prospects of stronger earnings. Overall valuations still remain in line with the long-term average, and an earnings bounce-back is anticipated from FY20.

Technology trades at a P/E of 18.5x, at a 13% premium to the historical average of 16.4x. Our interaction with various companies indicates sustained momentum in deal activity as of now, but the threat of unpleasant macros is also not unreal. Valuations for mid-cap IT have cooled off in comparison to larger peers in 9MFY19. Tier-II IT trades at a 17% discount to Tier-I P/E (notably, it was trading at a peak premium of 12% nine months ago).

Auto sector is trading at a P/E of 17.3x, at a 4% premium to its historical average of 16.6x. PV volumes remained weak for the ninth consecutive month, with no signs of a broad-based recovery yet.

Exhibit 50: Sector valuations - Snapshot

Sector PE (x)

Relative to Nifty P/E (%) PB (x)

Relative to Nifty P/B (%)

Current 10 Yr Avg

Prem/ Disc (%) Current 10 Yr

Avg Current 10 Yr Avg

Prem/ Disc (%) Current 10 Yr

Avg Auto 17.3 16.6 4.3 -6 -8 2.8 3.2 -12.1 0 23 Banks - PVT 21.0 17.8 17.8 14 0 3.0 2.3 28.3 8 -10 Banks - PSU 11.4 8.8 29.1 -39 -50 1.0 0.9 6.5 -64 -64 NBFC 23.7 19.2 23.6 28 8 3.5 3.0 16.0 27 18 Capital Goods 23.9 26.8 -10.7 30 49 2.8 3.4 -16.5 2 31 Cement 23.8 21.4 11.1 29 19 2.4 2.6 -8.1 -15 0 Consumer 40.0 32.8 21.8 116 87 12.8 10.2 25.6 360 299 Healthcare 20.8 23.5 -11.6 13 33 3.1 4.0 -24.1 10 58 Infrastructure 10.4 12.3 -15.5 -44 -30 1.2 1.7 -30.8 -57 -34 Media 18.6 22.5 -17.2 1 28 3.5 4.3 -18.5 25 66 Metals 10.0 12.2 -17.6 -46 -31 1.2 1.4 -11.0 -57 -48 Oil & Gas 12.2 11.3 7.7 -34 -34 1.7 1.5 8.7 -40 -40 Retail 54.1 37.0 46.3 193 109 16.4 9.9 64.8 489 287 Technology 18.5 16.4 13.1 0 -6 5.1 4.2 20.3 84 65 Telecom Loss - - 1.6 2.2 -27.4 -41 -12 Utilities 9.5 13.5 -29.5 -48 -21 1.1 1.5 -22.2 -59 -42

19.5 19.0

10

16

22

28

34

Apr-

14

Oct

-14

Apr-

15

Oct

-15

Apr-

16

Oct

-16

Apr-

17

Oct

-17

Apr-

18

Oct

-18

Apr-

19

Midcap PE (x) Nifty PE (x)Nifty Avg: 20.0x Midcap Avg: 20.8x

3

-35

-10

15

40

65

Apr-

14

Oct

-14

Apr-

15

Oct

-15

Apr-

16

Oct

-16

Apr-

17

Oct

-17

Apr-

18

Oct

-18

Apr-

19

Midcap Vs Nifty PE Prem/(Disc) (%)

Average: 5%

April 2019 30


MOFSL Universe: 4QFY19 Highlights

& Ready Reckoner

Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year numbers. This is because of differences in classification of account heads in the company’s quarterly and annual results or because of differences in the way we classify account heads as opposed to the company.

All stock prices and indices as on 2 April 2019, unless otherwise stated.

Sectors & Companies BSE Sensex: 39,057 S&P CNX: 11,713 April 2019

April 2019 31


MOFSL Universe: 4QFY19 aggregate performance highlights

Exhibit 51: Quarterly Performance - MOFSL Universe (INR b) Sector Sales EBITDA PAT

(Nos of Cos) Mar-19 Var % YoY

Var % QoQ Mar-19 Var

% YoY Var

% QoQ Mar-19 Var % YoY

Var % QoQ

Auto (16) 1,854 0.1 9.8 212 -13.5 23.7 84 -28.0 32.7 Capital Goods (13) 782 9.6 27.4 100 9.3 49.9 59 9.3 51.3 Cement (10) 319 10.9 9.0 60 18.5 24.2 29 8.8 37.3 Consumer (19) 519 11.7 1.8 127 11.3 4.6 85 7.8 0.4 Financials (30) 1,079 16.8 7.1 689 16.2 6.7 270 LP 3.6 Private Banks (11) 369 21.3 3.4 309 13.2 2.4 132 79.0 2.2 PSU Banks (4) 340 18.7 1.8 239 24.0 17.0 49 LP 2.1 Life Insurance (2) 199 13.5 38.6 8 14.2 40.0 7 -2.0 24.2 NBFC (13) 171 8.5 -1.0 134 10.8 -0.4 82 12.6 5.6 Healthcare (20) 458 13.9 -0.3 95 23.9 -2.0 54 15.8 0.7 Infrastructure (4) 46 19.9 8.2 11 10.8 -1.8 4 -17.7 -2.3 Logistics (2) 36 17.3 7.6 5 18.9 12.1 4 15.0 16.0 Media (7) 49 13.0 -9.8 16 10.6 -19.4 8 44.5 -22.9 Metals (10) 1,623 3.5 1.7 298 -13.8 -5.3 97 -33.7 -17.5 Oil & Gas (14) 5,057 17.2 -5.1 533 -0.8 16.6 289 1.5 20.5 Excl. OMCs (11) 2,393 27.2 -0.9 394 11.3 -10.0 216 14.5 -4.3 Retail (2) 56 14.7 -17.6 7 21.8 -10.0 5 23.0 -7.9 Technology (14) 1,120 17.7 1.5 264 18.1 0.7 195 12.6 -1.3 Telecom (4) 406 21.3 1.0 99 -5.7 2.3 -41 Loss Loss Utilities (8) 704 -4.4 -4.6 258 -1.4 1.1 115 -5.1 14.0 Others (23) 394 22.5 3.3 71 30.6 12.8 31 19.7 9.8 MOSL (196) 14,504 11.3 1.3 2,845 4.1 7.7 1,289 28.5 10.7 MOSL Excl. OMCs (193) 11,840 11.7 3.8 2,706 6.1 3.2 1,216 34.1 5.7 Sensex (30) 6,819 11.4 3.7 1,737 2.5 3.1 795 22.4 3.5 Nifty (50) 10,401 10.9 0.6 2,250 2.4 7.2 1,018 15.4 7.3

Exhibit 52: Quarter-wise sales growth (% YoY)

Exhibit 53: Quarter-wise net profit growth (% YoY)

Exhibit 54: Sectoral sales growth-quarter ended Mar-19 (%)

Exhibit 55: Sectoral PAT growth - quarter ended Mar-19 (%)

For Banks: Sales = Net Interest Income, EBITDA = Operating Profits For Life Insurance: Sales = Net Premium, EBITDA = Operating Profits

22.8% 24.8%

21.2%

11.3%

June-18 Sep-18 Dec-18 Mar-19E

14.2%

3.4% 1.9%

28.5%

June-18 Sep-18 Dec-18 Mar-19E

21 20 18 17 17 17 15 14 13 12 11 11 10 3

0

-4

Tele

com

Infr

a

Tech

nolo

gy

Logi

stic

s

Oil

& G

as

Fina

ncia

ls

Reta

il

Heal

th C

are

Med

ia

Cons

umer

MO

SL U

niv

Cem

ent

Cap

Goo

ds

Met

als

Auto

Util

ities

LP 45 29

23 16 15 13 9 9 8 2

-5 -10 -18

-28 -34

Fina

ncia

ls

Med

ia

MO

SL U

niv

Reta

il

Heal

th C

are

Logi

stic

s

Tech

nolo

gy

Cap

Goo

ds

Cem

ent

Cons

umer

Oil

& G

as

Util

ities

Tele

com

Infr

a

Auto

Met

als

April 2019 32


Annual performance - MOFSL universe (INR Billion) Sector Sales (INR B) Chg. YoY (%) EBIDTA (INR b) Chg. YoY (%) PAT (INR b) Chg. YoY (%)

FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Auto (16) 7,379 8,134 8,567 7.9 10.2 5.3 889 1,065 1,168 -3.8 19.8 9.6 295 404 456 -25.5 37.1 12.8 Cap. Goods (16) 2,664 2,956 3,328 15.6 11.0 12.6 302 355 411 20.7 17.6 15.6 173 203 241 20.0 17.3 18.9 Cement (13) 1,289 1,481 1,647 16.3 14.9 11.2 219 262 312 10.4 19.7 19.0 115 149 184 11.3 30.0 23.6 Consumer (19) 2,002 2,294 2,620 12.2 14.6 14.2 485 563 653 14.8 16.2 15.9 331 386 449 14.7 16.5 16.4 Financials (35) 4,313 5,097 6,036 17.9 18.2 18.4 2,853 3,473 4,188 9.4 21.7 20.6 814 1,509 1,998 133.5 85.4 32.3 Pvt Banks (12) 1,392 1,709 2,100 19.3 22.8 22.9 1,159 1,444 1,797 14.8 24.6 24.5 484 748 967 18.2 54.4 29.4 PSU Banks (7) 1,676 1,930 2,223 16.8 15.2 15.1 1,131 1,366 1,612 1.8 20.8 18.0 2 372 573 LP 17270 53.8 Life Ins.(2) 591 687 809 17.8 16.2 17.7 23 27 33 -4.5 13.6 24.2 25 29 34 -9.6 16.7 18.5 NBFC (14) 654 770 904 17.7 17.7 17.4 540 636 746 16.6 17.8 17.3 303 360 423 22.8 19.0 17.4 Healthcare (20) 1,753 2,037 2,280 12.4 16.2 12.0 361 449 510 15.7 24.3 13.5 209 262 300 14.9 25.3 14.6 Infra. (4) 158 205 232 16.3 29.8 13.1 42 46 47 10.9 10.1 1.6 17 16 14 7.3 -4.7 -12.7 Logistics (2) 136 155 176 13.8 14.3 13.5 19 23 26 19.6 21.8 13.3 14 17 19 13.0 18.4 12.6 Media (7) 202 227 256 16.6 12.5 12.5 69 80 92 19.1 16.2 15.0 39 46 54 25.5 18.6 17.0 Metals (10) 6,324 5,839 6,219 15.2 -7.7 6.5 1,229 1,198 1,315 17.1 -2.5 9.8 459 426 510 16.1 -7.1 19.6 Oil & Gas (14) 23,809 26,864 28,343 32.8 12.8 5.5 2,525 2,782 2,935 15.1 10.2 5.5 1,174 1,300 1,337 1.6 10.7 2.9 Excl. OMCs (11) 12,662 14,071 14,703 38.2 11.1 4.5 1,933 2,141 2,280 27.3 10.8 6.5 893 955 976 17.7 7.0 2.2 Retail (2) 232 276 329 21.0 19.1 19.3 27 33 41 29.0 22.4 23.1 18 22 27 33.5 24.5 23.1 Tech. (14) 4,295 4,746 5,259 17.0 10.5 10.8 1,011 1,114 1,241 19.5 10.2 11.4 768 820 927 13.7 6.8 13.0 Telecom (4) 1,502 1,654 1,783 4.9 10.1 7.8 379 432 523 -15.3 13.9 20.9 -166 -157 -125 Loss Loss Loss Utilities (8) 2,986 3,154 3,358 10.4 5.6 6.5 1,010 1,154 1,259 18.4 14.3 9.1 430 498 544 20.9 15.8 9.2 Others (24) 1,624 2,088 2,429 22.5 28.6 16.3 278 399 489 7.3 43.2 22.5 120 176 228 -7.8 47.5 29.2 MOFSL (208) 60668 67205 72862 20.3 10.8 8.4 11699 13429 15208 11.5 14.8 13.2 4807 6076 7160 13.3 26.4 17.8 OMCs (205)* 49521 54413 59222 18.9 9.9 8.8 11107 12788 14553 13.1 15.1 13.8 4526 5732 6799 17.7 26.6 18.6 Sensex (30) 14839 15989 17210 19.5 7.8 7.6 3611 4188 4794 11.4 16.0 14.5 1521 1960 2313 8.6 28.8 18.0 Nifty (50) 20526 22497 24249 20.0 9.6 7.8 4422 5093 5808 11.3 15.2 14.0 1947 2431 2859 8.7 24.8 17.6 For Banks: Sales = Net Interest Income, EBIDTA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.; *MOFSL Excl. OMCs (205)

Valuations - MOSFL universe PE (x) EV / EBIDTA (x) P/BV (x) ROE (%) Div Yld (%) EARN. CAGR Sector FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY18 (FY18-FY20) Auto (16) 26.7 19.5 17.3 8.7 7.2 6.4 3.2 3.0 2.7 12.2 15.3 15.6 1.0 1.1 Capital Goods (16) 27.3 23.3 19.6 17.8 14.6 12.5 3.4 2.9 2.6 12.3 12.4 13.4 1.1 18.6 Cement (13) 30.5 23.5 19.0 16.8 14.1 11.6 2.6 2.4 2.2 8.5 10.2 11.5 0.9 20.3 Consumer (19) 46.3 39.7 34.2 31.0 26.5 22.8 13.6 12.6 11.8 29.3 31.6 34.5 1.4 15.6 Financials (35) 35.7 19.2 14.5 N.M N.M N.M 2.6 2.3 2.1 7.3 12.2 14.2 0.8 108.1 Private Banks (12) 32.7 21.2 16.4 N.M N.M N.M 3.5 3.0 2.6 10.6 14.3 16.0 0.7 35.1 PSU Banks (7) 2010.3 11.6 7.5 N.M N.M N.M 1.0 0.9 0.8 0.0 7.9 11.0 0.0 LP Life Insurance (2) 52.4 44.8 37.8 N.M N.M N.M 9.8 8.6 7.5 18.7 19.3 19.8 0.0 2.7 NBFC (14) 25.1 21.1 17.9 N.M N.M N.M 3.7 3.3 2.8 14.8 15.5 15.8 1.4 20.9 Healthcare (20) 26.7 21.3 18.6 15.9 12.7 10.9 3.5 3.1 2.7 13.1 14.5 14.6 0.6 20.0 Infrastructure (4) 10.1 10.6 12.2 6.0 5.8 6.0 1.4 1.2 1.1 13.5 11.5 9.2 0.8 1.1 Logistics (2) 25.2 21.3 18.9 16.7 13.7 11.9 2.9 2.7 2.5 11.4 12.5 13.0 1.2 15.7 Media (7) 21.9 18.4 15.8 11.7 9.8 8.2 4.1 3.6 3.1 19.0 19.5 19.9 0.8 22.0 Metals (10) 9.9 10.7 8.9 6.6 6.7 6.0 1.3 1.2 1.1 12.7 11.6 12.6 3.0 3.9 Oil & Gas (14) 12.8 11.6 11.2 6.7 5.9 5.4 1.8 1.6 1.5 13.7 13.8 13.0 2.6 6.1 Excl. OMCs (11) 13.8 12.9 12.6 7.1 6.1 5.5 1.9 1.7 1.5 13.4 13.0 12.1 1.6 12.2 Retail (2) 67.0 53.8 43.7 43.2 35.1 28.4 18.8 16.1 14.0 28.0 30.0 31.9 0.4 28.9 Technology (14) 21.6 20.2 17.9 15.4 13.9 12.4 5.7 5.4 4.9 26.5 26.9 27.5 3.1 10.2 Telecom (4) -14 -15 -19 12.2 11.1 9.3 1.7 2.0 2.3 -12.1 -13.3 -12.2 1.2 Loss Utilities (8) 10.8 9.3 8.6 7.8 6.9 6.3 1.7 1.6 1.5 16.1 17.3 17.5 3.7 18.3 Others (24) 37.1 25.2 19.5 16.1 11.4 9.1 4.0 3.6 3.2 10.7 14.2 16.5 1.2 16.7 MOFSL (208) 24.2 19.1 16.2 N.M N.M N.M 2.9 2.7 2.4 12.1 14.1 15.0 1.7 19.7 MOFSL Excl. OMCs (205) 25.1 19.8 16.7 N.M N.M N.M 3.0 2.8 2.5 11.9 13.9 15.0 1.5 22.1 Sensex (30) 26.0 20.2 17.1 N.M N.M N.M 3.3 3.0 2.7 12.5 14.7 15.5 1.4 18.3 Nifty (50) 24.1 19.3 16.4 N.M N.M N.M 3.1 2.9 2.6 13.0 14.8 15.6 1.6 16.5 N.M.: Not Meaningful.

April 2019 33


Ready reckoner: Quarterly performance Sector CMP Sales (INR m) EBDITA (INR M) PAT (INR m)

(INR) RECO Mar-19 Var % YoY


% YoY Var


Var % QoQ

Automobiles Amara Raja Batt. 721 Buy 16,941 7.2 0.0 2,433 15.4 -3.8 1,249 13.7 -4.6 Ashok Leyland 89 Buy 89,192 1.7 41.0 9,860 -4.5 51.8 6,637 -0.6 72.1 Bajaj Auto 2,855 Buy 71,441 5.8 -3.6 11,400 -12.1 -1.4 9,980 -6.0 -9.4 Bharat Forge 514 Buy 17,333 18.2 2.4 4,905 23.3 0.7 2,678 45.8 -13.5 Bosch 17,985 Neutral 30,458 -3.6 -1.6 6,037 -12.7 42.8 4,400 -11.7 31.2 CEAT 1,128 Buy 17,185 2.7 0.3 1,469 -25.6 3.1 528 -45.3 0.0 Eicher Motors 20,581 Buy 24,606 -2.7 5.1 7,113 -10.8 4.7 5,429 -16.3 1.9 Endurance Tech. 1,172 Buy 19,051 6.9 5.1 2,740 6.5 8.3 1,211 4.1 9.2 Escorts 772 Neutral 16,737 16.5 1.1 1,970 13.4 -1.7 1,294 14.9 -2.6 Exide Inds. 215 Buy 26,882 9.3 7.7 3,499 3.5 11.9 1,851 -2.3 19.4 Hero Motocorp 2,570 Neutral 78,059 -8.9 -0.7 10,597 -22.7 -4.1 7,071 -26.9 -8.1 Mahindra & Mahindra 667 Buy 131,105 -0.6 1.7 15,054 -24.5 -11.6 7,505 -33.1 -48.5 Maruti Suzuki 6,883 Buy 207,515 -2.0 5.5 25,019 -17.0 29.6 16,112 -21.8 8.2 Motherson Sumi 155 Buy 167,319 8.6 1.6 15,728 4.8 12.9 4,556 -14.6 17.1 Tata Motors 203 Neutral 898,003 -1.6 16.6 90,594 -16.8 50.0 12,104 -61.3 LP TVS Motor 486 Neutral 42,214 5.7 -9.5 3,096 10.3 -17.6 1,321 -20.2 -26.0 Sector Aggregate 1,854,042 0.1 9.8 211,515 -13.5 23.7 83,926 -28.0 32.7 Capital Goods ABB 1,323 Sell 17,230 -31.8 -12.4 1,051 -44.4 -51.2 617 -39.8 -52.1 Bharat Electronics 101 Buy 38,887 7.8 43.2 7,583 -4.8 -1.3 4,769 -14.6 -6.0 BHEL 75 Sell 110,437 8.8 50.5 10,083 -18.1 361.0 5,801 26.9 202.2 Blue Star 706 Neutral 15,193 12.8 38.2 839 38.9 98.1 482 82.4 673.4 CG Consumer Elect. 222 Buy 12,318 9.4 19.6 1,785 8.5 41.6 1,149 11.3 44.2 Cummins India 745 Buy 13,134 6.5 -12.7 1,870 8.0 -17.5 1,667 3.4 -10.9 Engineers India 120 Buy 7,120 39.7 23.4 1,073 35.0 13.2 1,229 35.1 35.4 GE T&D India 290 Neutral 10,762 32.2 -7.8 1,030 475.9 -8.5 665 117.7 25.3 Havells India 765 Buy 29,941 18.1 18.9 4,094 14.4 39.0 2,836 20.8 53.2 Larsen & Toubro 1,410 Buy 452,638 11.3 26.8 63,074 17.0 57.8 34,757 9.7 70.2 Siemens 1,130 Neutral 36,045 9.8 28.4 3,764 16.6 2.8 2,553 16.2 -11.2 Thermax 941 Buy 15,934 10.4 10.9 1,496 8.3 39.4 979 29.3 50.2 Voltas 623 Neutral 22,142 8.1 48.4 2,492 -1.6 115.4 1,768 -8.9 90.8 Sector Aggregate 781,781 9.6 27.4 100,235 9.3 49.9 59,271 9.3 51.3

Cement ACC 1,620 Buy 40,497 11.7 4.0 6,385 30.0 25.2 3,539 44.4 40.0 Ambuja Cements 230 Neutral 31,094 8.6 8.6 5,265 3.8 30.4 3,000 10.4 1.6 Birla Corporation 523 Buy 17,460 5.8 12.1 2,681 7.0 29.5 1,054 -4.4 285.3 Grasim Industries 846 Neutral 53,522 16.2 1.1 10,697 26.6 1.6 6,520 10.2 7.2 India Cements 111 Neutral 15,020 7.5 14.1 2,134 34.6 58.2 608 72.5 1843.9 J K Cements 864 Buy 14,744 12.0 15.8 2,853 57.1 35.5 1,458 38.6 139.4 Ramco Cements 741 Buy 13,898 11.0 15.1 3,098 15.0 46.8 1,638 19.2 62.1 Sanghi Inds. 64 Buy 2,796 10.2 5.1 381 -7.6 18.6 40 -78.5 -7.2 Shree Cement 18,505 Buy 33,158 18.0 19.2 8,628 37.1 25.0 3,549 -11.1 26.2 Ultratech Cement 4,021 Buy 96,933 7.7 10.0 18,030 5.9 29.7 7,201 0.8 60.3 Sector Aggregate 319,121 10.9 9.0 60,153 18.5 24.2 28,608 8.8 37.3 Consumer Asian Paints 1,516 Neutral 52,316 16.7 -1.2 9,820 16.9 -5.8 5,841 17.8 -9.7 Britannia 2,994 Buy 27,491 8.3 -3.3 4,433 11.6 -1.9 2,991 13.4 -0.5 Colgate 1,247 Buy 11,866 8.7 7.9 3,355 9.1 6.7 2,034 3.5 5.9 Dabur 403 Neutral 22,195 9.2 0.9 5,007 3.2 12.4 4,011 1.3 9.6 Emami 410 Buy 6,483 5.1 -20.1 1,717 -0.9 -35.6 1,260 4.2 -39.7 Future Consumer 45 Buy 10,169 25.9 2.6 288 71.9 6.0 -41 Loss Loss

April 2019 34





% YoY Var


Var % QoQ

Godrej Consumer 659 Neutral 26,398 4.4 -3.0 6,133 1.4 -0.5 3,982 -5.9 -4.6 GSK Consumer 7,058 Neutral 13,072 10.8 17.0 2,829 13.1 18.6 2,290 8.1 17.4 Hind. Unilever 1,687 Buy 99,631 9.5 4.2 23,424 14.4 14.5 15,768 11.9 12.5 ITC 297 Neutral 120,252 13.6 7.1 46,885 13.1 8.4 31,941 8.9 -0.5 Jyothy Labs 183 Neutral 5,069 6.2 16.7 911 0.6 27.0 605 0.2 24.9 Marico 346 Buy 16,588 12.1 -10.9 2,990 18.5 -14.3 2,248 22.7 -10.7 Nestle 10,767 Neutral 31,708 15.0 9.4 7,394 3.9 20.5 4,574 4.2 13.0 P&G Hygiene 10,749 Neutral 6,514 14.5 -20.4 1,433 -2.1 -25.1 928 11.4 -25.3 Page Industries 25,225 Neutral 7,032 15.6 -4.8 1,536 4.6 -7.1 1,030 9.4 1.1 Parag Milk Foods 261 Buy 6,008 16.0 0.0 616 11.7 -0.8 274 4.6 -11.0 Pidilite Inds. 1,258 UR 17,611 18.6 -4.7 3,076 12.3 -8.7 2,320 -6.0 6.4 United Breweries 1,402 Neutral 16,476 12.1 13.5 2,471 18.7 -0.3 1,122 23.5 2.8 United Spirits 541 Buy 22,572 3.8 -9.7 2,872 4.8 -17.4 1,471 -20.5 -30.8 Sector Aggregate 519,451 11.7 1.8 127,190 11.3 4.6 84,647 7.8 0.4 Healthcare Alembic Pharma 542 Neutral 9,452 10.8 -7.2 1,860 7.4 -23.2 913 -2.6 -46.2 Alkem Lab 1,745 Buy 19,935 31.7 3.6 3,410 140.1 9.4 2,540 166.4 25.4 Ajanta Pharma 1,034 Buy 5,119 -3.5 5.5 1,212 -13.1 5.1 806 -14.7 10.9 Aurobindo Pharma 787 Buy 48,988 21.0 -7.0 10,191 26.8 -6.2 6,396 18.1 -7.6 Biocon 616 Neutral 16,053 37.2 4.2 4,284 83.9 4.8 1,982 73.6 -17.1 Cadila Health 344 Buy 34,902 7.4 -2.5 7,220 -17.0 -14.0 3,992 -34.2 -21.8 Cipla 526 Neutral 41,085 11.1 2.5 7,237 30.0 2.3 3,369 1.0 1.4 Divis Labs 1,699 Neutral 13,064 20.1 -2.7 5,167 33.7 -8.5 4,021 53.7 6.0 Dr Reddy’ s Labs 2,796 Neutral 38,986 10.3 1.3 7,706 39.8 -5.5 4,102 35.8 -15.4 Glenmark Pharma 650 Neutral 25,586 13.8 1.9 4,078 38.3 4.7 2,311 52.4 7.7 Granules India 114 Buy 6,518 29.4 3.2 1,122 157.2 -1.0 575 234.3 -1.3 GSK Pharma 1,294 Neutral 7,913 5.7 -4.1 1,442 -6.9 5.0 961 -8.9 1.3 IPCA Labs. 954 Buy 9,188 17.4 -3.0 1,597 36.3 -24.0 873 49.0 -37.0 Jubilant Life 686 Buy 23,736 5.4 -0.1 5,014 9.5 1.6 2,632 18.5 -1.6 Lupin 777 Buy 44,330 9.9 3.2 7,857 10.9 13.5 4,462 19.1 69.5 Sanofi India 5,914 Buy 6,810 10.2 -6.3 1,362 1.3 -0.8 828 0.4 4.4 Shilpa Medicare 335 Buy 1,876 -20.0 8.2 439 -7.6 67.6 391 28.7 112.2 Strides Pharma 474 Buy 9,384 41.3 18.1 1,493 72.6 17.5 636 505.6 166.3 Sun Pharma 470 Buy 73,872 10.1 -3.5 16,813 18.6 -5.0 9,861 7.2 4.7 Torrent Pharma 1,889 Neutral 21,185 23.0 6.6 5,709 56.8 8.5 2,714 -2.4 26.1 Sector Aggregate 457,983 13.9 -0.3 95,213 23.9 -2.0 54,367 15.8 0.7 Infrastructure Ashoka Buildcon 133 Buy 9,606 36.8 -9.8 1,179 46.0 -20.7 800 -24.1 -10.6 IRB Infra 155 Neutral 18,139 31.2 1.4 7,317 11.1 -3.8 2,210 -7.8 1.0 KNR Constructions 257 Buy 5,272 -15.6 17.5 1,012 -16.1 12.3 319 -60.0 -38.8 Sadbhav Engineering 249 Buy 12,720 15.2 37.4 1,396 12.6 26.0 741 6.1 31.8 Sector Aggregate 45,737 19.9 8.2 10,905 10.8 -1.8 4,071 -17.7 -2.3 Logistics Allcargo Logistics 113 Buy 18,818 22.5 4.4 968 31.0 -13.4 501 170.3 4.9 Concor 533 Buy 17,494 12.2 11.2 4,030 16.3 20.7 3,238 5.6 17.9 Sector Aggregate 36,311 17.3 7.6 4,998 18.9 12.1 3,752 15.4 16.4 Media D B Corp 186 Buy 5,879 4.9 -10.9 989 1.0 -29.2 558 -2.2 -26.2 Ent.Network 532 Buy 1,869 17.3 -7.0 457 29.2 13.3 204 74.2 27.7 Jagran Prakashan 120 Buy 5,856 6.9 -4.6 1,355 12.5 2.2 751 27.2 12.8 Music Broadcast 59 Buy 865 13.9 -0.6 306 12.0 7.1 197 20.9 20.0

April 2019 35





% YoY Var


Var % QoQ

PVR 1,656 Buy 7,633 30.5 -9.5 1,404 48.8 -14.5 295 12.7 -43.0 Sun TV 642 Buy 8,170 13.9 -9.7 5,889 12.7 -11.7 3,660 26.3 4.2 Zee Entertainment 418 Neutral 19,128 10.9 -11.7 5,128 1.3 -32.0 2,831 121.4 -46.1 Sector Aggregate 49,380 13.0 -9.8 15,441 10.0 -19.9 8,464 44.0 -23.2

Metals Hindalco 217 Buy 326,546 6.3 -3.0 35,844 0.5 -9.5 12,672 10.2 -24.3 Hindustan Zinc 283 Neutral 50,048 -20.3 -9.7 25,330 -30.0 -10.7 18,982 -25.7 -14.1 JSPL 185 Buy 97,767 13.7 2.2 21,030 -1.6 1.3 -200 PL Loss JSW Steel 288 Buy 212,206 3.8 4.4 40,323 -18.1 -10.4 12,519 -53.1 -22.9 Nalco 55 Buy 26,368 -7.9 -3.0 3,682 -41.5 -36.1 2,133 -42.1 -37.8 NMDC 105 Buy 33,525 -13.7 -8.1 18,979 -8.9 -16.7 12,319 -10.5 -18.8 Rain Industries 102 Buy 35,913 8.6 4.3 3,552 -44.6 54.8 803 -68.0 LP SAIL 56 Neutral 193,500 13.6 22.2 25,162 -3.2 -2.4 5,831 -3.1 -7.7 Tata Steel 531 Sell 433,489 20.0 5.2 68,129 4.8 1.3 24,327 -25.5 8.0 Vedanta 188 Sell 214,003 -22.5 -9.6 55,486 -29.2 -1.7 7,712 -66.1 -51.0 Sector Aggregate 1,623,366 3.5 1.7 297,518 -13.8 -5.3 97,099 -33.7 -17.5 Oil & Gas Aegis Logistics 205 Buy 13,031 4.1 -1.3 1,113 59.3 20.2 704 46.0 19.1 BPCL 381 Buy 733,025 12.4 -7.4 36,759 0.1 4593.5 22,261 -16.7 349.6 GAIL 362 Neutral 179,319 16.2 -9.4 27,990 65.1 4.7 17,760 76.5 7.7 Gujarat Gas 147 Buy 19,715 13.7 -6.9 2,474 11.1 -23.0 921 39.7 -38.8 Gujarat State Petronet 179 Buy 4,570 30.4 0.7 4,266 47.5 20.8 2,330 48.0 34.2 HPCL 274 Neutral 655,713 7.8 -9.1 26,668 -11.3 628.8 13,832 -20.9 458.8 IOC 158 Buy 1,275,301 8.7 -8.9 76,057 -35.0 398.4 37,348 -28.4 421.0 Indraprastha Gas 300 Buy 15,032 21.9 -0.3 3,391 23.1 6.7 2,195 33.5 10.9 Mahanagar Gas 1,000 Buy 7,516 28.0 -0.1 2,501 42.0 4.6 1,566 49.5 5.6 MRPL 74 Buy 165,774 10.6 -7.2 5,780 -51.5 LP 2,741 -49.4 LP Oil India 184 Buy 28,947 -3.5 -17.6 10,150 26.8 -33.3 9,859 13.8 -20.1 ONGC 157 Buy 249,349 4.0 -10.0 135,861 19.4 -18.0 74,699 26.3 -9.6 Petronet LNG 249 Buy 99,609 15.3 -1.4 8,558 4.1 0.9 5,580 6.8 -1.3 Reliance Inds. 1,388 Neutral 1,609,848 37.7 2.9 191,757 3.8 -10.0 97,532 3.1 -6.0 Sector Aggregate 5,056,748 17.2 -5.1 533,325 -0.8 16.6 289,329 1.5 20.5 Oil & Gas Excl. OMCs 2,392,709 27.2 -0.9 393,841 11.3 -10.0 215,888 14.5 -4.3 Retail Jubilant Foodworks 1,442 Neutral 8,605 10.3 -7.4 1,480 15.9 -13.2 791 16.1 -18.1 Titan Company 1,112 Buy 47,432 15.5 -19.2 5,378 23.5 -9.0 3,885 24.5 -5.5 Sector Aggregate 56,037 14.7 -17.6 6,859 21.8 -10.0 4,675 23.0 -7.9 Technology Cyient 579 Neutral 11,985 12.9 0.9 1,831 22.7 4.7 1,287 9.0 39.8 HCL Technologies 1,101 Neutral 160,256 21.6 2.1 36,828 21.3 1.0 25,931 16.3 -0.7 Hexaware Tech. 359 Neutral 12,725 21.3 1.6 1,916 17.8 0.2 1,441 7.3 16.8 Infosys 757 Buy 216,040 19.5 1.0 53,291 8.1 -1.5 40,151 8.8 0.7 L&T Infotech 1,714 Neutral 25,033 25.1 1.2 4,750 34.3 -6.7 3,652 8.0 -2.7 Mindtree 945 Neutral 18,353 25.4 2.7 2,803 19.0 -1.1 1,909 12.6 10.9 MphasiS 989 Neutral 20,496 17.5 4.0 3,351 8.3 1.4 2,488 -0.7 -10.5 NIIT Tech. 1,350 Neutral 9,848 24.8 1.3 1,792 26.4 -0.7 1,095 27.1 9.3 Persistent Systems 632 Buy 8,274 9.9 -4.3 1,302 17.2 -23.6 726 -1.5 -20.9 Tata Elxsi 982 Buy 4,274 13.8 5.0 1,090 14.6 5.5 664 -5.5 0.7 TCS 2,080 Neutral 378,341 18.0 1.3 103,015 19.1 2.2 78,442 13.6 -3.2 Tech Mahindra 792 Buy 90,810 12.7 1.5 17,360 23.0 0.8 12,092 -1.1 0.5 Wipro 262 Neutral 153,481 11.5 1.9 33,413 25.6 1.5 24,748 23.2 -2.7

April 2019 36





% YoY Var


Var % QoQ

Zensar Tech 232 Buy 10,501 28.9 1.4 1,256 30.7 13.7 860 18.4 55.5 Sector Aggregate 1,120,417 17.7 1.5 263,997 18.1 0.7 195,486 12.6 -1.3 Telecom Bharti Airtel 358 Buy 208,135 6.0 1.4 62,894 -9.2 1.1 -7,173 PL Loss Bharti Infratel 314 Neutral 37,426 2.2 2.8 15,479 -2.8 2.9 7,067 11.3 9.0 Tata Comm 606 Buy 42,855 6.9 0.4 6,795 22.3 -19.4 737 79.1 218.7 Vodafone Idea 17 Buy 117,365 91.2 -0.2 14,073 -2.8 23.8 -41,205 Loss Loss Sector Aggregate 405,780 21.3 1.0 99,241 -5.7 2.3 -40,575 Loss Loss Utilities CESC 726 UR 19,026 6.0 11.5 5,010 89.0 142.0 2,907 -0.4 63.3 Coal India 237 Buy 283,573 5.4 13.2 78,731 -21.8 -1.2 54,542 -11.6 19.5 JSW Energy 76 Neutral 20,921 17.9 -13.6 4,441 5.4 -39.9 -738 Loss PL NHPC 25 Buy 13,975 22.9 -11.1 4,996 39.7 -16.1 896 -52.7 -50.8 NTPC 135 Buy 175,860 -24.8 -26.1 70,971 14.3 13.2 28,399 1.4 11.3 Power Grid Corp. 200 Buy 74,154 -7.0 -10.8 73,154 9.5 -1.3 24,507 7.7 3.9 Tata Power 74 Neutral 85,479 8.3 10.9 12,898 -13.3 -19.5 2,963 9.2 LP Torrent Power 263 Buy 31,281 11.3 -3.9 7,906 14.5 7.4 1,809 -16.6 -23.7 Sector Aggregate 704,270 -4.4 -4.6 258,105 -1.4 1.1 115,285 -5.1 14.0 Others Avenue Supermarts 1,492 Sell 50,636 32.9 -7.1 4,118 39.9 -9.2 2,231 33.5 -13.2 Brigade Enterpr. 252 Buy 6,725 55.1 -2.2 1,648 22.2 -6.4 307 23.0 -48.6 BSE 613 Buy 1,052 -24.1 3.5 62 -77.6 LP 356 -37.3 -6.9 Castrol India 166 Buy 9,832 6.1 -4.9 3,064 11.7 -3.5 2,064 13.5 -2.6 Coromandel International 491 Buy 29,649 25.0 -2.8 1,977 16.9 -35.0 864 17.5 -44.1 Delta Corp 273 Buy 1,960 14.2 -4.8 784 16.2 -6.7 495 8.1 -2.0 Godrej Agrovet 541 Buy 13,320 11.5 -8.4 850 14.6 -15.8 274 -18.0 -32.9 Indian Hotels 158 Buy 12,524 9.5 -5.4 2,857 16.8 -14.9 1,095 21.6 -9.4 Info Edge 1,811 Neutral 2,931 21.8 4.3 971 63.6 16.5 968 71.1 30.2 Interglobe Aviation 1,384 Neutral 78,015 34.5 -1.4 19,943 77.6 25.0 4,392 273.3 130.1 Kaveri Seed 467 Buy 421 1.3 -37.3 -141 Loss PL -171 Loss PL MCX 793 Buy 774 9.7 0.6 241 -0.1 14.9 348 2.4 -17.1 Navneet Education 113 Buy 2,303 8.3 26.8 299 25.6 90.8 185 22.1 145.0 Oberoi Realty 546 Buy 5,371 55.7 1.6 2,250 22.7 19.6 1,462 2.3 6.0 P I Industries 1,056 UR 7,458 19.3 5.4 1,701 26.3 14.4 1,242 17.8 15.8 Phoenix Mills 666 Buy 4,839 10.8 9.9 2,419 11.9 8.7 655 -29.3 -7.5 Quess Corp 740 Neutral 23,218 22.8 6.9 1,287 17.7 8.8 726 -4.1 11.8 S H Kelkar 155 Buy 2,969 4.1 15.8 466 72.3 16.5 237 2.6 10.7 SRF 2,390 UR 20,101 24.7 2.3 3,558 27.5 7.5 1,556 25.6 -1.0 Tata Chemicals 595 Buy 28,683 12.3 1.3 5,352 4.4 13.6 2,600 -16.1 8.1 Team Lease Serv. 3,036 Buy 12,142 24.2 3.6 261 14.7 6.4 275 27.7 7.7 Trident 70 Buy 13,369 12.8 3.5 2,413 11.3 -0.5 873 71.6 -22.1 UPL 927 Buy 65,609 15.3 33.3 14,449 18.6 42.2 7,964 4.1 25.6 Sector Aggregate 393,900 22.5 3.3 70,830 30.6 12.8 30,998 19.7 9.8 PL: Profit to Loss; LP: Loss to Profit; UR: Under Review

April 2019 37


Ready reckoner: Quarterly performance Sector CMP NII (INR M) OP. PROFITS (INR M) NET PROFIT (INR M)

(INR) Rating Mar-19 Var % YoY


% YoY Var


Var % QoQ

Financials Private Banks AU Small Finance 608 Buy 3,790 32.1 8.9 1,975 27.8 10.5 1,055 27.1 10.7 Axis Bank 767 Buy 56,173 18.7 0.2 45,717 24.5 -17.2 15,185 LP -9.7 DCB Bank 203 Neutral 3,126 18.5 6.5 1,852 30.8 6.5 928 44.5 7.8 Equitas Holdings 138 Buy 3,454 39.0 7.9 1,437 113.2 17.3 705 102.4 12.9 Federal Bank 98 Buy 11,278 20.9 4.7 7,459 26.7 5.4 3,526 143.2 5.7 HDFC Bank 2,297 Buy 132,442 24.3 5.3 110,439 25.0 2.5 58,033 20.9 3.9 ICICI Bank 397 Buy 68,393 13.6 -0.5 62,332 -17.0 1.4 21,628 112.0 34.8 IndusInd Bank 1,776 Buy 24,037 19.7 5.1 22,576 27.6 6.6 5,261 -44.8 -46.6 Kotak Mahindra Bank 1,339 Neutral 31,262 21.2 6.4 24,773 22.8 27.8 13,880 23.5 7.5 RBL Bank 678 Buy 6,984 39.5 6.6 5,337 39.3 7.1 2,400 34.7 6.6 Yes Bank 280 Buy 27,614 28.2 3.6 25,006 17.1 25.6 9,708 -17.7 -3.1 Pvt Banking Sector Aggregate 368,555 21.3 3.4 308,900 13.2 2.4 132,309 79.0 2.2 PSU Banks Bank of Baroda 133 Buy 49,097 22.7 3.5 35,797 34.3 1.2 6,567 LP 39.4 Indian Bank 282 Buy 17,507 6.9 2.0 12,527 7.6 9.3 1,808 37.0 18.7 Punjab National Bank 98 Neutral 44,324 44.7 3.3 34,738 LP 12.1 4,400 LP 78.5 State Bank 329 Buy 229,386 14.8 1.1 155,768 -1.9 23.4 36,498 LP -7.7 PSU Banking Sector Aggregate 340,313 18.7 1.8 238,829 24.0 17.0 49,273 LP 2.1 Life Insurance HDFC Life Insur. 380 Buy 95,414 7.2 38.3 5,893 48.5 165.9 4,044 16.6 64.6 ICICI Pru Life 369 Buy 103,911 20.0 38.9 1,768 -35.5 -45.7 2,692 -21.0 -9.3 Life Insurance Sector Aggregate 199,325 13.5 38.6 7,661 14.2 40.0 6,736 -2.0 24.2 NBFC Bajaj Finance 3,050 Neutral 32,707 44.4 2.6 21,276 54.7 1.8 10,620 42.1 0.2 Chola. Inv & Fin. 1,483 UR 9,021 7.1 3.2 5,730 23.3 2.5 3,070 2.3 0.9 HDFC 1,993 Buy 29,003 -9.7 -10.2 25,953 -14.7 -9.1 23,740 -10.8 12.3 Indiabulls Housing 841 Buy 15,915 -0.3 -11.0 14,350 15.5 3.4 10,800 4.8 9.6 L&T Fin.Holdings 151 Buy 14,940 13.9 8.3 12,489 20.8 4.8 5,940 46.3 2.2 LIC Housing Fin 549 Buy 10,801 7.6 3.6 10,578 22.0 6.6 6,718 24.6 12.7 M & M Financial 416 Buy 12,512 -4.1 3.9 7,990 -3.3 7.3 3,650 -14.0 14.5 MAS Financial 586 Buy 1,042 33.1 -2.2 801 32.7 -4.9 432 44.6 -6.3 Muthoot Finance 616 Neutral 11,071 3.2 1.2 7,753 -2.1 -1.1 5,025 11.3 3.6 PNB Housing 920 Buy 3,662 -24.3 3.5 4,806 24.2 -5.9 2,781 26.1 -8.0 Repco Home Fin 465 Buy 1,164 0.0 1.1 951 -5.8 1.2 573 1.1 2.9 Shriram City Union 1,796 Buy 8,832 8.8 0.0 5,425 11.2 1.2 2,122 351.2 -18.0 Shriram Transport Fin. 1,200 Buy 20,378 22.6 0.5 15,891 12.3 -1.9 6,268 81.9 -1.4 NBFC Banking Sector Aggregate 171,049 8.5 -1.0 133,993 10.8 -0.4 81,740 12.6 5.6 Financials Sector Aggregate 1079,242 16.8 7.1 689,384 16.2 6.7 270,057 LP 3.6 PL: Profit to Loss; LP: Loss to Profit; UR: Under Review For Banks: Sales = Net Interest Income, EBITDA = Operating Profits For Life Insurance: Sales = Net Premium, EBITDA = Operating Profits

April 2019 38


Ready reckoner: Full year valuations Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Automobiles Amara Raja Batt. 721 Buy 28.6 36.1 43.1 25.2 20.0 16.7 12.7 10.0 8.4 15.6 17.2 17.8 Ashok Leyland 89 Buy 7.0 7.3 6.0 12.8 12.3 14.9 7.6 6.1 6.9 26.4 24.1 17.7 Bajaj Auto 2,855 Buy 161.4 180.1 203.2 17.7 15.9 14.1 12.6 10.5 8.8 23.1 23.0 23.2 Bharat Forge 514 Buy 23.9 27.3 27.5 21.5 18.9 18.7 11.8 10.2 9.8 22.0 21.4 18.7 Bosch 17,985 Neutral 532.8 613.7 724.3 33.8 29.3 24.8 21.8 19.0 15.5 15.5 17.4 20.4 CEAT 1,128 Buy 60.2 79.9 93.8 18.8 14.1 12.0 9.7 8.1 7.2 9.0 10.9 11.6 Endurance Tech. 1,172 Buy 34.2 43.0 50.1 34.2 27.2 23.4 15.4 12.5 10.6 20.4 22.0 21.9 Eicher Motors 20,581 Buy 813.7 878.2 1008.2 25.3 23.4 20.4 16.4 15.2 12.6 28.3 25.1 24.1 Escorts 772 Neutral 54.5 60.3 63.3 14.2 12.8 12.2 11.2 9.8 9.0 20.0 18.7 16.9 Exide Inds. 215 Buy 8.8 10.7 11.9 24.6 20.2 18.1 11.7 9.5 8.3 12.5 13.9 14.0 Hero Motocorp 2,570 Neutral 168.3 175.4 181.6 15.3 14.7 14.2 8.9 8.3 7.9 27.6 27.1 26.5 Mahindra & Mahindra 667 Buy 40.6 44.1 44.4 16.4 15.1 15.0 4.0 3.4 3.4 14.2 13.1 11.7 Maruti Suzuki 6,883 Buy 241.6 284.4 348.0 28.5 24.2 19.8 15.5 13.3 10.8 16.1 17.0 18.9 Motherson Sumi 155 Buy 5.3 6.9 7.8 29.5 22.4 20.0 9.7 7.3 6.1 16.7 19.4 19.1 Tata Motors 203 Neutral -7.2 12.2 15.7 -28.0 16.7 13.0 4.9 3.9 3.5 -3.1 6.2 7.4 TVS Motor 486 Neutral 14.1 19.7 25.3 34.5 24.7 19.2 17.0 12.8 10.3 21.6 25.7 27.1 Sector Aggregate 26.7 19.5 17.3 8.7 7.2 6.4 12.2 15.3 15.6 Capital Goods ABB 1,323 Sell 12.0 14.9 17.2 110.3 88.9 76.8 59.3 48.4 41.6 6.3 7.6 8.4 Bharat Electronics 101 Buy 7.1 7.4 7.7 14.2 13.6 13.1 8.7 7.9 7.4 19.7 18.3 17.1 BHEL 75 Sell 3.2 3.8 4.5 23.3 19.7 16.7 9.4 7.5 7.2 3.5 4.2 4.9 Blue Star 706 Neutral 16.0 23.1 31.1 44.1 30.5 22.7 21.8 17.2 13.8 17.0 22.0 26.0 CG Consumer Elect. 222 Buy 6.0 7.7 9.3 37.1 29.0 23.9 23.8 19.2 15.9 42.4 43.4 42.4 Cummins India 745 Buy 27.4 31.2 34.8 27.2 23.9 21.4 21.8 19.0 16.6 18.3 19.2 19.8 Engineers India 120 Buy 6.3 7.4 8.7 19.0 16.2 13.8 13.8 10.4 8.0 16.8 17.9 19.1 GE T&D India 290 Neutral 9.9 11.1 11.8 29.3 26.1 24.5 15.8 14.9 13.9 20.0 19.8 18.7 Havells India 765 Buy 13.8 16.7 20.3 55.4 45.7 37.7 36.1 29.3 23.9 20.1 21.1 21.9 K E C International 302 Neutral 19.7 24.7 27.0 15.3 12.2 11.2 8.7 7.4 6.6 20.9 21.5 19.6 Larsen & Toubro 1,410 Buy 62.4 72.4 89.6 22.6 19.5 15.7 16.8 13.7 11.5 14.9 14.4 15.0 Siemens 1,130 Neutral 25.1 30.9 32.5 45.0 36.6 34.8 27.8 22.7 20.8 11.2 12.7 12.4 Solar Inds. 1,039 Neutral 28.7 37.5 49.7 36.2 27.7 20.9 19.4 15.1 11.6 21.9 23.8 25.8 Thermax 941 Buy 25.4 36.3 43.0 37.0 25.9 21.9 21.1 15.1 12.2 10.2 13.3 14.1 Va Tech Wabag 323 Neutral 26.9 38.2 47.9 12.0 8.4 6.7 6.0 4.9 4.2 11.2 15.9 17.4 Voltas 623 Neutral 16.5 18.9 22.3 37.8 33.0 28.0 24.0 21.1 17.9 13.6 13.8 14.7 Sector Aggregate 27.3 23.3 19.6 17.8 14.6 12.5 12.3 12.4 13.4 Cement ACC 1,620 Buy 57.3 72.3 93.7 28.3 22.4 17.3 12.9 10.4 8.6 10.8 12.3 14.3 Ambuja Cements 230 Neutral 6.3 6.4 7.3 36.7 35.7 31.5 22.4 21.6 18.1 6.1 6.0 6.7 Birla Corporation 523 Buy 30.2 52.4 73.4 17.3 10.0 7.1 8.5 6.9 5.6 5.4 8.8 11.4 Grasim Industries 846 Neutral 66.2 85.0 98.3 12.8 9.9 8.6 13.8 13.1 11.6 6.0 6.1 6.0 India Cements 111 Neutral 2.8 5.4 7.8 39.4 20.6 14.2 10.2 8.6 7.4 1.7 3.1 4.4 J K Cements 864 Buy 35.8 43.4 52.7 24.1 19.9 16.4 10.4 10.3 8.4 13.3 14.4 15.4 JK Lakshmi Cem. 358 Buy 6.1 12.0 20.2 58.5 29.8 17.7 13.5 10.4 7.9 4.9 9.0 13.6 Orient Cement 82 Buy 0.3 3.8 7.0 308.8 21.6 11.7 12.4 10.5 8.6 0.5 7.4 12.5 Prism Johnson 96 Buy 2.7 3.4 3.9 35.0 27.9 24.7 11.2 10.6 9.9 12.8 14.3 14.3 Ramco Cements 741 Buy 21.4 28.5 36.8 34.6 26.0 20.2 18.4 14.3 10.9 11.9 14.1 15.9 Sanghi Inds. 64 Buy 1.2 2.3 2.4 53.4 28.2 26.6 16.7 14.5 8.9 1.9 3.5 3.5

April 2019 39


Ready reckoner: Full year valuations Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Shree Cement 18,505 Buy 371.5 459.7 600.3 49.8 40.3 30.8 21.8 16.8 13.2 13.9 15.5 17.4 Ultratech Cement 4,021 Buy 78.6 106.0 136.6 51.2 37.9 29.4 19.6 15.4 12.5 8.0 9.6 10.4 Sector Aggregate 30.5 23.5 19.0 16.8 14.1 11.6 8.5 10.2 11.5

Consumer Asian Paints 1,516 Neutral 24.1 28.3 34.0 63.0 53.5 44.6 39.4 33.0 27.8 26.3 29.0 33.1 Britannia 2,994 Buy 48.4 59.1 69.8 61.9 50.6 42.9 40.7 33.2 27.8 32.1 35.8 40.3 Colgate 1,247 Buy 27.9 32.1 37.0 44.7 38.8 33.7 26.6 23.4 20.4 48.4 54.1 64.2 Dabur 403 Neutral 8.4 9.5 10.9 48.1 42.4 37.1 37.7 33.2 29.0 24.1 24.2 25.4 Emami 410 Buy 12.5 14.3 16.4 32.9 28.7 25.1 24.8 21.2 18.7 27.0 29.4 32.9 Future Consumer 45 Buy -0.1 0.7 1.6 -400.1 65.0 27.5 91.2 40.8 22.2 -1.9 11.0 21.9 Godrej Consumer 659 Neutral 14.7 17.5 20.1 44.7 37.6 32.8 31.1 26.9 23.6 23.0 25.1 26.1 GSK Consumer 7,058 Neutral 206.1 223.9 252.9 34.2 31.5 27.9 23.9 20.8 18.0 24.5 24.7 25.0 Hind. Unilever 1,687 Buy 28.8 34.3 40.9 58.6 49.2 41.3 41.3 34.6 29.1 86.2 101.1 125.5 ITC 297 Neutral 9.9 11.2 12.4 29.9 26.6 24.0 20.0 17.6 15.8 23.9 26.2 27.3 Jyothy Labs 183 Neutral 5.2 6.3 7.6 35.5 29.2 24.2 23.2 19.9 16.8 15.9 18.3 20.6 Marico 346 Buy 7.3 8.8 10.7 47.1 39.3 32.4 34.0 28.3 23.3 34.8 37.4 42.9 Nestle 10,767 Neutral 178.6 197.3 232.0 60.3 54.6 46.4 36.7 33.0 28.2 48.5 51.4 61.6 P&G Hygiene 10,749 Neutral 134.4 167.0 209.9 80.0 64.4 51.2 50.9 40.8 31.8 50.0 53.0 56.1 Page Industries 25,225 Neutral 378.3 472.0 573.3 66.7 53.4 44.0 43.0 35.6 29.4 51.5 53.8 56.2 Parag Milk Foods 261 Buy 13.9 16.6 20.5 18.7 15.8 12.7 9.9 8.6 7.1 15.3 15.9 17.2 Pidilite Inds. 1,258 UR 18.2 22.4 26.6 69.3 56.2 47.2 45.3 37.1 31.1 24.4 27.3 29.5 United Breweries 1,402 Neutral 23.0 26.8 32.0 61.1 52.4 43.8 30.8 26.8 22.9 20.6 20.1 20.1 United Spirits 541 Buy 10.0 13.6 18.4 54.3 39.7 29.4 31.5 24.6 18.9 23.5 25.6 25.6 Sector Aggregate 46.3 39.7 34.2 31.0 26.5 22.8 29.3 31.6 34.5

Healthcare Alembic Pharma 542 Neutral 29.3 29.6 34.8 18.5 18.3 15.6 12.2 11.8 9.9 22.4 19.3 19.5 Alkem Lab 1,745 Buy 70.9 91.7 109.4 24.6 19.0 16.0 16.5 13.1 10.7 16.3 18.4 19.0 Ajanta Pharma 1,034 Buy 44.0 51.2 59.3 23.5 20.2 17.4 15.4 13.2 11.3 17.6 17.6 17.6 Aurobindo Pharma 787 Buy 42.8 59.1 64.2 18.4 13.3 12.3 12.7 9.5 8.0 19.6 22.2 19.7 Biocon 616 Neutral 12.1 21.8 25.6 50.8 28.2 24.1 26.0 16.6 13.9 13.2 20.9 21.1 Cadila Health 344 Buy 17.5 17.7 18.8 19.7 19.4 18.3 14.4 13.0 12.0 19.1 17.0 16.0 Cipla 526 Neutral 17.6 21.2 25.3 29.9 24.8 20.8 15.9 13.2 11.2 9.2 10.1 10.9 Divis Labs 1,699 Neutral 56.0 61.3 70.4 30.3 27.7 24.1 22.1 19.6 16.6 22.9 21.1 20.5 Dr Reddy’ s Labs 2,796 Neutral 111.8 129.2 141.5 25.0 21.6 19.8 15.5 11.9 10.7 14.0 14.4 14.0 Glenmark Pharma 650 Neutral 28.2 34.7 38.3 23.0 18.7 16.9 14.4 12.0 10.8 13.2 14.1 13.5 Granules India 114 Buy 9.1 10.4 12.3 12.5 11.0 9.3 8.5 6.8 5.9 16.6 17.0 17.9 GSK Pharma 1,294 Neutral 23.6 28.7 33.3 54.7 45.0 38.8 35.8 29.1 24.4 18.9 21.5 22.7 IPCA Labs. 954 Buy 36.8 42.7 50.7 25.9 22.3 18.8 17.1 14.2 12.0 16.0 16.1 16.7 Jubilant Life 686 Buy 60.4 69.5 73.7 11.4 9.9 9.3 7.3 6.0 5.4 20.8 19.9 17.8 Lupin 777 Buy 26.2 38.2 47.9 29.7 20.3 16.2 15.8 11.1 9.2 8.6 11.9 13.6 Sanofi India 5,914 Buy 165.5 197.3 218.6 35.7 30.0 27.1 20.5 16.7 14.6 17.2 18.5 18.3 Sun Pharma 470 Buy 16.2 20.4 23.8 28.9 23.0 19.8 16.0 12.5 10.5 10.0 11.7 12.3 Shilpa Medicare 335 Buy 13.9 22.3 24.2 24.1 15.0 13.9 16.7 12.1 9.1 9.7 13.8 13.2 Strides Pharma 474 Buy 9.8 25.1 34.0 48.6 18.9 14.0 12.8 10.4 8.8 3.5 8.6 10.8 Torrent Pharma 1,889 Neutral 48.7 68.5 83.4 38.8 27.6 22.7 17.3 14.3 12.1 16.4 19.9 21.2 Sector Aggregate 26.7 21.3 18.6 15.9 12.7 10.9 13.1 14.5 14.6

April 2019 40


Ready reckoner: Full year valuations Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Infrastructure Ashoka Buildcon 133 Buy 10.5 12.4 15.1 12.7 10.8 8.8 8.2 6.1 4.8 14.2 14.6 15.5 IRB Infra 155 Neutral 27.1 23.5 14.8 5.7 6.6 10.4 4.7 5.0 6.0 14.8 11.5 6.7 KNR Constructions 257 Buy 14.4 14.4 15.5 17.8 17.9 16.5 7.7 7.3 5.4 16.2 14.0 13.2 Sadbhav Engineering 249 Buy 13.5 13.4 14.0 18.4 18.6 17.8 10.9 8.8 7.9 11.8 10.5 10.0 Sector Aggregate 10.1 10.6 12.2 6.0 5.8 6.0 13.5 11.5 9.2

Logistics Allcargo Logistics 113 Buy 8.7 10.1 11.4 13.0 11.2 9.9 6.9 6.0 5.2 10.3 10.7 10.8 Concor 533 Buy 19.5 23.1 26.1 27.4 23.0 20.4 19.6 15.8 13.7 12.2 13.5 14.1 Sector Aggregate 25.2 21.3 18.9 16.7 13.7 11.9 11.4 12.5 13.0

Media D B Corp 186 Buy 15.7 22.3 24.6 11.8 8.4 7.6 6.5 4.3 3.4 14.7 19.9 18.8 Ent.Network 532 Buy 11.0 19.0 33.8 48.4 28.0 15.8 16.7 11.7 7.2 5.8 9.3 14.7 Jagran Prakashan 120 Buy 9.1 13.8 15.5 13.2 8.7 7.7 6.0 4.0 3.1 13.6 19.7 19.2 Music Broadcast 59 Buy 2.3 3.0 3.9 26.0 19.9 15.2 13.4 10.2 7.6 10.4 12.7 14.5 PVR 1,656 Buy 34.5 35.9 40.0 48.0 46.2 41.4 16.2 13.9 12.0 14.0 12.2 11.4 Sun TV 642 Buy 37.5 41.4 46.5 17.1 15.5 13.8 9.0 7.9 6.9 30.3 30.4 31.1 Zee Entertainment 418 Neutral 16.3 18.9 22.7 25.7 22.2 18.4 15.2 13.4 10.9 19.1 19.1 19.6 Sector Aggregate 21.9 18.5 15.8 11.7 9.8 8.2 18.9 19.5 19.8

Metals Hindalco 217 Buy 25.7 26.3 30.4 8.4 8.2 7.1 5.7 5.5 4.9 14.5 13.2 13.4 Hindustan Zinc 283 Neutral 18.6 22.0 22.5 15.2 12.8 12.6 9.7 7.8 7.3 22.5 25.6 22.7 JSPL 185 Buy 2.3 3.8 24.7 80.3 49.2 7.5 7.0 6.6 5.7 0.7 1.2 7.4 JSW Steel 288 Buy 30.6 20.7 29.3 9.4 13.9 9.8 6.8 8.2 6.9 24.8 15.1 18.7 Nalco 55 Buy 8.8 5.7 6.9 6.3 9.7 8.0 2.9 4.9 4.5 16.3 10.8 13.3 NMDC 105 Buy 15.3 10.7 12.9 6.9 9.8 8.1 3.9 5.6 4.5 18.9 12.5 14.2 Rain Industries 102 Buy 20.4 13.7 20.5 5.0 7.4 5.0 1.7 2.1 1.8 16.0 9.9 13.8 SAIL 56 Neutral 6.3 6.1 9.7 9.0 9.3 5.8 9.2 9.3 7.6 6.8 6.2 9.3 Tata Steel 531 Sell 88.7 72.0 74.2 6.0 7.4 7.2 6.0 6.9 6.8 17.3 14.1 14.8 Vedanta 188 Sell 13.2 17.4 18.1 14.2 10.8 10.4 6.7 5.4 5.0 8.0 10.7 10.6 Sector Aggregate 9.9 10.7 8.9 6.6 6.7 6.0 12.7 11.6 12.6

Oil & Gas Aegis Logistics 205 Buy 6.9 9.9 11.3 29.7 20.8 18.1 17.9 12.5 10.8 17.8 21.9 21.4 BPCL 381 Buy 39.3 47.8 51.8 9.7 8.0 7.3 7.1 6.6 6.5 20.0 21.7 21.0 GAIL 362 Neutral 29.5 28.4 30.0 12.3 12.8 12.1 8.1 8.2 7.6 15.7 13.7 13.3 Gujarat Gas 147 Buy 5.9 6.8 7.6 25.1 21.7 19.3 12.2 11.1 9.4 20.3 20.1 19.4 Gujarat State Petronet 179 Buy 15.4 14.9 16.0 11.6 12.1 11.2 3.9 4.3 3.6 16.0 13.6 13.0 HPCL 274 Neutral 37.6 50.8 51.4 7.3 5.4 5.3 4.8 4.4 5.1 21.1 25.0 22.1 Indraprastha Gas 300 Buy 11.2 13.0 14.6 26.9 23.1 20.6 15.8 13.7 11.9 20.4 20.4 19.7 IOC 158 Buy 15.5 18.2 19.1 10.2 8.7 8.3 5.0 4.8 4.7 12.5 13.8 13.6 Mahanagar Gas 1,000 Buy 57.7 58.3 65.7 17.3 17.2 15.2 9.4 8.9 7.7 25.2 22.3 22.2 MRPL 74 Buy 1.7 10.6 10.8 44.1 6.9 6.8 8.4 3.7 3.4 2.6 15.6 14.1 Oil India 184 Buy 33.5 29.8 30.6 5.5 6.2 6.0 4.6 4.4 4.2 13.1 10.9 10.6 ONGC 157 Buy 26.7 28.4 28.5 5.9 5.5 5.5 3.2 2.9 2.8 16.0 15.5 14.3 Petronet LNG 249 Buy 15.2 17.9 21.1 16.4 13.9 11.8 9.1 7.6 6.1 22.3 23.9 25.4 Reliance Inds. 1,388 Neutral 66.2 70.3 71.4 21.0 19.7 19.4 10.8 8.8 7.5 12.6 12.0 11.0 Sector Aggregate 12.8 11.6 11.2 6.7 5.9 5.4 13.7 13.8 13.0 Oil & Gas Ex OMCs 13.8 12.9 12.6 7.1 6.1 5.5 13.4 13.0 12.1

April 2019 41


Ready reckoner: Full year valuations Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Retail Jubilant Foodworks 1,442 Neutral 24.8 28.1 32.9 58.0 51.3 43.8 30.3 26.2 22.5 27.9 26.7 27.0 Titan Company 1,112 Buy 16.1 20.5 25.5 69.0 54.3 43.7 47.0 37.5 29.8 28.1 33.0 35.5 Sector Aggregate 67.0 53.8 43.7 43.2 35.1 28.4 28.0 30.0 31.9

Technology Cyient 579 Neutral 38.4 46.8 50.4 15.1 12.4 11.5 8.4 7.3 6.2 16.6 18.3 17.9 HCL Technologies 1,101 Neutral 73.7 81.1 91.7 14.9 13.6 12.0 10.1 8.6 7.6 25.7 24.9 25.2 Hexaware Tech. 359 Neutral 19.3 21.0 23.6 18.6 17.1 15.2 13.7 11.6 10.1 26.5 24.9 25.0 Infosys 757 Buy 36.2 38.7 45.3 20.9 19.6 16.7 14.9 14.0 12.2 25.5 27.1 29.4 L&T Infotech 1,714 Neutral 88.7 93.0 102.7 19.3 18.4 16.7 14.2 13.8 12.0 34.9 28.8 25.8 Mindtree 945 Neutral 45.4 50.7 61.2 20.8 18.7 15.5 14.9 13.4 11.0 24.6 24.4 25.5 MphasiS 989 Neutral 56.9 60.8 70.4 17.4 16.3 14.1 14.7 12.6 10.7 23.8 31.0 30.9 NIIT Tech. 1,350 Neutral 66.2 74.5 89.9 20.4 18.1 15.0 11.9 10.0 8.2 22.0 22.2 23.1 Persistent Systems 632 Buy 42.7 58.1 51.9 14.8 10.9 12.2 6.5 5.4 5.3 15.4 18.7 15.3 TCS 2,080 Neutral 82.3 88.2 98.6 25.3 23.6 21.1 19.8 18.1 16.4 36.4 38.5 41.1 Tata Elxsi 982 Buy 45.6 48.8 57.8 21.5 20.1 17.0 12.7 10.7 8.2 34.1 26.5 22.3 Tech Mahindra 792 Buy 49.1 54.1 60.7 16.1 14.6 13.0 11.9 10.9 9.6 22.7 23.5 24.3 Zensar Tech 232 Buy 14.0 15.5 18.5 16.5 14.9 12.5 10.1 8.2 6.6 17.9 17.2 17.9 Wipro 262 Neutral 14.8 16.6 18.3 17.7 15.8 14.3 11.3 10.1 9.1 17.3 17.0 17.8 Sector Aggregate 21.6 20.2 17.9 15.4 13.9 12.4 26.5 26.9 27.5

Telecom Bharti Airtel 358 Buy -7.6 -5.4 -2.7 -47.3 -65.8 -131 9.8 9.6 8.0 -4.7 -3.7 -1.9 Bharti Infratel 314 Neutral 14.1 14.3 13.8 22.2 22.0 22.8 8.9 9.1 9.2 15.6 16.2 16.3 Tata Comm 606 Buy 1.3 11.2 20.3 450.3 54.1 29.8 8.9 8.1 6.7 6.5 37.6 44.7 Vodafone Idea 17 Buy -18.6 -18.8 -16.7 -0.9 -0.9 -1.0 37.1 18.8 13.0 -37.0 -31.5 -39.8 Sector Aggregate -14.1 -15.0 -18.7 12.2 11.1 9.3 -12.1 -13.3 -12.2

Utilities CESC 726 UR 75.4 80.0 90.6 9.6 9.1 8.0 7.1 6.8 6.4 11.4 11.2 11.7 Coal India 237 Buy 27.4 29.0 29.9 8.6 8.1 7.9 4.5 4.3 4.2 82.5 80.4 76.3 JSW Energy 76 Neutral 3.8 4.7 5.6 20.3 16.3 13.5 8.8 7.5 6.8 5.5 6.7 7.7 NHPC 25 Buy 2.2 2.6 3.1 11.6 9.6 8.3 9.1 7.1 6.5 7.4 8.7 9.8 NTPC 135 Buy 11.1 13.7 15.9 12.2 9.8 8.5 9.6 8.1 6.8 10.3 12.0 12.9 Power Grid Corp. 200 Buy 18.3 20.8 22.6 10.9 9.6 8.8 8.2 7.3 6.8 16.7 17.1 16.8 Tata Power 74 Neutral 2.5 6.6 6.7 29.4 11.2 11.1 11.0 9.6 9.1 4.3 10.3 9.6 Torrent Power 263 Buy 22.0 23.1 27.6 12.0 11.4 9.5 6.9 6.5 5.6 13.0 12.5 13.5 Sector Aggregate 10.8 9.3 8.6 7.8 6.9 6.3 16.1 17.3 17.5

Others Avenue Supermarts 1,492 Sell 15.3 19.7 26.1 97.4 75.8 57.1 55.4 44.1 34.0 18.6 19.7 21.3 Brigade Enterpr. 252 Buy 16.5 16.1 14.2 15.3 15.7 17.7 9.4 9.9 9.3 9.5 8.5 7.1 BSE 613 Buy 34.6 40.0 47.5 17.7 15.3 12.9 -0.3 -4.7 -3.7 4.9 5.6 6.6 Castrol India 166 Buy 7.2 7.4 7.5 23.1 22.5 22.2 14.6 14.2 14.3 64.8 59.5 54.9 Cor.International 491 Buy 24.3 29.3 33.6 20.2 16.8 14.6 12.2 10.6 9.3 21.2 22.1 21.6 Delta Corp 273 Buy 7.0 9.0 10.9 38.9 30.2 25.0 22.5 17.9 14.4 11.0 12.9 13.8 Godrej Agrovet 541 Buy 12.6 16.1 19.7 42.8 33.6 27.4 23.0 17.8 14.8 16.4 18.7 20.1 Indian Hotels 158 Buy 2.4 3.1 4.2 64.7 51.0 37.3 24.5 19.1 15.3 6.7 8.0 10.2 Info Edge 1,811 Neutral 24.9 33.9 41.9 72.8 53.4 43.2 52.8 40.0 30.9 14.6 16.9 18.1 Interglobe Aviation 1,384 Neutral 0.1 67.4 103.1 9340.7 20.5 13.4 8.4 3.2 2.0 0.1 35.5 50.6 Kaveri Seed 467 Buy 32.9 36.9 38.8 14.2 12.7 12.0 12.0 10.5 9.8 20.6 21.2 20.3

April 2019 42


Ready reckoner: Full year valuations Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E MCX 793 Buy 23.3 28.5 36.6 34.0 27.8 21.7 34.6 28.7 19.3 9.1 11.5 13.8 Navneet Education 113 Buy 8.3 9.8 11.4 13.5 11.5 9.9 9.3 7.8 6.7 24.8 26.7 27.0 Oberoi Realty 546 Buy 22.2 34.5 33.3 24.6 15.8 16.4 17.8 15.6 13.2 11.5 14.8 12.7 P I Industries 1,056 UR 29.5 36.0 43.3 35.7 29.4 24.4 25.1 21.2 17.5 19.6 20.5 20.9 Piramal Enterprises 2,643 Buy 78.0 126.1 152.3 33.9 21.0 17.4 14.1 12.0 10.3 5.8 8.9 10.1 Phoenix Mills 666 Buy 16.9 21.8 26.7 39.5 30.5 24.9 15.8 13.1 11.4 8.2 9.4 10.5 Quess Corp 740 Neutral 17.4 30.5 40.5 42.5 24.3 18.3 23.3 16.8 13.5 9.8 15.2 17.1 S H Kelkar 155 Buy 6.4 7.6 9.4 24.3 20.3 16.4 14.5 11.7 9.5 10.3 11.4 13.0 SRF 2,390 UR 104.7 134.4 176.5 22.8 17.8 13.5 13.2 10.7 8.7 16.1 18.0 20.1 Tata Chemicals 595 Buy 40.7 46.8 56.0 14.6 12.7 10.6 8.0 6.7 5.7 9.0 9.7 10.8 Team Lease Serv. 3,036 Buy 59.1 86.1 122.6 51.3 35.3 24.8 51.7 34.5 23.6 20.0 23.4 26.0 Trident 70 Buy 8.5 9.3 10.3 8.2 7.5 6.8 5.6 4.9 4.2 13.8 13.9 14.0 UPL 927 Buy 46.0 48.0 75.8 20.1 19.3 12.2 12.1 9.0 6.9 23.5 20.6 27.3 Sector Aggregate 37.1 25.2 19.5 16.1 11.4 9.1 10.7 14.2 16.5 UR: Under Review

April 2019 43


Ready reckoner: Full year valuations Sector / Companies CMP EPS (INR) PE (x) PB (x) ROE (%) (INR) Reco FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Banks-Private AU Small Finance 608 Buy 12.8 16.8 22.4 47.4 36.1 27.2 5.7 4.4 2.9 13.7 13.7 12.9 Axis Bank 767 Buy 18.3 40.2 55.5 42.0 19.1 13.8 2.9 2.5 2.2 7.2 14.3 17.0 DCB Bank 203 Neutral 10.4 14.1 18.8 19.5 14.5 10.8 2.1 1.9 1.6 11.9 14.1 16.3 Equitas Holdings 138 Buy 6.4 9.5 12.5 21.6 14.5 11.1 1.9 1.7 1.5 9.2 12.4 14.5 Federal Bank 98 Buy 6.2 8.4 10.5 15.8 11.7 9.3 1.5 1.3 1.2 9.5 11.8 13.2 HDFC Bank 2,297 Buy 79.2 93.9 114.3 29.0 24.5 20.1 4.2 3.7 3.2 16.6 16.2 17.2 ICICI Bank 397 Buy 7.1 20.4 28.7 56.1 19.5 13.9 2.4 2.2 2.0 4.4 11.9 15.1 IndusInd Bank 1,776 Buy 53.8 99.4 127.4 33.0 17.9 13.9 4.2 3.3 2.7 13.1 20.6 21.4 Kotak Mahindra Bank 1,339 Neutral 38.0 45.6 55.3 35.2 29.4 24.2 4.4 3.9 3.3 12.2 13.1 14.2 RBL Bank 678 Buy 20.5 27.5 38.0 33.1 24.7 17.9 3.8 3.4 3.0 12.2 14.7 17.8 South Indian Bank 17 Buy 1.7 2.7 4.0 10.3 6.4 4.3 0.6 0.5 0.5 5.6 8.6 11.8 Yes Bank 280 Buy 18.2 24.7 31.6 15.4 11.3 8.9 2.2 1.9 1.6 15.3 18.1 19.8 Private Bank Aggregate 32.7 21.2 16.4 3.5 3.0 2.6 10.6 14.3 16.0 Banks-PSU Bank of Baroda 133 Buy 7.8 14.8 23.9 17.0 9.0 5.6 0.8 0.8 0.7 4.7 8.4 12.3 Bank of India 106 Neutral -22.0 3.2 11.7 -4.8 33.4 9.0 0.9 0.9 0.8 -14.1 2.4 8.7 Canara Bank 296 Neutral 17.0 42.3 49.3 17.4 7.0 6.0 0.7 0.6 0.6 3.5 8.2 8.9 Indian Bank 282 Buy 14.4 24.8 41.8 19.5 11.3 6.7 0.8 0.7 0.7 4.3 7.1 11.0 Punjab National Bank 98 Neutral -14.6 5.8 11.6 -6.8 17.1 8.5 0.9 0.8 0.8 -11.2 4.8 9.1 State Bank 329 Buy 6.8 27.1 38.1 48.4 12.1 8.6 1.3 1.2 1.1 1.9 10.3 13.3 Union Bank 99 Neutral 4.5 12.8 24.6 22.1 7.7 4.0 0.4 0.4 0.4 2.1 5.5 9.9 PSU Bank Aggregate 2010.3 11.6 7.5 1.0 0.9 0.8 0.0 7.9 11.0 Life Insurance HDFC Life Insur. 380 Buy 6.5 8.0 9.6 58.0 47.7 39.6 4.3 3.6 3.0 17.7 17.7 19.9 ICICI Pru Life 369 Buy 8.0 8.9 10.3 46.1 41.5 35.8 2.4 2.1 1.9 15.3 14.3 14.0 Life Insurance Aggregate 52.4 44.8 37.8 9.8 8.6 7.5 18.7 19.3 19.8 NBFC Aditya Birla Cap 103 Buy 3.5 5.5 6.3 29.4 18.8 16.2 2.4 2.1 1.8 8.9 12.4 12.5 Bajaj Finance 3,050 Neutral 67.5 86.2 109.2 45.2 35.4 27.9 9.3 7.5 6.1 22.6 23.5 24.1 Chola. Inv & Fin. 1,483 UR 76.8 88.6 101.1 19.3 16.7 14.7 3.8 3.1 2.6 21.4 20.5 19.5 HDFC 1,993 Buy 42.9 50.7 57.9 46.5 39.3 34.4 4.6 4.3 3.8 14.9 14.9 15.3 Indiabulls Housing 841 Buy 97.6 107.9 123.3 8.6 7.8 6.8 2.1 1.9 1.7 26.1 25.6 26.0 L&T Fin.Holdings 151 Buy 11.4 13.3 16.2 13.2 11.4 9.3 2.3 1.9 1.6 18.7 18.5 19.0 LIC Housing Fin 549 Buy 47.7 56.1 65.2 11.5 9.8 8.4 1.7 1.5 1.3 15.7 16.2 16.4 M & M Financial 416 Buy 21.7 26.1 31.1 19.2 15.9 13.4 2.4 2.2 2.0 13.2 14.4 15.4 MAS Financial 586 Buy 28.4 32.6 39.1 20.7 18.0 15.0 3.8 3.3 2.8 19.8 19.6 20.3 Muthoot Finance 616 Neutral 49.1 55.2 63.2 12.6 11.2 9.7 2.7 2.3 2.0 23.2 22.3 21.9 PNB Housing 920 Buy 65.0 75.3 85.8 14.1 12.2 10.7 2.1 1.9 1.6 15.9 16.3 16.3 Repco Home Fin 465 Buy 38.4 43.3 49.9 12.1 10.7 9.3 1.9 1.6 1.4 17.1 16.5 16.3 Shriram City Union 1,796 Buy 145.9 162.2 184.3 12.3 11.1 9.7 1.9 1.6 1.4 16.5 15.9 15.7 Shriram Transport Fin. 1,200 Buy 107.7 130.1 149.8 11.1 9.2 8.0 1.7 1.5 1.3 16.7 17.4 17.2 NBFC Aggregate 25.1 21.1 17.9 3.7 3.3 2.8 14.8 15.5 15.8 Financials Sector Aggregate 35.7 19.2 14.5 2.6 2.3 2.1 7.3 12.2 14.2 UR: Under Review

April 2019 44


Sectors & Companies BSE Sensex: 39,057 S&P CNX: 11,713 April 2019

Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year numbers. This is because of differences in classification of account heads in the company’s quarterly and annual results or because of differences in the way we classify account heads as opposed to the company.

All stock prices and indices as on 2 April 2019, unless otherwise stated.

MOFSL Universe: 4QFY19 Highlights

& Ready Reckoner

April 2019 45

Demand trends remain weak across segments OEMs facing margin pressures for the third straight quarter

All auto segments faced demand headwinds in 4QFY19 – a trend similar to theprevious quarter. Increased ownership cost and stress at the farm level hamperedbuying sentiment, particularly in 2Ws/PVs.

EBITDA margin for our OEM (ex-JLR) universe is likely to contract for the thirdconsecutive quarter by 120bp YoY (+30bp QoQ) to 12% due to negative operatingleverage and higher variable marketing expenses. While almost all OEMs (except TVSLand TTMT S/A) are likely to see YoY margin contraction, MSIL, AL and BJAUT areexpected to deliver a QoQ margin recovery of 220bp, 80bp and 40bp, respectively.

We have lowered our FY20/21 EPS estimates for EIM (12%/6%), TVSL (10%/17%),TTMT (23%/19.5%), ENDU (4%/8%) and MSS (8%/9%).

Increased ownership cost and farm stress continue hurting demand, particularly in PVs/2Ws: All auto segments faced demand headwinds even in 4QFY19, continuing the trend of weak retails in the previous quarter. Not only increased ownership cost but also stress at the farm level hampered buying sentiment, particularly in 2Ws/PVs. Consequently, inventories were at record levels across segments (highest in the 2W segment at 60-70 days).

Negative op. leverage, higher variable marketing spend to exert margin pressures for third consecutive quarter: EBITDA margin for our Auto OEM (ex-JLR) universe is likely to contract by 120 bp YoY (+30 bp QoQ) to 12% due to negative operating leverage and an increase in variable marketing expenses. All OEMs are likely to witness margin contraction on a YoY basis – BJAUT (-320bp), MM (-360bp), EIM (-280bp), HMCL (-240bp), MSIL (-220bp) and AL (-70bp) – barring TVSL (+30bp) and TTMT S/A (+230bp). Consequently, PAT is expected to decline (by a significant 20% YoY or 11.5% QoQ) for the first time in seven quarters.

Expect better demand trend from 2QFY20, but FY20 could be mixed bag: We expect the demand environment to only improve from 2QFY20 with pre-buy to kick start ahead of BS-6 implementation; however, the strategy around BS4 inventory management in 4QFY20 will determine the overall FY20 performance. The increase in regulatory cost to comply with BS6 emission norms is likely to take a toll on demand post FY20, as players will have to pass on the higher cost to consumers to tackle the consequent pressure on margins. The impact is likely to be significant on 2Ws and CVs but limited on PVs. We estimate 5-6% CAGR for 2Ws, 6-7% for 4Ws, 1-2% for CVs and 6-7% for tractors over FY19-21 (assuming normal monsoon).

Valuation and view Near-term headwinds notwithstanding, our preference remains for PVs over CVs/2Ws as it would be least impacted by BS-6 transition as well as stable competitive environment, in turn reflecting in strong earnings growth. Our top picks in autos are MSIL and MSS among large caps, and ENDU and EXID among midcaps.

Company name Amara Raja Batteries

Ashok Leyland

Bajaj Auto

Bharat Forge

BOSCH

CEAT Eicher Motors

Endurance technologies

Escorts

Exide Industries

Hero MotoCorp

Mahindra & Mahindra

Maruti Suzuki

Motherson Sumi

Tata Motors

TVS Motor Company

Automobiles March 2019 Results Preview | April 2019

Jinesh Gandhi – Research Analyst ([email protected]); +91 22 6129 1524 Research Analyst: Deep Shah ([email protected]); 6129 1533; Suneeta Kamath ([email protected]); 6129 1534

April 2019 46

Exhibit 1: Summary of expected quarterly performance (INR m) Sector Sales (INR M) EBDITA (INR M) Net Profit (INR M)

Automobiles CMP (INR) RECO Mar-19 Var %

YoY Var % QoQ Mar-19 Var %


YoY Var % QoQ

Amara Raja Batt. 721 Buy 16,941 7.2 0.0 2,433 15.4 -3.8 1,249 13.7 -4.6Ashok Leyland 89 Buy 89,192 1.7 41.0 9,860 -4.5 51.8 6,637 -0.6 72.1 Bajaj Auto 2,855 Buy 71,441 5.8 -3.6 11,400 -12.1 -1.4 9,980 -6.0 -9.4Bharat Forge 514 Buy 17,333 18.2 2.4 4,905 23.3 0.7 2,678 45.8 -13.5Bosch 17,985 Neutral 30,458 -3.6 -1.6 6,037 -12.7 42.8 4,400 -11.7 31.2 CEAT 1,128 Buy 17,185 2.7 0.3 1,469 -25.6 3.1 528 -45.3 0.0 Eicher Motors 20,581 Buy 24,606 -2.7 5.1 7,113 -10.8 4.7 5,429 -16.3 1.9 Endurance Tech. 1,172 Buy 19,051 6.9 5.1 2,740 6.5 8.3 1,211 4.1 9.2 Escorts 772 Neutral 16,737 16.5 1.1 1,970 13.4 -1.7 1,294 14.9 -2.6Exide Inds. 215 Buy 26,882 9.3 7.7 3,499 3.5 11.9 1,851 -2.3 19.4 Hero Motocorp 2,570 Neutral 78,059 -8.9 -0.7 10,597 -22.7 -4.1 7,071 -26.9 -8.1Mahindra & Mahindra 667 Buy 131,105 -0.6 1.7 15,054 -24.5 -11.6 7,505 -33.1 -48.5Maruti Suzuki 6,883 Buy 207,515 -2.0 5.5 25,019 -17.0 29.6 16,112 -21.8 8.2 Motherson Sumi 155 Buy 167,319 8.6 1.6 15,728 4.8 12.9 4,556 -14.6 17.1 Tata Motors 203 Neutral 898,003 -1.6 16.6 90,594 -16.8 50.0 12,104 -61.3 LP TVS Motor 486 Neutral 42,214 5.7 -9.5 3,096 10.3 -17.6 1,321 -20.2 -26.0Sector Aggregate 1,854,042 0.1 9.8 211,515 -13.5 23.7 83,926 -28.0 32.7

Exhibit 2: Volume snapshot for 4QFY19 ('000 units) 4QFY19 4QFY18 YoY (%) 3QFY19 QoQ (%) FY19 FY18 YoY (%)

Two wheelers 5,398 5,850 -7.7 5,734 -5.9 24,392 22,979 6.1 Three wheelers 319 295 7.9 303 5.0 1,264 1,016 24.5

Passenger cars 645 699 -7.7 635 1.6 2,716 2,751 -1.3UVs & MPVs 368 351 4.9 312 17.9 1,330 1,277 4.2

Total PVs 1,013 1,049 -3.5 947 7.0 4,045 4,028 0.4 M&HCV 124 130 -4.2 99 25.2 439 384 14.4 LCV 176 175 0.3 152 15.6 639 555 15.2

Total CVs 300 305 -1.6 252 19.4 1,078 939 14.9 Tractors 152 171 -11.2 217 -30.2 775 723 7.3 Total (ex-Tractor) 7,030 7,500 -6.3 7,235 -2.8 30,779 28,961 6.3

Exhibit 3: Trend in segment-wise EBITDA margins (%)

Source: Company, MOFSL

Exhibit 4: Commodity prices cool off sequentially


15.3

14.

6

8.4

14.6

15.

2

9.2

14.4

14.

5

9.2

13.2

11.

2

9.2

13.1

11.

8

9.8

2W Cars CVs

4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

147

141

134

140

110

153

139

138

154

117

153

127

128

146

105

152

123

133

144

102

139

125

131

133

121

Steel Lead Copper Alu Rubber


March 2019 Results Preview | Sector: Automobiles

April 2019 47

Exhibit 5: Trend in key currencies v/s INR (Indexed)

Source: Bloomberg, MOFSL

Exhibit 6: Margins (ex-JLR) to contract YoY but expand QoQ


Exhibit 7: Revised estimates FY20E FY21E

Rev Old Chg (%) Rev Old Chg (%) Bajaj Auto 180 177 1.6 203 190 6.8 Hero MotoCorp 175 181 -3.1 182 188 -3.2TVS Motor 20 22 -10.4 25 31 -17.3Maruti * 284 292 -2.5 348 354 -1.6M&M * 44 47 -7.1 44 52 -13.9Tata Motors * 12 16 -22.6 16 19 -19.5Ashok Leyland 7 7 -0.6 6 6 -0.1Eicher Motors * 878 1,000 -12.2 1,008 1,068 -5.6Amara Raja 36 36 0.4 43 43 0.7 Bharat Forge * 24 24 0.6 27 27 -0.2BOSCH 533 544 -2.0 614 632 -2.9Ceat 80 82 -3.2 94 98 -4.1Escorts 60 61 -0.3 63 64 -0.4Endurance Tech* 43 45 -3.9 50 55 -8.4Exide Industries 11 11 -1.8 12 12 -2.4Motherson Sumi 7 8 -8.0 8 9 -9.0* Consolidated

Exhibit 8: EBITDA margin to contract by ~120bp YoY for the third consecutive quarter Volumes ('000 units) EBITDA margins (%) Adj PAT (INR M)

4QFY19 YoY (%) QoQ (%) 4QFY19 YoY (%) QoQ (%) 4QFY19 YoY (%) QoQ (%) BJAUT 1,194 14.2 -5.3 16.0 -320 40 9,980 -6.0 -9.4HMCL 1,781 -11.0 -1.1 13.6 -240 -50 7,071 -26.9 -8.1TVS Motor 907 2.0 -8.3 7.3 30 -70 1,321 -20.2 -25.9MSIL 458 -0.7 7.0 12.1 -220 220 16,112 -21.8 8.2 MM 236 -0.4 0.7 11.5 -360 -170 7,505 -33.1 -48.5TTMT (S/A) 193 -5.7 12.2 9.2 230 40 4,003 -27.4 -37.7TTMT (JLR) * 162 -11.6 14.1 9.7 -390 230 -95 -126.2 -97.2TTMT (Cons) 10.1 -180 220 12,104 -61.3 -200Ashok Leyland 60 1.3 36.0 11.1 -70 80 6,637 -0.6 72.1 Eicher (RE) 196 -13.6 0.9 29.5 -280 0 4,697 13.3 -7.0Eicher (VECV) 21 -9.1 24.1 8.3 -120 170 1,441 -19.2 89.5 Eicher (Consol) 29.5 -280 0 5,429 -16.3 1.9 Agg. (ex JLR) 5,045 -2.0 -1.8 12.0 -120 30 58,059 -19.9 -11.5

80

100

120

Jun-

14Se

p-14

Dec-

14M

ar-1

5Ju

n-15

Sep-

15De

c-15

Mar

-16

Jun-

16Se

p-16

Dec-

16M

ar-1

7Ju

n-17

Sep-

17De

c-17

Mar

-18

Jun-

18Se

p-18

Dec-

18M

ar-1

9

USD GBP JPY

8

11

14

17

4QFY

13

2QFY

14

4QFY

14

2QFY

15

4QFY

15

2QFY

16

4QFY

16

2QFY

17

4QFY

17

2QFY

18

4QFY

18

2QFY

19

4QFY

19

Aggregate (excld JLR) Aggregate (incl JLR)


April 2019 48

Exhibit 9: Relative performance – three-month (%)


Exhibit 10: Relative performance – one-year (%)


Exhibit 11: Comparative valuation Sector / Companies Mkt Cap CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Automobiles (USD B) (INR)

FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E

Amara Raja Batt. 1.8 721 Buy 28.6 36.1 43.1 25.2 20.0 16.7 12.7 10.0 8.4 15.6 17.2 17.8 Ashok Leyland 3.8 89 Buy 7.0 7.3 6.0 12.8 12.3 14.9 7.6 6.1 6.9 26.4 24.1 17.7 Bajaj Auto 12.0 2,855 Buy 161.4 180.1 203.2 17.7 15.9 14.1 12.6 10.5 8.8 23.1 23.0 23.2 Bharat Forge 3.5 514 Buy 23.9 27.3 27.5 21.5 18.9 18.7 11.8 10.2 9.8 22.0 21.4 18.7 Bosch 8.2 17,985 Neutral 532.8 613.7 724.3 33.8 29.3 24.8 21.8 19.0 15.5 15.5 17.4 20.4 CEAT 0.7 1,128 Buy 60.2 79.9 93.8 18.8 14.1 12.0 9.7 8.1 7.2 9.0 10.9 11.6 Endurance Tech. 2.4 1,172 Buy 34.2 43.0 50.1 34.2 27.2 23.4 15.4 12.5 10.6 20.4 22.0 21.9 Eicher Motors 8.2 20,581 Buy 813.7 878.2 1008.2 25.3 23.4 20.4 16.4 15.2 12.6 28.3 25.1 24.1 Escorts 1.4 772 Neutral 54.5 60.3 63.3 14.2 12.8 12.2 11.2 9.8 9.0 20.0 18.7 16.9 Exide Inds. 2.7 215 Buy 8.8 10.7 11.9 24.6 20.2 18.1 11.7 9.5 8.3 12.5 13.9 14.0 Hero Motocorp 7.5 2,570 Neutral 168.3 175.4 181.6 15.3 14.7 14.2 8.9 8.3 7.9 27.6 27.1 26.5 Mahindra & Mahindra 11.7 667 Buy 40.6 44.1 44.4 16.4 15.1 15.0 4.0 3.4 3.4 14.2 13.1 11.7 Maruti Suzuki 30.2 6,883 Buy 241.6 284.4 348.0 28.5 24.2 19.8 15.5 13.3 10.8 16.1 17.0 18.9 Motherson Sumi 7.1 155 Buy 5.3 6.9 7.8 29.5 22.4 20.0 9.7 7.3 6.1 16.7 19.4 19.1 Tata Motors 10.0 203 Neutral -7.2 12.2 15.7 -28.0 16.7 13.0 4.9 3.9 3.5 -3.1 6.2 7.4 TVS Motor 3.4 486 Neutral 14.1 19.7 25.3 34.5 24.7 19.2 17.0 12.8 10.3 21.6 25.7 27.1 Sector Aggregate 26.7 19.5 17.3 8.7 7.2 6.4 12.2 15.3 15.6

89

94

99

104

109

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Automobiles Index

75

85

95

105

115

125

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Automobiles Index


April 2019 49

Quarterly Performance (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 14,975 14,275 15,535 15,807 17,787 17,531 16,947 16,941 60,592 69,205 YoY Change (%) 14.5 7.1 17.1 17.6 18.8 22.8 9.1 7.2 14.0 14.2 RM Cost (% of sales) 70.0 66.0 66.9 68.7 71.5 69.1 67.2 67.6 67.9 68.9 Staff Cost (% of sales) 5.4 5.2 4.9 5.0 4.7 5.3 5.1 5.3 4.2 4.9 Other Exp (% of sales) 11.7 12.1 12.7 13.0 11.4 12.1 12.7 12.8 11.6 13.0 EBITDA 1,929 2,381 2,416 2,107 2,203 2,366 2,528 2,433 8,832 9,529 Margins (%) 12.9 16.7 15.6 13.3 12.4 13.5 14.9 14.4 14.6 13.8 Depreciation 544 584 587 588 630 643 657 701 2,303 2,630 Interest 14 13 11 13 15 18 18 19 51 70 Other Income 137 122 168 237 137 142 125 176 664 580 PBT 1,508 1,907 1,985 1,743 1,695 1,848 1,978 1,888 7,142 7,410 Tax Rate (%) 33.7 33.3 32.3 37.0 33.3 34.9 33.8 33.9 34.0 34.0 Adj PAT 999 1,272 1,345 1,098 1,130 1,202 1,309 1,249 4,713 4,890 YoY Change (%) -23.6 -6.7 19.7 10.7 13.2 -5.5 -2.6 13.7 -1.5 3.8 E: MOFSL Estimates


Amara Raja BatteriesCMP: INR721 TP: INR861 (+19%) Buy We expect AMRJ’s revenue to grow 7% YoY (flat QoQ) to

INR16.9b, driven by growth in the automotive replacement andindustrial segments.

Spot LME lead prices increased by 1.1% QoQ (-11.5% YoY) in4QFY19 to average INR143/kg.

EBITDA margin is likely to expand 110bp YoY (-50bp QoQ) to14.4%.

We expect PAT to increase 13.7% YoY (-4.6% QoQ) to INR1.24b. The stock trades at 20.1x FY20E and 16.8x FY21E EPS; maintain

Buy.

Key issues to watch Update on the demand environment for OEMs, auto

replacement and industrial battery segments. Outlook for raw material cost trend and recent pricing action. Update on competitive intensity in telecom segment and pricing

power thereof. Strategy on technology sourcing post termination of JV with

Johnson Control. Update on progress made on product development in lithium

ion battery space and plans going forward.

Bloomberg AMRJ IN

Equity Shares (m) 170.8 M. Cap. (INR b)/(USD b) 123 / 2 52-Week Range (INR) 908 / 671

1,6,12 Rel Perf. (%) -9 / -10 / -29

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E

Sales 60.6 69.2 79.9 91.3

EBITDA 8.8 9.5 11.8 13.7 NP 4.7 4.9 6.2 7.4 EPS (INR) 27.6 28.6 36.1 43.1

EPS Gr. (%) (1.5) 3.8 25.9 19.5 BV/Sh. (INR) 172 195 225 260 RoE (%) 17.0 15.6 17.2 17.8

RoCE (%) 16.3 14.9 16.3 16.8 Valuations P/E (x) 26.2 25.3 20.1 16.8

P/BV (x) 4.2 3.7 3.2 2.8 EV/EBITDA (x) 13.9 12.7 10.1 8.4 EV/Sales (x) 2.0 1.8 1.5 1.3

April 2019 50

Quarterly Performance (INR m)

FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Total Volumes (nos) 28,488 40,986 46,627 58,772 42,127 51,958 43,760 59,523 174,873 197,368 Growth % -8.6 22.6 42.0 23.4 47.9 26.8 -6.1 1.3 20.5 12.9

Realizations (INR '000) 1,495 1,483 1,542 1,493 1,487 1,467 1,445 1,498 1,507 1,476 % change 9.4 7.3 4.9 0.2 -0.5 -1.1 -6.3 0.4 9.2 -2.1

Net operating revenues 42,579 60,764 71,907 87,725 62,627 76,211 63,252 89,192 263,564 291,282 Change (%) 0.0 31.5 48.9 23.7 47.1 25.4 -12.0 1.7 31.7 10.5 RM/sales % 69.1 70.8 69.7 71.9 68.9 72.1 70.1 71.9 69.9 70.9 Staff/sales % 9.9 7.7 6.6 5.2 8.0 6.9 7.9 6.0 7.0 7.1 Other exp/sales % 13.8 11.4 12.0 11.2 12.4 10.1 11.7 11.1 11.9 11.2 EBITDA 3,061 6,118 8,393 10,327 6,716 8,290 6,496 9,860 29,635 31,363 EBITDA Margins(%) 7.2 10.1 11.7 11.8 10.7 10.9 10.3 11.1 11.2 10.8 Other Income 384 557 417 577 525 276 208 391 1,966 1,400 Interest 366 410 368 201 142 204 192 239 1,473 777 PBT before EO Item 1,730 4,826 6,957 9,299 5,537 6,901 4,897 8,370 24,147 25,705 EO Exp/(Inc) 126 0 29 0 178 193 61 0 155 432 PBT 1,605 4,826 6,928 9,299 5,360 6,708 4,836 8,370 23,992 25,273 Effective Tax Rate (%) 30.7 30.7 30.0 28.2 21.3 21.3 21.2 20.7 27.8 21.1 Adj. PAT 1,199 3,342 4,869 6,674 4,356 5,429 3,856 6,637 17,423 20,279 Change (%) -58.7 13.5 201.1 36.5 263.2 62.4 -20.8 -0.6 41.0 16.4 E: MOFSL Estimates


Ashok Leyland

CMP: INR89 TP: INR113 (+27%) Buy Volumes grew 1.3% YoY (+36% QoQ) to 59,523 units in 4QFY19, as

M&HCV sales declined 0.9% YoY to 44,019 units. LCV sales, however, increased 8.3% YoY to 15,502 units.

We expect realization to increase 0.4% YoY (+3.7% QoQ), led by product mix and price increase.

Consequently, net revenue is likely to increase 1.7% YoY (+41% QoQ) to INR89.2b.

EBITDA margin is likely to contract 70bp YoY (+80 bp QoQ) to 11.1%, led by the product mix impact.

EBITDA should decline 4.5% YoY (+51.8% QoQ) to INR9.9b. Adj. PAT should decline 0.6% YoY (+72% QoQ) to INR6.6b. The stock trades at EV/EBITDA of 6.1x FY20E and 6.9x FY21E

EBITDA. Maintain Buy.

Key issues to watch Update on CV demand and discount trends. Update on LCVs, exports and defense business. RM cost guidance and price hikes to mitigate the same. Capex and investment guidance for FY20 and FY21.

Bloomberg AL IN


1,6,12 Rel Perf. (%) -5 / -32 / -57

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Sales 263.6 291.3 342.6 347.7 EBITDA 29.6 31.4 37.0 31.6 NP 17.4 20.4 21.3 17.5 Adj. EPS (INR) 6.0 7.0 7.3 6.0 EPS Gr. (%) 37.1 16.9 4.7 -18.0 BV/Sh. (INR) 24.5 28.2 32.3 35.1 RoE (%) 26.2 26.4 24.1 17.7 RoCE (%) 23.0 23.0 21.1 15.7 Valuations P/E (x) 15.0 12.8 12.3 14.9 P/BV (x) 3.6 3.2 2.8 2.5 EV/EBITDA (x) 7.8 7.6 6.1 6.9 Div. Yield (%) 2.7 2.9 3.0 3.0

April 2019 51

Quarterly Performance (INR m) FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Volumes ('000 units) 888 1,072 1,001 1,045 1,227 1,339 1,260 1,194 4,007 5,020 Growth YoY (%) -10.7 3.8 17.6 32.7 38.1 25.0 25.8 14.2 9.3 25.3 Realization (INR/unit) 61,258 61,408 63,783 64,618 60,485 59,815 58,812 59,854 62,806 59,736 Growth YoY (%) 6.0 4.7 7.2 3.9 -1.3 -2.6 -7.8 -7.4 5.7 (4.9) Net Sales 54,424 65,799 63,876 67,550 74,193 80,118 74,094 71,441 251,649 299,846 Change (%) -5.3 8.7 26.1 37.9 36.3 21.8 16.0 5.8 15.5 19.2 RM/Sales % 70.0 69.1 68.2 69.5 71.4 72.2 72.8 72.2 69.4 72.2 Staff cost/Sales % 5.0 4.0 4.2 4.0 4.2 3.9 4.3 4.5 4.2 4.2 Oth. Exp./Sales % 7.8 7.2 8.2 7.4 7.1 6.9 7.4 7.6 7.7 7.2 EBITDA 9,384 12,984 12,498 12,969 12,814 13,680 11,561 11,400 47,290 49,455

EBITDA Margins (%) 17.2 19.7 19.6 19.2 17.3 17.1 15.6 16.0 18.8 16.5 Other Income 4,573 2,964 2,086 3,667 4,044 3,565 4,700 3,610 13,473 15,919 Interest 2 5 3 3 3 3 36 10 13 52 Depreciation 753 770 747 879 700 715 634 655 3,148 2,704 PBT 12,881 15,174 13,833 15,754 16,156 16,527 15,591 14,345 57,602 62,618 Tax 3,642 4,055 4,309 5,138 5,003 5,002 4,572 4,365 17,145 18,942 Effective Tax Rate (%) 28.3 26.7 31.1 32.6 31.0 30.3 29.3 30.4 29.8 30.3 Adj. PAT 9,469 11,119 9,524 10,616 11,152 11,525 11,019 9,980 41,001 43,676 Change (%) (3.2) (1.0) 3.0 32.4 17.8 3.7 15.7 (6.0) 6.7 6.5 E: MOFSL Estimates


Bajaj AutoCMP: INR2,855 TP: INR3,302 (+16%) Buy Overall volumes increased 14.2% YoY (-5.3% QoQ) to ~1,194k

units due to a 15.2% YoY increase in domestic volume and a12.8% YoY increase in export volume.

Total motorcycle volume increased 17% YoY, while 3W volumedeclined 1.4% YoY.

We expect realization to decline by 7.4% YoY (+1.8% QoQ), led bydeterioration in the product mix. Consequently, net sales are expected to increase by 5.8% YoY (-3.6% QoQ) to INR71.4b.

We expect EBITDA margin to contract by 320bp YoY (+40 bp QoQ)to 16%.

We expect PAT to decline by 6% YoY (-9.4% QoQ) to INR9.98b. We increase FY21 volumes estimate by 1.3% and margins

estimate by 70bp to 17.3% to factor in INR depreciation andbetter product mix. As a result, our EPS estimate for FY21 isincreased by 6.8%.

The stock trades at 15.9x FY20E and 14.1x FY21E EPS; maintain Buy.Key issues to watch Update on 2W demand outlook from urban and rural areas. Price increase in domestic markets across segments. Export demand outlook and pricing in key currency market. Comments on 3W demand momentum in domestic market. Update on EV strategy.

Bloomberg BJAUT IN


1,6,12 Rel Perf. (%) -9 / -2 / -16

Financial Snapshot (INR b) Y/E MAR 2018 2019E 2020E 2021E

Sales 252 300 332 372 EBITDA 47.8 49.5 57.0 64.5 NP 43.8 46.7 52.1 58.8 Adj. EPS (INR) 151 161 180 203 EPS Gr. (%) 7.3 6.7 11.6 12.8 BV/Sh. (INR) 660 739 824 925 RoE (%) 24.2 23.1 23.0 23.2 RoCE (%) 22.0 21.0 21.0 21.2 Valuations P/E (x) 18.9 17.7 15.9 14.1 P/BV (x) 4.3 3.9 3.5 3.1 EV/EBITDA (x) 13.5 12.6 10.5 8.8 Div. Yield (%) 2.1 2.1 2.5 2.6

April 2019 52

S/A Quarterly (INR m) FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Tonnage 55,100 58,659 65,050 68,706 66,815 69,683 66,764 69,669 247,515 272,931 Change (%) 12.2 27.0 38.2 24.5 21.3 18.8 2.6 1.4 25.3 10.3 Realization (INR '000/ton) 217.9 214.5 213.8 213.5 221.5 241.0 253.5 248.8 214.8 241.3 Change (%) 18.3 11.2 6.7 4.7 1.6 12.4 18.6 16.5 9.8 12.3 Net operating income 12,008 12,580 13,906 14,666 14,797 16,792 16,925 17,333 53,160 65,846 Change (%) 32.8 41.2 47.4 30.3 23.2 33.5 21.7 18.2 37.6 23.9

RM/Sales (%) 35.0 35.0 35.6 36.1 36.1 39.1 36.8 37.0 35.5 37.3 Staff Cost (% of Sales) 8.9 8.5 8.0 7.6 8.3 7.3 7.2 7.5 8.2 7.5 Other Exp. (% of Sales) 27.3 26.1 26.8 29.1 26.6 25.4 27.2 27.2 26.7 26.6

EBITDA 3,457 3,814 4,115 3,979 4,288 4,754 4,869 4,905 15,762 18,817 EBITDA Margins (%) 28.8 30.3 29.6 27.1 29.0 28.3 28.8 28.3 29.6 28.6

Non-Operating Income 259 366 219 342 343 338 478 381 1,187 1,540 Interest 185 217 143 303 253 321 136 295 848 1,004 Depreciation 774 781 807 705 824 914 907 934 3,068 3,578 Fx loss/(gain) 124 120 -48 -198 2 410 -389 0 394 23 EO Exp / (Inc) 0 0 0 1,332 0 0 0 0 1,332 0 PBT after EO items 2,633 3,063 3,432 2,179 3,552 3,447 4,694 4,058 11,307 15,751 Eff. Tax Rate (%) 33.5 33.5 33.5 37.4 34.0 34.0 34.0 34.0 37.4 34.0 Rep. PAT 1,751 2,037 2,282 1,003 2,345 2,275 3,098 2,678 7,073 10,396 Change (%) 43.4 60.5 77.4 -51.6 33.9 11.7 35.8 166.9 20.9 47.0 Adj. PAT 1,751 2,037 2,282 1,837 2,345 2,275 3,098 2,678 7,906 10,396 Change (%) 43.4 60.5 77.4 1.4 33.9 11.7 35.8 45.8 41.5 31.5 E: MOFSL Estimates


Bharat ForgeCMP: INR514 TP: INR604 (+18%) Buy BHFC’s shipment tonnage is expected to increase by 1.4% YoY

(+4.4% QoQ) to 69,669 tons, impacted by weakness in thedomestic auto segment. Weakness in domestic autos segmentwould be off-set by robust growth in the CV exports segment aswell as non-segment (both domestic and export).

Net realization is expected to increase 16.5% YoY (-2% QoQ) to~INR248.8k/ton led by favorable mix and currency.

As a result, net revenue would increase 18% YoY (+2% QoQ) to~INR17.3b.

EBITDA margin is likely to expand ~120bp YoY (-50bp QoQ) to28.3%.

PAT is expected to increase by 46% YoY (-14% QoQ) to INR2.7b. The stock trades at 18.9x FY20E and 18.7x FY21E EPS; Maintain

Buy.

Key issues to watch Update on FY20 outlook for Class 8 trucks & India CVs. Update on capex plans. New order wins and ramp-up of past order wins. Update on defense business.

Bloomberg BHFC IN


1,6,12 Rel Perf. (%) -9 / -25 / -46

Financial Snapshot (INR b) Y/E Mar 2018 2019E 2020E 2021E

Sales 83.6 97.3 110.3 117.2

EBITDA 17.2 21.4 24.6 24.6 EPS (INR) 18.4 23.9 27.3 27.5 EPS Gr. (%) 40.7 29.7 14.1 0.7

BV/Sh. (INR) 99.9 117.5 137.2 157.2 RoE (%) 19.6 22.0 21.4 18.7 RoCE (%) 11.6 14.5 15.1 14.0

Valuations P/E (x) 27.9 21.5 18.9 18.7 P/BV (x) 5.1 4.4 3.7 3.3

EV/EBITDA(x) 15.6 12.6 10.9 10.7 EV/Sales (x) 3.2 2.8 2.4 2.2

Consolidated

April 2019 53

Quarterly performance (S/A) (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 26,484 28,119 30,719 31,580 32,122 32,011 30,955 30,458 116,902 125,546 YoY Change (%) 4.2 6.8 14.1 22.7 21.3 13.8 0.8 -3.6 12.0 7.4

RM Cost (% of sales) 54.4 55.1 52.8 53.5 54.4 56.7 55.5 54.7 53.9 55.4 Staff Cost (% of sales) 12.9 12.2 11.1 10.4 10.9 10.6 10.9 11.2 11.6 10.9 Other Expenses (% of sales) 16.2 14.5 21.5 14.2 15.1 14.0 19.9 14.2 16.6 15.8

EBITDA 4,390 5,080 4,476 6,914 6,282 5,962 4,226 6,037 20,933 22,508 Margins (%) 16.6 18.1 14.6 21.9 19.6 18.6 13.7 19.8 17.9 17.9 Depreciation 1,062 1,108 1,243 1,259 939 950 1,012 1,087 4,672 3,988 Interest 5 0 27 1 0 0 102 0 33 102 Other Income 1,295 1,290 1,023 1,582 1,147 1,395 1,786 1,638 5,118 5,966 PBT before EO expense 4,618 5,262 4,229 7,236 6,489 6,407 4,899 6,588 21,346 24,383 Extra-Ord expense 0 0 0 939 0 0 0 0 939 0 PBT after EO Expense 4,618 5,262 4,229 6,297 6,489 6,407 4,899 6,588 20,407 24,383 Tax 1,592 1,728 1,419 1,959 2,179 2,207 1,545 2,188 6,699 8,120

Tax Rate (%) 34.5 32.8 33.6 31.1 33.6 34.4 31.5 33.2 32.8 33.3 Reported PAT 3,026 3,533 2,810 4,338 4,310 4,200 3,354 4,400 13,708 16,263 Adj PAT 3,026 3,533 2,810 4,985 4,310 4,200 3,354 4,400 14,339 16,263 YoY Change (%) -19.3 -16.5 30.8 13.2 42.4 18.9 19.3 -11.7 4.7 13.4 E: MOFSL Estimates


BoschCMP: INR17,985 TP: 19,556(+9%) Neutral Net revenue is expected to decline by 3.6% YoY (-2% QoQ) to

INR30.5b, impacted by weakness in CV, tractors and PV segments. EBITDA margin is expected to contract 210bp YoY (+620bp QoQ)

to 19.8% due to higher commodity costs YoY and highercontribution of imported traded goods.

EBITDA is projected to decline by 13% YoY (+43% QoQ) to INR6b. Adjusted PAT is likely to decline 12% YoY to INR4.4b (+31% QoQ). The stock trades at 29.3x FY20E and 24.8x FY21E EPS; Maintain

Neutral.

Key issues to watch Outlook on impact of slowdown in auto segment. Update on demand environment in aftermarket business. Update on any developments in the BSVI opportunity

Bloomberg BOS IN


1,6,12 Rel Perf. (%) -12 / -16 / -21

Financial Snapshot (INR b) Y/E Mar FY18 FY19E FY20E FY21E

Sales 116.9 125.5 141.9 170.8

EBITDA 20.9 22.5 26.5 32.2 NP 14.3 16.3 18.1 21.4 EPS (INR) 469.8 532.8 613.7 724.3

EPS Gr. (%) -0.7 13.4 15.2 18.0BV/Sh. (INR) 3,270 3,586 3,343 3,773 RoE (%) 15.3 15.5 17.4 20.4


P/BV (x) 5.5 5.0 5.4 4.8 EV/EBITDA(x) 25.3 23.4 19.7 16.0 EV/Sales (x) 4.5 4.2 3.7 3.0

April 2019 54

Consolidated - Quarterly Earning Model (INR m)Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 14,597 15,230 15,742 16,739 17,063 17,546 17,139 17,185 62,308 68,933 YoY Change (%) -0.7 6.7 12.6 13.7 16.9 15.2 8.9 2.7 8.1 10.6 RM cost (%) 65.8 60.6 58.2 60.3 60.7 60.7 59.1 59.5 61.1 60.0 Employee cost (%) 6.9 7.3 7.1 6.9 7.0 8.1 8.3 8.8 7.0 8.0 Other expenses (%) 23.6 20.6 22.8 21.0 22.1 22.2 24.3 23.1 22.0 22.9 EBITDA 547 1,747 1,870 1,976 1,758 1,592 1,426 1,469 6,139 6,245 Margins (%) 3.7 11.5 11.9 11.8 10.3 9.1 8.3 8.5 9.9 9.1 Depreciation 396 409 433 448 460 477 482 533 1,686 1,952 Interest 226 237 273 238 204 186 222 241 974 852 Other Income 103 65 66 69 37 33 40 40 303 150 PBT before EO expense 28 1,166 1,230 1,359 1,131 962 762 736 3,783 3,591 Exceptional item 4 80 10 246 23 20 0 0 340 43 PBT 25 1,086 1,220 1,113 1,108 943 762 736 3,443 3,548 Tax Rate (%) 193.1 38.7 38.9 35.7 39.9 39.3 39.7 37.6 38.9 39.2 Minority Interest & P/L of Asso. Cos. -39 -65 -82 -91 -54 -59 -68 -68 -277 -250 Reported PAT 16 730 826 807 720 632 528 528 2,380 2,407 Adj PAT 13 779 833 966 734 644 528 528 2,587 2,433 YoY Change (%) -98.8 -27 -1 21 5,573 -17 -37 -45 -30.1 -5.9 E: MOFSL Estimates


CEATCMP: INR1,128 TP: INR1,313 (+16%) Buy We expect revenue to increase 3% YoY (flat QoQ) to INR17.2b in

4QFY19. RM cost is expected to increase by 40bp QoQ (-80bp YoY) to

59.5% in 4QFY19. We estimate 20bp QoQ margin expansion (-330bp YoY) in EBITDA

margin to 8.5%. We expect margins to remain subdued due tohigher costs attributable towards commissioning of the TBR plantduring the quarter.

EBITDA is likely to decline 26% YoY (+3% QoQ) to INR1.5b. We expect adjusted PAT to decline 45% YoY to INR528m. The stock trades at 14.1x FY20E and 12x FY21E EPS. Maintain Buy.

Key things to watch for Demand environment in replacement market. Guidance on RM costs and pricing actions. Update on ramp-up of newly commissioned TBR capacity. Whether capacity expansion is on track.

Bloomberg CEAT IN


1,6,12 Rel Perf. (%) -7 / -8 / -44

Financial Snapshot (INR Billion) Y/E March 2018 2019E 2020E 2021E

Sales 62.3 68.9 82.0 94.8

EBITDA 6.1 6.2 8.8 10.6 NP 2.6 2.4 3.2 3.8 EPS (Rs) 64.0 60.2 79.9 93.8

EPS Gr. (%) -30.3 -5.9 32.8 17.4BV/Share 644.3 695.9 765.2 846.6 RoE (%) 62.3 68.9 82.0 94.8



April 2019 55

Quarterly performance (Consolidated) (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Operating income 20,006 21,673 22,690 25,280 25,478 24,082 23,411 24,606 89,650 97,576

Growth (%) 28.6 23.5 23.7 33.9 27.3 11.1 3.2 -2.7 27.5 8.8 EBITDA 6,207 6,825 7,072 7,972 8,095 7,293 6,795 7,113 28,076 29,297 EBITDA Margins (%) 31.0 31.5 31.2 31.5 31.8 30.3 29.0 28.9 31.3 30.0 Recurring PAT 4,708 5,295 5,309 6,486 5,761 5,663 5,330 5,429 21,797 22,183

Growth (%) 25.1 28.1 27.0 39.1 22.4 7.0 0.4 -16.3 27.2 1.8 Standalone (Royal Enfield) Royal Enfield ('000 units) 184 203 207 227 225 210 194 196 820 826

Growth (%) 24.8 21.5 18.8 27.4 22.5 3.6 -5.9 -13.6 23.1 0.7 Net Realn (INR '000/unit) 109 107 110 111 113 114 121 126 109 118

Change - YoY (%) 2.9 1.0 3.9 5.4 3.9 7.3 10.1 12.7 3.4 8.2 EBITDA Margins (%) 31.4 31.9 31.7 32.3 32.3 30.6 29.5 29.5 34.7 30.5 Recurring PAT 4,943 4,864 4,720 4,146 5,912 4,927 5,014 4,697 18,674 20,554

Growth (%) 46.6 22.8 13.7 0.7 19.6 1.3 6.2 13.3 -24.3 10.1 VECV 5116.0 Total CV Volumes 11,584 15,017 16,231 23,100 16,326 18,696 16,936 21,009 65,932 72,967

Growth (%) -27.9 12.0 37.7 33.2 40.9 24.5 4.3 -9.1 12.5 10.7 Net Realn (INR '000/unit) 1,556 1,558 1,596 1,436 1,598 1,586 1,664 1,557 1,524 1,599

Change - YoY (%) 16.9 5.9 -0.2 -2.5 2.7 1.9 4.3 8.4 4.4 4.9 EBITDA Margins (%) 8.3 9.2 8.7 9.5 9.2 9.0 6.6 8.3 9.0 8.3 Recurring PAT 670 950 1,328 1,783 1,180 1,421 760 1,441 4,731 4,802

Growth (%) -38.1 46.2 133.0 52.4 76.1 49.6 -42.7 -19.2 35.8 1.5 E: MOFSL Estimates


Eicher Motors

CMP: INR20,581 TP: INR23,657 (+15%) Buy Royal Enfield’s volumes declined 13.6% YoY (+0.9% QoQ) to 196k

units. Net realization is expected to improve by 12.7% YoY (+4% QoQ). S/A EBITDA margin is expected to contract by 280bp YoY to 29.5%.

Consolidated revenue would decline 2.7% YoY (+5.1% QoQ) to INR24.6b. Consolidated margin is likely to be 28.9%. Adj. PAT is estimated to decline 16.3% YoY (+1.9% QoQ) to INR5.4b.

We are lowering our volume estimates for RE for FY20/21 by 9%/7.4% to 840k/913.5k. We have also cut VECV volumes by 5% each for FY20/21, translating in consol. EPS cut of 11%/4%.

Stock trades at 23.4x/20.4x FY20/21 consol. EPS. Key issues to watch Outlook on RE demand from metros, tier 1 and tier 2 cities, and

order book trend. Inventory levels for RE.

Bloomberg EIM IN


1,6,12 Rel Perf. (%) -5 / -24 / -45

Financial Snapshot (INR b) Y/E March FY18 FY19E FY20E FY21E

Net Income 89.6 97.6 105.4 121.1 EBITDA 28.1 29.3 30.9 35.8 Net Profit 21.8 22.2 23.9 27.5 Adj. EPS (INR) 800 814 878 1,008 EPS Gr. (%) 27.0 1.8 7.9 14.8 BV/Sh. (INR) 2,579 3,180 3,823 4,534 RoE (%) 35.2 28.3 25.1 24.1 RoCE (%) 33.9 27.9 25.7 25.3 Valuations P/E (x) 25.7 25.3 23.4 20.4 P/BV (x) 8.0 6.5 5.4 4.5 EV/EBITDA (x) 15.2 14.2 12.7 11.1 Div. Yield (%) 0.5 0.6 0.6 0.6

April 2019 56

Consolidated - Quarterly (INR m) Y/E March FY18 FY19E FY18 FY19E INR m 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 15,057 15,723 15,386 17,817 18,604 19,367 18,130 19,051 65,381 75,152 YoY Change (%) 4.5 8.6 16.6 29.1 23.6 23.2 17.8 6.9 17.0 14.9 RM Cost (% of sales) 57.8 58.1 56.0 59.5 58.6 59.7 58.4 58.6 58.8 58.8 Staff Cost (% of sales) 9.8 8.8 9.5 8.3 8.9 8.0 9.2 8.8 8.9 8.7 Other Exp. (% of sales) 18.1 18.5 19.7 17.8 17.9 17.8 18.4 18.2 18.1 18.1 EBITDA 2,139 2,295 2,271 2,573 2,714 2,798 2,530 2,740 9,278 10,782 Margins (%) 14.2 14.6 14.8 14.4 14.6 14.4 14.0 14.4 14.2 14.3 Depreciation 742 768 798 907 820 921 936 940 3,216 3,617 Interest 57 69 47 63 59 55 75 66 235 255 Other Income 56 59 42 77 41 80 93 70 235 284 PBT after EO 1,397 1,517 1,199 1,679 1,876 1,902 1,404 1,804 5,793 6,986

Eff. Tax Rate (%) 30.9 34.3 34.8 30.8 33.6 34.2 31.2 32.9 32.6 33.1 Adj. PAT 965 997 957 1,163 1,246 1,252 1,109 1,211 4,089 4,814 YoY Change (%) 9.7 11.6 28.8 39.2 29.1 25.6 15.8 4.1 23.8 17.7


Endurance TechnologiesCMP: INR1,172 TP: INR1,351(+15%) Buy We expect 7% YoY growth (+5% QoQ) in consolidated revenue to

INR19.1b, led by strong performance in standalone operations. While S/A operations revenue is expected to grow ~9% YoY, we

expect European operations to deliver 4% revenue growth led by~2% currency gain as well as consolidation of recent acquisitionFonpresmetal.

Consolidated EBITDA is expected to grow 7% YoY (+8% QoQ). EBITDA margin is likely to remain flat YoY (+40bp QoQ) at 14.4%. We expect PAT to grow 4% YoY (+9% QoQ) to INR1.2b. We have lowered our EPS estimates for FY21 by 8% mainly to

factor in for weaker demand environment. The stock trades at 27.2x FY20E EPS and 23.4x FY21 EPS. Maintain

Buy.

Key issues to watch for Update on new order wins in India and Europe during the

quarter. Extent of impact of slowdown in domestic 2W industry. Update on outlook for European market.

Bloomberg ENDU IN


1,6,12 Rel. Perf. (%) -16 / -20 / -24


Sales 65.4 75.2 87.2 97.4

EBITDA 9.3 10.8 13.0 14.8 NP 4.1 4.8 6.1 7.0 Adj EPS (INR) 29.1 34.2 43.0 50.1

EPS Gr. (%) 23.8 17.7 25.7 16.3 BV/Sh. (INR) 154.5 180.5 210.6 245.6 RoE (%) 21.0 20.4 22.0 21.9


P/BV (x) 7.6 6.5 5.6 4.8 EV/EBITDA (x) 18.0 15.4 12.6 10.7

April 2019 57

Standalone Quarterly Performance (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 11,632 12,117 12,050 14,361 15,113 13,984 16,551 16,737 50,593 62,384 YoY Change (%) 11.0 23.3 12.2 40.5 29.9 15.4 37.3 16.5 22.6 23.3 Total Expenditure 10,656 10,708 10,600 12,624 13,257 12,409 14,546 14,767 45,057 54,979 EBITDA 975 1,409 1,450 1,738 1,855 1,575 2,005 1,970 5,536 7,405 Margins (%) 8.4 11.6 12.0 12.1 12.3 11.3 12.1 11.8 10.9 11.9 Depreciation 178 179 179 188 206 215 215 220 732 856 Interest 80 84 59 63 29 39 43 30 295 140 Other Income 205 81 82 226 170 221 244 214 653 849 PBT before EO expense 923 1,227 1,294 1,712 1,791 1,543 1,991 1,934 5,162 7,258 Extra-Ord expense 0 69 -1 0 0 0 -109 0 68 -109 PBT 923 1,159 1,295 1,712 1,791 1,543 2,100 1,934 5,094 7,367 Tax 297 383 375 587 595 516 699 640 1,625 2,450 Rate (%) 32.1 33.1 29.0 34.3 33.2 33.5 33.3 33.1 31.9 33.3 Adj PAT 626 822 919 1,125 1,196 1,026 1,328 1,294 3,512 4,840 YoY Change (%) 14.3 104.8 67.0 133.6 90.9 24.9 44.6 14.9 77.3 37.8 Margins (%) 5.4 6.8 7.6 7.8 7.9 7.3 8.0 7.7 6.9 7.8 E: MOFSL Estimates


EscortsCMP: INR772 TP: INR760 (-1.5%) Neutral Tractor volumes grew 6.7% YoY (-2.4% QoQ) to 25,136 units. Realizations are estimated to grow 7% YoY (-1% QoQ) to

INR497.2k/unit due to product mix impact. Revenues should grow 16.5% YoY (+1.1% QoQ) to INR16.7b. We expect EBITDA margins to contract 30bp YoY (-30bp QoQ) to

11.8%. EBITDA is expected to increase by 13.4% YoY (-1.7% QoQ)to INR1.97b.

We expect PAT to be at INR1.3b (+14.9% YoY, -2.6% QoQ). The stock trades at 12.8x/12.2x FY20/21E EPS. Maintain Neutral.

Key things to watch for Market share movement and new launches in tractor segment. Demand momentum in construction equipment segment. Visibility of order book execution in railways division.

Bloomberg ESC IN


1,6,12 Rel Perf. (%) 6 / 17 / -30


Sales 50.6 62.4 66.4 70.3

EBITDA 5.5 7.4 8.1 8.5 NP 3.5 4.8 5.4 5.6 EPS (INR) 39.5 54.5 60.3 63.3

EPS Growth (%) 88.0 37.8 10.7 5.1 BV/Sh (INR) 249.2 296.1 348.0 402.9 RoE (%) 18.3 20.0 18.7 16.9


P/BV (x) 3.1 2.6 2.2 1.9 EV/EBITDA (x) 11.8 8.4 7.3 9.6 EV/Sales(x) 1.3 1.0 0.9 1.2

April 2019 58

S/A Quarterly Performance (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 21,029 23,584 22,783 24,594 27,725 27,204 24,968 26,882 91,863 106,779 Growth YoY (%) 4.6 22.5 32.8 25.8 31.8 15.3 9.6 9.3 21.1 16.2 RM(%) 62.9 67.4 65.5 65.2 66.4 66.9 64.9 65.2 65.4 65.9 Employee cost (%) 6.8 6.3 6.7 6.3 5.8 6.1 6.5 6.3 6.5 6.2 Other Exp(%) 14.9 13.8 15.4 14.8 13.6 14.8 16.1 15.4 14.6 14.9 EBITDA 3,243 2,959 2,826 3,380 3,909 3,327 3,125 3,499 12,408 13,860 EBITDA Margin(%) 15.4 12.5 12.4 13.7 14.1 12.2 12.5 13.0 13.5 13.0 Change (%) 3.2 2.3 24.3 34.2 20.6 12.4 10.6 3.5 14.6 11.7 Non-Operating Income 132 139 111 203 42 116 80 98 584 337 Interest 16 21 9 6 11 14 23 17 52 65 Depreciation 563 597 625 674 719 768 813 824 2,459 3,124 PBT after EO Exp 2,796 2,061 2,302 2,903 3,221 3,745 2,369 2,756 10,062 12,090 Tax 906 706 759 1,007 1,122 1,060 818 904 3,378 3,905 Effective Tax Rate (%) 32.4 34.3 33.0 34.7 34.8 28.3 34.5 32.8 33.6 32.3 Adj. PAT 1,890 1,630 1,543 1,896 2,099 1,908 1,550 1,851 6,961 7,452 Change (%) -3.6 -10.3 1.8 15.4 11.1 17.0 0.5 -2.3 0.4 7.0 E: MOFSL Estimates


Exide IndustriesCMP: INR215 TP: INR274 (+27%) Buy We expect revenues to grow 9.3% YoY to INR26.9b, led by healthy

auto replacement demand, as well as ramp-up in new segmentssuch as E-rickshaw and Solar.

Spot LME lead prices increased by 1.1% QoQ (-11.5% YoY) in4QFY19 to average INR143/kg.

EBITDA margin is likely to contract 70bp YoY (+50 bp QoQ) to 13%. PAT is likely to decline by 2.3% YoY (+19.4% QoQ) to INR1.85b. The stock trades at 20.2x FY20E and 18.1x FY21E EPS. Maintain

Buy.Key issues to watch Update on demand environment for OEMs, auto replacement

and industrial battery segments. Market share in autos and non-autos. Outlook for raw material cost trend and recent pricing actions, if

any.

Bloomberg EXID IN


1,6,12 Rel Perf. (%) -10 / -25 / -23

Financial Snapshot (INR b) Y/E MARCH 2018 2019E 2020E 2021E

Net Sales 91.9 106.8 120.6 134.0 EBITDA 12.4 13.9 16.7 18.8 Adj. PAT 7.0 7.5 9.1 10.1 Adj. EPS (INR) 8.2 8.8 10.7 11.9 EPS Gr. (%) 0.4 7.0 21.6 11.7 BV/Sh. (INR) 63.4 70.0 76.9 85.0 RoE (%) 12.9 12.5 13.9 14.0 RoCE (%) 13.3 13.2 14.6 14.8 Valuations P/E (x) 26.3 24.6 20.2 18.1 P/BV (x) 3.4 3.1 2.8 2.5 EV/EBITDA (x) 13.1 11.7 9.5 8.4 Div. Yield (%) 1.1 1.2 1.5 1.5

April 2019 59

Quarterly Performance (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Volumes ('000 nos) 1,858 2,023 1,709 2,002 2,105 2,134 1,800 1,781 7,592 7,821 Growth YoY (%) 6.5 10.9 16.0 23.4 13.3 5.5 5.3 -11.0 13.9 3.0 Net Realization 42,950 41,387 42,796 42,787 41,853 42,600 43,682 43,823 42,456 42,926 Growth YoY (%) 1.3 -3.2 -0.9 0.2 -2.6 2.9 2.1 2.4 -0.7 1.1 Net Op Revenues 79,805 83,717 73,142 85,640 88,098 90,909 78,648 78,059 322,305 335,715

RM Cost (% sales) 67.7 68.2 67.4 67.6 70.0 69.3 68.8 68.6 67.7 69.2 Staff Cost (% sales) 4.7 4.6 5.5 4.4 4.7 4.8 5.5 5.7 4.8 5.1 Other Exp (% sales) 11.4 9.8 11.3 11.9 9.7 10.8 11.6 12.2 11.1 11.0


Other Income 1,317 1,176 1,100 1,665 1,157 2,237 1,876 1,958 5,258 7,228 Interest 16 16 16 15 21 21 22 544 63 608 Depreciation 1,330 1,360 1,383 1,483 1,482 1,518 1,518 1,542 5,556 6,059 PBT 12,931 14,357 11,282 13,872 13,427 14,485 11,384 10,469 52,442 49,765 Effective Tax Rate (%) 29.3 29.6 28.6 30.3 32.3 32.6 32.4 32.5 29.5 32.5 Adj. PAT 9,140 10,105 8,054 9,674 9,092 9,763 7,691 7,071 36,974 33,616 Growth (%) 3.5 0.6 4.3 34.8 -0.5 -3.4 -4.5 -26.9 9.5 -9.1 E: MOFSL Estimates


Hero MotoCorpCMP: INR2,570 TP: INR2,867 (+11%) Neutral Volumes declined by 11% YoY (-1.1% QoQ) to 1.8m units. Realization is expected to grow by 2.4% YoY (+0.3% QoQ) to

INR43,823/unit, largely led by price hikes. Net revenue is expected to decline by 8.9% YoY (-0.7% QoQ) to

INR78.1b. EBITDA margin is expected to shrink by 240bp YoY (-40bp QoQ) to

13.6%. EBITDA is likely to decline by 22.7% YoY (-4.1% QoQ) to INR10.6b. We expect PAT to decline 26.9% YoY (-8.1% QoQ) to INR7.1b. We cut FY20/21 EPS by 3% each as we cut volumes by 1.6% each

and margins by 20bp to factor in negative operating leverage. The stock trades at 14.7x FY20E and 14.2 FY21E EPS; maintain

Neutral. Key issues to watch Update on demand trend in rural and urban markets. Level of inventory in the system. New product launches and the timelines. Outlook on exports.

Bloomberg HMCL IN


1,6,12 Rel Perf. (%) -12 / -20 / -47


Sales 322.3 335.7 361.6 400.2

EBITDA 52.8 49.2 52.1 54.9 NP 37.0 33.6 35.1 36.4 Adj. EPS (INR) 185.1 168.3 175.4 181.6

EPS Gr. (%) 9.5 -9.1 4.2 3.5 BV/Sh. (INR) 589.3 631.1 666.4 703.4 RoE (%) 33.8 27.6 27.1 26.5


P/BV (x) 4.4 4.1 3.9 3.7 EV/EBITDA (x) 8.3 8.9 8.4 7.9 Div. Yield (%) 3.7 4.1 4.5 4.7

April 2019 60

Quarterly Performance (incl MVML) (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Volumes (nos) 202,172 220,478 210,974 236,466 240,885 228,590 234,001 235,557 871,358 941,613

Growth YoY (%) 3.1 17.4 6.8 25.4 19.1 3.7 10.9 -0.4 13.2 8.1 Net Realization 538,034 545,083 544,686 557,744 554,524 559,524 550,959 556,575 546,014 553,846

Growth YoY (%) 0.3 1.7 3.2 0.1 3.1 2.6 1.2 -0.2 1.6 1.4 Net Op. Income 108,775 120,179 114,915 131,888 133,577 127,902 128,925 131,105 475,774 521,509

Growth YoY (%) 3.4 19.4 10.3 25.6 22.8 6.4 12.2 -0.6 15.0 9.6 RM Cost (% of sales) 67.8 65.9 66.2 66.2 67.4 67.6 69.2 69.7 66.5 68.5 Staff (% of sales) 7.3 6.6 7.0 6.0 6.3 6.5 6.6 6.7 6.7 6.5 Oth. Exp. (% of Sales) 11.7 11.6 12.1 12.6 10.4 11.2 11.0 12.0 12.0 11.3


Other income 1,283 5,548 1,028 1,659 1,930 8,478 3,423 1,053 9,517 14,883 Interest 509 440 435 499 431 379 353 363 1,882 1,526 Depreciation 3,820 3,992 4,052 4,390 4,295 4,986 5,054 5,374 16,254 19,708 PBT 11,296 20,335 17,305 17,199 18,550 22,981 14,245 10,370 66,152 66,146 Effective Tax Rate (%) 33.4 30.7 24.6 32.9 32.2 22.6 2.0 27.6 30.1 21.7 Adj PAT 7,518 14,094 10,359 11,214 12,380 16,710 14,586 7,505 43,202 51,182

Change (%) -16.0 21.8 24.6 60.2 64.7 18.6 40.8 -33.1 23.0 18.5 E: MOFSL Estimates


Mahindra & MahindraCMP: INR667 TP: INR791 (+19%) Buy Overall volumes declined 0.4% YoY (+0.7% QoQ) to 235.5k units,

as UV and 3W volumes increased 5.7% YoY and 12.8% YoY,respectively, while tractor volume declined 14.5% YoY.

MM’s (including MVML) realization is expected to decline 0.2%YoY (+1% QoQ), as impact of price increase is partly offset byproduct mix impact.

Revenue is likely to decline 0.6% YoY (+1.7% QoQ) to INR131b. EBITDA margin is expected to shrink 360bp YoY (-170 bp QoQ) to

11.5%. Adj. PAT is expected to decline 33% YoY (-48.5% QoQ) to INR7.5b. We have cut consol. EPS for FY20/21 by 7%/14% as we cut

volumes by 2%/8% to factor in uncertainties in tractor volumes.We cut margins by 70bp each to 13.9%/13.3% due to change inmix (from tractor to UVs) and BS6 challenge.

We are lowering target P/E to 14x (from 15x) as MM is exposed toBS6 challenge with over 95% of PV volume being diesel dependent and to factor in weak product mix.

The stock trades at 16x FY20E and 16.4x FY21E EPS; maintain Buy.Key issues to watch Outlook for UV and tractor businesses for FY19 and FY20. Update on response to the newly launched products. Update on average discounts per unit during festivals. Update on new launches and timelines.

Bloomberg MM IN


1,6,12 Rel Perf. (%) -6 / -28 / -28

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Sales 486.9 529.3 582.8 610.9

EBITDA 62.2 63.4 71.7 71.8 NP (incl. MVML) 43.2 51.2 49.5 48.4 Adj. EPS (INR) * 36.3 43.0 41.6 40.7

EPS Gr. (%) 22.7 18.5 -3.4 -2.2BV/Share (INR) 254.6 283 312 341 RoE (%) 14.2 14.2 13.1 11.7



* incl. MVML

April 2019 61


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Volumes (nos) 394,571 492,118 431,112 461,773 490,479 484,848 428,643 458,478 1,779,574 1,862,448 Change (%) 13.2 17.6 11.3 11.4 24.3 -1.5 -0.6 -0.7 13.4 4.7 Realizations (INR/car) 444,678 442,337 447,290 458,355 457,907 458,560 458,850 452,618 448,212 456,992 Change (%) 3.7 3.6 2.6 3.6 3.0 3.7 2.6 -1.3 3.3 2.0 Net operating revenues 175,457 217,682 192,832 211,656 224,594 222,332 196,683 207,515 797,627 851,124 Change (%) 17.4 21.8 14.2 15.4 28.0 2.1 2.0 -2.0 17.2 6.7

RM Cost (% of sales) 70.0 68.8 69.1 67.9 69.0 68.7 71.4 70.5 68.9 69.9 Staff Cost (% of sales) 3.7 3.1 3.6 3.9 3.4 3.6 4.5 4.1 3.6 3.9 Other Cost (% of sales) 13.0 11.2 11.5 13.9 12.6 13.2 14.3 13.3 12.1 13.3


Depreciation 6,839 6,825 6,890 7,025 7,198 7,212 7,677 7,665 27,579 29,752 EBIT 16,473 29,950 23,488 23,125 26,313 25,101 11,634 17,355 95,543 80,403

EBIT Margins (%) 9.4 13.8 12.2 10.9 11.7 11.3 5.9 8.4 12.0 9.4 Interest 313 150 263 224 207 257 206 180 3,457 850 Non-Operating Income 6,827 5,229 2,449 5,950 2,718 5,266 9,173 5,807 20,455 22,964 PBT 22,987 35,029 25,674 26,344 28,824 32,110 20,601 22,982 110,034 104,517 Effective Tax Rate (%) 32.3 29.1 29.9 28.6 31.5 30.2 27.7 29.9 29.8 30.0 Adjusted PAT 15,564 24,843 17,990 20,612 19,753 21,009 14,893 16,112 78,977 71,762 Change (%) 4.4 3.3 3.0 20.5 26.9 -15.4 -17.2 -21.8 7.4 -9.1 E:MOFSL Estimates


Maruti SuzukiCMP: INR6,883 TP: INR8,003 (+16%) Buy Volume declined by 0.7% YoY (+7% QoQ) to 458.5k units. Net realization is expected to decline 1.3% YoY (-1.4% QoQ) to

INR452,618 per unit, resulting in net revenue decline of 2% YoY(+5.5% QoQ) to INR207.5b.

We expect margins to expand 230bp QoQ (-210 bp YoY) to 12.1%,mainly due to lower discount and other expense.

EBITDA is estimated to decline by 17% YoY (+29.6% QoQ) toINR25b.

We expect adj. PAT to decline by 21.8% YoY (+8.2% QoQ) toINR16.1b.

We cut our FY20/21 EPS estimates by 1.8%/1.2% as we cutvolumes by 0.9%/1.2%.

The stock trades at 24.2x FY20E and 19.8x FY21E EPS. MaintainBuy.

Key issues to watch Update on demand scenario, channel inventory, discounting

trends and new launches. Demand trend in urban and rural areas.

Bloomberg MSIL IN


1,6,12 Rel Perf. (%) -9 / -15 / -41


Sales 797.6 851.1 940.1 1,060.9

EBITDA 123.1 110.2 126.7 151.8 Adj. PAT 79.0 71.8 84.0 103.0 Con.adj.EPS 267 242 284 348

EPS Gr. (%) 7.3 (9.4) 17.7 22.3 BV/Sh. (INR) 1,382 1,504 1,632 1,805 RoE (%) 18.5 16.1 17.0 18.9



April 2019 62

Quarterly performance (Cons.) (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 130,774 134,204 143,877 154,078 147,755 151,050 164,730 167,319 562,933 630,853 YoY Change (%) 25.1 32.4 35.7 36.9 13.0 12.6 14.5 8.6 32.8 12.1

RM Cost (% of sales) 61.1 60.6 61.5 60.6 57.6 57.9 57.7 57.0 61.0 57.5 Staff Cost (% of sales) 19.7 19.8 19.5 19.6 21.9 21.7 22.5 21.6 60.6 21.9 Other Exp (% of sales) 10.5 10.4 10.3 10.1 11.0 11.8 11.3 12.0 10.3 11.5

EBITDA 11,352 12,284 12,493 15,001 14,121 13,001 13,934 15,728 51,226 56,784 Margins (%) 8.7 9.2 8.7 9.7 9.6 8.6 8.5 9.4 9.1 9.0 Depreciation 3,768 3,978 3,937 4,069 4,471 4,879 5,714 5,803 15,752 20,867 Interest 1,176 771 1,032 1,130 1,005 1,315 882 1,060 4,108 4,262 Other income 551 379 253 615 447 463 610 230 1,701 1,750 PBT before EO expense 6,959 7,914 7,777 10,418 9,093 7,269 7,948 9,095 33,067 33,405

Tax Rate (%) 33.7 29.5 32.4 27.6 36.0 35.4 33.9 34.6 30.5 35.0 Min. Int & Share of profit 335 1,168 1,595 2,151 1,389 982 1,365 1,389 5,249 5,125 Adj PAT 3,637 4,396 3,659 5,332 4,431 3,711 3,891 4,556 17,024 16,588 YoY Change (%) 20.2 21.8 -12.0 1.3 21.8 -15.6 6.3 -14.6 10.2 -2.6 E: MOFSL Estimates


Motherson SumiCMP: INR155 TP: INR186 (+20%) Buy We estimate consolidated revenues to grow 8.6% YoY (+1.6%

QoQ), driven by SMP (+13.2%), PKC (+9.2%) and SMR (+4%). Consol. PAT is expected to decline 14.6% YoY to INR4.6b, driven

by lower margins and higher depreciation. Standalone EBITDA margin is expected to expand 140bp YoY (-240

bp QoQ) to 14.7%. For SMR, we estimate EBITDA margin at 12.8% (+30bp YoY/

+120bp QoQ). For SMP, we estimate EBITDA margins to contract 50bp YoY (+80

bp QoQ) to 6.2% due to ramp-up of new plants. For PKC, we estimate EBITDA margins to expand 240bp YoY (flat

QoQ) to 8.6% led by expectation of healthy operatingperformance.

The stock trades at 22.4x FY20E and 20x FY21E EPS. Maintain Buy.

Key issues to watch Update on new business wins at PKC. Update on ramp-up of new plants at SMRPBV. Update on trends in key businesses.

Bloomberg MSS IN


1,6,12 Rel Perf. (%) -12 / -13 / -46

Financial Snapshot (INR b) Y/E Mar 2018 2019E 2020E 2021E

Sales 562.9 630.9 724.4 794.9

EBITDA 51.2 56.8 71.8 81.2 NP 17.0 16.6 21.9 24.5 EPS (INR) 5.4 5.3 6.9 7.8

EPS Gr. (%) 6.0 -2.6 31.8 12.0BV/Sh. (INR) 29.5 33.2 38.0 43.3 RoE (%) 19.4 16.7 19.4 19.1


P/BV (x) 5.2 4.7 4.1 3.6 EV/EBITDA(x) 7.7 9.7 7.3 6.1 EV/Sales (x) 0.7 0.9 0.7 0.6

April 2019 63

Quarterly Performance (Consolidated) (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE JLR vols. (incl JV) 138,476 153,210 159,067 182,757 131,560 130,652 141,552 161,575 633,510 565,339 JLR Realizations (GBP/unit) 47,483 48,137 47,181 46,547 48,002 47,910 47,863 48,018 47,288 47,950

JLR EBITDA (%) 7.9 11.8 10.9 13.5 6.2 9.1 7.3 9.7 11.2 8.2 S/A vol. (units) 109,692 153,321 171,508 204,236 176,412 190,448 171,602 192,516 638,757 730,978 S/A Realizations (INR/unit) 828,485 899,947 930,708 968,454 945,230 932,469 944,492 959,293 921,030 945,436

S/A EBITDA (%) 0.2 6.7 8.1 6.9 8.6 8.5 8.8 9.2 6.5 8.8 S/A PAT (INR m) -5,059 -2,728 2,667 5,335 12,885 2,143 4,815 4,373 216 24,216 Net Op Income 584,934 703,734 733,659 912,791 667,011 721,121 770,009 898,003 2,946,192 3,056,143

Growth (%) -10.0 10.8 14.8 18.2 14.0 2.5 5.0 -1.6 9.2 3.7 EBITDA 49,648 86,210 77,534 108,944 50,504 67,576 60,406 90,594 333,411 269,080

EBITDA Margins (%) 8.5 12.3 10.6 11.9 7.6 9.4 7.8 10.1 11.3 8.8 PBT before EO Exp 1,168 30,814 20,338 39,480 -25,842 -2,932 -12,144 14,158 91,799 -26,760 EO Exp/(Inc) -36,202 0 47 16,403 0 5,303 280,140 18,649 -19,751 304,092 PBT after EO Exp 37,370 30,814 20,290 23,077 -25,842 -8,234 -292,284 -4,491 111,550 -330,852 Tax rate (%) 32.3 35.4 52.6 42.3 16.1 -33.0 8.2 18.8 38.9 8.0 PAT 25,295 19,916 9,614 13,305 -21,686 -10,953 -268,232 -3,647 68,131 -304,519 Minority Interest -177 -189 -160 -499 -398 -393 -317 12 -1,025 -1,096 Share in profit of Associate 6,704 5,101 2,532 8,446 3,060 859 -1,376 -1,425 22,783 1,118 Reported PAT 31,823 24,828 11,986 21,252 -19,024 -10,488 -269,925 -5,060 89,889 -304,497 Adj PAT 9,712 24,828 12,015 31,271 -19,024 -5,607 -12,082 12,104 77,826 -24,608

Growth (%) (49.3) 197.2 (422.8) (28.1) (295.9) (122.6) (200.6) (61.3) 15.7 -131.6 E: MOFSL Estimates


Tata MotorsCMP: INR203 TP: INR195 (-4%) Neutral Consolidated revenues are estimated to decline 1.6% YoY

(+16.6%) QoQ), with EBITDA margin contracting 180bp YoY to10.1%.

We expect JLR’s (including JV) volume to decline by 11.6% YoY(+14% QoQ), impacted by slow demand and deferment ofpurchase in China.

JLR’s net realization is expected to increase by 3.2% YoY (+0.3%QoQ). JLR’s EBITDA margin would contract 380bp YoY (+240 bpQoQ) to 9.7%.

S/A volume declined YoY by 5.7% (+12.2% QoQ) as CV volumedeclined 6% YoY, while PV volume fell 4.9% YoY. EBITDA margin isexpected to expand to 9.2% (+230bp YoY and +40bp QoQ). Weexpect adjusted PAT to be at INR4.4b.

We cut FY20/21 consolidated PAT by 23%/19.5% as we cut S/APAT by 8%/20%. For JLR, we cut PAT estimates by 34%/17%.

The stock trades at 16.7x/13x FY20/FY21 EPS. Maintain Neutral.Key issues to watch Current demand trends for JLR and outlook for key markets. Update on cost cutting initiatives at JLR. Demand trend in domestic markets and new product launch. Impact of forex hedge loss.

Bloomberg TTMT IN


1,6,12 Rel Perf. (%) 4 / -18 / -58


Net Sales 2,946 3,056 3,298 3,473

EBITDA 369.7 309.4 397.2 445.6 NP 77.8 -24.6 41.3 53.2Adj. EPS (INR) 22.9 -7.2 12.2 15.7

EPS Gr. (%) 15.7 -131.6 -267.7 28.8BV/Sh. (INR) 281.0 191.0 202.8 218.2 RoE (%) 10.1 -3.1 6.2 7.4

RoCE (%) 6.4 5.2 7.2 7.8 Valuations P/E (x) 8.8 -28.0 16.7 13.0

P/BV (x) 0.7 1.1 1.0 0.9 EV/EBITDA (x) 2.5 4.7 3.7 3.4

April 2019 64

S/A Quarterly Performance (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Volumes (units) 802,108 948,584 826,285 889,133 928,274 1,088,374 989,787 907,328 3,466,110 3,913,763

Growth (%) 12.2 16.3 15.0 32.0 15.7 14.7 19.8 2.0 18.8 12.9 Realization (INR/unit) 42,382 42,850 44,763 44,906 44,905 45,880 47,121 46,526 43,650 46,112

Growth (%) 5.2 2.0 7.8 6.3 6.0 7.1 5.3 3.6 5.0 5.6 Net Sales 33,995 40,647 36,987 39,928 41,685 49,935 46,640 42,214 151,297 180,473

Growth (%) 18.0 18.6 24.0 40.4 22.6 22.8 26.1 5.7 24.7 19.3 RM (% of sales) 74.6 73.2 72.4 73.8 75.9 75.8 75.8 75.5 73.6 75.8 Emp cost ( % of sales) 6.1 5.4 5.7 5.7 5.7 4.9 5.1 5.6 5.7 5.3 Other exp (% of sales) 13.1 12.5 13.7 13.5 10.7 10.7 11.1 11.5 13.2 11.0 EBITDA 2,114 3,626 3,005 2,807 3,212 4,282 3,757 3,096 11,292 14,348 EBITDA Margin(%) 6.2 8.9 8.1 7.0 7.7 8.6 8.1 7.3 7.5 8.0 Interest 107 155 122 183 180 212 167 197 566 755 Depreciation 783 836 824 944 933 1,016 1,012 1,014 3,387 3,975 Other Income 571 333 45 240 26 7 7 30 1,448 70 PBT after EO Exp 1,794 2,968 2,104 1,921 2,124 3,062 2,585 1,917 8,786 9,687

Tax rate (%) 27.8 28.2 26.6 13.8 31.0 31.0 31.0 31.1 24.6 31.0 Adjusted PAT 1,295 2,132 1,544 1,656 1,466 2,113 1,784 1,321 6,626 6,684

Growth (%) 6.1 20.2 16.4 30.6 13.2 (0.9) 15.6 (20.2) 18.7 0.9 E: MOFSL Estimates


TVS Motor CompanyCMP: INR486 TP: INR523 (+8%) Neutral Volume increased 2% YoY (-8.3% QoQ) to 907.3k units.

Motorcycle volume increased 8.2% YoY while Scooter andMopeds volume decline YoY by 3.3% and 5.6%, respectively. 3Wvolumes rose by 41.1% YoY.

Net realization is likely to increase 3.6% YoY (-1.3% QoQ) toINR46,526 per unit due to price hikes and better product mix.

We estimate net sales to grow by 5.7% YoY (-9.5% QoQ) toINR42.2b.

EBITDA margin is expected to be 7.3% (+30bp YoY and -70bpQoQ).

We expect PAT to decline 20% YoY (-26% QoQ) to INR1.3b. The stock trades at 24.7x FY20E and 19.2x FY21E EPS; Maintain

Neutral. Key issues to watch Update on demand from rural and urban areas. Exports outlook for 2W and 3W in key markets. Response to newly launched Radeon. Update on new product launches including EV.

Bloomberg TVSL IN


1,6,12 Rel Perf. (%) -5 / -19 / -44


Sales 151.3 180.5 210.9 245.3

EBITDA 11.3 14.3 18.8 23.1

Adj. PAT 6.6 6.7 9.4 12.0

EPS (INR) 13.9 14.1 19.7 25.3

EPS Gr. (%) 18.7 0.9 40.0 28.3

BV/Sh (INR) 60.6 69.9 83.6 102.8

RoE (%) 25.1 21.6 25.7 27.1

RoCE (%) 24.1 23.9 30.0 34.2

Valuations P/E (x) 34.8 34.5 24.7 19.2

P/BV (x) 8.0 7.0 5.8 4.7

EV/EBITDA (x) 21.6 17.0 12.8 10.3

Div. Yield (%) 0.7 0.8 1.0 1.0

April 2019 65

March 2019 Results Preview | Sector: Capital Goods

Exhibiting signs of an operational improvement Strong execution momentum to continue, helped by strong backlogs

Most companies in our coverage universe should report double-digit revenuegrowth; at an aggregate level, we expect 10% revenue growth; supported bypick-up and smooth execution of domestic projects.

Operating profit margin at an aggregate level is expected at 12.8% v/s 12.9% in4QFY18, despite most companies facing multiple headwinds, such as (a) inputprice pressure, (b) adverse foreign exchange movement, and (c) highcompetitive intensity. Cost rationalization measures undertaken by companiesat large also supported margins.

We continue to maintain positive stance on L&T, Cummins and Thermax in theIndustrials space, whereas on the Electronic Consumer Durables front, Havellsand Crompton remain our top picks.

Double-digit revenue growth supported by improved order execution Domestic execution has now started to witness traction after the hiccups felt post implementation of structural reforms like the GST. We expect companies from our coverage universe to register 10% revenue growth at an aggregate level. Industrials and Engineering companies are likely to witness healthy revenue growth, backed by smooth execution of projects in hand. For Electrical Consumer Durable companies, 9MFY19 has been weak given the muted demand for the RAC segment, which has impacted operational performance of companies like Voltas and Blue Star. The same trend is expected to continue in 4QFY19, given the weak demand for unitary cooling products (UCP) segment.

Operating margins to remain stable led by cost rationalization measures Operating margins are expected to remain stable despite multiple headwinds like (a) input price pressure, (b) adverse foreign exchange movement, and (c) high competitive intensity faced by the industry. Cost rationalization measures taken by the companies at large also supported margins. Operating profit margins at an aggregate level is expected at 12.8% v/s 12.9% in 4QFY18. Net profit at the sector level is expected to grow 9% YoY.

Adverse forex movement to impact MNCs, consumer durable companies INR depreciation of 9% YoY against the USD can potentially have a negative impact on the earnings of companies like Siemens, ABB, and GE T&D, which rely on its parent company for import of critical components. Even companies like Voltas and Blue Star could experience a potential negative impact given its reliance on import of compressor and indoor units from China.

Approaching general elections to slow fresh government orders Over the last few years, the capex cycle in India has been supported by government spending on infrastructure projects like roads, railways and power T&D sector. But, private sector capex has remained subdued given the underutilization of assets created by companies historically.

Company name

ABB

Bharat Electronics

BHEL

Blue Star

CG Consumer Elect.

Cummins India

Engineers India

GE T&D

Havells India

Larsen & Toubro

Siemens

Thermax

Voltas

Technology March 2019 Results Preview | April 2019

Capital Goods

Nilesh Bhaiya – Research Analyst ([email protected]); +91 22 6129 1556 Amit Shah – Research Analyst ([email protected]); +91 22 6129 1543

April 2019 66


However, with the impending general elections, even government capex has started witnessing a lull. The recently released CMIE capex data for FY19 showed new project announcements at -17% YoY.

Though the near-term outlook remains subdued, we note that policy initiatives have been undertaken to (i) expedite regulatory approvals, and (ii) establish monetary conditions conducive to industrial capex revival over the medium term.

We believe investment revival would be triggered by (i) sustained recovery inconsumption demand, and thus, capacity utilization; and (ii) investment push bythe public sector, leading to a virtuous cycle of cash flow generation.By initiating GST, labor and energy sector reforms, the Indian government haspartly addressed concerns about the pace and extent of reforms.Implementation of substantive reforms is essential for structured investmentgrowth.

Exhibit 1: Summary of expected quarterly performance Sector CMP Sales (INR m) EBDITA (INR M) PAT (INR m)

Capital Goods (INR) RECO Mar-19 Var

% YoY Var

% QoQ Mar-19 Var

% YoY Var

% QoQ Mar-19 Var

% YoY Var

% QoQ ABB 1,323 Sell 17,230 -31.8 -12.4 1,051 -44.4 -51.2 617 -39.8 -52.1Bharat Electronics 101 Buy 38,887 7.8 43.2 7,583 -4.8 -1.3 4,769 -14.6 -6.0BHEL 75 Sell 110,437 8.8 50.5 10,083 -18.1 361.0 5,801 26.9 202.2 Blue Star 706 Neutral 15,193 12.8 38.2 839 38.9 98.1 482 82.4 673.4 CG Consumer Elect. 222 Buy 12,318 9.4 19.6 1,785 8.5 41.6 1,149 11.3 44.2 Cummins India 745 Buy 13,134 6.5 -12.7 1,870 8.0 -17.5 1,667 3.4 -10.9Engineers India 120 Buy 7,120 39.7 23.4 1,073 35.0 13.2 1,229 35.1 35.4 GE T&D India 290 Neutral 10,762 32.2 -7.8 1,030 475.9 -8.5 665 117.7 25.3 Havells India 765 Buy 29,941 18.1 18.9 4,094 14.4 39.0 2,836 20.8 53.2 Larsen & Toubro 1,410 Buy 452,638 11.3 26.8 63,074 17.0 57.8 34,757 9.7 70.2 Siemens 1,130 Neutral 36,045 9.8 28.4 3,764 16.6 2.8 2,553 16.2 -11.2Thermax 941 Buy 15,934 10.4 10.9 1,496 8.3 39.4 979 29.3 50.2 Voltas 623 Neutral 22,142 8.1 48.4 2,492 -1.6 115.4 1,768 -8.9 90.8 Sector Aggregate 781,781 9.6 27.4 100,235 9.3 49.9 59,271 9.3 51.3

Source: MOFSL

Ordering activity supported by a select few sectors Overall, ordering activity has started to see signs of a pick-up, driven by ordering

from Steel, Cement, Fertilizers, and Oil & Gas sectors. Government awarding has been a pillar of support for industrial and engineering

companies. Sector-wise, roads, railways, and water segments registered strongtendering activity (fiscal allocations for roads/railways have increased).

April 2019 67


Exhibit 2: Revenue growth pick-up driven by domestic execution

Source: MOFSL, Company

Exhibit 3: EBITDA margin improvement on cost rationalization by companies


Exhibit 4: Book-to-bill stable at 2.1x


Exhibit 5: Order intake impacted by weak order inflow for L&T from domestic market






20.9

15

.6

6.6

-5.2 -3

.5 16.6

15.3

26

.3

11.7

1.

3 -1

.0 -0.8

-1.4

2.7 2.8

3.1

2.4 8.7

3.5

1.2

9.3

5.5

2.9

9.2

8.4 23

.0

17.5

18

.9

10.0

4QFY

12

2QFY

13

4QFY

13

2QFY

14

4QFY

14

2QFY

15

4QFY

15

2QFY

16

4QFY

16

2QFY

17

4QFY

17

2QFY

18

4QFY

18

2QFY

19

4QFY

19E

Engg Sector (revenue growth %)

12.1

12

.3

17.9

10

.2

12.0

11

.3

16.0

8.

4 10.0

11

.0 14

.0

9.9

9.2

10.0

12.0

8.

3 7.

2 4.

3 11

.6

8.7

7.8 8.5 10

.2

7.4 8.

7 9.5 11

.9

8.0 9.

7 10.9

12

.8

2QFY

12

4QFY

12

2QFY

13

4QFY

13

2QFY

14

4QFY

14

2QFY

15

4QFY

15

2QFY

16

4QFY

16

2QFY

17

4QFY

17

2QFY

18

4QFY

18

2QFY

19

4QFY

19E

EBITDA Margin (%)

3,02

8 2,

943

3,23

0 3,

482

3,59

4 3,

605

3,81

3 3,

717

2,70

7 3,

979

3,92

4 3,

917

3,97

6 3,

936

3,96

1 3,

940

4,13

9 4,

075

4,22

5 4,

317

4,25

1

2.4

2

.4

2.6

2

.9

3.0

2

.9

2.8

2

.5

1.7

2

.5

2.4

2

.4

2.4

2

.4

2.3

2

.3

2.4

2

.3

2.2

2

.2

2.1

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

19

Order book (INR b) BTB (x) 52

-2 -131

14

22

-5-2

227

15

3

-11

-15 -11 -9 -8

33

25

33

47

-14

3QFY

14

1QFY

15

3QFY

15

1QFY

16

3QFY

16

1QFY

17

3QFY

17

1QFY

18

3QFY

18

1QFY

19

3QFY

19

Order intake YoY %

85

92

99

106

113

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Capital Goods Index

72

87

102

117

132

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Capital Goods Index

April 2019 68


Exhibit 8: Summary of comparative full-year valuation Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Capital Goods (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E ABB 1,323 Sell 12.0 14.9 17.2 110.3 88.9 76.8 59.3 48.4 41.6 6.3 7.6 8.4 Bharat Electronics 101 Buy 7.1 7.4 7.7 14.2 13.6 13.1 8.7 7.9 7.4 19.7 18.3 17.1 BHEL 75 Sell 3.2 3.8 4.5 23.3 19.7 16.7 9.4 7.5 7.2 3.5 4.2 4.9 Blue Star 706 Neutral 16.0 23.1 31.1 44.1 30.5 22.7 21.8 17.2 13.8 17.0 22.0 26.0 CG Consumer Elect. 222 Buy 6.0 7.7 9.3 37.1 29.0 23.9 23.8 19.2 15.9 42.4 43.4 42.4 Cummins India 745 Buy 27.4 31.2 34.8 27.2 23.9 21.4 21.8 19.0 16.6 18.3 19.2 19.8 Engineers India 120 Buy 6.3 7.4 8.7 19.0 16.2 13.8 13.8 10.4 8.0 16.8 17.9 19.1 GE T&D India 290 Neutral 9.9 11.1 11.8 29.3 26.1 24.5 15.8 14.9 13.9 20.0 19.8 18.7 Havells India 765 Buy 13.8 16.7 20.3 55.4 45.7 37.7 36.1 29.3 23.9 20.1 21.1 21.9 K E C International 302 Neutral 19.7 24.7 27.0 15.3 12.2 11.2 8.7 7.4 6.6 20.9 21.5 19.6 Larsen & Toubro 1,410 Buy 62.4 72.4 89.6 22.6 19.5 15.7 16.8 13.7 11.5 14.9 14.4 15.0 Siemens 1,130 Neutral 25.1 30.9 32.5 45.0 36.6 34.8 27.8 22.7 20.8 11.2 12.7 12.4 Solar Inds. 1,039 Neutral 28.7 37.5 49.7 36.2 27.7 20.9 19.4 15.1 11.6 21.9 23.8 25.8 Thermax 941 Buy 25.4 36.3 43.0 37.0 25.9 21.9 21.1 15.1 12.2 10.2 13.3 14.1 Va Tech Wabag 323 Neutral 26.9 38.2 47.9 12.0 8.4 6.7 6.0 4.9 4.2 11.2 15.9 17.4 Voltas 623 Neutral 16.5 18.9 22.3 37.8 33.0 28.0 24.0 21.1 17.9 13.6 13.8 14.7 Sector Aggregate 27.3 23.3 19.6 17.8 14.6 12.5 12.3 12.4 13.4

April 2019 69


Quarterly Performance Y/E December CY18 CY19 CY18 CY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Sales 25,255 27,127 14,916 19,663 17,230 18,191 16,800 23,049 66,901 75,271 Change (%) 17.4 21.5 (22.4) 15.1 (31.8) (32.9) 12.6 17.2 9.8 12.5 EBITDA 1,890 1,959 654 2,154 1,051 1,105 986 2,340 4,578 5,481 Change (%) 17.4 32.6 -51.3 48.0 -44.4 -43.6 50.8 8.6 10.4 19.7 As % of Sales 7.5 7.2 4.4 11.0 6.1 6.1 5.9 10.2 6.8 7.3 Depreciation 356 356 236 239 255 255 248 278 928 1035 Interest 232 232 137 53 135 130 130 144 539 539 Other Income 269 236 269 160 298 283 248 164 840 992 Extra-ordinary Income 2567 0 PBT 1,571 1,607 549 2,023 959 1,002 856 2,082 3,951 4,900 Tax 546 586 189 736 342 358 306 742 1,410 1,748 Effective Tax Rate (%) 34.8 36.4 34.4 36.4 35.7 35.7 35.7 35.6 35.7 35.7 Repoted PAT 1,025 1,022 360 1,286 617 617 644 551 6,037 3,152 Adj. PAT 1,025 1,022 360 1,286 617 617 644 551 3,470 3,152 Change (%) 13.9 35.2 -56.8 57.6 -39.8 -39.6 78.8 -57.2 6.2 -9.2


ABBCMP: INR1,323 TP: INR1,175 (-11%) Sell On reported basis, we expect a revenue decline of 32% YoY as the

power grid business, which constitutes 40% of the revenue hasnow been segregated from the company. Continued business ofautomation and electrification products is expected to register 14%growth YoY.

We expect EBITDA margin to decline 140bp to 6.1%; EBIDTA onreported basis is expected to decline 44% on YoY basis to INR1.1b.

Net profit is expected to decline 40% YoY to INR617m. However, onlike-to-like basis, the growth is expected to be robust (Difficult toquantify as base numbers are not available, post re-segmentation).Maintain Sell.

Key issue to watch Management commentary suggests cautious optimism, continued

focus on exports and services—an important driver of theprojected strong double-digit revenue and profit growth.

Bloomberg ABB IN


1,6,12 Rel Perf. (%) -2 / -14 / -15

Financial Snapshot (INR b) Y/E Dec 2017 2018 2019E 2020E

Net Sales 60.9 66.9 75.3 83.8

EBITDA 4.1 4.6 5.5 6.5

Adj. PAT 4.2 5.1 3.2 3.6

Adj. EPS (INR) 10.6 12.0 14.9 17.2

EPS Gr (%) -41.9 12.7 24.0 15.8

BV/Sh (INR) 170.2 189.1 196.8 205.8

RoE (%) 6.3 6.3 7.6 8.4

RoCE (%) 9.8 8.6 8.2 9.3

Payout (%) 41.3 40.0 40.0 40.0

Valuations

P/E (x) 124.3 110.3 89.0 76.8

P/BV (x) 7.8 7.0 6.7 6.4

EV/EBITDA (x) 22.6 17.2 12.8 9.4

Div. Yield (%) 0.3 0.4 0.4 0.5

April 2019 70


Quarterly Performance Y/E March FY18 FY19 FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 17,218 24,731 25,057 36,085 21,021 33,814 27,165 38,887 103,223 120,887 Change (%) 97.6 45.2 22.7 -9.5 22.1 36.7 8.4 7.8 19.9 17.1 EBITDA 1,656 5,928 4,452 7,962 3,105 8,544 7,681 7,583 19,997 26,914 Change (%) -455 75 -8 -19 88 44 73 -5 14 35 As of % Sales 9.6 24.0 17.8 22.1 14.8 25.3 28.3 19.5 19.4 22.3 Depreciation 561 590 594 766 689 743 797 826 2,510 3,056 Interest 3 0 0 10 3 0 0 10 13 13 Other Income 700 532 492 279 89 143 176 193 2,004 600 PBT 1,793 5,870 4,350 7,465 2,502 7,944 7,060 6,939 19,478 24,445 Tax 540 1746 1322 1878 705 2230 1984 2170 5486 7089 Effective Tax Rate (%) 30.1 29.8 30.4 25.2 28.2 28.1 28.1 31.3 28.2 29.0 Reported PAT 1,253 4,124 3,028 5,587 1,797 5,713 5,076 4,769 13,992 17,356 Change (%) 247.2 19.1 -18.9 -29.4 43.4 38.5 67.6 -14.6 -9.6 24.0 Adj PAT 1,253 4,124 3,028 5,587 1,797 5,713 5,076 4,769 13,992 17,356 Change (%) 247.2 19.1 -18.9 -29.4 43.4 38.5 67.6 -14.6 -9.6 24.0


Bharat ElectronicsCMP: INR101 TP: INR115 (+15%) Buy Order inflow for FY19 stood at INR232b (+132% YoY). Order inflow

was supported by finalization of LRSAM, Kerala fiber opticsnetwork, smart city projects, integrated perimeter securitysolution, weapon repair facility for naval ships, and naval airfieldintegrated security system.

Order backlog stands at record high level of INR516b providingstrong revenue visibility of 4.4x its FY19 revenue.

Provisional Revenue for FY19 stood at INR11.7b (+16% YoY),implying 4QFY19 revenue of INR37b (+7.5% YoY), broadly in linewith our estimates. Exports revenue stood at INR1.3% of itsrevenue (USD22m).

We expect EBITDA margin of 19.5% for 4QFY19 v/s 22.1% in4QFY18, given the adverse revenue mix (contribution from low-margin EVM machines). EBITDA is likely to decline 5% YoY toINR7.6b.

PAT is expected to decline 15% YoY to INR4.8b. Maintain Buy.

Key issue to watch Akash missile, IACCS, Ship-borne EW systems and EVM orders are

expected to support revenue growth

Bloomberg BHE IN Equity Shares (m) 2436.5 M. Cap. (INR b)/(USD b) 246 / 4

52-Week Range (INR) 149 / 73 1,6,12 Rel Perf. (%) 10 / 15 / -48


Net Sales 103.2 120.9 138.3 153.0

EBITDA 20.0 26.9 29.0 30.3

NP 14.0 17.4 18.1 18.7

EPS (INR) 5.7 7.1 7.4 7.7

EPS Gr. (%) -8.8 24.0 4.1 3.7

BV/Sh (INR) 32.0 36.1 40.5 45.0

RoE (%) 18.0 19.7 18.3 17.1

RoCE (%) 18.2 20.9 19.4 18.0

Valuations

P/E (x) 17.6 14.2 13.6 13.1

P/BV (x) 3.2 2.8 2.5 2.2

EV/EBITDA (x) 12.0 8.7 7.9 7.4

April 2019 71


Quarterly Performance Y/E March FY18 FY19 FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales (Net) 55,834 62,971 66,661 101,470 59,355 67,799 73,364 110,437 289,257 310,955 Change (%) -0.5 -5.5 5.5 3.8 6.3 7.7 10.1 8.8 1.7 7.5 EBITDA 2,029 -954 2,652 12,316 2,872 2,408 2,187 10,083 19,329 17,551 Change (%) 185.7 -161.5 18.5 116.6 41.6 NA -17.5 -18.1 82.1 -9.2 As a % Sales 3.6 -1.5 4.0 12.1 4.8 3.6 3.0 9.1 6.7 5.6 Interest 657 552 610 726 639 689 577 1,141 2,546 3,046 Depreciation 2,001 1,872 1,820 2,171 1,761 521 1,124 1,475 7,864 4,881 Other Income 1,710 4,850 1,677 1,979 1,786 1,517 2,265 1,928 6,931 7,495 PBT 1,080 1,473 1,898 11,399 2,259 2,715 2,751 9,396 15,850 17,120 Tax 272 318 367 6,827 703 863 831 3,595 7,784 5,992 Effective Tax Rate (%) 25.2 21.6 19.3 59.9 31.1 31.8 30.2 38.3 49.1 35.0 Reported PAT 808 1,154 1,532 4,572 1,556 1,852 1,920 5,801 8,066 11,128 Change (%) 3.9 5.9 63.8 112.1 92.5 60.4 25.3 26.9 62.7 38.0 Adj. PAT 808 1,154 1,532 4,572 1,556 1,852 1,920 5,801 8,066 11,128 Change (%) 3.9 5.9 63.8 112.1 92.5 60.4 25.3 26.9 62.7 38.0

CMP: INR75 TP: INR60 (-19%) Sell We expect revenue growth of 9% YoY for 4QFY19 for BHEL, led by a

pick-up in execution of orders in hand. We expect gross margins to decline 850bp YoY to 41.0%, impacted

by higher import content required to execute the supercriticalorders.

BHEL is likely to report operating profit of INR10.1b in 4QFY19 asagainst INR12.3b in 4QFY18, a decline of 18% YoY. We anticipateoperating margin compression of 300bp YoY to 9.1%

Tax rate is expected to stand at 38.3% as against 60% in 4QFY18. We estimate adjusted net profit at INR5.8b as against INR4.6b in

4QFY18, a growth of 27% YoY. Maintain Sell.Key issues to watch Execution of orders in hand given that private sector order

backlog is slow moving Trends in provisions, particularly for liquidated damage on project

completion

Bloomberg BHEL IN Equity Shares (m) 3671.4 M. Cap. (INR b)/(USD b) 274 / 4

52-Week Range (INR) 91 / 56 1,6,12 Rel Perf. (%) 4 / -2 / -27


Net Sales 289.3 311.0 327.4 368.8

EBITDA 19.3 17.6 22.5 27.0

PAT 8.1 11.1 13.2 15.6

EPS (INR) 2.2 3.2 3.8 4.5

EPS Gr. (%) 62.7 45.5 45.5 17.9

BV/Sh. INR 88.8 90.0 91.2 92.6

RoE (%) 2.5 3.5 4.2 4.9

RoCE (%) 2.0 2.9 3.5 4.1

Payout (%) 82.8 60.0 60.0 60.0

Valuations

P/E (x) 34.1 23.5 19.8 16.8

P/BV (x) 0.8 0.8 0.8 0.8 EV/EBITDA (x)

8.4 9.1 7.2 7.0

Div Yield (%) 2.4 2.6 3.0 3.6

* Consolidated


BHEL

April 2019 72


Quarterly performance (Consolidated) (INR Million) FY18 FY19

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Sales 15,108 8,498 9,320 13,463 15,078 10,322 10,990 15,193 46,390 51,583 Change (%) 24.9 -4.4 1.6 -1.7 -0.2 21.5 17.9 12.8 5.8 11.2 EBITDA 1,106 489 424 604 1,367 581 423 839 2,659 3,209 Change (%) 44.6 21.8 25.1 -15.9 23.6 18.7 -0.2 38.9 19.6 20.7 As of % Sales 7.3 5.8 4.6 4.5 9.1 5.6 3.9 5.5 5.7 6.2 Depreciation 125 158 172 183 161 169 183 179 638 691 Interest 48 59 74 107 121 117 131 104 287 472 Other Income 86 45 36 38 33 49 104 43 170 229 Extra-ordinary Items 0 0 0 -53 -152 27 72 0 53 53 PBT 1,019 318 214 405 1,270 317 142 599 1,850 2,222 Tax 259 95 58 82 325 78 10 178 494 592 Effective Tax Rate (%) 25 30 27 20 26 25 7 30 27 27 MI/Share of profit from JV 1 4 (22) (5) (29) (43) (141) 61 (22) (153)Reported PAT 762 227 134 317 916 196 (9) 482 1,440 1,584 Change (%) 51.1 18.0 -5.8 -16.8 20.3 -14.0 -107.0 52.0 12.7 10.4 Adj PAT 762 227 134 264 764 223 62 482 1,387 1,531 Change (%) 48.2 13.9 -7.9 -29.0 0.3 -2.0 -53.4 82.4 12.7 10.4


Blue StarCMP: INR706 TP: INR755 (+7%) Neutral Unitary cooling division (UCP) of Blue Star is likely to report

revenue growth of 17% YoY; however, excluding INDAS 115implementation impact, we expect revenue to remain flat atINR6.9b.

We expect revenue growth of 11% YoY in the MEP segment,excluding the INDAS 115 implementation impact. MEP revenue isexpected to grow 7.2% to INR7.8b.

Operating margin is expected to improve 100bp YoY at 5.5%,supported by margin improvement in the MEP segment (5.3% v/s4.6% in 4QFY18) and normalization of margins in the ProfessionalElectronics segment (18.7% v/s 13.0% in 4QFY18). Operatingprofit is expected to increase 39% YoY.

We expect net profit of INR482m as against INR264m in 4QFY18(+82% YoY) supported by lower losses in the JV business.Maintain Neutral.

Key issue to watch Inventory situation in the UCP segment and demand outlook for

FY20

Bloomberg BLSTR IN Equity Shares (m) 95.6 M. Cap. (INR b)/(USD b) 67 / 1



Net Sales 46.4 51.6 58.5 66.6 EBITDA 2.7 3.2 4.0 5.0 Adj. PAT 1.4 1.5 2.2 3.0 EPS(INR) 14.5 16.0 23.1 31.1 EPS Gr. (%) 12.7 10.4 44.3 34.4 BV/Sh. (INR) 87.0 94.4 105.0 119.3 RoE (%) 16.7 17.0 22.0 26.0 RoCE (%) 26.6 28.3 38.6 49.2 Payout (%) 68.9 45.0 45.0 45.0 Valuations

P/E (x) 48.6 44.1 30.5 22.7 P/BV (x) 8.1 7.5 6.7 5.9 EV/EBITDA (x) 26.5 21.8 17.2 13.8 Div Yield (%) 1.4 1.0 1.5 2.0 *Consolidated

April 2019 73


Quarterly Performance (INR m) FY18 FY19 FY18 FY19

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 10,554 9,597 9,382 11,263 12,039 10,378 10,303 12,318 40,797 45,038 Change (%) -3.7 9.8 6.7 7.6 14.1 8.1 9.8 9.4 4.6 10.4 EBITDA 1,294 1,207 1,165 1,645 1,673 1,239 1,261 1,785 5,310 5,958 Change (%) -17.8 19.3 19.8 27.5 29.3 2.7 8.3 8.5 9.6 12.2 As of % Sales 12.3 12.6 12.4 14.6 13.9 11.9 12.2 14.5 13.0 13.2 Depreciation 32 32 32 31 31 32 33 38 126 134 Interest 162 157 158 161 152 150 150 159 637 611 Other Income 97 35 66 109 88 98 124 128 308 439 PBT 1,198 1,054 1,040 1,562 1,578 1,155 1,202 1,717 4,854 5,651 Tax 395 346 345 530 535 386 405 567 1,617 1,893 Effective Tax Rate (%) 33.0 32.8 33.2 33.9 33.9 33.4 33.7 33.0 33.3 33.5 Adjusted PAT 802 708 695 1,032 1,043 769 797 1,149 3,238 3,758 Change (%) (14.2) 22.3 27.9 29.0 30.0 8.6 14.7 11.3 14.3 16.1 Reported PAT 802 708 695 1,032 1,043 769 797 1,149 3,238 3,758 Change (%) (14.2) 23.3 27.9 32.4 30.0 8.6 14.7 11.3 14.3 16.1


CG Consumer Elect.CMP: INR222 TP: INR270 (+21%) Buy We expect sales to grow 9% YoY, driven by 15% growth in the

Electrical Consumer Durables’ segment. We expect operating profit of INR1.8b in 4QFY19, an improvement

of 8.5% YoY and a 10bp compression in EBITDA margin to 14.5%.Margin compression is expected on account of pricing pressurewitnessed in the lighting segment given high competitive intensity.

Net profit is expected at INR1.1b in 4QFY19 as against INR1.0b in4QFY18, implying a YoY growth of 11.0%. Maintain Buy.

Key issues to watch Performance of the lighting segment as players have taken price

hikes during the quarter Ad spends incurred by the company during the quarter, as

Crompton intends to position itself as an Electrical Consumer Durables brand as against its current positioning of a ‘fan’ brand

Bloomberg CROMPTON IN Equity Shares (m) 626.8 M. Cap. (INR b)/(USD b) 139 / 2

52-Week Range (INR) 272 / 190 1,6,12 Rel Perf. (%) -3 / -5 / -22


Net Sales 40.8 45.0 51.7 59.4

EBITDA 5.3 6.0 7.3 8.6

Adj. PAT 3.2 3.8 4.8 5.8

EPS (INR) 5.2 6.0 7.7 9.3

EPS Gr. (%) 14.3 16.1 27.6 21.6

BV/Sh. (INR) 12.6 15.7 19.6 24.3

RoE (%) 48.7 42.4 43.4 42.4

RoCE (%) 27.9 27.1 31.9 37.8

Payout (%) 33.9 40.7 40.7 40.7

Valuations P/E (x) 43.0 37.0 29.0 23.9

P/BV (x) 17.6 14.2 11.3 9.1

EV/EBITDA (x) 27.1 23.8 19.2 15.9

Div Yield (%) 0.8 1.1 1.4 1.7

* Consolidated

April 2019 74


Quarterly Performance (INR m) FY18 FY19 FY18 FY19

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 13,408 11,539 13,547 12,332 13,280 14,869 15,038 13,134 50,825 56,427 Change (%) 6.5 -9.8 0.0 4.1 -1.0 28.9 11.0 6.5 0.1 11.0 EBITDA 1,953 1,675 1,967 1,731 2,147 2,509 2,267 1,870 7,325 8,899 Change (%) -5.4 -15.8 -13.2 1.8 9.9 49.8 15.3 8.0 -12.3 27.7 As of % Sales 14.6 14.5 14.5 14.0 16.2 16.9 15.1 14.2 14.4 15.8 Depreciation 208 220 237 273 271 274 279 287 938 1,111 Interest 42 38 34 34 36 40 41 32 148 148 Other Income 583 536 501 664 696 785 755 814 2,285 3,050 PBT 2,286 1,953 2,197 2,088 2,536 2,980 2,702 2,365 8,523 10,690 Tax 625 424 475 475 706 865 831 698 2,000 3,100 Effective Tax Rate (%) 27.4 21.7 21.6 22.8 27.8 29.0 30.8 29.5 23.5 29.0 Adjusted PAT 1,660 1,529 1,722 1,612 1,830 2,116 1,871 1,667 6,524 7,590 Change (%) (8.4) (22.3) (13.1) 1.7 10.2 38.4 8.7 3.4 (11.2) 16.4 Extra-ordinary Income (net) 561.2 - - - - - - - 561.2 2.6 Reported PAT 2,222 1,529 1,722 1,612 1,830 2,116 1,871 1,667 7,085 7,593 Change (%) 22.6 (22.3) (13.1) 1.7 (17.6) 38.4 8.7 3.4 (3.6) 7.2


Cummins IndiaCMP: INR745 TP: INR950 (+30%) Buy We expect revenue to increase 7% YoY, supported by growth in the

Industrial segment (24% YoY) and Distribution and Spars business(+17% YoY). However, exports is expected to decline sharply (-18%YoY) given weak demand from Middle East and Europe.

EBITDA margin is expected to remain flat YoY to 14%; andoperating profit is expected to improve 8% YoY to INR1.9b.

Net profit is expected to register growth of 3% YoY to INR1.7b.Maintain Buy.

Key issue to watch Performance and guidance for the exports segment

Bloomberg KKC IN


1,6,12 Rel Perf. (%) -3 / 4 / -13


Net Sales 50.8 56.7 65.7 72.9

EBITDA 7.3 9.3 11.5 12.8

Adj. PAT 6.5 7.6 9.1 10.0

EPS (INR) 23.5 27.3 32.8 36.2

EPS Gr. (%) -11.2 16.2 20.1 10.3

BV/Sh. (INR) 143.8 155.3 169.2 184.4

RoE (%) 18.3 18.3 20.2 20.5

RoCE (%) 16.1 17.5 19.4 19.7

Payout (%) 58.7 49.7 49.7 49.7

Valuations P/E (x) 35.9 30.9 25.8 23.4

P/BV (x) 5.9 5.4 5.0 4.6

EV/EBITDA (x) 31.7 24.4 19.8 17.6

Div Yield (%) 1.8 1.6 1.9 2.1

April 2019 75


Quarterly Performance (INR m) Y/E March FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19 Net Sales 3,754 4,291 4,734 5,097 5,733 6,814 5,770 7,120 17,876 25,437 YoY Change (%) 9.8 26.6 45.7 15.1 52.7 58.8 21.9 39.7 23.4 42.3 Total Expenditure 2,936 2,901 3,386 4,302 4,870 5,899 4,821 6,047 13,486 21,637 EBITDA 818 1,390 1,349 795 864 915 949 1,073 4,390 3,800 Margins (%) 21.8 32.4 28.5 15.6 15.1 13.4 16.4 15.1 24.6 14.9 Depreciation 60 62 59 58 55 57 53 59 238 225 Interest 0 1 1 4 2 4 3 -2 6 6 Other Income 456 467 393 479 522 614 519 628 1,795 2,283 PBT before EO expense 1,214 1,794 1,682 1,213 1,328 1,468 1,411 1,645 5,941 5,853 Extraordinary expense/income 0 0 0 -220 0 0 0 0 260 0 PBT 1,214 1,794 1,682 1,433 1,328 1,468 1,411 1,645 5,681 5,853 Tax 400 602 597 303 462 491 504 417 1,902 1,873 Rate (%) 32.9 33.6 35.5 21.2 34.8 33.4 35.7 25.3 33.5 32.0 Reported PAT 815 1,192 1,084 1,129 866 978 908 1,229 3,779 3,980 Adj PAT 815 1,192 1,084 909 866 978 908 1,229 4,039 3,980 YoY Change (%) 1.4 27.0 27.4 -41.7 6.3 -18.0 -16.3 35.1 -2.7 -1.4 Margins (%) 21.7 27.8 22.9 17.8 15.1 14.3 15.7 17.3 22.6 15.6


Engineers IndiaCMP: INR120 TP: INR155 (+24%) Buy We expect revenue to increase 40% YoY to INR7.1b, supported by

growth in Turnkey segment execution (106% YoY); we expectConsultancy and Engineering projects to register a growth of 5%YoY.

We expect operating profit to register 35% growth YoY, supportedby better margins in the consultancy segment (29.3% v/s 26.6% YoY). Margins in the turnkey segment are expected to remain stable at 7% YoY.

We expect net profit to register 35% YoY growth to INR1.2b.Maintain Buy.

Key issue to watch Performance of the Turnkey project segment, which has seen

margin volatility in the recent past

Bloomberg ENGR IN


1,6,12 Rel Perf. (%) 0 / -7 / -43


Net Sales 17.9 25.4 30.5 33.1

EBITDA 4.4 3.8 4.8 5.8

Adj. PAT 4.0 4.0 4.7 5.5

EPS (INR) 6.3 6.3 7.4 8.7

EPS Gr. (%) 14.8 0.7 17.2 17.6

BV/Sh. (INR) 33.7 36.8 40.5 44.9

RoE (%) 15.7 16.8 17.9 19.1

RoCE (%) 15.7 16.8 17.9 19.1

Payout (%) 77.6 46.4 46.4 46.4

Valuations P/E (x) 18.1 17.9 15.3 13.0

P/BV (x) 3.4 3.1 2.8 2.5

EV/EBITDA (x) 10.6 12.0 9.0 6.9

Div Yield (%) 3.5 2.2 2.6 3.1

April 2019 76


CMP: INR290 TP: INR300 (+2%) Neutral We expect GE T&D to register revenue growth of 32% YoY to

INR10.7b in 4QFY19. Revenue growth is supported by the weakbase of 4QFY18 (-32.0% YoY).

We expect operating profit of INR1b in 4QFY19, as againstINR179m in 4QFY18 . Operating margins are expected to improve740bp at normalized level of to 9.6%. Margins in 4QFY18 (2.2%)were impacted by weak execution leading to operating de-leverage.

GET&D is expected to book net profit of INR665m as againstINR305m in 4QFY18. Maintain Neutral.

Key issues to watch Progress in the Champa-Kurukshetra II project, which is

expected to be executed in FY19

Bloomberg GETD IN


1,6,12 Rel Perf. (%) -8 / 15 / -46


Net Sales 43.3 44.0 44.8 46.9

EBITDA 2.9 4.5 4.6 4.8

Adj. PAT 1.9 2.5 2.8 3.0

EPS (INR) 7.5 9.9 11.1 11.8

EPS Gr. (%) 30.8 31.9 12.1 6.7

BV/Sh. (INR) 46.5 52.6 59.5 66.8

RoE (%) 17.3 20.0 19.8 18.7

RoCE (%) 22.5 31.1 29.9 28.1

Payout (%) 31.4 31.4 31.4 31.4

Valuations

P/E (x) 38.7 29.3 26.2 24.5

P/BV (x) 6.2 5.5 4.9 4.3

EV/EBITDA (x) 24.5 15.8 15.0 14.0

EV/ Sales (x) 1.6 1.6 1.5 1.4

Div Yield (%) 0.6 1.1 1.2 1.3

Quarterly Performance (INR m) FY18 FY19

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19 Sales 12,093 8,700 14,386 8,139 11,624 9,933 11,678 10,762 43,317 43,997 Change (%) 41.5 4.2 23.5 -32.0 -3.9 14.2 -18.8 32.2 6.9 1.6 EBITDA 1,055 805 728 179 1,442 921 1,126 1,030 2,853 4,519 Change (%) 4,875.9 130.6 -3.0 -83.7 36.7 14.5 54.7 475.9 -9.0 -9.0 As of % Sales 8.7 9.3 5.1 2.2 12.4 9.3 9.6 9.6 6.6 10.3 Depreciation 224 228 218 229 217 215 202 212 899 846 Interest 278 225 238 141 155 143 141 112 883 550 Other Income 422 344 630 638 192 238 97 242 1,948 769 PBT 975 695 1,099 419 1,262 801 880 949 3,189 3,893 Tax 358 220 381 141 442 287 350 284 1,101 1,362 Effective Tax Rate (%) 36.7 31.6 34.7 33.7 35.0 35.8 39.7 29.9 34.5 35.0 Reported PAT 617 475 718 278 820 515 531 665 2,088 2,530 Change (%) -131.3 131.6 62.0 -39.7 33.0 8.3 -26.1 139.2 NM 21.2 Adj PAT 617 475 521 305 820 515 531 665 1,919 2,530 Change (%) 71.4 131.6 17.6 -33.8 33.0 8.3 1.8 117.7 30.8 31.9


GE T&D

April 2019 77


CMP: INR765 TP: INR871 (+14%) Buy Revenue is expected to grow 18% YoY, driven by revenue growth

from the Electrical Consumer Durables segment (+23% YoY), andSwitchgear (+13% YoY). Lloyd Electric is expected to register growthof 12% YoY supported by primary channel filling on expandednetwork.

We expect the cables segment to register 22.0% YoY growth,supported by robust demand from government infrastructureproject segment.

We expect EBIDTA margin to decline 40bp YoY to 13.7%, impactedby margin pressure across segments. Operating profit is expectedto register 14% growth YoY

Net profit is expected to register a growth of 20% YoY to INR2.8b.Maintain Buy.

Key issue to watch Commentary on overall demand scenario of the company’s

product portfolio

Bloomberg HAVL IN


1,6,12 Rel Perf. (%) 0 / 21 / 33


Net Sales 81.4 103.0 120.8 139.4

EBITDA 10.5 12.8 15.7 18.9

Adj. PAT 7.0 8.6 10.4 12.7

Adj. EPS (INR) 11.2 13.8 16.7 20.3

EPS Gr. (%) 17.4 23.0 21.2 21.1

BV/Sh(INR) 59.9 68.7 79.4 92.4

RoE (%) 18.7 20.1 21.1 21.9

RoCE (%) 18.8 20.2 21.4 22.5

Payout (%) 41.7 36.0 36.0 36.0

Valuations P/E (x) 68.2 55.4 45.7 37.8

P/BV (x) 12.8 11.1 9.6 8.3

EV/EBITDA (x) 44.1 36.1 29.3 23.8

Div Yield (%) 0.5 0.5 0.7 0.8

Quarterly Performance (Standalone) FY18 FY19

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19 Sales 18,605 17,774 19,658 25,349 25,963 21,910 25,184 29,941 81,386 102,998 Change (%) 26.8 22.4 30.5 48.2 39.5 23.3 28.1 18.1 32.7 26.6 Adj EBITDA 1,743 2,569 2,622 3,577 3,208 2,578 2,946 4,094 10,493 12,825 Change (%) -13.0 26.3 37.5 55.8 84.0 0.4 12.3 14.4 27.3 22.2 Adj EBITDA margin (%) 9.4 14.5 13.3 14.1 12.4 11.8 11.7 13.7 12.9 12.5 Depreciation 336 349 363 347 350 391 353 370 1,395 1,465 Interest 34 67 55 84 26 37 36 75 240 173 Other Income 348 254 109 257 292 343 225 437 1,170 1,297 Extra-ordinary Items - 33 379 (91) - 47 106 - 119.1 0.0 PBT 1,703 2,407 2,313 3,404 3,039 2,540 2,782 4,086 10,028 12,485 Tax 489 730 748 1,055 935 754 931 1,251 3,022 3,870 Effective Tax Rate (%) 28.7 30.3 32.3 31.0 30.8 29.7 33.5 30.6 30.1 31.0 Reported PAT 1,214 1,710 1,944 2,258 2,104 1,833 1,957 2,836 7,125 8,615 Change (%) -16.6 17.3 68.9 138.4 73.3 7.2 0.7 25.6 32.2 20.9 Adj PAT 1,233 1,677 1,565 2,348 2,189 1,739 1,851 2,836 7,006 8,615 Change (%) -15.3 15.1 16.8 37.0 77.6 3.7 18.3 20.8 17.4 23.0


Havells India

April 2019 78


Quarterly Performance (INR m) Y/E March FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19 Sales 238,109 264,468 287,475 406,781 282,835 320,808 357,089 452,638 1,196,832 1,413,238 Change (%) 9.6 6.4 10.1 11.1 18.8 21.3 24.2 11.3 9.5% 18.1% EBITDA 20,752 29,622 31,413 53,905 29,133 37,706 39,963 63,074 135,714 169,745 Change (%) 9.9 28.0 25.4 23.0 40.4 27.3 27.2 17.0 21.9 25.1 Margin (%) 8.7 11.2 10.9 13.3 10.3 11.8 11.2 13.9 11% 12% Depreciation 5,513 4,306 4,545 4,924 6,449 4,285 4,490 4,829 19,287 20,053 Interest 3,644 3,930 3,608 4,181 3,648 3,993 5,349 5,718 15,385 18,707 Other Income 3,657 3,997 2,139 4,328 2,440 4,253 6,064 4,489 14,120 17,246 PBT 15,253 25,383 25,400 49,127 21,477 33,681 36,189 57,016 115,162 148,230 Tax 4,597 5,439 7,372 14,580 9,346 8,861 12,002 17,225 31,989 47,434 Effective Tax Rate (%) 30.1 21.4 29.0 29.7 43.5 26.3 33.2 30.2 29.0 32.0 Reported PAT 8,926 18,199 14,900 31,675 12,148 22,306 20,416 34,757 73,699 89,495 Change (%) 46.4 26.9 53.2 4.7 36.1 22.6 37.0 9.7 22 21 Extraordinary Inc/(Exp) 0 1,367 -138 0 0 2,078 0 0 1,230 2,078 Adjusted PAT 8,926 16,832 15,038 31,675 12,148 20,228 20,416 34,757 72,469 87,417 Change (%) 46.4 63.1 54.6 -4.2 36.1 20.2 35.8 9.7 22 21


Larsen & ToubroCMP: INR1,410 TP: IN1,710 (+22%) Buy L&T announced an order intake of INR578b in 4QFY19 compared to

INR329b in 4QFY18. Order inflow during the quarter was supportedby large (>INR15b), and base order finalizations.

Large orders worth ~INR400b were finalized during the quarter.Domestic order wins were supported by order finalizations in theInfrastructure segment. Overseas order finalization was supportedby Infrastructure and Power segments.

For 4QFY19, we expect revenue growth of 11% YoY to INR452b. Wehave factored in 11% YoY growth in the E&C segment driven by execution in the domestic segment. We expect operating profit margin to improve by 60bp YoY to 13.9% in 4QFY19.

We expect net profit to register 10% YoY growth to INR35b. MaintainBuy.

Key issue to watch Order inflow, revenue and margin guidance for FY20.

Bloomberg LT IN Equity Shares (m) 1401.7 M. Cap. (INR b)/(USD b) 1976 / 29

52-Week Range (INR) 1459 / 1183 1,6,12 Rel Perf. (%) -1 / 6 / -12

Financial Snapshot (INR b) Y/E March 2018 2019 2020E 2021E

Sales 1,197 1,413 1,556 1,763

EBITDA 135.7 169.7 198.1 231.0

Adj. PAT * 72.5 87.4 101.5 125.5

EPS (INR)* 51.7 62.4 72.4 89.6

EPS Gr. (%) 22.4 20.6 16.1 23.7

BV/Sh (INR) 397.1 438.6 565.7 626.8

RoE (%) 13.7 14.9 14.4 15.0

RoCE (%) 9.4 9.9 11.0 12.2

Payout (%) 30.8 29.3 30.6 27.8

Valuations P/E (x)* 27.3 22.6 19.5 15.7

P/BV (x) 3.9 3.6 3.2 2.5

EV/EBITDA (x) 21.9 17.7 14.4 12.2

Div Yield (%) 1.1 1.3 1.6 1.8

*Consolidated

April 2019 79


Quarterly Performance (Standalone) (INR m)

Y/E September FY18 FY19

FY18 FY19 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Total Revenues 24,295 32,834 30,730 39,392 28,071 36,045 32,709 42,853 127,251 139,680 Change (%) 5.9 12.1 15.9 25.4 15.5 9.8 6.4 8.8 17.7 9.8 EBITDA 2,724 3,228 3,023 4,186 3,661 3,764 3,637 4,835 13,161 15,897 Change (%) 16.6 15.9 33.4 32.0 34.4 16.6 20.3 15.5 25.2 20.8 As % of Revenues 11.2 9.8 9.8 10.6 13.0 10.4 11.1 11.3 10.3 11.4 Depreciation 470 490 500 507 532 550 560 567 1,967 2,209 Interest 17 11 4 51 2 11 4 65 82 82 Other Income 705 639 692 764 877 700 750 617 2,800 2,944 Extra-ordinary Items 0 0 0 0 -596 0 0 0 0 0 PBT 2,942 3,366 3,211 4,392 3,408 3,903 3,823 4,819 14,076 16,713 Tax 1,037 1,169 1,167 1,600 1,128 1,350 1,320 1,746 4,973 5,544 Effective Tax Rate (%) 35.2 34.7 36.3 36.4 33.1 34.6 34.5 36.2 35.3 33.2 Reported PAT 1,905 2,197 2,044 2,792 2,280 2,553 2,503 3,073 9,103 11,169 Adjusted PAT 1,905 2,197 2,044 2,792 2,876 2,553 2,503 3,073 8,939 11,005 Change (%) 18.6 22.6 25.5 39.1 51.0 16.2 22.5 10.1 27.1 23.1


SiemensCMP: INR1,130 TP: INR1,138 (+1%) Neutral We expect SIEM to register 10% YoY revenue growth during the

quarter to INR36.0b, led by strong performance in its Power & Gas,Building Technologies and Digital factories.

Operating margin is expected to improve by 60bp YoY to 10.4%,and operating profit is expected to register 17% YoY growthsupported by margin improvement in Power & Gas, EnergyManagement and Digital Factory segment

Net profit is expected to register 16% growth YoY to INR2.6b;Maintain Neutral.

Key issue to watch Raw material imports account for 55% of raw material cost;

Siemens AG’s network comprises 82% imports

Bloomberg SIEM IN Equity Shares (m) 356.1 M. Cap. (INR b)/(USD b) 402 / 6


Financial Snapshot (INR b) Y/E September 2018 2019E 2020E 2021E

Net Sales 127.3 139.7 144.7 162.5

EBITDA 13.2 15.9 17.0 18.9

Adj. PAT 8.9 11.0 11.6 13.0

Adj. EPS (INR) 25.1 30.9 32.5 36.5

EPS Gr (%) 27.1 23.1 5.2 12.3

BV/Sh. (INR) 233.3 252.2 273.8 298.1

RoE (%) 11.2 12.7 12.4 12.8

RoCE (%) 16.2 18.1 12.4 12.8

Payout (%) 22.0 27.9 27.9 27.9

Valuations P/E (x) 40.5 32.9 31.2 27.8

P/BV (x) 4.4 4.0 3.7 3.4

EV/EBITDA (x) 24.7 20.1 18.5 16.4

Div. Yield (%) 0.7 0.8 0.9 1.0

April 2019 80


Quarterly Performance (INR m) FY18 FY19

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Sales 8,718 10,331 11,170 14,430 10,353 14,276 14,366 15,934 44,649 54,929 Change (%) -11.0 -3.5 18.3 -3.2 18.7 38.2 28.6 10.4 -0.4 23.0 EBITDA 721 952 955 1,382 693 1,100 1,073 1,496 4,009 4,363 Change (%) -10.3 3.6 9.1 -20.2 -3.9 15.6 12.4 8.3 -7.4 8.8 As of % Sales 8.3 9.2 8.5 9.6 6.7 7.7 7.5 9.4 9.0 7.9 Depreciation 189 189 208 239 210 235 230 220 824 894 Interest 16 51 25 37 33 39 36 42 129 150 Other Income 241 236 238 450 310 356 313 355 1,164 1,334 Extra-ordinary Items 0 0 0 0 0 0 99 0 0 99 PBT 757 947 961 1,555 761 1,183 1,121 1,589 4,220 4,653 Tax 284 370 378 626 274 434 463 598 1,658 1,768 Effective Tax Rate (%) 37.5 39.0 39.3 40.3 36.0 36.7 41.3 37.6 39.3 38.0 Share of P/L from JV/Minority -67 -10 3 -172 3 -3 -7 -13 (251.9) (20.0) Reported PAT 406 568 586 757 490 745 751 979 2,311 2,865 Change (%) (17.0) (27.4) 9.3 73.4 20.6 31.1 28.1 29.3 (1.2) 24.0 Adj PAT 406 568 586 757 490 745 652 979 2,311 2,865 Change (%) (17.0) (27.4) 9.3 23.1 20.6 31.1 11.2 29.3 (1.2) 24.0


Thermax CMP: INR941 TP: INR1,290 (+37%) Buy Revenue is likely to grow 10% YoY, supported by execution pick-

up in the Energy segment (+20% YoY) and Chemicals segment(+31% YoY) given improvement in orders available for execution.

Operating profit is expected to register 9% YoY growth toINR1.5b, while operating margin is expected to remain stable at9.4% during the quarter.

Net profit is expected to register 29% YoY growth to INR979msupported by lower tax rate (40.3% v/s 37.6% in 4QFY18) andlower share of loss in JV (INR13m loss v/s INR172m loss in4QFY18). Maintain Buy.

Key issue to watch Demand environment in domestic and overseas markets

Bloomberg TMX IN Equity Shares (m) 112.6 M. Cap. (INR b)/(USD b) 106 / 2



Net Sales 44.6 54.9 64.0 75.3

EBITDA 4.0 4.4 5.9 7.1

Adj. PAT 2.3 2.9 4.1 4.8

EPS (INR) 20.5 25.4 36.3 43.0

EPS Gr. (%) -1.2 24.0 42.8 18.2

BV/Sh. (INR) 241.1 259.7 287.6 321.2

RoE (%) 8.8 10.2 13.3 14.1

RoCE (%) 9.8 10.0 12.7 13.4

Payout (%) 29.2 25.1 20.0 18.6

Valuations P/E (X) 51.5 41.6 29.1 24.6

P/BV (X) 4.4 4.1 3.7 3.3

EV/EBITDA (X) 29.5 27.5 19.8 16.1

Div Yield (%) 0.6 0.6 0.7 0.8

April 2019 81


Quarterly Performance (Consol. INR m) FY18 FY19

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19 Sales 19,446 10,367 13,747 20,484 21,481 14,214 14,918 22,142 64,044 72,754 Change (%) 5.1 7.2 16.5 0.7 10.5 37.1 8.5 8.1 6.2 13.6 EBITDA 2,083 857 1,186 2,532 2,432 1,085 1,157 2,492 6,626 7,166 Change (%) 4.4 24.8 33.3 14.1 16.7 26.7 -2.5 -1.6 14.4 8.1 As of % Sales 10.7 8.3 8.6 12.4 11.3 7.6 7.8 11.3 10.3 9.8 Depreciation 61 61 61 61 59 60 62 67 244 248 Interest 35 22 19 43 27 64 132 117 119 341 Other Income 590 512 170 438 282 461 548 425 1,741 1,716 Extra-ordinary Items -20 0 0 14 0 0 118 0 6 -118PBT 2,596 1,287 1,277 2,852 2,627 1,423 1,393 2,732 8,011 8,175 Tax 727 343 301 900 762 331 304 867 2,270 2,264 Effective Tax Rate (%) 28.0 26.6 23.6 31.6 29.0 23.2 21.8 31.7 28.3 27.7 Share of profit of associates/JV's (13.2) 9.7 28.7 (25.3) (26.4) (57.5) (279.4) (96.7) (17.0) (460.0) Reported PAT 1,856 954 1,004 1,927 1,839 1,035 809 1,768 5,724 5,451 Change (%) 16.3 22.0 23.2 -3.9 -0.9 8.5 -19.4 -8.2 11.9 -4.8Adj PAT 1,836 954 1,004 1,940 1,839 1,035 927 1,768 5,718 5,569 Change (%) 15.7 22.0 23.2 -3.1 0.2 8.5 -7.7 -8.9 12.0 -2.6


VoltasCMP: INR623 TP: INR605 (-3%) Neutral VOLT is likely to report revenue growth of 8% YoY, supported by

growth in EMP and the Engineering segment. We expect revenue growth of 11% YoY in the MEP segment,

supported by swift execution of orders in hand. Sustainability ofmargins will be a key challenge in the segment. VOLT had bookedEBIT margins of 8.0% in 3QFY19 supported by INR depreciationand execution of better margin RE orders.

We expect revenue growth of 6% in the UCP segment for 4QFY19. We expect operating profit to register 2% YoY decline to INR2.5b

despite revenue growth of 8% YoY, as we bake in margincompression in the Engineering Product and Services segment.

We expect net profit to decline 9% YoY to INR1.7b given highershare of losses in its JVs/associates (INR96.7m v/s INR25.3m4QFY18). Maintain Neutral.

Key issues to watch Impact of import duty hike on the performance of the UCP

segment Sustainability of profits in the MEP segment

Bloomberg VOLT IN Equity Shares (m) 330.8 M. Cap. (INR b)/(USD b) 206 / 3



Net Sales 64.0 72.8 79.4 88.2 EBITDA 6.6 7.2 8.1 9.4 Adj. PAT 5.7 5.5 6.2 7.4 EPS(INR) 17.3 16.5 18.9 22.3 EPS Gr. (%) 11.9 -4.8 14.5 18.0BV/Sh. (INR) 118.0 129.9 143.7 160.0 RoE (%) 15.9 13.6 13.8 14.7 RoCE (%) 15.3 14.1 14.1 14.9 Payout (%) 26.8 26.8 26.8 26.8 Valuations P/E (x) 34.7 35.7 31.8 27.0 P/BV (x) 5.1 4.6 4.2 3.7 EV/EBITDA (x) 29.8 27.1 24.0 20.4 Div Yield (%) 0.7 0.6 0.7 0.9 *Consolidated

April 2019 82

Pradnya Ganar – Research analyst ([email protected]); +91 22 6129 1537

Characterized by healthy realization and lower cost South-based companies to benefit significantly

Demand growth moderating after a strong 9MFY19 We expect companies under our coverage to report volume growth of ~6% YoY in 4QFY19. Notably, this will follow a healthy volume growth phase (+14% in 9MFY19 for coverage universe), led by a low base and healthy demand from government projects.

The southern region – which was primarily driving demand – witnessed a slowdown in Feb-Mar’19 on account of a high base of the previous year. Also, huge price increases taken by southern players led to lower volumes, as the hikes were not completely absorbed by the market. Demand in Rajasthan declined drastically after the state elections. Demand in central India too remained muted after the elections in Madhya Pradesh. The eastern region witnessed limited supply from southern players in 4QFY19. Supply of clinker was also affected due to shortage of wagons.

We expect (a) pan-India players (ACC and Ambuja) to report volume growth of 5-7% YoY and UTCEM to deliver growth of 5% YoY, (b) SRCM to report 9% YoY volume growth and (c) south-based companies(TRCL and ICEM) to report 5-10% volume growth.

We estimate volume growth at 11% for FY19, as demand for 9MFY19 remained healthy, led by increased infrastructure activities and affordable housing programs.

Price hikes taken in Feb’19 moderated in Mar’19 In Feb’19, south-based companies announced price hikes to the extent of INR30-50/bag. While Chennai saw a sustainable INR30/bag hike, the quantum was ~INR50/bag for Hyderabad, Bangalore and Kerala.

Cement production in the region was also curtailed with companies deciding not to sell OPC cement (an ordinary portland cement with lower margins). Also, blending OPC cement with fly-ash and selling it at a lower price by unorganized players was rampant in the south. However, this practice was controlled as organized players decided to not supply OPC cement to smaller players. Overall prices improved by INR45/bag MoM in Feb’19 in the southern region.

However, these hikes couldn’t sustain as Mar’19 approached because of selling pressure due to the year-end impact and the lack of demand. As a result, prices corrected to the extent of INR20/bag in Hyderabad, Kerala and Bangalore, while they remained constant in Chennai. Increase in prices in the south was 5% QoQ in 4QFY19.

The Delhi-NCR region witnessed a hike of INR20/bag in Feb’19 in the non-trade segment. Prices in the north increased by 1% QoQ.

Company name

ACC

Ambuja Cements

Birla Corporation

Grasim Industries

India Cements

J K Cement

Ramco Cement

Sanghi Industries

Shree Cement

UltraTech Cement

Technology March 2019 Results Preview | April 2019

Cement

April 2019 83

Prices increased 5% QoQ in the west (led by healthy prices in Pune/Maharashtra), remained flat QoQ in the east and increased 2% QoQ in the central region in 4QFY19. All India cement prices increased 3% QoQ.

Cost pressures easing out Petcoke prices declined 3% QoQ (up ~8% YoY) in 4QFY19. Prices of imported coal (adjusted for USD/INR) also decreased 13% QoQ. This should result in lower power & fuel cost for the companies. Additionally, the decrease in diesel prices (-6% QoQ) would result in lower freight cost for the companies. We, thus, expect a lower cost curve in 4QFY19. EBITDA/ton is likely to be higher (by INR152 QoQ) for our coverage companies.

Top picks: Shree Cement and ACC Shree Cement’s superior execution capabilities would enable it to achieve RoIC of over 30% (FY20), while its gross block to capacity has been structurally trending downward. Also, ACC – which is on a growth capex mode – seems to be narrowing its profitability gap with peers, led by its higher proportion of (a) premium sales and (b) sales from its new cost-efficient units of Jamul and Sindri.

March 2019 Results Preview| Sector: Cement

April 2019 84

Exhibit 1: Trend in key performance indicators Sector CMP Sales (INR M) EBTIDA (INR M) Net Profit (INR M)


Var % QoQ Mar-19 Var %


YoY Var % QoQ

Cement ACC 1,620 Buy 40,497 11.7 4.0 6,385 30.0 25.2 3,539 44.4 40.0 Ambuja Cements 230 Neutral 31,094 8.6 8.6 5,265 3.8 30.4 3,000 10.4 1.6 Birla Corporation 523 Buy 17,460 5.8 12.1 2,681 7.0 29.5 1,054 -4.4 285.3 Grasim Industries 846 Neutral 53,522 16.2 1.1 10,697 26.6 1.6 6,520 10.2 7.2 India Cements 111 Neutral 15,020 7.5 14.1 2,134 34.6 58.2 608 72.5 1843.9 J K Cements 864 Buy 14,744 12.0 15.8 2,853 57.1 35.5 1,458 38.6 139.4 Ramco Cements 741 Buy 13,898 11.0 15.1 3,098 15.0 46.8 1,638 19.2 62.1 Sanghi Inds. 64 Buy 2,796 10.2 5.1 381 -7.6 18.6 40 -78.5 -7.2Shree Cement 18,505 Buy 33,158 18.0 19.2 8,628 37.1 25.0 3,549 -11.1 26.2 Ultratech Cement 4,021 Buy 96,933 7.7 10.0 18,030 5.9 29.7 7,201 0.8 60.3 Sector Aggregate 319,121 10.9 9.0 60,153 18.5 24.2 28,608 8.8 37.3

Exhibit 2: Expect 4QFY19 volume growth of 6% YoY to 60mt for MOFSL universe

Source: Company, MOFSL Exhibit 3: Pan-India average cement prices (INR/bag) up 3% QoQ in 4QFY19


37 34 36 42 41 37 38 40 41 38 40 46 44 39 41 50 48 44 50 56 56 50 55 60

(3.8) (1.4) (2.8) 3.3

11.6 7.2 6.2

(6.1) 0.3 2.8 5.3

16.4 8.4

1.9 3.6 7.6 7.8 13.0

20.8 13.7 16.6 14.4

9.9 6.1

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

Aggregate Vol (m ton) Volume growth (%)

281

283

275

296

311

289

274

291

289

297

317

293

275

289

275

302

316

291

283

283

288

293

322

294

286

283

303

309

329

302

North Average Prices(INR/bag)

East Average Prices(INR/bag)

West Average Prices(INR/bag)

South Average Prices(INR/bag)

Central Average Prices(INR/bag)

National AveragePrices (INR/bag)



April 2019 85

Exhibit 4: Diesel prices up 3% YoY in 4QFY19


Exhibit 5: Petcoke prices increased 8% YoY in 4QFY19


Exhibit 6: MOFSL coverage realization should increase 2% QoQ in 4QFY19


Exhibit 7: Profitability to increase by INR152/ton QoQ led by a lower cost curve in 4QFY19


Exhibit 8: Relative performance—3 months (%) Exhibit 9: Relative performance—1 year (%)


52.8 55.0 58.8 55.9 58.8 61.4 66.3 69.5 73.0 72.0 68.0

12% 20%

29%

8% 11% 11% 13%

25% 24% 17%

3%

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

Diesel price (INR/ltr) YoY growth in Diesel prices

5,983 6,400 6,293 6,550 7,000 8,000 8,250 9,150 9,480 9,183 8,950

3%

44% 67%

43%

17% 25% 31% 40% 35% 15% 8%

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

Retail petcoke prices (INR/tonne)YoY growth in Retail petcoke prices

4,10

0 3,

936

4,01

1 4,

101

4,23

5 4,

306

4,18

5 4,

310

4,33

8 4,

489

4,36

4 4,

141

4,38

5 4,

482

4,42

0 4,

356

4,69

4 4,

660

4,49

6 4,

589

4,63

1 4,

674

4,64

1 4,

732

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

194Q

FY19

Realization (Rs/ton)

804

501

571

762

797

687

579

835

670

691

678

808

953

869

777

766

1,01

0 86

3 74

1 80

4 83

8 72

7 72

5 87

7

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

194Q

FY19

Aggregate EBITDA (Rs/ton)

89

94

99

104

109

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Cement Index

80

90

100

110

120

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Cement Index


April 2019 86

Exhibit 10: Trend in key operating parameters Volume (m ton) Realization (INR/ton) EBITDA (INR/ton)

4QFY19 YoY (%) QoQ (%) 4QFY19 YoY (INR) QoQ (INR) 4QFY19 YoY (INR) QoQ (INR) ACC 7.6 7.0 1.4 4794 163.0 80.0 839 148.5 159.1 Ambuja Cement 6.5 5.0 6.5 4761 158.8 90.0 806 -9.1 147.4 UltraTech 19.4 4.9 8.2 5004 127.7 81.1 931 8.4 154.2 Birla Corp 3.6 5.6 12.1 4638 84.3 84.7 745 9.7 99.6 India Cement 3.2 5.0 9.3 4646 122.3 196.0 660 145.3 204.1 Shree Cement 7.0 9.3 18.7 4401 243.8 86.4 1168 212.2 100.8 J K Cements 2.9 5.4 14.8 5142 303.0 43.9 995 327.2 152.0 JK Lakshmi Cem. 2.4 7.5 4.0 4097 74.5 40.3 520 65.6 93.5 Madras Cement 3.0 10.2 9.8 4603 31.9 211.3 1042 42.1 258.4 Orient Cement 1.8 6.3 18.2 3952 256.2 169.9 471 26.6 220.2 Prism Cement 1.7 -0.3 12.0 4463 -21.9 71.9 759 -60.1 56.2 Sanghi Industries 0.7 9.9 2.6 4102 11.2 95.2 559 -106.3 75.1 Sector Agg. 60 6 9 4,732 143 90 877 73 152

Exhibit 11: Comparative Valuations Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBITDA (x) RoE (%)

(INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Cement ACC 1,620 Buy 57.3 72.3 93.7 28.3 22.4 17.3 12.9 10.4 8.6 10.8 12.3 14.3 Ambuja Cements 230 Neutral 6.3 6.4 7.3 36.7 35.7 31.5 22.4 21.6 18.1 6.1 6.0 6.7 Birla Corporation 523 Buy 30.2 52.4 73.4 17.3 10.0 7.1 8.5 6.9 5.6 5.4 8.8 11.4 Grasim Industries 846 Neutral 66.2 85.0 98.3 12.8 9.9 8.6 13.8 13.1 11.6 6.0 6.1 6.0 India Cements 111 Neutral 2.8 5.4 7.8 39.4 20.6 14.2 10.2 8.6 7.4 1.7 3.1 4.4 J K Cements 864 Buy 35.8 43.4 52.7 24.1 19.9 16.4 10.4 10.3 8.4 13.3 14.4 15.4 JK Lakshmi Cem. 358 Buy 6.1 12.0 20.2 58.5 29.8 17.7 13.5 10.4 7.9 4.9 9.0 13.6 Orient Cement 82 Buy 0.3 3.8 7.0 308.8 21.6 11.7 12.4 10.5 8.6 0.5 7.4 12.5 Prism Johnson 96 Buy 2.7 3.4 3.9 35.0 27.9 24.7 11.2 10.6 9.9 12.8 14.3 14.3 Ramco Cements 741 Buy 21.4 28.5 36.8 34.6 26.0 20.2 18.4 14.3 10.9 11.9 14.1 15.9 Sanghi Inds. 64 Buy 1.2 2.3 2.4 53.4 28.2 26.6 16.7 14.5 8.9 1.9 3.5 3.5 Shree Cement 18,505 Buy 371.5 459.7 600.3 49.8 40.3 30.8 21.8 16.8 13.2 13.9 15.5 17.4 Ultratech Cement 4,021 Buy 78.6 106.0 136.6 51.2 37.9 29.4 19.6 15.4 12.5 8.0 9.6 10.4 Sector Aggregate 30.5 23.5 19.0 16.8 14.1 11.6 8.5 10.2 11.5



April 2019 87

Quarterly Performance (Standalone) (INR Million) Y/E December CY18 CY19E CY18 CY19E

1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Cement Sales (m ton) 7.11 7.24 6.55 7.50 7.61 7.75 7.14 8.18 28.40 30.67 YoY Change (%) 7.7 7.4 9.9 8.4 7.0 7.0 9.0 9.0 8.3 8.0 Cement Realization 4,631 4,872 4,778 4,714 4,794 4,854 4,874 4,909 4,749 4,859 YoY Change (%) 5.8 3.3 0.6 2.8 3.5 -0.4 2.0 4.1 2.7 2.3

QoQ Change (%) 0.9 5.2 -1.9 -1.3 1.7 1.3 0.4 0.7 Net Sales 36,246 38,483 34,332 38,954 40,497 41,203 38,453 44,287 1,48,014 1,64,440 YoY Change (%) 14.2 11.5 10.2 11.5 11.7 7.1 12.0 13.7 11.4 11.1 EBITDA 4,911 6,677 4,461 5,101 6,385 6,163 5,110 7,087 21,150 24,744 Margins (%) 13.5 17.3 13.0 13.1 15.8 15.0 13.3 16.0 14.3 15.0 Depreciation 1,474 1,481 1,499 1,543 1,544 1,544 1,545 1,543 5,996 6,176 Interest 193 275 201 223 225 225 225 225 892 900 Other Income 468 316 313 288 300 300 300 300 1,385 1,200 PBT before EO Item 3,712 5,236 3,076 3,623 4,916 4,694 3,640 5,619 15,647 18,868 EO Income/(Expense) 0 -438 -36 4,776 0 0 0 0 4,303 0 PBT after EO Item 3,712 4,798 3,040 8,400 4,916 4,694 3,640 5,619 19,949 18,868 Tax 1,261 1,543 984 1,095 1,376 1,314 1,019 1,573 4,883 5,283 Rate (%) 34.0 32.2 32.4 13.0 28.0 28.0 28.0 28.0 24.5 28.0 Reported PAT 2,451 3,255 2,056 7,305 3,539 3,380 2,621 4,046 15,066 13,585 Adjusted PAT 2,451 3,693 2,091 2,528 3,539 3,380 2,621 4,046 10,764 13,585 Margins (%) 6.8 9.6 6.1 6.5 8.7 8.2 6.8 9.1 7.3 8.3 YoY Change (%) 15.9 14.8 17.7 257.2 44.4 -8.5 25.3 -44.6 22.1 26.2 E: MOFSL Estimates


ACCCMP: INR1,620 TP: INR1,863 (+15%) Buy We expect dispatches to grow 7% YoY to 7.61m tons in 1QCY19, led

by growth in underlying markets. Average realizations are expectedto increase ~2% QoQ to INR4,794/ton, led by higher realizations insouth.

Revenues are expected to increase 11.7% YoY to INR40.5b. EBITDAmargin is expected to be 15.8% (+2.67pp QoQ; +2.22pp YoY).

EBITDA/ton is estimated at INR839 (+INR159 QoQ), led by INR129QoQ increase in blended realization and INR30 QoQ decrease incost. PAT is likely to increase by 44% YoY to INR3.5b.

The stock trades at a P/E of 22.4x (CY19E) and 17.3x (CY20E),EV/EBITDA of 9.9x (CY19E) and 7.7x (CY20E), and EV/ton of USD103(CY19E) and USD95 (CY20E). Maintain Buy.

Key issues to watch out for Cement pricing sustainability. Volume growth. Update on capacity expansion plans.

Bloomberg ACC IN Equity Shares (m) 188.0 M. Cap. (INR b)/(USD b) 304 / 4


Financial Snapshot (INR Billion) Y/E Dec 2017 2018 2019E 2020E

Sales 132.8 148.0 164.4 177.7

EBITDA 18.7 21.2 24.7 29.4

NP 8.8 10.8 13.6 17.6

Adj. EPS (INR) 46.9 57.3 72.3 93.7

EPS Gr. (%) 27.7 22.1 26.2 29.7

BV/Sh (INR) 498.4 560.0 615.4 692.2

RoE (%) 9.7 10.8 12.3 14.3

RoCE (%) 10.0 11.8 12.2 14.1

Payout (%) 64.2 21.0 23.3 18.0

Valuations

P/E (x) 34.6 28.3 22.4 17.3

P/BV (x) 3.3 2.9 2.6 2.3

EV/EBITDA (x) 14.6 12.7 9.9 7.7

EV/Ton (x) 114.8 113 103 95

April 2019 88

Quarterly Performance (INR Million) Y/E December CY18 CY19E CY18 CY19E

1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Sales Volume (m ton)* 6.22 6.41 5.46 6.13 6.53 6.79 5.73 6.57 24.18 25.63

YoY Change (%) 3.3 5.6 8.8 4.4 5.0 6.0 5.0 7.2 5.2 6.0 Realization (INR/ton) 4,602 4,707 4,787 4,671 4,761 4,811 4,831 4,827 4,697 4,807

YoY Change (%) 8.3 0.1 3.5 2.2 3.5 2.2 0.9 3.3 3.6 2.3 QoQ Change (%) 0.7 2.3 1.7 -2.4 1.9 1.1 0.4 -0.1

Net Sales 28,626 30,169 26,139 28,633 31,094 32,689 27,696 31,722 1,13,568 1,23,201 YoY Change (%) 11.9 5.7 12.6 6.8 8.6 8.4 6.0 10.8 9.0 8.5

EBITDA 5,071 6,223 3,582 4,039 5,265 6,191 3,887 4,788 18,915 20,130 Margins (%) 17.7 20.6 13.7 14.1 16.9 18.9 14.0 15.1 16.7 16.3

Depreciation 1,393 1,364 1,360 1,365 1,391 1,391 1,391 1,391 5,481 5,562 Interest 257 192 192 182 208 208 208 208 823 833 Other Income 507 1,911 482 850 500 2,000 500 1,011 3,750 4,011 PBT before EO Item 3,928 6,578 2,512 3,341 4,167 6,592 2,788 4,200 16,360 17,746 Extraordinary Inc/(Exp) 0 0 0 2,421 0 0 0 0 2,421 0 PBT after EO Exp/(Inc) 3,928 6,578 2,512 5,762 4,167 6,592 2,788 4,200 18,781 17,746 Tax 1,211 1,586 726 388 1,167 1,846 781 1,176 3,911 4,969

Rate (%) 30.8 24.1 28.9 6.7 28.0 28.0 28.0 28.0 20.8 28.0 Reported Profit 2,718 4,993 1,786 5,374 3,000 4,746 2,007 3,024 14,870 12,777 Adj PAT 2,718 4,993 1,786 2,953 3,000 4,746 2,007 3,024 12,450 12,777

YoY Change (%) 10.2 27.3 -34.4 -3.3 10.4 -4.9 12.4 2.4 2.0 2.6 E: MOFSL Estimates


Ambuja CementsCMP: INR230 TP: INR201 (-12%) Neutral We expect dispatches to grow 5% YoY to 6.53m tons in 1QCY19, led

by volume growth in underlying markets. Average realizations areexpected to increase 2% QoQ to INR4,761/ton due to healthyprices in west. Revenue is likely to grow 9% YoY to INR31.1b.

EBITDA margin is expected to be 16.9% (+2.8pp QoQ, -0.8pp YoY).EBITDA/ton is estimated at INR806 (+INR147 QoQ, -INR9 YoY).

Adjusted PAT is estimated to increase 10% YoY to INR3b. The stock trades at a P/E of 24.2x (CY19E) and 21.3x (CY20E),

EV/EBITDA of 13.5x (CY19E) and 11.7x (CY20E), and EV/ton ofUSD131 (CY19E) and USD127 (CY20E). Maintain Neutral.

Key issues to watch out for Volume growth outlook. Cement pricing outlook and sustainability. Cost curve trend in CY19.

Bloomberg ACEM IN


1,6,12 Rel Perf. (%) -3 / -3 / -22


Sales 104.2 113.6 123.2 135.9

EBITDA 19.1 18.9 20.1 23.7

NP 12.2 12.4 12.8 14.5

Adj. EPS (INR) 6.1 6.3 6.4 7.3

EPS Gr. (%) 32.0 2.0 2.6 13.3

BV/Sh. (INR) 100.9 106.2 107.8 110.3

RoE (%) 6.2 6.1 6.0 6.7

RoCE (%) 6.6 6.6 6.3 7.0

Payout (%) 64.7 64.3 74.9 66.1

Valuations

P/E (x) 25.3 24.8 24.2 21.3

P/BV (x) 1.5 1.5 1.4 1.4

EV/EBITDA (x) 14.1 14.3 13.5 11.7

EV/Ton (USD) 130 130 131 127

April 2019 89

Consolidated Performance (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Cement Sales (m ton) 3.28 2.65 3.03 3.41 3.52 3.07 3.21 3.60 12.37 13.39 YoY Change (%) 51.3 27.6 21.9 4.0 7.3 15.7 5.9 5.6 22.8 8.3 Cement Realization 4,856 4,373 4,363 4,554 4,499 4,538 4,553 4,638 4,548 4,558 YoY Change (%) 8.3 16.5 -6.0 -2.3 -7.4 3.8 4.3 1.9 14.3 0.2

QoQ Change (%) 4.2 -9.9 -0.2 4.4 -1.2 0.9 0.3 1.9 Net Sales 14,588 12,355 13,893 16,506 16,545 14,646 15,569 17,460 57,342 64,220 YoY Change (%) 63.3 30.8 29.1 14.8 13.4 18.5 12.1 5.8 31.9 12.0 Total Expenditure 12,184 10,587 12,506 13,999 14,081 12,790 13,498 14,779 49,275 55,148 EBITDA 2,404 1,768 1,387 2,507 2,464 1,856 2,071 2,681 8,066 9,072 Margins (%) 16.5 14.3 10.0 15.2 14.9 12.7 13.3 15.4 14.1 14.1 Depreciation 832 831 823 836 857 870 836 833 3,322 3,395 Interest 937 1,053 958 829 952 935 922 930 3,776 3,739 Other Income 161 119 141 334 232 203 106 362 755 902 Profit before Tax 671 3 -252 1,385 852 252 419 1,281 1,807 2,840 Tax 239 -12 -34 74 49 91 146 227 267 511 Rate (%) 35.6 -421.4 13.4 5.3 5.7 35.9 34.7 17.7 14.8 18.0 Reported PAT 432 15 -218 1,311 803 162 274 1,054 1,540 2,329 EO Income/(Expense) 125 0 0 -208 35 1 0 0 -83 0 Adj. PAT 557 15 -218 1,103 838 163 274 1,054 1,456 2,329 YoY Change (%) -41.0 -97.8 -47.1 2.1 50.5 1,015.8 -225.3 -4.4 -35.6 59.9 E: MOFSL Estimates


Birla CorporationCMP: INR 523 TP: INR634 (+21%) Buy 4QFY19 consolidated cement volumes are estimated to increase

5.6% YoY to 3.6m tons, led by growth in underlying market.Realizations are estimated to increase by 2% QoQ toINR4,638/ton, led by healthy prices in the central region.

We estimate blended EBITDA/ton at INR745 (+INR100/t QoQ), ledby INR85/t QoQ increase in realization. EBITDA margin is expected to expand 2.05pp QoQ to 15.4%.

Consolidated EBITDA is likely to increase 7% YoY and 29% QoQ toINR2.68b. We expect the company to report PAT of INR1.05b in4QFY19 (-4% YoY).

The stock trades at a P/E of 10x (FY20E) and 7.1x (FY21E),EV/EBITDA of 6.3x (FY20E) and 5.1x (FY21E), and EV/ton of USD68(FY20E) and USD66 (FY21E). Maintain Buy.

Key issues to watch out for Volume growth recovery and outlook. Cement pricing outlook and sustainability. Update on profitability of acquired subsidiary of Reliance.

Bloomberg BCORP IN

Equity Shares (m) 77.0 M. Cap. (INR b)/(USD m) 40 / 1 52-Week Range (INR) 819 / 440

1,6,12 Rel Perf. (%) -5 / -28 / -49


Sales 57.3 64.2 71.4 77.3

EBITDA 8.1 9.1 11.5 13.6

NP 1.5 2.3 4.0 5.7

Adj. EPS INR 18.9 30.2 52.4 73.4

EPS Gr. (%) -35.6 59.9 73.4 39.9

BV/Sh. (INR) 556 574 615 677

RoE (%) 3.8 5.4 8.8 11.4

RoCE (%) 5.6 6.0 7.6 8.9

Payout (%) 58.1 38.4 22.2 15.8

Valuation

P/E (x) 27.7 17.3 10.0 7.1

P/BV (x) 0.9 0.9 0.9 0.8

EV/EBITDA .x 8.7 7.7 6.3 5.1

EV/Ton (USD) 67 67 68 66

April 2019 90

Quarterly Performance (Standalone) (INR m) Y/E March FY18 FY19 FY18 FY19E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 27,403 40,373 43,838 46,056 47,892 51,185 52,929 53,522 1,57,885 2,05,528 YoY Change (%) 14.4 62.2 73.6 60.1 74.8 26.8 20.7 16.2 52.6 30.2 EBITDA 5,553 7,852 8,896 8,447 10,542 10,687 10,526 10,697 30,802 42,452 Margins (%) 20.3 19.4 20.3 18.3 22.0 20.9 19.9 20.0 19.5 20.7 Depreciation 1,103 1,664 1,658 1,853 1,827 1,874 1,928 2,026 6,277 7,656 Interest 73 427 295 486 588 522 413 472 1,281 1,995 Other Income 658 2,688 212 1,020 1,217 2,836 585 862 4,523 5,500 PBT before EO Items 5,036 8,449 7,154 7,128 9,343 11,127 8,770 9,061 27,767 38,301 Extraordinary Inc/(Exp) 0 -540 91 -2,187 0 -22,834 0 0 -2,635 -22,834 PBT after EO Items 5,036 7,909 7,245 4,942 9,343 -11,706 8,770 9,061 25,131 15,468 Tax 1,564 2,164 2,507 1,210 2,918 160 2,689 2,541 7,445 8,307 Rate (%) 31.1 27.4 34.6 24.5 31.2 -1.4 30.7 28.0 29.6 53.7 Reported PAT 3,472 5,745 4,739 3,731 6,426 -11,867 6,082 6,520 17,687 7,160 Adj. PAT 3,472 6,285 4,648 5,918 6,426 8,167 6,082 6,520 20,322 27,194 Margins (%) 12.7 15.6 10.6 12.8 13.4 16.0 11.5 12.2 12.9 13.2 YoY Change (%) 8.2 6.1 40.3 87.6 85.1 30.0 30.9 10.2 30.3 33.8 E: MOFSL Estimates


Grasim IndustriesCMP: INR 846 TP: INR836 (-1%) Neutral We expect net sales of INR53.5b (+16% YoY, +1% QoQ), led by 21%

YoY increase in VSF sales and 11% YoY in Chemical sales. Standalone EBITDA should increase by 27% YoY to INR10.7b, led by

a 10% YoY rise in EBITDA for VSF and a 14% YoY increase for thechemical business. We estimate EBITDA margin at 20% (+1.65 YoY,+0.1pp QoQ).

We estimate adjusted PAT at INR6.5b (+10% YoY). MaintainNeutral.

Key issues to watch out for Pick-up in cement demand and pricing. Outlook on VSF business and strategy to utilize upcoming

capacities globally. Outlook on chemical business.

Bloomberg GRASIM IN


1,6,12 Rel Perf. (%) -1 / -22 / -40

Financial Snapshot (INR Billion) S/A Y/E March 2018 2019E 2020E 2021E

Sales 157.9 205.5 218.7 242.1

EBITDA 30.8 42.5 45.5 52.3

Adj. PAT 20.3 27.2 29.0 30.3

Consol PAT 31.1 43.51 55.89 64.65

Adj. EPS (INR) 30.9 41.4 44.2 46.0

EPS Gr. (%) -81.5 33.8 6.7 4.3

BV/Sh. (INR) 681 687 726 766

RoE (%) 4.5 6.0 6.1 6.0

RoCE (%) 6.1 8.8 8.9 9.3

Payout (%) 19.7 49.6 12.1 11.5

Valuations

P/E (x) 27.4 20.5 19.2 18.4

P/BV (x) 1.2 1.2 1.2 1.1

EV/EBITDA (x) 7.3 5.9 5.4 4.7

April 2019 91

Quarterly Performance (Standalone) (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales Dispatches (m ton) 2.66 2.70 2.73 3.08 3.08 3.08 2.96 3.23 11.17 12.34 YoY Change (%) 15 10 3 5 16 14 9 5 1.2 10.5 Realization (INR/ton) 4,857 4,696 4,450 4,524 4,425 4,508 4,450 4,646 4,588 4,482

YoY Change (%) -6.1 -10.7 -7.0 -1.7 -8.9 -4.0 0.0 2.7 1.1 -2.3 QoQ Change (%) 5.6 -3.3 -5.2 1.7 -2.2 1.9 -1.3 4.4

Net Sales 12,901 12,683 12,131 13,978 13,607 13,871 13,163 15,020 51,692 55,660 YoY Change (%) 7.3 -3.0 -4.3 4.0 5.5 9.4 8.5 7.5 1.8 7.7 EBITDA 1,856 1,814 1,673 1,585 1,561 1,548 1,349 2,134 6,928 6,591 Margins (%) 14.4 14.3 13.8 11.3 11.5 11.2 10.2 14.2 13.4 11.8 Depreciation 630 632 633 664 616 617 632 642 2,559 2,507 Interest 874 886 924 718 733 954 728 784 3,402 3,200 Other Income 52 66 37 39 55 38 43 34 194 170 PBT before EO expense 404 362 152 242 267 14 31 742 1,161 1,054 Extra-Ord expense 0 0 0 0 0 0 0 0 PBT 404 362 152 242 267 14 31 742 1,161 1,054 Tax 140 125 0 -110 57 0 0 133 155 190 Rate (%) 34.6 34.6 0.0 -45.5 21.2 0.0 0.0 18.0 13.3 18.0 Reported PAT 264 237 152 353 210 14 31 608 1,006 864 Adj PAT 264 237 152 353 210 14 31 608 1,006 864 YoY Change (%) -39.9 -62.1 -56.9 2.9 -20.5 -94.0 -79.5 72.5 -42.0 -14.1 Margins (%) 2.0 1.9 1.3 2.5 1.5 0.1 0.2 4.1 1.9 1.6 E: MOFSL Estimates


India CementsCMP: INR111 TP: INR103 (-7.5%) Neutral India Cements’ volumes are expected increase by 5% YoY to 3.23m

tons in 4QFY19. We expect realizations to increase by 4.4% QoQ toINR4,646/ton due to strong prices in the underlying markets ofsouth. We estimate revenue at INR15b (+7.5% YoY).

EBITDA is estimated at INR2.13b. EBITDA margin is likely to expand2.86pp YoY and 3.96pp QoQ to 14.2%, translating into blendedEBITDA/ton of INR660 (+INR204 QoQ), led by higher realization.PAT is expected to be INR608m in 4QFY19 (+72.5% YoY).

The stock trades at a P/E of 20.7x (FY20E) and 14.3x (FY21E),EV/EBITDA of 8.6x (FY20E) and 7.5x (FY21E), and EV/ton of US58(FY20E) and USD57 (FY21E). Maintain Neutral.

Key issues to watch out for Visibility on demand in south. Pricing outlook in south India.

Bloomberg ICEM IN


1,6,12 Rel Perf. (%) 11 / 3 / -45

Financial Snapshot (INR Billion)

Y/E March 2018 2019E 2020E 2021E

Sales 51.7 55.7 61.5 67.6

EBITDA 6.9 6.6 7.9 8.9

NP 1.0 0.9 1.7 2.4

Adj. EPS (INR) 3.3 2.8 5.4 7.8

EPS Gr. (%) -42.0 -14.1 91.5 44.7

BV/Sh (INR) 168.8 170.4 174.6 181.2

RoE (%) 2.0 1.7 3.1 4.4

RoCE (%) 4.8 4.1 4.9 5.6

Payout (%) 24.5 41.4 21.6 14.9

Valuations P/E (x) 34.0 39.6 20.7 14.3

P/BV (x) 0.7 0.7 0.6 0.6

EV/EBITDA(x) 9.4 10.2 8.6 7.5

EV/Ton (USD) 57 58 58 57

April 2019 92


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales Dispatches (m ton) 2.13 2.22 2.32 2.72 2.32 2.16 2.50 2.87 9.39 9.84 YoY Change (%) 12.7 15.8 21.0 26.4 8.9 -2.9 7.5 5.4 19.1 4.8 Realization (INR/ton) 4,900 4,981 4,847 4,839 4,819 5,096 5,098 5,142 4,888 5,045

YoY Change (%) 3.2 3.7 2.3 1.3 -1.7 2.3 5.2 6.3 2.7 3.2 QoQ Change (%) 2.6 1.6 -2.7 -0.2 -0.4 5.8 0.0 0.9

Net Sales 10,415 11,077 11,261 13,160 11,156 11,006 12,732 14,744 45,912 49,638 YoY Change (%) 16.4 20.1 23.7 28.0 7.1 -0.6 13.1 12.0 22.3 8.1 Total Expenditure 8,438 9,005 9,559 11,343 9,652 9,309 10,627 11,891 38,309 41,478 EBITDA 1,977 2,072 1,702 1,816 1,504 1,698 2,105 2,853 7,604 8,160 Margins (%) 19.0 18.7 15.1 13.8 13.5 15.4 16.5 19.4 16.6 16.4 Depreciation 450 492 451 470 474 487 486 496 1,863 1,943 Interest 680 633 578 562 547 583 564 570 2,454 2,264 Other Income 186 220 249 533 158 180 118 174 1,153 630 PBT before EO expense 1,033 1,167 923 1,317 640 808 1,173 1,961 4,440 4,582 Extra-Ord expense 0 -58 1 91 0 0 0 0 34 0 PBT 1,033 1,225 922 1,227 640 808 1,173 1,961 4,406 4,582 Tax 240 293 193 265 147 161 564 502 991 1,375 Rate (%) 23.2 23.9 20.9 21.6 22.9 20.0 48.1 25.6 22.5 30.0 Reported PAT 793 931 729 962 493 647 609 1,458 3,415 3,207 Adj PAT 793 873 731 1,052 493 647 609 1,458 3,449 3,207 YoY Change (%) 13.1 113.5 10.9 130.2 -37.8 -25.9 -16.6 38.6 49.9 -7.0


JK CementCMP: INR 864 TP: INR 993 (+15%) Buy 4QFY19 volumes (grey cement + white) are estimated at 2.87m

tons (+5.4%YoY). Realizations are estimated to increase 0.9% QoQto INR5,142/ton.

We estimate EBITDA/ton at INR995 (+INR 152 QoQ), primarily dueto a lower cost curve and better realizations. EBITDA margin isexpected to expand 2.8pp QoQ to 19.4%.

PAT is estimated to grow 39% YoY to INR1.45b. The stock trades at a P/E of 19.9x (FY20E) and 16.4x (FY21E),

EV/EBITDA of 10.2x (FY20E) and 8.3x (FY21E), and EV/ton ofUSD92 (FY20E) and USD88 (FY21E). Maintain Buy.

Key issues to watch out for Volume growth outlook. Cement pricing outlook and sustainability.

Bloomberg JKCE IN


1,6,12 Rel Perf. (%) 10 / 8 / -32


Sales 48.5 53.0 58.5 65.9

EBITDA 7.9 8.6 10.0 11.7

NP 2.9 2.8 3.4 4.1

Adj. EPS (INR) 41.0 35.8 43.4 52.7

EPS Gr. (%) 56.2 -12.6 21.1 21.5

BV/Share (INR) 282.4 283.9 318.8 363.1

RoE (%) 15.8 13.3 14.4 15.4

RoCE (%) 10.4 9.1 9.0 9.8

Payout (%) 30.8 23.6 19.5 16.0

Valuation

P/E (x) 21.1 24.1 19.9 16.4

P/BV (x) 3.1 3.0 2.7 2.4

EV/EBITDA (x) 11.0 9.6 10.2 8.3

EV/Ton (USD) 106 101 92 88

April 2019 93


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales Dispatches (m ton) 2.15 2.15 2.27 2.74 2.61 2.47 2.75 3.02 9.31 10.85 YoY Change (%) 4.1 6.3 14.7 20.2 21.6 14.7 20.8 10.2 11.5 16.5 Realization (INR/ton) 4,607 4,783 4,606 4,571 4,537 4,622 4,392 4,603 4,638 4,538

YoY Change (%) 1.0 -0.1 -1.9 2.7 -1.5 -3.4 -4.7 0.7 0.4 -2.2 QoQ Change (%) 3.5 3.8 -3.7 -0.8 -0.8 1.9 -5.0 4.8

Net Sales 10,165 10,633 10,534 12,519 12,046 11,806 12,074 13,898 43,851 49,825 YoY Change (%) 5.1 5.0 12.4 23.1 18.5 11.0 14.6 11.0 11.6 13.6 EBITDA 2,781 2,908 2,276 2,694 2,350 2,442 2,110 3,098 10,658 10,000 Margins (%) 27.4 27.3 21.6 21.5 19.5 20.7 17.5 22.3 24.3 20.1 Depreciation 720 718 730 754 735 728 756 776 2,922 2,994 Interest 155 173 160 105 114 131 135 141 592 522 Other Income 176 103 82 218 202 88 96 134 579 520 PBT before EO expense 2,082 2,120 1,467 2,053 1,703 1,671 1,315 2,315 7,723 7,005 Extra-Ord expense 0 -77 -124 288 0 0 0 0 87 0 PBT 2,082 2,197 1,592 1,765 1,703 1,671 1,315 2,315 7,636 7,005 Tax 524 511 364 679 453 527 304 677 2,079 1,961 Rate (%) 25.2 23.3 22.9 38.5 26.6 31.5 23.1 29.3 27.2 28.0 Reported PAT 1,558 1,685 1,227 1,086 1,250 1,145 1,011 1,638 5,557 5,043 Adj PAT 1,558 1,609 1,103 1,374 1,250 1,145 1,011 1,638 5,644 5,043 YoY Change (%) -0.1 -22.3 -26.4 2.2 -19.8 -28.8 -8.4 19.2 -12.8 -10.6 Margins (%) 15.3 15.1 10.5 11.0 10.4 9.7 8.4 11.8 12.9 10.1 E: MOFSL Estimates

CMP: INR741 TP: INR853 (+15%) Buy 4QFY19 volumes are estimated to grow 10% YoY to 3.02m tons,

with growth from underlying markets of south. Averagerealizations are expected to increase by 5% QoQ to 4,603/ton dueto strong prices in the south.

EBITDA margin is likely to expand 4.8pp QoQ (+0.8pp YoY) to22.3%. EBITDA/ton (ex-windmill) is estimated at INR 1042 (+INR42YoY, +INR258 QoQ) due to higher realization.

PAT is estimated to increase 19% YoY to INR1.6b. The stock trades at a P/E of 26x (FY20E) and 20x (FY21E),

EV/EBITDA of 14.2x (FY20E) and 10.8x (FY21E), and EV/ton ofUSD130 (FY20E) and USD123 (FY21E). Maintain Buy.

Key issues to watch out for Volume growth recovery and outlook. Cement pricing outlook and demand sustainability in south (AP

and Tamil Nadu).


Ramco CementsBloomberg TRCL IN Equity Shares (m) 235.6 M. Cap. (INR b)/(USD b) 175 / 3 52-Week Range (INR) 879 / 546 1,6,12 Rel Perf. (%) -1 / 6 / -17

Financial Snapshot (INR Billion) Y/E MARCH 2018 2019E 2020E 2021E

Sales 43.9 49.8 57.4 66.5 EBITDA 10.7 10.0 12.9 16.1 NP 5.6 5.0 6.7 8.7

Adj. EPS (INR) 24.0 21.4 28.5 36.8 EPS Gr. (%) -11.9 -10.6 33.1 29.0BV/Sh. (INR) 171.6 189.5 214.5 247.8

RoE (%) 14.5 11.9 14.1 15.9 RoCE (%) 11.7 9.9 11.7 13.6 Payout (%) 12.7 16.3 12.2 9.5


EV/EBITDA (x) 17.2 17.3 14.2 10.8 EV/Ton (USD) 154 146 130 123

April 2019 94

Standalone - Quarterly Earning Model (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales Dispatches (m ton) 0.67 0.48 0.74 0.62 0.67 0.62 0.66 0.68 2.44 2.63 YoY Change (%) (6.5) (16.0) (11.4) (20.1) 0.5 29.4 (10.8) 9.9 (15.6) 8.0 Realization (INR/ton) 4,324 4,292 3,758 4,091 4,114 3,937 4,007 4,102 4,209 4,042

YoY Change (%) 13.6 18.1 16.0 28.7 (4.8) (8.3) 6.6 0.3 21.9 (4.0) QoQ Change (%) 36.0 (0.7) (12.4) 8.9 0.6 (4.3) 1.8 2.4

Net Sales 2,875 2,056 2,796 2,536 2,748 2,441 2,661 2,796 10,264 10,646 YoY Change (%) 6.2 -0.8 2.8 2.8 -4.4 18.7 -4.8 10.2 2.9 3.7 EBITDA 661 467 618 413 434 324 321 381 2,158 1,460 Margins (%) 23.0 22.7 22.1 16.3 15.8 13.3 12.1 13.6 21.0 13.7 Depreciation 178 180 181 185 195 198 187 200 724 779 Interest 187 189 173 173 123 167 147 198 721 635 Other Income 21 11 57 131 83 61 55 57 220 255 PBT before EO expense 316 109 322 186 199 20 43 40 933 302 Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 PBT 316 109 322 186 199 20 43 40 933 302 Tax 0 0 0 0 0 0 0 0 0 0 Rate (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Reported PAT 316 109 322 186 199 20 43 40 933 302 Adj PAT 316 109 322 186 199 20 43 40 933 302 YoY Change (%) 32.9 28.4 596.7 -29.2 -37.1 -82.1 -86.6 -78.5 47.8 -67.7 Margins (%) 11.0 5.3 11.5 7.3 7.2 0.8 1.6 1.4 9.1 2.8 E: MOFSL Estimates


Sanghi IndustriesCMP: INR64 TP: INR76 (+18%) Buy We expect 4QFY19 cement volumes to increase 10% YoY to 0.68mt

due to an increase in sales in the new markets of Mumbai.Realizations are expected to increase 2.4% QoQ to INR4,102/tondue to healthy prices in west.

Revenue is estimated at INR2.8b (+10% YoY; +5% QoQ) and EBITDAat INR381m (-8%YoY; +19%QoQ), translating into margin of 13.6%(-2.6pp YoY; +1.6pp QoQ), led by QoQ realization increase.Adjusted PAT is likely to be INR40m (-78% YoY).

The stock trades at a P/E of 28.2x (FY20E) and 26.6x (FY21E),EV/EBITDA of 14.5x (FY20E) and 8.9x (FY21E), and EV/ton of USD 50(FY20E) and USD50 (FY21E). Maintain Buy.

Key issues to watch out for Volume and pricing recovery for western region. Update on expansion projects.

Bloomberg SNGI IN


1,6,12 Rel Perf. (%) -3 / -13 / -64

Financial Snapshot (INR Billion) Y/E March FY18 FY19E FY20E FY21E

Sales 10.3 10.6 12.4 18.0

EBITDA 2.2 1.5 2.1 3.4

NP 0.9 0.3 0.6 0.6

Adj. EPS (INR) 3.7 1.2 2.3 2.4

EPS Gr. (%) 29.5 -67.7 89.5 5.9

BV/Share (INR) 63.7 64.9 67.1 79.4

RoE (%) 6.9 1.9 3.5 3.5

RoCE (%) 8.2 3.9 3.8 5.1

Valuation

P/E (x) 17.3 53.4 28.2 26.6

P/BV (x) 1.0 1.0 1.0 0.8

EV/EBITDA (x) 8.8 16.7 14.5 8.9

EV/Ton (USD) 54.5 55.7 49.9 50.0

April 2019 95

Quarterly Performance - Shree Cement (S/A) (INR m) FY18 FY19 FY18 FY19E

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales Dispat. (m ton) 5.89 4.88 5.33 6.44 6.99 5.64 5.93 7.04 22.54 25.60 YoY Change (%) 14.8 6.8 8.5 8.7 18.7 15.6 11.4 9.3 9.7 13.6 Realization (INR/Ton) 4,215 4,181 4,132 4,157 4,107 4,268 4,315 4,401 4,171 4,271

YoY Change (%) 8.5 2.9 10.4 7.4 -2.6 2.1 4.4 5.9 6.8 2.4 QoQ Change (%) 8.9 -0.8 -1.2 0.6 -1.2 3.9 1.1 2.0

Net Sales 25,769 21,424 23,027 28,111 30,699 25,866 27,806 33,158 98,331 1,17,529 YoY Change (%) 17.2 4.4 23.5 15.3 19.1 20.7 20.8 18.0 14.4 19.5 EBITDA 7,133 5,605 5,293 6,294 6,452 6,037 6,901 8,628 24,325 28,018 Margins (%) 27.7 26.2 23.0 22.4 21.0 23.3 24.8 26.0 24.7 23.8 Depreciation 2,312 2,253 2,100 2,330 3,055 3,295 3,361 3,381 8,994 13,092 Interest 329 380 207 437 562 618 593 597 1,353 2,370 Other Income 974 995 873 1,049 936 514 553 547 3,891 2,550 PBT before EO Exp 5,466 3,968 3,858 4,576 3,771 2,638 3,500 5,197 17,868 15,107 Extra-Ord Expense 0 3 -403 0 676 2,618 -200 0 -403 3,094 PBT 5,466 3,965 4,262 4,576 3,095 20 3,700 5,197 18,271 12,013 Tax 1,065 1,850 928 584 301 -473 687 1,648 4,427 2,162

Rate (%) 19.5 46.7 21.8 12.8 9.7 -2,343.6 18.6 31.7 24.2 18.0 Reported PAT 4,401 2,115 3,333 3,992 2,795 494 3,013 3,549 13,844 9,850 Adj PAT 4,401 2,118 2,930 3,992 3,471 3,112 2,813 3,549 13,441 12,944 YoY Change (%) -13.3 -27.4 24.5 31.1 -21.1 46.9 -4.0 -11.1 0.4 -3.7 E:MOFSL Estimates


Shree CementCMP: INR 18,505 TP: INR21,198(+15%) Buy We expect 4QFY19 cement volumes to grow 9.3% YoY to 7.04m

tons, led by healthy growth in underlying markets. Realizations areexpected to increase 2% QoQ to INR4,401/ton.

Revenue is estimated at INR33b (+18% YoY) and EBITDA atINR8.6b, translating into margin of 26% (+3.6pp YoY; +1.2ppQoQ)due to better realizations and lower cost curve.

We expect power EBITDA to be ~INR405m. SRCM should report EBITDA/ton of INR1168 (+INR100 QoQ), led by

QoQ increase in realization and lower cost curve. Adjusted PAT is likely to be INR3.55b (-11% YoY).

The stock trades at a P/E of 40x (FY20E) and 30x (FY21E), EV/EBITDA of 16.8x (FY20E) and 13.2x (FY21E), and EV/ton of USD188 (FY20E) and USD171 (FY21E). Maintain Buy.

Key issues to watch out for Volume and pricing recovery for north India. Update on various expansion projects. New expansion plans.

Bloomberg SRCM IN


1,6,12 Rel Perf. (%) 2 / 3 / -5


Sales 98.3 117.5 137.6 157.3

EBITDA 24.3 28.0 35.4 43.0

NP 13.4 12.9 16.0 20.9

Adj. EPS (INR) 385.8 371.5 459.7 600.3

EPS Gr. (%) 0.4 -3.7 23.7 30.6

BV/Share (INR) 2,554 2,775 3,172 3,708

RoE (%) 16.2 13.9 15.5 17.4

RoCE (%) 13.7 11.2 12.8 14.5

Payout (%) 15.2 21.7 13.6 10.6

Valuation

P/E (x) 48.0 49.8 40.3 30.8

P/BV (x) 7.2 6.7 5.8 5.0

EV/EBITDA (x) 25.6 21.8 16.8 13.2

EV/Ton (USD) 241 220 188 171

April 2019 96

S/A Quarterly Performance (INR m) FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales (m ton) 13.19 13.14 15.85 18.46 17.50 15.80 17.90 19.37 60.64 70.57 YoY Change (%) 0.0 17.5 35.1 31.2 32.7 20.2 12.9 4.9 21.4 16.6 Blended Realn.(INR/ton) * 5,025 5,001 4,714 4,877 4,946 4,973 4,923 5,004 4,842 4,962 YoY Change (%) 6.4 3.6 -1.4 4.0 -1.6 -0.6 4.4 2.6 1.7 2.5 QoQ Change (%) 7.2 -0.5 -5.7 3.5 1.4 0.5 -1.0 1.6 Net Sales 66,265 65,713 74,710 90,025 86,550 78,567 88,127 96,933 2,93,579 3,50,177 EBITDA 15,601 13,513 12,691 17,028 16,238 12,931 13,901 18,030 58,833 61,100 Margins (%) 23.5 20.6 17.0 18.9 18.8 16.5 15.8 18.6 20.0 17.4 Depreciation 3,098 4,988 4,744 4,806 4,860 5,137 5,113 5,115 17,636 20,225 Interest 1,285 3,759 3,472 3,348 3,356 3,422 3,701 3,712 11,863 14,190 Other Income 1,652 1,680 518 1,059 731 1,338 1,244 1,237 4,909 4,550 PBT before EO expense 12,870 6,447 4,993 9,934 8,753 5,710 6,331 10,440 34,243 31,235 Extra-Ord expense 0 0 -1,038 2,263 0 0 0 0 1,225 0 PBT after EO Expense 12,870 6,447 6,031 7,671 8,753 5,710 6,331 10,440 33,018 31,235 Tax 3,963 2,135 1,816 2,791 2,769 1,802 1,841 3,239 10,706 9,651 Rate (%) 30.8 33.1 30.1 36.4 31.6 31.6 29.1 31.0 32.4 30.9 Reported PAT 8,906 4,312 4,215 4,880 5,984 3,908 4,491 7,201 22,313 21,583 Adj PAT 8,906 4,312 3,177 7,142 5,984 3,908 4,491 7,201 23,538 21,583 YoY Change (%) 14.9 -28.3 -43.6 2.4 -32.8 -9.4 41.4 0.8 -10.9 -8.3 E: MOFSL Estimates


UltraTech CementCMP: INR4,021 TP: INR4,688 (+17%) Buy 4QFY19 grey cement volumes are estimated at 19.37m tons,

including JPA’s volumes. Realizations are estimated to increase1.6% QoQ to INR5,004/ton.

We estimate EBITDA/ton at INR931 (+INR154 QoQ), primarily dueto lower cost curve and healthy realization. EBITDA margin isexpected to expand 2.8pp QoQ to 18.6%.

EBITDA is estimated to increase 6% YoY to INR18b, while PATshould increase by 1% YoY to INR7.2b due to higher depreciationand interest.

The stock trades at a P/E of 38x (FY20E) and 29x (FY21E),EV/EBITDA of 16.1x (FY20E) and 13x (FY21E), and EV/ton ofUSD170 (FY20E) and USD159 (FY21E). Maintain Buy.

Key issues to watch out for Volume growth recovery and outlook. Cement pricing outlook and sustainability. Update on JPA’s operations.

Bloomberg UTCEM IN


1,6,12 Rel Perf. (%) -5 / -5 / -16


Sales 293.6 350.2 443.7 493.1

EBITDA 58.8 61.1 78.0 93.1

NP 23.5 21.6 30.6 39.4

Adj. EPS (INR) 85.7 78.6 106.0 136.6

EPS Gr. (%) -10.9 -8.3 41.7 28.9

BV/Share (INR) 944 1,010 1,254 1,382

RoE (%) 9.4 8.0 9.6 10.4

RoCE (%) 8.5 7.0 8.0 8.7

Payout (%) 15.6 16.3 13.2 11.2

Valuation

P/E (x) 46.9 51.2 37.9 29.4

P/BV (x) 4.3 4.0 3.2 2.9

EV/EBITDA (x) 20.6 19.5 16.1 13.0

EV/Ton (USD) 198 186 170 159

April 2019 97

Moderation in sales likely for the quarter Lowest PAT growth in seven quarters likely, rural to outpace urban growth again

APNT/MRCO/BRIT/HUVR to report healthy earnings in a weak environment Various industry players have cited a relatively weak environment in 4QFY19. However, companies believe that government schemes aimed at boosting consumption, particularly in rural India, will likely revive demand 1QFY20 onward. Meanwhile, 4QFY19 top-line numbers are likely to be muted due to relative moderation in volume growth and low price realization as a result of tepid material costs/and or promotion spends. Rural growth is likely to outpace urban growth YoY for the seventh consecutive quarter in 4QFY19, but the extent of outperformance is likely to moderate (was ~1.3x in earlier quarters). On the margins front, the pressures are likely to abate in 4QFY19 (unlike the previous quarter) due to a decline in material costs. Aggregate sales are likely to grow at 11.7% YoY, while EBITDA/PAT growth is estimated at 11.3%/7.8%. Aggregate PAT growth is likely to come in lowest in seven quarters.

HUVR’s sales growth is expected to come in at ~9.5% YoY (with 8% volume growth). Lower material costs and cost savings are likely to drive EBITDA growth of 14.4% YoY and adj. PAT growth of 11.9%. We expect ITC to report 7% cigarette volumes increase, driving sales growth of 13.6% YoY and PAT growth of 8.9% YoY. Strong all-round numbers are expected from APNT. Emami, Dabur, GCPL, Jyothy and Colgate are likely to report tepid numbers (PAT growth between -5% to +5%). Marico is expected to report double-digit sales growth and over 20% PAT growth owing to margin expansion. UNSP is likely to report weak top line as a result of a delay in passing on excise increase in Maharashtra and up-stocking in Karnataka in the base.

Commodity costs are largely benign For 4QFY19, PFAD prices declined by 21.4% YoY but increased marginally QoQ. Mentha prices declined 5.3% QoQ but were still up 12.2% YoY. Barring wheat (for which prices were down sequentially by 2.2% but up 14.7% YoY), many agri commodities saw a decline in prices YoY – e.g. sugar (-3.1%), palm oil (-18.7%) and cashew (-8.0%). Barley costs were flat QoQ but up sharply 29.5% YoY. Copra costs declined in double-digits YoY. VAM costs declined in double-digits YoY, but Pidilite will benefit only in subsequent quarters. Molasses costs remained benign.

Preference for quality and longevity of growth Our framework for earnings visibility, longevity of growth and quality management drives our choices in the sector universe. We continue preferring BRIT, HUVR and MRCO. We recently upgraded UNSP to Buy owing to favorable risk-reward after price correction. The FY20 outlook on industry growth appears robust, and medium-term margin expansion triggers are intact. We downgraded UBBL (now rated Neutral), for which we believe the best in terms of earnings growth (especially on margin improvement) is in the past, which, along with fair valuations, will limit upside.

Asian Paints

Britannia Industries

Colgate

Dabur

Emami

Future Consumer

Godrej Consumer

GSK Consumer

Hindustan Unilever

ITC

Jyothy Labs

Marico

Nestle India

Page Industries

Parag Milk Foods

Pidilite Industries

P&GHH

United Breweries

United Spirits

Consumer

March 2019 Results Preview | April 2019

Krishnan Sambamoorthy – Research analyst ([email protected]); +91 22 6129 1545 Vishal Punmiya – Research analyst ([email protected]); +91 22 6129 1547

April 2019 98

Exhibit 1: Summary of expected quarterly performance Sector CMP Sales (INR M) EBDITA (INR M) Net Profit (INR M)

Consumer (INR) RECO Mar-19 Var % YoY



YoY Var % QoQ

Asian Paints 1,516 Neutral 52,316 16.7 -1.2 9,820 16.9 -5.8 5,841 17.8 -9.7Britannia 2,994 Buy 27,491 8.3 -3.3 4,433 11.6 -1.9 2,991 13.4 -0.5Colgate 1,247 Buy 11,866 8.7 7.9 3,355 9.1 6.7 2,034 3.5 5.9 Dabur 403 Neutral 22,195 9.2 0.9 5,007 3.2 12.4 4,011 1.3 9.6 Emami 410 Buy 6,483 5.1 -20.1 1,717 -0.9 -35.6 1,260 4.2 -39.7Future Consumer 45 Buy 10,169 25.9 2.6 288 71.9 6.0 -41 Loss Loss Godrej Consumer 659 Neutral 26,398 4.4 -3.0 6,133 1.4 -0.5 3,982 -5.9 -4.6GSK Consumer 7,058 Neutral 13,072 10.8 17.0 2,829 13.1 18.6 2,290 8.1 17.4 Hind. Unilever 1,687 Buy 99,631 9.5 4.2 23,424 14.4 14.5 15,768 11.9 12.5 ITC 297 Neutral 120,252 13.6 7.1 46,885 13.1 8.4 31,941 8.9 -0.5Jyothy Labs 183 Neutral 5,069 6.2 16.7 911 0.6 27.0 605 0.2 24.9 Marico 346 Buy 16,588 12.1 -10.9 2,990 18.5 -14.3 2,248 22.7 -10.7Nestle 10,767 Neutral 31,708 15.0 9.4 7,394 3.9 20.5 4,574 4.2 13.0 P&G Hygiene 10,749 Neutral 6,514 14.5 -20.4 1,433 -2.1 -25.1 928 11.4 -25.3Page Industries 25,225 Neutral 7,032 15.6 -4.8 1,536 4.6 -7.1 1,030 9.4 1.1 Parag Milk Foods 261 Buy 6,008 16.0 0.0 616 11.7 -0.8 274 4.6 -11.0Pidilite Inds. 1,258 Buy 17,611 18.6 -4.7 3,076 12.3 -8.7 2,320 -6.0 6.4 United Breweries 1,402 Neutral 16,476 12.1 13.5 2,471 18.7 -0.3 1,122 23.5 2.8 United Spirits 541 Buy 22,572 3.8 -9.7 2,872 4.8 -17.4 1,471 -20.5 -30.8Sector Aggregate 519,451 11.7 1.8 127,190 11.3 4.6 84,647 7.8 0.4

Source: MOFSL

Exhibit 2: 4QFY19 volume growth expectations (%) Quarter Ending 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19E Asian Paints (Dom Deco) 13.0 11.0 12.0 2.0 10.0 4.0 9.0 6.0 10.0 10.0 11.0 21.0 12.0 Britannia (Biscuits) 10.0 8.0 10.0 2.0 2.0 2.0 5.0 11.0 11.0 11.0 11.0 7.0 6.0 Colgate (Toothpaste) 3.0 5.0 4.0 (12.0) (3.0) (5.0) (0.9) 12.0 4.0 4.0 7.0 7.0 6.0 Dabur 7.0 4.1 4.5 (5.0) 2.4 (4.4) 7.2 13.0 7.7 21.0 8.1 12.4 6.0 Emami 18.0 18.0 11.0 0.2 (1.5) (18.0) 10.0 6.0 8.0 18.0 (4.0) 3.5 4.5 Godrej Cons. (Soaps) MSD LDD (MSD) (8.0) 5.0 (9.0) 15.0 15.0 15.0 10.0 10.0 0.0 2.0 GSK Consumer 0.0 (6.0) (3.0) (17.0) (1.0) 0.0 2.5 15.0 8.0 12.0 10.0 8.0 8.0 Hindustan Unilever 4.0 4.0 (1.0) (4.0) 4.0 0.0 4.0 11.0 11.0 12.0 10.0 10.0 8.0 ITC (cigarette) 0.0 3.0 4.0 (1.0) 0.0 1.0 (6.0) (3.0) (2.0) 1.0 6.0 7.0 7.0 Marico Domestic 8.4 8.0 3.0 (4.0) 10.0 (9.0) 8.0 9.4 1.0 12.4 6.0 5.0 8.5 Pidilite 6.0 9.0 7.8 (1.5) 7.0 0.0 15.0 23.0 13.0 20.2 11.0 13.0 14.0


Exhibit 3: Relative performance – 3m (%) Exhibit 4: Relative performance – 1Yr (%)


89

94

99

104

109

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Consumer Index

90

102

114

126

138

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Consumer Index

March 2019 Results Preview | Consumer

April 2019 99

Exhibit 5: Brent crude down 5.7% YoY and 6.7% QoQ


Exhibit 6: PFAD prices down 21.4% YoY, up 13.5% QoQ


Exhibit 7: HDPE prices down 9.1% YoY and 15% QoQ

* Data available till Feb’19 Source: Bloomberg, MOFSL

Exhibit 8: Palm oil prices down 18.7% YoY, up 4.5% QoQ


Exhibit 9: Mentha prices up 12.2% YoY, down 5.3% QoQ


Exhibit 10: TiO2 prices up 12.9% YoY and 0.2% QoQ


Exhibit 11: Copra prices down 16.5% YoY, up 15.1% QoQ


Exhibit 12: LLP prices down 5.5% YoY and 15% QoQ


Mar

-14

Jul-1

4

Nov

-14

Mar

-15

Jul-1

5

Nov

-15

Mar

-16

Jul-1

6

Nov

-16

Mar

-17

Jul-1

7

Nov

-17

Mar

-18

Jul-1

8

Nov

-18

Mar

-19

Brent Crude Index

Mar

-14

Jul-1

4

Nov

-14

Mar

-15

Jul-1

5

Nov

-15

Mar

-16

Jul-1

6

Nov

-16

Mar

-17

Jul-1

7

Nov

-17

Mar

-18

Jul-1

8

Nov

-18

Mar

-19

Palm Fatty Acid price (INR/MT)

Feb-

14

Jun-

14

Oct

-14

Feb-

15

Jun-

15

Oct

-15

Feb-

16

Jun-

16

Oct

-16

Feb-

17

Jun-

17

Oct

-17

Feb-

18

Jun-

18

Oct

-18

Feb-

19HDPE INR / Kg

Mar

-14

Jul-1

4

Nov

-14

Mar

-15

Jul-1

5

Nov

-15

Mar

-16

Jul-1

6

Nov

-16

Mar

-17

Jul-1

7

Nov

-17

Mar

-18

Jul-1

8

Nov

-18

Mar

-19

Palm Oil (Malaysian Ringgit Per Metric Tonne)

Mar

-14

Jul-1

4

Nov

-14

Mar

-15

Jul-1

5

Nov

-15

Mar

-16

Jul-1

6

Nov

-16

Mar

-17

Jul-1

7

Nov

-17

Mar

-18

Jul-1

8

Nov

-18

Mar

-19

Mentha Oil prices INR / kg

Mar

-14

Jul-1

4

Nov

-14

Mar

-15

Jul-1

5

Nov

-15

Mar

-16

Jul-1

6

Nov

-16

Mar

-17

Jul-1

7

Nov

-17

Mar

-18

Jul-1

8

Nov

-18

Mar

-19

TiO2 price (INR/kg)

Feb-

14

Jun-

14

Oct

-14

Feb-

15

Jun-

15

Oct

-15

Feb-

16

Jun-

16

Oct

-16

Feb-

17

Jun-

17

Oct

-17

Feb-

18

Jun-

18

Oct

-18

Feb-

19

Copra Calicut INR/100Kg

Feb-

14

Jun-

14

Oct

-14

Feb-

15

Jun-

15

Oct

-15

Feb-

16

Jun-

16

Oct

-16

Feb-

17

Jun-

17

Oct

-17

Feb-

18

Jun-

18

Oct

-18

Feb-

19

Liquid Paraffin INR / Lt


April 2019 100

Exhibit 13: Comparative valuation Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Consumer (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Asian Paints 1,516 Neutral 24.1 28.3 34.0 63.0 53.5 44.6 39.4 33.0 27.8 26.3 29.0 33.1 Britannia 2,994 Buy 48.4 59.1 69.8 61.9 50.6 42.9 40.7 33.2 27.8 32.1 35.8 40.3 Colgate 1,247 Buy 27.9 32.1 37.0 44.7 38.8 33.7 26.6 23.4 20.4 48.4 54.1 64.2 Dabur 403 Neutral 8.4 9.5 10.9 48.1 42.4 37.1 37.7 33.2 29.0 24.1 24.2 25.4 Emami 410 Buy 12.5 14.3 16.4 32.9 28.7 25.1 24.8 21.2 18.7 27.0 29.4 32.9 Future Consumer 45 Buy -0.1 0.7 1.6 -400.1 65.0 27.5 91.2 40.8 22.2 -1.9 11.0 21.9Godrej Consumer 659 Neutral 14.7 17.5 20.1 44.7 37.6 32.8 31.1 26.9 23.6 23.0 25.1 26.1 GSK Consumer 7,058 Neutral 206.1 223.9 252.9 34.2 31.5 27.9 23.9 20.8 18.0 24.5 24.7 25.0 Hind. Unilever 1,687 Buy 28.8 34.3 40.9 58.6 49.2 41.3 41.3 34.6 29.1 86.2 101.1 125.5 ITC 297 Neutral 9.9 11.2 12.4 29.9 26.6 24.0 20.0 17.6 15.8 23.9 26.2 27.3 Jyothy Labs 183 Neutral 5.2 6.3 7.6 35.5 29.2 24.2 23.2 19.9 16.8 15.9 18.3 20.6 Marico 346 Buy 7.3 8.8 10.7 47.1 39.3 32.4 34.0 28.3 23.3 34.8 37.4 42.9 Nestle 10,767 Neutral 178.6 197.3 232.0 60.3 54.6 46.4 36.7 33.0 28.2 48.5 51.4 61.6 P&G Hygiene 10,749 Neutral 134.4 167.0 209.9 80.0 64.4 51.2 50.9 40.8 31.8 50.0 53.0 56.1 Page Industries 25,225 Neutral 378.3 472.0 573.3 66.7 53.4 44.0 43.0 35.6 29.4 51.5 53.8 56.2 Parag Milk Foods 261 Buy 13.9 16.6 20.5 18.7 15.8 12.7 9.9 8.6 7.1 15.3 15.9 17.2 Pidilite Inds. 1,258 Buy 18.2 22.4 26.6 69.3 56.2 47.2 45.3 37.1 31.1 24.4 27.3 29.5 United Breweries 1,402 Neutral 23.0 26.8 32.0 61.1 52.4 43.8 30.8 26.8 22.9 20.6 20.1 20.1 United Spirits 541 Buy 10.0 13.6 18.4 54.3 39.7 29.4 31.5 24.6 18.9 23.5 25.6 25.6 Sector Aggregate 46.3 39.7 34.2 31.0 26.5 22.8 29.3 31.6 34.5

Source: MOFSL


April 2019 101

Quarterly Performance (Consolidated) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Estimated Dom. Deco. Vol. growth (%) 4.0 9.0 6.0 10.0 10.0 11.0 21.0 12.0 7.3 13.5 Net Sales 38,152 42,652 42,605 44,836 43,903 46,391 52,940 52,316 168,246 195,549 Change (%) 6.4 15.0 10.5 14.7 15.1 8.8 24.3 16.7 11.7 16.2 Gross Profit 16,340 17,610 17,995 19,389 18,980 18,467 21,690 22,568 71,334 81,704

Gross Margin (%) 42.8 41.3 42.2 43.2 43.2 39.8 41.0 43.1 42.4 41.8 EBITDA 6,654 8,011 8,912 8,399 8,744 7,842 10,430 9,820 31,976 36,836

Margin (%) 17.4 18.8 20.9 18.7 19.9 16.9 19.7 18.8 19.0 18.8 Change (%) -18.5 13.6 17.7 18.7 31.4 -2.1 17.0 16.9 7.1 15.2

Interest 80 88 92 91 88 121 148 145 351 502 Depreciation 905 889 896 914 905 947 1,154 1,318 3,605 4,324 Other Income 783 534 497 392 617 633 452 405 2,206 2,107 PBT 6,452 7,569 8,420 7,786 8,368 7,406 9,580 8,761 30,227 34,116 Tax 2,160 2,459 2,913 2,877 2,770 2,427 3,263 2,969 10,410 11,429

Effective Tax Rate (%) 33.5 32.5 34.6 37.0 33.1 32.8 34.1 33.9 34.4 33.5 PAT before Minority & extraordinary 4,292 5,110 5,507 4,909 5,599 4,979 6,317 5,792 19,817 22,687 Minority Interest -90 -152 -165 -50 -115 -81 -154 -49 -458 -398Adjusted PAT 4,382 5,262 5,672 4,959 5,713 5,060 6,472 5,841 20,275 23,085

Change (%) -20.4 7.5 19.6 3.4 30.4 -3.8 14.1 17.8 0.6 13.9 E: MOFSL Estimates


Asian PaintsCMP: INR1,516 TP: INR1,530 (+3%) Neutral We expect revenue to grow 16.7% YoY to INR52.3b in 4QFY19,

with double-digit volume growth in the domestic decorativebusiness.

We note that crude prices are down 5.7% YoY and 6.7% QoQ in4QFY19. The magnitude of price movement in crude derivatives islower vis-à-vis crude prices.

We expect gross margin to contract slightly by 10bp YoY to 43.1%. Operating margin is likely to remain flat at 18.8%, with EBITDA

growing 16.9% YoY. We estimate 17.8% adjusted PAT growth for the quarter. The stock trades at 53.5x/44.6x FY20E/21E EPS of INR28.3/INR34.

Maintain Neutral.

Key issues to watch for Volume growth trends and demand scenario in urban and rural

geographies. Market share trends. Outlook for raw materials. Commentary on pricing action.

Bloomberg APNT IN


1,6,12 Rel Perf. (%) 1 / 12 / 14

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Sales 168.2 195.5 228.4 265.4 EBITDA 32.0 36.8 43.6 51.5 Adj. PAT 20.3 23.1 27.2 32.6 Adj. EPS (INR) 21.1 24.1 28.3 34.0 EPS Gr. (%) 1.9 13.9 17.7 19.9 BV/Sh.(INR) 87.7 95.2 100.2 104.9 RoE (%) 25.3 26.3 29.0 33.1 RoCE (%) 21.6 22.7 25.0 28.8 Payout (%) 48.7 60.2 70.6 73.6 Valuations P/E (x) 71.7 63.0 53.5 44.6 P/BV (x) 17.3 15.9 15.1 14.4 EV/EBITDA (x) 44.8 39.1 32.8 27.6 Div. Yield (%) 0.8 1.1 1.5 1.9

April 2019 102

Quarterly Performance Y/E March FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Base business volume growth (%) 2.0 5.0 11.0 11.0 11.0 11.0 7.0 6.0 7.3 8.7 Net Sales 22,637 25,453 25,675 25,375 25,438 28,696 28,424 27,491 99,140 110,050 YoY Change (%) 5.7 6.6 12.5 13.1 12.4 12.7 10.7 8.3 9.5 11.0 Gross Profit 8,764 9,613 9,930 9,762 10,175 11,491 11,737 11,133 38,069 44,536 Margins (%) 38.7 37.8 38.7 38.5 40.0 40.0 41.3 40.5 38.4 40.5 EBITDA 3,285 3,777 3,984 3,971 3,894 4,544 4,518 4,433 15,017 17,388 Margins (%) 14.5 14.8 15.5 15.6 15.3 15.8 15.9 16.1 15.1 15.8

YoY Growth (%) 3.9 11.4 26.8 28.9 18.5 20.3 13.4 11.6 17.6 15.8 Depreciation 332 336 329 424 356 369 424 453 1,421 1,602 Interest 13 14 26 24 24 24 30 33 76 111 Other Income 352 508 359 444 420 440 600 456 1,664 1,916 PBT 3,293 3,934 3,989 3,968 3,933 4,590 4,664 4,404 15,184 17,590 Tax 1,133 1,326 1,354 1,330 1,352 1,559 1,658 1,413 5,142 5,981 Rate (%) 34.4 33.7 33.9 33.5 34.4 34.0 35.5 32.1 33.9 34.0 Adjusted PAT 2,160 2,609 2,635 2,638 2,581 3,031 3,007 2,991 10,041 11,610 YoY Change (%) -1.5 11.5 19.6 25.2 19.5 16.2 14.1 13.4 13.5 15.6 E: MOFSL Estimates


Britannia IndustriesBloomberg BRIT IN


1,6,12 Rel Perf. (%) -11 / -4 / 0


CMP: INR2,994 TP: INR3,700 (+24%) Buy We expect Britannia’s (BRIT) sales to grow 8.3% YoY to INR27.5b,

with base business volumes growing 6% on a high base of +11%.

Wheat prices are up 14.7% YoY (down 2.2% QoQ), while sugarand cashew prices are benign. Milk/SMP prices are now startingto see some inflation. We build in gross margin expansion of200bp YoY to 40.5%.

We expect 50bp YoY expansion in the operating margin to 16.1%.

EBITDA and adj. PAT are thus likely to grow 11.6% and 13.4% YoY,respectively.

The stock trades at 50.7x/42.9x FY20E/21E EPS ofINR59.1/INR69.8. Maintain Buy.

Key issues to watch for Pace of growth in erstwhile weak states. Direction on future volume growth. Outlook for raw materials. Update on dairy business.

April 2019 103

CMP: INR1,247 TP: INR1,555 (+25%) Buy We expect Colgate’s (CLGT) sales to grow 8.7% YoY to INR11.9b,

with 6% toothpaste volume growth.

Gross margins are expected to contract by 60bp YoY to 65.1%.

We estimate EBITDA margin to expand by just 10bp YoY to 28.3%.

Hence, we have modeled EBITDA growth of 9.1% to INR3.4b andadjusted PAT growth of 3.5% to INR2b for the quarter.

The stock trades at 38.8x/33.7x FY20E/21E EPS of INR32.1/INR37.Maintain Buy.

Key issues to watch for Volume growth in toothpaste. Market share movement. Ad spends and competitive intensity in toothpaste.

Bloomberg CLGT IN


1,6,12 Rel Perf. (%) -8 / 7 / 2


Sales 41.9 45.0 50.5 57.1

EBITDA 11.1 12.6 14.3 16.3

Adj. PAT 6.9 7.6 8.7 10.1

Adj. EPS (INR) 25.2 27.9 32.1 37.0

EPS Gr. (%) 18.6 10.8 15.1 15.2

BV/Sh.(INR) 56.1 59.2 59.5 55.7

RoE (%) 49.0 48.4 54.1 64.2

RoCE (%) 47.9 47.3 52.9 62.8

Payout (%) 95.3 70.0 80.0 90.0

Valuation P/E (x) 49.5 44.7 38.8 33.7

P/BV (x) 22.2 21.0 21.0 22.4

EV/EBITDA (x) 30.1 26.5 23.3 20.4 Div. Yield (%) 1.9 1.6 2.1 2.7

Quarterly Performance Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Toothpaste Volume Gr % -5.0 -0.9 12.0 4.0 4.0 7.0 7.0 6.0 2.5 6.0 Net Sales (incldg. OOI) 9,781 10,849 10,333 10,917 10,413 11,680 10,994 11,866 41,880 44,953 YoY Change (%) -3.5 2.7 18.2 5.2 6.5 7.7 6.4 8.7 5.2 7.3 COGS 3,579 3,967 3,593 3,750 3,550 4,115 3,833 4,145 14,889 15,643 Gross Profit 6,202 6,882 6,740 7,167 6,863 7,565 7,161 7,721 26,991 29,310

Gross Margin (%) 63.4 63.4 65.2 65.7 65.9 64.8 65.1 65.1 64.4 65.2 Other operating Expenses 3,979 3,873 3,911 4,092 4,048 4,269 4,016 4,366 15,855 16,699 EBITDA 2,223 3,009 2,829 3,075 2,815 3,296 3,145 3,355 11,135 12,611 Margins (%) 22.7 27.7 27.4 28.2 27.0 28.2 28.6 28.3 26.6 28.1

YoY Growth (%) 5.2 9.5 32.2 26.6 26.7 9.5 11.2 9.1 18.1 13.3 Depreciation 373 392 396 405 394 398 406 428 1,565 1,626 Financial other Income 120 86 86 85 92 86 79 83 377 340 PBT 1,970 2,703 2,519 2,755 2,513 2,984 2,818 3,010 9,947 11,325 Tax 606 927 812 789 844 1,020 897 977 3,135 3,737 Rate (%) 30.8 34.3 32.3 28.7 33.6 34.2 31.8 32.4 31.5 33.0 Adj PAT 1,364 1,776 1,707 1,966 1,669 1,964 1,921 2,034 6,812 7,588 YoY Change (%) 8.5 -2.1 33.5 37.9 22.4 10.6 12.6 3.5 18.0 11.4 E: MOFSL Estimates


Colgate

April 2019 104


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Domestic Vol Growth (%) -4.4 7.2 13.0 7.7 21.0 8.1 12.4 6.0 6.0 11.9 Net Sales 17,901 19,589 19,664 20,329 20,807 21,250 21,992 22,195 77,483 86,244 YoY Change (%) -8.3 -1.1 6.1 6.2 16.2 8.5 11.8 9.2 0.6 11.3 Gross profit 8,755 9,818 10,141 10,305 10,321 10,491 10,839 11,283 39,019 42,935

Margin (%) 48.9 50.1 51.6 50.7 49.6 49.4 49.3 50.8 50.4 49.8 EBITDA 3,089 4,199 4,035 4,852 3,861 4,508 4,454 5,007 16,174 17,830 Margins (%) 17.3 21.4 20.5 23.9 18.6 21.2 20.3 22.6 20.9 20.7 YoY Growth (%) -11.4 2.7 20.8 16.2 25.0 7.4 10.4 3.2 7.2 10.2 Depreciation 391 401 405 426 427 431 449 459 1,622 1,766 Interest 133 133 132 132 149 156 167 174 531 646 Other Income 813 843 663 732 737 812 753 713 3,052 3,014 PBT 3,378 4,508 4,162 5,026 4,022 4,734 4,591 5,086 17,074 18,432 Tax 589 880 833 1,053 724 941 924 1,061 3,354 3,650 Rate (%) 17.4 19.5 20.0 20.9 18.0 19.9 20.1 20.9 19.6 19.8 Adjusted PAT 2,787 3,619 3,321 3,962 3,292 3,786 3,661 4,011 13,689 14,750 YoY Change (%) -4.8 1.3 13.1 18.9 18.1 4.6 10.2 1.3 7.2 7.8 E: MOFSL Estimates


DaburCMP: INR403 TP: INR445 (+11%) Neutral We expect sales to grow 9.2% YoY to INR22.2b, led by 6%

domestic organic volume growth.

Gross margin is expected to remain flattish at 50.8%.

We expect EBITDA margin to contract 130bp YoY to 22.6% duringthe quarter, with EBITDA growth of 3.2% YoY to INR5b.

Adjusted PAT is expected to be slightly up by 1.3% YoY to INR4b.

The stock trades at 42.4x/37.1x FY20E/21E EPS of INR9.5/INR10.9.Maintain Neutral.

Key issues to watch for Domestic volume growth and outlook for rural demand. New launch pipeline. Margin performance in international business.

Bloomberg DABUR IN


1,6,12 Rel Perf. (%) -18 / -15 / 4


Sales 77.2 86.2 95.0 106.1 EBITDA 16.2 17.8 20.1 22.8

Adj. PAT 13.7 14.8 16.7 19.1 Adj. EPS (INR) 7.8 8.4 9.5 10.9 EPS Gr. (%) 7.2 7.8 13.4 14.4

BV/Sh.(INR) 32.4 37.2 41.2 44.4 RoE (%) 25.9 24.1 24.2 25.4 RoCE (%) 22.6 21.6 22.2 23.5

Payout (%) 96.5 40.0 50.0 60.0 Valuation P/E (x) 51.8 48.1 42.4 37.1


April 2019 105

Quarterly performance Y/E MARCH FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Domestic volume growth (%) -18.0 10.0 6.0 8.0 18.0 -4.0 3.5 2.0 1.5 4.9 Net Sales 5,289 6,279 7,568 6,170 6,144 6,280 8,109 6,483 25,306 27,016 YoY Change (%) -18.1 9.6 6.0 8.2 16.2 0.0 7.1 5.1 1.1 6.8 Gross Profit 3,501 4,328 5,357 4,021 4,071 4,308 5,432 4,161 17,207 17,971

Gross margin (%) 66.2 68.9 70.8 65.2 66.3 68.6 67.0 64.2 68.0 66.5 EBITDA 802 2,013 2,647 1,733 1,235 1,894 2,666 1,717 7,195 7,513 Margins (%) 15.2 32.1 35.0 28.1 20.1 30.2 32.9 26.5 28.4 27.8

YoY Change -45.6 14.9 2.4 -2.7 54.1 -5.9 0.7 -0.9 -5.2 4.4 Depreciation 153 156 168 208 230 202 178 191 673 800 Interest 79 104 92 68 46 44 62 68 343 220 Other Income 65 53 55 22 20 31 55 56 195 162 PBT 635 1,807 2,442 1,479 980 1,680 2,482 1,515 6,374 6,656 Tax 28 227 338 270 103 240 401 255 863 998 Rate (%) 4.4 12.5 13.9 18.2 10.5 14.3 16.2 16.8 13.5 15.0 PAT before Amortization 605 1,580 2,104 1,209 879 1,440 2,089 1,260 5,511 5,657 YoY Change (%) -48.5 18.2 2.8 -15.4 45.3 -8.8 -0.8 4.2 -7.9 2.6 Reported PAT 10 987 1,443 602 267 827 1,375 695 3,043 3,257 E: MOFSL Estimates


Emami CMP: INR410 TP: INR540 (+32%) Buy We project Emami’s (HMN) sales to grow 5.1% YoY at INR6.5b in

4QFY19, with 2% domestic volume growth on a base of 8%volume growth.

Gross margin is likely to contract 100bp to 64.2% in the quarter.Mentha prices were up 12.2% YoY (-5.3% QoQ).

We expect EBITDA margin to contract 160bp to 26.5%. Thus,EBITDA is likely to decline by 0.9% YoY to INR1.7b.

PAT before amortization is expected to grow 4.2% YoY to INR1.3b.


Key issues to watch for Volume growth and broad consumer demand across categories. Outlook for mentha oil prices. Competitive intensity. Performance of Kesh King.

Bloomberg HMN IN


1,6,12 Rel Perf. (%) -5 / -24 / -42


Sales 25.3 27.0 30.3 34.2

EBITDA 7.2 7.5 8.7 9.9

NP 5.5 5.7 6.5 7.4

EPS (INR) 12.1 12.5 14.3 16.4

EPS Gr. (%) -8.5 2.7 14.7 14.5

BV/Sh. (INR) 44.4 47.9 49.6 49.9

RoE (%) 29.2 27.0 29.4 32.9

RoCE (%) 28.2 29.0 34.7 39.7

Payout (%) 21.6 44.1 52.5 61.1

Valuations

P/E (x) 33.8 32.9 28.7 25.1

P/BV (x) 9.2 8.6 8.3 8.2

EV/EBITDA (x) 25.8 24.6 21.0 18.5

Div. Yld (%) 0.6 1.3 1.8 2.4

April 2019 106

Consolidated - Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 6,626 7,510 7,847 8,075 8,409 10,111 9,912 10,169 30,050 38,602 YoY Change (%) 41.9 33.2 42.3 51.4 26.9 34.6 26.3 25.9 42.0 28.5 Gross Profit 922 1,038 1,071 1,042 1,182 1,331 1,273 1,310 4,076 5,095 Margins (%) 13.9 13.8 13.7 12.9 14.1 13.2 12.8 12.9 13.6 13.2 EBITDA 86 128 166 168 201 251 272 288 541 1,012 YoY Change (%) 949.1 318.3 420.1 543.0 133.4 96.0 64.0 71.9 458.9 87.0 Margins (%) 1.3 1.7 2.1 2.1 2.4 2.5 2.7 2.8 1.8 2.6 Depreciation 90 113 106 146 123 127 139 148 455 536 Interest 128 122 136 140 159 172 194 208 527 734 Other Income 58 52 45 163 83 89 67 77 325 317 PBT -74 -55 -31 44 2 40 7 10 -115 60 Tax 0 0 0 -25 0 10 5 -13 -25 2 Rate (%) 0.0 0.0 0.0 -56.4 0.0 25.8 62.3 -135.3 21.7 2.9 Minority Interest & P/L of Asso. Cos. 28 33 16 110 61 60 55 64 216 240 Reported PAT -102 -88 -47 -41 -59 -30 -52 -41 -306 -182Adj PAT -102 -88 -47 -41 -59 -30 -53 -41 -306 -184 YoY Change (%) -51.0 -45.6 -66.5 -59.6 -41.8 -65.9 13.2 -0.4 Loss LP Margins (%) -1.5 -1.2 -0.6 -0.5 -0.7 -0.3 -0.5 -0.4 -1.0 -0.5E: MOFSL Estimates


Future Consumer CMP: INR45 TP: INR58 (+30%) Buy We expect Future Consumer’s (FCON) sales to grow 25.9% YoY to

INR10.2b.

Gross margins are expected to remain flat YoY at 12.9% (up 10bpQoQ).

We estimate EBITDA margin expansion of 70bp YoY to 2.8% (upjust 10bp QoQ). Hence, we have modeled EBITDA growth of71.9% in the quarter with adj. loss of INR41m.

The stock trades at 1.6x/3.1x FY20E/21E EV/sales. Buy.

Key issues to watch for Whether the pace of top-line growth will be sustained. Extent of gross margin expansion. Flow of gross margin expansion into EBITDA margin.

Commentary on working capital

Bloomberg FCON IN


1,6,12 Rel Perf. (%) -14 / 9 / -37


Sales 30.1 38.6 51.7 68.7 EBITDA 0.5 1.0 2.3 4.1 NP -0.3 -0.2 1.1 2.7 EPS (INR) -0.2 -0.1 0.7 1.6 EPS Gr. (%) -53.2 -39.9 -715.4 136.0BV/Sh. (INR) 6.0 5.9 6.6 8.2 RoE (%) -3.3 -1.9 11.0 21.9 RoCE (%) 2.2 4.6 10.9 17.4 Valuations P/E (x) -240.6 -400.1 65.0 27.5 P/BV (x) 7.4 7.5 6.8 5.4 EV/Sales (x) 146.8 80.2 35.9 19.5 EV/EBITDA (x) 2.6 2.1 1.6 1.2

April 2019 107


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales (including OOI) 21,773 25,066 26,303 25,289 24,760 26,592 27,219 26,398 98,433 104,969 YoY Change (%) 2.9 6.3 9.5 5.8 13.7 6.1 3.5 4.4 6.2 6.6 Gross Profit 11,640 14,097 15,040 14,913 13,814 14,551 15,310 15,263 55,689 58,939 Margin (%) 53.5 56.2 57.2 59.0 55.8 54.7 56.2 57.8 56.6 56.1 EBITDA 3,498 5,427 5,987 6,050 4,491 5,382 6,162 6,133 20,671 22,168 Margins (%) 16.1 21.6 22.8 23.9 18.1 20.2 22.6 23.2 21.0 21.1

YoY Growth (%) -8.7 16.1 15.8 10.9 28.4 -0.8 2.9 1.4 8.0 7.2 Depreciation 374 386 396 401 421 426 427 430 1,557 1,704 Interest 397 402 386 422 477 612 578 545 1,607 2,213 Other Income 237 190 359 290 310 260 227 247 1,076 1,043 PBT 2,960 4,721 5,467 5,435 3,853 4,607 5,309 5,404 18,582 19,294 Tax 634 1,060 1,148 1,204 678 1,015 1,133 1,418 4,047 4,244 Rate (%) 21.4 22.5 21.0 22.2 17.6 22.0 21.3 26.2 21.8 22.0 Adj PAT 2,327 3,664 4,322 4,234 3,177 3,594 4,176 3,982 14,382 15,049 YoY Change (%) -9.2 13.8 23.7 11.3 36.5 -1.9 -3.4 -5.9 10.0 4.6 E: MOFSL Estimate


Godrej ConsumerCMP: INR659 TP: INR740 (+12%) Neutral We expect Godrej Consumer’s revenue to rise 4.4% YoY to

INR26.4b.

Volume growth in soaps is expected to be 2% YoY.

Gross margin is expected to contract 120bp YoY to 57.8%.

We estimate operating margin to contract 70bp YoY to 23.2%.

Thus, we have modeled just 1.4% EBITDA growth and expectadjusted PAT to decline by 5.9% YoY to INR4b.

The stock trades at 37.6x/32.8x FY20E/21E EPS ofINR17.5/INR20.1. Neutral.

Key issues to watch for Competitive intensity across categories. Outlook for international business— demand outlook in

Indonesia and margin guidance for LatAm. Response to new launches in HI segment.

Bloomberg GCPL IN


1,6,12 Rel Perf. (%) -11 / -24 / -29


April 2019 108

Quarterly Performance Y/E Mar FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Domestic HFD volume growth (%) 0.0 2.5 15.0 8.0 12.8 10.0 8.0 8.0 6.4 9.5 Net Sales 9,859 11,117 10,394 11,796 11,071 12,720 11,168 13,072 43,166 48,031 YoY Change (%) 4.4 2.9 20.8 7.0 12.3 14.4 7.5 10.8 8.3 11.3 Gross profit 6,433 7,178 7,170 8,059 7,703 8,861 7,897 9,155 28,839 33,616

Margin (%) 65.2 64.6 69.0 68.3 69.6 69.7 70.7 70.0 66.8 70.0 EBITDA 1,669 2,589 2,075 2,500 2,303 3,537 2,385 2,829 8,834 11,054 Margins (%) 16.9 23.3 20.0 21.2 20.8 27.8 21.4 21.6 20.5 23.0 YoY Change (%) -18.0 5.6 23.8 14.7 38.0 36.6 14.9 13.1 5.9 25.1 Depreciation 170 177 151 145 147 151 158 165 644 621 Interest 5 6 2 8 2 2 2 2 20 7 Other Income 552 574 607 842 607 740 843 716 2,574 2,905 PBT 2,045 2,981 2,529 3,189 2,761 4,124 3,068 3,378 10,744 13,331 Tax 723 1,057 892 1,071 989 1,467 1,117 1,089 3,743 4,662 Rate (%) 35.3 35.5 35.3 33.6 35.8 35.6 36.4 32.2 34.8 35.0 Adj PAT 1,322 1,924 1,637 2,118 1,772 2,657 1,951 2,290 7,001 8,669 YoY Change (%) -17.7 4.7 20.0 20.4 34.0 38.1 19.2 8.1 6.6 23.8 E: MOFSL Estimates


GSK ConsumerCMP: INR7,058 TP: INR7,730 (+10%) Neutral We expect GSK Consumer to report net sales of INR13.1b (+10.8%

YoY), led by 8% volume growth in HFD.

Gross margin is likely to expand 170bp YoY to 70%.

We estimate EBITDA margin to expand 40bp YoY to 21.6%.

Thus, EBITDA and adjusted PAT are expected to grow by 13.1%and 8.1% YoY to INR2.8b and INR2.3b, respectively.

The stock trades at 31.5x/27.9x FY20E/21E EPS ofINR223.9/INR252.9. Neutral.

Key issues to watch for HFD volume outlook. Performance of new brands. Market share trend. Material cost outlook.

Bloomberg SKB IN


1,6,12 Rel Perf. (%) -10 / -6 / 4


Sales 43.2 48.0 54.8 61.6

EBITDA 8.8 11.1 12.4 14.2

Adj. PAT 7.0 8.7 9.4 10.6

Adj. EPS (INR) 166.5 206.1 223.9 252.9

EPS Gr. (%) 6.6 23.8 8.6 13.0

BV/Sh.(INR) 828.7 855.7 956.5 1,070.3

RoE (%) 21.2 24.5 24.7 25.0

RoCE (%) 21.2 24.5 24.7 25.0

Payout (%) 45.1 55.0 55.0 55.0

Valuation

P/E (x) 42.4 34.2 31.5 27.9

P/BV (x) 8.5 8.2 7.4 6.6


April 2019 109

Quarterly performance Y/E March FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Domestic volume growth (%) 0.0 4.0 11.0 11.0 12.0 10.0 10.0 8.0 6.0 10.0 Net Sales 85,290 83,090 85,900 90,970 94,870 92,340 95,580 99,631 345,250 382,421 YoY Change (%) 4.9 5.9 11.5 10.8 11.2 11.1 11.3 9.5 8.3 10.8 Gross Profit 44,450 43,800 46,850 47,830 51,230 47,990 51,400 53,158 182,930 203,778

Margin % 52.1 52.7 54.5 52.6 54.0 52.0 53.8 53.4 53.0 53.3 EBITDA 18,660 16,820 16,800 20,480 22,510 20,190 20,460 23,424 72,760 86,584 YoY Change (%) 14.1 19.7 23.9 24.0 20.6 20.0 21.8 14.4 20.3 19.0 Margins (%) 21.9 20.2 19.6 22.5 23.7 21.9 21.4 23.5 21.1 22.6 Depreciation 1,140 1,150 1,210 1,280 1,270 1,300 1,330 1,304 4,780 5,204 Interest 60 60 50 40 70 70 70 70 200 280 Other Income 1,130 2,040 1,520 1,000 1,350 3,050 1,060 1,197 5,690 6,657 PBT 18,590 17,650 17,060 20,160 22,520 21,870 20,120 23,247 73,470 87,757 Tax 5,630 5,250 3,590 6,010 6,640 6,270 5,060 7,480 20,480 25,450 Rate (%) 30.3 29.7 21.0 29.8 29.5 28.7 25.1 32.2 27.9 29.0 Adjusted PAT 12,920 12,360 11,980 14,090 15,670 15,220 14,010 15,768 52,990 62,308 YoY Change (%) 14.6 14.2 30.2 26.0 21.3 23.1 16.9 11.9 24.7 17.6 Reported Profit 12,830 12,760 13,260 13,510 15,290 15,250 14,440 15,768 52,370 62,308 E: MOFSL Estimates


Hindustan UnileverCMP: INR1,687 TP: INR2,125 (+26%) Buy We expect Hindustan Unilever’s revenue to grow 9.5% YoY, with

underlying domestic volume growth of 8% in 4QFY19. Basequarter volumes were high at 11%.

PFAD prices are down 21.4% YoY (up 13.5% QoQ).

Gross margins are likely to expand 80bp YoY to 53.4%.

We expect operating margin to expand by 100bp YoY to 23.5% inthe quarter, leading to EBITDA growth of 14.4% YoY.

Adjusted PAT is likely to grow 11.9% YoY to INR15.8b.


Key issues to watch for Comments on consumer demand environment. Pace of rural growth. Performance of Lever Ayush. WIMI growth.

Bloomberg HUVR IN


1,6,12 Rel Perf. (%) -11 / -4 / 8


Sales 345.3 382.4 436.2 498.7

EBITDA 72.8 86.6 103.0 122.5

Adj. PAT 53.0 62.3 74.2 88.5

Adj. EPS (INR) 24.5 28.8 34.3 40.9

EPS Gr. (%) 24.7 17.6 19.1 19.3

BV/Sh.(INR) 32.7 34.1 33.7 31.5

RoE (%) 78.1 86.2 101.1 125.5

RoCE (%) 108.6 121.7 144.8 179.7

Payout (%) 98.9 99.7 104.7 108.2

Valuations

P/E (x) 68.9 58.6 49.2 41.3

P/BV (x) 51.6 49.4 50.1 53.6

EV/EBITDA (x) 49.7 41.7 34.9 29.3

Div. Yield (%) 1.2 1.4 1.8 2.2

April 2019 110


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Est. cigarette volume gr. (%) 1.0 -6.0 -3.0 -2.0 1.0 6.0 7.0 7.0 -2.5 5.5 Net Sales 99,547 103,141 97,720 105,867 107,070 110,689 112,277 120,252 406,275 450,287 YoY Change (%) -1.0 6.8 5.7 -4.8 7.6 7.3 14.9 13.6 1.3 10.8 Gross Profit 61,187 59,578 61,756 65,855 65,977 67,892 69,272 74,184 240,142 277,323

Margin (%) 61.5 57.8 63.2 62.2 61.6 61.3 61.7 61.7 59.1 61.6 EBITDA 37,464 37,615 38,891 41,440 42,021 42,060 43,258 46,885 155,639 174,223 Growth (%) 6.2 3.6 9.7 6.9 12.2 11.8 11.2 13.1 6.8 11.9 Margins (%) 37.6 36.5 39.8 39.1 39.2 38.0 38.5 39.0 38.3 38.7 Depreciation 2,682 2,824 2,908 3,040 2,987 3,275 3,354 3,365 11,454 12,980 Interest 104 290 240 232 73 135 56 119 1,096 384 Other Income 4,768 4,942 6,269 5,165 4,039 5,041 8,364 6,189 21,298 23,633 PBT 39,446 39,443 42,012 43,333 42,999 43,691 48,212 49,590 164,388 184,492 Tax 13,841 13,045 13,969 14,006 14,813 14,145 16,121 17,649 56,285 62,727 Rate (%) 35.1 33.1 33.2 32.3 34.4 32.4 33.4 35.6 34.2 34.0 Adj PAT 25,605 26,398 28,043 29,327 28,187 29,547 32,091 31,941 108,104 121,765 YoY Change (%) 7.4 5.6 6.0 9.9 10.1 11.9 14.4 8.9 6.0 12.6 E: MOFSL Estimates


ITCCMP: INR297 TP: INR310 (+4%) Neutral We expect net sales to grow 13.6% YoY to INR120.3b, with

cigarette volume growth at 7% (base quarter saw 2% volumedecline).

We expect cigarette EBIT to grow 10.5% YoY.

We have factored in company’s EBITDA growth of 13.1% YoY toINR46.9b and EBITDA margin is expected to shrink by 20bp to 39%in the quarter.

We expect ‘Other FMCG’ revenue to grow 14% YoY.

We estimate ITC’s adj. PAT growth of 8.9% YoY to INR31.9b.

The stock trades at 26.6x/24x FY20E/21E EPS of INR11.2/INR12.4;maintain Neutral.

Key issues to watch for Trends in cigarette volumes and mix. Demand outlook for FMCG categories and segmental

profitability.

Bloomberg ITC IN


1,6,12 Rel Perf. (%) -1 / -7 / -3


Sales 406.3 450.3 507.0 565.6

EBITDA 155.6 174.2 197.1 219.1

Adj. PAT 108.1 121.8 136.7 151.5

Adj. EPS (INR) 8.9 9.9 11.2 12.4

EPS Gr. (%) 5.5 12.3 12.3 10.8

BV/Sh.(INR) 42.1 41.2 44.2 46.6

RoE (%) 22.3 23.9 26.2 27.3

RoCE (%) 21.6 23.1 25.2 26.3

Payout (%) 67.5 78.0 84.0 90.0

Valuations

P/E (x) 33.5 29.9 26.6 24.0

P/BV (x) 7.1 7.2 6.7 6.4

EV/EBITDA (x) 21.6 19.3 16.9 15.1

Div. Yield (%) 2.1 2.6 3.2 3.7

April 2019 111

Standalone Quarterly Performance Y/E March FY18 FY19 Consol. Consol.

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 3,438 3,992 4,088 4,773 4,026 4,277 4,343 5,069 17,310 18,811 YoY Change (%) -19.0 -0.9 10.1 10.2 17.1 7.1 6.3 6.2 8.7 COGS 1,728 2,221 2,208 2,531 2,133 2,312 2,372 2,739 8,753 9,774 Gross Profit 1,711 1,771 1,880 2,241 1,892 1,965 1,971 2,330 8,706 9,200 Margins (%) 49.8 44.4 46.0 47.0 47.0 45.9 45.4 46.0 50.3 48.9 Total Exp 1,276 1,125 1,198 1,336 1,310 1,233 1,253 1,418 5,998 6,245 EBITDA 434 646 682 906 583 732 718 911 2,708 2,955

EBITDA Growth % -46.1 -1.0 32.2 44.4 34.2 13.3 5.2 0.6 9.1 Margins (%) 12.6 16.2 16.7 19.0 14.5 17.1 16.5 18.0 15.6 15.7 Depreciation 141 138 141 146 138 139 140 146 311 345 Interest 86 104 106 127 77 71 67 70 481 433 Other Income 19 118 48 221 49 47 69 70 491 196 PBT 227 521 482 854 417 569 581 765 2,407 2,374 Tax 22 98 110 250 93 116 97 161 619 499 Rate (%) 9.5 18.8 22.7 29.3 22.3 20.3 16.7 21.0 25.7 21.0 Adjusted PAT 206 423 373 604 324 453 484 605 1,789 1,876 YoY Change (%) -52.7 42.3 96.7 -45.1 57.5 7.2 29.9 0.2 4.9 E: MOFSL Estimates; Full year numbers on consolidated basis


Jyothy LabsCMP: INR183 TP: INR195 (+7%) Neutral We expect Jyothy Labs’ standalone net sales to grow 6.2% to

~INR5.1b on a base of 10.2% sales growth.

Gross margin is expected to contract 100bp YoY to 46%.

We expect EBITDA margin to contract by 100bp YoY to 18%.Therefore, we estimate EBITDA growth of just 0.6% YoY toINR911m.

Adjusted PAT is expected to remain flat at INR605m.

The stock trades at 19.9x/16.8x FY20E/21E EV/EBITDA. Neutral.

Key issues to watch for Update on new launches and innovations. Performance of Household Insecticide portfolio.

Bloomberg JYL IN


1,6,12 Rel Perf. (%) -6 / -9 / -25


Net Sales 17.3 18.8 21.4 24.3 EBITDA 2.7 3.0 3.4 4.0

Adj PAT 1.8 1.9 2.3 2.7 Adj PAT for NCD 1.3 1.4 1.9 2.4 Adj.EPS (INR) 4.9 5.2 6.3 7.6

EPS Gr. (%) -12.4 4.9 21.4 20.5BV/Sh (INR) 31.5 33.3 35.1 38.2 RoE (%) 16.0 15.9 18.3 20.6


P/BV (x) 5.8 5.5 5.2 4.8 EV/EBITDA 13.4 23.2 19.9 16.8 D. Yield (%) 0.3 1.6 2.2 2.2

April 2019 112


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Domestic volume growth (%) -9.0 8.0 9.4 1.0 12.4 6.0 5.0 8.5 3.5 8.0 Net Sales 16,815 15,363 16,243 14,801 20,268 18,368 18,610 16,588 63,222 73,834 YoY Change (%) -4.0 6.7 15.1 12.6 20.5 19.6 14.6 12.1 6.8 16.8 Gross Profit 8,043 7,209 7,584 6,905 8,572 8,081 8,616 7,846 29,741 33,116

Gross margin (%) 47.8 46.9 46.7 46.6 42.3 44.0 46.3 47.3 47.0 44.9 EBITDA 3,251 2,591 3,013 2,523 3,549 2,941 3,489 2,990 11,378 12,969 Margins (%) 19.3 16.9 18.5 17.0 17.5 16.0 18.8 18.0 18.0 17.6

YoY Change (%) -13.1 2.4 10.4 -2.5 9.2 13.5 15.8 18.5 -1.8 14.0 Depreciation 211 235 213 231 224 224 226 225 891 899 Interest 35 35 39 53 53 57 48 44 162 201 Other Income 222 214 182 229 240 292 216 202 846 950 PBT 3,227 2,535 2,943 2,468 3,512 2,952 3,431 2,923 11,172 12,818 Tax 866 679 709 642 913 776 914 665 2,896 3,269 Rate (%) 26.8 26.8 24.1 26.0 26.0 26.3 26.6 22.7 25.9 25.5 Adjusted PAT 2,360 1,850 2,233 1,832 2,601 2,183 2,517 2,248 8,275 9,548 YoY Change (%) -11.9 2.5 16.5 7.2 10.2 18.0 12.7 22.7 2.0 15.4 E: MOFSL Estimates


MaricoCMP: INR346 TP: INR460 (+33%) Buy We expect sales to grow 12.1% YoY to ~INR16.6b, with 8.5%

growth in domestic volumes.

We observe that copra prices are down 16.5% YoY, while kardi oilprices are up 10.9% YoY (till Feb’19). We are modeling grossmargin expansion of 70bp YoY to 47.3%.

EBITDA is expected to grow at 18.5% YoY, with margin expansionof 100bp YoY to 18.5% in the quarter.

Adjusted PAT is projected to grow by 22.7% YoY to ~INR2.2b,higher than EBITDA growth, due to a low tax rate in the base.

We like MRCO’s franchise, portfolio strength, managementquality and multiple growth drivers. The stock trades at39.3x/32.4x FY20E/21E EPS of INR8.8/INR10.8; we have a Buyrating on the stock and is one of our top picks.

Key issues to watch for Comments on volume growth trends across key categories. Outlook for raw materials. Margin expansion and guidance for international business.

Bloomberg MRCO IN


1,6,12 Rel Perf. (%) -5 / -3 / -12


Sales 63.2 73.8 84.5 96.8 EBITDA 11.4 13.0 15.6 18.9


BV/Sh.(INR) 19.7 22.5 24.5 25.2 RoE (%) 34.0 34.8 37.4 42.9 RoCE (%) 30.8 31.3 33.6 38.3

Payout (%) 78.6 88.5 96.6 79.7 Valuations P/E (x) 53.9 47.1 39.3 32.4


April 2019 113

Quarterly performance Y/E December CY18 CY19 CY18 CY19E

1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Net Sales 27,572 26,984 29,394 28,973 31,708 30,492 32,774 32,767 112,923 127,741 YoY Change (%) 10.6 12.3 16.9 11.4 15.0 13.0 11.5 13.1 12.8 13.1 COGS 11,277 10,890 11,841 11,894 13,603 13,068 13,695 13,013 45,902 53,378 Gross Profit 16,296 16,094 17,552 17,078 18,106 17,424 19,079 19,754 67,020 74,363 Margin (%) 59.1 59.6 59.7 58.9 57.1 57.1 58.2 60.3 59.4 58.2 Operating Exp 9,176 9,447 10,132 10,941 10,711 10,522 10,642 12,276 39,696 44,151 EBITDA 7,119 6,648 7,420 6,137 7,394 6,902 8,437 7,478 27,324 30,212 Margins (%) 25.8 24.6 25.2 21.2 23.3 22.6 25.7 22.8 24.2 23.7

YoY Growth (%) 35.0 44.9 25.6 -4.8 3.9 3.8 13.7 21.9 23.0 10.6 Depreciation 825 817 930 784 875 866 986 834 3,357 3,560 Interest 311 283 275 252 342 311 302 277 1,120 1,231 Other income 564 602 670 752 649 693 771 858 2,589 2,970 PBT 6,547 6,150 6,886 5,854 6,827 6,418 7,920 7,226 25,437 28,390 Tax 2,157 2,003 2,257 1,804 2,253 2,118 2,614 2,385 8,220 9,369 Rate (%) 32.9 32.6 32.8 30.8 33.0 33.0 33.0 33.0 32.3 33.0 Adjusted PAT 4,391 4,147 4,629 4,049 4,574 4,300 5,307 4,841 17,217 19,022 YoY Change (%) 38.7 59.3 32.3 -4.3 4.2 3.7 14.6 19.6 27.5 10.5 E: MOFSL Estimates


Nestle IndiaCMP: INR10,767 TP:INR11,820(+10%) Neutral We expect Nestle India’s net sales to grow 15% YoY to ~INR31.7b

in 1QCY19.

Gross margins are likely to contract 200bp YoY to 57.1%.

We expect EBITDA margin to contract by 250bp YoY to 23.3%.

EBITDA and adjusted PAT are projected to grow by 3.9% YoY (to~INR7.4b) and 4.2% YoY (to ~INR4.6b), respectively.

The stock trades at 54.6x/46.4x CY19E/CY20E EPS ofINR197.3/INR232; maintain Neutral.

Key issues to watch for Volume trends and management commentary on demand

environment. Response to new product/variant launches. Raw material price outlook.

Bloomberg NEST IN


1,6,12 Rel Perf. (%) -5 / 5 / 12

Financial Snapshot (INR b) Y/E Dec 2018 2019E 2020E 2021E

Sales 112.9 127.7 144.1 162.2

EBITDA 27.3 30.2 35.1 40.4

Adj. PAT 17.2 19.0 22.4 25.9

Adj. EPS (INR) 178.6 197.3 232.0 268.8

EPS Gr. (%) 27.5 10.5 17.6 15.9

BV/Sh.(INR) 381.0 386.4 366.5 323.3

RoE (%) 48.5 51.4 61.6 77.9

RoCE (%) 50.2 53.1 63.5 80.1

Payout (%) 63.3 76.0 86.2 93.0

Valuations

P/E (x) 60.3 54.6 46.4 40.1

P/BV (x) 28.3 27.9 29.4 33.3

EV/EBITDA (x) 36.4 32.7 28.0 24.2

Div. Yield (%) 1.0 1.4 1.9 2.3

April 2019 114

Quarterly Performance Y/E MARCH FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 6,969 6,257 6,210 6,084 8,153 6,908 7,383 7,032 25,520 29,475 YoY Change (%) 22.4 17.0 17.6 22.2 17.0 10.4 18.9 15.6 19.8 15.5 Gross Profit 3,782 3,606 3,452 3,809 4,481 3,994 4,215 4,111 14,649 16,801

Gross margin (%) 54.3 57.6 55.6 62.6 55.0 57.8 57.1 58.5 57.4 57.0 EBITDA 1,372 1,282 1,288 1,468 1,893 1,428 1,653 1,536 5,411 6,509 Margins (%) 19.7 20.5 20.7 24.1 23.2 20.7 22.4 21.8 21.2 22.1

YoY Change 24.9 18.9 30.0 49.9 38.0 11.4 28.3 4.6 30.5 20.3 Depreciation 67 68 70 76 72 77 82 90 280 320 Interest 45 36 41 44 40 40 41 43 166 163 Other Income 40 49 53 73 72 108 95 93 215 368 PBT 1,301 1,227 1,231 1,421 1,852 1,420 1,625 1,496 5,180 6,394 Tax 441 389 397 479 608 494 606 466 1,705 2,174 Rate (%) 33.9 31.7 32.2 33.7 32.8 34.8 37.3 31.1 32.9 34.0 PAT 860 839 834 942 1,244 926 1,019 1,030 3,474 4,220 YoY Change (%) 25.5 21.5 32.6 39.9 44.8 10.5 22.2 9.4 29.8 21.5 E: MOFSL Estimates


Page IndustriesCMP: INR25,225 TP: INR27,515 (+9%) Neutral We expect Page to report net sales of INR7b, up 15.6% YoY, led by

double-digit volume growth.

We expect EBITDA margin to be down by 230bp YoY to 21.8% ledby contraction in gross margin of 410bp YoY (as base marginswere high). Thus, EBITDA should grow by just 4.6% YoY toINR1.5b.

Adjusted PAT is likely to grow 9.4% YoY to INR1b.

The stock trades at 53.4x/44x FY20E/21E EPS of INR472/INR573.3;we maintain Neutral on account of fair valuations.

Key issues to watch for Performance of kidswear. Competitive intensity, especially in men’s and women’s

innerwear. Any update on minimum wage hike in Karnataka for the textile

industry.

Bloomberg PAG IN


1,6,12 Rel Perf. (%) 5 / -31 / -3

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Sales 25.5 29.5 34.9 41.4 EBITDA 5.4 6.5 7.8 9.5 Adj. PAT 3.5 4.2 5.3 6.4 Adj. EPS (INR) 311.1 378.3 472.0 573.3 EPS Gr. (%) 30.3 21.6 24.7 21.5 FCF to PAT 1.1 0.9 0.8 0.8 BV/Sh.(INR) 759.6 735.1 876.6 1020.0 RoE (%) 41.0 51.5 53.8 56.2 RoCE (%) 42.9 48.9 57.6 60.4 Payout (%) 52.6 106.5 70.0 75.0 Valuations P/E (x) 81.1 66.7 53.4 44.0 EV/EBITDA (x) 51.6 43.0 35.6 29.4

April 2019 115

Standalone - Quarterly Earning Model 7% -19% -8% 3% -20% -8%Y/E June FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE Net Sales 6,576 7,042 5,689 5,247 7,918 8,181 6,514 6,010 24,553 28,623 YoY Change (%) 9.5 9.5 -0.9 4.3 20.4 16.2 14.5 14.6 5.8 16.6 Gross profit 3,804 4,235 3,641 3,387 4,766 4,542 3,693 3,457 15,066 16,458

Margin (%) 57.8 60.1 64.0 64.6 60.2 55.5 56.7 57.5 61.4 57.5 EBITDA 1,875 2,102 1,464 839 2,096 1,912 1,433 1,257 6,280 6,698 Growth 24.0 -8.0 -4.8 -36.0 11.8 -9.0 -2.1 49.7 -5.5 6.7 Margins (%) 28.5 29.9 25.7 16.0 26.5 23.4 22.0 20.9 25.6 23.4 Depreciation 128 135 137 123 121 123 130 132 524 506 Interest 4 5 4 41 4 5 6 6 53 21 Other Income 35 71 66 68 96 117 115 121 241 448 PBT 1,777 2,033 1,307 744 2,066 1,901 1,412 1,240 6,025 6,619 Tax 622 721 475 298 716 660 484 390 2,160 2,250 Rate (%) 35.0 35.5 36.3 40.1 34.7 34.7 34.3 31.5 35.8 34.0 Reported PAT 3,865 4,368 Adj PAT 1,156 1,312 832 445 1,350 1,241 928 849 3,746 4,368 YoY Change (%) 10.6 -12.9 -16.5 -42.9 16.8 -5.4 11.4 90.6 -13.4 16.6 Margins (%) 17.6 18.6 14.6 8.5 17.1 15.2 14.2 14.1 15.3 15.3 E: MOFSL Estimates


P&G Hygiene CMP: INR10,749 TP: INR 10,555 (-2%) Neutral We expect PGHH to report net sales of INR6.5b, up 14.5% YoY.

We estimate EBITDA margin to contract 370bp YoY to 22% in3QFY19 (June-ending).

EBITDA is expected to thus decline by 2.1% YoY to ~INR1.4b, whileadj. PAT is expected to grow 11.4% YoY to INR928m in thequarter.

The stock trades at 64.4x/51.2x FY20E/21E EPS ofINR167/INR209.9; maintain Neutral.

Key issues to watch for Sustenance of growth signs reported in the preceding quarter. Strategy on advertising. Margin performance.

Bloomberg PG IN


1,6,12 Rel Perf. (%) -10 / 5 / -3

Financial Snapshot (INR b) Y/E June 2018 2019E 2020E 2021E Sales 24.6 28.6 33.2 39.4 EBITDA 6.3 6.7 8.3 10.5 Adj. PAT 3.7 4.4 5.4 6.8 Adj. EPS (INR) 115.3 134.4 167.0 209.9 EPS Gr. (%) -13.4 16.6 24.3 25.7BV/Sh. (INR) 248.2 289.9 341.7 406.9 RoE (%) 56.3 50.0 53.0 56.1 RoCE (%) 59.1 51.6 54.6 57.7 Valuations P/E (x) 93.3 80.0 64.4 51.2 P/BV (x) 43.3 37.1 31.5 26.4 EV/EBITDA (x) 54.9 50.9 40.8 31.8 EV/Sales (x) 14.0 11.9 10.2 8.5

April 2019 116


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 4,129 5,045 5,193 5,178 5,494 5,735 6,006 6,008 19,545 23,243 YoY Change (%) 7.7 6.7 16.4 20.9 33.1 13.7 15.7 16.0 12.9 18.9 Gross Profit 1,199 1,415 1,596 1,656 1,668 1,768 1,957 1,973 5,866 7,365 Margin (%) 29.0 28.1 30.7 32.0 30.4 30.8 32.6 32.8 30.0 31.7 EBITDA 285 508 587 551 597 581 620 616 1,931 2,415 YoY Change (%) -10.4 50.2 LP 42.5 109.5 14.5 5.7 11.7 124.6 25.1 Margins (%) 6.9 10.1 11.3 10.6 10.9 10.1 10.3 10.2 9.9 10.4 Depreciation 116 129 136 125 136 134 139 144 506 552 Interest 70 82 107 96 103 76 102 95 355 376 Other Income 15 36 25 43 18 15 7 11 120 50 PBT 115 333 368 374 377 386 387 387 1,190 1,537 Tax 9 84 114 112 94 82 79 114 319 369 Rate (%) 8.1 25.3 30.8 30.0 25.0 21.1 20.5 29.3 26.8 24.0 Adj PAT 105 249 255 262 283 304 307 274 871 1,168 YoY Change (%) 3.0 94.5 LP 8.6 168.6 22.2 20.6 4.6 405.2 34.2 Margins (%) 2.5 4.9 4.9 5.0 5.1 5.3 5.1 4.6 4.5 5.0 E: MOFSL Estimates


Parag Milk foods CMP: INR261 TP: INR305 (+17%) Buy We expect PARAG to report net sales of INR6b, up 16% YoY.

Gross margin is likely to expand 90bp YoY to 32.8%.

We estimate EBITDA margin to contract 40bp YoY to 10.2% in4QFY19.

EBITDA and adjusted PAT are expected to grow 11.7% and 4.6%YoY to INR616m and INR274m, respectively, in the quarter.

The stock trades at 15.8x/12.7x FY20E/21E EPS ofINR16.6/INR20.5. Buy.

Key issues to watch for Volatility of milk prices. Margin performance.

Bloomberg PAG IN

Equity Shares (m) 11.2 M. Cap. (INR b)/(USD b) 281 / 4 52-Week Range (INR) 36062 /

202411,6,12 Rel Perf. (%) 5 / -31 / -3


Sales 19.5 23.2 26.9 30.8 EBITDA 1.9 2.4 2.7 3.2


BV/Sh. (INR) 84.9 97.2 110.9 126.6 RoE (%) 13.0 15.3 15.9 17.2 RoCE (%) 12.5 14.2 14.8 16.1

Valuations P/E (x) 25.1 18.7 15.8 12.7 P/BV (x) 3.1 2.7 2.4 2.1 EV/EBITDA (x) 12.5 9.8 8.6 7.1 EV/Sales (x) 1.2 1.0 8.2 7.1

April 2019 117


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 15,289 15,299 15,429 14,853 18,341 17,574 18,483 17,611 60,784 72,010 YoY Change (%) -2.6 7.9 15.6 14.7 20.0 14.9 19.8 18.6 8.2 18.5 Gross Profit 7,908 8,109 8,243 7,734 9,267 8,683 8,731 8,790 31,908 35,470

Margin (%) 51.7 53.0 53.4 52.1 50.5 49.4 47.2 49.9 52.5 49.3 EBITDA 3,210 3,761 3,703 2,739 3,817 3,648 3,368 3,076 13,412 13,908

YoY change (%) -18.5 17.0 29.2 6.2 18.9 -3.0 -9.0 12.3 6.5 3.7 Margins (%) 21.0 24.6 24.0 18.4 20.8 20.8 18.2 17.5 22.1 19.3

Depreciation 313 296 292 298 301 316 321 351 1,199 1,288 Interest 37 39 41 38 73 60 62 62 155 257 Other Income 432 337 195 521 321 276 307 397 1,484 1,301 PBT 3,292 3,763 3,564 2,924 3,764 3,549 3,291 3,059 13,542 13,663 Tax 1,033 1,245 1,193 457 1,361 1,230 1,110 739 3,927 4,441 Rate (%) 31.4 33.1 33.5 15.6 36.1 34.7 33.7 24.2 29.0 32.5 Adj PAT 2,260 2,518 2,370 2,467 2,404 2,318 2,181 2,320 9,615 9,223 YoY Change (%) -16.7 9.6 17.3 59.3 6.4 -7.9 -8.0 -6.0 12.1 -4.1E: MOFSL Estimates


Pidilite IndustriesCMP: INR1,258 TP: INR1,330 (+6%) Under Review We expect Pidilite (PIDI) to report revenue of INR17.6b in 4QFY19,

up 18.6% YoY, led by 14% volume growth in domestic ConsumerBazaar segment. This is on a base of ~13% volume growth inConsumer and Bazaar segment.

EBITDA margin is expected to contract 100bp YoY to 17.5%. We expect EBITDA to grow 12.3% YoY to INR3.1b, while PAT is

expected to decline by 6% YoY INR2.3b as tax rate is higher versusbase quarter.

The stock trades at 56.2x/47.2x FY20E/21E EPS ofINR22.4/INR26.6.

Key issues to watch for Volume growth in Fevicol. Outlook for VAM prices. Outlook for Industrial and Construction Chemical segments.

Bloomberg PIDI IN


1,6,12 Rel Perf. (%) 2 / 14 / 16


Sales 60.8 72.0 84.7 98.5 EBITDA 13.4 13.9 17.0 20.1

Adj. PAT 9.6 9.2 11.4 13.5 Adj. EPS (INR) 18.9 18.2 22.4 26.6 EPS Gr. (%) 13.2 -4.1 23.2 19.0

BV/Sh.(INR) 70.4 78.4 85.6 94.7 RoE (%) 27.3 24.4 27.3 29.5 RoCE (%) 25.1 22.5 25.2 27.6



April 2019 118

Standalone - Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 16,780 12,796 11,994 14,693 18,659 15,260 14,512 16,476 56,263 64,906 YoY Change (%) 7.3 23.4 17.3 32.0 11.2 19.3 21.0 12.1 18.8 15.4 Gross Profit 8,817 6,907 6,272 7,762 10,095 8,485 7,739 8,588 29,759 34,907

Margin (%) 52.5 54.0 52.3 52.8 54.1 55.6 53.3 52.1 52.9 53.8 EBITDA 3,184 2,219 1,526 2,082 4,004 3,182 2,479 2,471 9,011 12,137 YoY Change (%) 9.4 83.1 19.3 105.9 25.8 43.4 62.4 18.7 41 34.7 Margins (%) 19.0 17.3 12.7 14.2 21.5 20.9 17.1 15.0 16.0 18.7 Depreciation 649 650 650 648 637 656 665 761 2,596 2,720 Interest 142 127 93 114 92 40 62 69 477 263 Other Income 63 12 8 48 153 37 21 40 130 251 PBT 2,456 1,454 791 1,368 3,428 2,523 1,772 1,681 6,068 9,404 Tax 837 515 317 459 1,208 885 681 555 2,128 3,329 Rate (%) 34.1 35.4 40.1 33.6 35.3 35.1 38.4 33.0 35 35.4 MI & P/L of Asso. Cos. 0 0 0 0 0 0 0 4 4.3 4 Adj PAT 1,619 938 474 909 2,219 1,638 1,092 1,122 3,936 6,071 YoY Change (%) 10.1 246.9 -2.3 1,250.4 37.1 74.5 130.4 23.5 71.6 54.3 Margins (%) 9.6 7.3 4.0 6.2 11.9 10.7 7.5 6.8 7.0 9.4 E: MOFSL Estimates


United BreweriesCMP: INR1,402 TP: INR1,535 (+9%) Neutral We expect United Breweries’ revenue to grow by 12.1% YoY to

INR16.5b.

We build in EBITDA margin expansion of 80bp YoY to 15%, withEBITDA growth of 18.7% YoY to INR2.5b.

We estimate 23.5% adjusted PAT growth in 4QFY19 to INR1.1b.

The stock trades at 26.8x/22.9x FY20E/FY21E EV/EBITDA. Neutral.

Key issues to watch for Trends in volume and market share. Price trend and outlook for raw materials. Traction on premium range of beers.

Bloomberg UBBL IN


1,6,12 Rel Perf. (%) -6 / -1 / 27


Net Sales 56.2 64.9 73.3 84.3 EBITDA 9.0 12.1 13.9 16.3

NP 3.9 6.1 7.1 8.5 EPS (INR) 14.9 23.0 26.8 32.0 EPS Growth (%) 71.7 54.0 16.6 19.5

BV/Sh. (INR) 101.7 121.7 145.0 172.9 RoE (%) 15.7 20.6 20.1 20.1 RoCE (%) 14.3 18.9 18.4 18.5


EV/EBITDA (x) 41.4 30.8 26.8 22.9 EV/Sales (x) 6.6 5.8 5.1 4.4

April 2019 119

Quarterly Performance Y/E March FY18 FY19 FY18 FY19E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Volume Growth % -18.9 -15.9 -14.2 -2.3 1.1 10.3 3.8 -1.9 -12.8 3.3 Total Revenues 17,818 19,513 22,633 21,737 20,119 22,281 25,009 22,572 81,701 89,981 YoY Change (%) -12.7 -3.7 -7.8 7.3 12.9 14.2 10.5 3.8 -4.4 10.1 Gross Profit 8,199 9,289 10,719 10,603 9,887 10,935 11,839 10,890 38,810 43,551

Margin (%) 46.0 47.6 47.4 48.8 49.1 49.1 47.3 48.2 47.5 48.4 Total Exp 16,114 16,786 19,910 18,996 17,836 17,957 21,531 19,700 71,806 77,024 EBITDA 1,704 2,727 2,723 2,741 2,283 4,324 3,478 2,872 9,895 12,957 Margins (%) 9.6 14.0 12.0 12.6 11.3 19.4 13.9 12.7 12.1 14.4 EBITDA growth (%) -20.1 18.5 -7.6 5.1 34.0 58.6 27.7 4.8 -1.0 30.9 Depreciation 321 326 337 367 339 350 355 375 1,351 1,419 Interest 703 659 658 591 559 415 552 511 2,611 2,037 PBT From operations 680 1,742 1,728 1,783 1,385 3,559 2,571 1,987 5,933 9,502 Other income 309 305 236 1,210 214 249 614 305 2,060 1,382 PBT 989 2,047 1,964 2,993 1,599 3,808 3,185 2,292 7,993 10,884 Tax 265 681 491 1,142 545 1,221 1,059 821 2,579 3,646 Rate (%) 26.8 33.3 25.0 38.2 34.1 32.1 33.2 35.8 32.3 33.5 Adj. PAT 724 1,366 1,473 1,851 1,054 2,587 2,126 1,471 5,414 7,238 YoY Change (%) -12.9 39.6 -0.3 83.6 45.6 89.4 44.3 -20.5 26.1 33.7 E: MOFSL Estimates

CMP: INR541 TP: INR690 (+28%) Buy We expect United Spirits (UNSP) to post revenue growth of 3.8%

to INR22.6b, with 1.9% decline in volumes, as a result of a delay inpassing on excise increase in Maharashtra, up-stocking inKarnataka in the base and disruptions in UP in 4QFY19. Whileprestige & above volumes are expected to grow 7.1%, popularvolumes are modeled to be down 9.9%.

Gross margins are expected to contract 50bp YoY to 48.2%.

We expect EBITDA margin to be up 10bp to 12.7% and EBITDAgrowth of 4.8% YoY to INR2.9b.

We estimate adjusted PAT of ~INR1.5b in 4QFY19, down 20.5%YoY, mainly due to steep decline in other income. Buy.

Key issues to watch for Trends in volume growth, premiumization and margins. Price trend and outlook for ENA/molasses.

Bloomberg UNSP IN


1,6,12 Rel Perf. (%) -12 / -2 / -34

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Sales 81.7 90.0 104.4 119.9 EBITDA 10.2 13.0 16.3 20.7 PAT 4.9 7.2 9.9 13.4 EPS (INR) 6.7 10.0 13.6 18.4 EPS Gr. (%) 26.1 47.7 36.8 34.8 BV/Sh.(INR) 34.5 42.4 53.3 71.7 RoE (%) 19.6 23.5 25.6 25.6 RoCE (%) 11.5 16.0 21.5 37.4 Valuations P/E (x) 80.2 54.3 39.7 29.4 P/BV (x) 15.7 12.7 10.1 7.5 EV/EBITDA (x) 41.3 31.5 24.6 18.9 Div. Yield (%) 0.0 0.0 0.0 0.0


United Spirits

April 2019 119

Earnings set to improve driven by corporate banks Margins to remain stable; Deposits traction – a key monitorable

Corporate banks to drive earnings recovery; expect 79% YoY PAT growth forprivate banks: We expect banking system earnings to pick up sharply, led bystable/expanding NIMs, moderate credit costs, stability in fee income andtreasury book. Margin cycle is set to recover as loan book re-prices over FY19,offsetting the impact of higher cost of funds. We expect private banks to report~79% YoY PAT growth, led by a sharp pick-up in profitability of AXSB and ICICIBCas the provisioning requirement moderates. However, PAT growth is likely toremain muted at ~2% QoQ, as banks will be making higher provisioning towardsIL&FS exposure (like IIB) and the resolution of key NCLT cases is getting delayed.PSU banks will likely report PAT growth of ~2% QoQ on the back of lowerslippages and a decline in the provisioning requirement, though we remainoptimistic on the earnings trajectory during FY20/21E.

NII to grow at 21%/19% YoY for private/PSU banks; mid-sized private banks tomaintain strong traction: We expect private banks to record NII growth of21.3% YoY, led by stronger growth in mid-sized private banks – IIB (~20% YoY),YES (~28% YoY) and RBL Bank (~40% YoY). SFBs Equitas and AUBANK wouldcontinue reporting healthy growth of 39% and 32%, respectively. Among PSUs,PNB/BOB/SBIN are expected to report strong ~45%/23%/15% YoY growth in NII,while INBK is likely to report modest growth.

Systemic credit growth at five-year high; private banks to maintain steadymomentum: Systemic credit growth has remained strong and recovered to afive-year-high of ~14.5% YoY, driven by (a) strong growth in the retail/servicessegment, (b) pick-up in industrial growth (5.1% YoY), and (c) the recent liquiditycrisis witnessed by NBFCs, which led to incremental credit disbursements andportfolio buyouts by the banks. We expect loan growth to remain steady, led bycontinued strength in the retail segment, portfolio buyouts from NBFCs due tosustained funding pressure, the government’s recent capital infusion in PSUbanks, and the RBI’s decision to bring six banks out of PCA.

Stance on IL&FS exposure is to be watched for; bond yields largely stable: Mostbanks have downgraded their exposure towards IL&FS holding co and have madeadequate provisions on the same. However, exposure toward the SPVs was keptstandard by some banks. With the NCLAT now giving the relaxation for notdeclaring these accounts as NPA, the stance of banks toward these accountswould be a key monitorable – though we expect status quo to sustain. Bond yieldshave remained largely stable over 4QFY19 while capital markets have performedwell. We, thus, expect banks to report modest treasury gains.

Mid-sized private banks to maintain stronger growth; improvement tocontinue for PSU banks: We expect profitability to pick up to ~79% YoY (~12%YoY exlcluding ICICIBC and AXSB) for private banks and improve for PSU banks.Mid-sized private banks will continue recording superior PAT growth (35%YoY/27% YoY for RBK/AUBANK), barring IIB, which is estimated to report asequential decline due to higher provisioning. PSU banks’ earnings, too, areexpected to pick up.

4QFY19 earnings estimate (INR b)

PAT (INR b) 4Q FY19E

YoY (%)

QoQ (%)

Pvt Banks AUBANK 1.06 27.1 10.7 AXSB 15.18 NM -9.7DCBB 0.93 44.5 7.8 EQUITAS 0.70 102.4 12.9 FB 3.53 143.2 5.7 HDFCB 58.03 20.9 3.9 ICICIBC 21.63 112.0 34.8 IIB 5.26 -44.8 -46.6KMB 13.88 23.5 7.5 RBK 2.40 34.7 6.6 YES 9.71 -17.7 -3.1Pvt Total 132.31 79.0 2.2 PSU Banks BOB 6.57 NM 39.4 INBK 1.81 37.0 18.7 PNB 4.40 NM 78.5 SBIN 36.50 NM -7.7PSU Total 49.27 NM 2.1 Banks Total 181.58 NM 2.1 Life Insurance HDFCLIFE 4.04 16.6 64.6 IPRU 2.69 -21.0 -9.3Life Total 6.74 -2.0 24.2

Technology December 2017 Results Preview | January 2018 December 2018 Results Preview | January 2019

Financials - Banks

June 2018 Results Preview | Sector: Financials March 2019 Results Preview | Sector: Financials

Research Analyst: Nitin Aggarwal ([email protected]); +91 22 6129 1542 | Parth Gutka ([email protected]); +91 22 6129 1567 Alpesh Mehta ([email protected]); +91 22 6129 1526 | Himanshu Taluja ([email protected]); +91 22 6129 1544 Yash Agarwal ([email protected]); +91 22 6129 1571


April 2019 120

Other monitorables: (a) Margins trajectory, particularly as the loan book re-pricing happens, (b) Growth in deposits has been consistently lagging the loangrowth by ~500bp for most of FY19 resulting in stretched CD ratios for privatebanks. Thus, traction in deposits would be a key factor, (c) Asset qualityclassification and provisioning requirement toward IL&FS (especially after therecent relaxation by the NCLT), (d) Commentary on stress assets in theSME/business banking segment. (e) Trends in overall business growth and assetquality.

Our top picks –AXSB, ICICIBC and HDFCB AXSB (BUY): Asset quality will continue improving, as the bank has already

increased the PCR to 75%, which will further curb incremental provisioningrequirement. This, along with an improving outlook on fresh slippages/creditcost, would result in normalized earnings. Retail franchise has strengthened,which is likely to support margins and keep funding cost stable. Fee income hasbecome highly granular, with retail and transaction banking forming 80% of thebank’s fees, driven by cards/third-party distribution, and is expected tocontribute significantly to RoA. AXSB disclosed its FY20-22 strategy with the keyvectors being (i) Growth, (ii) Profitability and (iii) Sustainability. The bank aims todeliver 18% RoE over the medium term, led by reducing credit cost below itslong-term average, improving operating efficiency and optimizing the businessmix. We believe in management's focus on delivering long-term sustainablegrowth, expecting earnings to accelerate FY20 onward.

ICICIBC (BUY): The bank's strong operating performance has beenovershadowed by the continued pressure on asset quality. However, with asuccessive decline in the size of watch-list, controlled slippages from coreportfolio and bottoming out of the NPL ratios over FY19, we expect ICICIBC'sreturn profile to improve steadily. Watch-list has declined successively, whilePCR has increased sharply to 68.5%. We derive comfort on asset quality from (a)bulk of slippages happening from watch-list/OSRL, (b) of the total power sectorexposure, excluding state electricity boards, ~81% is rated A- and above and (c)relatively low concentration of deeper-stressed sectors such as power on watch-list. Retail business matrix remains healthy, with (a) robust liability franchise(CASA ratio of 49.3% as of 3QFY19), (b) retail contribution to fees at 73%+ and(c) higher share of secured loans.

HDFCB (BUY): With structural drivers in place – (a) best-in-class liabilityfranchise, (b) opportunities for market share gains, (c) improving operatingefficiency led by digitalization initiatives and (d) expected traction in income dueto strong expansion in branch network – we expect HDFCB to record strong loangrowth and profitability. Retail growth has been led by contribution from thehigh-RoE products like personal loans, LAS and credit cards. Over the last 12years, HDFCB's market share has increased significantly in (a) retail loans, (b)low-cost deposits and (c) profitability, indicating the strength of its franchisee.Margin expansion, a robust fee income profile and strong control on operatingleverage are likely to continue driving a steady improvement in the returnratios, in our view. We believe that strong capitalization and liquidity levelsshould enable HDFCB to sustain growth momentum over the next few years.

March 2019 Results Preview | Sector: Financials

April 2019 121

Exhibit 1: 4QFY19 earnings estimate (INR m)

CMP (INR) RECO

NII PPoP PAT

Mar-19 YoY (%)

QoQ (%) Mar-19 YoY

(%) QoQ (%) Mar-19 YoY

(%) QoQ (%)

Private Banks AU Small Finance Bank 608 Buy 3,790 32.1 8.9 1,975 27.8 10.5 1,055 27.1 10.7 Axis Bank 767 Buy 56,173 18.7 0.2 45,717 24.5 -17.2 15,185 NM -9.7DCB Bank 203 Neutral 3,126 18.5 6.5 1,852 30.8 6.5 928 44.5 7.8 Equitas Holdings 138 Buy 3,454 39.0 7.9 1,437 113.2 17.3 705 102.4 12.9 Federal Bank 98 Buy 11,278 20.9 4.7 7,459 26.7 5.4 3,526 143.2 5.7 HDFC Bank 2,297 Buy 1,32,442 24.3 5.3 1,10,439 25.0 2.5 58,033 20.9 3.9 ICICI Bank 397 Buy 68,393 13.6 -0.5 62,332 -17.0 1.4 21,628 112.0 34.8 IndusInd Bank 1,776 Buy 24,037 19.7 5.1 22,576 27.6 6.6 5,261 -44.8 -46.6Kotak Mahindra Bank 1,339 Neutral 31,262 21.2 6.4 24,773 22.8 27.8 13,880 23.5 7.5 RBL Bank 678 Buy 6,984 39.5 6.6 5,337 39.3 7.1 2,400 34.7 6.6 Yes Bank 280 Buy 27,614 28.2 3.6 25,006 17.1 25.6 9,709 -17.7 -3.1Pvt Banking Sector Aggregate 3,68,555 21.3 3.4 3,08,900 13.2 2.4 1,32,309 79.0 2.2 PSU Banks Bank of Baroda 133 Buy 49,097 22.7 3.5 35,797 34.3 1.2 6,567 NM 39.4 Indian Bank 282 Buy 17,507 6.9 2.0 12,527 7.6 9.3 1,808 37.0 18.7 Punjab National Bank 98 Neutral 44,324 44.7 3.3 34,738 NM 12.1 4,400 NM 78.5 State Bank 329 Buy 2,29,386 14.8 1.1 1,55,768 -1.9 23.4 36,498 NM -7.7PSU Banking Sector Aggregate 3,40,313 18.7 1.8 2,38,829 24.0 17.0 49,273 NM 2.1 Banking Sector Aggregate 7,08,868 20.0 2.6 5,47,730 17.7 8.3 1,81,582 NM 2.1 Life Insurance HDFC Standard life 380 Buy 95,414 7.2 38.3 4,317 27.4 68.3 4,044 16.6 64.6 ICICI Prudential life 369 Buy 1,03,911 20.0 38.9 3,636 0.6 22.2 2,692 -21.0 -9.3Life Insurance Aggregate 1,99,325 13.5 38.6 7,953 13.6 43.6 6,736 -2.0 24.2 Note: For HDFC life and IPRU life NII represents net premium income, PPoP represents shareholder’s PBT and PAT represents shareholder's profit

Exhibit 2: State-owned banks—one-year forward P/BV Exhibit 3: Private sector banks—one-year forward P/BV

1.0 0.9

1.7

0.5

1.2

0.7 0.3

0.9

1.5

2.1

Mar

-09

Jun-

10

Sep-

11

Dec-

12

Mar

-14

Jun-

15

Sep-

16

Dec-

17

Mar

-19

P/B (x) Avg (x) Max (x)Min (x) +1SD -1SD

3.0 2.3

3.0

1.0

2.7

1.9

0.8

1.8

2.8

3.8

Mar

-09

Jun-

10

Sep-

11

Dec-

12

Mar

-14

Jun-

15

Sep-

16

Dec-

17

Mar

-19

P/B (x) Avg (x) Max (x)Min (x) +1SD -1SD


April 2019 122

Exhibit 4: System loan growth stable at ~14%-15% Exhibit 5: Deposit growth also picked up to ~10%

Exhibit 6: IL&FS exposure and provision thereon INRm Exposure Provision

Axis Bank 8,300 500

Bandhan Bank 3,885 3,850

Federal Bank 2,450 184

ICICI Bank* 8,210 NA

IndusInd Bank 30,000 6,000

RBL Bank 150 NA

South Indian Bank 4,000 600

Yes Bank 26,180 5,708

Bank of Baroda 46,800 4,092

Bank Of India 36,000 3,630

Canara Bank 22,700 4,000

Indian Bank 17,650 2,500

State Bank Of India 31,000 4,500

Union Bank Of India 10,930 150 *Includes downgrades to a group engaged in infrastructure, infra-financing and EPC business and some other accounts (fund and non-fund)

Exhibit 7: NIMs are likely to remain stable driven by lower interest reversals

66.

3

68.

1

69.

9

75.

3

72.

3

75.

7

73.

5

78.

8

76.

6

80.

1

80.

7

86.

5

86.

2

89.

8

93.

4

95.

5

8.8

9.1

10.

6

10.

7 9

.0

11.

2 5

.1

4.7

6.0

5.7

9.8

9.8

12.

4

12.

2

14.

5

14.

5

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

Loans (INR t) Chg YoY (%)

87.5

91.1

91.3

97.2

95.4

102.

1

105.

2

108.

1

106.

1

109.

7

108.

2

114.

7

113.

5

118.

0

120.

3

122.

3

10.7

10.6

10.2

9.7

9.1 12

.0

15.2

11.2

11.1

7.4

2.9 6.

1 7.1 7.6 9.

9

10.0

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

Deposits (INR t) Chg YoY (%)

2.5 2.5 2.3 2.3 2.7 2.7 2.5 2.7 2.4 2.6 2.6 2.5 2.9 2.7 2.8 2.8

4.1 4.0 4.0 4.0 3.9 3.9 3.9 4.0 3.9 3.9 3.9 3.9 3.8 3.9 4.0 3.9

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19E

PSU Private

Most banks have downgraded the IL&FS

holding co exposure and made provisions on the

same

Re-pricing of MCLR to offset elevated cost of funds, which is likely to keep

margins stable


April 2019 123

Exhibit 8: 10-year G-Sec yields have moderated and stood largely stable over the past three months

Exhibit 9: Relative performance—3 months (%)


Exhibit 10: Relative performance—1 year (%)


Exhibit 11: NCLT exposure and provisioning coverage for major banks as on 3QFY19 INR b ICICI BoB SBI BoI UNBK CBK NCLT -1 Exposure (INR b) 39.4 39.1 256.8 43.4 60.0 88.5 PCR towards above (%) 89.6 72.7 66.0 76.0 63.0 62.7 NCLT -2 Exposure (INR b) 95.7 38.4 186.4 26.0 36.9 48.1 PCR towards above (%) 71.4 76.1 86.0 100.0 73.0 78.3 Total Exposure (INR b) 135.1 236.5 443.2 271.4 97.0 136.6 PCR towards above (%) 76.7 73.0 75.0 85.0 67.0 68.2

6.0

6.5

7.0

7.5

8.0

8.5

Mar

-17

May

-17

Jul-1

7

Sep-

17

Nov

-17

Jan-

18

Mar

-18

May

-18

Jul-1

8

Sep-

18

Nov

-18

Jan-

19

Mar

-19

Govt 10yr bond yield

94

98

102

106

110

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Financials Index

95

105

115

125M

ar-1

8

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19



April 2019 124

Exhibit 12: Valuation summary Sector / Companies CMP EPS (INR) PE (x) PB (x) ROE (%)

(INR) Reco FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Banks-Private AU Small Finance 608 Buy 12.8 16.8 22.4 47.4 36.1 27.2 5.7 4.4 2.9 13.7 13.7 12.9 Axis Bank 767 Buy 18.3 40.2 55.5 42.0 19.1 13.8 2.9 2.5 2.2 7.2 14.3 17.0 DCB Bank 203 Neutral 10.4 14.1 18.8 19.5 14.5 10.8 2.1 1.9 1.6 11.9 14.1 16.3 Equitas Holdings 138 Buy 6.4 9.5 12.5 21.6 14.5 11.1 1.9 1.7 1.5 9.2 12.4 14.5 Federal Bank 98 Buy 6.2 8.4 10.5 15.8 11.7 9.3 1.5 1.3 1.2 9.5 11.8 13.2 HDFC Bank 2,297 Buy 79.2 93.9 114.3 29.0 24.5 20.1 4.2 3.7 3.2 16.6 16.2 17.2 ICICI Bank 397 Buy 7.1 20.4 28.7 56.1 19.5 13.9 2.4 2.2 2.0 4.4 11.9 15.1 IndusInd Bank 1,776 Buy 53.8 99.4 127.4 33.0 17.9 13.9 4.2 3.3 2.7 13.1 20.6 21.4 Kotak Mahindra Bank 1,339 Neutral 38.0 45.6 55.3 35.2 29.4 24.2 4.4 3.9 3.3 12.2 13.1 14.2 RBL Bank 678 Buy 20.5 27.5 38.0 33.1 24.7 17.9 3.8 3.4 3.0 12.2 14.7 17.8 South Indian Bank 17 Buy 1.7 2.7 4.0 10.3 6.4 4.3 0.6 0.5 0.5 5.6 8.6 11.8 Yes Bank 280 Buy 18.2 24.7 31.6 15.4 11.3 8.9 2.2 1.9 1.6 15.3 18.1 19.8 Private Bank Aggregate 32.7 21.2 16.4 3.5 3.0 2.6 10.6 14.3 16.0 Banks-PSU Bank of Baroda 133 Buy 7.8 14.8 23.9 17.0 9.0 5.6 0.8 0.8 0.7 4.7 8.4 12.3 Bank of India 106 Neutral -22.0 3.2 11.7 -4.8 33.4 9.0 0.9 0.9 0.8 -14.1 2.4 8.7 Canara Bank 296 Neutral 17.0 42.3 49.3 17.4 7.0 6.0 0.7 0.6 0.6 3.5 8.2 8.9 Indian Bank 282 Buy 14.4 24.8 41.8 19.5 11.3 6.7 0.8 0.7 0.7 4.3 7.1 11.0 Punjab National Bank 98 Neutral -14.6 5.8 11.6 -6.8 17.1 8.5 0.9 0.8 0.8 -11.2 4.8 9.1 State Bank 329 Buy 6.8 27.1 38.1 48.4 12.1 8.6 1.3 1.2 1.1 1.9 10.3 13.3 Union Bank 99 Neutral 4.5 12.8 24.6 22.1 7.7 4.0 0.4 0.4 0.4 2.1 5.5 9.9 PSU Bank Aggregate 2010.3 11.6 7.5 1.0 0.9 0.8 0.0 7.9 11.0 Life Insurance HDFC Life Insur. 380 Buy 6.5 8.0 9.6 58.0 47.7 39.6 4.3 3.6 3.0 17.7 17.7 19.9 ICICI Pru Life 369 Buy 8.0 8.9 10.3 46.1 41.5 35.8 2.4 2.1 1.9 15.3 14.3 14.0 Life Insurance Aggregate 52.4 44.8 37.8 9.8 8.6 7.5 18.7 19.3 19.8 (*) Multiples adj. for value of key ventures/Investments; **ABV represents EV, RoE represents ROEV and P/BV represents P/EV


April 2019 125

Quarterly Performance (INRm) INRm FY18 FY19

FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Interest Income 1,835 2,197 2,504 2,869 2,864 3,210 3,480 3,790 9,405 13,344 % Change (Y-o-Y) 9.1 12.4 24.8 26.7 56.1 46.1 39.0 32.1 20.0 41.9 Other Income 579 926 1,060 1,345 1,031 1,225 1,059 1,711 3,881 5,025 Total Income 2,413 3,122 3,565 4,213 3,894 4,435 4,539 5,501 13,285 18,369 Operating Expenses 1,169 1,689 2,035 2,668 2,370 2,683 2,752 3,526 7,526 11,332 Operating Profit 1,245 1,433 1,529 1,545 1,524 1,752 1,787 1,975 5,759 7,037 % Change (Y-o-Y) 16.0 -9.1 5.5 6.8 22.4 22.2 16.8 27.8 -53.6 22.2 Other Provisions 291 403 329 296 351 350 325 402 1,326 1,428 Profit before Tax 954 1,030 1,200 1,249 1,173 1,402 1,462 1,573 4,433 5,610 Tax Provisions 335 348 411 419 404 488 509 517 1,513 1,918 Net Profit 618 682 789 830 768 914 953 1,055 2,920 3,691 % Change (Y-o-Y) -89.5 -3.0 -4.8 6.6 24.2 34.0 20.8 27.1 -12.4 26.4 Asset Quality GNPA (INRb) 2.2 2.7 2.9 2.7 3.3 3.7 4.2 4.3 2.7 4.3 Net NPA (INRb) 1.5 1.8 1.9 1.7 2.1 2.3 2.6 2.7 1.7 2.7 GNPA (%) 3.0 3.1 2.8 2.0 2.2 2.0 2.1 2.0 2.0 2.0 NNPA (%) 2.1 2.1 1.9 1.3 1.4 1.3 1.3 1.2 1.3 1.2 PCR (Computed, %) 28.6 32.8 34.4 37.2 36.8 37.6 37.6 37.7 37.2 37.7


AU Small Finance Bank CMP: INR608 TP: INR720 (+18%) Buy We expect AU Bank to deliver ~11% QoQ loan growth, while

deposit growth is estimated at ~21% QoQ. NII is expected to grow 9% QoQ as margins are likely to shrink to

5.7% due to a rise in cost of funds. Elevated opex due to investment in manpower and technology will

keep operating profit growth at ~28% YoY. We estimate PAT at INR1.06b v/s INR830m in 4QFY18 (+27% YoY).

FY19 PAT estimate stands at INR3.7b. GNPA/NNPA are expected to decline to ~2.0%/1.2%. AU Bank trades at 2.9x FY21E BV. Buy.

Key issues to watch for Cost-to-income ratio remains the key monitorable as the bank

opens more branches and invests in technology. Slippages in the MSME segment and the impact of recent RBI

guidelines on restructuring of advances to MSMEs.

Bloomberg AUBANK IN

Equity Shares (m) 292.1 M. Cap. (INR b)/(USD b) 178 / 2.5 52-Week Range (INR) 747 / 502

1,6,12 Rel Perf. (%) -2 / 1 / -23

Financial Snapshot (INRb) Y/E March FY18 FY19E FY20E FY21E NII 9.4 13.3 17.9 24.9 PPP 5.8 7.0 9.8 14.0 PAT 2.9 3.7 5.0 7.1 NIM (%) 6.6 5.2 4.5 4.4 EPS (INR) 10.2 12.8 16.8 22.4 EPS Gr. (%) -79.5 25.1 31.4 32.7BV/Sh. (INR) 79.2 107.2 137.6 206.6 RoE (%) 13.8 13.7 13.7 12.9 RoA (%) 1.7 1.3 1.2 1.2 Valuations P/E(X) 59.3 47.4 36.1 27.2 P/BV (X) 7.7 5.7 4.4 2.9

April 2019 126

Quarterly Performance (INR m) FY18 FY19E


Net Interest Income 46,161 45,396 47,315 47,305 51,668 52,321 56,037 56,173 1,86,177 2,16,199 % Change (Y-o-Y) 2.2 0.6 9.2 0.0 11.9 15.3 18.4 18.7 2.9 16.1 Other Income 29,998 25,855 25,931 27,887 29,250 26,784 40,007 31,178 1,09,671 1,27,218 Total Income 76,160 71,252 73,246 75,191 80,918 79,105 96,044 87,351 2,95,848 3,43,417 Operating Expenses 33,248 33,478 34,708 38,469 37,198 38,165 40,797 41,635 1,39,903 1,57,794 Operating Profit 42,912 37,773 38,538 36,722 43,720 40,940 55,247 45,717 1,55,945 1,85,623 % Change (Y-o-Y) -4.0 -7.9 -16.9 -16.1 1.9 8.4 43.4 24.5 -11.3 19.0 Provisions 23,419 31,404 28,110 71,795 33,377 29,274 30,545 23,456 1,54,729 1,16,652 Profit before Tax 19,492 6,369 10,428 -35,073 10,343 11,666 24,701 22,260 1,216 68,971 Tax 6,436 2,045 3,163 -13,186 3,333 3,770 7,893 7,075 -1,541 22,071Net Profit 13,056 4,324 7,264 -21,887 7,011 7,896 16,809 15,185 2,757 46,900 % Change (Y-o-Y) -16.1 35.5 25.3 NM -46.3 82.6 131.4 NM -92.5 NM Operating Parameters Deposit (INR b) 3,937 4,164 4,090 4,536 4,471 4,797 5,141 5,443 4,536 5,443 Loan (INR b) 3,855 4,102 4,209 4,397 4,411 4,561 4,751 5,100 4,397 5,100 Deposit Growth (%) 10.0 9.5 10.3 9.5 13.5 15.2 25.7 20.0 9.5 20.0 Loan Growth (%) 11.8 16.1 21.2 17.8 14.4 11.2 12.9 16.0 17.8 16.0 CD Ratio (%) 97.9 98.5 102.9 96.9 98.7 95.1 92.4 93.7 96.9 93.7 Asset Quality Gross NPA (INR b) 220 274 250 342 327 309 309 297 342 297 Gross NPA (%) 5.0 5.9 5.3 6.8 6.5 6.0 5.8 5.8 6.8 5.8 Net NPA (INR b) 98 141 118 166 149 127 122 112 166 112 Net NPA (%) 2.3 3.1 2.6 3.4 3.1 2.5 2.4 2.2 3.4 2.2 PCR (%) 55.7 48.7 52.9 51.6 54.4 58.9 60.4 62.3 51.6 62.3

Bloomberg AXSB IN

Equity Shares (m) 2,569.9 M. Cap. (INR b)/(USD b) 1,972 / 27.9 52-Week Range (INR) 789 / 478

1,6,12 Rel Perf. (%) 1 / 22 / 37

Financial Snapshot (INRb)Y/E March FY18 FY19E FY20E FY21E NII 186.2 216.2 254.0 312.7 OP 155.9 185.6 226.3 287.3 NP 2.8 46.9 104.0 144.8 NIM (%) 3.1 3.1 3.1 3.2 EPS (INR) 1.1 18.3 40.2 55.5 EPS Gr. (%) -92.8 NM 119.8 38.1 BV/Sh. (INR) 247.2 261.6 301.1 350.9 ABV/Sh. (INR) 193.8 222.6 269.8 324.4 RoE (%) 0.5 7.2 14.3 17.0 RoA (%) 0.0 0.6 1.2 1.4 Valuations P/E(X) 690.6 42.0 19.1 13.8 P/BV (X) 3.1 2.9 2.5 2.2 P/ABV (X) 4.0 3.4 2.8 2.4

CMP: INR767 TP: INR875 (+14%) Buy We expect AXSB to report ~16% loan growth, driven by continued

strong growth in the retail and SME segments. Deposit growth islikely to be ~20%, resulting in a CD ratio of ~94%.

Margins are likely to remain stable QoQ at ~3.5%. Net stressed loans for the bank have declined to 5.2%, while the

bank has already improved its coverage ratio to 75% (Incl. TWO).We expect slippages to remain at ~3.1% (from ~17.7% a year ago)as the bank proceeds to clean up its balance sheet.

We estimate PAT of INR15.2b v/s loss of INR21.9b in 4QFY18, thusresulting in total PAT of INR46.9b for FY19.

AXSB trades at 2.4x FY21E ABV. Buy.

Key issues to watch for Quantum of corporate slippages from BB and below list and any

revision in the size of the stressed assets. Outlook on the power assets. Bank's strategy on retail, unsecured and business banking loans.


Axis Bank

April 2019 127



Net Interest Income 34,050 37,205 43,940 40,023 43,811 44,925 47,432 49,097 1,55,218 1,85,265 % Change (YoY) 1.0 8.6 40.2 11.7 28.7 20.7 7.9 22.7 14.9 19.4 Other Income 15,512 17,371 16,730 16,959 11,478 13,516 16,211 16,046 66,572 57,251 Total Income 49,561 54,576 60,671 56,982 55,289 58,441 63,644 65,143 2,21,789 2,42,516 Operating Expenses 23,080 24,158 24,170 30,327 25,233 27,622 28,258 29,346 1,01,734 1,10,459 Operating Profit 26,481 30,418 36,501 26,655 30,056 30,819 35,385 35,797 1,20,056 1,32,057 % Change (YoY) -0.8 13.1 40.6 -11.7 13.5 1.3 -3.1 34.3 9.4 10.0 Provisions 23,681 23,294 34,265 66,724 21,656 24,295 27,942 26,143 1,47,963 1,00,037 Profit before Tax 2,801 7,125 2,236 -40,069 8,400 6,524 7,443 9,654 -27,907 32,020 Tax 767 3,571 1,118 -9,046 3,120 2,270 2,731 3,086 -3,589 11,207 Net Profit 2,034 3,554 1,118 -31,023 5,280 4,254 4,712 6,567 -24,318 20,813 % Change (YoY) -52.0 -35.6 -55.8 NM 159.6 19.7 321.6 NM NM NM Operating Parameters Deposit (INR b) 5,706 5,832 5,733 5,913 5,815 6,070 6,106 6,327 5,913 6,327 Loan (INR b) 3,776 3,873 3,994 4,274 4,145 4,335 4,487 4,727 4,274 4,727 Asset Quality Gross NPA (INR B) 462 463 485 565 559 551 532 516 565 516 Gross NPA (%) 11.4 11.2 11.3 12.3 12.5 11.8 11.0 10.9 12.3 10.9 Net NPA (INR B) 195.2 195.7 198.5 234.8 223.8 210.6 191.3 170.2 234.8 170.2 Net NPA (%) 5.2 5.1 5.0 5.5 5.4 4.9 4.3 3.6 5.5 3.6 PCR (%) 57.7 57.7 59.1 58.4 59.9 61.8 64.0 67.0 58.4 67.0


Bank of Baroda CMP: INR133 TP: INR160 (+20%) Buy We expect loan book to grow at 11% YoY and deposit growth to

remain moderate at 7% YoY. We expect drill-down in theinternational book to continue and the focus to remain ongranular retail loans.

We expect margins to improve to 2.8% on account of re-pricing ofloans and an improvement in international margins.

We expect slippages to moderate (0.6% annualized) and GNPA/NNPA to decline to 10.9%/3.6%.

Management aims to develop more sustained fee income streams, which, coupled with an improvement in treasury performance, is expected to result in an uptick in other income.

PAT is expected to be at INR6.6b v/s INR4.7b in 3QFY19. PAT for FY19 is expected to be INR20.8b. The stock trades at 0.8x FY21E ABV. Buy.

Key issues to watch for Movement of the watch-list and stress addition from the

exposure toward infra group and international book. Developments on the merger front and the possible benefits

from the same.

Bloomberg BOB IN

Equity Shares (m) 2,651.8

M. Cap. (INR b)/(USD b) 353 / 5.0

52-Week Range (INR) 157 / 91

1,6,12 Rel Perf. (%) 15 / 21 / -24

Financial Snapshot (INRb) Y/E March FY18 FY19E FY20E FY21E NII 155.2 185.3 214.1 246.0 OP 120.1 132.1 153.2 180.6 NP -24.3 20.8 39.3 63.5NIM (%) 2.3 2.6 2.7 2.6EPS (INR) -9.8 7.8 14.8 23.9 EPS Gr. (%) NM NM 89.0 61.4 BV/Sh. (INR) 157.1 163.8 177.5 198.6 ABV/Sh. (INR) 90.9 114.6 135.4 159.9 RoE (%) -5.8 4.7 8.4 12.3 RoA (%) -0.3 0.3 0.5 0.7 Valuations P/E(X) -13.6 17.0 9.0 5.6 P/BV (X) 0.8 0.8 0.8 0.7 P/ABV (X) 1.5 1.2 1.0 0.8

April 2019 128



Net Interest Income 2,332 2,481 2,505 2,637 2,730 2,818 2,936 3,126 9,954 11,610 % Change (Y-o-Y) 31.7 30.4 19.6 19.7 17.1 13.6 17.2 18.5 24.9 16.6 Other Income 858 653 749 849 828 735 945 936 3,103 3,444 Total Income 3,189 3,134 3,254 3,486 3,558 3,553 3,881 4,062 13,057 15,054 Operating Expenses 1,825 1,890 2,029 2,070 2,144 2,092 2,143 2,211 7,807 8,590 Operating Profit 1,364 1,244 1,225 1,416 1,414 1,461 1,738 1,852 5,250 6,465 % Change (Y-o-Y) 47.1 23.4 12.2 22.8 3.7 17.4 41.8 30.8 25.5 23.1 Provisions 355 302 343 388 332 319 401 460 1,388 1,513 Profit before Tax 1,009 942 883 1,028 1,082 1,142 1,336 1,391 3,862 4,952 Tax Provisions 357 353 313 386 387 408 475 463 1,409 1,733 Net Profit 652 589 570 642 695 734 861 928 2,453 3,219 % Change (Y-o-Y) 38.7 21.5 11.1 21.5 6.6 24.7 51.0 44.5 22.8 31.2 Operating Parameters Deposit (INR b) 191.5 205.7 213.0 240.1 250.3 261.7 275.1 296.5 240.1 296.5 Loan (INR b) 162.7 174.0 186.0 203.4 212.4 220.7 228.9 252.2 203.4 252.2 Deposit Growth (%) 22.2 16.3 13.0 24.5 30.7 27.2 29.2 23.5 24.5 23.5 Loan Growth (%) 22.0 20.5 27.5 28.6 30.6 26.9 23.1 24.0 28.6 24.0 Asset Quality Gross NPA (INRb) 2.9 3.2 3.5 3.7 4.0 4.1 4.5 4.8 3.7 4.8 Gross NPA (%) 1.7 1.8 1.9 1.8 1.9 1.8 1.9 1.9 1.8 1.9 Net NPA (INRb) 1.5 1.6 1.6 1.5 1.5 1.6 1.6 1.7 1.5 1.7 Net NPA (%) 0.9 0.9 0.9 0.7 0.7 0.7 0.7 0.7 0.7 0.7 PCR (%) 47.7 50.3 54.4 60.2 61.6 62.1 63.3 64.9 60.2 64.9


DCB Bank CMP: INR203 TP: INR190 (-7%) Neutral Loan growth (24% YoY) and deposit growth (23% YoY) are

expected to remain high off a low base. Growth will be driven byretail loans; management intends to grow corporate loan at sub20%.

Non-interest income to remain muted (+10% YoY) on account oflower fee income.

Overall, we expect PPoP growth to remain strong at ~31% YoY,supported by lower opex (+ ~7% YoY), as the pace of branchaddition is expected to slow down. Credit cost is likely to remainelevated owing to the potential stress in the SME and LAPsegments (we factor in ~2.0% slippage ratio for 4QFY19). We,thus, expect PAT growth of ~45% YoY to INR928m (INR3.2b forFY19).

DCBB trades at 1.7x FY21E ABV. Expensive valuations leavelimited room for upside. Maintain Neutral.

Key issues to watch for Management commentary on slippages in the SME/LAP

segment and the potential restructuring due to RBI guidelines. NIM compression due to higher cost of funds. Management guidance on the cost ratios, particularly as the

pace of branch addition moderates.

Bloomberg DCBB IN

Equity Shares (m) 309.3 M. Cap. (INR b)/(USD b) 63 / 0.9 52-Week Range (INR) 209 / 140

1,6,12 Rel Perf. (%) 3 / 33 / 6

Financial Snapshot (INRb)Y/E MARCH FY18 FY19E FY20E FY21E NII 10.0 11.6 14.5 18.3 OP 5.2 6.5 8.6 11.4 NP 2.5 3.2 4.3 5.8 NIM (%) 4.0 3.8 3.8 3.9 EPS (INR) 8.0 10.4 14.1 18.8 EPS Gr. (%) 13.8 31.2 34.5 34.1 BV/Sh. (INR) 86.7 96.2 109.8 128.1 ABV/Sh. (INR) 83.3 92.4 105.3 122.6 RoE (%) 10.9 11.9 14.1 16.3 RoA (%) 0.9 1.0 1.1 1.1 Valuations P/E (x) 25.5 19.5 14.5 10.8 P/BV (x) 2.3 2.1 1.9 1.6 P/ABV (X) 2.4 2.2 1.9 1.7

April 2019 129



Net Interest Income 2,160 2,263 2,337 2,485 2,544 2,771 3,203 3,454 9,245 11,972 % Change (YoY) 5.7 12.8 -13.6 12.2 17.8 22.4 37.0 39.0 8.1 29.5 Other Income 820 314 326 433 610 647 654 701 1,893 2,612 Total Income 2,980 2,577 2,663 2,918 3,154 3,418 3,857 4,155 11,138 14,584 Operating Expenses 2,263 2,175 2,252 2,244 2,394 2,342 2,632 2,719 8,907 10,087 Operating Profit 717 402 411 674 760 1,076 1,225 1,437 2,231 4,498 % Change (YoY) -37.1 -54.6 -60.7 42.2 6.0 167.7 197.9 113.2 -37.1 101.6 Provisions 439 273 869 138 209 305 243 388 1,719 1,145 Profit before Tax 278 129 -458 536 551 771 982 1,049 512 3,353 Tax 98 65 -152 187 198 274 357 344 198 1,173 Net Profit 180 64 -306 348 353 497 624 705 314 2,179 % Change (YoY) -70.5 -86.1 NM 404.7 95.7 671.2 NM 102.4 -80.3 594.0 Operating Parameters AUM (INR b) 70 73 77 82 89 100 109 124 82 124 Deposits (INR b) 23 31 37 47 57 57 67 79 47 79 Loans (INR b) 61 64 72 78 84 95 107 119 78 119 AUM Growth (%) 7 3 8 15 27 36 41 50 15 50 Deposit Growth (%) NM NM 387 150 154 84 81 67 150 67 Loan Growth (%) 7 14 22 34 38 48 49 52 34 52 Asset Quality Gross NPA (INR B) 3,000 3,702 3,560 2,130 2,390 3,188 3,353 3,567 2,130 3,571 Net NPA (INR B) 1,630 1,988 1,350 1,310 1,460 1,880 1,870 1,892 1,320 1,892 Gross NPA (%) 4.9 5.8 5.0 2.7 2.8 3.4 3.1 3.0 2.7 3.0 Net NPA (%) 3.0 3.2 1.6 1.4 1.5 2.0 1.8 1.6 1.7 1.6 PCR (%) 45.7 46.3 62.1 38.5 38.9 41.0 44.2 47.0 38.0 47.0


Equitas Holdings CMP: INR138 TP: INR160 (+16%) Buy We expect NII growth of 39% YoY due to (a) pick-up in loan

growth and (b) recalibration in the liability side (sufficientavailability of funds). AUM is expected to grow ~50% YoY, as thesecuritized portfolio continues to run down.

NIM is expected to contract by ~31bp QoQ to 8.7% on account ofan increase in cost of funds and a moderation in yields.

Opex growth is expected to stay elevated at 21% YoY (v/s 42%YoY growth in total income), with increase in both employee andother expenses led by investment in further branch additions.

GNPA ratio is likely to remain stable at 3%, with NNPA ratio of1.6%.

The stock trades at 1.6x FY21E ABV. Maintain Buy.

Key issues to watch for Asset quality of MSME book remains a key monitorable. Commentary on growth and asset quality in MFI book.

Bloomberg EQUITAS IN

Equity Shares (m) 340.8

M. Cap. (INR b)/(USD b) 47 / 0.7


1,6,12 Rel Perf. (%) 11 / 7 / -23

Financial Snapshot (INRb) Y/E March FY18 FY19E FY20E FY21E NII 9.2 12.0 16.1 20.1 OP 2.2 4.5 6.5 8.5 NP 0.3 2.2 3.2 4.2 NIM (%) 8.5 7.6 7.6 7.6 EPS (INR) 0.9 6.4 9.5 12.5 BV/Sh. (INR) 67 73 80 91 ABV/Sh. (INR) 64 69 76 87 RoE (%) 1.4 9.2 12.4 14.5 RoA (%) 0.3 1.4 1.6 1.7 Valuations P/E(X) 149.5 21.6 14.5 11.1 P/BV (X) 2.1 1.9 1.7 1.5 P/ABV (X) 2.2 2.0 1.8 1.6

April 2019 130



Net Interest Income 8,007 8,989 9,500 9,332 9,801 10,225 10,773 11,278 35,828 42,076 % Change (YoY) 15.6 23.8 20.0 10.8 22.4 13.7 13.4 20.9 17.4 17.4 Other Income 3,291 2,872 2,286 3,142 2,709 3,229 3,456 3,705 11,591 13,098 Total Income 11,298 11,861 11,786 12,474 12,509 13,454 14,228 14,983 47,419 55,174 Operating Expenses 5,719 6,029 6,172 6,588 6,480 6,478 7,150 7,524 24,509 27,632 Operating Profit 5,579 5,832 5,614 5,886 6,029 6,976 7,078 7,459 22,910 27,543 % Change (YoY) 31.0 22.8 18.2 7.2 8.1 19.6 26.1 26.7 19.0 20.2 Provisions 2,364 1,768 1,624 3,715 1,992 2,888 1,901 2,069 9,472 8,850 Profit before Tax 3,214 4,064 3,990 2,170 4,038 4,088 5,177 5,390 13,439 18,693 Tax 1,113 1,427 1,390 721 1,411 1,427 1,841 1,864 4,650 6,542 Net Profit 2,102 2,637 2,600 1,450 2,627 2,660 3,336 3,526 8,789 12,150 % Change (YoY) 25.6 31.0 26.4 -43.5 25.0 0.9 28.3 143.2 5.8 38.3 Operating Parameters Deposit (INR b) 958.4 972.1 1,005.4 1,119.9 1,112.4 1,181.8 1,234.6 1,332.7 1,119.9 1,332.7 Loan (INR b) 763.1 806.5 849.5 919.6 943.0 1,009.4 1,055.5 1,112.7 919.6 1,112.7 Deposit Growth (%) 18.1 12.6 9.0 14.7 16.1 21.6 22.8 19.0 14.7 19.0 Loan Growth (%) 29.1 24.7 22.0 25.4 23.6 25.2 24.2 21.0 25.4 21.0 Asset Quality Gross NPA (INR b) 18.7 19.5 21.6 28.0 28.7 31.8 33.6 34.4 28.0 34.4 Gross NPA (%) 2.4 2.4 2.5 3.0 3.0 3.1 3.1 3.1 3.0 3.1 Net NPA (INR b) 10.6 10.7 11.6 15.5 16.2 18.0 18.2 18.1 15.5 18.1 Net NPA (%) 1.4 1.3 1.4 1.7 1.7 1.8 1.7 1.6 1.7 1.6 PCR (%) 43.2 45.3 46.5 44.5 43.5 43.6 45.9 47.3 44.5 47.3


Federal Bank CMP: INR98 TP: INR115 (+18%) Buy We expect FB to report loan growth of ~21% YoY (5% QoQ), aided

by the renewed focus on corporate growth. Traction in SME andretail loans would be maintained. We expect NIM to be ~3.2% forthe quarter, aided by MCLR re-pricing and lower interest reversal.

Other income (+18% YoY) is likely to grow at a healthy rate, aidedby strong fee income. We expect PPoP growth of ~27% YoY,significantly higher than opex growth of 14% YoY.

We expect slippages to moderate (1.4% annualized) during thequarter, with most of the dispensation from Kerala floods beingrecognized.

We expect PAT of INR3.5b v/s INR1.5b in 4QFY18 and INR3.3b in3QFY19. PAT for FY19 is expected to be at INR12.1b. FB trades at1.3x FY21E ABV. Buy.

Key issues to watch for Outlook on slippages, asset quality and growth post the recent

floods in Kerala and restructuring of MSME loans. Strategy on balance sheet growth, particularly corporate loan

growth and fee income.

Bloomberg FB IN


M. Cap. (INR b)/(USD b) 194 / 2.7


1,6,12 Rel Perf. (%) 6 / 27 / -9

Financial Snapshot (INRb)Y/E Mar FY18 FY19E FY20E FY21E NII 35.8 42.1 51.4 62.5 OP 22.9 27.5 34.8 43.4 NP 8.8 12.2 16.5 20.6 NIM (%) 3.1 3.1 3.2 3.2 EPS (INR) 4.8 6.2 8.4 10.5 EPS Gr. (%) -1.3 29.6 35.6 25.3BV/Sh. (INR) 61.9 67.2 74.7 84.2 ABV/Sh. (INR) 54.3 58.8 65.5 74.2 ROE (%) 8.3 9.5 11.8 13.2 ROA (%) 0.7 0.8 0.9 1.0 Valuations P/E(X) 20.5 15.8 11.7 9.3 P/BV (X) 1.6 1.5 1.3 1.2 P/ABV (X) 1.8 1.7 1.5 1.3

April 2019 131



Net Interest Income 93,707 97,521 1,03,143 1,06,577 1,08,136 1,17,634 1,25,768 1,32,442 4,00,949 4,83,979 % Change (Y-o-Y) 20.4 22.0 24.1 17.7 15.4 20.6 21.9 24.3 21.0 20.7 Other Income 35,167 36,059 38,692 42,286 38,181 40,156 49,210 49,009 1,52,203 1,76,556 Total Income 1,28,874 1,33,580 1,41,835 1,48,863 1,46,316 1,57,790 1,74,978 1,81,451 5,53,152 6,60,535 Operating Expenses 53,675 55,401 57,322 60,506 59,839 62,991 67,193 71,012 2,26,904 2,61,035 Operating Profit 75,199 78,179 84,513 88,357 86,478 94,800 1,07,784 1,10,439 3,26,248 3,99,500 % Change (Y-o-Y) 29.2 29.8 27.9 21.4 15.0 21.3 27.5 25.0 26.8 22.5 Provisions 15,588 14,762 13,514 15,411 16,294 18,200 22,115 22,337 59,275 78,946 Profit before Tax 59,612 63,417 70,999 72,946 70,184 76,600 85,669 88,102 2,66,973 3,20,554 Tax 20,673 21,907 24,573 24,953 24,169 26,543 29,810 30,069 92,106 1,10,591 Net Profit 38,938 41,510 46,426 47,993 46,014 50,057 55,859 58,033 1,74,867 2,09,963 % Change (Y-o-Y) 20.2 20.1 20.1 20.3 18.2 20.6 20.3 20.9 20.2 20.1 Operating Parameters Deposit Growth (%) 17.0 16.5 10.1 22.5 20.0 20.9 22.0 21.0 22.5 21.0 Loan Growth (%) 23.4 22.3 27.5 18.7 22.0 24.1 23.7 23.4 18.7 23.4 Deposit (INR b) 6,714 6,893 6,990 7,888 8,058 8,334 8,525 9,544 7,888 9,544 Loan (INR b) 5,810 6,049 6,312 6,583 7,086 7,508 7,810 8,124 6,583 8,124 Asset Quality Gross NPA (INR B) 72.4 77.0 82.3 86.1 95.4 101.0 109.0 115.2 86.1 115.2 Gross NPA (%) 1.2 1.3 1.3 1.3 1.3 1.3 1.4 1.4 1.3 1.4 Net NPA (INR B) 25.3 26.0 27.7 26.0 29.1 30.3 33.0 34.2 26.0 34.2 Net NPA (%) 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 PCR 65.1 66.3 66.3 69.8 69.5 70.0 69.7 70.3 69.8 70.3


HDFC Bank CMP: INR2,297 TP: INR2,650 (+15%) Buy Loan growth is expected to remain healthy at ~23% YoY, driven by

retail loans, while deposit growth is estimated at ~21% YoY, led byan increase in term deposits.

Calculated margins are likely to pick up to 4.4% as NII is expectedto grow at ~24% YoY.

Other income growth is expected to come in at ~16% YoY,factoring in healthy fee income and stable treasury performance.

Opex growth at 17% YoY is likely to trail total income growth of~22% YoY (aided by the bank's strong digital initiatives), leading toPPoP growth of ~25% YoY.

We estimate 4QFY19 PAT at INR58b (up ~21% YoY), resulting intotal PAT of INR209.9b for FY19.

Asset quality is expected to remain stable, with GNPA at ~1.4%. HDFCB trades at 3.4x FY21E ABV. Buy.

Key issues to watch for Management indicated some stress in SME and retail book.

Hence, the outlook on the same will be a key monitorable. Trends in digital banking/payments and various initiatives.

Bloomberg HDFCB IN

Equity Shares (m) 2,719.5 M. Cap. (INR b)/(USD b) 6,245 / 88.5 52-Week Range (INR) 2,332 / 1,880

1,6,12 Rel Perf. (%) 2 / 6 / 2

Financial Snapshot (INRb) Y/E MARCH FY18 FY19E FY20E FY21E NII 400.9 484.0 586.5 706.8 OP 326.2 399.5 490.6 599.5 NP 174.9 210.0 254.1 309.2 NIM (%) 4.4 4.3 4.2 4.2 EPS (INR) 67.8 79.2 93.9 114.3 EPS Gr. (%) 19.4 16.8 18.5 21.7 BV/Sh. (INR) 409.6 542.6 618.4 713.4 ABV/Sh. (INR) 387.8 516.1 587.7 675.6 RoE (%) 17.9 16.6 16.2 17.2 RoA (%) 1.8 1.8 1.8 1.8 Payout (%) 23.1 20.8 19.2 16.9 Valuations P/E(X) 33.9 29.0 24.5 20.1 P/BV (X) 5.6 4.2 3.7 3.2 P/ABV (X) 5.9 4.4 3.9 3.4 Div. Yield (%) 0.7 0.7 0.8 0.8

April 2019 132



Net Interest Income 55,898 57,091 57,053 60,217 61,019 64,176 68,753 68,393 2,30,258 2,62,341 % Change (YoY) 8.4 8.7 6.4 1.0 9.2 12.4 20.5 13.6 5.9 13.9 Other Income 33,879 51,862 31,669 56,786 38,518 31,565 38,829 41,246 1,74,196 1,50,157 Total Income 89,778 1,08,953 88,721 1,17,003 99,537 95,741 1,07,581 1,09,639 4,04,455 4,12,498 Operating Expenses 37,944 39,088 38,144 41,863 41,453 43,244 46,117 47,307 1,57,039 1,78,121 Operating Profit 51,833 69,865 50,578 75,140 58,084 52,497 61,464 62,332 2,47,415 2,34,377 % Change (YoY) -0.6 -34.3 -8.4 47.0 12.1 -24.9 21.5 -17.0 -6.6 -5.3Provisions 26,087 45,029 35,696 66,258 59,713 39,943 42,442 33,856 1,73,070 1,75,953 Profit before Tax 25,746 24,836 14,882 8,882 -1,629 12,554 19,023 28,476 74,346 58,423 Tax 5,256 4,254 -1,621 -1,318 -434 3,465 2,974 6,848 6,571 12,853 Net Profit 20,490 20,582 16,502 10,200 -1,196 9,089 16,049 21,628 67,774 45,570 % Change (YoY) -8.2 -33.7 -32.4 -49.6 NM -55.8 -2.7 112.0 -30.9 -32.8Operating Parameters Deposit (INR b) 4,863 4,986 5,174 5,610 5,469 5,587 6,068 6,339 5,610 6,339 Loan (INR b) 4,641 4,828 5,054 5,124 5,163 5,445 5,643 5,841 5,124 5,841 Deposit Growth (%) 14.7 11.0 11.2 14.5 12.5 12.0 17.3 13.0 14.5 13.0 Loan Growth (%) 3.3 6.3 10.5 10.4 11.3 12.8 11.7 14.0 10.4 14.0 Asset Quality Gross NPA (INR b) 431.5 444.9 460.4 540.6 534.6 544.9 515.9 496.3 540.6 496.3 Gross NPA (%) 8.0 7.9 7.8 8.8 8.8 8.5 7.8 8.5 8.8 8.5 Net NPA (INR b) 253.1 241.3 238.1 278.9 241.7 220.9 162.5 141.2 278.9 141.2 Net NPA (%) 4.9 4.4 4.2 4.8 4.2 3.7 2.6 2.4 4.8 2.4 PCR (%) 41.3 45.8 48.3 48.4 54.8 59.5 68.5 71.6 48.4 71.6


ICICI Bank CMP: INR397 TP: INR470 (+18%) Buy We expect loan growth to come in at ~14% YoY, driven largely by

retail loans. Corporate loan growth would be moderate, whileoverseas book would continue declining. Deposits are expected togrow at ~13% YoY, mainly driven by growth in term deposits.

NIMs are expected to be under slight pressure due to an increasein funding cost. NII is expected to grow ~14% YoY.

Other income is likely to grow at 6% QoQ to INR41.2b. Gross slippages are expected to moderate to 2.0% due to a

reduction in corporate slippages. Net stress loans (incl. BB &below) as on 3QFY19 stood at 6.8% of loans and are expected todecline further as incremental stress addition moderates.

We expect PAT of INR21.6b v/s INR10.2b in 4QFY18 and INR16b in3QFY19. We expect ICICIBC to report PAT of INR45.6b for FY19. ICICIBC trades at 1.7x FY21E consolidated ABV. Buy.

Key issues to watch for Movement of BB and below pool and commentary on power

assets. Outlook on asset quality and trend on further relapse from

restructured loans. Growth in CASA + retail term deposits.

Bloomberg ICICIBC IN


M. Cap. (INR b)/(USD b) 2,560 / 36.3


1,6,12 Rel Perf. (%) 4 / 20 / 34

Financial Snapshot (INRb) Y/E March FY18 FY19E FY20E FY21E NII 230.3 262.3 310.2 372.1 OP 247.4 234.4 278.5 338.9 NP 67.8 45.6 131.2 184.2 NIM (%) 3.2 3.2 3.4 3.4 EPS (INR) 11.1 7.1 20.4 28.7 EPS Gr (%) -34.3 -35.9 187.9 40.4BV/Sh. (INR) 161.0 165.4 180.4 202.5ABV/Sh. (INR) 115.3 134.7 152.5 176.2Cons. BV/Sh.INR 172.1 191.9 218.0 253.7 Cons. ABV/Sh. INR 126.4 161.1 190.2 227.5 RoE (%) 6.8 4.4 11.9 15.1 RoA (%) 0.8 0.5 1.3 1.6 Valuations P/BV (x) (Cons) 2.3 2.1 1.8 1.6 P/ABV (x) (Cons) 3.1 2.5 2.1 1.7 P/ABV (x) 2.4 2.1 1.8 1.6 P/E (x) 25.2 39.3 13.6 9.7 Div. Yield (%) 0.6 0.7 1.4 1.7 *ADJ FOR INVT IN SUBSIDIARIES

April 2019 133

Quarterly Performance (INRm) Y/E March FY18 FY19E


Net Interest Income 14,595 15,436 16,227 16,377 18,070 17,309 17,167 17,507 62,636 70,053 % Change (YoY) 18.1 20.8 30.2 18.2 23.8 12.1 5.8 6.9 21.7 11.8 Other Income 6,521 7,146 5,489 4,903 4,398 4,283 4,452 5,151 24,058 18,284 Total Income 21,116 22,582 21,715 21,280 22,468 21,593 21,619 22,658 86,694 88,338 Operating Expenses 8,592 8,826 9,623 9,643 9,492 9,682 10,153 10,131 36,684 39,459 Operating Profit 12,524 13,756 12,092 11,638 12,976 11,910 11,466 12,527 50,010 48,879 % Change (YoY) 38.7 36.7 18.4 8.7 3.6 -13.4 -5.2 7.6 25.0 -2.3Other Provisions 7,156 7,446 9,181 15,463 10,296 10,043 9,237 10,070 39,246 39,646 Profit before Tax 5,368 6,310 2,911 -3,826 2,680 1,867 2,229 2,457 10,764 9,233 Tax 1,644 1,795 -120 -5,145 587 366 707 649 -1,826 2,308 Net Profit 3,724 4,515 3,031 1,320 2,093 1,501 1,523 1,808 12,590 6,925 % Change (YoY) 21.1 11.5 -18.8 -58.7 -43.8 -66.7 -49.8 37.0 -10.4 -45.0Operating Parameters Deposits (INR b) 1,915 1,987 2,065 2,083 2,102 2,195 2,258 2,337 2,083 2,337 Loans (INR b) 1,294 1,392 1,483 1,566 1,584 1,670 1,712 1,779 1,566 1,779 Deposit Growth (%) 7.9 11.5 12.5 14.1 9.8 10.5 9.4 12.2 14.1 12.2 Loan Growth (%) 4.2 13.4 21.6 22.6 22.5 19.9 15.4 13.6 22.6 13.6 Asset Quality Gross NPA (INR B) 96.5 96.2 96.0 119.9 118.3 123.3 132.0 138.8 119.9 138.8 Net NPA (INR B) 52.4 47.5 49.0 59.6 60.0 70.6 75.7 75.3 59.6 75.3 Gross NPA (%) 7.2 6.7 6.3 7.4 7.2 7.2 7.5 7.8 7.4 7.8 Net NPA (%) 4.1 3.4 3.3 3.8 3.8 4.2 4.4 4.2 3.8 4.2 PCR (%) 45.7 50.7 48.9 50.3 49.3 42.8 42.6 45.8 50.3 45.8


Indian Bank CMP: INR282 TP: INR325 (+15%) Buy Loan growth is expected to remain at ~14% YoY (+3.9% QoQ), led

by balance sheet recalibration. Deposit growth is expected to pickup to ~12% YoY (3.5% QoQ).

Calculated NIM is expected to expand slightly at ~3%, while NIIgrowth is likely to come in at ~7% YoY.

Overall non-interest income is expected to increase, primarily ledby improved treasury gains.

We expect the slippage ratio to moderate to 3.2% from the highlevels seen over the past 3-4 quarters and the NNPA ratio todecline to 4.2%, improving the coverage ratio to 46%.

INBK trades at 0.79x FY21E ABV. Maintain Buy.

Key issues to watch for Outlook on business growth. Incremental slippages could provide some overhang. Views on margin trajectory.

Bloomberg INBK IN


M. Cap. (INR b)/(USD b) 135 / 1.9


1,6,12 Rel Perf. (%) 14 / 7 / -24

Financial Snapshot (INRb) Y/E March FY18 FY19E FY20E FY21E NII 62.6 70.1 75.0 92.1 OP 50.0 48.9 50.7 64.9 NP 12.6 6.9 11.9 20.1 NIM (%) 2.8 2.7 2.6 2.7 EPS (INR) 26.2 14.4 24.8 41.8 EPS Gr. (%) -10.4 -45.0 72.3 68.3BV/Sh. (INR) 354 364 385 421 ABV/Sh. (INR) 265 253 275 323 RoE (%) 8.3 4.3 7.1 11.0 RoA (%) 0.5 0.3 0.4 0.6 Valuations P/E(X) 10.7 19.5 11.3 6.7 P/BV (X) 0.8 0.8 0.7 0.7 P/ABV (X) 1.1 1.1 1.0 0.9

April 2019 134



Net Interest Income 17,741 18,210 18,948 20,076 21,224 22,033 22,881 24,037 74,974 90,175 % Change (YoY) 30.8 24.7 20.0 20.4 19.6 21.0 20.8 19.7 23.7 20.3 Other Income 11,673 11,876 11,868 12,085 13,016 13,173 14,689 15,174 47,501 56,051 Total Income 29,413 30,086 30,816 32,161 34,240 35,206 37,569 39,211 1,22,475 1,46,226 Operating Expenses 13,528 13,751 14,169 14,467 15,129 15,281 16,400 16,635 55,914 63,445 Operating Profit 15,885 16,335 16,647 17,694 19,111 19,924 21,170 22,576 66,561 82,781 % Change (YoY) 28.8 27.5 22.1 12.5 20.3 22.0 27.2 27.6 22.1 24.4 Provisions 3,100 2,938 2,362 3,356 3,500 5,903 6,067 14,780 11,754 30,250 Profit before Tax 12,786 13,398 14,285 14,338 15,611 14,022 15,103 7,796 54,807 52,531 Tax 4,420 4,597 4,923 4,808 5,254 4,819 5,253 2,535 18,747 17,861 Net Profit 8,365 8,801 9,362 9,531 10,357 9,203 9,850 5,261 36,060 34,671 % Change (YoY) 26.5 25.0 24.7 26.8 23.8 4.6 5.2 -44.8 25.7 -3.9Operating Parameters Deposit Growth (%) 31.4 25.9 22.5 19.8 18.8 18.9 20.3 22.0 19.8 22.0 Loan Growth (%) 24.3 24.5 25.1 28.2 29.4 32.4 34.7 32.0 28.2 32.0 Deposit (INR b) 1,337 1,414 1,461 1,516 1,589 1,682 1,757 1,850 1,516 1,850 Loan (INR b) 1,164 1,232 1,285 1,450 1,507 1,631 1,732 1,913 1,450 1,913 Asset Quality Gross NPA (INR b) 12.7 13.5 15.0 17.0 17.4 17.8 19.7 21.2 17.0 21.2 Gross NPA (%) 1.1 1.1 1.2 1.2 1.2 1.1 1.1 1.1 1.2 1.1 Net NPA (INR b) 5.1 5.4 5.9 7.5 7.6 7.9 10.3 10.7 7.5 10.7 Net NPA (%) 0.4 0.4 0.5 0.5 0.5 0.5 0.6 0.6 0.5 0.6 PCR (%) 60.0 60.1 60.5 56.3 56.2 55.8 47.7 49.5 56.3 49.5


IndusInd Bank CMP: INR1,776 TP: INR2,050 (+15%) Buy We expect IIB to report strong loan growth of ~32% YoY in

4QFY19, significantly ahead of system loan growth. Depositgrowth should also remain strong at ~22% YoY. Margins are likelyto remain flattish QoQ at ~3.9%.

We expect non-interest income to grow ~26% YoY, supported byhealthy fee income growth. Stronger third-party distribution feesand treasury gains will further support non-interest income.

Opex growth would remain at ~15% YoY v/s 22% growth in totalincome. PPoP growth would remain healthy at 28% YoY.

We expect earnings to remain under pressure and report a PATof INR5.3b in 4QFY19 (INR34.7b for FY19) on account of elevatedprovisions due to IL&FS.

IIB trades at 2.8x FY21E ABV. Maintain Buy.

Key issues to watch for Impact on the CV portfolio, particularly after the slowdown in

CV sales. Corporate asset quality will be a key monitorable. Provisioning and further developments on the IL&FS exposure

Bloomberg IIB IN


M. Cap. (INR b)/(USD b) 1,069 / 15.1

52-Week Range (INR) 2,038 / 1,334

1,6,12 Rel Perf. (%) 9 / 1 / -19

Financial Snapshot (INR B) Y/E MARCH FY18 FY19E FY20E FY21E NII 75.0 90.2 135.6 176.7 OP 66.6 82.8 125.8 161.6 NP 36.1 34.7 69.3 89.8 NIM (%) 4.2 4.0 4.7 4.8 EPS (INR) 60.2 53.8 99.4 127.4 EPS Gr. (%) 25.2 -10.6 84.8 28.2BV/Sh. (INR) 394 427.1 541.0 656.6 ABV/Sh. (INR) 385 416.2 529.2 644.3 RoE (%) 16.5 13.1 20.6 21.4 RoA (%) 1.8 1.4 2.2 2.3 Payout (%) 12.0 16.4 10.5 9.2 Valuations P/E (X) 29.5 33.0 17.9 13.9 P/BV (X) 4.5 4.2 3.3 2.7 P/ABV (X) 4.6 4.3 3.4 2.8 Div. Yield (%) 0.4 0.5 0.6 0.7

April 2019 135



Net Interest Income 22,456 23,126 23,937 25,798 25,829 26,891 29,391 31,262 95,317 1,13,373 % Change (Y-o-Y) 17.0 15.9 16.7 19.4 15.0 16.3 22.8 21.2 17.3 18.9 Other Income 9,069 9,539 10,398 11,516 11,646 12,053 9,639 12,858 40,522 46,195 Total Income 31,525 32,665 34,335 37,314 37,475 38,944 39,030 44,120 1,35,839 1,59,568 % Change (Y-o-Y) 18.9 15.6 16.0 17.9 18.9 19.2 13.7 18.2 17.1 17.5 Operating Expenses 15,571 15,417 16,135 17,134 17,150 17,994 19,646 19,347 64,257 74,136 Operating Profit 15,954 17,248 18,201 20,180 20,325 20,950 19,384 24,773 71,582 85,432 % Change (Y-o-Y) 21.3 19.8 19.1 18.6 27.4 21.5 6.5 22.8 19.6 19.3 Other Provisions 2,037 2,165 2,128 3,069 4,696 3,538 -323 3,880 9,400 11,791 Profit before Tax 13,917 15,083 16,073 17,110 15,629 17,412 19,707 20,893 62,182 73,641 Tax Provisions 4,789 5,140 5,541 5,870 5,380 5,995 6,798 7,012 21,339 25,185 Net Profit 9,128 9,943 10,532 11,241 10,249 11,417 12,909 13,880 40,843 48,455 % Change (Y-o-Y) 23.0 22.3 19.7 15.1 12.3 14.8 22.6 23.5 19.7 18.6 Loan growth (%) 17.9 21.1 23.1 24.7 24.3 21.2 23.5 22.3 24.7 22.3 Cost to Income Ratio (%) 49.4 47.2 47.0 45.9 45.8 46.2 50.3 43.9 47.3 46.5 Asset Quality Gross NPA (INR b) 37.3 38.1 37.1 38.3 39.0 40.3 41.3 42.7 38.3 42.7 Gross NPA (%) 2.6 2.5 2.3 2.3 2.2 2.2 2.1 2.1 2.3 2.1 Net NPA (INR b) 17.8 19.2 17.3 16.7 15.3 15.0 14.0 14.5 16.7 14.5 Net NPA (%) 1.3 1.3 1.1 1.0 0.9 0.8 0.7 0.7 1.0 0.7 PCR (%) 52.3 49.7 53.5 56.5 60.8 62.8 66.2 66.1 56.5 66.1


Kotak Mahindra Bank CMP: INR1,339 TP: INR1,350 (+1%) Neutral We expect standalone bank to report loan growth of ~22% YoY

and deposit growth of ~18% YoY in 4QFY19. Margins are likely toexpand marginally to ~4.4%. Overall, we expect NII growth of 21%YoY. CASA retention would be a key driver of NII and NIM.

With strong digital initiatives and fast-paced customer acquisition,fee income would be a key growth driver for the bank. We factorin other income growth of ~12% in 4QFY19, driven mostly byhealthy fee traction and expect the trend to continue.

We expect asset quality to remain stable, with GNPA at ~2.1% andNNPA at 0.7%, led by an improvement in the coverage ratio.

We expect standalone bank earnings to grow ~23% YoY(INR13.9b) for 4QFY19. We thus expect FY19 PAT of INR48.5.

The stock trades at 3.4x FY21E consolidated BV. Maintain Neutral.

Key issues to watch for Guidance on balance sheet growth, CASA and fee income

growth. Trend in customer acquisition post the Aadhar verdict. GNPAs in the MSME segment. Update on the stake reduction.

Bloomberg KMB IN


M. Cap. (INR b)/(USD b) 2,554 / 36.2

52-Week Range (INR) 1,424 / 1,002

1,6,12 Rel Perf. (%) 1 / 12 / 5

Financial Snapshot (INR B) Y/E MARCH FY18 FY19E FY20E FY21E NII 95.3 113.4 138.0 169.4 OP 71.6 85.4 105.9 131.7 NP 40.8 48.5 58.8 72.7 Cons. NP 62.0 72.5 86.8 105.5 NIM (%) 4.3 4.3 4.3 4.4 EPS (INR) 21.8 25.4 30.8 38.1 EPS Gr. (%) 17.4 16.6 21.3 23.6 BV. (INR) 196.7 221.2 250.9 287.9 ABV. (INR) 177.6 201.0 228.5 261.7 Cons. BV. (INR) 264.9 302.8 347.5 401.9 Cons. ABV. (INR) 253.5 292.2 336.3 389.8 Cons. RoE (%) 13.9 13.4 14.0 14.8 RoE (%) 12.5 12.2 13.1 14.2 RoA (%) 1.7 1.7 1.7 1.7 Valuations P/BV (X) (Cons.) 5.1 4.4 3.9 3.3 P/ABV (X) (Cons.) 5.3 4.6 4.0 3.4 P/ABV (X) (Adj.) 5.1 4.5 4.0 3.5 P/E(X) (Adj.) 41.8 35.9 29.6 23.9

*Adjusted for Investment in subsidiaries

April 2019 136

Quarterly Performance (INRm) Y/E March FY18 FY19E


Net Interest Income 38,551 40,152 39,887 30,634 46,919 39,741 42,901 44,324 1,49,224 1,73,884 % Change (YoY) 4.2 3.5 6.9 -16.8 21.7 -1.0 7.6 44.7 -0.5 16.5 Other Income 23,318 19,060 30,820 15,611 19,592 17,096 18,192 18,831 88,809 73,711 Total Income 61,869 59,212 70,707 46,244 66,511 56,837 61,092 63,155 2,38,033 2,47,595 Operating Expenses 29,696 26,421 28,255 50,718 24,564 28,442 30,094 28,417 1,35,091 1,11,517 Operating Profit 32,173 32,791 42,452 -4,474 41,947 28,395 30,999 34,738 1,02,942 1,36,078 % Change (YoY) -1.8 -1.0 52.7 NM 30.4 -13.4 -27.0 NM -29.3 32.2 Other Provisions 26,087 24,408 44,667 2,03,531 57,582 97,579 27,538 28,158 2,98,738 2,10,857 Profit before Tax 6,086 8,383 -2,215 -2,08,005 -15,635 -69,184 3,460 6,580 -1,95,796 -74,779Tax 2,652 2,777 -4,516 -73,836 -6,235 -23,861 995 2,180 -72,968 -26,920Net Profit 3,434 5,606 2,301 -1,34,169 -9,400 -45,324 2,465 4,400 -1,22,828 -47,858 % Change (YoY) 12.1 2.0 11.1 NM NM NM 7.1 NM NM NM Operating Parameters Deposits (INR b) 6,256 6,362 6,480 6,422 6,303 6,497 6,504 6,660 6,422 6,660 Loans (INR b) 3,997 4,103 4,521 4,337 4,153 4,310 4,344 4,467 4,337 4,467 Deposit Growth (%) 12.9 10.7 5.9 3.3 0.8 2.1 0.4 3.7 3.3 3.7 Loan Growth (%) 2.1 4.2 17.2 3.4 3.9 5.0 -3.9 3.0 3.4 3.0 Asset Quality Gross NPA (INR B) 577 576 575 866 829 813 777 726 866 726 Net NPA (INR B) 346 346 341 487 439 383 357 336 487 336 Gross NPA (%) 13.7 13.3 12.1 20.0 18.3 17.2 16.3 16.3 20.0 16.3 Net NPA (%) 8.7 8.4 7.6 11.2 10.6 8.9 8.2 7.5 11.3 7.5 PCR (%) 40.1 40.0 40.8 43.8 47.1 52.9 54.1 53.7 43.8 53.7


Punjab National Bank CMP: INR98 TP: INR90 (-9%) Neutral We expect loan growth to come in at 3% YoY and deposits growth

at ~4% YoY. NII growth is expected to pick up to 45% YoY due to lower interest

reversals as 4QFY18 witnessed spike in slippages. We expectmargins to remain stable at ~2.6%.

Overall non-interest income is estimated to grow 21% YoY,supported by higher fee income.

Stress addition is likely to moderate at 2.6% annualized. Weexpect credit cost to be ~405bp for FY19.

The stock trades at 0.8x FY21E BV. Maintain Neutral.

Key issues to watch for Outlook on asset quality, as net stressed loans remain one of the

highest in the industry. NIMs and CASA performance. Overall growth outlook.

Bloomberg PNB IN


M. Cap. (INR b)/(USD b) 374 / 5.3


1,6,12 Rel Perf. (%) 20 / 49 / -15

Financial Snapshot (INRb) Y/E March FY18 FY19E FY20E FY21E NII 149.2 173.9 193.6 215.2 OP 102.9 136.1 153.2 173.7 NP -122.8 -47.9 21.9 44.3NIM (%) 2.1 2.4 2.6 2.7EPS (INR) -50.3 -14.6 5.8 11.6 EPS Gr. (%) NM NM NM 101.9 BV/Sh. (INR) 141 112 117 129 ABV/Sh. (INR) 6 41 60 79 RoE (%) -29.5 -11.2 4.8 9.1 RoA (%) -1.7 -0.6 0.3 0.5 Valuations P/E(X) -2.0 -6.8 17.1 8.5 P/BV (X) 0.7 0.9 0.8 0.8 P/ABV (X) 15.8 2.4 1.6 1.3

April 2019 137

Quarterly performance (INRm) FY18 FY19E


Net Interest Income 3,784 4,202 4,673 5,005 5,527 5,930 6,551 6,984 17,663 24,991 % Change (Y-o-Y) 54.7 38.7 45.3 42.1 46.1 41.1 40.2 39.5 44.6 41.5 Other Income 2,569 2,411 2,582 3,120 3,260 3,331 3,741 4,089 10,682 14,421 Total Income 6,353 6,612 7,255 8,124 8,787 9,261 10,291 11,073 28,345 39,412 Operating Expenses 3,239 3,581 3,921 4,293 4,464 4,770 5,307 5,736 15,034 20,277 Operating Profit 3,114 3,032 3,334 3,831 4,323 4,491 4,985 5,337 13,311 19,135 % Change (Y-o-Y) 68.8 38.4 41.8 36.0 38.8 48.1 49.5 39.3 44.6 43.8 Other Provisions 945 749 823 1,129 1,404 1,397 1,607 1,642 3,645 6,049 Profit before Tax 2,169 2,283 2,511 2,702 2,920 3,094 3,378 3,695 9,665 13,086 Tax Provisions 759 776 858 921 1,019 1,048 1,126 1,295 3,315 4,488 Net Profit 1,410 1,506 1,653 1,781 1,900 2,045 2,252 2,400 6,351 8,598 % Change (Y-o-Y) 44.9 67.6 28.5 36.9 34.8 35.8 36.2 34.7 42.4 35.4 Operating Parameters Deposit (INR b) 354.3 365.7 386.2 439.0 449.5 477.9 521.9 583.9 439.0 583.9 Loan (INR b) 311.1 335.8 368.9 402.7 422.0 458.7 498.9 545.6 402.7 545.6 Deposit Growth (%) 37.3 30.8 28.7 26.9 26.9 30.7 35.1 33.0 26.9 33.0 Loan Growth (%) 39.7 35.0 37.8 36.7 35.7 36.6 35.2 35.5 36.7 35.5 Asset Quality Gross NPA (INR b) 4.6 4.9 5.8 5.7 6.0 6.4 7.0 7.4 5.7 7.4 Gross NPA (%) 1.5 1.4 1.6 1.4 1.4 1.4 1.4 1.4 1.4 1.4 Net NPA (INR b) 2.5 2.6 3.6 3.1 3.2 3.4 3.6 3.6 3.1 3.6 Net NPA (%) 0.8 0.8 1.0 0.8 0.8 0.7 0.7 0.7 0.8 0.7 PCR (%) 45.3 46.5 38.3 44.8 47.0 47.5 48.5 51.1 44.8 51.1


RBL Bank CMP: INR678 TP: INR650 (-4%) Buy Loan growth (+36% YoY, driven by credit card/MFI business) and

deposit growth (+33% YoY) are expected to remain robust andsignificantly above industry average.

We expect NII to grow ~40% YoY, led by strong loan growth andfavorable NIMs. Increase in yields is expected to offset higher costof funds.

Overall non-interest income is expected to grow ~31% YoY, led bystrong growth in fee income and digital initiatives. Opex growthof 34% (led by branch expansion) is expected to trail total incomegrowth of 36%, leading to an increase in PPoP by 39% YoY toINR5.3b.

Asset quality is expected to remain largely stable in 4QFY19, withthe MFI segment showing lower delinquencies. Credit costs wouldlargely be under control. We expect PAT growth of 35%/7%YoY/QoQ to INR2.4b.

RBK trades at 3.1x FY21E ABV. We maintain our Buy rating.Key issues to watch for Management commentary on slippages in the SME segment. Trend in provisioning expenses, particularly residual credit cost

related to MFI business. CASA ratio and traction on NIMs. Update and commentary on balance sheet growth strategy.

Bloomberg RBK IN Equity Shares (m) 428.1 M. Cap. (INR b)/(USD b) 290 / 4.1

52-Week Range (INR) 692 / 439 1,6,12 Rel Perf. (%) 6 / 23 / 23

Financial Snapshot (INRb)Y/E March FY18 FY19E FY20E FY21E

NII 17.7 25.0 33.4 45.4 OP 13.3 19.1 25.8 35.7 NP 6.4 8.6 11.5 15.9 NIM (%) 3.3 3.6 3.7 3.8 EPS (INR) 15.1 20.5 27.5 38.0 EPS Gr. (%) 27.3 35.4 34.2 38.0 BV/Sh. (INR) 159.3 176.1 198.5 228.5 ABV/Sh. (INR) 152.8 170.1 190.3 217.3 RoE (%) 11.6 12.2 14.7 17.8 RoA (%) 1.1 1.2 1.2 1.3 Payout (%) 15.0 15.0 16.0 18.0 Valuations P/E(X) 44.8 33.1 24.7 17.9 P/BV (X) 4.3 3.8 3.4 3.0 P/ABV (X) 4.4 4.0 3.6 3.1

April 2019 138

Quarterly Performance (INR b) Y/E March FY18 FY19E


Net Interest Income 176.1 185.9 186.9 199.7 218.0 209.1 226.9 229.4 748.5 883.3 % Change (YoY) -3.5 2.6 5.2 -5.2 23.8 12.5 21.4 14.8 -0.5 18.0 Other Income 80.1 160.2 80.8 124.9 66.8 93.8 80.4 102.5 446.0 343.4 Total Income 256.1 346.0 267.7 324.7 284.8 302.8 307.3 331.9 1,194.5 1,226.8 Operating Expenses 137.4 146.0 150.2 165.9 165.0 163.8 181.0 176.1 599.4 686.0 Operating Profit 118.7 200.0 117.5 158.8 119.7 139.0 126.2 155.8 595.1 540.8 % Change (YoY) -13.7 43.0 -18.4 -8.2 0.8 -30.5 7.4 -1.9 0.1 -9.1Other Provisions 89.3 191.4 188.8 281.0 192.3 120.9 60.1 100.7 750.4 474.0 Profit before Tax 29.4 8.6 -71.2 -122.1 -72.6 18.1 66.2 55.0 -155.3 66.8 Tax Provisions 9.4 -7.2 -47.1 -44.9 -23.8 8.7 26.6 18.5 -89.8 30.1 Net Profit 20.1 15.8 -24.2 -77.2 -48.8 9.4 39.5 36.5 -65.5 36.7 % Change (YoY) 436.2 NM NM NM NM -40.3 NM NM NM NM Operating Parameters Deposits 26,025.3 26,231.8 26,512.4 27,063.4 27,478.1 28,074.2 28,305.4 29,093.2 27,063.4 29,093.2 Loans 18,042.2 18,026.1 18,262.1 19,348.8 18,757.7 19,573.4 20,477.8 21,380.4 19,348.8 21,380.4 Asset Quality Gross NPA 1,880.7 1,861.1 1,991.4 2,234.3 2,128.4 2,058.6 1,877.6 1,792.5 2,234.3 1,792.5 Gross NPA (%) 10.0 9.8 10.4 10.9 10.7 10.0 8.7 8.4 10.9 8.4 Net NPA 1,077.6 979.0 1,023.7 1,108.5 992.4 948.1 809.4 773.1 1,108.5 773.1 Net NPA (%) 6.0 5.4 5.6 5.7 5.3 4.8 4.0 3.6 5.7 3.6 PCR (%) 42.7 47.4 48.6 50.4 53.4 53.9 56.9 56.9 50.4 56.9


State Bank of India Bloomberg SBIN IN Equity Shares (m) 8,924.6 M. Cap. (INR b)/(USD b) 2,932 / 41.5


Financial Snapshot (INRb) Y/E March FY18 FY19E FY20E FY21E NII 748.5 883.3 1,039.0 1,204.2 OP 595.1 540.8 701.6 839.0 NP -65.5 36.7 213.6 305.7NIM (%) 2.5 2.8 3.0 3.1 EPS (INR) -7.7 4.1 23.9 34.3EPS Gr. (%) NM NM 481.4 43.1 BV (INR) 230.2 233.8 255.4 286.2 ABV (INR) 134.5 164.8 199.5 235.0 Cons. BV (INR) 242.8 246.9 269.3 302.1 Cons. ABV (INR) 152.3 183.5 217.7 254.1 RoE (%) -3.5 1.9 10.3 13.3RoA (%) -0.2 0.1 0.5 0.7 Valuations P/BV (x) (Cons.) 1.3 1.3 1.2 1.1 P/ABV (x) (Cons.) 2.0 1.8 1.5 1.3 P/ABV (x) 1.9 1.6 1.3 1.1 P/E (x) -33.3 62.2 10.7 7.5

*Adjusted for Investment in subs

CMP: INR329 TP: INR380 (+16%) Buy We expect loan growth of 11% YoY, led by growth in retail books

and portfolio buyouts. Deposit growth is expected to come in at8% YoY.

NII is expected to increase by 15% YoY due to lower interestreversals and better recoveries from w/off accounts.

Non-interest income is expected to decline YoY, but increase QoQon account of an improvement in the treasury performance andfee income.

Stress addition is likely to moderate to 1.9% levels, as we believethat most of the stress has been recorded in previous quarters.Developments on the IBC-related accounts and resolution ofpower assets remain a key monitorable.

The stock trades at 1.3x FY21E consolidated ABV. Buy.

Key issues to watch for Updates on the retail, SME and agri slippages. Recoveries from resolution of NCLT accounts. Outlook on power assets and macro developments on asset

quality.

April 2019 139



Net Interest Income 18,089 18,851 18,888 21,542 22,191 24,176 26,664 27,614 77,371 1,00,645 % Change (Y-o-Y) 44.5 33.5 26.8 31.4 22.7 28.2 41.2 28.2 33.5 30.1 Other Income 11,322 12,484 14,223 14,210 16,941 14,735 8,909 13,743 52,238 54,328 Total Income 29,411 31,335 33,111 35,752 39,133 38,910 35,573 41,358 1,29,609 1,54,973 Operating Expenses 12,369 12,269 13,093 14,398 14,586 15,246 15,669 16,352 52,128 61,853 Operating Profit 17,042 19,067 20,018 21,354 24,547 23,664 19,904 25,006 77,481 93,121 % Change (Y-o-Y) 30.4 37.6 37.7 26.3 44.0 24.1 -0.6 17.1 32.7 20.2 Provisions 2,858 4,471 4,213 3,996 6,257 9,400 5,502 10,681 15,538 31,839 Profit before Tax 14,184 14,596 15,805 17,358 18,291 14,265 14,401 14,325 61,943 61,281 Tax 4,529 4,569 5,036 5,564 5,687 4,618 4,383 4,616 19,697 19,304 Net Profit 9,655 10,027 10,769 11,794 12,604 9,647 10,019 9,709 42,246 41,978 % Change (Y-o-Y) 31.9 25.1 22.0 29.0 30.5 -3.8 -7.0 -17.7 26.9 -0.6 Operating Parameters Deposit Growth (%) 22.6 23.4 29.7 40.5 42.0 41.0 29.7 18.5 40.5 18.5 Loan Growth (%) 32.1 34.9 46.5 53.9 53.4 61.2 42.2 24.3 53.9 24.3 Deposit (INR b) 1,502 1,580 1,717 2,007 2,134 2,228 2,228 2,379 2,007 2,379 Loan (INR b) 1,400 1,487 1,715 2,035 2,147 2,396 2,439 2,530 2,035 2,530 Asset Quality Gross NPA (INR B) 13.6 27.2 29.7 26.3 28.2 38.7 51.6 59.3 26.3 59.3 Gross NPA (%) 1.0 1.8 1.7 1.3 1.3 1.6 2.1 2.3 1.3 2.3 Net NPA (INR B) 5.5 15.4 16.0 13.1 12.6 20.2 28.8 29.1 13.1 29.1 Net NPA (%) 0.4 1.0 0.9 0.6 0.6 0.8 1.2 1.2 0.6 1.2 PCR (%) 60.0 43.3 46.4 50.0 55.3 47.8 44.2 50.9 50.0 50.9


Yes Bank CMP: INR280 TP: INR270 (-4%) Buy We expect loan growth to remain ahead of the system at ~24%

YoY on the back of refinancing opportunities, strong growth inretail banking and sell-down of portfolios. Deposits growth is alsolikely to remain healthy at ~19% YoY.

We expect NIM to pick up to 3.4% due to MCLR increase andpricing power shifting toward banks. Consequently, NII growth isexpected to remain robust at ~28% YoY.

Non-interest income growth is likely to remain strong, led bythird-party distribution and processing fees, further aided by theimproved treasury performance.

GNPL/NNPL ratio is expected to increase slightly in 4QFY19, butthe likely higher recoveries in 4QFY19 will provide some supporton the asset quality front.

We expect PAT of INR9.7b for 4QFY19 (INR41.9b for FY19). YES trades at 1.7x FY21E ABV. Maintain Buy.

Key issues to watch for Capital raising plans and strategy of the bank under new MD &

CEO. Performance on balance sheet growth/asset

quality/CASA/margins.

Bloomberg YES IN Equity Shares (m) 2305.7 M. Cap. (INR b)/(USD b) 647 / 9.2


Financial Snapshot (INRb) Y/E March FY18 FY19E FY20E FY21E NII 77.4 100.6 126.2 160.4 OP 77.5 93.1 114.1 142.5 NP 42.2 42.0 56.9 72.8 NIM (%) 3.2 3.1 3.2 3.3 EPS (INR) 18.4 18.2 24.7 31.6 EPS Gr. (%) 26.3 -1.1 35.6 28.0BV/Sh. (INR) 111.8 126.2 146.6 173.4 ABV/Sh. (INR) 107.4 116.8 140.2 166.8 RoE (%) 17.7 15.3 18.1 19.8 RoA (%) 1.6 1.2 1.4 1.5 Valuations P/E(X) 15.2 15.4 11.3 8.9 P/BV (X) 2.5 2.2 1.9 1.6 P/ABV (X) 2.6 2.4 2.0 1.7

April 2019 140

Quarterly Performance (INR m)

Policy holder's A/c FY18 FY19E


Net premium income 36,615 53,894 54,200 89,000 49,947 67,776 68,977 95,414 2,33,710 2,82,113 Growth (%) 15.3 22.9 19.5 24.0 36.4 25.8 27.3 7.2 21.3 20.7 Commission paid 1,563 2,475 2,625 4,087 1,982 2,637 2,623 6,213 10,749 13,454 Operating expense 5,638 7,189 7,769 10,998 7,246 9,458 9,243 9,354 31,593 35,301 Surplus/(Deficit) 3,012 2,169 1,797 3,968 3,388 1,946 2,217 5,893 10,946 13,443 Growth (%) 72.2 -30.0 0.0 40.1 12.5 -10.3 23.3 48.5 79.9 22.8 Shareholders' Account Total income 3,351 2,549 2,117 4,939 4,081 3,073 2,604 6,039 12,955 15,797 PBT 3,267 2,450 2,162 3,390 3,918 2,963 2,565 4,317 11,267 13,763 Tax 103 65 89 -79 116 93 109 274 177 592 PAT 3,164 2,385 2,073 3,468 3,802 2,869 2,456 4,044 11,090 13,171 Growth (%) 28.5 9.3 14.8 40.4 20.2 20.3 18.5 16.6 24.3 18.8 Other key data (%) AUM NA NA 1,044 1,066 1,096 1,132 1,210 1,288 1,066 1,288 EV NA NA 145 152 157 164 171 179 152 179


HDFC Standard Life Insurance CMP: INR380 TP: INR475 (+25%) Buy We expect net premium income to grow by ~7% YoY, largely

driven by renewal premium. Total commission and operating expense is expected to grow by

3% YoY, largely driven by commission expense to drive newbusiness sales.

We expect surplus to grow by 49% YoY and shareholder PAT toincrease by 17% YoY.

We expect the margins to expand further as the share ofprotection in the overall business goes up further.

HDFCLIFE trades at 3.0x FY21E EV. Maintain Buy.

Key issues to watch for Outlook on cost-ratios, new business margins, persistency and

new business growth (as the impact of demon wanes out). Ramp-up of agency channel and the productivity outlook mainly

through use of digital means.

Bloomberg HDFCLIFE IN

Equity Shares (m) 2,005.4 M. Cap. (INR b)/(USD b) 762 / 10.8 52-Week Range (INR) 547 / 345

1,6,12 Rel Perf. (%) -3 / -9 / -38

Financial Snapshot (INR b) Y/E MARCH FY18 FY19E FY20E FY21E Net Premiums 233.7 282.1 333.4 401.7 Surplus / Deficit 10.9 13.4 15.6 19.8 Sh. PAT 11.1 13.2 16.0 19.3 New bus.gr-unwtd .% 31.7 24.0 20.0 24.0 New bus gr-APE (%) 30.0 11.2 18.8 26.0 Total prem.gr-unwtd .% 21.2 20.9 18.2 20.5 NBP margin (%) 23.2 25.4 26.0 26.0 RoE (%) 25.8 25.2 25.5 25.3 RoEV (%) 22.0 17.7 17.7 19.9 Total AUMs (INRb) 1,066 1,288 1,574 1,938 VNB(INRb) 12.8 15.2 18.5 23.4 EV (INRb) 152.1 179.0 210.7 252.6 Valuations P/EV (x) 5.0 4.3 3.6 3.0 P/EPS (x) 68.7 56.7 46.6 38.6

April 2019 141

Quarterly Performance (INRm)

Policyholder's account FY18 FY19E


Net premium income 48,202 65,395 67,951 86,558 54,378 76,012 74,830 1,03,911 2,68,107 3,09,131 Growth (%) 37.4 20.6 19.3 15.0 12.8 16.2 10.1 20.0 21.0 15.3 Commission paid 2,162 3,632 3,773 4,466 2,795 3,951 3,671 5,816 14,033 16,233 Operating expense 4,120 4,921 5,211 6,048 5,952 6,585 5,785 9,260 20,299 27,582 Surplus/(Deficit) 3,965 3,554 3,372 2,740 3,009 2,003 3,254 1,768 13,630 10,035 Growth (%) 74.7 12.5 15.2 15.0 -24.1 -43.6 -3.5 -35.5 27.0 -26.4Shareholders' Account Total income 4,373 4,578 4,904 4,482 3,864 2,910 4,046 3,046 18,362 13,865 PBT 4,281 4,491 4,810 3,614 2,840 3,032 2,975 3,636 17,189 12,483 Tax 221 279 289 208 24 24 8 944 997 999 PAT 4,059 4,212 4,521 3,406 2,816 3,009 2,968 2,692 16,192 11,485 Growth (%) 0.3 0.6 0.5 -16.6 -30.6 -28.6 -34.4 -21.0 -3.7 -29.1Key metrics (INRb) AUM 1,266 1,306 1,383 1,395 1,427 1,461 1,500 0 1,395 1,601 EV NA 172 NA 188 NA 192 205 217 188 217


ICICI Prudential Life Insurance Bloomberg IPRU IN


M. Cap. (INR b)/(USD b) 529 / 7.5


1,6,12 Rel Perf. (%) 6 / 5 / -21

Financial Snapshot (INR B) Y/E MARCH FY18 FY19E FY20E FY21E Net Premiums 268.1 309.1 353.6 407.0 Surplus / Deficit 13.6 10.0 11.1 13.3 Sh. holder's PAT 16.2 11.5 12.7 14.8 New bus.gr-unwtd. % 16.2 12.0 15.0 17.0 New bus gr- APE. % 16.0 0.4 13.9 16.5 Total prem.gr – unwtd. % 20.3 16.5 14.5 15.1 NBP margin (%) 16.5 16.6 16.9 17.4 RoE (%) 24.4 16.0 16.4 17.5 RoEV (%) 16.1 15.3 14.3 14.0 Total AUMs (INR b) 1,395 1,601 1,819 2,070 VNB(INRb) 12.9 12.6 14.5 17.5 EV (INRb) 188 217 248 282 Valuations P/EV (x) 2.8 2.4 2.1 1.9 P/EPS (x) 32.7 40.2 36.3 31.3

CMP: INR369 TP: INR430 (+17%) Buy We expect net premium income to grow by 20% YoY, with

renewal premium expected to grow by 18% YoY and first-yearpremium to grow by 25%, mainly due to ULIP-dominatedbusiness.

Total commission and operating expenses are likely to increaseby 43% YoY, led by a 53% YoY increase in operating expenses.

We expect surplus to decline by 35% YoY and PAT in shareholders' account to decline by 21% YoY to INR2.7b.

IPRULIFE trades at 1.9x FY21E EV. Maintain Buy.

Key issues to watch for New business growth in ULIP segment due to volatile market

conditions. Value of new business and the margin trajectory after

reporting sharp expansion in FY18.

April 2019 142

March 2019 Results Preview | Sector: Financials - NBFCs

Liquidity improves, but normalcy a while away Moderation in growth across segments In recent times, 4QFY19 was one of the toughest quarters (although tad better than

3Q) for most NBFCs under our coverage. While liquidity started improving towardsend-3QFY19, a number of events (Cobrapost, Essel Group related, etc.) led to ittightening once again. While short-term money has been more easily available, long-term money access from the capital markets has shrunk significantly. Also, with thepick-up in credit growth and increase in risk aversion towards NBFCs, bank fundingwas also slow during the quarter.

We analyzed the borrowing trends from the capital markets (NCDs and CPs) for NBFCs.The NCD market has still not recovered fully due to mutual funds reducing their NBFCexposure significantly. In this space, companies with strong parentage have benefitteddisproportionately compared to others. On the other hand, the CP market has beenmore active, money has, by and large, been available to all players. However, cost ofcapital from this source has been very divergent across players – those with highershare of wholesale lending continue to witness much higher incremental cost of fundscompared to others.

The quarter has been tough for vehicle financiers due to slowdown in auto sales andimpact of the high base of 4QFY18. We expect disbursements for vehicle financiersunder our coverage to remain stable at best, on a YoY basis. Margins should be largelystable as companies were able to pass on most of the cost of funds’ increase to theircustomers. We also expect incremental migration towards used vehicle financing formost players.

HFCs with good parentage are likely to witness healthy retail growth (reduction inprepayment rates) despite strong competition from banks. However, the non-retailsegment would see some moderation due to funding constraints. For some HFCs,access to credit is still limited. Overall, we expect HFCs to lose market share to banksin the core home loan segment. Also, the quantum of direct assignments is likely toreduce on a sequential basis. This could impact the upfront assignment income. Weremain selective in the NBFC space and prefer companies with good parentage. Ourtop picks are HDFC and LICHF.

Housing Finance – Divergent performance across companies We expect HFCs to report divergent performance in 4QFY19. In our view, HDFC and LICHF will be the biggest beneficiaries of a tight liquidity environment, resulting in some market share gains. AUM growth for these two HFCs would be 15-18%. Spreads are likely to be sequentially stable as both these players have hiked home loan rates in 2HFY19. Asset quality performance of LICHF will be a key monitorable. We expect PNBHF to report largely stable sequential disbursements, resulting in 35% AUM growth. However, lower-than-average direct assignments would result in lower upfront assignment income QoQ. We expect other HFCs to report subdued performance in the quarter.

Financials - NBFCs

Company name

Bajaj Finance

Chola. Inv & Fin.

HDFC

Indiabulls Housing

L&T Finance

LIC Housing Fin

M & M Financial

MAS Financial

Muthoot Finance

PNB Housing

Repco Home Fin

Shriram City Union

Shriram Transport Fin.

Full year numbers may not match quarterly numbers in tables below, due to difference in accounting standards in quarterly v/s full year financials; Full year nos are also likely to be restated due to IND AS


Research Analyst: Alpesh Mehta ([email protected]); +91 22 6129 1526 | Piran Engineer ([email protected]); +91 22 6129 1539 Nitin Aggarwal ([email protected]); +91 22 6129 1542

April 2019 143


Vehicle Finance – Players to witness a slowdown Vehicle financiers are likely to face challenges on the growth front. While disbursements are likely to improve sequentially, they would be lower on a YoY basis due to the high base. We also expect two key trends emerging from these NBFCs – (a) less focus on HCVs given the intense pricing pressure from banks, and (b) incremental migration towards financing of used vehicles. On the margin front,we expect largely stable margins as the companies have been able to pass on bulk ofthe cost of funds increase to their borrowers. We expect CIFC and MMFS to report18%+ AUM growth, while SHTF should report high single-digit growth.

Diversified financiers and others – BAF, LTFH to outperform BAF and LTFH are likely to have a strong quarter and report numbers in line with past trends. We expect LTFH to continue its trend of balance sheet retailization coupled with improvement in asset quality. The company has been making floating provisions to the tune of ~INR1b every quarter – we expect this trend to continue. SCUF is expected to have a muted quarter with disbursements down 18% YoY, driven by decline in MSME and 2W disbursements. Margins should be stable. However, credit costs during the quarter will be the key monitorable – SCUF has reported INR1.3b credit costs in 3Q v/s the quarterly average of INR2.3b in 1HFY19. We believe the provisioning number during the quarter would have a big impact on PAT.

Exhibit 1: Expected quarterly performance summary (INR m) Sector CMP Sales (INR M) EBDITA (INR M) Net Profit (INR M)




YoY Var % QoQ

Bajaj Finance 3,050 Neutral 32,707 44.4 2.6 21,276 54.7 1.8 10,620 42.1 0.2 Chola. Inv & Fin. 1,483 UR 9,021 7.1 3.2 5,730 23.3 2.5 3,070 2.3 0.9 HDFC 1,993 Buy 29,003 -9.7 -10.2 25,953 -14.7 -9.1 23,740 -10.8 12.3 Indiabulls Housing 841 Buy 15,915 -0.3 -11.0 14,350 15.5 3.4 10,800 4.8 9.6 L&T Fin.Holdings 151 Buy 14,940 13.9 8.3 12,489 20.8 4.8 5,940 46.3 2.2 LIC Housing Fin 549 Buy 10,801 7.6 3.6 10,578 22.0 6.6 6,718 24.6 12.7 M & M Financial 416 Buy 12,512 -4.1 3.9 7,990 -3.3 7.3 3,650 -14.0 14.5 MAS Financial 586 Buy 1,042 33.1 -2.2 801 32.7 -4.9 432 44.6 -6.3Muthoot Finance 616 Neutral 11,071 3.2 1.2 7,753 -2.1 -1.1 5,025 11.3 3.6 PNB Housing 920 Buy 3,662 -24.3 3.5 4,806 24.2 -5.9 2,781 26.1 -8.0Repco Home Fin 465 Buy 1,164 0.0 1.1 951 -5.8 1.2 573 1.1 2.9 Shriram City Union 1,796 Buy 8,832 8.8 0.0 5,425 11.2 1.2 2,122 351.2 -18.0Shriram Transport Fin. 1,200 Buy 20,378 22.6 0.5 15,891 12.3 -1.9 6,268 81.9 -1.4Sector Aggregate 171,049 8.5 -1.0 133,993 10.8 -0.4 81,740 12.6 5.6

E: MOFSL Estimates; Note: FY19 numbers as of Ind-AS; UR: Under Review; Source: MOFSL

April 2019 144


Exhibit 2: Relative performance—3 months (%)


Exhibit 3: Relative performance—1 year (%)


Exhibit 4: Comparative valuation Sector / Companies CMP EPS (INR) PE (x) PB (x) RoE (%)

(INR) Reco FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E NBFC Aditya Birla Cap 103 Buy 3.5 5.5 6.3 29.4 18.8 16.2 2.4 2.1 1.8 8.9 12.4 12.5 Bajaj Finance 3,050 Neutral 67.5 86.2 109.2 45.2 35.4 27.9 9.3 7.5 6.1 22.6 23.5 24.1 Chola. Inv & Fin. 1,483 UR 76.8 88.6 101.1 19.3 16.7 14.7 3.8 3.1 2.6 21.4 20.5 19.5 HDFC 1,993 Buy 42.9 50.7 57.9 46.5 39.3 34.4 4.6 4.3 3.8 14.9 14.9 15.3 Indiabulls Housing 841 Buy 97.6 107.9 123.3 8.6 7.8 6.8 2.1 1.9 1.7 26.1 25.6 26.0 L&T Fin.Holdings 151 Buy 11.4 13.3 16.2 13.2 11.4 9.3 2.3 1.9 1.6 18.7 18.5 19.0 LIC Housing Fin 549 Buy 47.7 56.1 65.2 11.5 9.8 8.4 1.7 1.5 1.3 15.7 16.2 16.4 M & M Financial 416 Buy 21.7 26.1 31.1 19.2 15.9 13.4 2.4 2.2 2.0 13.2 14.4 15.4 MAS Financial 586 Buy 28.4 32.6 39.1 20.7 18.0 15.0 3.8 3.3 2.8 19.8 19.6 20.3 Muthoot Finance 616 Neutral 49.1 55.2 63.2 12.6 11.2 9.7 2.7 2.3 2.0 23.2 22.3 21.9 PNB Housing 920 Buy 65.0 75.3 85.8 14.1 12.2 10.7 2.1 1.9 1.6 15.9 16.3 16.3 Repco Home Fin 465 Buy 38.4 43.3 49.9 12.1 10.7 9.3 1.9 1.6 1.4 17.1 16.5 16.3 Shriram City Union 1,796 Buy 145.9 162.2 184.3 12.3 11.1 9.7 1.9 1.6 1.4 16.5 15.9 15.7 Shriram Transport Fin. 1,200 Buy 107.7 130.1 149.8 11.1 9.2 8.0 1.7 1.5 1.3 16.7 17.4 17.2 NBFC Aggregate 25.1 21.1 17.9 3.7 3.3 2.8 14.8 15.5 15.8

95

100

105

110

Dec-

18

Jan-

19

Feb-

19

Mar

-19


95

105

115

125

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19


April 2019 145


Quarterly Performance (INR M) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue from operations 28,329 30,507 33,714 34,931 39,365 42,559 49,747 50,950 127,480 182,620

YoY Growth (%) 23.9 30.6 25.2 31.1 39.0 39.5 47.6 45.9 37.5 43.3 Interest expenses 10,729 11,414 11,788 12,286 13,636 15,673 17,861 18,242 46,216 65,413 Total Income 17,600 19,093 21,927 22,645 25,728 26,886 31,886 32,707 81,264 117,207

YoY Growth (%) 25.4 38.4 28.0 34.7 46.2 40.8 45.4 44.4 48.6 44.2 Other income 10 153 27 48 49 404 206 242 239 900 NII 17,610 19,246 21,953 22,693 25,777 27,290 32,092 32,949 81,503 118,107 Operating Expenses 7,433 7,812 8,534 8,940 9,536 9,799 11,197 11,673 32,719 42,205 Operating Profit 10,177 11,434 13,420 13,753 16,241 17,491 20,894 21,276 48,783 75,902

YoY Growth (%) 22.4 44.4 30.3 40.4 59.6 53.0 55.7 54.7 67.9 55.6 Provisions and Cont. 3,051 2,205 2,782 2,311 3,268 3,146 4,538 4,875 10,349 15,825 Profit before Tax 7,126 9,229 10,638 11,442 12,973 14,345 16,357 16,402 38,434 60,077 Tax Provisions 2,517 3,250 3,737 3,966 4,615 5,110 5,761 5,781 13,471 21,267 Net Profit 4,609 5,979 6,900 7,476 8,359 9,235 10,596 10,620 24,963 38,810

YoY Growth (%) 8.7 46.6 24.2 66.4 81.3 54.5 53.6 42.1 35.9 55.5 Loan Growth (%) 39.0 38.9 35.5 39.6 35.3 37.9 40.9 37.5 40.7 37.5 Borrowings Growth (%) 33.4 22.6 30.0 25.0 25.9 54.7 60.4 48.2 30.9 41.5 Cost to Income Ratio (%) 42.2 40.6 38.9 39.4 37.0 35.9 34.9 35.4 40.3 36.0 Tax Rate (%) 35.3 35.2 35.1 34.7 35.6 35.6 35.2 35.2 35.1 35.1 E: MOFSL Estimates


Bajaj FinanceCMP: INR3,050 TP: INR2,760 (-10%) Neutral BAF will continue its robust growth trajectory on the assets front.

The incremental cost of funds has also declined from the peak in3QFY19.

AUM is expected to grow 5% QoQ/ 37% YoY. Margins are expectedto be largely stable at 11.6%.

With prudent cost management, C/I ratio is expected to be 35%. The YoY comparison would be inaccurate due to migration to Ind-AS.

We expect provisions of INR4.9b in 4QFY19, as against INR4.5b in 3QFY19 and INR2.3b in 4QFY18.

The stock trades at 7.5x FY20E BV. We maintain a Neutral rating, given the rich valuations.

Key issues to watch for Trend in disbursement growth Incremental cost of funds and borrowing mix Asset quality trends, especially in LAP and 2W/3W businesses Traction in the cross-sell franchise

Bloomberg BAF IN


M. Cap. (INR b)/(USD b) 1754 / 26

52-Week Range (INR) 3070 / 1770

1,6,12 Rel Perf. (%) 6 / 31 / 50


Total Income 81.5 118.1 151.6 193.4

PPP 48.8 75.9 98.3 125.8

PAT 25.0 38.8 49.6 62.8

EPS (INR) 43.4 67.5 86.2 109.2

EPS Gr. (%) 35.9 55.5 27.7 26.8

BV/Sh. (INR) 269 329 405 501

RoA (%) 3.3 3.8 3.7 3.7

RoE (%) 20.4 22.6 23.5 24.1

Payout (%) 10.1 10.0 10.0 10.0

Valuations P/E (x) 70.3 45.2 35.4 27.9

P/BV (x) 11.3 9.3 7.5 6.1

Div. Yield (%) 0.1 0.2 0.3 0.4

April 2019 146



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Income from Operations 12,962 13,503 13,894 15,622 16,174 16,716 18,307 19,227 53,953 70,424 Interest Expenses 6,326 6,562 6,730 7,198 7,989 8,609 9,561 10,206 23,079 36,366 Net Interest Income 6,636 6,942 7,164 8,424 8,185 8,107 8,746 9,021 30,875 34,058

YoY Growth (%) 19.9 18.4 18.6 27.8 23.3 16.8 22.1 7.1 28.5 10.3 Other Op. and Other Income 1 1 1 2 2 1 1 0 304 4 Net Operating Income 6,637 6,942 7,165 8,427 8,187 8,108 8,747 9,021 31,179 34,062

YoY Growth (%) 18.4 17.0 17.5 26.5 23.4 16.8 22.1 7.1 28.3 9.2 Operating Expenses 2,315 2,706 2,820 3,779 2,816 2,901 3,158 3,291 12,895 12,167 Operating Profit 4,322 4,236 4,345 4,647 5,370 5,207 5,588 5,730 18,284 21,896

YoY Growth (%) 29.4 24.4 23.7 19.0 24.3 22.9 28.6 23.3 29.1 19.8 Provisions & Loan Losses 1,080 1,135 969 116 983 612 953 1,007 3,451 3,555 Profit before Tax 3,242 3,102 3,376 4,532 4,388 4,595 4,635 4,723 14,833 18,341 Tax Provisions 1,145 1,062 1,182 1,531 1,535 1,549 1,591 1,652 5,092 6,328 Net Profit 2,097 2,040 2,194 3,001 2,853 3,047 3,044 3,070 9,741 12,013

YoY Growth (%) 26.5 19.3 35.0 36.7 36.0 49.4 38.7 2.3 35.5 23.3 AUM Growth (%) 13.5 14.3 19.3 25.5 29.5 30.9 29.3 24.1 25.5 24.1 NIM on AUM (%) 7.7 7.8 7.6 8.2 7.4 7.0 7.1 7.0 8.1 6.9 Cost to Income Ratio (%) 34.9 39.0 39.4 44.8 34.4 35.8 36.1 36.5 41.4 35.7 Tax Rate (%) 35.3 34.2 35.0 33.8 35.0 33.7 34.3 35.0 34.3 34.5 E: MOFSL Estimates; * Quaterly nos and full year nos will not tally due to different way of reporting financial nos; FY19 numbers under Ind-AS


Cholamandalam Inv & FinCMP: INR1,483 Under Review The vehicle finance business is likely to witness a severe

moderation in disbursement growth due to (a) high base, and (b)slowdown in OEM sales across CVs and cars. We estimate totaldisbursements to be largely stable on a YoY basis.

As a result, we expect a decline in AUM growth from 29% YoY in3QFY19 to 24% YoY in 4QFY19.

The company has managed its treasury well. As it has passed onincremental increase in CoF to its borrowers, we expect margins tobe largely stable at 7%.

Trend in asset quality, especially LAP, would be a key monitorable.We expect provisions of INR1b v/s INR953m in 3QFY19.

The stock trades at 3.8x FY19E and 3.1x FY20E BV. Under Review.

Key issues to watch for Disbursement growth and product mix in the vehicle finance

segment Traction in home loans Management expectation of incremental cost of funds Trend in opex, given management’s intent to reduce expense

ratio to 2.5% by FY20.

Bloomberg CIFC IN


1,6,12 Rel Perf. (%) 9 / 13 / -17

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Total Income 31.2 34.1 39.7 44.7 PPP 18.3 21.9 25.9 29.5 Adj. PAT 9.7 12.0 13.9 15.8 EPS (INR) 62.3 76.8 88.6 101.1 EPS Gr. (%) 35.5 23.3 15.4 14.0 BV (INR) 324 392 472 564 BVPS Gr. (%) 19 21 20 19 RoAA (%) 2.7 2.4 2.3 2.2 RoE (%) 20.9 21.4 20.5 19.5 Valuations P/E (x) 23.8 19.3 16.7 14.7 P/BV (x) 4.6 3.8 3.1 2.6 Div. Yield (%) 0.4 0.5 0.5 0.5

April 2019 147



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 24,117 24,616 25,643 32,110 28,904 29,911 32,299 29,003 113,127 120,116

YoY Change (%) 8.2 7.2 -0.4 12.6 19.8 21.5 26.0 -9.7 13.6 6.2 Gross fee income 1,279 1,928 1,701 2,378 1,420 1,994 1,583 2,228 8,148 7,893 Core Income 25,396 26,545 27,344 34,487 30,324 31,905 33,882 31,231 121,275 128,009

YoY Change (%) 5.0 6.4 -1.3 10.5 19.4 20.2 23.9 -9.4 12.3 5.6 Operating Expenses 3,497 5,093 5,293 2,321 5,096 3,221 3,261 3,335 9,578 14,912 % of core income 13.8 19.2 19.4 6.7 16.8 10.1 9.6 10.7 7.9 11.6 Comission expenses 1,024 1,256 1,588 1,729 1,205 1,139 2,079 1,943 6,700 6,365 % of core income 4.0 4.7 5.8 5.0 4.0 3.6 6.1 6.2 5.5 5.0 Core Operating profits 20,875 20,196 20,464 30,438 24,023 27,546 28,543 25,953 104,997 106,732

YoY Change (%) 1.7 -6.3 -16.6 8.7 15.1 36.4 39.5 -14.7 10.9 1.7 Provisions 1,636 -616 1,900 1,000 197 1,313 1,160 980 3,750 3,650 Core PBT 19,238 20,812 18,564 29,438 23,826 26,233 27,383 24,973 101,247 103,082

YoY Change (%) -3.3 1.0 -20.6 11.0 23.8 26.0 47.5 -15.2 12.0 1.8 Profit on Sale of Inv. 193 781 53,973 3,006 570 11,011 1,052 3,167 56,347 15,800 Dividend inc. and other op inc. 749 5,512 1,602 3,411 6,258 233 115 4,728 11,146 11,333 One off expense/Prov -15,750 -800 -2,700 -950 -16,550 -3,650Other Income 43 42 117 117 46 114 139 148 447 447 PBT 20,224 27,147 58,506 35,172 30,700 34,891 28,688 32,066 152,637 127,012

YoY Change (%) -25.1 6.1 131.1 19.7 51.8 28.5 -51.0 -8.8 42.3 -16.8Provision for Tax 5,979 7,365 5,506 6,710 8,800 10,220 7,550 8,993 31,000 35,563 PAT 14,245 19,782 53,000 28,462 21,900 24,671 21,138 23,072 121,637 91,449

YoY Change (%) -23.9 8.3 211.5 39.2 53.7 24.7 -60.1 -18.9 63.4 -24.8E: MOFSL Estimates; FY19 estimates are under Ind-AS


HDFCCMP: INR1,993 TP: INR2,365 (+19%) Buy HDFC was able to manage the liquidity situation well this quarter.

It assigned loans worth INR24b in 4QFY19 vs INR70b in 3QFY19. We expect 3% QoQ/ 14% YoY AUM growth. The mix of retail and

corporate lending will remain largely stable on a sequential basis. Profit on sale of investments amounted to INR3.14b in 4Q Asset quality has remained healthy over past several quarters,

and the trend is likely to continue. Asset quality in the corporateloan book would be a key monitorable.

We estimate provisions at INR1.9b (after factoring in one offprovision of INR1b (30% of profit on sale of investment) in4QFY19 vs INR1.2b in 3QFY19.

We expect reported PAT of INR23.7b in the quarter v/s INR21.1bin 3QFY19.

The stock trades at 3.6x FY19E AP/ABV and 2.8x FY20E AP/ABV(price adjusted for value of other businesses and book valueadjusted for investments made in those businesses). Buy.

Key issues to watch for Loan growth trend in corporate loans. Movement in spreads and margins (on individual loans). Asset quality in corporate lending

Bloomberg HDFC IN


M. Cap. (INR b)/(USD b) 3339 / 49

52-Week Range (INR) 2051 / 1646

1,6,12 Rel Perf. (%) -1 / 4 / -9

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E NII 113.1 120.1 141.1 161.3 PAT 121.6 91.4 101.0 115.7 Adj. EPS (INR) 38.7 40.9 48.4 55.3 EPS Gr. (%) 8.9 5.7 18.2 14.3 BV/Sh. (INR) 374 431 466 527 ABV/Sh. (INR) 247 307 342 383 RoAA (%) 1.9 1.7 1.8 1.8 Core RoE (%) 17.7 14.9 14.9 15.3 Payout (%) 32.0 46.4 46.4 46.4 Valuation AP/E (x) 33.2 26.8 19.8 17.3 P/BV (x) 5.3 4.6 4.3 3.8 AP/ABV (x) 5.2 3.6 2.8 2.5 Div. Yield (%) 1.0 0.9 1.0 1.2

April 2019 148


Quarterly Performance (INR M) Y/E March FY18 FY19


Income from operations 30,165 31,557 34,197 36,897 38,903 39,804 42,368 40,932 132,816 162,007 Other Income 2,718 2,968 7,593 2,775 1,811 2,749 2,434 2,257 16,053 9,250 Total income 32,882 34,525 41,790 39,672 40,713 42,553 44,802 43,189 148,869 171,257

Y-o-Y Growth (%) 26.6 20.1 39.1 23.0 23.8 23.3 7.2 8.9 27.2 15.0 Interest expenses 18,408 19,113 20,737 20,930 23,351 25,564 24,492 25,017 79,188 98,424 Net Income 14,475 15,412 21,053 18,742 17,362 16,989 20,310 18,172 69,681 72,833

Y-o-Y Growth (%) 22.0 23.6 53.5 26.1 19.9 10.2 -3.5 -3.0 31.7 4.5 Operating Exp (Incl Prov) 3,856 4,332 6,161 6,315 3,337 3,123 6,435 3,822 20,663 16,718 Profit before tax 10,619 11,080 14,892 12,427 14,024 13,866 13,875 14,350 49,019 56,115

Y-o-Y Growth (%) 21.4 20.3 48.1 28.1 32.1 25.1 -6.8 15.5 30.0 14.5 Tax Provisions 2,571 2,557 3,492 2,182 3,538 3,516 4,147 3,669 10,802 14,870 Net Profit 8,049 8,523 11,401 10,245 10,487 10,349 9,728 10,680 38,217 41,244 Minority Int/Profit from associates 46 91 23 59 60 92 127 120 219 400 Net Profit after MI 8,095 8,614 11,423 10,304 10,547 10,442 9,855 10,800 38,435 41,644

Y-o-Y Growth (%) 28.5 25.9 52.0 22.6 30.3 21.2 -13.7 4.8 32.2 8.3 AUM Growth (%) 33.0 33.1 31.4 34.3 33.4 28.6 16.2 2.4 34.3 2.4 C/I Ratio (%) 13.9 16.0 13.7 11.7 15.5 16.0 16.5 16.5 12.7 16.1 Tax Rate (%) 24.2 23.1 23.4 17.6 25.2 25.4 29.9 25.6 23.1 26.5 E: MOFSL Estimates; Note: FY19 numbers as of Ind-AS


Indiabulls HousingCMP: INR841 TP: INR1,000 (+19%) Buy Albeit a sequential improvement, we expect this quarter to be

tepid for Indiabulls. Disbursements should improve from INR39b in3Q to INR87b in 4Q. This would result in 1% QoQ growth in AUM toINR1.26t.

Quantum of sell-downs will be a key monitorable. In 3QFY19, IHFLrecorded INR5b+ upfront income from direct assignments. Weestimate lower upfront income in 4Q, resulting in total incomedeclining sequentially from INR20.3b to INR18.2b.

Opex is expected to decline sequentially as the company upfrontedINR500m+ of CSR in 3Q itself. We estimate INR3.0b opex in 4Q v/sINR3.35b in 3Q.

We expect provisions of INR832m in 4QFY19 v/s INR1.7b in 3QFY19(one-off provisions made). Asset quality trends would be a keymonitorable.

The stock trades at 2.1x FY19E and 1.9x FY20E BV. Maintain Buy.

Key issues to watch for Asset quality trends in the corporate segment Quantum of sell-downs in the quarter Movement in incremental spreads and margins AUM growth trend and guidance

Bloomberg IHFL IN


M. Cap. (INR b)/(USD b) 359 / 5


1,6,12 Rel Perf. (%) 17 / -14 / -50

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Net Fin inc 54.1 61.2 66.3 74.6 PPP 61.0 61.1 65.5 73.8 PAT 38.5 41.6 46.0 52.6 EPS (INR) 90.2 97.6 107.9 123.3 EPS Gr. (%) 31.5 8.2 10.6 14.3 BV/Sh. (INR) 352 396 446 503 RoA on AUM (%) 3.4 3.3 3.5 3.6 RoE (%) 27.9 26.1 25.6 26.0 Payout (%) 46.6 45.0 45.0 45.0 Valuations P/E (x) 9.3 8.6 7.8 6.8 P/BV (x) 2.4 2.1 1.9 1.7 P/ABV (x) 2.4 2.1 1.9 1.7 Div. Yield (%) 5.0 5.2 5.8 6.6

April 2019 149


Quarterly performance (INR M) Y/E March FY18 FY19


Interest Income 23,010 25,967 25,433 27,483 30,410 31,532 32,440 33,813 101,894 128,195 Interest Expenses 12,703 13,137 14,022 14,373 15,132 16,497 18,647 18,873 54,234 69,148 Net Interest Income 10,307 12,831 11,411 13,111 15,279 15,035 13,793 14,940 47,660 59,047

YoY Growth (%) 22.6 37.3 22.2 30.5 48.2 17.2 20.9 13.9 28.3 23.9 Other income 1,262 129 513 1,901 1,375 1,870 2,724 2,422 3,805 8,391 Total Income 11,570 12,960 11,924 15,012 16,653 16,905 16,517 17,362 51,466 67,438

YoY Growth (%) 32.2 31.1 19.0 39.0 43.9 30.4 38.5 15.7 30.4 31.0 Operating Expenses 3,565 4,313 3,600 4,671 5,003 5,256 4,599 4,873 16,149 19,731

YoY Growth (%) 10.7 29.7 14.1 52.5 40.3 21.9 27.8 4.3 26.5 22.2 Operating Profits 8,005 8,647 8,325 10,341 11,650 11,649 11,918 12,489 35,317 47,706

YoY Growth (%) 44.8 31.9 21.3 33.6 45.5 34.7 43.2 20.8 32.3 35.1 Provisions 4,433 5,180 4,567 4,746 4,359 3,673 4,160 4,367 18,926 16,558 Profit before Tax 3,571 3,467 3,758 5,595 7,292 7,976 7,758 8,122 16,391 31,149 Tax Provisions 204 14 503 1,504 1,894 2,385 1,949 2,183 2,225 8,410 Profit after tax 3,143 3,447 3,267 4,060 5,398 5,591 5,810 5,940 14,415 22,739

YoY Growth (%) 51.5 38.9 20.6 28.5 71.8 62.2 77.8 46.3 38.2 57.7 Loan growth (%) 19.7 20.7 25.5 25.4 24.3 24.1 21.8 18.6 27.3 19.9 Cost to Income Ratio (%) 30.8 33.3 30.2 31.1 30.0 31.1 27.8 28.1 31.4 29.3 Tax Rate (%) 5.7 0.4 13.4 26.9 26.0 29.9 25.1 26.9 13.6 27.0 E: MOFSL Estimates


L&T FinanceCMP: INR151 TP: INR185 (+23%) Buy With a strong parentage, LTFH has been able to raise adequate

capital at competitive rates. This has helped it maintain growthmomentum.

The company is likely to report strong numbers in the rural andhousing finance segments. Performance in the wholesale financeand builder finance segments is a key monitorable. We expecttotal AUM to grow 19% YoY growth to INR991b.

We expect total income to be at INR17.4b, with margins largelystable sequentially.

Operating profit should be at INR12.5b vs. INR 11.9b in 3QFY19. Asset quality is expected to remain stable. We factor in provisions

of INR4.4b v/s INR4.2b in the prior quarter. Note that thecompany has been making floating provisions of INR1b everyquarter.

PAT is likely to be at INR5.9b in the quarter. The stock trades at 2.3x FY19E and 1.9x FY20E BV. Maintain Buy.

Key issues to watch for Asset quality outlook in the builder loan book Commentary on outlook for rural and housing finance segments Competition in the wholesale finance segment, especially

renewables

Bloomberg LTFH IN


M. Cap. (INR b)/(USD b) 300 / 4


1,6,12 Rel Perf. (%) 9 / 8 / -23

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Total Income 51.7 67.4 83.5 99.9 PPP 36.4 47.7 59.3 70.9 PAT 13.5 22.7 26.4 32.1 EPS (INR) 6.8 11.4 13.3 16.2 BV/Sh. (INR) 56.2 66.1 77.8 92.1 RoAA (%) 1.7 2.3 2.2 2.3 RoE (%) 14.2 18.7 18.5 19.0 Payout (%) 17.1 13.9 11.6 11.6 Valuation P/E (x) 22.3 13.2 11.4 9.3 P/BV (x) 2.7 2.3 1.9 1.6 Div. Yield (%) 0.7 0.9 0.9 1.1

April 2019 150


Quarterly Performance (INR M) Y/E March FY18 FY19 FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 36,176 36,499 35,606 38,467 40,050 41,859 43,722 46,269 146,748 171,900 Interest Expenses 26,982 27,804 28,231 28,431 30,252 31,383 33,299 35,468 111,447 130,403 Net Interest Income 9,194 8,696 7,375 10,036 9,797 10,476 10,423 10,801 35,301 41,497

YoY Growth (%) 11.5 0.4 -19.4 -3.5 6.6 20.5 41.3 7.6 -3.2 17.6 Fees and other income 214 1,093 654 874 543 222 670 957 2,835 2,392 Net Income 9,408 9,789 8,028 10,911 10,340 10,698 11,093 11,758 38,136 43,889

YoY Growth (%) 7.1 5.6 -15.6 -0.1 9.9 9.3 38.2 7.8 -0.9 15.1 Operating Expenses 915 1,139 928 2,242 847 1,051 1,173 1,180 5,224 4,250 Operating Profit 8,493 8,650 7,100 8,669 9,493 9,647 9,921 10,578 32,911 39,640

YoY Growth (%) 14.8 9.4 -12.4 -3.2 11.8 11.5 39.7 22.0 1.7 20.4 Provisions and Cont. 2,040 2,252 -80 281 1,610 2,194 1,325 1,281 4,493 6,409 Profit before Tax 6,453 6,397 7,180 8,387 7,884 7,454 8,596 9,297 28,418 33,231 Tax Provisions 1,749 1,259 2,429 2,994 2,205 1,722 2,633 2,579 8,431 9,138 Net Profit 4,704 5,139 4,751 5,393 5,679 5,732 5,963 6,718 19,987 24,092

YoY Growth (%) 15.3 3.9 -4.8 1.9 20.7 11.5 25.5 24.6 3.5 20.5 Loan Growth (%) 15.4 15.5 15.5 15.1 14.7 16.2 16.3 14.7 15.1 14.7 Cost to Income Ratio (%) 9.7 11.6 11.6 20.5 8.2 9.8 10.6 10.0 13.7 9.7 Tax Rate (%) 27.1 19.7 33.8 35.7 28.0 23.1 30.6 27.7 29.7 27.5 E: MOFSL Estimates; Numbers as per Ind-AS except 4QFY18


LIC Housing FinanceCMP: INR549 TP: INR640 (+17%) Buy The company has been regularly tapping the NCD and CP markets

over the past three months. Incremental cost of NCD borrowingsis 8.3-8.7% (3-10 years) while that of CPs is 7.0-7.5%.

We expect loan growth of 14% YoY, driven primarily by the LAP/developer loans segment. The share of builder loans is likely tomarginally increase from ~6% of the overall book driven bymarket share gains. Growth in the retail home loan book wouldbe a key monitorable.

The company hiked home loan rates by 20bp in 2HFY19, theimpact of which will be seen in the 4Q. Hence, calculated marginsare likely to be stable to improving QoQ, despite the increase incost of funds.

Operating expenses to come in at INR1.2b, with the C/I ratioexpected at ~10%.

Asset quality is likely to remain stable. We model provisions ofINR1.3b (flat QoQ).

The stock trades at 1.7x FY19E and 1.5x FY20E BV. Buy.

Key issues to watch for Growth in the core home loan book Trend in incremental CoF and spreads Performance of corporate loan book and loans against property Management commentary on increasing competitive intensity

and margin trends

Bloomberg LICHF IN


M. Cap. (INR b)/(USD b) 277 / 4


1,6,12 Rel Perf. (%) 7 / 24 / -16

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E NII 37.0 41.5 48.6 56.2 PPP 33.0 39.6 46.2 53.5 PAT 19.9 24.1 28.3 32.9 EPS (INR) 39.4 47.7 56.1 65.2 EPS Gr. (%) 3.0 21.1 17.7 16.2 BV/Sh (INR) 285 324 370 424 RoAA (%) 1.3 1.4 1.5 1.5 RoE (%) 15.6 15.7 16.2 16.4 Payout (%) 20.1 17.5 17.5 17.5 Valuations P/E (x) 11.6 9.6 8.2 7.0 P/BV (x) 1.6 1.4 1.2 1.1 Div. Yield (%) 1.5 1.6 1.8 2.1

FY18 numbers are per IGAAP

April 2019 151


Quarterly Performance (INR M) Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Operating Income 14,980 15,174 18,186 20,600 19,258 21,033 22,225 23,168 66,295 85,684 Other Income 107 221 125 138 138 451 237 274 592 1,100 Total income 15,087 15,395 18,311 20,738 19,397 21,484 22,462 23,441 66,887 86,784

YoY Growth (%) 9.7 1.6 21.8 12.5 28.6 39.5 22.7 13.0 7.2 29.7 Interest Expenses 7,553 7,344 8,159 7,550 8,488 9,367 10,185 10,655 30,995 38,695 Total income 7,534 8,051 10,153 13,188 10,909 12,117 12,277 12,786 35,892 48,089

YoY Growth (%) 10.0 -0.3 33.7 16.8 44.8 50.5 20.9 -3.0 6.2 34.0 Operating Expenses 3,274 3,309 3,531 4,927 3,849 4,248 4,833 4,795 14,233 17,725 Operating Profit 4,260 4,742 6,622 8,261 7,060 7,869 7,444 7,990 21,659 30,364

YoY Growth (%) 18.8 5.3 67.7 13.9 65.8 65.9 12.4 -3.3 12.3 40.2 Provisions 1,269 2,237 1,228 1,572 2,938 2,311 2,247 2,343 5,681 9,840 Profit before Tax 2,991 2,506 5,394 6,688 4,122 5,558 5,197 5,647 15,979 20,525 Tax Provisions 977 866 2,081 2,443 1,432 1,744 2,010 1,997 5,907 7,183 Net Profit 2,014 1,640 3,314 4,245 2,691 3,814 3,187 3,650 10,072 13,342

YoY Growth (%) 131.5 73.0 -2,219.0 81.4 33.6 132.5 -3.8 -14.0 151.6 32.5 AUM growth (%) 16.2 7.2 5.3 19.5 21.9 26.8 31.5 18.5 19.6 18.2 Borrowings growth (%) 17.8 16.1 8.8 14.1 19.9 22.9 29.7 16.2 8.0 9.7 Cost to Income Ratio (%) 43.5 41.1 34.8 37.4 35.3 35.1 39.4 37.5 39.7 36.9 Tax Rate (%) 32.7 34.5 38.6 36.5 34.7 31.4 38.7 35.4 37.0 35.0 E: MOFSL Estimates


Mahindra Financial Services

CMP: INR416 TP: INR530 (+27%) Buy Given the slowdown in growth for key auto OEMs, we expect

AUM growth to slow down to 18% YoY in the quarter. Further company has also moderated growth towards SME and Smaller NBFCs considering the liquidity situation which would have temporary issues in growth.

Given the strong parentage, MMFS has been able to raise money from multiple sources at attractive rates. It’s 90-day CPs are raised at sub-7.5% levels – lower than the pre-crisis levels. Hence, margins are expected to be sequentially stable at 8.0%.

With operating expenses expected at INR4.8b, operating profit should improve to INR7.8b.

We factor in INR2.3b provisions in 4QFY19 v/s INR2.2b in 3QFY19 and INR1.6b in 4QFY18.

The stock trades at 2.4x FY19E and 2.2x FY20E BV. Maintain Buy. Key issues to watch for Management commentary on performance of rural areas Potential for further market share gains Margin and growth trends Performance of subsidiaries

Bloomberg MMFS IN


1,6,12 Rel Perf. (%) -7 / -6 / -29

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E NII 35.3 47.0 55.2 65.1 PPP 21.7 30.4 35.6 42.6 PAT 10.1 13.3 16.1 19.1 EPS (INR) 17.4 21.7 26.1 31.1 BV/Sh.(INR) 156.6 172.0 190.5 212.6 ABV/Sh (INR) 134.1 139.2 154.6 172.2 RoA on AUM (%) 2.3 2.4 2.4 2.4 RoE (%) 12.5 13.2 14.4 15.4 Payout (%) 32.1 29.3 29.3 29.3 Valuations P/E (x) 23.8 19.2 15.9 13.4 P/BV (x) 2.7 2.4 2.2 2.0 P/ABV (x) 3.1 3.0 2.7 2.4 Div. Yield (%) 1.0 1.3 1.6 1.9

April 2019 152


Quarterly Performance (INR M) Y/E March FY18 FY19 FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Income 1,041 1,239 1,247 1,135 1,288 1,421 1,705 1,701 4,662 6,114 Interest expenses 489 518 448 352 468 528 639 658 1,807 2,293 Net Income 552 721 799 783 820 893 1,066 1,042 2,855 3,821

Growth Y-o-Y (%) 24.0 49.5 63.4 61.3 48.5 23.9 33.4 33.1 50.1 33.9 Operating Expenses 175 195 244 179 203 219 223 241 794 886 Operating Profits 377 525 555 604 617 674 843 801 2,061 2,936

Growth Y-o-Y (%) 24.4 54.7 68.5 85.2 63.7 28.4 51.8 32.7 58.8 42.4 Provisions 76 121 86 148 137 126 141 139 429 543 Profit before tax 301 405 469 456 480 548 702 663 1,632 2,393

Growth Y-o-Y (%) 29.4 41.4 66.3 98.8 59.4 35.5 49.5 45.3 58.3 46.7 Tax Provisions 127 159 163 157 167 193 240 230 606 830 Net Profit 174 246 306 299 313 355 461 432 1,025 1,563

Growth Y-o-Y (%) 16.8 29.1 65.5 100.6 79.6 44.7 50.7 44.6 52.2 52.4 Int. Exp/Int. Income % 47.0 41.8 35.9 31.0 36.3 37.1 37.5 38.7 38.8 37.5 Cost to Income Ratio % 31.7 27.1 30.5 22.9 24.7 24.5 20.9 23.1 27.8 23.2 Prov to Operating Profits % 20.1 22.9 15.4 24.4 22.2 18.7 16.7 17.3 20.8 18.5 Tax Rate % 42.1 39.3 34.8 34.5 34.7 35.2 34.3 34.8 37.2 34.7 E: MOFSL Estimates; FY18 annual number taken as sum of 4 quarters


MAS FinancialCMP: INR586 TP: INR705 (+20%) Buy The company is likely to have a stable quarter. We expect

consolidated AUM growth to slow down from 34% in the priorquarter to 29% in 4QFY19.

Margins are expected to contract QoQ due to re-pricing ofborrowings and build-up of excess liquidity in the balance sheet.We estimate margins of 7.8% v/s 8.5% QoQ.

With stable asset quality, we estimate provisions of INR140m(unchanged QoQ).


Key issues to watch for Guidance on growth trends and loan mix Asset quality performance Management commentary on increasing competitive intensity

and margin trends

Bloomberg MASFIN IN


1,6,12 Rel Perf. (%) -1 / 12 / -22

Financial Snapshot (INR b)

Y/E March 2018 2019E 2020E 2021E

NII 2.5 3.4 4.0 5.0

PPP 2.1 2.9 3.5 4.3

PAT 1.0 1.5 1.8 2.1

EPS (INR) 19.2 28.4 32.6 39.1

BV/Sh. (INR) 132.8 154.0 178.5 207.9

RoA on AUM (%) 2.7 3.1 2.9 2.7

RoE (%) 20.7 19.8 19.6 20.3

Valuations

P/E (x) 30.6 20.7 18.0 15.0

P/BV (x) 4.4 3.8 3.3 2.8

April 2019 153


Quarterly Performance (INR M) Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Income from operations 13,599 16,431 15,652 15,223 16,108 16,316 16,827 17,207 60,905 66,459 Other operating income 173 186 150 287 215 181 338 327 796 1,061 Total Operating income 13,773 16,616 15,802 15,510 16,323 16,496 17,165 17,535 61,701 67,519

YoY Growth (%) 6.2 20.3 17.9 -9.3 18.5 -0.7 8.6 13.1 7.7 9.4 Other income 1 2 112 571 6 5 6 8 685 25 Total Income 13,773 16,619 15,914 16,080 16,330 16,501 17,171 17,542 62,387 67,544

YoY Growth (%) 5.9 19.9 18.2 -6.1 18.6 -0.7 7.9 9.1 8.6 8.3 Interest Expenses 5,121 4,933 4,725 4,495 5,016 5,354 5,889 6,137 19,274 22,395 Net Income 8,652 11,686 11,190 11,585 11,314 11,148 11,282 11,406 43,112 45,150 Operating Expenses 3,103 3,119 3,254 3,664 3,738 3,669 3,440 3,653 13,139 14,500 Operating Profit 5,550 8,567 7,936 7,921 7,577 7,478 7,842 7,753 29,973 30,650

YoY Growth (%) 25.8 78.7 76.6 -4.8 36.5 -12.7 -1.2 -2.1 36.1 2.3 Provisions 126 1,170 505 596 27 25 19 24 2,397 95 Profit before Tax 5,424 7,397 7,431 7,324 7,550 7,453 7,823 7,729 27,578 30,556 Tax Provisions 1,975 2,940 2,645 2,810 2,634 2,615 2,971 2,704 10,370 10,924 Net Profit 3,449 4,457 4,787 4,514 4,916 4,838 4,852 5,025 17,208 19,633

YoY Growth (%) 27.6 50.2 64.5 40.3 42.5 8.6 1.4 11.3 45.8 14.1 E: MOFSL Estimates; Note 1HFY18 and FY19 numbers as per Ind-AS


Muthoot Finance

CMP: INR616 TP: INR560 (-9%) Neutral While the company maintained a conservative stance in 3Q, we

expect it to be a bit more aggressive in 4Q. AUM is expected to grow 3% QoQ/ 15% YoY to INR334b. We believe this growth will be led by both volume and pricing gains.

Incremental cost of funds remains high for MUTH. We see spreads remaining sequentially stable at 11.6%.

Opex, which dropped in 3Q, would pick up to a run-rate of INR3.65b in the quarter.

We expect gross stage 3 loans to remain stable or even decline further. Hence, credit costs are likely to be subdued at INR24m.

The stock trades at 2.7x FY19E and 2.3x FY20E BV. Maintain Neutral.

Key issues to watch for Management commentary on business growth and steps taken to

sustain AUM growth Plan of branch expansion Movement in yields and margins, with declining cost of funds Progress in gold auctions

Bloomberg MUTH IN


M. Cap. (INR b)/(USD b) 246 / 4


1,6,12 Rel Perf. (%) 8 / 38 / 32


NII 41.0 44.1 49.2 56.1

PPP 30.0 30.7 34.2 39.3

PAT 17.2 19.6 22.1 25.3

EPS (INR) 43.0 49.1 55.2 63.2

BV/Sh.(INR) 194 228 267 311

RoA on AUM (%) 6.1 6.3 6.2 6.4

RoE (%) 24.1 23.2 22.3 21.9

Valuations

Div. Yld. (%) 1.6 2.0 2.2 2.6

P/E (x) 14.3 12.6 11.2 9.7

P/BV (x) 3.2 2.7 2.3 2.0

April 2019 154


Quarterly performance (INR M) FY18 FY19


Interest Income 10,898 11,972 13,356 15,008 15,238 16,121 17,641 19,120 51,234 68,120 Interest Expenses 7,505 8,348 9,257 10,168 10,998 12,289 14,103 15,458 35,277 52,846 Net Interest Income 3,394 3,624 4,099 4,840 4,241 3,832 3,538 3,662 15,957 15,273

YoY Growth (%) 62.2 58.7 55.0 45.5 25.0 5.8 -13.7 -24.3 54.2 -4.3Other income 704 773 806 694 1,245 1,962 3,137 2,810 2,977 9,153 Total Income 4,097 4,396 4,906 5,534 5,486 5,794 6,675 6,472 18,933 24,427

YoY Growth (%) 60.8 53.9 50.6 39.0 33.9 31.8 36.1 17.0 49.8 29.0 Operating Expenses 962 881 1,066 1,663 1,293 1,422 1,565 1,666 4,572 5,946

YoY Growth (%) 20.6 -12.6 22.6 85.2 34.4 61.5 46.8 0.2 28.0 30.1 Operating Profits 3,136 3,516 3,840 3,871 4,193 4,372 5,110 4,806 14,362 18,481

YoY Growth (%) 79.0 90.3 60.8 25.6 33.7 24.4 33.1 24.2 58.4 28.7 Provisions 681 756 482 444 440 647 701 723 2,363 2,511 Profit before Tax 2,454 2,760 3,358 3,427 3,753 3,725 4,409 4,083 11,999 15,969 Tax Provisions 754 859 1,064 1,223 1,195 1,195 1,386 1,303 3,899 5,078 Profit after tax 1,701 1,901 2,295 2,205 2,558 2,530 3,023 2,781 8,100 10,891

YoY Growth (%) 77.3 38.1 66.5 44.7 50.4 33.1 31.7 26.1 54.7 34.5 Loans growth (%) 42.4 51.2 61.1 48.0 45.2 37.0 27.9 31.8 48.0 45.2 Cost to Income Ratio (%) 23.5 20.0 21.7 30.0 23.6 24.5 23.4 25.7 24.1 24.3 Tax Rate (%) 30.7 31.1 31.7 35.7 31.8 32.1 31.4 31.9 32.5 31.8 E: MOFSL Estimates; Note: FY19 numbers as of Ind-AS


PNB Housing FinanceCMP: INR920 TP: INR1,100 (+20%) Buy PNBHF has had a stable quarter – growth remained strong in retail

lending, while the company scaled back a bit in corporate lending.We estimate disbursements of INR89b leading to 36% YoY growthin AUM.

The company has demonstrated its ability to raise money frommultiple sources including banks, ECBs, NCDs and CPs. We expect5bp QoQ margin compression to 1.8%.

However, loan assignments in 4QFY19 have not been as robust asthe prior quarters. Hence, there could be lower upfronting ofassignment related income in the quarter.

We estimate provisions of INR723m, as against INR701m in3QFY19.


Key issues to watch for Disbursement trend in corporate lending Management commentary on incremental cost of funds Upfront assignment related income recognized in the quarter Plans of branch expansion Movement in yields and margins, with declining cost of funds

Bloomberg PNBHOUSI IN


M. Cap. (INR b)/(USD b) 154 / 2


1,6,12 Rel Perf. (%) -7 / -10 / -44

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E NII 15.5 15.3 18.4 22.0 PPP 14.8 18.5 21.9 25.8 PAT 8.3 10.9 12.6 14.4 EPS (INR) 49.6 65.0 75.3 85.8 BV/Sh. (INR) 383 434 493 560 RoAA (%) 1.6 1.5 1.3 1.3 RoE (%) 14.0 15.9 16.3 16.3 Payout (%) 21.7 21.6 21.6 21.6 Valuations P/E (x) 18.5 14.1 12.2 10.7 P/BV (x) 2.4 2.1 1.9 1.6 Div. Yield (%) 1.0 1.3 1.5 1.7

April 2019 155


Quarterly performance (INR M) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 2,686 2,843 2,686 2,774 2,827 2,870 3,000 3,120 10,988 11,816 Interest Expenses 1,630 1,626 1,621 1,610 1,684 1,755 1,848 1,956 6,487 7,242 Net Interest Income 1,056 1,217 1,065 1,164 1,143 1,115 1,152 1,164 4,502 4,574

YoY Growth (%) 25.7 34.9 17.4 13.2 8.2 -8.4 8.2 0.0 22.4 1.6 Other income 55 22 60 59 45 90 40 40 196 215 Total Income 1,111 1,238 1,125 1,223 1,188 1,205 1,192 1,205 4,697 4,790

YoY Growth (%) 20.8 23.8 15.5 11.0 6.9 -2.7 5.9 -1.5 17.6 2.0 Operating Expenses 168 187 218 214 219 236 253 254 787 962

YoY Growth (%) 13.0 14.8 33.4 6.9 30.3 25.7 16.0 18.8 16.5 22.1 Operating Profits 943 1,051 907 1,009 969 970 939 951 3,910 3,828

YoY Growth (%) 22.3 25.5 11.9 12.0 2.8 -7.7 3.5 -5.8 17.8 -2.1 Provisions 88 -8 265 143 47 -35 182 73 488 267 Profit before Tax 855 1,059 642 866 923 1,004 757 878 3,422 3,561 Tax Provisions 296 358 218 300 314 338 201 305 1,172 1,157 Profit after tax 560 700 424 566 609 666 556 573 2,250 2,404

YoY Growth (%) 41.6 53.3 -8.7 11.9 8.8 -4.9 31.2 1.1 23.5 6.8 Loan growth (%) 13.1 10.1 9.6 10.3 11.9 11.4 12.4 11.9 10.1 11.8 Cost to Income Ratio (%) 15.1 15.1 19.4 17.5 18.4 19.6 21.2 21.1 16.8 20.1 Tax Rate (%) 34.6 33.8 34.0 34.6 34.0 33.7 26.5 34.7 34.2 32.5 E: MOFSL Estimates; Note: FY19 numbers are based on Ind-AS accounting


Repco Home FinanceCMP: INR465 TP: INR550 (+18%) Buy Our interactions at the ground level suggest that the lack of sand

availability still remains an issue. Hence, disbursements areexpected to grow 3% YoY to INR8.7b. As a result, we expect loangrowth to remain largely unchanged at 12% YoY in 4QFY19.

We expect a modest 20bp QoQ spread compression to 2.8% in4Q. Hence, NII is expected to be largely stable on a QoQ and YoYbasis at INR1.2b.

C/I ratio is expected to be 21.1%, with opex at INR254m. Credit costs would be a key monitorable. Provisions are expected

to be INR73m v/s INR182m in 3QFY19. The stock trades at 1.9x FY19E and 1.6x FY20E BV. Maintain Buy.

Key issues to watch for Competitive environment and prepayments by borrowers Business outlook, loan growth, and share of home loans and LAP Trend in credit costs under Ind-AS Movement in borrowing costs and margins

Bloomberg REPCO IN


M. Cap. (INR b)/(USD b) 29 / 0


1,6,12 Rel Perf. (%) 23 / 2 / -36

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E NII 4.3 4.6 5.1 5.9 PPP 3.8 3.8 4.3 5.0 PAT 2.1 2.4 2.7 3.1 EPS (INR) 32.9 38.4 43.3 49.9 BV/Sh. (INR) 207 243 284 330 RoAA (%) 2.2 2.3 2.3 2.3 RoE (%) 16.9 17.1 16.5 16.3 Payout (%) 8.0 7.0 7.0 7.0 Valuation P/E (x) 14.1 12.1 10.7 9.3 P/BV (x) 2.2 1.9 1.6 1.4 Div. Yield (%) 0.5 0.5 0.6 0.6

April 2019 156


Quarterly performance (INR m) Y/E MARCH FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 12,274 12,790 13,384 12,428 13,893 14,721 14,131 14,205 50,358 56,950 Interest expenses 4,040 4,152 4,242 4,310 4,640 4,952 5,302 5,373 16,677 20,267 Net Interest Income 8,234 8,638 9,142 8,118 9,253 9,769 8,829 8,832 33,681 36,683 Y-o-Y Growth (%) 20.0 17.5 19.9 13.8 12.4 13.1 -3.4 8.8 18.4 8.9 Fees and Other Income 16 113 399 10 109 437 271 432 658 1,250 Net Operating Income 8,250 8,751 9,541 8,128 9,362 10,206 9,100 9,265 34,339 37,933 Y-o-Y Growth (%) 20.0 19.0 25.0 13.9 13.5 16.6 -4.6 14.0 18.4 10.5 Operating Expenses 3,209 3,433 3,878 3,251 3,677 3,963 3,740 3,840 13,624 15,094 Operating Profit 5,041 5,318 5,664 4,877 5,685 6,243 5,361 5,425 20,715 22,839 Y-o-Y Growth (%) 21.8 17.5 21.7 12.8 12.8 17.4 -5.3 11.2 17.4 10.3 Provisions 1,968 1,718 1,825 4,122 2,154 2,506 1,335 2,153 10,537 8,148 Profit before Tax 3,073 3,600 3,838 756 3,532 3,737 4,025 3,272 10,178 14,691 Tax Provisions 1,072 1,251 1,299 285 1,236 1,244 1,438 1,150 3,531 5,068 Net Profit 2,001 2,349 2,540 470 2,296 2,493 2,588 2,122 6,647 9,622 Y-o-Y Growth (%) 10.0 14.9 61.0 291.5 14.8 6.1 1.9 351.2 19.5 44.8 Int Exp/ Int Earned (%) 32.9 32.5 31.7 34.7 33.4 33.6 37.5 37.8 33.1 35.6 Cost to Income Ratio (%) 38.9 39.2 40.6 40.0 39.3 38.8 41.1 41.4 39.7 39.8 Tax Rate (%) 34.9 34.8 33.8 37.8 35.0 33.3 35.7 35.2 34.7 34.5 E: MOFSL Estimates; *Quarterly nos and full year nos will not tally due to different way of reporting financial nos; Note: FY19 numbers on Ind-AS basis


Shriram City Union Finance

CMP: INR1,796 TP: INR2,100 (+17%) Buy While business conditions have improved since 3QFY19, yet, SCUF

is expected to have a tough quarter. On account of liquidity tightness, disbursements are expected to be 18% lower YoY to INR55b. The decline would be broad-based across segments.

Hence, we expect AUM to be sequentially stable at INR288b. The company has been securitizing assets more intensively, though.

We expect margins to be largely stable at 12.3%, resulting in NII of INR8.8b.

We expect asset quality to remain largely stable. We factor in provisions of INR2.15b, as against INR1.34b in 3QFY19 and INR4.12b in 4QFY18.

The stock trades at 1.9x FY19E and 1.6x FY20E BVPS. Buy. Key issues to watch for Trends in asset quality in each segment. Business growth and momentum, and management

commentary on the same. Impact of GST. Performance of the housing finance subsidiary.

Bloomberg SCUF IN


M. Cap. (INR b)/(USD b) 118 / 2

52-Week Range (INR) 2454 / 1480

1,6,12 Rel Perf. (%) 1 / 2 / -36

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E NII 33.7 36.7 40.5 45.8 PPP 20.7 22.8 25.2 28.7 PAT 6.6 9.6 10.7 12.2 EPS (INR) 100.8 145.9 162.2 184.3 EPS Gr. (%) 19.5 44.8 11.2 13.6 BV/Sh. (INR) 822 950 1,094 1,257 RoA (%) 2.8 3.5 3.7 3.9 RoE (%) 12.7 16.5 15.9 15.7 Payout (%) 21.5 12.4 11.1 11.7 Valuations P/E (x) 17.8 12.3 11.1 9.7 P/BV (x) 2.2 1.9 1.6 1.4 Div. Yield (%) 1.0 0.8 0.8 1.0

April 2019 157



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 31,028 32,326 33,615 29,502 37,107 39,173 39,682 40,427 126,471 156,389 Interest expenses 15,692 15,835 16,160 14,633 18,888 18,675 19,413 20,049 62,320 77,024 Net Interest Income 15,336 16,491 17,455 14,869 18,220 20,498 20,269 20,378 64,151 79,365

YoY Growth (%) 32.2 46.4 50.3 30.0 18.8 24.3 16.1 37.0 39.7 23.7 Securitization income 0 0 0 3,206 0 0 0 0 3,206 0 Net Income (Incl. Securitization) 15,336 16,491 17,455 18,076 18,220 20,498 20,269 20,378 67,357 79,365

YoY Growth (%) 13.8 21.9 23.6 28.3 18.8 24.3 16.1 12.7 22.0 17.8 Fees and Other Income 154 270 167 1,717 186 244 261 310 2,307 1,000 Net Operating Income 15,490 16,761 17,622 19,792 18,406 20,742 20,530 20,687 69,665 80,365

YoY Growth (%) 13.6 22.4 23.2 38.1 18.8 23.8 16.5 4.5 24.5 15.4 Operating Expenses 3,342 3,531 3,812 4,193 4,348 4,516 4,328 4,797 14,878 17,989 Operating Profit 12,148 13,230 13,810 15,599 14,057 16,226 16,202 15,891 54,787 62,375

YoY Growth (%) 17.9 25.3 21.2 36.6 15.7 22.6 17.3 1.9 25.4 13.9 Provisions 5,107 5,669 5,475 13,666 5,227 6,836 6,362 6,223 29,917 24,647 Profit before Tax 7,041 7,560 8,335 1,934 8,831 9,390 9,839 9,668 24,869 37,728 Tax Provisions 2,442 2,588 2,919 488 3,101 3,295 3,485 3,399 8,437 13,280 Net Profit 4,599 4,972 5,415 1,446 5,729 6,096 6,355 6,268 16,432 24,448 YoY Growth (%) 22.9 28.3 56.5 -3.4 24.6 22.6 17.3 333.5 30.7 48.8 AUM Growth (%) 10.4 14.6 19.2 22.2 21.7 20.9 14.1 9.0 22.2 9.0 Cost to Income Ratio (%) 21.6 21.1 21.6 21.2 23.6 21.8 21.1 23.2 21.4 22.4 Tax Rate (%) 34.7 34.2 35.0 25.2 35.1 35.1 35.4 35.2 33.9 35.2 E: MOFSL Estimates; * Quarterly nos and full-year nos will not tally due to different way of reporting financial nos


Shriram Transport FinanceCMP: INR1,200 TP: INR1,450 (+21%) Buy SHTF is likely to have a slightly tough quarter with respect to

growth. While disbursements are expected to improve fromINR94b to INR125b QoQ, they would still be 18% below 4QFY18levels.

Hence, SHTF is expected to deliver 1% QoQ/ 9% YoY AUM growthin the quarter. We also expect share of used vehicles to increase sequentially.

We expect calc. NIMs to be sequentially stable at 7.8%. We factor in INR6.2b NPL provisions v/s INR6.4b in 3QFY19 and

INR13.2b in 4QFY18. We expect stable to improving asset qualitytrends.

The stock trades at 1.7x FY19E and 1.5x FY20E BVPS. MaintainBuy.

Key issues to watch for Disbursements in used and new vehicle segments CV demand in FY19, volume gain on BS4 switch to BS6 Movement in borrowing costs and margins Asset quality trends, given impact of GST

Bloomberg SHTF IN


M. Cap. (INR b)/(USD b) 272 / 4


1,6,12 Rel Perf. (%) -5 / -1 / -36

Financial Snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Net Inc. 67.3 79.4 89.7 100.3 PPP 54.9 62.4 70.3 78.1 PAT 15.7 24.4 29.5 34.0 EPS (INR) 69.1 107.7 130.1 149.8 EPS Gr. (%) 24.7 55.9 20.8 15.1 BV/Sh (INR) 600 693 804 933 RoA on AUM (%) 1.9 2.4 2.6 2.6 RoE (%) 12.7 16.7 17.4 17.2 Payout (%) 16.8 13.9 13.9 13.9 Valuations P/E (x) 17.4 11.1 9.2 8.0 P/BV (x) 2.0 1.7 1.5 1.3 Div. Yield (%) 0.8 1.1 1.3 1.5

April 2019 158

Earnings to be on a gradual uptrend Marginal recovery in US sales supported by FX to support growth

Year-on-year earnings growth on an aggregate basis has been picking up gradually over the past three quarters. We expect this uptrend to continue, with 15.8% YoY growth in 4QFY19. Sales are estimated to grow by 13.9% YoY, led by healthy growth in the domestic formulation (DF) business and a moderate recovery in US sales led by currency tailwinds. Lower RM prices and controlled operational cost are likely to drive 24% YoY growth in EBITDA in 4QFY19. PAT growth is likely to trail EBITDA growth due to a higher tax outgo.

US sales to pick up moderately, further support from weak INR 4Q is likely to be the fourth consecutive quarter of positive top-line growth (in CC terms). US sales are likely to grow at 5-6% YoY on an aggregate basis. Companies were seen benefiting from tailwinds in the form of (a) healthy ANDA approvals, (b) moderate price erosion, (c) product-specific opportunities (e.g. G-Ranexa for LPC, g-Suboxone for DRRD) and (d) INR depreciation v/s USD. Within our coverage universe, we expect ARBP/Cipla/TRP to deliver more than average growth. However, a high base and a lower number of launches may impact growth for SUNP and CDH. Regulatory concerns have been easing for a few companies (DRRD/LPC/TRP), based on the current status of plants. We, however, believe that consistency in compliance remains critical. Momentum in approvals and potential launches over the next 12-15 months would be the key monitorable in the US generics segment.

DF to remain on steady growth path; volume growth to pick up marginally We expect 15% YoY growth in the DF segment on an aggregate basis in 4QFY19. At the industry level, price hikes continue driving growth, while volumes have started picking up. Within our coverage universe, ALKEM/CIPLA/TRP are likely to deliver considerable growth, with the former two benefiting from a low base and CIPLA from superior execution. We expect LPC/IPCA/GNP to maintain 12-15% YoY growth in the DF segment in 4QFY19, and CDH/SUNP/AJP to exhibit moderate growth.

DIVI/IPCA/GNP/BIOS – outperformers; CDH/AJP/TRP – underperformers We expect strong YoY growth in 4QFY19 for DIVI, IPCA, GNP and BIOS on the back of superior execution. GRAN/STR/ALKEM are expected to deliver significant growth, partly due to a low base of the past year. We expect CIPLA and SUNP to exhibit moderate growth in earnings due to headwinds in the institutional business (CIPLA) and lower profitability in Taro (SUNP). We expect CDH’s earnings to decline meaningfully due to a high base (some high-potential products were launched in 4QFY18).

Our top picks – ARBP/ALKEM

Company name Alembic Pharma Ajanta Pharma Alkem Lab Aurobindo Pharma Biocon Cadila Health Cipla Divis Labs Dr Reddy’ s Labs Fortis Health Glenmark Pharma Granules India GSK Pharma IPCA Labs. Jubilant Life Lupin Sanofi India Shilpa Medicare Strides Pharma Sun Pharma Torrent Pharma

Healthcare March 2019 Results Preview | April 2019

Tushar Manudhane – Research Analyst ([email protected]); +91 022 6129 1536 Rajat Srivastava – Research Analyst ([email protected]); +91 22 6129 1557

April 2019 159

Exhibit 1: Expected quarterly performance summary (INR m) Sector / Companies CMP SALES (INR m) EBDITA (INR m) NET PROFIT (INR m)

Healthcare (INR) Rating Mar-19 Var % YoY


% YoY Var


Var % QoQ

Alembic Pharma 542 Neutral 9,452 10.8 -7.2 1,860 7.4 -23.2 913 -2.6 -46.2Alkem Lab 1,745 Buy 19,935 31.7 3.6 3,410 140.1 9.4 2,540 166.4 25.4 Ajanta Pharma 1,034 Buy 5,119 -3.5 5.5 1,212 -13.1 5.1 806 -14.7 10.9 Aurobindo Pharma 787 Buy 48,988 21.0 -7.0 10,191 26.8 -6.2 6,396 18.1 -7.6Biocon 616 Neutral 16,053 37.2 4.2 4,284 83.9 4.8 1,982 73.6 -17.1Cadila Health 344 Buy 34,902 7.4 -2.5 7,220 -17.0 -14.0 3,992 -34.2 -21.8Cipla 526 Neutral 41,085 11.1 2.5 7,237 30.0 2.3 3,369 1.0 1.4 Divis Labs 1,699 Neutral 13,064 20.1 -2.7 5,167 33.7 -8.5 4,021 53.7 6.0 Dr Reddy’ s Labs 2,796 Neutral 38,986 10.3 1.3 7,706 39.8 -5.5 4,102 35.8 -15.4Glenmark Pharma 650 Neutral 25,586 13.8 1.9 4,078 38.3 4.7 2,311 52.4 7.7 Granules India 114 Buy 6,518 29.4 3.2 1,122 157.2 -1.0 575 234.3 -1.3GSK Pharma 1,294 Neutral 7,913 5.7 -4.1 1,442 -6.9 5.0 961 -8.9 1.3 IPCA Labs. 954 Buy 9,188 17.4 -3.0 1,597 36.3 -24.0 873 49.0 -37.0Jubilant Life 686 Buy 23,736 5.4 -0.1 5,014 9.5 1.6 2,632 18.5 -1.6Lupin 777 Buy 44,330 9.9 3.2 7,857 10.9 13.5 4,462 19.1 69.5 Sanofi India 5,914 Buy 6,810 10.2 -6.3 1,362 1.3 -0.8 828 0.4 4.4 Shilpa Medicare 335 Buy 1,876 -20.0 8.2 439 -7.6 67.6 391 28.7 112.2 Strides Pharma 474 Buy 9,384 41.3 18.1 1,493 72.6 17.5 636 505.6 166.3 Sun Pharma 470 Buy 73,872 10.1 -3.5 16,813 18.6 -5.0 9,861 7.2 4.7 Torrent Pharma 1,889 Neutral 21,185 23.0 6.6 5,709 56.8 8.5 2,714 -2.4 26.1 Sector Aggregate 457,983 13.9 -0.3 95,213 23.9 -2.0 54,367 15.8 0.7


Exhibit 2: 4QFY19 Aggregates Healthcare Universe YoY Growth (%) EBITDA Margin (%) PAT margin (%)

Sales EBITDA Adj. PAT Mar-19 Mar-18 CHG (BPS) Mar-19 Mar-18 CHG (BPS) MNC Pharma 7.8 -3.1 -4.8 19.0 21.2 -213 12.2 13.8 -161Big 5 Generics 12.4 18.3 14.7 22.9 21.8 113 13.7 13.4 27 CRAMS 9.3 21.3 -2.5 18.3 16.5 182 9.0 10.1 -109Second Tier generics 16.3 22.3 11.2 20.1 19.1 102 11.3 11.8 -50Sector Aggregate 13.9 23.9 15.8 20.8 19.1 168 11.9 11.7 19

A push from FX tailwinds The INR has depreciated by ~9% from 64.6 in 4QFY18 v/s 70.3 in 4QFY19. This should benefits exports to the regulated markets. The extent of hedging, RM imports and foreign currency servicing would decide the quantum of benefits.

Currency depreciation adversely impacts companies having foreign currency borrowings. This will, however, vary depending on the hedging policy of the respective companies.

March 2019 Results Preview | Sector: Healthcare

April 2019 160

Exhibit 3: 86 ANDA approved for companies under coverage Exhibit 4: Favorable FX to support US sales growth

Exhibit 5: Relative performance—3 months (%) Exhibit 6: Relative performance—1 year (%)

Source: Bloomberg, MOFSL Exhibit 7: Comparative valuation Sector / Companies CMP Reco EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Healthcare (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E

Alembic Pharma 542 Neutral 29.3 29.6 34.8 18.5 18.3 15.6 12.2 11.8 9.9 22.4 19.3 19.5 Alkem Lab 1,745 Buy 70.9 91.7 109.4 24.6 19.0 16.0 16.5 13.1 10.7 16.3 18.4 19.0 Ajanta Pharma 1,034 Buy 44.0 51.2 59.3 23.5 20.2 17.4 15.4 13.2 11.3 17.6 17.6 17.6

Aurobindo Pharma 787 Buy 42.8 59.1 64.2 18.4 13.3 12.3 12.7 9.5 8.0 19.6 22.2 19.7 Biocon 616 Neutral 12.1 21.8 25.6 50.8 28.2 24.1 26.0 16.6 13.9 13.2 20.9 21.1 Cadila Health 344 Buy 17.5 17.7 18.8 19.7 19.4 18.3 14.4 13.0 12.0 19.1 17.0 16.0

Cipla 526 Neutral 17.6 21.2 25.3 29.9 24.8 20.8 15.9 13.2 11.2 9.2 10.1 10.9 Divis Labs 1,699 Neutral 56.0 61.3 70.4 30.3 27.7 24.1 22.1 19.6 16.6 22.9 21.1 20.5 Dr Reddy’ s Labs 2,796 Neutral 111.8 129.2 141.5 25.0 21.6 19.8 15.5 11.9 10.7 14.0 14.4 14.0

Glenmark Pharma 650 Neutral 28.2 34.7 38.3 23.0 18.7 16.9 14.4 12.0 10.8 13.2 14.1 13.5 Granules India 114 Buy 9.1 10.4 12.3 12.5 11.0 9.3 8.5 6.8 5.9 16.6 17.0 17.9 GSK Pharma 1,294 Neutral 23.6 28.7 33.3 54.7 45.0 38.8 35.8 29.1 24.4 18.9 21.5 22.7

IPCA Labs. 954 Buy 36.8 42.7 50.7 25.9 22.3 18.8 17.1 14.2 12.0 16.0 16.1 16.7 Jubilant Life 686 Buy 60.4 69.5 73.7 11.4 9.9 9.3 7.3 6.0 5.4 20.8 19.9 17.8 Lupin 777 Buy 26.2 38.2 47.9 29.7 20.3 16.2 15.8 11.1 9.2 8.6 11.9 13.6

Sanofi India 5,914 Buy 165.5 197.3 218.6 35.7 30.0 27.1 20.5 16.7 14.6 17.2 18.5 18.3 Sun Pharma 470 Buy 16.2 20.4 23.8 28.9 23.0 19.8 16.0 12.5 10.5 10.0 11.7 12.3 Shilpa Medicare 335 Buy 13.9 22.3 24.2 24.1 15.0 13.9 16.7 12.1 9.1 9.7 13.8 13.2

Strides Pharma 474 Buy 9.8 25.1 34.0 48.6 18.9 14.0 12.8 10.4 8.8 3.5 8.6 10.8 Torrent Pharma 1,889 Neutral 48.7 68.5 83.4 38.8 27.6 22.7 17.3 14.3 12.1 16.4 19.9 21.2 Sector Aggregate 26.7 21.3 18.6 15.9 12.7 10.9 13.1 14.5 14.6

16 13

9 9 8 7 7 5 4 3 3 2

Cadi

la

Sun

Phar

ma

Lupi

n

Alke

m

Cipl

a

Auro

bind

o

Torr

ent

Alem

bic

Glen

mar

k

DrRe

ddy

Ajan

ta P

harm

a

Strid

es

Number of ANDA approvals in 4QFY19

-13.3-17.6 -14.2 -14.3

-0.4 1.56.4

17.1 11.4

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19E

US sales growth YoY(%)

98

100

102

104

106

108

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Health care Index

95100105110115120125

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Health care Index


April 2019 161

Consolidated - Quarterly Earning Model (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 4,731 5,404 5,870 5,303 5,110 5,441 4,851 5,119 21,308 20,521 YoY Change (%) -0.6 4.8 10.1 11.2 8.0 0.7 -17.4 -3.5 6.5 -3.7 Total Expenditure 3,424 3,567 3,896 3,908 3,535 3,779 3,698 3,907 14,794 14,919 EBITDA 1,307 1,837 1,975 1,395 1,575 1,662 1,153 1,212 6,514 5,602 Margins (%) 27.6 34.0 33.6 26.3 30.8 30.5 23.8 23.7 30.6 27.3 Depreciation 134 146 150 166 172 175 187 191 596 724 Interest 1 1 1 1 2 0 1 -1 4 2 Other Income 16 92 152 52 81 152 44 30 311 308 PBT before EO expense 1,187 1,783 1,975 1,280 1,483 1,640 1,010 1,052 6,225 5,184 Extra-Ord expense 0 0 0 0 0 0 80 0 80 PBT 1,187 1,783 1,975 1,280 1,483 1,640 930 1,052 6,225 5,104 Tax 239 464 501 335 425 385 261 246 1,539 1,316 Rate (%) 20.1 26.0 25.3 26.2 28.7 23.5 28.0 23.4 24.7 25.8 Minority Interest & P/L of Asso. Cos. 0 0 0 0 0 0 0 0 0 0 Reported PAT 948 1,319 1,475 945 1,058 1,255 669 806 4,686 3,788 Adj PAT 948 1,319 1,475 945 1,058 1,255 727 806 4,686 3,847 YoY Change (%) -20.7 0.9 3.4 -22.5 11.6 -4.8 -50.7 -14.7 -8.9 -17.9 Margins (%) 20.0 24.4 25.1 17.8 20.7 23.1 15.0 15.7 22.0 18.7 E: MOFSL Estimates


Ajanta PharmaCMP: INR1,033 TP:INR1,375 (+33%) Buy We expect Ajanta Pharma’s (AJP) sales to decline 4% YoY to

INR5.1b due to significant erosion in the institutional anti-malariabusiness. With the global fund delaying its procurement process,sales of anti-malaria drugs have been impacted. Consequently, weexpect AJP’s Africa business to see 47% YoY decline for thequarter, which, in turn, will drag overall growth.

We expect the domestic formulation business to grow at 7% YoYto INR1.5b for the quarter. We expect subdued growth in DF dueto low growth in Melacare range of dermatology products andsaturation in overall market share in the ophthalmic segment.

We expect Asia business to deliver sales of INR1.3b, growing 4%YoY for the quarter.

On an overall basis, we expect EBITDA margin to come in at 23.7%,contracting by 260bp YoY and remaining stable on a sequentialbasis. Expect PAT at INR806m for 4QFY19, down 15% YoY.

We expect FY19 to be the year of trough with a 17% YoY declinein earnings. Further, we expect 16% CAGR in earnings over FY19-21 on the back of smoothening of base for Institutional Anti-malaria business, better traction in US generics andoutperformance in domestic formulations. We maintain Buy witha target price of INR1,375 (24x 12M forward earnings).

Key issues to watch out Procurement of anti-malaria medicine by Global Fund. ANDA filing rate, new approval and traction from recently

launched products in the US market.

Bloomberg AJP IN


1,6,12 Rel Perf. (%) -4 / -10 / -44

Financial Snapshot (INR Billion) Y/E MARCH FY18 FY19E FY20E FY21E

Sales 21.3 20.5 23.1 26.6

EBITDA 6.6 5.6 6.4 7.3 NP 4.7 3.9 4.5 5.2 EPS (INR) 53.0 44.0 51.2 59.3

EPS Gro. (%) -7.5 -17.0 16.5 15.8BV/Sh. (INR) 230.8 268.8 312.3 362.7 RoE (%) 26.0 17.6 17.6 17.6



D. Yield (%) 0.0 0.6 0.8 0.9

April 2019 162


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 6,482 7,893 8,400 8,533 8,625 11,271 10,182 9,452 31,310 39,529 YoY Change (%) -10.8 -9.4 9.1 15.8 33.1 42.8 21.2 10.8 -0.1 26.3 Total Expenditure 5,468 6,101 6,525 6,801 7,115 8,247 7,759 7,592 24,877 30,708 EBITDA 1,014 1,792 1,875 1,732 1,510 3,023 2,422 1,860 6,433 8,821 Margins (%) 15.6 22.7 22.3 20.3 17.5 26.8 23.8 19.7 20.5 22.3 Depreciation 218 257 264 316 276 286 291 364 1,055 1,217 Interest 9 4 8 13 16 58 60 76 34 209 Other Income 2 77 3 6 1 24 35 19 70 79 PBT before EO expense 789 1,608 1,606 1,410 1,219 2,703 2,108 1,439 5,415 7,474 Extra-Ord expense 0 0 0 0.0 0 0 0 0.0 0 0 PBT 789 1,608 1,606 1,410 1,219 2,703 2,108 1,439 5,415 7,474 Tax 155 366 298 385 315 703 400 450 1,204 1,869 Rate (%) 19.6 22.7 18.5 27.3 25.9 26.0 19.0 31.3 22.2 25.0 MI & P/L of Asso. Cos. -33 27 3 87 -1 -1 9 76 83 83 Adj PAT 667 1,216 1,306 938 905 2,001 1,698 913 4,128 5,523 YoY Change (%) -34.6 2.4 51.6 0.8 35.7 64.6 30.0 -2.6 2.5 33.8 Margins (%) 10.3 15.4 15.5 11.0 10.5 17.8 16.7 9.7 13.2 14.0 E: MOFSL Estimates


Alembic PharmaCMP: INR542 TP: INR615 (+14%) Neutral In 4QFY19, we expect Alembic Pharma (ALPM) to report

moderate growth of ~11% YoY in sales to INR9.4b, led by 19% YoYgrowth in the international formulations business.

Within the international segment we expect higher growth tocome from Non US geographies as US business had a high baselast year. We expect domestic segment to witness 13% YoYgrowth while API business to see 8% YoY decline.

We expect EBITDA margin to come in at 19.7%, down 60bp YoYand 410bp sequentially. Absolute EBITDA is expected to 7% YoYgrowth on account of increased sales.

PAT expected to decline YoY to INR913m vs INR938m in 4QFY18on account of reduced margins and higher tax rate (32.7% vs27.3% in 4QFY18) expected during the quarter.

We value ALPM at 18x 12M forward earnings to arrive at TP ofINR615. We have Neutral rating on the stock.

Key issues to watch out for Rate of ANDA filings and approval pace for US Contribution of chronic therapies to overall domestic business

Bloomberg ALPM IN


1,6,12 Rel Perf. (%) -10 / -21 / -17


Sales 31.3 39.5 43.4 49.5

EBITDA 6.4 8.8 9.2 10.7

NP 4.1 5.5 5.6 6.6

EPS (INR) 21.9 29.3 29.6 34.8

EPS Gro. (%) 2.5 33.8 1.2 17.5

BV/Sh. (INR) 117.8 140.0 162.8 190.8

RoE (%) 19.6 22.4 19.3 19.5

RoCE (%) 17.3 18.4 16.8 17.6

Valuations

P/E (x) 24.8 18.5 18.3 15.6

P/BV (x) 4.6 3.9 3.3 2.8

EV/EBITDA (x) 15.7 11.4 11.0 9.2

EV/Sales (x) 3.2 2.5 2.3 2.0

April 2019 163

Quarterly Performance (Consolidated) (INR m) Y/E March FY18 FY19E FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 12,952 18,649 17,405 15,132 16,695 19,189 19,250 19,935 64,312 75,069 YoY Change (%) -12.5 13.8 17.4 20.9 28.9 2.9 10.6 31.7 9.9 16.7 EBITDA 944 4,605 3,598 1,420 2,142 3,642 3,118 3,410 10,566 12,311 Margins (%) 7.3 24.7 20.7 9.4 12.8 19.0 16.2 17.1 16.4 16.4 Depreciation 306 346 375 403 425 458 477 480 1,430 1,839 Net Other Income 169 62 101 74 0 76 -60 75 406 90 PBT before EO Exp 807 4,321 3,324 1,091 1,718 3,260 2,581 3,004 9,542 10,563 PBT 807 4,321 3,324 1,091 1,718 3,260 2,581 3,004 9,542 10,563 Tax 169 1,046 1,515 145 345 656 526 480 2,876 2,007 Rate (%) 20.9 24.2 45.6 13.3 20.1 20.1 20.4 16.0 30.1 19.0 PAT (pre Minority Interest) 638 3,274 1,809 946 1,373 2,604 2,055 2,524 6,667 8,556 Minority Interest -78 68 92 -8 11 60 29 -15 75 85 Reported PAT 716 3,207 1,716 671 1,362 2,545 2,025 2,540 6,309 8,471 Adj Net Profit 716 3,207 2,164 953 1,362 2,545 2,025 2,540 7,040 8,471 YoY Change (%) -70.0 13.4 -7.3 -30.4 90.3 -20.6 -6.4 166.4 -21.1 20.3

March 2019 Results Preview | Sector: Healthcare Alkem Labs

CMP: INR1,744 TP: INR2,170 (+24%) Buy We expect Alkem Labs to witness strong revenue increase of

~31% YoY to INR19.9b (on a high base), led by strong growth in both India and international business.

Domestic business is expected to grow by ~43% YoY on a low base to INR13.7b. The US business is expected to grow by ~51% YoY to INR6b for the quarter led by new product launches. Revenue from other international markets is expected to grow at a much lower rate of 17% YoY, offsetting growth to some extent.

EBITDA margin for the company is expected to improve by 770bp YoY and 90bp sequentially to 17.1% for the quarter. The improvement in EBITDA margin is due to lower employee expenses, R&D expenses and other expenses as a % of sales. Thus, we expect PAT to come in at INR2.5b, up 166% YoY and 25% sequentially, driven by higher sales and improved margins for the quarter.

We remain positive on ALKEM on the back increased share of chronic therapy in the domestic formulation business, improvement in MR productivity and enhanced US business where the operating leverage is now kicking in. Maintain Buy with a TP of INR2,170 @ 22x 12M forward earnings.

Key issues to watch out for Rate of ANDA filings and approval pace. Consistency in compliance. New launches in the domestic formulations business.

Bloomberg ALKEM IN


M. Cap. (INR b)/(USD b) 209 / 3

52-Week Range (INR) 2265 / 1693

1,6,12 Rel Perf. (%) -10 / -22 / -27


Sales 64.3 75.1 87.1 99.6

EBITDA 10.6 12.3 15.4 18.2

NP 7.0 8.5 11.0 13.1

EPS (INR) 58.9 70.9 91.7 109.4

EPS Gro. (%) -21.1 20.3 29.4 19.2

BV/Sh. (INR) 406.8 461.7 532.8 617.6

RoE (%) 15.1 16.3 18.4 19.0

RoCE (%) 13.0 18.4 20.5 21.3

Valuations

P/E (x) 29.6 24.6 19.0 15.9

P/BV (x) 4.3 3.8 3.3 2.8

EV/EBITDA (x) 20.0 16.9 13.3 11.0

EV/Sales (x) 3.3 2.8 2.4 2.0

April 2019 164

Quarterly performance (Consolidated) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 36,788 44,359 43,362 40,491 42,503 47,514 52,697 48,988 164,998 191,701 YoY Change (%) -2.3 17.5 11.0 11.2 15.5 7.1 21.5 21.0 9.3 16.2 EBITDA 8,416 11,173 10,256 8,040 7,792 10,260 10,864 10,191 37,885 39,107 Margins (%) 22.9 25.2 23.7 19.9 18.3 21.6 20.6 20.8 23.0 20.4 Depreciation 1,312 1,321 1,381 1,566 1,545 1,637 1,631 1,642 5,580 6,455 Interest 169 173 189 247 295 354 477 469 777 1,594 Other Income 221 103 258 438 437 263 134 166 1,020 1,000 PBT before EO expense 7,156 9,782 8,945 6,665 6,389 8,532 8,890 8,247 32,548 32,058 Forex loss/(gain) 77 4 -73 159 682 397 -505 0 168 574 Exceptional (expenses)/income -268 -250 (518) PBT 7,080 9,778 9,017 6,506 5,707 7,866 9,144 8,247 32,380 30,966 Tax 1,910 1,980 3,069 1,224 1,155 1,754 2,048 1,855 8,183 6,812 Rate (%) 27.0 20.2 34.0 18.8 20.2 22.3 22.4 22.5 25.3 22.0 Minority Interest -15 -13 -3 -3 -3 -2 -26 -4 -34 -35 Reported PAT 5,185 7,812 5,951 5,285 4,555 6,114 7,122 6,396 24,231 24,188 Adj PAT 5,241 7,815 6,567 5,414 5,095 6,632 6,925 6,396 25,021 25,070 YoY Change (%) -9.5 32.2 2.9 -2.6 -2.8 -15.1 5.5 18.1 8.7 0.2 Margins (%) 14.2 17.6 15.1 13.4 12.0 14.0 13.1 13.1 15.2 13.1


Aurobindo PharmaCMP: INR787 TP: INR940 (+20%) Buy We expect Aurobindo (ARBP) to post healthy growth of ~21% YoY

to INR48.9b in 4QFY19. Growth will be supported by 26% YoYincrease in the formulation business (~83% of sales).

We expect the US business to grow by 27% YoY to INR22b. Europeand rest-of-the-world (RoW) sales are expected to grow 18% YoY,while active pharmaceutical ingredient (API) sales are estimatedto be stable on a YoY basis.

EBITDA margin is expected to improve by ~90bp YoY to 20.8%,mainly due to lower employee cost and other expenses as % ofsales. Absolute EBITDA is expected to grow 27% YoY to INR10b.

We expect PAT to grow at a lower rate of ~18% YoY to INR6.4b onaccount of increased tax rate during the quarter.

We remain positive on ARBP on the back of its high ANDA filingsrate, strong pace of approvals, minimal regulatory risks and thecompany outperforming the industry in the EU market. Wemaintain Buy on the stock with a TP of INR944 (15x 12M forwardearnings).

Key issues to watch out for Pace of approvals in the US business. Consistency in compliance. US business outlook amid ongoing pricing pressure.

Bloomberg ARBP IN


M. Cap. (INR b)/(USD b) 461 / 7


1,6,12 Rel Perf. (%) 1 / -5 / 15


Sales 165.0 191.7 264.6 293.4

EBITDA 37.9 39.1 56.4 63.7

NP 25.0 25.1 34.6 37.6

EPS (INR) 42.7 42.8 59.1 64.2

EPS Gro. (%) 8.7 0.2 38.1 8.7

BV/Sh. (INR) 199.4 238.1 294.7 356.5

RoE (%) 23.8 19.6 22.2 19.7

RoCE (%) 17.4 14.7 15.3 13.3

Valuations

P/E (x) 18.4 18.4 13.3 12.3

P/BV (x) 3.9 3.3 2.7 2.2

EV/EBITDA(x) 12.6 12.4 9.3 7.8

EV/Sales (x) 2.9 2.5 2.0 1.7

April 2019 165

Quarterly performance (Consolidated) (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 9,337 9,686 10,579 11,700 11,240 13,210 15,410 16,053 41,297 55,913 YoY Change (%) -5.9 1.5 1.3 25.7 20.4 36.4 45.7 37.2 5.3 35.4 Total Expenditure 7,416 7,864 8,362 9,370 8,860 9,810 11,320 11,769 33,006 41,759 EBITDA 1,921 1,822 2,217 2,330 2,380 3,400 4,090 4,284 8,291 14,154 Margins (%) 20.6 18.8 21.0 19.9 21.2 25.7 26.5 26.7 20.1 25.3 Depreciation 988 936 974 950 990 1,120 1,170 1,241 3,851 4,521 Interest 161 138 147 170 180 190 190 147 615 707 Other Income 540 508 339 670 690 540 250 420 2,062 1,900 Extraordinary income 1,888 -220 1,668 PBT 1,312 1,256 1,435 1,880 1,900 4,518 2,760 3,316 5,887 12,494 Tax 376 425 361 410 520 730 460 997 1,569 2,707 Rate (%) 28.7 33.8 25.2 21.8 27.4 16.2 16.7 30.1 26.7 21.7 Minority Interest 123 144 155 170 180 240 130 338 594 888 PAT 813 687 919 1,300 1,200 3,548 2,170 1,982 3,724 8,900 Adj PAT 815 712 1,022 1,142 1,097 1,840 2,390 1,982 3,690 7,129 YoY Change (%) -44.4 -51.5 -40.4 -10.1 34.6 158.5 133.9 73.6 -38.1 93.2 Margins (%) 8.7 7.1 8.7 11.1 10.7 26.9 14.1 12.3 9.0 15.9


BioconCMP: INR615 TP: INR685 (+11%) Neutral Biocon (BIOS) is expected to report robust revenue growth of

~37% YoY to INR16b, primarily led by ~96% YoY growth inBiologics. Branded formulations business is expected to grow at15% YoY, while small molecules and research services are bothexpected to see moderate growth of ~9% YoY.

EBITDA margin is expected to improve by 680bp YoY to 26.7%with the changing product mix towards high margin products forthe company. Absolute EBITDA is expected to see 84% YoYgrowth to INR4.2b for the quarter.

We expect PAT of INR1.9b as against INR1b in 4QFY18. We expect the Biologics segment to continue to perform strongly,

led by improved traction for approved biosimilars in both regulated and emerging markets. Accordingly, we estimate earnings CAGR of 45% to INR15.4b over FY19-21. We continue to value BIOS at 30x P/E and roll our target on 12M forward basis to INR685. We maintain our Neutral stance on limited upside from current levels.

Key issues to watch out for Increased traction in biosimilars in regulated market. Update on BIOS’ plans to list Biologics business separately. Update on various products under approval stage.

Bloomberg BIOS IN


M. Cap. (INR b)/(USD b) 369 / 5


1,6,12 Rel Perf. (%) -11 / -16 / -15


Sales 41.3 55.9 78.0 93.2

EBITDA 8.3 14.2 21.9 25.8

NP 3.7 7.3 13.1 15.4

EPS (INR) 6.2 12.1 21.8 25.6

EPS Gro. (%) -39.2 95.3 79.9 17.4

BV/Sh. (INR) 86.3 96.8 112.3 130.4

RoE (%) 7.4 13.2 20.9 21.1

RoCE (%) 6.2 11.1 15.8 16.5

Valuations

P/E (x) 107.1 54.9 30.5 26.0

P/BV (x) 7.7 6.9 5.9 5.1

EV/EBITDA (x) 48.0 28.1 17.9 15.0

EV/Sales (x) 9.6 7.1 5.0 4.2

April 2019 166

Quarterly Performance (Consolidated) Y/E March FY18 FY19E FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 21,973 32,340 32,475 32,502 28,937 29,612 35,779 34,902 119,364 129,230 YoY Change (%) -3.9 37.4 40.5 31.2 31.7 -8.4 10.2 7.4 26.6 8.3 EBITDA 2,773 8,571 8,433 8,704 6,450 6,878 8,399 7,220 28,475 28,947 Margins (%) 12.6 26.5 26.0 26.8 22.3 23.2 23.5 20.7 23.9 22.4 Depreciation 1,220 1,267 1,469 1,440 1,418 1,475 1,537 1,794 5,388 6,224 Interest 219 406 134 154 350 357 455 683 911 1,845 Other Income 210 225 410 287 1,013 304 310 334 1,132 1,961 PBQ before EO Income 1,544 7,123 7,240 7,397 5,695 5,350 6,717 5,077 23,308 22,839 EO Exp/(Inc) 0 0 0 0 0 0 0 0 0 0 PBT after EO Income 1,544 7,123 7,240 7,397 5,695 5,350 6,717 5,077 23,308 22,839 Tax 293 2,123 1,786 1,442 1,203 1,247 1,586 1,217 5,644 5,253 Rate (%) 19.0 29.8 24.7 19.5 21.1 23.3 23.6 24.0 24.2 23.0 Min. Int/Adj on Consol 133 33 4 112 113 72 -24 132 282 293 Adj PAT 1,384 5,033 5,458 6,067 4,605 4,175 5,107 3,992 17,946 17,879 YoY Change (%) -61.2 49.1 93.8 57.4 232.7 -17.0 -6.4 -34.2 20.6 -0.4 Margins (%) 6.3 15.6 16.8 18.7 15.9 14.1 14.3 11.4 15.0 13.8

March 2019 Results Preview | Sector: Healthcare Cadila Healthcare

CMP: INR344 TP:INR420 (+22%) Buy Cadila Healthcare's (CDH) 4QFY19 revenues are expected to see

YoY growth of 7.4% to INR34.9b. Growth is expected to be moderate on a high base of 4QFY18 which included sales of FTF g-Lialda.

Overall export formulations (58% of sales) business is expected to see growth of ~12% YoY to INR21.3b, while domestic formulations business (25% of sales) is likely to grow marginally by ~2% YoY to INR9b.

Margins are expected to shrink by ~530bp YoY to 20.7% due to a change in the product mix. Consequently, EBITDA is expected to decline by 17% YoY to INR7.2b for the quarter. Adjusted PAT is expected to decline at a higher rate of 34% YoY to INR3.9b, with the tax rate expected to go up during the quarter.

We remain positive on CDH, considering its robust ANDA pipeline for the US market, minimal regulatory hurdles, and outperformance versus industry in the DF market. We value the stock at 22x P/E on 12M forward earnings and maintain Buy with a TP of INR420.

Key issues to watch out for Update on growth in the US business post competition in

existing potential molecules. Growth strategy for domestic formulations going forward.

Bloomberg CDH IN


1,6,12 Rel Perf. (%) -2 / -20 / -28


Sales 119.4 129.2 145.1 156.4

EBITDA 28.5 28.9 32.5 34.3 Net Profit 17.9 17.9 18.2 19.2 Adj. EPS (INR) 17.5 17.5 17.7 18.8


RoCE (%) 14.0 11.7 10.7 10.5 Payout (%) 0.0 0.0 0.0 0.0 Valuations

P/E (x) 19.6 19.7 19.4 18.3 P/BV (x) 4.0 3.5 3.1 2.8 EV/EBITDA (x) 13.6 14.4 13.0 12.0

April 2019 167

Quarterly Performance (Consolidated) (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 35,251 40,824 39,139 36,980 39,390 40,119 40,075 41,085 152,200 160,669 YoY Change (%) -3.4 8.8 7.3 3.2 11.7 -1.7 2.4 11.1 4.3 5.6 EBITDA 6,465 8,044 8,187 5,569 7,264 7,022 7,077 7,237 28,271 28,599 Margins (%) 18.3 19.7 20.9 15.1 18.4 17.5 17.7 17.6 18.6 17.8 Depreciation 2,134 3,022 5,224 2,848 2,410 2,819 2,931 2,854 13,228 11,014 Interest 279 420 92 352 351 444 442 362 1,142 1,598 Other Income 1,514 1,133 529 400 551 1,326 785 688 3,577 3,350 Profit before Tax 5,566 5,735 3,402 2,769 5,056 5,085 4,489 4,710 17,477 19,337 Extra-Ord (expense)/income 0 0 0 775 1,150 0 0 0 775 1,150 PBT after EO expense 5,566 5,735 3,402 1,994 6,206 5,085 4,489 4,710 16,702 20,487 Tax 1,308 1,374 -642 462 1,737 1,424 1,257 1,216 2,501 5,634 Rate (%) 23.5 24.0 -18.9 16.7 34.4 28.0 28.0 25.8 14.3 29.1 Minority Interest 169.6 134.7 38.1 -254.2 -45.7 -109.2 -90.0 124.9 88.2 -120.0 Reported PAT 4,088 4,226 4,006 1,786 4,515 3,770 3,322 3,369 14,113 14,973 Adj PAT 4,088 4,226 4,677 3,336 3,655 3,770 3,322 3,369 16,335 14,116 YoY Change (%) 20.6 19.3 24.8 64.2 -10.6 -10.8 -29.0 1.0 31.2 -13.6 Margins (%) 11.6 10.4 12.0 9.0 9.3 9.4 8.3 8.2 10.7 8.8


CiplaCMP: INR526 TP: INR488 (-7%) Neutral We expect Cipla’s revenue to grow ~11% YoY to INR41b in 4QFY19. Growth is expected to be driven by domestic formulations business

which we expect to grow by 21% YoY. Export formulations areexpected to grow at a subdued rate of 5% YoY on account of declinein sales expected in South Africa and emerging markets. Thisdecline will be somewhat offset by exports to the US (which areexpected to deliver strong growth of 31% YoY) and EU (which areexpected to grow by 8% YoY).

EBITDA margin is expected to come in at 17.6% (+250bp YoY).Absolute EBITDA is expected to see 30% YoY growth to INR7.2b.

We expect PAT to grow 1% YoY to INR3.4b on account of increasedtax rate during the quarter (25.8% vs 16.7% in 4QFY18).

We remain positive on the company on the back of outperformancein domestic formulations business and better traction in the USbusiness leveraging on its own front end. However, we maintainNeutral on limited upside from current levels with TP of INR488(19x 12M forward earnings).

Key issues to watch out for Quality of filings in US and approval rate. Response to USFDA latest inspection observations. Outlook on institutional business. New product launches in the domestic segment.

Bloomberg CIPLA IN


M. Cap. (INR b)/(USD b) 423 / 6


1,6,12 Rel Perf. (%) -13 / -27 / -26


Sales 152.2 160.7 178.7 199.9

EBITDA 28.3 28.6 33.7 39.1

NP 16.3 14.1 17.1 20.3

EPS (INR) 20.3 17.6 21.2 25.3

EPS Gro. (%) 31.2 -13.6 20.8 19.1

BV/Sh. (INR) 176.7 191.3 209.5 231.7

RoE (%) 11.5 9.2 10.1 10.9

RoCE (%) 8.6 7.8 8.9 9.7

Valuations

P/E (x) 25.8 29.9 24.7 20.8

P/BV (x) 3.0 2.7 2.5 2.3

EV/EBITDA (x) 16.0 15.8 13.1 11.2

EV/Sales (x) 3.0 2.8 2.5 2.2

April 2019 168


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Op Revenue 8,212 8,902 10,379 10,880 9,953 12,850 13,429 13,064 39,128 49,296 YoY Change (%) -18.4 -10.2 8.1 2.3 21.2 44.3 29.4 20.1 -4.5 26.0 EBITDA 2,448 2,772 3,421 3,865 3,519 5,141 5,645 5,167 12,617 19,472 Margins (%) 29.8 31.1 33.0 35.5 35.4 40.0 42.0 39.6 32.2 39.5 Depreciation 323 339 374 388 416 424 425 518 1,425 1,783 Interest 5 8 3 -2 6 2 25 20 13 54 Other Income 227 230 170 252 221 273 346 291 888 1,130 PBT before EO Income 2,347 2,655 3,215 3,731 3,317 4,988 5,540 4,920 12,067 18,766 Forex gain /(Loss) 70 106 -160 230 267 528 -411 0 246 795 PBT 2,417 2,761 3,055 3,961 3,584 5,516 5,129 4,920 12,313 19,560 Tax 652 693 808 1,345 923 1,539 1,334 899 3,543 4,695 Deferred Tax 0 0 0 0 0 0 0 0 0 0 Rate (%) 27.0 25.1 26.5 33.9 25.7 27.9 26.0 18.3 28.8 23.1 PAT 1,765 2,068 2,247 2,616 2,662 3,977 3,795 4,021 8,770 14,866 YoY Change (%) -41.5 -31.8 -16.3 0.9 50.8 92.3 68.9 53.7 -17.3 69.5 Margins (%) 21.5 23.2 21.6 24.0 26.7 30.9 28.3 30.8 22.4 30.2


Divi’s LaboratoriesCMP: INR1,699 TP:INR1,570 (-8%) Neutral Divi’s Laboratories (DIVI) is likely to register robust revenue

growth of 20% YoY to INR13b in 4QFY19. EBITDA margins are expected to expand ~410bp YoY to 39.6%,

with ~34% YoY growth in EBITDA to INR5.1b. PAT is expected to increase at a higher rate by ~54% YoY to INR4b

on the back of better revenue growth, margin expansion and reduced tax rates.

We value DIVI at 3-year average P/E of 23x. We maintain Neutral stance on limited upside from current levels with TP of INR1,570.

Key issues to watch out Outlook on ramp-up of new facility. Benefit from increased API prices on account of supply shortage

due to environment-led slowdown in production from Chinese companies.

Bloomberg DIVI IN


M. Cap. (INR b)/(USD b) 451 / 7


1,6,12 Rel Perf. (%) -6 / 23 / 38


Sales 39.1 49.3 55.9 65.9 EBITDA 12.6 19.5 21.7 25.4 NP 8.8 14.9 16.3 18.7 EPS (INR) 33.0 56.0 61.3 70.4 EPS Gro. (%) -17.3 69.5 9.4 14.8BV/Sh. (INR) 223.2 266.1 314.8 370.7 RoE (%) 15.5 22.9 21.1 20.5 RoCE (%) 15.4 21.8 21.0 20.4 Valuations

P/E (x) 51.4 30.3 27.7 24.1 P/BV (x) 7.6 6.4 5.4 4.6 EV/EBITDA (x) 35.7 23.1 20.5 17.4 EV/Sales (x) 11.5 9.1 8.0 6.7

April 2019 169


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 33,159 35,460 38,060 35,349 37,207 37,978 38,500 38,986 142,028 152,671 YoY Change (%) 2.5 -1.1 2.7 -0.5 12.2 7.1 1.2 10.3 0.9 7.5 Total Expenditure 30,101 28,826 30,393 29,839 29,632 30,575 30,344 31,280 119,137 121,831 EBITDA 3,058 6,634 7,667 5,510 7,575 7,403 8,156 7,706 22,891 30,840 Margins (%) 9.2 18.7 20.1 15.6 20.4 19.5 21.2 19.8 16.1 20.2 Amortization 2,799 2,940 2,971 3,030 3,110 2,998 3,108 2,998 11,762 12,214 Other Income 513 182 1,249 1,268 542 1,375 757 400 3,212 3,074 Profit before Tax 772 3,876 5,945 3,748 5,007 5,780 5,805 5,108 14,340 21,699 Tax 181 1,027 2,601 726 446 742 953 1,005 4,535 3,146 Rate (%) 23.4 26.5 43.8 19.4 8.9 12.8 16.4 19.7 31.6 14.5 Reported PAT 591 2,849 3,344 3,022 4,561 5,038 4,852 4,102 9,805 18,552 Minority Interest 0 0 0 0 0 0 0 0 0 0 Net Profit 591 2,849 3,344 3,022 4,561 5,038 4,852 4,102 9,805 18,552 One-off/low-competition PAT in US 0 0 -930 0 0 0 0 0 -930 0 Adjusted PAT 591 2,849 4,274 3,022 4,561 5,038 4,852 4,102 10,735 18,552 YoY Change (%) -53.2 -12.2 -9.1 -3.3 671.7 76.8 13.5 35.8 -13.0 72.8 Margins (%) 1.8 8.0 11.2 8.5 12.3 13.3 12.6 10.5 7.6 12.2


Dr Reddy’s LabsCMP: INR2,796 TP: INR2,540 (-9%) Neutral Dr Reddy’s Laboratories is expected to report moderate growth of

~10% YoY in 4QFY19 with revenues at INR38.9b. The US business is likely to remain stable YoY at INR14.6b. Europe

sales are expected to decline ~9% YoY to INR1.5b, while Indiabusiness is expected to grow ~13% YoY to INR6.9b.

EBITDA margins are expected to improve ~400bp YoY for thequarter at 19.8%. Consequently, absolute EBITDA is likely to grow~40% YoY to INR7.7b during the quarter.

PAT is expected to be up 36% YoY to INR4.1b. We maintain Neutral with TP of INR2,540 @18x 12M forward

earnings, due to limited upside from current levels. Delay in theresolution of regulatory issues and subsequent launches remainsthe key overhang.

Key issues to watch out for Update on resolution of USFDA warning letters for Srikakulam,

Duvvada and Miryalaguda API plants. Update on data to be submitted related to g-Copaxone. Update on g-Suboxone related litigation.

Bloomberg DRRD IN


1,6,12 Rel Perf. (%) -2 / 4 / 14


Sales 142.0 152.7 182.5 199.2

EBITDA 22.9 30.8 39.2 43.4

NP 10.7 18.6 21.4 23.5

EPS (INR) 64.7 111.8 129.2 141.5

EPS Gro. (%) -10.9 72.8 15.6 9.5

BV/Sh. (INR) 757 845 955 1,073

RoE (%) 8.6 14.0 14.4 14.0

RoCE (%) 4.8 9.3 10.9 11.3

Valuations

P/E (x) 43.2 25.0 21.6 19.8

P/BV (x) 3.7 3.3 2.9 2.6

EV/EBITDA (x) 21.1 15.5 11.9 10.7

EV/Sales (x) 3.4 3.1 2.6 2.3

April 2019 170

Quarterly performance (Consolidated) (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues (Core) 23,294 22,234 21,715 22,479 21,294 25,399 25,098 25,586 89,722 97,376 YoY Change (%) 22.0 2.3 -11.8 -7.3 -8.6 14.2 15.6 13.8 0.0 8.5 EBITDA 5,438 3,552 2,905 2,949 3,106 3,986 3,894 4,078 14,845 15,065 Margins (%) 23.3 16.0 13.4 13.1 14.6 15.7 15.5 15.9 16.5 15.5 Depreciation 777 752 754 735 794 825 831 830 3,019 3,279 Interest 709 698 705 744 790 851 885 815 2,856 3,341 Other Income 489 629 90 1,015 495 563 663 679 2,222 2,400 PBT before EO Expense 4,441 2,731 1,537 2,485 2,017 2,874 2,840 3,112 11,193 10,844 Extra-Ord Expense/(Income) 0 0 0 0 -1,250 -2,922 1,300 0 0 -2,872 PBT after EO Expense 4,441 2,731 1,537 2,485 3,267 5,796 1,540 3,112 11,193 13,716 Tax 1,108 589 489 968 937 1,656 377 802 3,155 3,772 Rate (%) 24.9 21.6 31.8 39.0 28.7 28.6 24.5 25.8 28.2 27.5 Reported PAT 3,334 2,141 1,047 1,516 2,330 4,140 1,163 2,311 8,039 9,944 Adj PAT (excl one-offs) 3,334 2,141 1,047 1,516 1,442 2,065 2,145 2,311 8,039 7,964 YoY Change (%) 47.0 -2.4 -78.0 -17.5 -56.7 -3.5 104.8 52.4 -27.5 -0.9 Margins (%) 14.3 9.6 4.8 6.7 6.8 8.1 8.5 9.0 9.0 8.2


Glenmark PharmaBloomberg GNP IN


M. Cap. (INR b)/(USD b) 183 / 3


1,6,12 Rel Perf. (%) 0 / -5 / 2

Financial Snapshot (INR Billion) Y/E MAR 2018 2019E 2020E 2021E

Sales 89.7 97.4 109.9 122.7 EBITDA 14.8 15.1 17.9 19.4 NP 8.0 8.0 9.8 10.8 EPS (INR) 28.5 28.2 34.7 38.3 EPS Gro. (%) -27.5 -0.9 22.8 10.6BV/Sh. (INR) 183.0 214.6 245.7 284.0RoE (%) 15.6 13.2 14.1 13.5 RoCE (%) 14.4 15.2 15.1 15.3 Valuations

P/E (x) 22.8 23.0 18.8 17.0 P/BV (x) 3.6 3.0 2.6 2.3 EV/EBITDA (x) 14.5 14.4 12.0 10.8 EV/Sales (x) 2.4 2.2 2.0 1.7

CMP: INR650 TP: INR560 (-14%) Neutral We expect Glenmark Pharmaceuticals (GNP) to report revenue

growth of ~14% YoY to INR25.5b. Growth can be attributed to 24% YoY increase in sales expected in

the US business and 14% YoY increase in sales expected in bothIndia and ROW markets. API segment is too expected to show29% YoY growth during the quarter. LATAM and EU are expectedto drag overall growth with both expected to see decline in salesduring the quarter.

EBITDA margins are expected to expand by ~210bp YoY to 15.9%with other expenses as a % of sales seeing 340bp decline.However R&D cost as a % of sales is expected to increase by100bp YoY. Thus, absolute EBITDA is expected to grow by ~38%YoY to INR4b led by margin expansion and revenue growth.

PAT is expected to grow at a higher rate than EBITDA, growing~52% YoY to INR2.3b. This is mainly due to margin expansion,higher other income and lower tax rate.

We value GNP at 15x P/E multiple 12M forward earnings to factorin subdued return ratios as earnings CAGR is yet to pick upmeaningfully and financial leverage remains elevated. Wemaintain Neutral with a TP of INR560, on limited upside fromcurrent levels. Out-licensing deals could act as positive triggers.

Key issues to watch out for New ANDA filings in complex category. Update on free-cash generation and debt repayment schedule. Progress of NCE/NBE pipeline and potential out-licensing

prospects.

April 2019 171

Quarterly Performance (INR m) Y/E March FY18 FY19E FY18 FY19E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 3,860 3,926 4,107 5,038 4,532 5,809 6,318 6,518 16,918 23,177 YoY Change (%) 10.3 7.9 14.3 38.7 17.4 48.0 53.8 29.4 17.9 37.0 EBITDA 842 769 740 436 726 1,005 1,133 1,122 2,784 3,986 Margins (%) 21.8 19.6 18.0 8.7 16.0 17.3 17.9 17.2 16.5 17.2 Depreciation 176 186 196 204 245 265 270 312 762 1,093 Interest 82 104 82 62 65 76 75 79 331 295 Other Income 4 68 9 97 147 42 59 53 108 301 PBT before EO expense 515 547 471 267 563 706 847 784 1,800 2,900 Tax 177 193 169 95 191 234 265 210 634 899 Rate (%) 34.4 35.2 35.9 35.6 34.0 33.1 31.2 26.7 35.2 31.0 (Profit)/Loss of JV/Asso. Cos. -30 -49 -49 -32 -146 -130 -21 -3 -160 -300 PAT (Ex associate income) 338 355 302 172 372 472 582 575 1,166 2,001 Reported PAT 368 403 350 204 518 603 603 577 1,326 2,301 YoY Change (%) -5.5 -1.2 -10.1 -55.3 40.7 49.4 72.3 182.4 -19.4 73.5 Margins (%) 9.5 10.3 8.5 4.1 11.4 10.4 9.5 8.9 7.8 9.9

March 2019 Results Preview | Sector: Healthcare Granules India

Bloomberg GRAN IN




1,6,12 Rel Perf. (%) 1 / 9 / -10

Financial Snapshot (INR Billion) Y/E MAR 2018 2019E 2020E 2021E

Sales 16.9 23.2 26.1 30.5

EBITDA 2.8 4.0 4.9 5.8

NP 1.3 2.3 2.6 3.1

EPS (INR) 5.6 9.1 10.4 12.3

EPS Gro. (%) -23.2 63.3 14.2 18.4

BV/Sh. (INR) 51.4 57.8 64.2 72.5

RoE (%) 12.0 16.6 17.0 17.9

RoCE (%) 11.3 13.5 14.8 16.5

Valuations

P/E (x) 20.4 12.5 10.9 9.2

P/BV (x) 2.2 2.0 1.8 1.6

EV/EBITDA (x) 12.3 8.9 7.1 6.1

EV/Sales (x) 2.0 1.5 1.3 1.2

CMP: INR114 TP: INR140 (+23%) Buy We expect Granules India (GRAN) to post strong 29% YoY sales

growth in 4QFY19 to INR6.5b on the back of enhanced traction in the formulation business and commercialization of its new API/PFI facility.

EBITDA margin is expected to expand 850bp YoY to 17.2% on account of write offs done by the company in 4QFY18 which had significant impact on the margins. On a sequential basis, we expect EBITDA margin to contract by 70bp. Absolute EBITDA is expected to remain stable QoQ at INR1.1b.

We expect PAT, including associate income, to increase by ~182% YoY to INR577 on account of margin expansion and lower tax rate (27% vs 36% in 4QFY18).

We value GRAN at 13x 12M forward earnings with TP of INR140. We remain positive on GRAN as it is almost through with its capex cycle and the company is in process to reap benefit on the back of increased revenue from US formulations, better capacity utilization which will further improve return ratios as well. Recommend Buy.

Key issues to watch out for New ANDA filings in complex category. Update on free-cash generation and debt repayment schedule. Update on performance of JV with Onmichem.

April 2019 172

Quarterly Performance (Consolidated) (INR m) Y/E March FY18 FY19E FY18 FY19E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 6,071 8,363 7,039 7,486 7,357 8,163 8,254 7,913 28,957 31,686 YoY Change (%) -11.4 6.8 2.1 -1.9 21.2 -2.4 17.3 5.7 -1.1 9.4 Total Expenditure 5,874 6,442 5,621 5,938 5,953 6,512 6,880 6,471 23,898 25,816 EBITDA 197 1,921 1,418 1,549 1,404 1,652 1,373 1,442 5,058 5,870 Margins (%) 3.2 23.0 20.1 20.7 19.1 20.2 16.6 18.2 17.5 18.5 Depreciation 75 77 134 94 114 115 120 152 380 501 Interest 0 0 0 2 2 2 1 -3 2 2 Other Income 137 96 120 183 178 148 164 210 545 700 PBT before EO Expense 258 1,940 1,404 1,636 1,466 1,683 1,417 1,502 5,222 6,067 Tax 120 688 507 581 497 557 468 541 2,043 2,063 Rate (%) 46.6 35.5 36.1 35.5 33.9 33.1 33.0 36.0 36.2 34.0 Adjusted PAT 138 1,252 897 1,056 969 1,126 949 961 3,329 4,004 YoY Change (%) -80.4 26.8 155.7 21.5 603.0 -10.1 5.8 -8.9 14.4 20.3 Margins (%) 2.3 15.0 12.7 14.1 13.2 13.8 11.5 12.1 11.5 12.6 Extra-Ord Expense/(Income) -126 -52 0 0 83 118 -181 0 -178 20 Reported PAT 264 1,303 897 1,056 886 1,008 1,130 961 3,507 3,984


GSK PharmaCMP: INR1,294 TP:INR1,309 (+1%) Neutral In 4QFY19, we expect GlaxoSmithKline Pharmaceuticals (GLXO) to

report muted growth of 5.7% YoY in revenues to INR7.9b. We expect EBITDA margin to contract by 250bp YoY due to

change in product mix. However, on sequential basis, EBITDAmargin is expected to improve 160bp.

PAT is expected to be down 9% YoY on account of reducedmargins.

We continue valuing GLXO on 43x 12M forward earnings, at a35% discount to its 3-year average to factor in lower growth in itsmajor brands. The ongoing product rationalization attempts bythe company would pave way for some improvement inprofitability. We maintain our Neutral rating due to limitedupside from current levels with a TP of INR1,309.

Key issues to watch out for New drug launches in FY20. Impact on sales of products under which came under DPCO

2013. Impact on sales due to product rationalization exercise.

Bloomberg GLXO IN


M. Cap. (INR b)/(USD b) 219 / 3

52-Week Range (INR) 1812 / 1043

1,6,12 Rel Perf. (%) -11 / -18 / 6

Financial Snapshot (INR Billion) Y/E March

2018 2019E 2020E 2021E

Sales 29.0 31.7 35.5 39.9

EBITDA 5.1 5.9 7.2 8.4

NP 3.3 4.0 4.9 5.6

EPS (INR) 19.7 23.6 28.7 33.3

EPS Gro. (%) 14.4 20.3 21.5 16.1

BV/Sh. (INR) 121.4 124.8 133.4 146.6

RoE (%) 16.2 18.9 21.5 22.7

RoCE (%) 16.4 19.2 22.2 23.8

Valuations

P/E (x) 65.8 54.7 45.1 38.8

P/BV (x) 10.7 10.4 9.7 8.8

EV/EBITDA (x) 40.8 35.8 29.1 24.4

EV/Sales (x) 7.1 6.6 5.9 5.1

April 2019 173

Quarterly Performance (Standalone) (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues (Core) 7,130 8,643 8,592 7,828 8,539 9,978 9,476 9,188 32,836 37,182 YoY Change (%) -15.3 -0.9 16.1 17.6 19.8 15.4 10.3 17.4 2.3 13.2 EBITDA 172 1,537 1,712 1,172 1,370 2,033 2,101 1,597 4,547 7,102 Margins (%) 2.4 17.8 19.9 15.0 16.0 20.4 22.2 17.4 13.8 19.1 Depreciation 433 441 438 432 445 432 426 439 1,777 1,742 Interest 56 64 56 65 49 24 49 35 240 157 Other Income 62 110 110 114 136 138 126 100 418 500 PBT before EO Expense -255 1,143 1,328 790 1,012 1,715 1,752 1,223 2,948 5,703 Exceptional Expense -43 47 -100 73 248 305 -215 0 0 338 PBT after EO Expense -212 1,096 1,428 717 764 1,410 1,967 1,223 2,948 5,365 Tax -10 130 172 204 127 213 366 349 511 1,055 Rate (%) 3.8 11.4 12.9 25.8 12.5 12.4 20.9 28.6 17.3 18.5 Reported PAT -203 966 1,256 513 637 1,198 1,601 874 2,436 4,310 Adj PAT -246 1,013 1,156 586 885 1,503 1,386 873 2,394 4,648 YoY Change (%) N/A 114.8 155.1 32.1 N/A 48.4 19.9 49.0 18.1 94.1 Margins (%) -2.8 11.2 14.6 6.6 7.5 12.0 16.9 9.5 7.4 11.6


Ipca LaboratoriesBloomberg IPCA IN


M. Cap. (INR b)/(USD b) 120 / 2


1,6,12 Rel Perf. (%) 3 / 37 / 26


Sales 32.8 37.2 42.8 48.8

EBITDA 4.5 7.1 8.5 9.9

NP 2.4 4.6 5.4 6.4

EPS (INR) 19.0 36.8 42.7 50.7

EPS Gro. (%) 18.1 94.1 15.9 18.9

BV/Sh. (INR) 213.0 246.6 282.9 326.0

RoE (%) 9.3 16.0 16.1 16.7

RoCE (%) 8.6 14.1 14.4 15.0

Valuations

P/E (x) 50.3 25.9 22.4 18.8

P/BV (x) 4.5 3.9 3.4 2.9

EV/EBITDA (x) 20.4 12.8 10.6 11.0

EV/Sales (x) 2.8 2.5 2.1 2.7

CMP: INR954 TP: INR981 (+3%) Buy We expect Ipca Laboratories’ (IPCA) revenue to grow ~17.4% YoY

to INR9b, led by 24% YoY growth in the international formulationsbusiness to INR3.1b. This growth will be offset to some extent bythe domestic formulations business which is expected to grow at12% YoY to INR3.6b and 14% YoY decline in the API business.

EBITDA margin is expected to expand by 240bp YoY to 17.4% onaccount of higher gross margin and contraction in employee costas a % of sales

With high growth in revenues and expansion in margins, weexpect PAT to grow by 49% YoY to INR873m.

We remain positive on IPCA on the back of healthy growth in theDF segment, the gradual recovery in the international market andoperating leverage kicking in, which has led to a revival in returnratios. We have Buy rating on the stock with TP of INR981 @ 21x12M forward earnings.

Key issues to watch out for Consistency in compliance with respect to USFDA inspections. New product launches in both domestic and international

markets. Outlook for institutional tender business.

April 2019 174


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 15,961 16,420 20,678 22,520 20,787 22,695 23,771 23,736 75,578 90,988 YoY Change (%) 9.8 15.7 38.6 37.2 30.2 38.2 15.0 5.4 25.8 20.4 Total Expenditure 12,584 13,359 16,509 17,941 16,411 18,193 18,838 18,722 60,394 72,164 EBITDA 3,376 3,061 4,168 4,579 4,376 4,502 4,933 5,014 15,188 18,824 Margins (%) 21.2 18.6 20.2 20.3 21.1 19.8 20.8 21.1 20.1 20.7 Depreciation 725 790 818 907 880 895 984 858 3,240 3,616 Interest 687 660 771 725 727 627 683 407 2,843 2,444 Other Income 68 71 32 229 95 38 290 65 400 488 PBT before EO expense 2,032 1,682 2,612 3,176 2,864 3,018 3,556 3,814 9,505 13,252 Extra-Ord expense 0 0 0 910 0 0 0 0 910 0 PBT 2,032 1,682 2,612 2,266 2,864 3,018 3,556 3,814 8,595 13,252 Tax 595 427 483 742 860 920 881 1,182 2,247 3,843 Rate (%) 29.3 25.4 18.5 32.7 30.0 30.5 24.8 31.0 26.1 29.0 Minority Interest & P/L of Asso. Cos. -34 -27 3 -25 0 0 0 0 -83 0 Reported PAT 1,471 1,282 2,125 1,549 2,004 2,098 2,675 2,632 6,428 9,409 Adj PAT 1,471 1,282 2,125 2,221 2,004 2,098 2,675 2,632 7,100 9,409 YoY Change (%) -9.0 -11.4 80.0 49.0 36.2 63.6 25.9 18.5 23.3 32.5 Margins (%) 9.2 7.8 10.3 9.9 9.6 9.2 11.3 11.1 9.4 10.3 E: MOFSL Estimates

Bloomberg JUBILANT IN


1,6,12 Rel Perf. (%) -21 / -11 / -36


Sales 75.6 88.8 99.0 111.0

EBITDA 15.2 18.8 21.4 22.3

NP 7.1 9.4 10.8 11.5

EPS (INR) 45.6 60.4 69.5 73.7

EPS Gro. (%) 23.3 32.5 15.1 6.1

BV/Sh. (INR) 262.3 317.7 381.4 449.0

RoE (%) 18.9 20.8 19.9 17.8

RoCE (%) 12.1 14.1 14.3 13.7

Valuations

P/E (x) 15.0 11.3 9.9 9.3

P/BV (x) 2.6 2.2 1.8 1.5

EV/EBITDA (x) 9.2 7.4 6.1 5.5

EV/Sales (x) 1.8 1.6 1.3 1.1

D. Yield (%) 0.5 0.7 0.8 0.9

CMP: INR686 TP:INR1,050 (+53%) Buy We expect Jubilant Life Sciences to deliver muted revenue growth

of 5.4% YoY to INR23.7b on a high base in 4QFY18. We expectsales to remain stable QoQ.

We expect pharmaceutical segment (incl. Triad) to remain stableat INR12b on account of ongoing pricing pressure in US and slowpace of approvals in this geography.

The Life Science Ingredient business is expected to see 28%sequential growth in revenues to INR11.5b due to increasedtraction in existing products, new product launches and favorablepricing environment.

We expect EBITDA margin to improve marginally by 80bp YoY at21.1%.

Consequently, we expect PAT to come in at INR2.6b, up 22% YoYand down 2% QoQ for the quarter.

We remain positive on JLS on the back of improved businessscenario for the LSI segment and superior execution in thepharma segment through its own front-end. Maintain Buy, with atarget price of 1,050 (SOTP-based).

Key issues to watch out Outlook on contracts for new radiopharmaceutical products. Price mix for LSI segment. Competitive scenario for existing pharma products in the US.


Jubilant Life Sciences

April 2019 175


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 38,696 39,520 39,756 40,338 38,559 39,511 42,946 44,330 158,041 165,345 YoY Change (%) -13.4 -7.9 -11.3 -5.2 -0.4 0.0 8.0 9.9 -9.7 4.6 Total Expenditure 31,012 30,989 32,873 33,251 33,290 34,014 36,023 36,472 126,566 139,800 EBITDA 7,684 8,531 6,883 7,088 5,270 5,496 6,922 7,857 31,475 25,546 Margins (%) 19.9 21.6 17.3 17.6 13.7 13.9 16.1 17.7 19.9 15.5 Depreciation 2,605 2,722 2,804 2,728 2,590 2,655 2,798 2,619 10,859 10,661 Interest 439 479 540 585 687 738 798 811 2,044 3,034 Other Income 320 740 284 1,449 1,842 2,307 434 417 1,504 5,000 EO Exp/(Inc) 0 0 0 14,644 0 0 2,819 0 14,644 2,819 PBT 4,959 6,070 3,824 -9,420 3,835 4,410 942 4,845 5,433 14,032 Tax 1,368 1,541 1,608 -1,632 1,811 1,729 2,478 296 2,885 6,314 Rate (%) 27.6 25.4 42.0 17.3 47.2 39.2 263.0 6.1 53.1 45.0 Minority Interest 11 -21 0 47 -4 21 -18 87 36 85 Reported PAT 3,581 4,550 2,216 -7,835 2,028 2,660 -1,517 4,462 2,512 7,632 Adj PAT 3,581 4,550 2,577 3,747 2,028 2,660 2,633 4,462 14,455 11,810 YoY Change (%) -59.4 -30.8 -59.3 -38.3 -43.4 -41.5 2.2 19.1 -43.3 -18.3 Margins (%) 9.3 11.5 6.5 9.3 5.3 6.7 6.1 10.1 9.1 7.1


LupinCMP: INR777 TP:INR1,000 (+29%) Buy We expect Lupin (LPC) to report moderate growth of ~9% YoY in

its 4QFY19 revenue to INR44.3b led by 16% YoY growth in itsdomestic formulations business to INR11b, 12% YoY growth in USformulations to INR16.7b and 18% YoY growth in Japan toINR6.2b. This growth will be to some extent be offset by 3%decline in EU business to INR1.7b and muted 3% YoY growth inROW markets to INR5.4b.

EBITDA margin is expected to remain stable YoY and expand160bp YoY to 17.6%.

PAT is likely to grow by 20% YoY to INR4.4b on account ofincreased revenues and lower tax rate for the quarter (6% vs 17%in 4QFY18).

We remain positive on Lupin on account of healthy pipeline forthe US business and outperformance in the domesticformulations business. The company is also preparing for somekey launches in the near term. Maintain Buy with TP of INR1,000@21x 12M forward earnings.

Key issues to watch out for Update on warning letter for Goa and Indore facility. New product filings and approvals for US.

Bloomberg LPC IN


M. Cap. (INR b)/(USD b) 351 / 5


1,6,12 Rel Perf. (%) -9 / -20 / -17


Sales 158.0 165.3 180.0 201.5

EBITDA 31.5 25.5 35.6 41.9

NP 14.5 11.8 17.2 21.6

EPS (INR) 32.0 26.2 38.2 47.9

EPS Gro. (%) -43.5 -18.2 46.0 25.4

BV/Sh. (INR) 300.3 307.0 334.7 372.0

RoE (%) 10.7 8.6 11.9 13.6

RoCE (%) 4.9 5.2 8.9 10.2

Valuations

P/E (x) 26.3 32.2 22.0 17.6

P/BV (x) 2.8 2.7 2.5 2.3

EV/EBITDA (x) 13.9 17.0 12.0 9.9

EV/Sales (x) 2.8 2.6 2.4 2.1

April 2019 176

Quarterly Performance (INR m) Y/E December CY18 CY19E CY18 CY19E

1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Net Sales 6,177 6,836 7,438 7,264 6,810 7,731 8,275 9,168 27,715 31,984 YoY Change (%) 11.7 13.8 11.4 8.4 10.2 13.1 11.3 26.2 11.2 15.4 EBITDA 1,344 1,645 1,873 1,373 1,362 1,546 1,738 2,730 6,235 7,376 Margins (%) 21.8 24.1 25.2 18.9 20.0 20.0 21.0 29.8 22.5 23.1 Depreciation 254 254 260 259 292 316 316 244 1,027 1,168 Interest 0 0 0 7 2 3 3 0 7 7 Other Income 226 208 262 201 236 236 236 236 897 945 PBT before EO Items 1,316 1,599 1,875 1,308 1,304 1,463 1,655 2,722 6,098 7,145 Extra-Ord Expense 0 0 0 0 0 0 0 0 0 0 PBT after EO Items 1,316 1,599 1,875 1,308 1,304 1,463 1,655 2,722 6,098 7,145 Tax 491 603 683 515 476 534 604 994 2,292 2,608

Effective tax Rate (%) 37.3 37.7 36.4 39.4 36.5 36.5 36.5 36.5 37.6 36.5 Reported PAT 825 996 1,192 793 828 929 1,051 1,728 3,806 4,537 Adj PAT 825 996 1,192 793 828 929 1,051 1,728 3,806 4,537 YoY Change (%) 37.5 35.1 2.5 4.3 0.4 -6.7 -11.8 118.0 16.7 19.2 Margins (%) 13.4 14.6 16.0 10.9 12.2 12.0 12.7 18.9 13.7 14.2


Sanofi IndiaCMP: INR5,914 TP:INR7,000 (+18%) Buy We expect Sanofi India's (SANL) revenue to grow at moderate

~8% YoY in 1QCY19 to INR6.2b. Top 2 brands – Lantus and Allegra– continue to do well and grew >15% for quarter ending Feb-19.Some other top brands like Hexaxim, Combiflam and Avil aredragging overall growth.

EBITDA margin for the company is expected to contract by 180bpYoY to 20% for the quarter on account of a significant reduction in other expenses as % of sales.

We expect PAT to remain stable YoY at INR828m. Maintain Buy with a TP of INR7,000 (32x 12-month forward EPS).

Key issues to watch out for Sales outlook for drugs under DPCO. New launches in the near term.

Bloomberg SANL IN


M. Cap. (INR b)/(USD b) 136 / 2

52-Week Range (INR) 6840 / 4706

1,6,12 Rel Perf. (%) -8 / -12 / -2


Sales 24.9 27.7 32.0 35.2

EBITDA 5.4 6.2 7.4 8.2

Net Profit 3.3 3.8 4.5 5.0

Adj. EPS (INR) 141.7 165.5 197.3 218.6

EPS Gr. (%) 9.8 16.7 19.2 10.8

BV/Sh. (INR) 882 965 1,065 1,192

RoE (%) 16.1 17.2 18.5 18.3

RoCE (%) 16.2 16.8 18.3 18.4

Payout (%) 57.8 58.9 49.4 41.7

Valuations

P/E (x) 42.8 36.7 30.8 27.8

P/BV (x) 6.9 6.3 5.7 5.1

EV/EBITDA (x) 24.6 21.1 17.2 15.1

EV/Sales (x) 5.3 4.7 4.0 3.5

April 2019 177

Quarterly performance FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 1,685 2,040 1,855 2,345 1,982 1,623 1,734 1,876 7,925 7,215 YoY Change (%) 0.8 -1.5 1.1 3.8 17.6 -20.5 -6.5 -20.0 1.1 -9.0 Total Expenditure 1,339 1,473 1,583 1,870 1,434 1,247 1,472 1,437 6,266 5,591 EBITDA 346 567 272 475 547 375 262 439 1,659 1,623 Margins (%) 20.5 27.8 14.7 20.3 27.6 23.1 15.1 23.4 20.9 22.5 Depreciation 84 83 92 108 103 100 113 119 367 434 Interest 5 5 5 10 6 6 11 3 26 26 Other Income 52 53 51 68 44 32 31 67 223 173 PBT before EO expense 308 531 226 424 482 301 170 384 1,490 1,337 Share of profit/ (Loss) in Asso./ JV 28 -76 -8 -16 -55 -31 0 175 (72) 90 Extra-Ord expense 0 0 0 0 0 -261 57 -77 0 -281 PBT 336 455 218 409 428 531 113 636 1,418 1,707 Tax 90 119 54 102 96 114 -5 170 365 376 Rate (%) 26.8 26.2 24.7 25.0 22.5 21.5 -4.1 26.7 25.8 22.0 Minority Interest & P/L of Asso. Cos. 6 6 10 3 -5 -6 -8 18 24 0 Reported PAT 240 330 154 304 336 423 125 448 1,029 1,332 Adj PAT 240 330 154 304 336 218 185 391 1,029 1,113 YoY Change (%) 86.4 -3.7 -7.8 -23.5 40.1 -33.9 19.9 28.7 -0.7 8.2 Margins (%) 14.2 16.2 8.3 13.0 17.0 13.4 10.6 20.9 13.0 15.4

CMP: INR335 TP: INR465 (+39%) Buy We expect sales to decline by 20% YoY to INR1.8b for the quarter

on account of reduction in CRAMS business. This decline isexpected to be offset to some extent by high growth in USformulations business.

We expect EBITDA margin for the company to expand by 310bpYoY to 23.4% for the quarter on account of increased revenueshare from US formulations business.

We expect PAT to come in at INR391m. Stock trades at 15x FY20E EPS. We remain positive on SLPA on the

back of strong product pipeline for the regulated markets,consistency in compliance and higher capacity utilization to resultin improved operating leverage which will in turn drive the returnratios.

We maintain Buy, with a target price of INR465 (20x 12-monthforward earnings).

Key issues to watch out Pace of filings, approvals and new product launches in the US. Traction in existing products. Progress on next growth drivers – Biologics & Transdermals.

Bloomberg SLPA IN




1,6,12 Rel Perf. (%) -13 / -23 / -45


Sales 7.9 7.2 9.0 10.9

EBITDA 1.6 1.6 2.2 2.9

NP 1.0 1.1 1.8 1.9

EPS (INR) 12.8 13.9 22.3 24.2

EPS Gro. (%) -0.7 8.2 60.8 8.3

BV/Sh. (INR) 133.1 148.8 169.6 192.1

RoE (%) 10.3 9.7 13.8 13.2

RoCE (%) 8.0 7.9 11.5 11.2

Valuations

P/E (x) 26.1 24.1 15.0 13.8

P/BV (x) 2.5 2.3 2.0 1.7

EV/EBITDA (x) 17.6 17.2 12.5 9.4

EV/Sales (x) 3.6 3.9 3.1 2.5


Shilpa Medicare

April 2019 178


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 6,579 7,687 7,488 6,642 6,635 7,326 7,945 9,384 28,394 31,290 YoY Change (%) -16.7 -19.4 -19.8 -1.9 0.8 -4.7 6.1 41.3 3.0 10.2 Total Expenditure 5,950 6,609 6,178 5,776 5,827 6,330 6,674 7,891 24,428 26,721 EBITDA 629 1,078 1,310 865 808 996 1,271 1,493 3,965 4,568 Margins (%) 9.6 14.0 17.5 13.0 12.2 13.6 16.0 15.9 14.0 14.6 Depreciation 356 373 380 443 429 445 407 444 1,540 1,724 Interest 524 486 498 455 441 485 501 505 1,962 1,932 Other Income 345 221 157 218 106 77 8 58 941 250 PBT before EO expense 93 441 589 185 44 144 372 603 1,403 1,163 Extra-Ord expense 34 123 63 217 49 74 -7 0 436 116 PBT 60 318 526 -31 -5 70 379 603 967 1,047 Tax 10 54 20 -40 -43 16 63 89 97 126 Rate (%) 15.9 17.0 3.8 125.8 837.3 23.1 16.7 14.7 10.1 12.0 Minority Interest & (P/L) of Asso. Cos. 31 53 32 52 79 123 71 -122 168 150 Reported PAT from Continuing Ops. 20 211 473 -44 -41 -69 245 636 702 771 Adj. PAT from Continuing Ops. 48 313 534 105 9 -12 239 636 1,007 871 YoY Change (%) -87.5 -57.8 -13.4 -88.5 -81.3 -104.0 -55.3 505.6 -67.4 -13.4 Margins (%) 0.7 4.1 7.1 1.6 0.1 -0.2 3.0 6.8 3.5 2.8 E: MOFSL Estimates

CMP: INR474 TP:INR590(+24%) Buy We expect sales at INR9.3b (+41% YoY) for 4QFY19 on account of

high growth expected in the US business. We expect US business to clock revenues of ~INR3.4b for the

quarter v/s INR1.3b in 4QFY18. Africa business is expected togrow 14% YoY.

We expect 290bp QoQ improvement in EBITDA margin at 15.9%due to better product mix with increased US business, thus driving operating leverage for STR.

Accordingly, PAT is expected at INR6.3b for 4QFY19. We remain positive on STR on the back of enhanced business

from US geography which will in turn drive profitability. Wemaintain Buy, with a target price of INR590 (SOTP basis).

Key issues to watch out Quality of ANDA filings and rate of approvals. Competitive scenario in existing products in the US. Outlook on institutional as well as branded generic business in

Africa.

Bloomberg STR IN




1,6,12 Rel Perf. (%) 1 / 0 / -46

Financial Snapshot (INR Billion) Y/E March 2018 2019E 2020E 2021E Sales 28.4 31.3 32.0 35.1 EBITDA 4.0 4.6 5.0 5.7 NP 1.0 0.9 2.2 3.0 EPS (INR) 11.3 9.8 25.1 34.0 EPS Gro. (%) -65.1 -13.3 157.0 35.5BV/Sh. (INR) 274.5 282.2 300.9 326.3 RoE (%) 3.9 3.5 8.6 10.8 RoCE (%) 5.1 5.1 6.2 8.2 Valuations P/E (x) 42.1 48.5 18.9 13.9 P/BV (x) 1.7 1.7 1.6 1.5 EV/EBITDA (x) 17.4 14.4 11.9 10.1 EV/Sales (x) 2.4 2.1 1.9 1.6


Strides Pharma

April 2019 179


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 61,667 65,901 65,982 67,110 71,388 68,465 76,567 73,872 260,659 290,292 YoY Change (%) -23.0 -15.1 -14.1 -1.7 15.8 3.9 16.0 10.1 -13.9 11.4 Total Expenditure 51,131 52,747 51,999 52,936 56,175 54,064 58,873 57,059 208,813 226,171 EBITDA 10,535 13,153 13,984 14,174 15,214 14,401 17,694 16,813 51,846 64,121 Margins (%) 17.1 20.0 21.2 21.1 21.3 21.0 23.1 22.8 19.9 22.1 Depreciation 3,466 3,587 3,393 4,552 4,016 4,265 4,711 4,308 14,998 17,300 Interest 1,094 1,574 953 1,554 1,309 1,295 1,448 1,348 5,176 5,400 Net Other Income 1,941 3,151 1,842 5,688 2,851 4,423 2,765 2,961 12,623 13,000 PBT before EO Exp 7,916 11,144 11,479 13,756 12,739 13,263 14,301 14,118 44,295 54,421 Less: EO Exp/(Inc) 9,505 0 0 0 0 12,144 -3,000 0 9,505 9,144 PBT -1,589 11,144 11,479 13,756 12,739 1,119 17,301 14,118 34,790 45,277 Tax 1,618 1,114 7,487 -1,767 1,639 2,189 2,709 2,824 8,452 9,360 Rate (%) 20.4 10.0 65.2 -12.8 12.9 16.5 18.9 20.0 19.1 17.2 PAT (pre Minority Interest) -3,207 10,030 3,992 15,523 11,101 -1,070 14,592 11,294 26,338 35,917 Minority Interest 1,042 908 338 2,434 1,275 1,119 2,173 1,433 4,722 6,000 Reported PAT -4,249 9,121 3,654 13,090 9,825 -2,188 12,419 9,861 21,616 29,917 One-off upsides 0 0 -5,130 3,890 0 0 0 0 -1,240 0 Adj Net Profit 5,256 9,121 8,784 9,200 9,825 9,956 9,419 9,861 32,361 39,061 YoY Change (%) -74.2 -59.2 -40.3 -24.8 86.9 9.1 7.2 7.2 -48.5 20.7 Margins (%) -6.9 13.8 5.5 19.5 13.8 -3.2 16.2 13.3 8.3 10.3


Sun PharmaCMP: INR470 TP:INR546 (+16%) Buy Sun Pharmaceuticals (SUNP) is expected to deliver 10% YoY

growth in revenues to INR74b for 4QFY19. We expect the US business to grow at a muted ~7% YoY to

INR25.7b on a low base of past year. Domestic formulationsbusiness is expected to grow at 7% YoY to INR21b. We expect APIbusiness to register strong revenue growth of 28% YoY whileROW markets to witness 16% YoY decline in revenues.

EBITDA margins are expected to improve by 170bp to 22.8% dueto shift towards high-margin specialty products.

We expect PAT to witness YoY growth of 7% to INR9.8b. We remain positive on SUNP on the back of its shift towards high

margin specialty products, healthy product pipeline for regulatedmarkets and sustained performance in domestic formulations.We maintain Buy on the stock with TP of INR546 @ 23x 12Mforward earnings.

Key issues to watch out Ongoing pricing pressure in US and impact on SUNP sales. New launches in the domestic segment and impact on drugs

under DPCO 2013. Update on traction in specialty products.

Bloomberg SUNP IN


1,6,12 Rel Perf. (%) -3 / -32 / -25


Sales 260.7 290.3 322.4 358.9

EBITDA 51.8 64.1 78.4 89.9

NP 32.4 39.1 49.1 57.1

EPS (INR) 13.5 16.2 20.4 23.8

EPS Gro. (%) -48.5 20.7 25.7 16.4

BV/Sh. (INR) 158.4 166.7 183.0 201.8

RoE (%) 8.7 10.0 11.7 12.3

RoCE (%) 8.1 10.0 12.7 14.0

Valuations

P/E (x) 32.5 26.9 21.4 18.4

P/BV (x) 2.8 2.6 2.4 2.2

EV/EBITDA (x) 19.6 13.7 10.0 8.4

EV/Sales (x) 3.9 2.9 2.5 2.2

April 2019 180

Quarterly performance (Consolidated) Y/E March FY18 FY19E FY18 FY19E INR m 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 13,740 14,290 14,770 17,220 18,720 18,940 19,880 21,185 60,020 78,725 YoY Change (%) -8.8 1.6 4.5 24.7 36.2 32.5 34.6 23.0 2.5 31.2 EBITDA 2,970 3,290 3,590 3,640 4,770 4,730 5,260 5,709 13,490 20,469 Margins (%) 21.6 23.0 24.3 21.1 25.5 25.0 26.5 26.9 22.5 26.0 Depreciation 800 840 940 1,510 1,500 1,520 1,560 1,533 4,090 6,113 Interest 560 510 800 1,210 1,220 1,260 1,330 1,192 3,080 5,002 Other Income 1,050 780 740 420 270 100 30 300 2,990 700 PBT before EO Expense 2,660 2,720 2,590 1,340 2,320 2,050 2,400 3,284 9,310 10,054 Extra-Ord Expense 0 0 -1,810 -500 0 0 -350 0 -2,310 0 PBT after EO Expense 2,660 2,720 4,400 1,840 2,320 2,050 2,750 3,284 11,620 10,054 Tax 780 680 2,010 -940 690 260 290 570 2,530 1,810 Rate (%) 29.3 25.0 77.6 -70.1 29.7 12.7 12.1 17.3 27.2 18.0 Reported PAT 1,880 2,040 580 2,280 1,630 1,790 2,460 2,714 6,780 8,244 Adj PAT 1,880 2,040 2,390 2,780 1,630 1,790 2,152 2,714 9,090 8,244 YoY Change (%) -35.6 -30.1 15.5 21.4 -13.3 -12.3 -9.9 -2.4 -2.6 -9.3 Margins (%) 13.7 14.3 16.2 16.1 8.7 9.5 10.8 12.8 15.1 10.5 E: MOFSL Estimates


Torrent PharmaceuticalsCMP: INR1,889 TP:INR1,660 (-12%) Neutral We expect Torrent Pharmaceuticals (TRP) to post ~23% YoY

growth in revenues to INR21b in 4QFY19. The domestic formulations and Europe business are expected to

grow 20% YoY to INR8.3b and INR2.9b respectively while USbusiness is expected to witness 12% YoY decline to INR2.7b.

The EBITDA margin is expected to expand 580bp YoY to 26.9% onaccount of better product mix and lower employee cost and otherexpenses as % of sales.

Absolute EBITDA is expected to increase 57% YoY to INR5.7b,while PAT is expected to remain stable YoY at INR2.7b due to taxcredit received by the company in 4QFY18.

We remain positive on TRP on the back of pick-up in the Unichemportfolio, sustained outperformance in DF and increased R&Dspend for building a healthy pipeline for US business. However,we maintain Neutral given the limited upside from current levelswith TP of INR1,660 @ 20x 12M forward earnings.

Key issues to watch out for Performance in the acquired portfolio of Unichem. Outlook on future ANDA launches in the US market.

Bloomberg TRP IN


1,6,12 Rel Perf. (%) -2 / 8 / 32


Sales 60.0 78.7 90.0 102.3

EBITDA 13.5 20.5 24.0 27.5

NP 9.1 8.2 11.6 14.1

EPS (INR) 53.7 48.7 68.5 83.4

EPS Gro. (%) -2.6 -9.3 40.6 21.7

BV/Sh. (INR) 273.1 322.5 366.3 419.5

RoE (%) 20.3 16.4 19.9 21.2

RoCE (%) 10.6 11.8 13.5 14.9

Valuations

P/E (x) 35.2 38.8 27.6 22.7

P/BV (x) 6.9 5.9 5.2 4.5

EV/EBITDA (x) 27.3 17.3 14.3 12.0

EV/Sales (x) 6.1 4.5 3.8 3.2

April 2019 181

Sectoral hurdles receding; focus shifts to project execution Ordering activity stands muted for FY19 Ordering activity in the road sector has been slowing down in FY19 owing to (a) land acquisition delays faced by the NHAI, (b) banks’ caution toward lending to infrastructure projects, (c) changes at top management of the NHAI and (d) upcoming general elections impacting project awarding in the road sector. Awarding activity by the NHAI stood at ~INR600b in FY19, and tenders worth INR300b have been deferred and now stand to be awarded in FY20. We expect awarding activity to pick up in 2HFY20 post the general elections.

Execution of awarded projects – a key focus area HAM projects awarded in FY18 had seen delays in receiving the appointed date due to land acquisition issues faced by the NHAI and as banks adopted stringent approach in lending to infrastructure projects. However, activities have started picking up now – most of the HAM projects awarded in FY18 have achieved financial closure and now awaiting the appointed date from the NHAI. This, along with the resolution of the land issues, sets the tone for timely execution of these HAM projects in FY20.

Execution for coverage universe to increase 20% YoY We expect execution for our coverage universe to increase 20% YoY. Barring KNR, which is likely to be hurt by a lower order book, all companies are likely to deliver healthy execution.

Operating margin to shrink due to adverse revenue mix; expect muted net profit growth We expect operating margins for our coverage universe to contract at the aggregate level, given the adverse revenue mix and the moderation in profitability. Net profit is likely to decline 20% YoY, given that most companies would incur higher tax burden after the expiry of tax holiday under section 80IA.

Opportunities abundant for incumbent players With financial closure becoming stringent and banks being selective in extending credit to companies, the sector will likely see consolidation, in our view. Companies with a healthy balance sheet would benefit the most. Stringent financial closure would also lead to moderation in competition (witnessed in recently invited tenders), and thus, an improvement in pricing and margins of financially strong players.

Robust capex is being planned by both the central and state governments (INR7t construction opportunity). We believe the best way to play the road sector capex theme is through EPC players having a strong execution record and a healthy balance sheet. Our top picks are KNR and Ashoka Buildcon.

Company name

Ashoka Buildcon

IRB Infra

KNR Constructions

Sadbhav Engineering

March 2016 Results Preview | Sector: Capital Goods March 2019 Results Preview | Sector: Infrastructure

Infrastructure

Amit Shah – Research Analyst ([email protected]); +91 22 6129 1543 Nilesh Bhaiya – Research Analyst ([email protected]); +91 22 6129 1556

April 2019 182

Exhibit 1: Summary of expected quarterly performance Sector Sales (INR M) EBITDA (INR M) PAT (INR M)

CMP (INR) Reco Mar-19 Var

% YoY Var



% YoY Var

% QoQ Infrastructure Ashoka Buildcon 133 Buy 9,606 36.8 -9.8 1,179 46.0 -20.7 800 -24.1 -10.6IRB Infra 155 Neutral 18,139 31.2 1.4 7,317 11.1 -3.8 2,210 -7.8 1.0 KNR Constructions 257 Buy 5,272 -15.6 17.5 1,012 -16.1 12.3 319 -60.0 -38.8Sadbhav Engineering 249 Buy 12,720 15.2 37.4 1,396 12.6 26.0 741 6.1 31.8 Sector Aggregate 45,737 19.9 8.2 10,905 10.8 -1.8 4,071 -17.7 -2.3

Source: MOFSL

Exhibit 2: Softness witnessed in awarding activity for FY19, expect activity to pick up post 2HFY20


Exhibit 3: Overall road construction target has been scaled down by government to 10,000km for FY19






Exhibit 6: Comparative valuation Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%)

(INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Infrastructure Ashoka Buildcon 133 Buy 10.5 12.4 15.1 12.7 10.8 8.8 8.2 6.1 4.8 14.2 14.6 15.5 IRB Infra 155 Neutral 27.1 23.5 14.8 5.7 6.6 10.4 4.7 5.0 6.0 14.8 11.5 6.7 KNR Constructions 257 Buy 14.4 14.4 15.5 17.8 17.9 16.5 7.7 7.3 5.4 16.2 14.0 13.2 Sadbhav Engineering 249 Buy 13.5 13.4 14.0 18.4 18.6 17.8 10.9 8.8 7.9 11.8 10.5 10.0 Sector Aggregate 10.1 10.6 12.2 6.0 5.8 6.0 13.5 11.5 9.2


9,794

1,916 3,169

7,980 10,404

16,270 17,055

2105

FY12

FY13

FY14

FY15

FY16

FY17

FY18

9MFY

19Awarded km(NHAI+ Morth)

5,013 5,732 4,260 4,410

6,029 8,230

9,829

5759

FY12

FY13

FY14

FY15

FY16

FY17

FY18

9MFY

19

construction Km (NHAI+MoRTH)

85

91

97

103

109

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Infrastructure Index

50

65

80

95

110

125

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Infrastructure Index

March 2018 Results Preview | Sector: Infrastructure

April 2019 183

Quarterly performance (INR m) Y/E March FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19 Net Sales 7,063 3,787 6,589 7,023 6,837 7,644 10,651 9,606 24,464 34,739 YoY Change (%) 50.8 -14.5 25.7 15.1 -3.2 101.9 61.6 36.8 19.6 42.0 Total Expenditure 6,138 3,331 5,844 6,216 6,025 6,607 9,164 8,427 21,529 30,223 EBITDA 925 456 746 807 813 1,037 1,487 1,179 2,935 4,516 Margins (%) 13.1 12.0 11.3 11.5 11.9 13.6 14.0 12.3 12.0 13.0 Depreciation 113 130 144 144 136 166 202 205 532 708 Interest 129 116 128 113 171 130 239 224 485 764 Other Income 92 108 166 612 366 157 254 201 978 978 PBT before EO expense 774 318 640 1,163 871 899 1,301 951 2,895 4,022 Extra-Ord expense 0 0 0 0 0 0 398 0 0 -398PBT 774 318 640 1,163 871 899 903 951 2,895 3,624 Tax 205 41 170 109 232 278 281 151 524 942 Rate (%) 26.5 13.0 26.5 9.3 26.7 30.9 31.2 15.8 18.1 26.0 Reported PAT 569 277 470 1,054 639 621 622 800 2,371 2,682 Adj PAT 569 277 470 1,054 639 621 895 800 2,371 2,956 YoY Change (%) 84.7 -39.0 9.9 61.2 12.3 124.4 90.5 -24.1 28.6 24.6 Margins (%) 8.1 7.3 7.1 15.0 9.3 8.1 8.4 8.3 9.7 8.5


Ashoka BuildconCMP: INR133 TP: INR175 (+32%) Buy We expect revenue growth of 37% YoY, led by a pick-up in

execution of orders in hand. Revenue growth will be supported byexecution of the existing EPC road project portfolio and power T&Dprojects.

We expect operating margin to contract 80bp YoY to 12.3% andoperating profit to improve 46% YoY to INR1.2b.

Other income is expected to be INR201m, as against INR612m in4QFY18.

Tax rate during the quarter is expected to be 16%, as against 9.3%in 4QFY18.

Net profit is expected to decline 24% YoY to INR800m, given thelikely fall in other income during the quarter. Maintain Buy.

Key issues to watch Equity contribution arrangement from ABL for the recently won

HAM projects. Execution timelines for the recently won HAM projects.

Bloomberg ASBL IN Equity Shares (m) 280.7 M. Cap. (INR b)/(USD b) 37 / 1



Net Sales 24.5 34.7 47.9 57.5

EBITDA 2.9 4.5 6.0 7.2

Adj. PAT 2.4 3.0 3.5 4.2

Adj. EPS (INR) 8.4 10.6 12.4 15.1

EPS Gr (%) 34.6 25.6 16.8 21.7

BV/Sh (INR) 68.6 79.5 90.4 103.6

RoE (%) 13.0 14.3 14.6 15.5

RoCE (%) 14.0 16.1 16.7 17.6

Valuations P/E (x) 15.8 12.5 10.7 8.8

P/BV (x) 1.9 1.7 1.5 1.3

EV/EBITDA (x) 12.7 8.2 6.1 4.8

Div. Yield (%) 1.5 1.1 0.8 0.6

April 2019 184

Quarterly performance (INR m) Y/E March FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19 Net Sales 18,169 11,227 12,962 13,822 15,380 14,323 17,885 18,139 56,941 65,726 YoY Change (%) 19.7 -13.0 -8.1 -15.1 -15.4 27.6 38.0 31.2 -2.6 15.4 Total Expenditure 9,991 5,503 6,659 7,234 7,913 7,621 10,281 10,821 30,147 36,637 EBITDA 8,178 5,724 6,740 6,588 7,467 6,701 7,604 7,317 26,794 29,089 Margins (%) 45.0 51.0 52.0 47.7 48.5 46.8 42.5 40.3 47.1 44.3 Depreciation 1,816 1,260 1,212 1,152 1,345 1,372 1,321 1,138 5,440 5,176 Interest 2,854 2,356 2,366 2,090 2,477 2,719 2,866 2,914 9,667 10,977 Other Income 535 424 455 499 453 532 465 188 1,687 1,638 PBT before EO expense 4,044 2,532 3,616 3,845 4,098 3,141 3,882 3,453 13,373 14,575 PBT 4,044 3,573 3,616 3,845 4,098 3,141 3,882 3,453 13,373 14,575 Tax 1,665 1,225 1,100 1,447 1,597 1,412 1,693 1,243 5,444 5,031 Rate (%) 41.2 34.3 30.4 37.6 39.0 44.9 43.6 36.0 40.7 34.5 Reported PAT 2,379 2,348 2,516 2,398 2,501 1,729 2,189 2,210 7,924 9,536 Adj PAT 2,379 1,504 2,516 2,398 2,501 1,729 2,189 2,210 7,924 9,536 YoY Change (%) 30.8 5.8 36.6 15.7 5.1 15.0 -13.0 -7.8 10.9 20.3 Margins (%) 13.1 13.4 19.4 17.3 16.3 12.1 12.2 12.2 13.9 14.5

CMP: INR155 TP: INR155 Neutral IRB’s revenue is expected to increase 31% YoY to INR18.1b, driven

by growth in revenue of the construction segment and BoT assets. EBITDA is expected to grow 11% YoY to INR7.3b, impacted by

margin compression in the construction segment (24% v/s 30% in4QFY18).

EBITDA margin is expected to shrink 770bp YoY to 40.3%. PAT is expected to decline 8% YoY to INR2.2b. Maintain Neutral.

Key issues to watch Execution timelines for recently won HAM projects. Impact on EPC margins of the company once execution of lower-

margin HAM projects starts.

Bloomberg IRB IN Equity Shares (m) 351.5 M. Cap. (INR b)/(USD b) 54 / 1



Net Sales 56.9 65.7 85.8 90.0

EBITDA 26.8 29.1 30.8 29.0

PAT 8.4 9.5 8.3 5.2

EPS (INR) 23.9 27.1 23.5 14.8

EPS Gr. (%) 17.5 13.6 -13.4 -37.1

BV/Sh. INR 172 195 215 229

RoE (%) 14.7 14.8 11.5 6.7

RoCE (%) 8.9 9.1 7.7 5.8

Valuations P/E (x) 6.1 5.3 6.2 9.8

P/BV (x) 0.8 0.7 0.7 0.6

EV/EBITDA (x) 5.5 4.9 5.2 6.2

Div Yield (%) 2.6 2.2 1.9 2.0

* Consolidated


IRB

April 2019 185

Quarterly performance (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 4,807 3,933 4,332 6,244 5,564 4,163 4,489 5,272 19,317 19,488 YoY Change (%) 58.6 5.3 13.3 29.5 15.7 5.8 3.6 -15.6 25.3 0.9 Total Expenditure 3,962 3,109 3,348 5,036 4,465 3,331 3,588 4,260 15,455 15,644 EBITDA 845 825 984 1,207 1,099 831 901 1,012 3,861 3,844 Margins (%) 17.6 21.0 22.7 19.3 19.7 20.0 20.1 19.2 20.0 19.7 Depreciation 244 235 371 491 360 393 450 552 1,341 1,755 Interest 52 43 49 88 72 74 73 67 231 286 Other Income 123 27 61 183 178 88 217 48 393 531 PBT before EO expense 672 574 624 811 844 453 595 441 2,682 2,333 PBT 672 574 624 811 844 453 595 441 2,682 2,333 Tax -4 -17 -33 14 104 3 74 122 -39 303 Rate (%) -0.6 -2.9 -5.2 1.7 12.3 0.6 12.5 27.7 -1.5 13.0 Reported PAT 676 591 657 798 740 450 521 319 2,721 2,030 Adj PAT 676 591 657 798 740 450 521 319 2,721 2,030 YoY Change (%) 123.7 34.5 58.1 52.1 9.5 -23.8 -20.7 -60.0 61.8 -25.4 Margins (%) 14.1 15.0 15.2 12.8 13.3 10.8 11.6 6.0 14.1 10.4 E: MOFSL Estimates


KNR CMP: INR257 TP: INR295 (+15%) Buy We expect revenue to decline 16% YoY to INR5.3b on account of

lower order book availability for execution. Operating profit is expected to decline 16%, given weak execution

during the quarter. Margins are expected to remain stable at 19.2% (19.3% in 4QFY18). Net profit is expected to decline 60% YoY on account of higher tax

rate assumption for the quarter at 28%, as against 1.7% in 4QFY18.Maintain Buy.

Key issues to watch Update on execution timelines for the newly won HAM projects.

Bloomberg KNRC IN


1,6,12 Rel Perf. (%) 19 / 29 / -27


Net Sales 19.3 19.5 25.4 30.3

EBITDA 3.9 3.8 3.9 4.5

NP 2.7 2.0 2.0 2.2

EPS (INR) 19.4 14.4 14.4 15.5

EPS Gr. (%) 61.8 -25.4 -0.4 8.1

BV/Sh (INR) 82.3 96.0 110.1 125.4

RoE (%) 26.5 16.2 14.0 13.2

RoCE (%) 19.5 14.3 13.6 12.7

Valuations P/E (x) 10.4 13.9 14.0 12.9

P/BV (x) 2.4 2.1 1.8 1.6

EV/EBITDA (x) 7.8 7.1 7.0 5.2

April 2019 186

Standalone - Quarterly Earning Model (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 9,444 6,931 8,394 11,045 9,114 6,906 9,255 12,720 35,813 37,995 YoY Change (%) 17.0 12.6 -2.9 6.9 -3.5 -0.4 10.3 15.2 7.9 6.1 Total Expenditure 8,376 6,143 7,338 9,804 8,044 6,073 8,147 11,323 31,661 33,588 EBITDA 1,068 788 1,056 1,240 1,070 833 1,108 1,396 4,151 4,407 Margins (%) 11.3 11.4 12.6 11.2 11.7 12.1 12.0 11.0 11.6 11.6 Depreciation 245 251 247 236 241 244 241 259 979 986 Interest 322 215 285 345 257 273 291 354 1,167 1,175 Other Income 39 5 74 39 108 66 127 59 157 361 PBT 540 327 598 698 681 383 703 841 2,163 2,607 Tax -15 -8 -20 0 46 0 141 100 -44 287 Rate (%) -2.8 -2.6 -3.4 -0.1 6.8 0.0 20.0 11.9 -2.0 11.0 Reported PAT 555 335 618 699 634 383 563 741 2,207 2,321 Adj PAT 555 335 618 699 634 383 563 741 2,207 2,321 YoY Change (%) 14.0 80.8 17.9 2.4 14.3 14.3 -9.0 6.1 17.5 5.2 Margins (%) 5.9 4.8 7.4 6.3 7.0 5.5 6.1 5.8 6.2 6.1


Sadbhav Engg CMP: INR249 TP: INR285 (+15%) Buy We expect revenue of INR12.7b (up 15% YoY), led by smooth

execution of orders in hand. EBITDA is expected to grow 13% YoY to INR1.4b. EBITDA margin is

expected to remain stable YoY at 11.0%. Despite revenue growth of 15%, adjusted PAT is likely to grow 6%

YoY to INR741m due to increased impact on assumption of ahigher tax rate (11.9% v/s -0.1% in 4QFY18). Maintain Buy.

Key issues to watch Improvement in working capital cycle and overall quality of

balance sheet. Monetization of the assets in SIPL.

Bloomberg SADE IN Equity Shares (m) 171.5 M. Cap. (INR b)/(USD b) 43 / 1



Net Sales 35.1 38.0 45.9 54.0

EBITDA 4.2 4.4 5.4 6.1

Adj. PAT 2.2 2.3 2.3 2.4

EPS(INR) 12.9 13.5 13.4 14.0

EPS Gr. (%) 17.5 5.2 -1.1 4.6

BV/Sh. (INR) 108.8 121.0 132.9 145.5

RoE (%) 12.5 11.8 10.5 10.0

RoCE (%) 8.4 9.0 9.9 9.7

Valuations P/E (x) 17.8 16.9 17.1 16.4

P/BV (x) 2.1 1.9 1.7 1.6

EV/EBITDA (x) 12.6 11.4 9.2 8.3

Div Yield (%) 1.5 1.3 1.1 0.9

*Consolidated

April 2019 187

Container volume growth moderates in Jan-Feb 2019 Lead distance declines in EXIM

EXIM originating container rail volumes increased 6% YoY, while domestic containerrail volumes grew 5% YoY in Jan-Feb 2019.

Lead distance remained flat YoY for EXIM and declined 16km YoY for domesticoperations in Feb’19.

CCRI is likely to report healthy QoQ improvement in margins led by volume andrealization growth.

AGLL’s margins are expected to decline QoQ, as improvement in MTO margins is likelyto be offset by a contraction in CFS margins.

Originating container rail volumes grow 6% for EXIM, 5% for domestic in Jan-Feb 2019 After growing a robust 8% YoY in Jan’19, EXIM originating container rail volumes

increased by a moderate 4% YoY in Feb’19. Domestic originating container rail volumes grew 7.4% YoY in Jan’19 and 3.3%

YoY in Feb’19. CCRI is likely to report EXIM handling volume growth of 6% YoY for 4QFY19 and

5% YoY volume growth for the domestic segment. In Feb’19, lead distance remained flat YoY for EXIM (-3% YoY in 3QFY19) and

declined 16km YoY (-5% YoY in 3QFY19) for domestic operations.

Margins to improve for CCRI We expect CCRI’s EXIM volumes to grow by 6% YoY and domestic volumes to

increase by 5% YoY in 4QFY19. We expect margins to improve QoQ led by healthy volume growth and

realization improvement of 3% QoQ.

AGLL – MTO, CFS margins to remain healthy, P&E loss to narrow We expect AGLL’s net sales to improve by 22.5% YoY, led by a 4% YoY increase

in MTO volumes. Margins for MTO should remain stable while that for CFS should contract. We expect P&E segment to report positive EBIT.

Exhibit 1: Expected quarterly performance summary CMP Sales (INR m) EBITDA (INR m) PAT (INR m)

Logistics (INR) Rating Mar-19 Var % YoY


% YoY Var


Var % QoQ

Allcargo Logistics 113 Buy 18,818 22.5 4.4 968 31.0 -13.4 515 177.8 7.8 Concor 533 Buy 17,494 12.2 11.2 4,030 16.3 20.7 3,238 5.6 17.9 Sector Aggregate 36,311 17.3 7.6 4,998 18.9 12.1 3,752 15.4 16.4

Source: MOFSL

Logistics Company name

Allcargo

Concor

Pradnya Ganar – Research analyst (Pradnya.Ganar @motilaloswal.com); +91 22 6129 1537


April 2019 188

EXIM originating rail volumes up 3.6% YoY in Feb’19

Exhibit 2: EXIM volumes up 3.6% YoY in Feb’19

Source: Indian Rail, MOFSL

Exhibit 3: Domestic volumes up 3.3% YoY in Feb’19


Exhibit 4: EXIM lead distance remained flat YoY in Feb’19


Exhibit 5: Domestic lead distance declined 1% YoY in Feb’19


Exhibit 6: India’s imports down 4% YoY, exports up 3% YoY in Feb’19

Source: CEIC, MOFSL

Exhibit 7: IIP was up ~2% YoY in Jan’19

Source: CEIC, MOFSL

3.61

4.16

3.73

3.99

3.93

4.21

4.39

4.09

3.76

3.56

4.04

4.05

3.74

23.6 19.5

13.0 15.0 11.6

23.1

13.7 12.4 8.7

3.8

10.7 8.3

3.6

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

EXIM tonnes originating (mn) % Change (YoY)

0.90

1.08

0.88

0.97

1.03

0.94

1.03

0.94

0.99

0.91

0.96

1.01

0.93

(1.1) 1.9

(4.3)

4.3

13.2 16.0 19.8

8.0

16.5

1.1 (2.0)

7.4 3.3

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Domestic tonnes originating (mn) % Change (YoY)

791

804

800

780

788

765

781

792

794

788

780

792

791

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Average lead (kms) EXIM1,

283

1,29

4

1,21

0

1,22

5

1,24

8

1,24

9

1,27

7

1,24

0

1,28

7

1,26

4

1,26

4

1,24

1

1,26

7

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Average lead (kms) Domestic

0%

5%

20%

16%

30%

17%

-2%

18%

2%

3%

8%

3% 8%

4%

16%

24%

29%

28%

11%

18%

7%

1%

1%

-4%

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Export - YoY (%) Import - YoY (%)

7 7

5 5 4

7 6

5 4

8

0

3 2

Jan-

18

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

IIP YoY growth (%)

March 2019 Results Preview | Sector: Logistics

April 2019 189

Exhibit 8: Relative performance – three months (%)


Exhibit 9: Relative performance – one year (%)


Exhibit 10: Comparative valuation Sector / Companies CMP Reco EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Logistics (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Allcargo Logistics 113 Buy 8.7 10.1 11.4 13.0 11.2 9.9 6.9 6.0 5.2 10.3 10.7 10.8 Concor 533 Buy 19.5 23.1 26.1 27.4 23.0 20.4 19.6 15.8 13.7 12.2 13.5 14.1 Sector Aggregate 25.2 21.3 18.9 16.7 13.7 11.9 11.4 12.5 13.0

85

90

95

100

105

110

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Logistics Index

80

90

100

110

120

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Logistics Index


April 2019 190

Consolidated - Quarterly Earning Model (INR m) Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 14,834 15,472 14,799 15,363 16,250 17,373 18,027 18,818 60,469 70,468 YoY Change (%) 6.0 9.9 4.9 12.7 9.5 12.3 21.8 22.5 8.3 16.5 EBITDA 1,030 1,047 933 739 1,021 1,249 1,118 968 3,748 4,356 Margins (%) 6.9 6.8 6.3 4.8 6.3 7.2 6.2 5.1 6.2 6.2 Depreciation 399 398 397 397 397 403 398 406 1,591 1,605 Interest 83 71 71 75 79 85 65 75 299 304 Other Income 159 51 49 155 51 54 151 44 414 300 PBT before EO expense 707 629 515 422 596 815 806 531 2,273 2,748 Extra-Ord expense 0 0 0 69 0 0 0 0 69 0 PBT 707 629 515 354 596 815 806 531 2,204 2,748 Tax 76 6 199 231 86 199 306 14 513 605 Rate (%) 10.8 1.0 38.7 65.3 14.4 24.4 37.9 2.6 23.3 22.0 Reported PAT 630 623 315 123 510 616 500 517 1,692 2,143 Min. Interest & P& L of Asso. Cos. -19 15 32 -6 21 2 -23 -16 22 -16 Adj PAT 611 638 348 185 531 618 477 501 1,782 2,127 YoY Change (%) 0.2 -2.4 -29.3 -67.6 -13.2 -3.1 37.3 170.3 -23.1 19.3 Margins (%) 4.1 4.1 2.3 1.2 3.3 3.6 2.6 2.7 2.9 3.0 E: MOFSL Estimates


Allcargo

CMP: INR 113 TP: INR142 (+24%) Buy We expect AGLL to report EBITDA of INR968m (+31% YoY, -13%

QoQ). With MTO reporting healthy margins, we expect the P&E segment to also report a positive EBIT. We expect PAT at INR501m (+170% YoY, +5% QoQ) in 4QFY19.

We estimate MTO volumes at 166k TEU (+4% YoY, -1% QoQ) and CFS volumes at 76k TEU (0% YoY, -7% QoQ).

We estimate ~14% EBITDA CAGR and ~15% PAT CAGR over FY19-21 and expect return ratios to improve from ~9.5% in FY18 to ~10.8% in FY21, driven by margin expansion.

The stock trades at 13.2x/11.3x FY19E/20E P/E and FY19E/20E EV/EBITDA of 7x/6.1x. Maintain Buy.

Key issues to watch for Volume data Setting up of a logistics park in Jhajjar

Bloomberg AGLL IN


1,6,12 Rel Perf. (%) 3 / 8 / -42

Financial snapshot (INR b) Y/E March 2018 2019E 2020E 2021E

Sales 60.5 70.5 80.8 91.5

EBITDA 3.7 4.4 5.1 5.7

NP 1.8 2.1 2.5 2.8

EPS (INR) 7.3 8.7 10.1 11.4

EPS Growth (%) -23.1 19.3 16.2 12.9

BV/Share (INR) 80.0 88.7 99.0 110.6

RoE (%) 9.5 10.3 10.7 10.8

RoCE (%) 8.4 9.7 10.3 10.5

Valuations

P/E (x) 15.7 13.2 11.3 10.0

P/BV (x) 1.4 1.3 1.2 1.0

EV/EBITDA (x) 7.8 7.0 6.1 5.3

April 2019 191

Container Corp of India (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 14,568 14,449 14,197 15,587 14,983 17,223 15,726 17,494 58,893 65,372 YoY Change (%) 9.9 6.2 8.0 11.7 2.8 19.2 10.8 12.2 9.2 11.0 EBITDA 3,267 3,112 2,424 3,466 3,202 4,042 3,339 4,030 12,118 14,613 Margins (%) 22.4 21.5 17.1 22.2 21.4 23.5 21.2 23.0 20.6 22.4 YoY Change (%) 24.7 36.9 -6.9 21.4 -2.0 29.9 37.7 16.3 17.0 20.6 Depreciation 953 969 995 1,010 1,022 1,048 1,059 1,095 3,927 4,223 Interest 0 0 0 0 0 0 0 0 1 1 Other Income 936 753 2,575 1,228 1,321 1,692 1,586 1,497 5,705 6,095 PBT before EO expense 3,251 2,897 4,004 3,683 3,500 4,686 3,866 4,432 13,896 16,485 Extra-Ord expense 0 0 0 129 0 0 0 0 129 0 PBT 3,251 2,897 4,004 3,554 3,500 4,686 3,866 4,432 13,767 16,485 Tax 817 607 1,233 618 977 1,326 1,119 1,194 3,289 4,616 Rate (%) 25.1 21.0 30.8 17.4 27.9 28.3 28.9 26.9 23.9 28.0 Reported PAT 2,434 2,289 2,771 2,936 2,524 3,361 2,747 3,238 10,478 11,869 Adj PAT 2,434 2,289 2,771 3,066 2,524 3,361 2,747 3,238 10,607 11,869 YoY Change (%) 36.4 45.0 49.0 45.5 3.7 46.8 -0.9 5.6 39.6 11.9 Margins (%) 16.7 15.8 19.5 19.7 16.8 19.5 17.5 18.5 18.0 18.2 E: MOFSL Estimates


ConcorCMP: INR533 TP: INR618 (+16%) Buy We expect CCRI to report net sales of INR17.5b (+12% YoY, +11%

QoQ), led by volume growth of 6% YoY. Realization is expected toincrease 3% QoQ.

EXIM volumes should improve 6% YoY and domestic volumesshould grow 5% YoY.

We expect EXIM realizations to improve by 8% YoY and domesticrealization to improve 2% YoY, resulting in net realization increaseof 6% YoY.

We estimate EBITDA at INR4b (+16% YoY, +21% QoQ) and adj. PATat INR3.2b (+6% YoY, +18% QoQ).

The stock trades at 27.4x/23x FY19E/20E P/E and FY19E/20EEV/EBITDA of 19.6x/15.8x. Buy.

Key issues to watch for EXIM, domestic volumes, and realizations Progress on MMLPs and DFC projects

Bloomberg CCRI IN


1,6,12 Rel Perf. (%) 3 / -4 / -10

Financial snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Sales 58.9 65.4 74.4 84.7 EBITDA 12.1 14.6 18.0 20.5 NP 10.6 11.9 14.1 15.9 EPS (INR) 17.4 19.5 23.1 26.1 EPS Gr. (%) 44.7 11.9 18.8 12.6 BV/Sh (INR) 154.3 165.4 177.5 191.1 RoE (%) 11.6 12.2 13.5 14.1 RoCE (%) 11.3 11.9 13.2 13.8 Payout (%) 47.9 47.9 47.9 47.9 Valuations P/E (x) 30.6 27.4 23.0 20.4 P/BV (x) 3.5 3.2 3.0 2.8 EV/EBITDA (x) 24.0 19.6 15.8 13.7 Div. Yield (%) 1.3 1.5 1.7 2.0

April 2019 192

March 2019 Results Preview | Sector: Media

Tariff order headwinds to impact broadcasters Print/Radio pack eying revival

A lackluster quarter for broadcasters Marred by the implementation of the TRAI’s new tariff order, broadcasters are likely to see a slowdown in revenues. On-ground hiccups coupled with blackouts in some areas are expected to impact subscription growth. This has also led to various advertisers tightening their purse strings on ad spends, thus, hurting ad growth. However, big movie releases should provide some support to overall revenue. We expect ZEE/SUNTV to report 11%/14% YoY revenue growth, with ad growth of 13%/4% YoY and subscription growth of 4%/11% YoY.

Muted revenue growth coupled with increasing thrust on digital content (in addition to the traditional content) should accentuate the impact on margins – ZEE/SUNTV are likely to report 250bp/80bp YoY drop in margins resulting in 1%/13% EBITDA growth.

Print pack to start seeing revival Print companies should see an improvement in performance due to (a) higher ad spends, (b) the 25% increase in DAVP rates, and (c) softening newsprint prices. Post the muted growth of the last few quarters, print companies should see ad growth inching up on improving ad spends by the government, retail, education, and real estate advertisers. Overall revenue is expected to grow at 7%/5% for JAGRAN/DBCL, primarily led by 8%/7% ad growth. Circulation growth, however, is likely to remain subdued YoY. The 20% decline in newsprint prices from the peak should start to translate into lower cost to the tune of 7-8% for Jagran and DB Corp, even as fresh domestic inventory starts getting utilized from Feb’19. Consequently, increase in overall costs should be limited to 5%/6% YoY for Jagran/ DB Corp, resulting in EBITDA solace for DB Corp (1% QoQ growth), and relatively better performance by Jagran with 13% EBITDA growth.

Radio companies to see healthy growth The radio pack is likely to report healthy growth. During 4Q, traction in ad spends was limited to select categories, such as the government and BFSIs. However, higher utilization at new stations coupled with election-led spending is expected to drive growth for radio companies. We expect ENIL/MBL to report 17%/14% revenue growth. This, along with operating leverage as a result of higher contribution from new stations would support margins; launch of new stations would offset some benefits for ENIL though. Expect ENIL to report 225bp YoY margin expansion while MBL should report 60bp contraction (on a high base of 36%)

Company name

D B Corp

Entertainment Network

Jagran Prakashan

Music Broadcast

PVR

Sun TV

Zee Entertainment


Media

Aliasgar Shakir – Research Analyst ([email protected]); +91 22 6129 1565 Hafeez Patel – Research Analyst ([email protected]); +91 22 6129 1568

April 2019 193


Exhibition – PVR to continue its robust momentum Reduced GST rate on movie tickets coupled with the launch of new screens and healthy occupancy during 4Q should drive revenue growth for PVR. Including SPI Cinemas, PVR is likely to report 31% YoY revenue growth on the back of (a) healthy 25% growth in ticketing revenue backed by higher admits and ~16% YoY decline in ATP (due to the cut in GST rates), (b) strong volume-led 31% YoY growth in F&B revenue, and (c) SPI Cinemas’ consolidation. We expect margin to expand 225bp on the back of operating leverage coupled with merger synergies from SPI Cinemas.

Exhibit 1: Media coverage — Quarterly snapshot FY17 FY18 FY19 YoY

(%) QoQ (%) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Advertisement Revenue (INR b) Music Broadcast 0.6 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9 14 -1Entertainment Network (India) 1.1 1.3 1.5 1.7 1.0 1.3 1.5 1.6 1.2 1.2 2.0 1.9 17 -7ZEE Entertainment 9.1 9.6 9.6 8.5 9.7 9.9 12.0 10.5 11.5 12.1 14.6 11.8 13 -19SUN TV 3.2 3.1 2.8 2.7 3.0 3.3 3.4 3.4 3.6 3.4 3.8 3.5 4 -7Jagran Prakashan 3.5 3.4 3.7 3.3 3.6 3.4 3.6 3.1 3.6 3.1 3.6 3.4 8 -7DB Corp 3.7 3.3 4.0 3.1 3.9 3.5 3.8 3.4 4.1 3.6 4.2 3.6 7 -14PVR 0.5 0.6 0.8 0.5 0.7 0.7 0.9 0.7 0.7 0.8 1.1 1.0 32 -15Aggregate MOFSL universe 21.7 22.0 23.0 20.4 22.6 22.8 25.8 23.4 25.5 25.1 30.3 26.0 11 -14Growth (YoY) 15% 11% 2% 1% 4% 4% 12% 15% 13% 10% 17% 11% Subscription/Circulation Revenue (INR b) ZEE Entertainment 5.3 5.8 5.9 5.6 4.8 5.0 5.0 5.5 5.2 6.1 6.2 5.7 4 -8SUN TV 2.7 2.7 2.8 2.8 3.1 3.2 3.2 3.5 3.5 3.9 4.0 3.9 11 -1Jagran Prakashan 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 0 0 DB Corp 1.2 1.2 1.2 1.2 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.3 4 0 Aggregate MOFSL universe 10.2 10.8 11.1 10.7 10.2 10.5 10.6 11.3 11.2 12.4 12.5 12.0 6 -4Growth (YoY) 14% 17% 13% 0% 0% -2% -4% 6% 9% 18% 18% 6% Total Revenue (INR b) Music Broadcast 0.6 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9 14 -1Entertainment Network (India) 1.1 1.3 1.5 1.7 1.0 1.3 1.5 1.6 1.2 1.2 2.0 1.9 17 -7ZEE Entertainment 15.7 17.0 16.4 15.3 15.4 15.8 18.4 17.3 17.7 19.8 21.7 19.1 11 -12SUN TV 7.6 6.3 5.9 5.8 7.9 6.8 6.8 7.2 11.2 7.5 9.0 8.2 14 -10Jagran Prakashan 5.6 5.5 6.0 5.6 5.9 5.7 6.0 5.5 6.0 5.5 6.1 5.9 7 -5DB Corp 5.7 5.4 6.3 5.2 5.9 5.7 6.0 5.6 6.3 5.8 6.6 5.9 5 -11PVR 5.6 5.4 5.3 4.8 6.4 5.6 5.6 5.8 7.0 7.1 8.4 7.6 30 -9Aggregate MOFSL universe 42.1 41.6 42.1 39.0 43.2 41.5 45.0 43.7 50.2 47.7 54.8 49.4 13 -10Growth (YoY) 17% 16% 4% 4% 3% 0% 7% 12% 16% 15% 22% 13% EBITDA (INR b) Music Broadcast 0.2 0.3 0.3 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 12 7 Entertainment Network (India) 0.3 0.2 0.4 0.4 0.2 0.3 0.4 0.4 0.3 0.3 0.4 0.5 29 13 ZEE Entertainment 4.5 4.9 5.2 4.7 4.8 4.9 5.9 5.1 5.7 6.8 7.5 5.1 1 -32SUN TV 4.4 4.7 4.4 3.9 4.5 5.0 4.9 5.2 7.3 5.5 6.7 5.9 13 -12Jagran Prakashan 1.6 1.5 1.9 1.4 1.6 1.4 1.6 1.2 1.6 1.0 1.3 1.4 13 2 DB Corp 1.8 1.5 2.0 1.1 1.9 1.4 1.4 1.0 1.7 0.9 1.4 1.0 1 -29PVR 1.1 0.8 0.8 0.5 1.1 0.9 1.0 0.9 1.4 1.2 1.6 1.4 49 -15Aggregate MOFSL universe 13.8 13.9 14.9 12.2 14.3 14.1 15.5 14.0 18.2 16.0 19.3 15.5 11 -19Growth (YoY) 22% 17% 7% 3% 4% 1% 4% 15% 27% 14% 24% 11% EBITDA Margin (%) Music Broadcast 30.5 41.7 36.6 24.9 31.5 31.9 30.6 36.0 34.4 33.1 32.9 35.4 -63bps 254bpsEntertainment Network (India) 26.6 17.8 25.3 21.3 16.4 22.7 24.1 22.2 23.3 22.3 20.1 24.5 225bps 437bps

April 2019 194

March 2019 Results Preview | Sector: Media FY17 FY18 FY19 YoY

(%) QoQ (%)

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE ZEE Entertainment 28.8 28.9 31.5 30.7 31.4 31.0 32.3 29.3 31.9 34.2 34.8 26.8 -253bps -800bps SUN TV 57.4 74.6 74.6 67.6 57.0 73.4 72.0 72.9 65.6 73.9 73.8 72.1 -77bps -168bps Jagran Prakashan 27.6 27.6 31.0 25.6 27.3 24.5 27.2 22.0 27.1 18.0 21.6 23.1 117bps 154bps DB Corp 31.5 28.1 31.6 21.7 31.4 24.6 23.3 17.5 26.6 15.9 21.2 16.8 -66bps -436bps PVR 19.0 14.8 15.1 9.7 17.6 16.3 18.2 16.1 19.7 17.5 19.5 18.4 226bps -109bps Margins MOFSL universe 32.8 33.5 35.3 31.2 33.1 34.0 34.4 32.1 36.3 33.5 35.2 31.4 -69bps -375bps Growth (YoY, bp) 131 46 97 -36 29 46 -83 95 319 -44 76 -69 PAT (INR b) Music Broadcast 0.1 0.1 0.1 0.0 0.1 0.1 0.1 0.2 0.1 0.1 0.2 0.2 21 20 Entertainment Network (India) 0.2 0.1 0.2 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.2 0.2 74 28 ZEE Entertainment 2.2 2.4 2.5 2.9 2.5 3.1 3.7 2.3 3.3 3.9 5.6 2.8 23 -50 SUN TV 2.3 2.7 2.4 2.4 2.5 2.8 2.7 2.9 4.1 3.5 3.5 3.7 26 4 Jagran Prakashan 0.8 0.9 1.0 0.8 0.9 0.7 0.8 0.6 0.9 0.4 0.7 0.8 27 13 DB Corp 1.0 0.9 1.2 0.6 1.1 0.8 0.8 0.6 1.0 0.5 0.8 0.6 -2 -26 PVR 0.4 0.3 0.2 0.0 0.4 0.3 0.3 0.3 0.5 0.3 0.5 0.3 12 -43 Aggregate MOFSL universe 7.1 7.3 7.6 6.9 7.6 7.9 8.6 6.9 9.9 8.8 11.4 8.5 23 -25 Growth (YoY) 1% 17% 3% 9% 7% 7% 13% 0% 31% 12% 33% 23% ZEE’s 4QFY17 and 2QFY18 PAT excludes exceptional gain from sports business. Source: Company, MOFSL PVR’s 2QFY19/3QFY19E performance includes SPI cinemas consolidation. Thus, not comparable on YoY basis

Exhibit 2: 4QFY19E ad revenue growth (YoY, %)


Exhibit 3: 4QFY19E subscription/circulation revenue growth (YoY, %)


Exhibit 4: 4QFY19E total revenue growth (YoY, %)


13 4 8 7 14 17 32

ZEE SUN TV Jagran DB Corp MBL ENIL PVR

4 11 0 4

ZEE SUN TV Jagran DB Corp

11 14 7 5 14 17 30

ZEE SUN TV Jagran DB Corp MBL ENIL PVR

April 2019 195


Exhibit 5: MOFSL Media universe quarterly aggregate revenue and EBITDA margin trend


Exhibit 6: MOFSL Media universe quarterly aggregate PAT growth trend


Exhibit 7: Expected quarterly performance summary (INR m) Sector CMP Sales (INR m) EBDITA (INR M) PAT (INR m)

Media (INR) RECO Mar-19 Var % YoY


% YoY Var


Var % QoQ

D B Corp 186 Buy 5,879 4.9 -10.9 989 1.0 -29.2 558 -2.2 -26.2Ent.Network 532 Buy 1,869 17.3 -7.0 457 29.2 13.3 204 74.2 27.7 Jagran Prakashan 120 Buy 5,837 6.5 -4.9 1,266 5.1 -4.5 719 21.8 8.0 Music Broadcast 59 Buy 865 13.9 -0.6 306 12.0 7.1 197 20.9 20.0 PVR 1,656 Buy 7,633 30.5 -9.5 1,404 48.8 -14.5 295 12.7 -43.0Sun TV 642 Buy 8,170 13.9 -9.7 5,889 12.7 -11.7 3,660 26.3 4.2 Zee Entertainment 418 Neutral 19,128 10.9 -11.7 5,128 1.3 -32.0 2,831 121.4 -46.1Sector Aggregate 49,380 13.0 -9.8 15,441 10.0 -19.9 8,464 44.0 -23.2

Source: MOFSL

Exhibit 8: Relative performance-3m (%)


Exhibit 9: Relative performance-1 Yr (%)


36.0 35.9 40.3 37.4 42.1 41.6 42.1 39.0 43.2 41.5 45.0 43.7 50.2 47.7 54.8 49.4

32 33

34

32 33 33

35

31 33 34 34

32

36

34 35

31

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19E

Aggregate Revenue (INR b) Aggregate EBITDA margin (%)

7.0 6.3 7.3 6.3 7.1 7.3 7.6 6.9 7.6 7.9 8.6 6.9 9.9 8.8 11.4 8.5

36 21

0

46

1 17

3 9 7 7 13 0

31 12

33 23

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19E

Aggregate PAT (INR b) YoY growth (%)

80

87

94

101

108

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Media Index

60728496

108120

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Media Index

April 2019 196


Exhibit 10: Comparative valuation Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%)

Media (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E

D B Corp 186 Buy 15.7 22.3 24.6 11.8 8.4 7.6 6.5 4.3 3.4 14.7 19.9 18.8

Ent.Network 532 Buy 11.0 19.0 33.8 48.4 28.0 15.8 16.7 11.7 7.2 5.8 9.3 14.7

Jagran Prakashan 120 Buy 8.7 13.3 15.1 13.8 9.0 8.0 6.3 4.2 3.2 13.1 19.3 18.9

Music Broadcast 59 Buy 2.3 3.0 3.9 26.0 19.9 15.2 13.4 10.2 7.6 10.4 12.7 14.5

PVR 1,656 Buy 34.5 35.9 40.0 48.0 46.2 41.4 16.2 13.9 12.0 14.0 12.2 11.4

Sun TV 642 Buy 37.5 41.4 46.5 17.1 15.5 13.8 9.0 7.9 6.9 30.3 30.4 31.1

Zee Entertainment 418 Neutral 16.3 18.9 22.7 25.7 22.2 18.4 15.2 13.4 10.9 19.1 19.1 19.6

Sector Aggregate 21.9 18.5 15.8 11.7 9.8 8.2 18.9 19.5 19.8

Source: MOFSL

April 2019 197


Consolidated quarterly performance (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue from operations 5,927 5,683 5,986 5,603 6,324 5,821 6,597 5,879 23,199 24,621 YoY Change (%) 3.2 5.4 -4.6 8.3 6.7 2.4 10.2 4.9 2.7 6.1 Total Expenditure 4,063 4,284 4,590 4,624 4,644 4,898 5,200 4,890 17,561 19,631 EBITDA 1,864 1,399 1,396 979 1,680 923 1,397 989 5,638 4,990 Margins (%) 31.4 24.6 23.3 17.5 26.6 15.9 21.2 16.8 24.3 20.3 Depreciation 220 229 232 243 243 251 249 256 924 999 Interest 16 20 11 20 18 30 19 14 67 81 Other Income 70 57 39 72 68 54 19 99 238 240 PBT 1,698 1,207 1,191 789 1,488 696 1,149 818 4,885 4,150 Tax 597 421 410 218 512 234 392 259 1,645 1,397 Rate (%) 35.1 34.8 34.4 27.6 34.4 33.6 34.2 31.7 33.7 33.7 MI & P/L of Asso. Cos. 0 0 0 0 0 0 0 0 0 0 Reported PAT 1,101 787 781 571 976 462 756 558 3,240 2,752 Adj PAT 1,101 787 781 571 976 462 756 558 3,240 2,752 YoY Change (%) 5.9 -12.0 -33.9 -11.1 -11.4 -41.3 -3.2 -2.2 -13.8 -15.0 Margins (%) 18.6 13.8 13.0 10.2 15.4 7.9 11.5 9.5 14.0 11.2 E: MOFSL Estimates


D B CorpCMP: INR186 TP: INR215 (+16%) Buy We expect print ad revenues to grow at a modest 7% YoY to

INR3.6b, mainly led by traction in ad spends across selectcategories such as government, real estate, retail, and education.Further, election driven ad spends should also provide somesupport.

Circulation revenue is likely to grow at 4% YoY to INR1.3b. Subsequently, we expect consolidated revenue to grow 5% YoY to

INR5.9b. Though, there has been correction in newsprint prices, we believe

the benefits would not be fully captured in 4Q due to (a) increasein circulation copies and (b) consumption of already bought high-priced inventory, thus leading to high newsprint cost.

Consequently, we expect EBITDA to grow marginally by 1% YoY toINR1b; margins to contract 70bp YoY to 16.8%.

We estimate net profit of INR0.6b, down 2% YoY. The stock trades at 8x FY20E/21E EPS. Maintain Buy.

Key issues to watch for Print ad revenue (expect 7% YoY growth) EBITDA margin (expect 70bp YoY contraction to 16.8%)

Bloomberg DBCL IN Equity Shares (m) 183.7 M. Cap. (INR b)/(USD b) 34 / 0



Net Sales 23.1 24.6 26.6 28.2

EBITDA 5.6 5.0 6.7 7.4

Adj. Net Profit 3.2 2.8 3.9 4.3

Adj. EPS (INR) 17.6 15.7 22.3 24.6

Adj. EPS Gr. (%) -13.8 -10.6 41.4 10.4

BV/Sh (INR) 104.9 98.3 114.9 133.6

RoE (%) 18.4 14.7 19.9 18.8

RoCE (%) 18.0 14.7 19.7 18.7

Div. Payout (%) 27.3 30.6 21.6 19.6

Valuations

P/E (x) 10.6 11.8 8.4 7.6

P/BV (x) 1.8 1.9 1.6 1.4

EV/EBITDA (x) 5.5 6.2 4.1 3.2

Div. Yield (%) 2.2 2.2 2.2 2.2

April 2019 198


Standalone quarterly performance (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue from operations 1,045 1,253 1,479 1,594 1,216 1,225 2,009 1,869 5,371 6,319 YoY Change (%) -5.6 -3.3 -1.8 -3.5 16.4 -2.2 35.9 17.3 -3.4 17.7 Total Expenditure 873 969 1,123 1,240 932 952 1,605 1,412 4,205 4,901 EBITDA 172 284 356 354 284 273 404 457 1,166 1,418 Margins (%) 16.4 22.7 24.1 22.2 23.3 22.3 20.1 24.5 21.7 22.4 Depreciation 156 159 161 158 152 166 174 190 635 681 Net Interest cost -10 -8 -6 -17 -18 -22 -27 2 -41 -65 PBT before EO expense 25 134 201 213 150 130 257 265 573 802 Extra-Ord expense 42 0 0 0 0 0 0 0 42 0 PBT 68 134 201 213 150 130 257 265 615 802 Tax 23 74 70 96 58 40 97 61 263 257 Rate (%) 34.2 55.5 34.9 45.0 38.5 31.1 37.8 23.1 42.8 32.0 Reported PAT 45 60 131 117 92 89 160 204 352 545 Adj PAT 17 60 131 117 72 89 160 204 324 525 YoY Change (%) -89.9 -24.5 -19.8 -15.2 331.4 50.1 22.2 74.2 -40.5 62.0 Margins (%) 1.6 4.8 8.8 7.3 5.9 7.3 7.9 10.9 6.0 8.3 E: MOFSL Estimates

CMP: INR532 TP: INR720 (+35%) Buy We expect standalone revenue to grow 17% YoY to INR1,869m,

mainly driven by volume-led growth in FCT business. Revival in adspends across certain categories such as Govt. and real estateshould drive overall volumes.

Consequently, standalone EBITDA is likely to grow 29% YoY toINR457m led by strong revenue growth and operating leverage. Weexpect margins to expand 225bp YoY to 24.5%.

PAT is expected to grow 74% YoY to INR204m on the back of strongEBITDA growth.

The stock trades at an EV/EBITDA of 13x FY20E and 8x FY21E.Maintain Buy.

Key issues to watch for Growth in advertisement revenue in old and new stations Yield improvement at legacy stations

Bloomberg ENIL IN Equity Shares (m) 47.7 M. Cap. (INR b)/(USD b) 25 / 0


Financial Snapshot (INR Billion) Y/E March 2018 2019E 2020E 2021E Net Sales 5.4 6.3 7.3 8.6 EBITDA 1.2 1.4 1.9 2.8

Adj. NP 0.3 0.5 0.9 1.6 Adj. EPS (INR) 6.8 11.0 19.0 33.8 Adj. EPS Gr. (%) -40.5 62.0 72.9 77.6

BV/Sh (INR) 185.5 195.8 213.6 246.2 RoE (%) 3.7 5.8 9.3 14.7 RoCE (%) 3.1 4.9 8.0 13.3

Valuation P/E (x) 78.3 48.3 28.0 15.7 P/BV (x) 2.9 2.7 2.5 2.2

EV/EBITDA (x) 22.5 17.8 12.6 7.7


Entertainment Network

April 2019 199



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue from operations 5,913 5,665 5,981 5,480 6,026 5,534 6,138 5,856 23,040 23,554 YoY Change (%) 4.8 2.1 -0.6 -2.5 1.9 -2.3 2.6 6.9 0.9 2.2 Total Expenditure 4,301 4,279 4,352 4,276 4,390 4,538 4,813 4,501 17,208 18,242 EBITDA 1,613 1,386 1,629 1,204 1,636 996 1,326 1,355 5,832 5,312 Margins (%) 27.3 24.5 27.2 22.0 27.1 18.0 21.6 23.1 25.3 22.6 Depreciation 328 340 343 350 307 311 331 332 1,361 1,281 Interest 72 74 76 49 31 53 91 46 271 221 Other Income 120 125 108 113 49 71 158 91 467 369 PBT 1,333 1,098 1,318 918 1,346 703 1,062 1,067 4,667 4,179 Tax 446 375 446 290 463 255 361 317 1,557 1,395 Rate (%) 33.5 34.2 33.8 31.6 34.4 36.2 33.9 29.7 33.4 33.4 MI & P/L of Asso. Cos. 21 27 25 37 29 27 36 0 111 93 Reported PAT 866 695 848 590 854 421 666 751 2,999 2,691 Adj PAT 866 695 848 590 854 421 666 751 2,999 2,691 YoY Change (%) 3.3 -18.5 -12.9 -27.2 -1.4 -39.4 -21.5 27.2 -13.7 -10.3 Margins (%) 14.6 12.3 14.2 10.8 14.2 7.6 10.8 12.8 13.0 11.4 E: MOFSL Estimates


Jagran PrakashanCMP: INR120 TP: INR140 (+16%) Buy Despite subdued election-led ad spending, the uptick in ad spends

across select categories including government, retail, real estate,etc., should lead to a modest 8% YoY print ad growth to INR3.4b.

Circulation revenue is likely to remain flat YoY at INR1.1b. Expectradio revenue to grow at a faster pace of 14% YoY to INR0.9b.

Subsequently, consolidated revenue should come in at INR5.9b, up7% YoY.

Benefits from correction in newsprint prices would not be fullyreflected in 4Q due to (a) increase in circulation copies, and (b)consumption of already bought high-priced inventory.

Consequently, we expect EBITDA to grow 13% YoY to INR1.4bmainly driven by revenue growth; margins should expand 120bpYoY to 23.1%.

PAT is expected to grow 27% YoY to INR0.8b. The stock trades at 9x FY20E and 8x FY21E EPS. Maintain Buy.

Key issues to watch for Ad revenue (expect 8% YoY growth) EBITDA margin (expect 120bp expansion to 23.1%)

Bloomberg JAGP IN Equity Shares (m) 311.4 M. Cap. (INR b)/(USD b) 37 / 1


Financial Snapshot (INR Billion) Y/E MARCH 2018 2019E 2020E 2021E Net Sales 23.0 23.6 25.5 27.5 EBITDA 5.8 5.3 7.1 7.9

Adj. Net Profit 3.0 2.7 4.1 4.6 Adj. EPS (INR) 9.6 9.1 13.8 15.5 Adj. EPS Gr. (%) -9.5 -5.7 51.5 12.9

BV/Sh (INR) 65.5 64.7 74.9 86.8 RoE (%) 14.3 13.6 19.7 19.2 RoCE (%) 14.1 13.8 18.8 18.5

Div. Payout (%) 37.5 41.6 27.1 23.9 Valuations P/E (x) 12.5 13.2 8.7 7.7 P/BV (x) 1.8 1.9 1.6 1.4


April 2019 200



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue from operations 703 758 762 759 757 801 870 865 2,982 3,294 YoY Change (%) 11.9 9.5 4.7 14.1 7.6 5.7 14.2 13.9 9.9 10.4 Total Expenditure 481 516 529 486 496 536 584 559 2,012 2,175 EBITDA 222 242 233 274 261 266 286 306 971 1,119 Margins (%) 31.5 31.9 30.6 36.0 34.4 33.1 32.9 35.4 32.5 34.0 Depreciation 64 67 65 67 67 67 68 67 263 269 Interest 39 38 39 34 14 14 14 -1 150 40 Other Income 47 50 43 54 24 36 45 48 194 153 PBT 166 187 172 227 204 221 249 288 752 962 Tax 57 60 53 65 69 87 86 92 235 333 Rate (%) 34.6 32.0 30.9 28.4 33.7 39.4 34.3 31.8 31.2 34.6 Reported PAT 108 127 119 163 135 134 164 197 517 629 Adj PAT 108 127 119 163 135 134 164 197 517 629 YoY Change (%) 42.3 9.7 16.4 261.3 24.5 5.1 37.9 20.9 41.1 21.7 Margins (%) 15.4 16.8 15.6 21.4 17.8 16.7 18.8 22.7 17.3 19.1 E: MOFSL Estimates


Music Broadcast CMP: INR59 TP: INR76 (+28%) Buy We expect revenue to grow at a healthy 14% YoY to INR865m

mainly on the back of a revival in ad spends across categoriessuch as BFSI and Govt. Although election-led ad spends started ona soft note, it should provide impetus to overall growth.

EBITDA is expected to grow 12% YoY to INR306m on the back ofoperating leverage and higher contribution from new stations,partly offset by higher opex; margins are likely to contract 60bpYoY to 35.4% (on a high base of 36%).

We expect PAT to grow 21% YoY to INR197m led by EBITDAgrowth.

The stock trades at EV/EBITDA of 11x FY20E and 8x FY21E.Maintain Buy.

Key issues to watch for Growth in utilization of new and old stations Yield improvement at legacy stations

Bloomberg RADIOCIT IN Equity Shares (m) 285.3 M. Cap. (INR b)/(USD b) 17 / 0



Sales 3.0 3.3 3.7 4.3 EBITDA 1.0 1.1 1.4 1.7 Adj. NP 0.5 0.6 0.8 1.1

Adj. EPS (INR) 1.8 2.3 3.0 3.9 Adj.EPS Gr (%) 41.1 25.5 30.6 31.2 BV/Sh. (INR) 21.0 21.9 24.9 28.8

RoE (%) 9.0 10.4 12.7 14.5 RoCE (%) 9.2 10.4 12.7 14.5 Valuations


April 2019 201


Consolidated quarterly performance (INR m) Y/E March FY18 FY19 FY18 FY19E*

1Q 2Q 3Q 4Q 1Q 2Q* 3Q* 4QE* Revenue from operations 6,366 5,554 5,573 5,849 6,963 7,086 8,431 7,633 23,341 30,112 YoY Change (%) 13.2 2.1 5.0 21.2 9.4 27.6 51.3 30.5 10.1 29.0 Total Expenditure 5,246 4,649 4,557 4,905 5,591 5,845 6,788 6,228 19,323 24,452 EBITDA 1,120 905 1,015 944 1,372 1,240 1,643 1,404 4,018 5,660 Margins (%) 17.6 16.3 18.2 16.1 19.7 17.5 19.5 18.4 17.2 18.8 Depreciation 376 347 386 394 401 448 514 556 1,537 1,920 Interest 208 207 212 210 208 298 379 448 837 1,333 Other Income 164 42 32 75 43 61 143 54 313 300 PBT before EO expense 700 393 449 415 805 555 893 454 1,958 2,707 Extra-Ord expense 0 6 0 0 0 0 0 0 6 0 PBT 700 387 449 415 805 555 893 454 1,952 2,707 Tax 258 140 154 153 283 212 337 159 704.4 991.0 Rate (%) 36.8 36.1 34.2 36.9 35.2 38.1 37.8 35.0 36.1 36.6 MI & P/L of Asso. Cos. -2 -5 7 0 1 13 38 0 0 52 Reported PAT 445 252 289 262 521 330 518 295 1,247 1,665 Adj. PAT 445 255 289 262 521 330 518 295 1,252 1,665 YoY Change (%) -1.5 -12.3 -19.3 NM 17.3 29.3 79.3 12.7 27.3 33.0 Margins (%) 7.0 4.5 5.2 4.5 7.5 4.7 6.1 3.9 5.3 5.5 *Represents performance including SPI cinemas consolidation. Thus, not comparable on YoY basis; E: MOFSL Estimates


PVRCMP: INR1,656 TP: INR1,900 (+15%) Buy We expect robust 31% YoY consolidated revenue growth (including

the SPI Cinemas’ consolidation) in PVR to INR7.6b. The stronggrowth can be attributed to (a) strong ticketing revenue growth –led by screen additions, better content driven uptick in footfalls,and GST rate-cut leading to a decline in ATP, (b) (volume-led)double-digit growth in F&B revenue, and (c) consolidation of SPICinemas.

We expect EBITDA to grow 49% YoY to INR1.4b mainly on the backof strong revenue growth coupled with merger synergies; weexpect margins to expand 230bp YoY to 18.4%.

However, higher depreciation and finance cost are expected topartly offset benefits of EBITDA growth. Consequently, we expectPAT to grow 13% YoY to INR295m.

The stock trades at 46x FY20E and 41x FY21E EPS. Maintain Buy.

Key issues to watch for Number of screen additions Occupancy rate Growth in ATP and SPH

Bloomberg PVRL IN Equity Shares (m) 46.7 M. Cap. (INR b)/(USD b) 77 / 1



Net Sales 23.3 30.1 35.2 40.3

EBITDA 4.0 5.7 6.7 7.8

Adj. Net Profit 1.2 1.6 1.7 1.9

Adj. EPS (INR) 26.7 34.5 35.9 40.0

Adj. EPS Gr. (%) 30.4 29.2 3.9 11.7

BV/Sh (INR) 230.1 263.3 333.2 370.8

RoE (%) 12.2 14.0 12.2 11.4

RoCE (%) 10.4 11.5 9.9 9.9

Payout (%) 9.0 6.8 6.7 6.0

Valuations

P/E (x) 62.0 48.0 46.2 41.4

P/BV (x) 7.2 6.3 5.0 4.5

EV/EBITDA (x) 20.8 16.2 13.9 12.0

Div Yield (%) 0.1 0.1 0.1 0.1

April 2019 202



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue from operations 7,863 6,759 6,833 7,170 11,204 7,496 9,045 8,170 28,625 35,913 YoY Change (%) 3.4 8.1 15.9 23.1 42.5 10.9 32.4 13.9 11.9 25.5 Total Expenditure 3,380 1,798 1,912 1,946 3,857 1,956 2,373 2,280 9,036 10,465 EBITDA 4,484 4,961 4,920 5,224 7,347 5,540 6,672 5,889 19,589 25,448 Margins (%) 57.0 73.4 72.0 72.9 65.6 73.9 73.8 72.1 68.4 70.9 Depreciation 1,035 1,027 1,145 1,190 1,468 819 1,761 770 4,397 4,817 Interest 1 1 1 9 3 6 7 10 11 25 Other Income 371 372 291 368 390 621 516 354 1,402 1,881 PBT 3,819 4,306 4,066 4,393 6,267 5,336 5,420 5,465 16,584 22,488 Tax 1,302 1,459 1,397 1,496 2,175 1,823 1,907 1,804 5,654 7,710 Rate (%) 34.1 33.9 34.3 34.0 34.7 34.2 35.2 33.0 34.1 34.3 Reported PAT 2,516 2,847 2,670 2,898 4,091 3,513 3,513 3,660 10,930 14,778 YoY Change (%) 8.0 5.3 11.2 22.8 62.6 23.4 31.6 26.3 11.6 35.2 Margins (%) 32.0 42.1 39.1 40.4 36.5 46.9 38.8 44.8 38.2 41.1 E: MOFSL Estimates


Sun TVCMP: INR642 TP: INR740 (+15%) Buy We expect Sun TV’s standalone revenue to grow 14% YoY to

INR8.2b mainly led by domestic subscription growth and movierevenue.

Though impacted by implementation of TRAI’s new tariff order, weexpect domestic subscription revenue to grow 11% YoY to INR3.4b,primarily led by digitization in Tamil Nadu and contribution fromSun Nxt.

Domestic ad revenue is likely to witness subdued growth; expect a4% YoY increase to INR3.5b.

However, margins are expected to be under pressure due to highercontent cost along with investments for Sun Nxt; we expect 80bpYoY contraction in margins to 72.1%. Standalone EBITDA is likely togrow 13% YoY to INR5.9b.

PAT is expected to grow 26% YoY to INR3.7b on the back of EBITDAgrowth.

The stock trades at 16x FY20E and 14x FY21E EPS. Maintain Buy.

Key issues to watch for Domestic ad revenue (expect 4% YoY growth) Domestic subscription revenue (expect 11% YoY growth)

Bloomberg SUNTV IN Equity Shares (m) 394.1 M. Cap. (INR b)/(USD b) 253 / 4



Adj. Net Profit 10.9 14.8 16.3 18.3 Adj. EPS (INR) 27.7 37.5 41.4 46.5 Adj. EPS Gr. (%) 11.6 35.2 10.4 12.2

BV/Sh (INR) 117.7 129.8 142.4 156.5 RoE (%) 25.2 30.3 30.4 31.1 RoCE (%) 25.3 30.3 30.5 31.1

Div. Payout (%) 43.4 67.8 69.7 69.6 Valuations P/E (x) 23.2 17.1 15.5 13.8 P/BV (x) 5.5 4.9 4.5 4.1


April 2019 203


Consolidated quarterly performance (INR m) Y/E March FY18 FY19

FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue from operations 15,403 15,821 18,381 17,253 17,720 19,759 21,668 19,128 66,857 78,274 YoY Change (%) -2.0 -6.7 12.1 12.9 15.0 24.9 17.9 10.9 3.9 17.1 Total Expenditure 10,559 10,909 12,437 12,191 12,064 13,001 14,125 13,999 46,095 53,189 EBITDA 4,844 4,912 5,944 5,062 5,657 6,757 7,543 5,128 20,761 25,085 Margins (%) 31.4 31.0 32.3 29.3 31.9 34.2 34.8 26.8 31.1 32.0 Depreciation 311 411 505 594 576 588 615 620 1,821 2,400 Interest 147 3 24 1,274 53 55 55 945 1,448 1,108 Other Income 1,011 2,031 480 881 498 589 860 726 4,404 2,673 Fair Value through P&L gain/(loss) -532 -148 -419 1,032 -213 -220 376 0 -68 -57 PBT before EO expense 4,864 6,381 5,477 5,106 5,312 6,483 8,109 4,289 21,829 24,194 Extra-Ord expense 0 -1,346 0 0 0 0 0 0 -1,346 0 PBT 4,864 7,727 5,477 5,106 5,312 6,483 8,109 4,289 23,175 24,194 Tax 2,376 1,832 1,739 2,805 2,071 2,624 2,484 1,458 8,409 8,637 Rate (%) 48.8 23.7 31.7 54.9 39.0 40.5 30.6 34.0 36.3 35.7 MI & P/L of Asso. Cos. 4 -16 -4 -9 -23 -8 1 0 -25 -29 Reported PAT 2,484 5,912 3,743 2,310 3,264 3,867 5,624 2,831 14,791 15,585 Adj PAT 3,016 3,113 4,162 1,278 3,477 4,087 5,247 2,831 11,570 15,642 YoY Change (%) 39.0 30.6 65.9 -68.1 15.3 31.3 26.1 121.4 -23.1 35.2 Margins (%) 19.6 19.7 22.6 7.4 19.6 20.7 24.2 14.8 17.3 20.0 E: MOFSL Estimates


Zee Entertainment

CMP: INR418 TP: INR450 (+8%) Neutral We expect domestic ad/subscription revenue to grow at a

relatively slower pace — 13%/4% YoY to INR11.1b/INR4.7b due to the implementation of the TRAI’s new tariff order.

However, revenue from the release of the movie ‘Manikarnika’ should support overall growth.

Consequently, we expect overall revenue to grow at 11% YoY to INR19.1b.

Slow pace of revenue growth coupled with higher content cost on account of amortization of ZEE5’s content, and investment in traditional and movie content are expected to accentuate the impact on margins. We expect EBITDA margin to contract 250bp YoY to 26.8%; consolidated EBITDA is likely to grow a meager 1% YoY to INR5.1b.

Yet, lower finance cost and taxes should provide impetus to PAT, and is expected to grow 23% YoY to INR2.8b.

The stock trades at 22x FY20E and 18x FY21E EPS.

Key issues to watch for Domestic ad revenue (expect 13% YoY growth) Domestic subscription revenue (expect 4% YoY growth)

Bloomberg Z IN Equity Shares (m) 960.5 M. Cap. (INR b)/(USD b) 402 / 6



Net Sales 66.9 78.3 88.1 100.8 EBITDA 20.8 25.1 28.0 33.1 Adj. NP 11.6 15.6 18.1 21.8

Adj. EPS (INR) 12.0 16.3 18.9 22.7 Adj. EPS Gr. (%) -23.2 35.2 15.8 20.5 BV/Sh (INR) (INR)

78.7 91.4 106.6 125.8

RoE (%) 16.2 19.1 19.1 19.6 RoCE (%) 16.5 17.1 17.7 18.7 Div. Payout (%) 22.6 22.2 19.1 15.8



April 2019 204

Earnings to decline as lower prices seep in Our top picks: JSP, HNDL and JSTL

Steel prices lower but stabilizing Average flat steel product prices were down ~9% QoQ to ~INR 41,660/t while average long steel product prices were unchanged at ~INR37,500/t. Flat steel prices, though, have recovered by INR2,000/t since the start of Feb’19. Long products are trading at ~INR36,700/t, while flat products are at ~INR42,000/t. Domestic steel demand growth was modest at ~5% YoY in Jan-Feb 2019 (according to JPC). While steel exports have been hit, it declined ~16% during Jan-Feb 2019 on a YoY basis. On a QoQ basis, we expect sales volumes to recover as 3Q witnessed a deferral in purchases due to price volatility and on companies looking to reduce their excess inventory. Expect steel sales volumes for companies under our coverage to increase 19% /8% QoQ /YoY in 4QFY19.

Base metals (except aluminum) inch higher Prices for most base metals (except aluminum) were higher on a QoQ basis. Avgerage Zinc prices increased ~3% QoQ to USD2,694/t. Lead was up ~4% QoQ to USD2,039/t; while copper was up ~1% QoQ to INR6,202/t. Alumina prices, though, continued to trend lower and declined ~12% QoQ to USD387/t due to increasing supply from China, upcoming capacity (Emirates Global) and lifting of sanctions on Rusal. All-in aluminum prices declined ~5% QoQ to USD1,949/t (LME is down 6% QoQ to USD1,859/t).

Earnings growth to get impacted due to falling prices Earnings growth for our metals coverage universe is expected to decline on the back of lower spreads. Aggregate EBITDA for the universe is expected to decrease by ~14% YoY (down 5% QoQ), turning negative after 11 quarters of YoY increase. Aggregate PAT is expected to decline by 34% YoY (-18% QoQ). Declining steel and metal prices amid US China trade war concerns and signs of a slowdown in China have driven the weakness. Expect JSW Steel‘s EBITDA to decline 10% QoQ owing to lower realizations. SAIL’s EBITDA is expected to decline ~2% QoQ to INR25.2b. JSP’s EBITDA is likely to increase ~1% QoQ to INR21b on higher steel volumes and improved subsidiary performance. We expect EBITDA for Tata Steel to increase ~1% QoQ to INR68.1b led by higher steel volumes,and offset by lower realizations.

NMDC’s EBITDA is expected to decrease 17% QoQ to INR19b on lower prices. Amongst base metals, the ~2% QoQ appreciation in the USD-INR is likely to have a negative impact. Vedanta’s EBITDA is likely to decrease 2% QoQ to INR55.5b. HNDL and NACL will be impacted by lower LME leading to 10%/36% QoQ fall in EBITDA.

Estimates and TP change (Exhibit 15 to 17) We have cut LME aluminum assumption from USD2,000 to USD1,900 for FY19 and have increased our alumina assumption from USD350 to USD400 for FY20 and FY21. The change in estimates is presented in Exhibit 15 to 16.

Company name

Hindalco

Hindustan Zinc

Jindal Steel & Power

JSW Steel

Nalco

NMDC

Rain Industries

SAIL

Tata Steel

Vedanta

Metals March 2019 Results Preview | April 2019

Sanjay Jain – Research analyst ([email protected]@MotilalOswal.com); +91 22 6129 1523 Aniket Mittal – Research analyst ([email protected]@MotilalOswal.com); +91 22 6129 1572

April 2019 205

Top picks – JSP, HNDL and JSTL Metal stocks have de-rated in recent months on risk of a trade war and on concerns pertaining to the slowing demand in China. We prefer structurally efficient companies with low capital and operating cost, access to cheap raw material and a strong balance sheet. Our top picks are HNDL and JSTL. We also like JSP, which should benefit from capacity addition and revival in the Power sector, though the leverage is high. We also have a Buy rating on NACL and NMDC.

Exhibit 1: Expected quarterly performance summary Sector Sales (INR M) EBDITA (INR M) Net Profit (INR M) Metals CMP (INR) RECO Mar-19 Var % YoY Var % QoQ Mar-19 Var % YoY Var % QoQ Mar-19 Var % YoY Var % QoQ Hindalco 217 Buy 326,546 6.3 -3.0 35,844 0.5 -9.5 12,672 10.2 -24.3Hindustan Zinc 283 Neutral 50,048 -20.3 -9.7 25,330 -30.0 -10.7 18,982 -25.7 -14.1JSPL 185 Buy 97,767 13.7 2.2 21,030 -1.6 1.3 -200 PL Loss JSW Steel 288 Buy 212,206 3.8 4.4 40,323 -18.1 -10.4 12,519 -53.1 -22.9Nalco 55 Buy 26,368 -7.9 -3.0 3,682 -41.5 -36.1 2,133 -42.1 -37.8NMDC 105 Buy 33,525 -13.7 -8.1 18,979 -8.9 -16.7 12,319 -10.5 -18.8Rain Industries 102 Buy 35,913 8.6 4.3 3,552 -44.6 54.8 803 -68.0 LP SAIL 56 Neutral 193,500 13.6 22.2 25,162 -3.2 -2.4 5,831 -3.1 -7.7Tata Steel 531 Sell 433,489 20.0 5.2 68,129 4.8 1.3 24,327 -25.5 8.0 Vedanta 188 Sell 214,003 -22.5 -9.6 55,486 -29.2 -1.7 7,712 -66.1 -51.0Sector Aggregate 1,623,366 3.5 1.7 297,518 -13.8 -5.3 97,099 -33.7 -17.5

Exhibit 2: India domestic HRC prices

Exhibit 3: China steel spreads with raw materials


32,500

37,000

41,500

46,000

50,500

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19HR

C M

umba

i (IN

R/t)

Spot Quaterly average

Avg. is down INR3877 QoQ

90

170

250

330

410

490

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Jan-

15

May

-15

Sep-

15

Jan-

16

May

-16

Sep-

16

Jan-

17

May

-17

Sep-

17

Jan-

18

May

-18

Sep-

18

Jan-

19

HRC Rebar

Average domestic HRC steel price was down INR3,877/t

in 4QFY19

Chinese steel mills’ product spreads were slightly higher

March 2019 Results Preview | Sector: Metals

April 2019 206

Exhibit 4: Domestic steel demand growth – trailing 12-month (YoY %)


Exhibit 5: India net steel imports – kt


Exhibit 6: India steel – sales volumes (mt)


Exhibit 7: India steel – EBITDA/ton (INR)


-2.00.02.04.06.08.0

10.0

Feb-

14Ap

r-14

Jun-

14Au

g-14

Oct

-14

Dec-

14Fe

b-15

Apr-

15Ju

n-15

Aug-

15O

ct-1

5De

c-15

Feb-

16Ap

r-16

Jun-

16Au

g-16

Oct

-16

Dec-

16Fe

b-17

Apr-

17Ju

n-17

Aug-

17O

ct-1

7De

c-17

Feb-

18Ap

r-18

Jun-

18Au

g-18

Oct

-18

Dec-

18Fe

b-19

Cons. (mt) Trailing 12m Growth (%)

-1,000

-500

0

500

1,000

Feb-

12Ap

r-12

Jun-

12Au

g-12

Oct

-12

Dec-

12Fe

b-13

Apr-

13Ju

n-13

Aug-

13O

ct-1

3De

c-13

Feb-

14Ap

r-14

Jun-

14Au

g-14

Oct

-14

Dec-

14Fe

b-15

Apr-

15Ju

n-15

Aug-

15O

ct-1

5De

c-15

Feb-

16Ap

r-16

Jun-

16Au

g-16

Oct

-16

Dec-

16Fe

b-17

Apr-

17Ju

n-17

Aug-

17O

ct-1

7De

c-17

Feb-

18Ap

r-18

Jun-

18Au

g-18

Oct

-18

Dec-

18Fe

b-19

Net steel imports (kt)

2.7 2.2 2.6 3.0 3.2 2.8 3.1 3.3 3.0 3.0 3.2 3.0 3.4 3.8 2.8 3.6 3.3 3.4 3.0 3.5 3.8 3.7 3.3 3.5 3.2 4.3 3.3

3.3 3.8 3.6 4.0 3.5 3.9 4.0 4.2 3.8 4.0 3.7

4.1

10.8 9.1

10.9 10.8 11.5 10.1

11.4 12.0 12.2 11.3 11.9 11.1 13.2

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

Tata Steel SAIL JSW Steel JSP

-5,000

1,000

7,000

13,000

19,000

4QFY

131Q

FY14

2QFY

143Q

FY14

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

4QFY

161Q

FY17

2QFY

173Q

FY17

4QFY

171Q

FY18

2QFY

183Q

FY18

4QFY

181Q

FY19

2QFY

193Q

FY19

4QFY

19

Average Tata Steel - India SAIL JSW Steel JSP

Domestic steel consumption up ~8% YoY in

trailing 12M

India has been a net importer of steel in recent

months


April 2019 207

Exhibit 8: Revenue of coverage universe


Exhibit 9: EBITDA of coverage universe


Exhibit 10: Quarterly average aluminum prices – USD/ton

Quarter Aluminum Premium Aluminum total price Alumina

Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY 4QFY19 1,859 -6% -14% 90 16% -16% 1,949 -5% -14% 387 -12% 1% 3QFY19 1,967 -4% -7% 77 -22% -18% 2,045 -5% -7% 441 -19% -1%2QFY19 2,056 -9% 2% 99 -29% 9% 2,156 -10% 3% 544 4% 63% 1QFY19 2,254 4% 18% 140 30% 20% 2,394 6% 18% 523 36% 77% 4QFY18 2,159 3% 17% 108 14% 5% 2,267 3% 16% 383 -14% 13% 3QFY18 2,105 5% 23% 95 4% 29% 2,200 5% 23% 446 33% 46% 2QFY18 2,011 5% 24% 91 -22% 21% 2,103 4% 24% 335 13% 43% 1QFY18 1,910 3% 21% 117 13% 17% 2,027 4% 21% 295 -13% 17% 4QFY17 1,848 8% 22% 103 40% -8% 1,950 9% 20% 340 12% 55% 3QFY17 1,711 6% 14% 73 -3% -21% 1,784 5% 12% 305 30% 31% 2QFY17 1,621 3% 2% 76 -24% -25% 1,696 1% 0% 235 -7% -20%1QFY17 1,572 4% -11% 100 -10% -50% 1,672 3% -15% 253 15% -25%4QFY16 1,516 1% -16% 111 20% -70% 1,627 2% -25% 219 -6% -36%3QFY16 1,500 -6% -24% 93 -8% -78% 1,592 -6% -33% 233 -20% -34%2QFY16 1,592 -10% -20% 100 -49% -75% 1,693 -14% -29% 292 -13% -9%1QFY16 1,767 -2% -2% 198 -48% -47% 1,965 -10% -10% 337 -2% 6%


811 748 834 915

1,072 945

1,052 1,153

1,275 1,214 1,272 1,266 1,275

0

400

800

1,200

1,600

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

Reve

nue

(INR

b)

Nalco

Hindalco

VEDL

NMDC

JSP

JSW Steel

SAIL

Tata Steel

116 79

110 142 146

182 213

170 198

237 286 278 271 262 247

-500

50100150200250300350

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

EBIT

DA (I

NR

b)

NalcoHindalcoVEDLNMDCJSPJSW SteelSAILTata Steel


April 2019 208

Exhibit 11: Global aluminum production trend

Source: MOFSL, Company, Bloomberg

Exhibit 12: China aluminum production trend

Source: MOFSL, Company, Bloomberg

Exhibit 13: LME aluminum and inventories

Source: MOFSL, Bloomberg

Exhibit 14: Other base metals quarterly average prices – USD/ton

Quarter Zinc Copper Lead Silver (Rs/kg)

Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY 4QFY19 2,694 3% -21% 6,202 1% -11% 2,039 4% -19% 39,109 4% 2% 3QFY19 2,627 3% -19% 6,164 1% -10% 1,967 -6% -21% 37,465 0% -3%2QFY19 2,545 -18% -14% 6,106 -11% -4% 2,103 -12% -10% 37,529 -5% -3%1QFY19 3,112 -9% 20% 6,868 -1% 21% 2,385 -5% 10% 39,423 2% -1%4QFY18 3,410 5% 23% 6,959 2% 20% 2,521 1% 11% 38,509 0% -7%3QFY18 3,235 9% 29% 6,819 7% 29% 2,491 7% 16% 38,571 0% -7%2QFY18 2,955 14% 31% 6,345 12% 33% 2,332 8% 25% 38,659 -3% -16%1QFY18 2,596 -6% 35% 5,662 0 20% 2,166 0 26% 39,766 -4% 0% 4QFY17 2,774 11% 65% 5,818 10% 24% 2,269 6% 30% 41,378 0% 16% 3QFY17 2,509 11% 55% 5,281 11% 8% 2,144 15% 27% 41,376 -10% 19% 2QFY17 2,251 17% 22% 4,769 1% -9% 1,870 9% 9% 45,793 15% 32% 1QFY17 1,918 14% -12% 4,735 0 -22% 1,720 0 -12% 39,661 11% 7% 4QFY16 1,682 4% -19% 4,680 -4% -20% 1,747 4% -3% 35,608 2% -4%3QFY16 1,615 -13% -28% 4,893 -7% -26% 1,683 -2% -16% 34,778 0% -5%2QFY16 1,847 -16% -20% 5,263 -13% -25% 1,715 -12% -21% 34,690 -7% -19%1QFY16 2,187 5% 6% 6,052 0 -11% 1,944 0 -7% 37,177 0% -11%


Exhibit 15: Aluminum - change in estimates and TP EBITDA (INR b) Adj. PAT (INR b) Comments

4QFY19E FY19E FY20E 4QFY19E FY19E FY20E TP

Hindalco (Consol.) Old 39 160 193 15 59 65 302

Lower LME, Higher alumina New 36 157 185 13 57 59 281 Change -2% -4% -3% -9% -7%

Nalco Old 4 29 17 2 17 10 69

New 4 28 18 2 17 11 75 Change -2% 10% -2% 11% 8%


-13.0-6.01.08.015.022.0

3,000

3,600

4,200

4,800

5,400

Aug-

16

Nov

-16

Feb-

17

May

-17

Aug-

17

Nov

-17

Feb-

18

May

-18

Aug-

18

YoY

grow

th (%

)

'000

tons

Production YoY

(20)

(10)

-

10

20

30

2.2

2.4

2.6

2.8

3.0

3.2

May

-16

Aug-

16

Nov

-16

Feb-

17

May

-17

Aug-

17

Nov

-17

Feb-

18

May

-18

Aug-

18

Nov

-18

YoY

grow

th (%

)

m to

ns

Production YoY

0.2

0.6

1.0

1.4

1.8

1,700

2,000

2,300

2,600

2,900

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

m to

ns

USD

/t

Inventories (RHS) Spot


April 2019 209

Exhibit 16: Others - change in estimates and TP EBITDA (INR b) Adj. PAT (INR b)

Comments 4QFY19E FY19E FY20E 4QFY19E FY19E FY20E TP

HZL Old 30 109 128 23 82 98 254

USDINR and lower metal volumes New 25 104 123 19 78 93 244 Change -5% -4% -5% -5% -4%

VEDL Old 65 236 299 10 51 80 161

USDINR, lower zinc volumes and lower LME New 55 227 278 8 49 65 122 Change -4% -7% -5% -19% -25%




Exhibit 18: Relative performance – one year (%)


Exhibit 19: Comparative valuation Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Metals (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Hindalco 217 Buy 25.7 26.3 30.4 8.4 8.2 7.1 5.7 5.5 4.9 14.5 13.2 13.4 Hindustan Zinc 283 Neutral 18.6 22.0 22.5 15.2 12.8 12.6 9.7 7.8 7.3 22.5 25.6 22.7 JSPL 185 Buy 2.3 3.8 24.7 80.3 49.2 7.5 7.0 6.6 5.7 0.7 1.2 7.4 JSW Steel 288 Buy 30.6 20.7 29.3 9.4 13.9 9.8 6.8 8.2 6.9 24.8 15.1 18.7 Nalco 55 Buy 8.8 5.7 6.9 6.3 9.7 8.0 2.9 4.9 4.5 16.3 10.8 13.3 NMDC 105 Buy 15.3 10.7 12.9 6.9 9.8 8.1 3.9 5.6 4.5 18.9 12.5 14.2 Rain Industries 102 Buy 20.4 13.7 20.5 5.0 7.4 5.0 1.7 2.1 1.8 16.0 9.9 13.8 SAIL 56 Neutral 6.3 6.1 9.7 9.0 9.3 5.8 9.2 9.3 7.6 6.8 6.2 9.3 Tata Steel 531 Sell 88.7 72.0 74.2 6.0 7.4 7.2 6.0 6.9 6.8 17.3 14.1 14.8 Vedanta 188 Sell 13.2 17.4 18.1 14.2 10.8 10.4 6.7 5.4 5.0 8.0 10.7 10.6 Sector Aggregate 9.9 10.7 8.9 6.6 6.7 6.0 12.7 11.6 12.6

Source: MOFSL

85

91

97

103

109

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Metals Index

80

90

100

110

120

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Metals Index


April 2019 210

Quarterly Performance (Standalone + Utkal) (INR Million)Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Aluminium (sales, kt) 299 329 325 321 300 326 323 338 1,274 1,287 Copper (sales, kt) 105 93 102 108 82 79 99 100 408 360 Net Sales 97,770 103,120 110,440 116,810 106,700 108,330 119,380 117,354 428,140 451,764 EBITDA 14,540 16,290 16,090 15,940 18,590 17,370 17,170 14,171 62,860 67,301

Aluminium 11,320 11,070 11,880 12,650 15,240 13,490 12,860 10,372 46,920 51,962 USD/t 587 518 564 612 758 589 551 435 570 577

Copper 3,220 5,220 4,210 3,290 3,350 3,880 4,310 3,800 15,940 15,340 Interest 6,030 5,720 5,400 5,000 4,640 4,790 4,770 4,814 22,150 19,014 Depreciation 4,590 4,600 4,620 5,350 4,800 4,750 5,050 4,867 19,160 19,467 Other Income 2,070 1,960 2,510 2,140 920 1,850 2,090 1,200 8,680 6,060 PBT (before EO item) 5,990 7,930 8,580 7,730 10,070 9,680 9,440 5,691 30,230 34,881 EO item -1,040 -940 -1,150 -3,130PBT (after EO item) 4,950 6,990 7,430 7,730 10,070 9,680 9,440 5,691 27,100 34,881 Total Tax 1,310 2,290 2,590 1,570 2,730 2,430 2,310 1,650 7,760 9,120

% Tax 26.5 32.8 34.9 20.3 27.1 25.1 24.5 29.0 28.6 26.1 Reported PAT 3,640 4,700 4,840 6,160 7,340 7,250 7,130 4,041 19,340 25,761 Adjusted PAT 4,680 5,640 5,990 6,160 7,340 7,250 7,130 4,041 22,470 25,761 Novelis Shipments (kt) 785 802 796 805 797 807 800 821 3,188 3,252 Novelis adj. EBITDA (USDm) 289 302 305 319 332 355 322 319 1,215 1,328 Cosol. EBITDA 32,369 35,118 35,052 35,665 40,032 41,489 39,620 35,868 138,204 157,009 Consol. Adj. PAT 9,470 9,765 12,561 10,291 14,780 15,738 15,464 11,398 42,088 57,380


HindalcoCMP: INR217 TP: INR281 (+29%) Buy Standalone (incl. Utkal): We expect EBITDA to decline 17% QoQ

to INR14.2b on lower LME aluminum, partly offset by the benefitof hedges. Aluminum EBITDA is expected to decline 19% QoQ toINR10.4b and copper is likely to decrease 12% QoQ to INR3.8b.Aluminum LME is down ~USD109/t QoQ to USD1,859/t, drivingthe decline in EBITDA.

Aluminum volumes will increase 5% QoQ to 338kt and copper willincrease 1% QoQ to 100kt.

Novelis: We expect Novelis to report adjusted EBITDA of USD319m, down 1% QoQ. Adjusted EBITDA/t is estimated at USD388 (v/s USD403 in 3QFY19). Volumes are expected to increase by 3% QoQ to 821kt. Buy.

Key issues to watch for: Lower margins in aluminum Foreign exchange rate impact at Novelis

Bloomberg HNDL IN


1,6,12 Rel Perf. (%) 2 / -17 / -15

Financial Snapshot (INR Billion) Y/E March 2018 2019 2020E 2021E

Sales 1,152 1,281 1,484 1,538 EBITDA 138.2 157.0 185.0 196.0

NP 42.1 57.4 58.6 67.8 Adj. EPS (INR) 18.9 25.7 26.3 30.4 EPS Gr(%) 120.5 36.3 2.2 15.7

BV/Sh. (INR) 166.1 187.8 212.2 240.6 RoE (%) 12.8 14.5 13.2 13.4 RoCE (%) 9.3 10.4 10.4 10.5


P/BV 1.3 1.1 1.0 0.9 EV/EBITDA (x) 6.4 5.7 5.5 4.9 Div. Yield (%) 0.6 0.7 0.7 0.8

April 2019 211

Quarterly Performance INR million Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Mine prodn. (kt) 233 219 240 255 212 232 247 244 947 935 Sales Zinc refined (kt) 190 193 200 210 170 160 187 170 793 687 Lead refined (kt) 34 40 45 50 42 49 54 49 169 194 Silver (tonnes) 110 146 132 167 141 161 178 163 555 643 Zinc LME (USD/t) 2,589 2,950 3,236 3,180 3,108 2,541 2,631 2,694 3,048 2,748 Net Sales 45,760 53,090 59,220 62,770 53,100 47,770 55,400 50,048 220,840 206,318 Change (YoY %) 80.8 50.6 18.9 0.3 16.0 -10.0 -6.5 -20.3 27.7 -6.6EBITDA 23,840 30,240 32,440 36,200 27,130 23,340 28,380 25,330 122,720 104,180 Change (YoY %) 110.8 45.6 16.5 -3.4 13.8 -22.8 -12.5 -30.0 26.0 -15.1

As % of Net Sales 52.1 57.0 54.8 57.7 51.1 48.9 51.2 50.6 55.6 50.5 Finance cost 1,370 840 170 450 150 0 510 0 2,830 660 DD&A 3,600 3,940 4,810 4,590 3,870 4,540 4,890 4,939 16,940 18,239 Other Income 5,300 4,870 2,980 4,860 2,990 3,940 5,500 3,636 18,010 16,066 PBT (before EO item) 24,170 30,330 30,440 36,020 26,100 22,740 28,480 24,028 120,960 101,348 EO exp. (income) 0 -2,910 0 510 0 0 0 0 -2,400 0 PBT (after EO item) 24,170 33,240 30,440 35,510 26,100 22,740 28,480 24,028 123,360 101,348 Total Tax 5,410 7,790 8,140 10,460 6,920 4,590 6,370 5,046 31,800 22,926

% Tax 22.4 23.4 26.7 29.5 26.5 20.2 22.4 21.0 25.8 22.6 Reported PAT 18,760 25,450 22,300 25,050 19,180 18,150 22,110 18,982 91,560 78,422 Adjusted PAT 18,760 22,540 22,300 25,560 19,180 18,150 22,110 18,982 89,160 78,422 Change (YoY %) 80.8 18.5 -3.9 -16.4 2.2 -19.5 -0.9 -25.7 7.2 -12.0


Hindustan ZincCMP: INR283 TP: INR244 (-14%) Neutral We expect HZL’s EBITDA to decrease 11% QoQ (-30% YoY) to

INR25.3b on lower volumes. LME zinc is expected to increase by USD67/t QoQ to USD2,694/t.

Lead is up USD73/t QoQ to USD2,039/t. Mine metal production is expected to decrease 1% QoQ to 244kt. PAT is seen decreasing 14% QoQ to INR19b (-2% YoY). Neutral.

Key issues to watch for Recovery in global zinc prices Production issues

Bloomberg HZ IN


1,6,12 Rel Perf. (%) -4 / -2 / -17

Financial Snapshot (INR Billion) Y/E March 2018 2019E 2020E 2021E Sales 221 208 236 246 EBITDA 122.7 104.7 122.7 125.4 NP 89.2 78.8 93.3 95.2 Adj. EPS (INR) 21.1 18.6 22.1 22.5 EPS Gr(%) 7.2 -11.6 18.4 2.1 BV/Sh. (INR) 85.0 79.7 92.5 105.6 RoE (%) 26.7 22.6 25.7 22.8 RoCE (%) 35.5 31.3 34.1 29.9 Payout (%) 45.5 128.7 42.0 42.0 Valuations P/E (x) 13.4 15.1 12.8 12.5 P/BV (x) 3.3 3.5 3.1 2.7 EV/EBITDA (x) 7.9 9.6 7.8 7.3 Div. Yield (%) 2.8 7.1 2.7 2.8

April 2019 212

Quarterly Performance (Consolidated) (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 59,096 61,234 69,926 85,988 96,654 99,823 95,656 97,767 276,244 389,899 Change (YoY %) 26.9 31.2 29.3 36.7 63.6 63.0 36.8 13.7 31.4 41.1 EBITDA 13,527 13,734 16,065 21,365 22,766 22,074 20,769 21,030 64,691 86,638 Change (YoY %) 37.5 61.9 25.8 37.7 68.3 60.7 29.3 -1.6 38.8 33.9

As % of Net Sales 22.9 22.4 23.0 24.8 23.6 22.1 21.7 21.5 23.4 22.2 Interest 9,006 9,268 9,670 10,714 9,729 10,858 10,424 10,478 38,657 41,489 Depreciation 9,622 9,977 9,632 9,599 10,399 10,314 10,357 10,738 38,830 41,809 Other Income 0 14 10 5 0 9 148 9 29 165 PBT (before EO item) -5,101 -5,496 -3,227 1,057 2,637 911 136 -178 -12,767 3,506 Extra-ordinary Income 0 -1,497 0 -4,376 0 2,555 0 0 -5,874 2,555 PBT (after EO item) -5,101 -6,994 -3,227 -3,319 2,637 3,466 136 -178 -18,641 6,060 Total Tax -887 -1,999 -457 944 1,538 674 1,008 702 -2,398 3,922

% Tax 17.4 28.6 14.2 -28.4 58.3 19.4 741.5 -394.3 12.9 64.7 Reported PAT -4,214 -4,995 -2,770 -4,264 1,099 2,792 -872 -880 -16,243 2,138 MI - Loss/(Profit) -334 -497 -67 -1,166 -709 -645 -614 -654 -2,064 -2,622Associate 10 19 43 17 0 0 0 26 87 26 Adjusted PAT -3,871 -2,982 -2,660 1,295 1,808 882 -258 -200 -8,218 2,232 Change (YoY %) -15.2 -60.0 -34.7 -142.8 -146.7 -129.6 -90.3 -115.4 -57.0 -127.2


Jindal Steel & PowerCMP: INR185 TP: INR287 (+55%) Buy Standalone: We estimate standalone EBITDA to decline 4% QoQ

(-6% YoY) to INR14.3b as lower steel prices are partly offset byhigher volumes. EBITDA per ton should decline ~INR2,500/t toINR9,838/t. Volumes will increase 21% QoQ to ~1.45mt.

Jindal Power: Jindal Power’s EBITDA is expected to come in atINR4.1b on higher generation, which is pegged to increase 12%QoQ to 2.9BU.

Oman: We expect an EBITDA of INR3.7b. Consolidated EBITDA is likely to increase 1% QoQ to INR21b. Buy.

Key issues to watch for Ramp-up of Angul Power demand growth

Bloomberg JSP IN


1,6,12 Rel Perf. (%) 6 / -12 / -35


Sales 276.2 389.9 393.0 418.2 EBITDA 64.7 86.6 88.6 98.9

Adj. PAT -8.2 2.2 3.6 24.0 Adj. EPS (INR) -8.5 2.3 3.8 24.7 EPS Gr (%) -59.4 -127.2 63.1 558.2

BV/Sh. (INR) 313.9 318.8 322.2 346.5 RoE (%) -2.6 0.7 1.2 7.4 RoCE (%) 3.2 5.6 5.8 8.1

Payout (%) 0.0 0.0 0.0 0.0 Valuations P/E (x) -21.5 79.1 48.5 7.4


April 2019 213


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 148,285 169,475 178,610 204,500 205,190 215,520 203,180 212,206 700,870 836,096 Change (YoY %) 26.7 28.1 27.5 22.8 38.4 27.2 13.8 3.8 26.0 19.3 EBITDA 27,465 31,655 38,510 49,230 51,050 49,060 45,010 40,323 146,860 185,443 Change (YoY %) -16.0 7.0 34.3 55.6 85.9 55.0 16.9 -18.1 19.8 26.3 EBITDA (INR per ton) 8,102 7,994 9,556 11,666 13,329 12,389 12,231 9,835 9,402 11,910 EBITDA (USD per ton) 121 126 150 181 199 176 169 137 146 169 Interest 9,450 9,500 9,230 8,830 8,870 9,630 10,210 10,070 37,010 38,780 Depreciation 8,190 8,510 8,520 8,650 9,050 9,740 10,780 10,795 33,870 40,365 Other Income 410 390 420 450 580 560 370 322 1,670 1,832 PBT (before EO Item) 10,235 14,035 21,180 32,200 33,710 30,250 24,390 19,780 77,650 108,130 EO Items -1,295 -1,295 -2,640 10,960 5,730 PBT (after EO Item) 8,940 12,740 18,540 43,160 33,710 30,250 24,390 19,780 83,380 108,130 Total Tax 2,840 4,450 940 14,440 10,530 9,360 8,200 7,795 22,670 35,885

% Tax 31.8 34.9 5.1 33.5 31.2 30.9 33.6 39.4 27.2 33.2 Reported PAT 6,100 8,290 17,600 28,720 23,180 20,890 16,190 11,984 60,710 72,244 MI (Profit)/Loss 30 -210 1,170 270 390 210 510 990 1,380 Share of P/(L) of Ass. 140 70 140 70 210 -20 -160 25 420 55 Adjusted PAT 6,624 8,774 18,313 26,709 23,660 21,260 16,240 12,519 60,420 73,679 Change (YoY %) -40.3 20.8 150.8 163.3 257.2 142.3 -11.3 -53.1 68.8 21.9


JSW SteelCMP: INR288 TP: INR336 (+17%) Buy Consolidated EBITDA is expected to decline 10% QoQ to INR40.3b

(-18% YoY) on lower steel realizations. Standalone steel sales would increase 11% QoQ (-3% YoY) to

4.1mt. Standalone EBITDA/t is expected to decline ~INR2,400/t QoQ to

INR9,619/t on lower steel prices. Adjusted consolidated PAT is expected to decline 23% QoQ to

INR12.5b (-53% YoY). We have revised our FY20E to account for lower debt and working

capital, and have raised our target price to INR336. Buy.

Key issues to watch for Impact of lower steel prices Domestic steel demand growth

Bloomberg JSTL IN


1,6,12 Rel Perf. (%) -6 / -31 / -20


Sales 700.9 836.1 806.3 947.6 EBITDA 146.9 185.4 160.6 196.3

Adj. PAT 56.4 73.7 51.0 70.6 Adj. EPS (INR) 23.4 30.6 21.2 29.3 EPS Gr(%) 56.9 30.7 -30.8 38.4

BV/Sh. (INR) 116.2 130.4 145.5 169.5 RoE (%) 22.2 24.8 15.3 18.6 RoCE (%) 9.6 11.4 8.2 9.3



April 2019 214

Quarterly Performance (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Alumina Prodn. (kt) 526 509 516 566 583 471 538 566 2,117 2,158

CoP (USD/t) 215 219 226 268 249 272 283 280 240 271 Aluminium Prodn. (kt) 101 105 111 112 110 111 108 112 429 441

CoP (USD/t) 2,112 2,115 2,126 2,070 2,030 1,946 2,055 1,991 2,109 2,004 Aluminium Sales (kt) 89 113 110 112 105 115 104 112 424 436 Alumina Sales (kt) 259 380 256 440 320 324 293 353 1,335 1,290 Avg LME Aluminium (USD/ton) 1,910 2,011 2,097 2,162 2,250 2,050 1,973 1,859 2,045 2,033 NSR premiums (USD/ton) 395 306 291 220 308 211 310 260 303 272 Alumina NSR (USD/ton) 290 314 413 405 547 534 475 387 355 486 Net Sales 18,027 24,548 23,888 28,632 29,733 30,409 27,189 26,368 95,094 113,699 Change (YoY %) 16.4 33.0 20.2 12.3 64.9 23.9 13.8 -7.9 19.9 19.6 EBITDA 2,270 3,549 4,668 6,297 10,111 8,509 5,766 3,682 16,783 28,068 Alumina-EBITDA (USD/t) 108 71 88 144 299 262 192 107 118 211 Aluminum - EBITDA (USD/t) 187 190 191 318 527 316 228 128 241 294

As % of Net Sales 12.6 14.5 19.5 22.0 34.0 28.0 21.2 14.0 17.6 24.7 Interest 4 4 5 6 6 6 6 0 20 Depreciation 1,170 1,123 1,243 1,268 1,217 1,160 1,181 1,219 4,804 4,777 Other Income 859 810 766 573 621 903 758 704 3,008 2,985 PBT (before EO Item) 1,954 3,231 4,186 5,597 9,509 8,246 5,337 3,166 14,968 26,276 Extra-ordinary Income 6 -32 6,784 -1,336 910 0 -636 0 5,421 PBT (after EO Item) 1,960 3,199 10,969 4,261 10,419 8,246 4,701 3,166 20,388 26,276 Total Tax 670 853 3,752 1,690 3,549 3,146 1,683 1,033 6,964 9,411

% Tax 34.2 26.7 34.2 39.7 34.1 38.2 35.8 32.6 34.2 35.8 Reported PAT 1,289 2,346 7,218 2,571 6,871 5,100 3,018 2,133 13,424 16,865 Adjusted PAT 1,287 2,127 2,756 3,685 6,270 5,100 3,426 2,133 9,855 16,865


NalcoCMP: INR55 TP: INR75 (+36%) Buy We expect EBITDA to decline 36% QoQ to INR3.7b (-42% YoY) on

lower aluminum LME and alumina realization. Aluminum LME has declined by ~USD109/t QoQ to USD1,859/t.

Alumina prices are expected to decline USD54/t to USD387/t. Aluminum volumes are expected to increase 8% QoQ to 112kt.

Alumina sales should rise 21% QoQ to 353kt. Adj. PAT is expected to decline 38% QoQ to INR2.1b. Buy.

Key issues to watch for Availability of coal for captive power plant LME price trend, utilization of smelter

Bloomberg NACL IN


1,6,12 Rel Perf. (%) 3 / -21 / -21


Sales 95.1 113.5 106.1 109.9 EBITDA 16.8 28.0 18.5 21.7

NP 9.9 16.9 11.1 13.3 Adj. EPS (INR) 5.1 8.8 5.7 6.9 EPS Gr(%) 37.0 71.8 -34.5 19.9

BV/Sh. (INR) 54.3 53.4 52.0 51.8 RoE (%) 9.5 16.2 10.9 13.2 RoCE (%) 12.9 22.6 14.4 17.6



April 2019 215

Quarterly Performance (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Production (m tons) 8.5 7.2 8.6 11.3 7.0 5.3 9.5 10.0 35.6 32.2 Sales (m tons) 9.2 8.3 8.1 10.5 6.8 6.7 8.7 10.2 36.1 32.2 Avg Dom. NSR (INR/t) 2,938 2,839 2,975 3,644 3,573 3,635 4,185 3,251 3,128 3,661 Lumps % (production) 36 36 36 36 36 36 36 36 36 36 Net Sales 28,415 24,213 24,690 38,830 24,220 24,379 36,494 33,525 116,149 118,618 Change (QoQ %) 65.1 -14.8 2.0 57.3 -37.6 0.7 49.7 -8.1 32% 2% Total Expenditure 12,209 11,362 11,376 18,004 9,432 10,555 13,706 14,546 52,951 48,238 EBITDA 16,206 12,852 13,314 20,826 14,788 13,824 22,788 18,979 63,198 70,380 EBITDA per ton (INR/t) 1,765 1,549 1,652 1,976 2,182 2,061 2,618 1,853 1,752 2,187 Interest 82 102 112 76 108 97 96 0 371 301 Depreciation 467 620 772 702 616 675 694 711 2,560 2,696 Other Income 1,286 1,099 1,111 1,702 1,251 1,310 1,361 708 5,197 4,630 PBT (before EO Item) 16,944 13,229 13,542 21,749 15,316 14,362 23,360 18,976 65,464 72,013 Extra-ordinary item -1,258 -823 234 -3,463 -550 -1,232 -1,245 0 -5,309 -3,026 PBT (after EO Item) 15,686 12,406 13,776 18,286 14,766 13,131 22,115 18,976 60,155 68,987 Total Tax 5,994 3,963 4,910 7,226 5,013 6,767 6,347 6,072 22,093 24,199

% Tax 38.2 31.9 35.6 39.5 34.0 51.5 28.7 32.0 36.7 35.1 Reported PAT 9,692 8,443 8,866 11,060 9,753 6,364 15,768 12,903 38,062 44,787 Adjusted PAT 10,721 8,370 8,568 13,762 9,943 9,324 15,165 12,319 41,421 46,752


NMDCCMP: INR105 TP: INR132 (+26%) Buy NMDC’s adj. EBITDA is expected to decrease 17% QoQ to ~INR19b

on lower realizations that were partly offset by higher volumes. Iron ore sales’ volumes are expected to increase 18% QoQ to

10.2mt. Domestic iron ore realization is expected to decrease 22% QoQ to

INR3,251/t. Adjusted PAT is expected to decrease 19% QoQ to INR12.3b. Buy.

Key issues to watch for Increase in global iron ore prices Iron ore demand

Bloomberg NMDC IN


1,6,12 Rel Perf. (%) -6 / -13 / -28


Sales 116.1 119.4 97.7 143.1 EBITDA 63.2 71.0 50.3 62.3

Adj. PAT 41.4 47.2 32.9 39.5 Adj. EPS (INR) 13.1 15.4 10.7 12.9 EPS Gr(%) 31.5 17.7 -30.4 20.2

BV/Sh. (INR) 77.0 84.4 88.0 93.6 RoE (%) 17.7 19.1 12.4 14.2 RoCE (%) 17.1 18.0 11.9 13.6



April 2019 216

Quarterly Performance (Consolidated) (INR Million) Y/E December CY18 CY19 CY18 CY19E

1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Net Sales 33,062 38,033 34,922 34,441 35,913 36,510 36,039 36,871 140,457 145,333 Change (YoY %) 34 44 14 10 9 -4 3 7 24 3 EBITDA 6,409 6,924 5,110 2,295 3,552 3,644 4,587 4,675 20,737 16,458

As % of Net Sales 19.4 18.2 14.6 6.7 9.9 10.0 12.7 12.7 14.8 11.3 Interest 1,180 1,118 1,126 1,141 1,146 1,153 1,153 1,153 4,565 4,605 Depreciation 1,230 1,316 1,314 1,691 1,287 1,312 1,299 1,306 5,551 5,204 Other Income 61 93 137 90 216 255 176 186 381 832 PBT (before EO Inc.) 4,060 4,583 2,807 -448 1,335 1,434 2,310 2,402 11,002 7,481 EO Income(exp) 0 0 0 -1,055 0 0 0 0 -1,055 0 PBT (after EO Inc.) 4,060 4,583 2,807 -1,502 1,335 1,434 2,310 2,402 9,948 7,481 Total Tax 1,403 1,546 910 -215 454 487 785 817 3,643 2,544

% Tax 34.6 33.7 32.4 14.3 34.0 34.0 34.0 34.0 36.6 34.0 Reported PAT 2,657 3,038 1,897 -1,287 881 946 1,525 1,585 6,305 4,938 Less: Min. Int. & assc. 145 90 149 104 78 61 100 88 497 328 Adjusted PAT 2,512 2,948 1,748 -337 803 885 1,424 1,497 6,862 4,609

Change (YoY %) 99.0 94.6 -28.8 -110.0 -68.0 -70.0 -18.5 -544.5 -20.2 -32.8


Rain IndustriesCMP: INR102 TP: INR123 (+21%) Buy We expect EBITDA to increase 55% QoQ to INR5.5b on higher

margins for carbon products and advanced materials business. Carbon business EBITDA per ton will be up 34% QoQ to USD50/t

on a low base. EBITDA per ton from its advanced chemical business is expected

to normalize to levels of ~USD100/t in 1QCY19 from USD36/t in4QCY18.

Cement business’ EBITDA per ton will be lower at INR300/t. Adj. PAT will come in at INR0.8b (v/s loss of INR0.3b in 4QCY18).

Buy.

Key issues to watch for Environment measures in China Global aluminum production growth

Bloomberg RINDL IN


1,6,12 Rel Perf. (%) 0 / -46 / -91


Sales 113.0 140.5 145.3 157.9 EBITDA * 22.7 20.7 16.5 19.4

NP 8.0 6.9 4.6 6.9 Adj. EPS (INR) 23.7 20.4 13.7 20.5 EPS Gr (%) 238.1 -14.0 -32.8 49.8

BV/Sh. (INR) 117.3 137.4 140.7 157.6 RoE (%) 22.9 16.0 9.9 13.8 RoCE (%) 19.7 15.6 11.9 15.9


P/BV 3.2 0.7 0.7 0.6 EV/EBITDA, x* 8.7 4.9 6.0 4.8 Div. Yield (%) 0.5 2.0 2.0 3.0

April 2019 217

Quarterly Performance (INR Million) Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Production (m tons) 3.2 3.7 3.6 3.6 3.6 3.5 3.8 4.4 14.1 15.4

Change (YoY %) -5.8 4.7 8.9 -0.4 12.9 -3.3 5.5 22.8 1.8 9.3 Sales (m tons) 3.0 3.5 3.8 3.7 3.3 3.5 3.2 4.3 14.1 14.3

Change (YoY %) 8.1 -1.7 14.2 8.6 8.0 -1.8 -14.1 14.9 7.1 1.4 Realization (INR per ton) 38,242 38,467 40,646 45,519 48,631 48,109 48,921 45,000 40,877 47,477

Change (YoY %) 15.9 23.4 18.7 23.6 27.2 25.1 20.4 -1.1 20.9 16.1 Net Sales 115,796 136,174 153,237 170,378 159,072 167,180 158,358 193,500 575,585 678,110 Change (%) 25.3 21.3 35.6 34.3 37.4 22.8 3.3 13.6 29.5 17.8 NSR to RM Spread (INR/t) 18,065 19,776 20,773 25,226 28,993 26,401 29,602 22,900 21,124 26,666 EBITDA 260 10,242 15,501 25,996 25,764 23,650 25,782 25,162 51,999 100,358 EBITDA per ton (INR) 86 2,893 4,112 6,945 7,877 6,806 7,965 5,852 3,693 7,026 Interest 5,879 6,435 6,745 9,169 7,554 7,711 8,251 8,414 28,228 31,929 Depreciation 6,947 7,622 7,596 8,485 8,136 8,261 8,547 8,897 30,649 33,841 Other Income 893 486 1,195 2,270 978 1,143 747 852 4,845 3,720 PBT (after EO Inc.) -11,773 -6,304 1,922 8,566 8,278 8,480 9,498 8,703 -7,589 34,959 Total Tax -4,859 -2,013 391 3,708 2,874 2,943 3,334 2,872 -2,773 12,023

% Tax 41.3 31.9 20.3 43.3 34.7 34.7 35.1 33.0 36.5 34.4 Reported PAT -6,915 -4,292 1,531 4,858 5,404 5,537 6,163 5,831 -4,817 22,936 Adjusted PAT -6,855 -2,266 1,876 6,019 7,215 5,760 6,314 5,831 -1,291 25,133

Change (YoY %) 36.0 -64.4 -123.6 -178.0 -205.2 -354.2 236.6 -3.1 -95.2 -2,047.1


SAIL

CMP: INR56 TP: INR52 (-8%) Neutral SAIL’s EBITDA is expected to decline 2% QoQ to INR25b on lower

steel prices, partly offset by higher volumes. Volumes would increase 17% QoQ to 4.4mt. Steel prices are

expected to decline ~8% QoQ on lower global steel prices. EBITDA per ton would decline ~INR2,100/t QoQ to INR5,852/t. Adj. PAT will decrease ~8% QoQ to INR5.8b. Neutral. Key issues to watch for Impact of lower steel prices Domestic steel demand growth

Bloomberg SAIL IN


1,6,12 Rel Perf. (%) -1 / -25 / -40


Sales 575.6 664.1 736.5 767.4 EBITDA 52.2 92.8 106.9 133.0

NP 1.1 20.5 25.0 40.1 Adj. EPS (INR) 0.3 5.0 6.1 9.7 EPS Gr(%) -104.0 1,830.7 21.9 60.4

BV/Sh. (INR) 89.4 93.4 99.0 108.3 RoE (%) 0.3 5.4 6.3 9.4 RoCE (%) 3.4 7.6 8.4 10.9

Payout (%) Valuation P/E (x) 223.7 11.6 9.5 5.9

P/BV 0.6 0.6 0.6 0.5 EV/EBITDA (x) 13.2 7.5 6.5 4.9

April 2019 218

Quarterly Performance (Consolidated) (INR Million) Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 295,568 324,641 334,466 361,323 378,328 435,441 412,199 433,489 1,315,998 1,659,457

Change (YoY %) 17.2 23.1 19.6 6.6 28.0 34.1 23.2 20.0 16.0 26.1 EBITDA 49,740 47,207 56,969 64,989 64,677 89,195 67,233 68,129 218,905 289,235

Change (YoY %) 53.4 58.9 61.0 -7.5 30.0 88.9 18.0 4.8 30.5 32.1 (% of Net Sales) 16.8 14.5 17.0 18.0 17.1 20.5 16.3 15.7 16.6 17.4

EBITDA(USD/tss) 132 112 134 158 152 171 133 121 134 144 Interest 13,437 13,499 13,273 14,809 16,701 21,531 19,400 20,465 55,018 78,097 Depreciation 15,011 14,733 14,751 15,122 18,056 19,079 19,255 19,167 59,617 75,557 Other Income 1,555 2,532 2,259 2,749 3,473 3,544 2,115 2,829 9,095 11,961 PBT (before EO Inc.) 22,846 21,507 31,205 37,808 33,392 52,130 30,693 31,327 113,365 147,541 EO Income(exp) -6,168 -447 -11,156 113,761 -3,465 1,583 324 95,991 -1,558 PBT (after EO Inc.) 16,679 21,060 20,049 151,569 29,926 53,713 31,018 31,327 209,357 145,983 Total Tax 7,405 11,380 9,508 5,761 11,037 23,264 14,006 12,683 34,054 60,989

% Tax 32.4 52.9 30.5 15.2 33.1 44.6 45.6 40.5 30.0 41.3 Reported PAT 9,273 9,680 10,541 145,808 18,890 30,449 17,012 18,644 175,303 84,994 Adj. PAT (after MI & asso) 15,352 10,205 24,100 32,633 22,976 34,404 22,517 24,327 82,290 104,225


Tata Steel

CMP: INR531 TP: INR367 (-31%) Sell India: We expect Tata Steel’s standalone EBITDA to increase ~2%

QoQ to INR46.2b led by higher volumes offset by lower steel prices. Volumes would be up 13% QoQ at 3.36mt while EBITDA per ton would decline ~INR1,560/t to INR13,755/t on lower steel prices.

Europe: EU margins are estimated to decline to USD49/t v/s USD56/t in 3Q.

Consolidated EBITDA is expected to increase 1% QoQ to INR68.1b. Adjusted PAT is expected to increase 8% QoQ to INR24.3b. Sell.

Key issues to watch for Global iron ore prices Impact of lower steel prices

Bloomberg TATA IN


1,6,12 Rel Perf. (%) -4 / -16 / -26 Financial Snapshot (INR Billion) Y/E March 2018 2019E 2020E 2021E

Sales 1,322 1,659 911 927 EBITDA 219 289 221 224

Adj. PAT 80 102 82 85 Adj. EPS (INR) 69.5 88.7 72.0 74.2 EPS Gr(%) 83.3 27.6 -18.9 3.2

BV/Sh. (INR) 476 547 471 533 RoE (%) 17.2 17.3 14.1 14.8 RoCE (%) 11.6 12.7 9.9 10.9



April 2019 219


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE EBITDA 48,740 56,690 67,630 78,370 62,840 52,080 56,450 55,486 251,430 226,856

Copper 2,130 3,920 2,970 4,070 -870 20 -750 -152 13,090 -1,752Aluminum 5,280 4,570 6,100 13,100 12,590 3,990 -880 864 29,050 16,564 Iron ore 400 -40 2,310 1,930 1,630 980 1,010 2,189 4,600 5,809 Power 1,100 3,660 5,950 5,970 4,250 3,780 3,640 3,909 16,680 15,579 Zinc-India 23,840 30,240 32,440 36,200 27,130 23,340 28,380 25,330 122,720 104,180 Zinc-Int 3,210 3,890 4,460 2,590 850 160 2,060 1,333 14,150 4,403 Oil&Gas 13,850 11,760 13,590 15,090 18,520 20,260 19,730 19,779 54,290 78,289 Steel 1,680 2,490 2,233 6,403 Others -1,070 -1,310 -190 -580 -1,260 -2,130 770 -3,150 -2,620

Change (YoY %) 41.7 21.5 12.8 6.6 28.9 -8.1 -16.5 -29.2 17.9 -9.8As % of Net Sales 26.7 26.3 27.8 28.4 28.3 22.9 23.8 25.9 27.4 25.2

Finance cost 15,920 13,840 13,060 14,240 15,460 15,710 13,580 14,745 57,060 59,495 DD&A 13,860 14,260 15,490 16,830 17,960 19,310 22,070 20,155 60,440 79,495 Other Income 10,550 8,760 5,730 9,930 4,180 5,920 13,980 2,922 34,970 27,002 PBT (before EO item) 29,510 37,350 44,810 57,230 33,600 22,980 34,780 23,508 168,900 114,868 EO exp. (income) 0 -1,860 1,580 -8,190 0 -3,200 0 0 -8,470 -3,200PBT (after EO item) 29,510 39,210 43,230 65,420 33,600 26,180 34,780 23,508 177,370 118,068 Total Tax 6,810 9,350 13,640 25,740 11,120 7,180 11,460 8,031 55,540 37,791 Reported PAT 22,700 29,860 29,590 39,680 22,480 19,000 23,320 15,476 121,830 80,276 Adjusted PAT 15,250 19,050 22,110 22,760 15,330 10,230 15,740 7,712 79,170 49,012 Change (YoY %) 148.0 52.1 18.5 49.3 0.5 -46.3 -28.8 -66.1 40.7 -38.1


VedantaCMP:INR188 TP: INR122 (-35%) Sell We expect VEDL’s EBITDA to decrease 2% QoQ (-29% YoY) to

INR55.5b, due to lower zinc volumes and the exchange rateimpact. Adjusted PAT is estimated to decrease 51% QoQ toINR7.7b.

Aluminum: EBITDA is expected to come in at INR0.9b, on lowerLME.

Zinc India: EBITDA is expected to decrease 11% QoQ to INR25.3bon lower volumes, and on ~2% appreciation in USDINR QoQ.

Power: EBITDA is expected to be at INR3.9b (+7% QoQ). Copper: Will be impacted due to closure. Oil & Gas: EBITDA is expected to be flat QoQ at INR19.8b on

lower crude oil prices, partly offset by higher volumes. Sell

Key issues to watch for Progress on Gamsberg mine Movement in base metal prices

Bloomberg VEDL IN


1,6,12 Rel Perf. (%) 0 / -26 / -51


Sales 919 892 906 945 EBITDA * 203.3 185.3 222.0 232.1

NP 75.8 48.0 59.5 62.6 Adj. EPS (INR) 20.4 12.9 16.0 16.8 EPS Gr (%) 34.6 -36.7 23.9 5.3

BV/Sh. (INR) 170.7 159.6 164.1 173.7 RoE (%) 12.2 7.8 9.9 10.0 RoCE (%) 14.5 11.7 13.5 13.5


P/BV 1.1 1.2 1.2 1.1 EV/EBITDA, x* 5.8 6.9 5.7 5.3 Div. Yield (%) 10.9 8.8 2.9 3.1

April 2019 220

Refining margin slips; inventory gain for OMCs Strong volume growth for CGDs

Very low Naphtha cracks (~2012-13 levels) and Gasoline cracks (lowest since FY03)resulted in the Singapore (SG) GRM declining further from USD7.0/bbl in 4QFY18 toUSD3.2/bbl in 4QFY19 (v/s USD4.3/bbl in 3QFY19), the lowest after 3QFY14.

Brent remained volatile averaging ~USD63.2/bbl (declined ~6% QoQ and YoY) in4QFY19, with concerns over OPEC+ cuts and increased US shale supply.

Petchem margins remained under pressure despite lower Naphtha prices, whileprimary spreads of ethylene, propylene and butadiene declined 31%/11%/18% YoY.

A volatile Brent — declines 5.5% YoY and 6.2% QoQ After bottoming out in Dec’18, crude prices followed a strong upward

momentum in the quarter, 4QFY19 averaged ~USD63.2/bbl. This is expected toresult in inventory gains for refiners in the quarter.

We understand there may not be any subsidy sharing with the oil marketingcompanies (OMCs) or the upstream companies (ONGC/Oil India) in the quarter.

SG GRM at USD3.2/bbl, down from USD7.0/bbl in 4QFY18 Singapore GRM for the quarter stood at USD3.2/bbl, down ~55% YoY and ~26%

QoQ due to weak Gasoline and Naphtha cracks. Gasoline cracks in 4QFY19 averaged USD1.6/bbl (lowest since FY03), while

Naphtha cracks were around FY13 levels — at USD7.8/bbl. Diesel cracks declined to USD11.7/bbl (down 16% YoY and 10% QoQ) due to

increased product inventory. Petrochem margins declined despite weakness in feedstock prices. PE delta

declined ~22% YoY and PP delta declined ~13% YoY, while PVC delta witnessed3% YoY increase.

Exhibit 1: Expected quarterly performance summary Sector Sales (INR M) EBDITA (INR M) PAT (INR M) Oil & Gas CMP (INR) RECO Mar-19 Var % YoY Var % QoQ Mar-19 Var % YoY Var % QoQ Mar-19 Var % YoY Var % QoQ Aegis Logistics 205 Buy 13,031 4.1 -1.3 1,113 59.3 20.2 704 46.0 19.1 BPCL 381 Buy 733,025 12.4 -7.4 36,759 0.1 4593.5 22,261 -16.7 349.6 GAIL 362 Neutral 179,319 16.2 -9.4 27,990 65.1 4.7 17,760 76.5 7.7 Gujarat Gas 147 Buy 19,715 13.7 -6.9 2,474 11.1 -23.0 921 39.7 -38.8Gujarat State Petronet 179 Buy 4,570 30.4 0.7 4,266 47.5 20.8 2,330 48.0 34.2 HPCL 274 Neutral 655,713 7.8 -9.1 26,668 -11.3 628.8 13,832 -20.9 458.8 IOC 158 Buy 1,275,301 8.7 -8.9 76,057 -35.0 398.4 37,348 -28.4 421.0 Indraprastha Gas 300 Buy 15,032 21.9 -0.3 3,391 23.1 6.7 2,195 33.5 10.9 Mahanagar Gas 1,000 Buy 7,516 28.0 -0.1 2,501 42.0 4.6 1,566 49.5 5.6 MRPL 74 Buy 165,774 10.6 -7.2 5,780 -51.5 LP 2,741 -49.4 LP Oil India 184 Buy 28,947 -3.5 -17.6 10,150 26.8 -33.3 9,859 13.8 -20.1ONGC 157 Buy 249,349 4.0 -10.0 135,861 19.4 -18.0 74,699 26.3 -9.6Petronet LNG 249 Buy 99,609 15.3 -1.4 8,558 4.1 0.9 5,580 6.8 -1.3Reliance Inds. 1,388 Neutral 1,609,848 37.7 2.9 191,757 3.8 -10.0 97,532 3.1 -6.0Sector Aggregate 5,056,748 17.2 -5.1 533,325 -0.8 16.6 289,329 1.5 20.5 Excl. OMCs 2,392,709 27.2 -0.9 393,841 11.3 -10.0 215,888 14.5 -4.3

Source: MOFSL

Oil & Gas March 2019 Results Preview | April 2019

Company name Aegis Logistics

BPCL

GAIL

Gujarat Gas

Gujarat State Petronet

HPCL

Indraprastha Gas

IOC

Mahanagar Gas

MRPL

Oil India

ONGC

Petronet LNG

Reliance Industries

Swarnendu Bhushan – Research Analyst ([email protected]); +91 22 6129 1529 Sarfraz Bhimani – Research Analyst ([email protected]); +91 22 6129 1566

April 2019 221

Domestic oil production remains a laggard, while gas production grows We have limited data for the quarter. However, total domestic oil production in

Jan-Feb’19 declined by 5% YoY, while FY19 (March data not out yet) witnessed4% decline YoY.

Domestic gas production in Jan-Feb 2019 increased ~5% YoY, while FY19 (Marchdata not out yet) increased 1% YoY.

LNG consumption grew 8% in Apr-Jan 2019, with increased consumption fromthe Fertilizer sector (+13% YoY) and City Gas Distribution (CGD: +10% YoY). BothPower and others have shown a decline of 2.5% and 7.4%, respectively.

Valuation and view PLNG – accumulate for the long term: Visibility for PLNG’s medium-term/long-

term earnings is high, given (a) the huge gas demand-supply gap in India, (b)volume growth driven by gradual capacity addition, and (c) earnings growthboosted by annual re-gas charge escalation. Poor competition from existing andupcoming terminals and lower LNG prices are additional positives for PLNG.

Prefer IGL among CGDs: We expect volume growth to continue for CGD players.IGL took a price hike on 18 Nov’18, reflecting a higher exchange rate. Since then,the INR has appreciated, averaging ~INR70.6/USD, which is likely to result inmargin expansion for the quarter. We prefer IGL among CGD players due to (a)higher longevity of volume growth compared to MGL, and (b) higher share ofCNG v/s PNG, supporting stable EBITDA/SCM.

OMCs election hurdle to end: The quarter has seen low GRM and USDdepreciation, both expected to hit OMCs. They have also stopped sharing theirgross margins periodically. Although auto fuel prices have declined, there isalways a risk of populist measures hitting the companies during election period.IOCL remains our preferred pick due to (a) strong FCFF, (b) high dividend yield,(c) and inexpensive valuation.

Mixed quarter for RIL: RIL is expected to clock in GRM of USD8.0/bbl, led byweakness in benchmark GRMs. Petchem segment is expected to suffer due toreduced Petchem margins.

ONGC appears attractive: ONGC has been faltering on its oil production growth.But, we believe that once KG-DWN-98/2 comes into production, it would resultin significant gas production growth for the company. We prefer ONGC over OilIndia, as (a) gas production is likely to grow ~5-6% annually for the next 3-4years, (b) oil production is set to increase marginally, (c) ONGC has no subsidyburden so far, (d) it has strong dividend yield, and (e) its valuations areattractive.

March 2019 Results Preview | Sector: Oil & Gas

April 2019 222

Exhibit 2: Relative performance - 3m (%) Exhibit 3: Relative performance - 1Yr (%)


Exhibit 4: Comparative valuations Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Oil & Gas (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Aegis Logistics 205 Buy 6.9 9.9 11.3 29.7 20.8 18.1 17.9 12.5 10.8 17.8 21.9 21.4 BPCL 381 Buy 39.3 47.8 51.8 9.7 8.0 7.3 7.1 6.6 6.5 20.0 21.7 21.0 GAIL 362 Neutral 29.5 28.4 30.0 12.3 12.8 12.1 8.1 8.2 7.6 15.7 13.7 13.3 Gujarat Gas 147 Buy 5.9 6.8 7.6 25.1 21.7 19.3 12.2 11.1 9.4 20.3 20.1 19.4 Gujarat State Petronet 179 Buy 15.4 14.9 16.0 11.6 12.1 11.2 3.9 4.3 3.6 16.0 13.6 13.0 HPCL 274 Neutral 37.6 50.8 51.4 7.3 5.4 5.3 4.8 4.4 5.1 21.1 25.0 22.1 Indraprastha Gas 300 Buy 11.2 13.0 14.6 26.9 23.1 20.6 15.8 13.7 11.9 20.4 20.4 19.7 IOC 158 Buy 15.5 18.2 19.1 10.2 8.7 8.3 5.0 4.8 4.7 12.5 13.8 13.6 Mahanagar Gas 1,000 Buy 57.7 58.3 65.7 17.3 17.2 15.2 9.4 8.9 7.7 25.2 22.3 22.2 MRPL 74 Buy 1.7 10.6 10.8 44.1 6.9 6.8 8.4 3.7 3.4 2.6 15.6 14.1 Oil India 184 Buy 33.5 29.8 30.6 5.5 6.2 6.0 4.6 4.4 4.2 13.1 10.9 10.6 ONGC 157 Buy 26.7 28.4 28.5 5.9 5.5 5.5 3.2 2.9 2.8 16.0 15.5 14.3 Petronet LNG 249 Buy 15.2 17.9 21.1 16.4 13.9 11.8 9.1 7.6 6.1 22.3 23.9 25.4 Reliance Inds. 1,388 Neutral 66.2 70.3 71.4 21.0 19.7 19.4 10.8 8.8 7.5 12.6 12.0 11.0 Sector Aggregate 12.8 11.6 11.2 6.7 5.9 5.4 13.7 13.8 13.0 Ex OMCs 13.8 12.9 12.6 7.1 6.1 5.5 13.4 13.0 12.1

Source: MOFSL

95

101

107

113

119

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Oil & Gas Index

90

100

110

120

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Oil & Gas Index


April 2019 223

Brent down 5.5% YoY, GRM down 55% YoY

Exhibit 5: Brent down 5.5% YoY (-6% QoQ)


Exhibit 6: Premium of Brent over WTI up QoQ to USD8.3/bbl


Exhibit 7: Reuters Singapore GRM declines sharply


Exhibit 8: Gasoline and Naphtha crack continue to weaken

Source: Reuters, MOFSL

Exhibit 9: Crude differentials declined QoQ


Exhibit 10: Spread over Naphtha for PE and PP declined QoQ


0

35

70

105

140

4QFY

052Q

FY06

4QFY

062Q

FY07

4QFY

072Q

FY08

4QFY

082Q

FY09

4QFY

092Q

FY10

4QFY

102Q

FY11

4QFY

112Q

FY12

4QFY

122Q

FY13

4QFY

132Q

FY14

4QFY

142Q

FY15

4QFY

152Q

FY16

4QFY

162Q

FY17

4QFY

172Q

FY18

4QFY

182Q

FY19

4QFY

19

Brent Crude Price (USD/bbl)

(8)

0

8

16

24

4QFY

052Q

FY06

4QFY

062Q

FY07

4QFY

072Q

FY08

4QFY

082Q

FY09

4QFY

092Q

FY10

4QFY

102Q

FY11

4QFY

112Q

FY12

4QFY

122Q

FY13

4QFY

132Q

FY14

4QFY

142Q

FY15

4QFY

152Q

FY16

4QFY

162Q

FY17

4QFY

172Q

FY18

4QFY

182Q

FY19

4QFY

19

Brent less WTI (USD/bbl)

0

2

4

6

8

10

4QFY

052Q

FY06

4QFY

062Q

FY07

4QFY

072Q

FY08

4QFY

082Q

FY09

4QFY

092Q

FY10

4QFY

102Q

FY11

4QFY

112Q

FY12

4QFY

122Q

FY13

4QFY

132Q

FY14

4QFY

142Q

FY15

4QFY

152Q

FY16

4QFY

162Q

FY17

4QFY

172Q

FY18

4QFY

182Q

FY19

4QFY

19

Reuters Singapore GRM (USD/bbl)

(30)

(20)

(10)

0

10

20

Gasoline Naphtha LPG Diesel Jet/Kero Fuel Oil

USD/bbl 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

(1)

1

3

5

7

9

4QFY

052Q

FY06

4QFY

062Q

FY07

4QFY

072Q

FY08

4QFY

082Q

FY09

4QFY

092Q

FY10

4QFY

102Q

FY11

4QFY

112Q

FY12

4QFY

122Q

FY13

4QFY

132Q

FY14

4QFY

142Q

FY15

4QFY

152Q

FY16

4QFY

162Q

FY17

4QFY

172Q

FY18

4QFY

182Q

FY19

4QFY

19

Brent - Dubai Arab L-HIn USD/bbl

0

200

400

600

800

1000

4QFY

09

4QFY

10

4QFY

11

4QFY

12

4QFY

13

4QFY

14

4QFY

15

4QFY

16

4QFY

17

4QFY

18

4QFY

19

USD/MT PE PP PVC


April 2019 224

Exhibit 11: With almost nil subsidy, model ONGC’s net realization for 4QFY19 at USD63/bbl


Exhibit 12: LNG import expected to increase in 4QFY19

* Jan’19 data extrapolated for 4QFY19 expectation Source: PPAC, MOFSL

Exhibit 13: Expect RIL’s GRM at USD8.0/bbl (USD/bbl)


Exhibit 14: Inventory gains to support already weak GRMs for OMCs (USD/bbl)


47

41

36 56

59

49

44

35

46

48

52

55

51

51 61

67

74

73

66

63

62

61

40

5 2 0 0

0 0 0 0 0 0

0 0 0 0 0 0

109

102

76

56 64

51

44

35

46

48

52

55

51

51 61

67 74

73

66

63

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

FY15 FY16 FY17 FY18 FY19

Net Realization Subsidy BurdenGross Realization

2.9

9 3

.00

3.0

7 2

.40

3.6

3 4

.09

4.2

4 4

.13

4.7

1 4

.84

4.6

1 4

.37

4.4

7 4

.73

5.3

1 5

.36

5.2

6 5

.44

5.0

8 5

.46

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

194Q

FY19

*

LNG imports (net RIL) (mmt)

5.8 4.8 6.3

8.6 8.0 6.3

8.0 7.8 5.0 5.1

6.7 6.4 6.4 8.3 7.3 7.0 6.0 6.1

4.3 3.2

2.9 3.5 1.0

1.5 2.4 4.3

3.5 3.0 6.5 5.0

4.1 5.1 5.5 3.7

4.3 4.0 4.5 3.4

4.5 4.8

8.7 8.3 7.3

10.1 10.4 10.6 11.5 10.8 11.5

10.1 10.8 11.5 11.9 12.0 11.6 11.0 10.5 9.5 8.8

8.0

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19E

Singapore GRM Premium / (Disc) RIL GRM

3.6

4.2

5.1

6.9

7.7

7.0

6.1

6.1

3.3

3.5

9.2

2.5

2.6

3.8

3.6

5.9

6.9

6.5

4.9

5.6

4.2

3.3

6.0

3.0

4.8

4.2

3.9

8.5

8.8

5.6

6.1

6.6

3.7

2.7

10.0

2.7

11.5

10.1

10.8

11.5

11.8

12.0

11.6

11.0

10.5

9.5

8.2

8.0

5.0 5.1

6.7 6.4 6.4

8.3 7.3 7.0

6.0 6.1

4.3 3.2

1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19E

IOCL Core GRM BPCL Core GRM HPCL Core GRM RIL SGRM

March 2019 Results Preview | Sector: Oil & Gas March 2019 Results Preview | Sector: Oil & Gas

April 2019 225

Exhibit 15: Oil, Gas, Product Prices and Cracks & Margins (USD/bbl) (USD/bbl) 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 YoY (%) QoQ (%) Oil

WTI 62.9 67.9 69.7 58.8 54.9 (12.7) (6.7) Brent 66.9 74.6 75.1 67.4 63.2 (5.5) (6.2) Dubai 63.9 72.1 74.3 67.4 63.5 (0.6) (5.8) Arab Light-Heavy 2.9 3.1 2.3 2.2 1.4 (51.7) (36.1)

Gas Henry Hub (USD/mmbtu) 3.1 2.8 2.9 3.8 2.9 (5.5) (23.3) Oil to Gas 22.3 26.4 25.8 18.2 21.8 (2.2) 19.9

Exchange Rate (INR/USD) 64.4 67.0 70.2 72.0 70.5 9.5 (2.2) Product Prices

LPG 42.5 48.2 55.1 42.7 41.4 (2.6) (3.1) Gasoline 75.0 81.7 83.7 70.1 65.2 (13.1) (7.1) Diesel 77.8 85.3 87.0 80.6 75.3 (3.3) (6.6) Jet/Kero 80.0 87.4 88.8 83.0 76.5 (4.3) (7.8) Naphtha 63.3 70.5 72.8 61.1 55.7 (11.9) (8.7) Fuel Oil 59.3 68.0 72.1 69.1 64.6 8.9 (6.5)

Product Cracks (v/s Dubai) LPG (21.4) (23.9) (19.1) (24.8) (22.1) (3.5) 10.6 Gasoline 11.1 9.7 9.4 2.7 1.6 (85.2) (38.5) Diesel 13.9 13.2 12.7 13.1 11.7 (15.6) (10.5) Jet/Kero 16.1 15.3 14.5 15.6 13.0 (19.3) (16.5) Naphtha (0.6) (1.6) (1.4) (6.4) (7.8) NM (21.6) Fuel Oil (4.6) (4.1) (2.2) 1.6 1.1 NM (34.3)

SGRM 7.0 6.0 6.1 4.2 3.2 (54.8) (25.5) Source: MOFSL, Company

Our key assumptions Our crude price assumptions are USD70.6/bbl for 4QFY19, USD70/bbl for FY19

and USD70/bbl for FY20/21. We expect the regional benchmark Singapore Reuters GRM to recover to

~USD6/bbl over the medium-to long-term.


April 2019 226

Consolidated - Quarterly Earning Model (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 8,560 12,409 14,421 12,519 10,169 14,259 13,205 13,031 47,910 50,663 YoY Change (%) 15.8 83.6 15.5 -1.3 18.8 14.9 -8.4 4.1 21.9 5.7 EBITDA 566 678 717 699 864 887 926 1,113 2,660 3,790 Margins (%) 6.6 5.5 5.0 5.6 8.5 6.2 7.0 8.5 5.6 7.5 Depreciation 57 63 90 133 121 125 129 133 343 507 Interest 34 34 49 36 65 73 51 39 152 229 Other Income 16 14 14 40 12 21 12 43 84 88 PBT 491 595 592 570 690 710 758 984 2,248 3,142 Tax 23 36 28 24 98 135 106 157 110 496 Rate (%) 4.6 6.0 4.7 4.2 14.2 19.0 14.0 16.0 4.9 15.8 MI & P/L of Asso. Cos. 29 39 29 63 75 86 61 122 160 344 Reported PAT 440 521 535 483 516 489 591 704 1,978 2,301 Adj PAT 440 521 535 483 516 489 591 704 1,978 2,301 YoY Change (%) 59.8 108.5 42.5 62.1 17.5 -6.1 10.5 46.0 65.1 16.3 Margins (%) 5.1 4.2 3.7 3.9 5.1 3.4 4.5 5.4 4.1 4.5 E: MOFSL Estimates


Aegis LogisticsCMP: INR205 TP: INR276 (+35%) Buy AGIS is an attractive play in India’s rising LPG consumption. Its

recently commissioned Haldia LPG terminal is expected to drive thenext leg of growth for the LPG segment.

The Liquids segment should remain a cash-cow for the company,growing in line with capacity addition.

We estimate AGIS’ EBITDA at INR1.1b (+59% YoY; +20% QoQ), ledby a ramp-up of the Haldia and Pipavav LPG terminals.

We estimate PAT at INR704m (+46% YoY; +19% QoQ). AGIS trades at 19.3x FY20E EPS of INR9.9 and 11.6x FY20E

EV/EBITDA. Maintain Buy.

Key issues to watch for Ramp-up of Pipavav and Haldia LPG terminals Capacity addition in the liquids segment Clarity on the commissioning of two new LPG terminals

Bloomberg AGIS IN Equity Shares (m) 334.0 M. Cap. (INR b)/(USD b) 68 / 1 52-Week Range (INR) 299 / 170 1,6,12 Rel Perf. (%) -9 / 1 / -38

Financial snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Sales 47.9 50.7 75.2 86.6 EBITDA 2.7 3.8 5.2 5.8 Adj. PAT 2.0 2.3 3.3 3.8 Adj. EPS (INR) 5.9 6.9 9.9 11.3 EPS Gr.% 64.5 16.3 43.0 14.7 BV/Sh.INR 36.1 41.3 48.7 57.1 RoE (%) 19.4 17.8 21.9 21.4 RoCE (%) 17.7 18.3 22.2 22.1 Payout (%) 25.3 25.3 25.3 25.3 Valuation P/E (x) 32.1 27.6 19.3 16.8 P/BV (x) 5.3 4.6 3.9 3.3 EV/EBITDA (x) 24.3 16.6 11.6 10.0 Div. Yld (%) 0.7 0.8 1.1 1.3

April 2019 227

Standalone - Quarterly Earning Model (INR Million) Y/E March FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 5,71,258 5,33,252 6,06,164 6,52,393 7,16,967 7,22,918 7,91,688 7,33,025 23,63,067 29,64,599 YoY Change (%) 21.7 19.3 13.2 14.4 25.5 35.6 30.6 12.4 16.9 25.5 EBITDA 12,250 35,864 31,882 36,715 45,803 33,497 783 36,759 1,16,712 1,16,842 Margins (%) 2.1 6.7 5.3 5.6 6.4 4.6 0.1 5.0 4.9 3.9 EBITDA adj. for inventory and one-offs 26,345 29,024 15,922 32,235 19,013 19,147 34,113 20,139 1,03,526 77,181 Forex loss -292 588 -840 -500 7,050 9,302 -6,590 -1,007 -1,045 16,353Depreciation 5,892 6,406 6,774 7,413 7,392 7,571 7,781 7,997 26,485 30,741 Interest 1,789 2,348 2,002 2,194 3,018 3,276 3,369 3,570 8,333 13,234 Other Income 6,274 8,004 6,434 8,329 5,480 5,380 9,672 7,176 29,041 27,708 PBT 11,136 34,526 30,380 35,938 33,823 18,727 5,895 33,375 1,11,980 84,222 Tax 3,690 10,952 8,943 9,202 10,890 6,540 944 11,114 32,787 29,488 Rate (%) 33.1 31.7 29.4 25.6 32.2 34.9 16.0 33.3 29.3 35.0 Reported PAT 7,446 23,574 21,437 26,736 22,933 12,187 4,951 22,261 79,193 54,734 Adj PAT 7,446 23,574 21,437 26,736 22,933 12,187 4,951 22,261 79,193 54,734 YoY Change (%) -71.6 80.6 -5.6 45.2 208.0 -48.3 -76.9 -16.7 -4.7 -30.9 Margins (%) 1.3 4.4 3.5 4.1 3.2 1.7 0.6 3.0 3.4 1.8 Key Assumptions Refining throughput (mmt) 6.4 7.0 7.3 7.9 7.7 7.6 7.5 8.3 28.5 31.2 Core GRM (USD/bbl) 6.9 6.5 4.9 5.6 4.2 3.3 6.0 3.0 6.0 4.1 Mkting sales volume excld exports (mmt) 10.0 9.8 10.7 10.7 11.0 10.1 10.7 10.9 41.2 42.7 Marketing GM incld inv (INR/litre) 3.1 4.3 3.8 4.6 4.9 4.9 2.9 4.4 3.9 4.1 E: MOFSL Estimates


BPCLCMP: INR381 TP: INR444 (+17%) Buy Inventory gains and higher marketing margins would aid BPCL’s

earnings in 4QFY19. We model nil subsidy-sharing for OMCs;subsidy in 4QFY19 would be borne entirely by the government.

We estimate BPCL’s refinery throughput at 8.3mmt for 4QFY19 v/s7.9mmt in 4QFY18 and 7.5mmt in 3QFY19. We model core GRM ofUSD3.0/bbl and inventory gain of USD1.5/bbl for refining.Additional inventory gain of INR10.2b is expected in marketing.

We expect BPCL to report adj. EBITDA of INR20.1b (-38% YoY; -41%QoQ) in 4QFY19. We estimate PAT at INR22.3b (-17% YoY) for4QFY19.

BPCL trades at 8.0x FY20E EPS of INR47.8 and 1.6x FY20E BV, with~4.2% current dividend yield. EPS change is due to thenormalization of marketing margins.

We raise our PBV multiple from 1.6x to 1.7x as post-election we donot expect government intervention. Maintain Buy with a TP ofINR444 (earlier: INR398).

Key issues to watch for Kochi refinery stabilization Update on Mozambique/Brazil E&P blocks GRM and marketing margins Inventory and forex change impact

Bloomberg BPCL IN Equity Shares (m) 1966.9 M. Cap. (INR b)/(USD b) 748 / 11 52-Week Range (INR) 455 / 239 1,6,12 Rel Perf. (%) 2 / -4 / -27

Financial conso snapshot (INR b) Y/E March 2018 2019E 2020E 2021E

Sales 2,358 2,959 3,206 3,336

EBITDA 152 152 164 168

Adj. PAT 98 77 94 102

EPS (INR) 49.8 39.3 47.8 51.8

EPS Gr.% 3.0 -21.0 21.4 8.5

BV/Sh.INR 186.2 207.0 232.5 261.3

RoE (%) 29.0 20.0 21.7 21.0

RoCE (%) 13.7 11.5 11.2 10.6

Payout*(%) 49.4 47.1 46.6 44.4

Valuation

P/E (x) 7.6 9.7 8.0 7.3

P/BV (x) 2.0 1.8 1.6 1.5

EV/EBITDA (x) 7.3 7.6 7.1 6.9

Div yield (%) 5.5 4.2 5.0 5.2

April 2019 228

Quarterly Performance (INR Million) Y/E March FY18 FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 1,14,065 1,24,097 1,44,143 1,54,307 1,72,986 1,92,753 1,97,890 1,79,319 5,36,612 7,42,948 Change (%) 6.7 4.7 19.0 15.0 51.7 55.3 37.3 16.2 11.6 38.5 EBITDA 18,994 20,694 19,699 16,953 22,436 29,276 26,735 27,990 76,339 1,06,436 % of Net Sales 16.7 16.7 13.7 11.0 13.0 15.2 13.5 15.6 14.2 14.3 Depreciation 3,451 3,425 3,668 3,608 3,789 3,506 3,634 3,410 14,151 14,338 Interest 1,014 926 479 333 441 455 227 303 2,751 1,425 Other Income 1,158 2,929 3,027 2,756 1,196 3,656 2,201 2,230 9,870 9,283 Extraordinary item* 0 0 0 277 0 0 0 0 277 0 PBT 15,687 19,273 18,580 16,044 19,403 28,972 25,075 26,507 69,584 99,956 Tax 5,431 6,177 5,957 5,835 6,810 9,342 8,262 8,747 23,400 33,163 Rate (%) 34.6 32.0 32.1 36.4 35.1 32.2 33.0 33.0 33.6 33.2 PAT 10,256 13,096 12,622 10,209 12,593 19,630 16,812 17,760 46,184 66,793 Change (%) -23.2 41.6 28.4 292.4 22.8 49.9 33.2 74.0 31.8 44.6 Extraord.: Tax Prov. Write Back 0 0 128 0 0 317 0 128 Adj PAT 10,256 13,096 12,622 10,060 12,593 19,630 16,496 17,760 46,035 66,477 Change (%) 21.3 41.6 28.4 -4.0 22.8 49.9 30.7 76.5 21.1 44.4 EPS (INR) 4.5 5.8 5.6 4.5 5.6 8.7 7.3 7.9 20.4 29.5 Key Assumptions Gas Trans. volume (mmsmd) 100 106 109 106 107 106 108 110 105 108 Petchem sales ('000MT) 131 175 176 191 166 183 173 198 673 720 E: MOFSL Estimates


GAILCMP: INR362 TP: INR340 (-6%) Neutral We expect petrochem sales to get a boost due to an increase in

utilization after the temporary slowdown to introduce new grade(Metallocene film) during 3QFY19. Transmission volumes areexpected to increase 2% QoQ.

We estimate EBITDA at INR28b in 4QFY19 v/s INR17b in 4QFY18 andINR26.7b in 3QFY19.

We expect GAIL to report adjusted PAT of INR17.8b (+77% YoY and+4% QoQ). We model nil subsidy-sharing for GAIL.

GAIL trades at 12.8x FY20E EPS of INR28.4. Maintain Neutral.

Key issues to watch for Petchem profitability LNG glut impacting gas trading business Progress of pipeline projects Pending tariff revisions for key pipelines Visibility on placement of US contracts

Bloomberg GAIL IN Equity Shares (m) 2255.1 M. Cap. (INR b)/(USD b) 816 / 12 52-Week Range (INR) 399 / 296 1,6,12 Rel Perf. (%) -3 / -12 / -6


Sales 536.6 742.9 755.8 804.9

EBITDA 76.3 106.4 101.5 105.9

Adj. PAT 46.0 66.5 63.9 67.6

Adj. EPS (INR) 20.4 29.5 28.4 30.0

EPS Gr. (%) 20.5 44.6 -3.8 5.7

BV/Sh.(INR) 182.1 200.7 218.5 237.3

RoE (%) 11.8 15.7 13.7 13.3

RoCE (%) 10.2 13.5 11.7 11.5

Payout (%) 37.1 37.1 37.3 37.3

Valuations

P/E (x) 17.7 12.3 12.8 12.1

P/BV (x) 2.0 1.8 1.7 1.5

EV/EBITDA (x) 10.0 7.4 7.6 7.3

Div. Yield (%) 1.7 2.5 2.4 2.6

April 2019 229


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 14,780 13,914 15,713 17,336 17,651 19,643 21,174 19,715 61,743 78,183 YoY Change (%) 20.7 12.5 27.7 23.8 19.4 41.2 34.8 13.7 21.2 26.6 Total Expenditure 12,082 11,888 13,714 15,110 15,166 18,036 17,962 17,241 52,793 68,404 EBITDA 2,698 2,027 1,999 2,227 2,486 1,607 3,212 2,474 8,951 9,779 Margins (%) 18.3 14.6 12.7 12.8 14.1 8.2 15.2 12.6 14.5 12.5 Depreciation 666 683 688 682 707 724 728 700 2,718 2,858 Interest 496 499 487 479 486 494 485 476 1,961 1,940 Other Income 78 89 91 99 584 188 154 77 357 1,003 PBT 1,615 934 915 1,165 1,878 578 1,975 1,375 4,629 5,805 Tax 571 323 315 506 664 167 595 454 1,715 1,879 Rate (%) 35.4 34.6 34.4 43.4 35.3 28.9 30.1 33.0 37.0 32.4 Reported PAT 1,044 611 600 660 1,214 411 1,380 921 2,914 3,926 YoY Change (%) 39.4 -12.1 41.9 99.0 16.3 -32.8 150.9 39.7 32.7 38.9 Margins (%) 7.1 4.4 3.8 3.8 6.9 2.1 7.1 4.7 4.7 5.2 Total volume (mmscmd) 6.1 5.7 6.3 6.8 6.4 6.7 6.6 6.4 6.2 6.5

CNG 1.3 1.3 1.3 1.4 1.4 1.4 1.4 1.5 1.3 1.4 PNG - Industrials/commercial 4.4 4.0 4.5 4.7 4.6 4.7 4.6 4.4 4.4 4.6 PNG - Households 0.4 0.5 0.5 0.7 0.4 0.5 0.5 0.6 0.5 0.5

EBITDA (INR/scm) 4.8 3.8 3.5 3.7 4.2 2.6 5.3 4.3 4.0 4.1 E: MOFSL Estimates


Gujarat GasCMP: INR147 TP: INR183 (+24%) Buy GUJGA is expected to see a pick-up in its industrial volumes after the

NGT order to ban coal gasifiers at Morbi. Due to the slowdown involumes in Jan-Feb 2019, we expect volumes of 6.4mmscmd, andEBITDA/scm at INR4.3 in 4QFY19.

We expect 4QFY19 PNG industrial/commercial volumes at4.4mmscmd (-6% YoY; -4% QoQ), and PNG household volumes at0.6mmscmd (-23% YoY; +3% QoQ). We expect CNG volumes at1.5mmscmd (+7% YoY; +2% QoQ).

We expect GUJGA to report EBITDA of INR2.5b (+11% YoY; -23%QoQ) for 4QFY19.

GUJGA should report adj. PAT of INR921m (+40% YoY; -39% QoQ). We model total volumes of 7.4/8.2mmscmd and EBITDA/scm of

INR4.0/INR4.1 in FY20/FY21. The stock trades at 21.7x FY20E EPS of INR6.8. Maintain Buy with a

TP of INR183 (earlier: INR165). Key issues to watch for PNG industrial usage CNG volumes EBITDA/scm

Bloomberg GUJGA IN Equity Shares (m) 688.4 M. Cap. (INR b)/(USD b) 102 / 1 52-Week Range (INR) 183 / 116 1,6,12 Rel Perf. (%) 14 / 10 / -29

Financial snapshot (INR b) Y/E March 2018 2019E 2020E 2021E Sales 61.7 78.2 95.9 108.9

EBITDA 9.0 9.8 10.5 11.9

PAT 2.9 3.9 4.7 5.3

EPS (INR) 4.2 5.9 6.8 7.6

EPS Gr. (%) 32.7 38.9 15.4 12.4

BV/Sh.(INR) 26.8 31.2 36.5 42.3

RoE (%) 16.7 20.3 20.1 19.4

RoCE (%) 16.5 19.5 20.5 22.9

Payout (%) 22.9 22.9 22.9 22.9

Valuations

P/E (x) 34.8 25.1 21.7 19.3

P/BV (x) 5.5 4.7 4.0 3.5

EV/EBITDA (x) 13.7 12.2 11.1 9.4

Div. Yield (%) 0.5 0.7 0.9 1.0

April 2019 230

Standalone - Quarterly Earning Model (INR Million) Y/E March FY18 FY19 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 2,963 3,348 3,502 3,504 3,912 5,983 4,538 4,570 13,318 19,003 YoY Change (%) 14.8 29.8 31.3 43.2 32.0 78.7 29.6 30.4 29.6 42.7 EBITDA 2,760 2,855 2,971 2,892 3,438 5,163 3,532 4,266 11,478 16,399 YoY Change (%) 18.3 26.3 30.6 43.7 24.6 80.8 18.9 47.5 29.2 42.9 Margins (%) 93.1 85.3 84.8 82.5 87.9 86.3 77.8 93.3 86.2 86.3 Depreciation 430 438 442 440 448 436 440 438 1,750 1,763 Interest 106 90 55 103 579 557 551 524 354 2,211 Other Income 164 278 121 171 54 384 76 174 735 688 PBT 2,389 2,605 2,595 2,520 2,466 4,553 2,618 3,477 10,108 13,113 Tax 864 836 779 946 1,021 1,319 882 1,148 3,424 4,421 Rate (%) 36 32 30 38 41 29 34 33 34 34 Reported PAT 1,525 1,770 1,816 1,574 1,444 3,233 1,736 2,330 6,685 8,692 YoY Change (%) 25.8 36.3 53.1 23.9 -5.3 82.7 -4.4 48.0 34.6 30.0 Margins (%) 51.5 52.9 51.8 44.9 36.9 54.0 38.2 51.0 50.2 45.7 Key Operating Parameters

Transmission Volume (mmscmd) 26.9 31.6 33.5 34.1 36.5 35.0 34.5 35.5 31.5 35.4 Implied Tariff (INR/mscm) 1,157 1,112 1,123 1,126 1,141 1,810 1,420 1,416 1,129 1,445 E: MOFSL Estimates


Gujarat State Petronet

CMP: INR179 TP: INR212 (+18%) Buy With expected 2% increase in LNG import for the quarter; we build

in transmission volume at 35.5mmscmd v/s 34.1mmscmd in 4QFY18 and 34.5mmscmd in 3QFY19.

We build in a flat transmission tariff of INR1,416/mscm; implied tariff in 3QFY19 was INR1,420/mscm.

We expect GUJS to report net sales of INR4.6b and PAT of INR2.3b (+48%YoY; +34% QoQ).

We await clarity on the current status, timelines and other details regarding Mehsana-Bhatinda, Bhatinda-Srinagar, Mallavaram-Bhilwara pipelines.

We build in gas transmission volumes of 30mmscmd /31mmscmd for FY20/21, and model tariff at INR1,445/mscm for FY20/21.

The stock trades at 12.1x FY20E EPS of INR14.9. Maintain Buy.

Key issues to watch for Transmission volumes and tariff hike Progress on the three pipelines

Bloomberg GUJS IN


1,6,12 Rel Perf. (%) 4 / -8 / -22

Financial snapshot (INR b) Y/E March FY18 FY19E FY20E FY21E

Sales 13.3 19.0 16.1 16.6

EBITDA 11.5 16.4 14.0 14.5 PAT 6.7 8.7 8.4 9.0 EPS (INR) 11.9 15.4 14.9 16.0

EPS Gr. (%) 34.6 30.0 -3.5 7.8 BV/Sh.(INR) 89.8 103.1 115.9 129.8 RoE (%) 14.0 16.0 13.6 13.0

RoCE (%) 11.6 13.3 11.0 10.9 Payout (%) 17.8 13.7 14.2 13.1 Valuations P/E (x) 15.1 11.6 12.1 11.2

P/BV (x) 2.0 1.7 1.5 1.4 EV/EBITDA (x) 10.0 6.7 7.6 6.8

Div. Yield (%) 1.0 1.0 1.0 1.0

April 2019 231


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 5,34,685 4,75,226 5,74,743 6,08,101 6,76,289 6,75,180 7,21,118 6,55,713 21,92,754 27,28,300 YoY Change (%) 19.2 12.9 18.4 18.0 26.5 42.1 25.5 7.8 17.2 24.4 EBITDA 16,280 29,056 31,585 30,069 37,284 30,086 3,659 26,668 1,06,990 97,696 Margins (%) 3.0 6.1 5.5 4.9 5.5 4.5 0.5 4.1 4.9 3.6 EBITDA adj. for inventory and one-offs 32,030 21,136 16,815 28,499 13,974 17,326 38,309 19,001 98,480 66,450 Depreciation 6,671 6,804 6,799 7,254 7,064 7,385 7,393 7,817 27,528 29,659 Forex loss -1,122 -200 -2,743 843 5,377 8,867 -5,973 -913 -3,222 7,358 Interest 1,430 1,563 899 1,776 1,909 2,007 1,472 1,001 5,667 6,389 Other Income 4,582 4,994 2,000 3,427 3,056 4,134 3,937 1,985 15,002 13,112 PBT 13,883 25,882 28,631 23,624 25,990 15,962 4,704 20,747 92,019 67,403 Tax 4,636 8,535 9,134 6,145 8,798 5,042 2,228 6,915 28,449 22,983 Rate (%) 33.4 33.0 31.9 26.0 33.9 31.6 47.4 33.3 30.9 34.1 Reported PAT 9,247 17,347 19,497 17,479 17,192 10,920 2,476 13,832 63,571 44,420 YoY Change (%) -55.9 147.4 22.6 -3.9 85.9 -37.1 -87.3 -20.9 4.3 -30.1 Margins (%) 1.7 3.7 3.4 2.9 2.5 1.6 0.3 2.1 2.9 1.6 Key Assumptions Refining throughput (mmt) 4.5 4.6 4.5 4.6 4.5 4.8 4.6 4.4 18.3 18.2 Core GRM (USD/bbl) 8.8 5.5 6.1 6.6 3.2 2.7 10.0 2.7 6.7 4.6 Marketing sales volume incl exports (mmt) 9.3 8.8 9.4 9.5 9.7 9.1 9.7 9.8 36.9 38.4 Marketing GM incld inv (INR/litre) 3.2 3.8 3.1 4.4 4.6 3.9 3.3 4.2 3.6 4.0 E: MOFSL Estimates


HPCLCMP: INR274 TP: INR272 (-1%) Neutral HPCL is likely to post good quarterly numbers aided by inventory

gains and improved marketing margins. We model nil subsidy-sharing for OMCs in 4QFY19.

We peg HPCL’s refinery throughput at 4.4mmt for 4QFY19 v/s4.6mmt in 4QFY18 and 4.6mmt in 3QFY19.

We model core GRM at USD2.7/bbl; while inventory gain ismodeled at USD1.5/bbl in refining and additional INR4.3b inmarketing.

We expect HPCL to report adj. EBITDA of INR19b (-33% YoY; -50%QoQ) in 4QFY19.

We estimate PAT at INR13.9b (-21% YoY) for 4QFY19. HPCL trades at 5.4x consolidated FY20E EPS of INR50.8 and 1.3x

FY20E BV, with ~4.9% current dividend yield. EPS change is due tomarketing margin normalization.

We raise our PBV multiple from 1.0x to 1.1x as post-election we donot expect any government intervention. Maintain Neutral with a TP of INR272 (earlier: INR231).

Key issues to watch for GRM Marketing margins Impact of forex and inventory change

Bloomberg HPCL IN Equity Shares (m) 1524.2 M. Cap. (INR b)/(USD b) 418 / 6 52-Week Range (INR) 370 / 163 1,6,12 Rel Perf. (%) 10 / 6 / -38

Financial snapshot (Conso.) (INR b) Y/E March 2018 2019E 2020E 2021E Sales 2,195 2,730 3,012 3,126 EBITDA 107.1 98.1 116.4 117.5 Adj. PAT 72.2 57.3 77.4 78.3 Adj. EPS (INR) 47.4 37.6 50.8 51.4 EPS Gr. (%) (12.4) (20.6) 35.1 1.1 BV/Sh.(INR) 167.5 188.9 217.8 247.1 RoE (%) 31.0 21.1 25.0 22.1 RoCE (%) 15.8 11.1 12.3 10.3 Payout (%) 44.5 43.1 43.1 43.1 Valuations P/E (x) 5.8 7.3 5.4 5.3 P/BV (x) 1.6 1.5 1.3 1.1 EV/EBITDA (x) 5.7 6.0 5.4 6.1 Div. Yield (%) 6.2 4.9 6.6 6.7

April 2019 232

Quarterly performance (INR Million) Y/E MARCH FY18 FY19 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 10,492 11,261 11,839 12,329 12,874 14,215 15,084 15,032 45,921 57,205 Change (%) 17.0 17.0 25.1 23.1 22.7 26.2 27.4 21.9 20.6 24.6 EBITDA 2,773 2,816 2,631 2,754 2,951 3,080 3,179 3,391 10,973 12,600

EBITDA (INR/scm) 6.2 5.9 5.4 5.7 5.8 5.7 5.9 6.3 5.8 5.9 % of Net Sales 26.4 25.0 22.2 22.3 22.9 21.7 21.1 22.6 23.9 22.0 % Change 7.9 9.4 3.0 21.7 6.4 9.4 20.8 23.1 10.2 14.8 Depreciation 439 450 453 470 473 503 513 524 1,813 2,012 Interest 4 4 4 6 6 6 9 10 17 30 Other Income 179 250 326 267 262 332 403 434 1,021.3 1,430.9 PBT before EO 2,509 2,612 2,499 2,545 2,735 2,903 3,060 3,291 10,165 11,989 EO 0 0 0 160 0 0 0 0 160 0 PBT after EO 2,509 2,612 2,499 2,705 2,735 2,903 3,060 3,291 10,325 11,989 Tax 897 923 840 957 976 1,030 1,080 1,096 3,617 4,182 Rate (%) 35.7 35.3 33.6 35.4 35.7 35.5 35.3 33.3 35.0 34.9 PAT 1,613 1,689 1,659 1,747 1,759 1,873 1,980 2,195 6,708 7,807 Adj. PAT 1,613 1,689 1,659 1,644 1,759 1,873 1,980 2,195 6,604 7,807

PAT (Rs/scm) 3.6 3.5 3.4 3.6 3.5 3.5 3.6 4.1 2.8 3.4 Change (%) 9.0 17.1 14.6 30.3 9.1 10.9 19.3 25.6 17.5 16.4 EPS (INR) 2.3 2.4 2.4 2.3 2.5 2.7 2.8 3.1 9.4 11.2 Gas Volumes (mmscmd)

CNG 3.70 3.91 3.89 3.98 4.13 4.41 4.40 4.47 3.87 4.35 PNG 1.20 1.30 1.37 1.38 1.42 1.48 1.50 1.50 1.31 1.47

Total 4.90 5.22 5.26 5.36 5.55 5.89 5.90 5.97 5.18 5.83 YoY Change (%)

CNG 11.8 12.9 11.9 10.2 11.6 12.8 13.1 12.4 11.6 12.5 PNG 17.2 17.6 21.2 14.8 18.3 13.3 9.5 9.0 17.7 12.4

Total 13.1 14.0 14.2 11.3 13.2 12.9 12.2 11.5 13.1 12.4 E: MOFSL Estimates


Indraprastha Gas

CMP: INR300 TP: INR388 (+29%) Buy We expect IGL’s volume growth to be similar to the growth in

3QFY19. We estimate sales volume of 5.97mmscmd (+12% YoY, +1% QoQ).

The INR has appreciated in 4QFY19, averaging ~INR70.5/USD v/s INR72/USD in 3QFY19, which is expected to result in EBITDA/scm expansion from INR5.9 in 3QFY19 to INR6.3 in 4QFY19.

We expect 4QFY19 PNG volumes at 1.5mmscmd (+9% YoY; flat QoQ), and CNG volumes at 4.47mmscmd (12% YoY; +2% QoQ).

We expect IGL to report EBITDA of INR3.4b (+23% YoY; +7% QoQ) for 4QFY19.

We expect IGL to report PAT of INR2.2b (+26% YoY; +11% QoQ). We model volume growth of 12%/11% annually during FY20/21 and

EBITDA/scm at ~INR5.9/scm. The stock trades at 23.1x FY20E EPS of INR13.0. Maintain Buy. Key issues to watch for Volumes growth Exchange rate fluctuations EBITDA/SCM

Bloomberg IGL IN


1,6,12 Rel Perf. (%) -6 / 14 / -10


Y/E March 2018 2019E 2020E 2021E

Sales 45.9 57.2 67.8 79.2 EBITDA 11.1 12.6 14.1 15.6 Adj. PAT 6.6 7.8 9.1 10.2

Adj. EPS (INR) 9.4 11.2 13.0 14.6 EPS Gr. (%) 9.2 18.2 16.5 12.0 BV/Sh.(INR) 50.2 59.0 68.5 79.5

RoE (%) 20.8 20.4 20.4 19.7 RoCE (%) 19.6 19.3 19.4 18.8 Payout (%) 21.2 17.9 23.1 20.6



April 2019 233


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 10,54,342 9,05,667 11,06,669 11,73,685 12,94,750 13,20,348 13,99,689 12,75,301 42,40,364 52,90,087 YoY Change (%) 23.1 13.1 18.9 17.0 22.8 45.8 26.5 8.7 18.1 24.8 Total Expenditure 10,02,427 8,29,305 9,73,982 10,56,713 11,50,942 12,26,532 13,84,429 11,99,243 38,62,426 49,61,146 EBITDA 51,915 76,362 1,32,687 1,16,973 1,43,808 93,815 15,260 76,057 3,77,938 3,28,940 Margins (%) 4.9 8.4 12.0 10.0 11.1 7.1 1.1 6.0 8.9 6.2 EBITDA adj. for inventory and one-offs 92,335 71,802 69,657 82,553 65,148 50,850 1,22,700 50,878 3,16,348 2,24,013 Depreciation 17,213 16,970 17,151 19,336 17,879 18,091 18,606 19,304 70,670 73,880 Forex loss -6,120 2,630 -6,310 6,760 18,050 26,196 -20,841 -3,186 -3,040 20,219 Interest 7,180 7,726 6,549 13,029 10,311 11,878 8,479 8,560 34,484 39,228 Other Income 6,156 5,878 7,224 2,481 5,853 10,407 4,431 4,640 21,739 25,331 PBT before EO expense 39,798 54,914 1,22,522 80,329 1,03,422 48,057 13,446 56,019 2,97,562 2,20,945 PBT 67,878 54,914 1,22,522 80,329 1,03,422 48,057 13,446 56,019 3,25,643 2,20,945 Tax 22,393 17,951 43,690 28,148 35,110 15,588 6,278 18,671 1,12,182 75,648 Rate (%) 33.0 32.7 35.7 35.0 33.9 32.4 46.7 33.3 34.4 34.2 Reported PAT 45,485 36,963 78,832 52,181 68,311 32,469 7,168 37,348 2,13,461 1,45,297 Adj PAT 26,767 36,963 78,832 52,181 68,311 32,469 7,168 37,348 1,95,054 1,45,297 YoY Change (%) -67.6 18.4 97.3 40.2 155.2 -12.2 -90.9 -28.4 8.4 -25.5 Margins (%) 2.5 4.1 7.1 4.4 5.3 2.5 0.5 2.9 4.6 2.7 Key Assumptions

Refining throughput (mmt) 17.5 16.1 18.2 17.2 17.7 17.8 19.0 18.3 69.0 72.8 Core GRM (USD/bbl) 6.6 6.9 6.1 6.1 3.4 3.5 9.2 3.5 6.4 4.9 Domestic sale of refined products 19.8 18.0 19.7 19.7 20.5 18.6 20.3 20.4 77.1 79.9 Marketing GM incld inv per litre (INR/litre) 4.5 4.1 4.0 5.1 5.2 5.7 3.5 3.7 4.4 4.5 E: MOFSL Estimates


IOCCMP: INR158 TP: INR203 (+28%) Buy IOCL is most likely to benefit from the upward crude price

momentum in the quarter, resulting in inventory gains. We expect core refining margin of USD3.5/bbl and inventory gain of

USD2.0/bbl in the quarter. We expect additional INR6.2b ofinventory gain in marketing.

We peg IOCL’s refinery throughput at 18.3mmt for 4QFY19 v/s17.2mmt in 4QFY18 and 19.0mmt in 3QFY19, impacted byslowdown at its Panipat refinery.

We expect IOCL to report adj. EBITDA of INR50.9b (-38% YoY; -59%QoQ) in 4QFY19.

We estimate PAT at INR37.3b (-28% YoY) in 4QFY19, with nilsubsidy-sharing for the company.

IOCL trades at 8.7x FY20E EPS of INR18.2 and at 1.2x FY20E BV.Current Dividend yield is 4.4%. EPS change is due to normalization ofmarketing margins.

We raise our PBV multiple from 1.3x to 1.4x as post-election we donot expect any government intervention. Maintain Buy with a TP ofINR203 (earlier: INR183).

Key issues to watch for GRM / petchem margins Capex plans Forex / inventory changes

Bloomberg IOCL IN


1,6,12 Rel Perf. (%) -1 / -4 / -25

Financial snapshot (Cons.) (INR b) Y/E March 2018 2019E 2020E 2021E

Sales 4,215 5,458 6,574 7,179

EBITDA 416 343 361 369

Adj. PAT 226 147 173 181

Adj. EPS (INR) 23.9 15.5 18.2 19.1

EPS Gr. (%) 11 -35 18 5

BV/Sh.(INR) 120 128 136 145

RoE (%) 21 12 14 14

RoCE (%) 14 9 9 9

Payout (%) 56.4 52.2 53.0 52.6

Valuations

P/E (x) 6.6 10.2 8.7 8.3

P/BV (x) 1.3 1.2 1.2 1.1

EV/EBITDA (x) 5.1 6.4 6.1 6.0

Div. Yield (%) 7.3 4.4 5.2 5.4

April 2019 234


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 5,309 5,338 5,814 5,870 6,193 6,965 7,527 7,516 22,330 28,201 YoY Change (%) 9.8 2.5 15.3 11.7 16.7 30.5 29.5 28.0 9.8 26.3 Total Expenditure 3,276 3,335 3,805 4,108 4,084 4,750 5,136 5,015 14,524 18,985 EBITDA 2,033 2,003 2,009 1,762 2,109 2,215 2,391 2,501 7,806 9,216 EBITDA/SCM 8.7 8.1 8.0 7.0 8.1 8.1 8.8 9.2 7.9 8.6 Margins (%) 38.3 37.5 34.6 30.0 34.1 31.8 31.8 33.3 35.0 32.7 Depreciation 246 259 268 339 295 308 328 349 1,112 1,279 Interest 2 0 0 1 1 1 1 0 3 3 Other Income 120 139 141 174 153 182 204 218 574 756 PBT 1,904 1,883 1,883 1,595 1,967 2,087 2,266 2,370 7,265 8,691 Tax 661 635 643 548 684 724 783 803 2,487 2,995 Rate (%) 34.7 33.7 34.1 34.3 34.8 34.7 34.6 33.9 34.2 34.5 Reported PAT 1,243 1,248 1,240 1,048 1,283 1,363 1,483 1,566 4,779 5,696 Adj PAT 1,243 1,248 1,240 1,048 1,283 1,363 1,483 1,566 4,779 5,696 YoY Change (%) 34.1 22.1 25.2 5.3 3.2 9.2 19.6 49.5 21.5 19.2 Margins (%) 23.4 23.4 21.3 17.8 20.7 19.6 19.7 20.8 21.4 20.2 Sales Volumes (mmscmd)

CNG 1.9 2.0 2.0 2.1 2.1 2.2 2.2 2.2 2.0 2.2 PNG - Domestic 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.3 0.4 PNG - Industry/ Commercial 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 PNG - Total 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.7 0.8 Total Volumes 2.6 2.7 2.7 2.8 2.9 3.0 3.0 3.0 2.7 3.0 E: MOFSL Estimates


Mahanagar GasCMP: INR1,000 TP: INR1,315 (+31%) Buy We expect MGL to report a volume growth of +8% YoY and +2%

QoQ in the quarter at 3.0mmscmd. Improved INR exchange rateshould boost EBITDA/scm in 4QFY19 at INR9.2, up from INR8.8 in3QFY19 and INR7.0 in 4QFY18.

We expect 4QFY19 PNG industrial/commercial volumes at0.4mmscmd (+3% YoY; flat QoQ), and PNG domestic volumes at0.4mmscmd (+12% YoY; +2% QoQ). We expect CNG volumes at2.2mmscmd (+8% YoY; +2% QoQ).

We expect MGL to report EBITDA of INR2.5b (+42% YoY; +5% QoQ)for 4QFY19.

We expect MGL to report PAT of INR1.6b (+50% YoY; +6% QoQ). We model total volumes of 3.2mmscmd /3.4mmscmd and

EBITDA/SCM at INR8.0 in FY20/FY21. The stock trades at 17.2x FY20E EPS of INR58.3. Maintain Buy.

Key issues to watch for Increase in volumes Exchange rate fluctuations High EBITDA/SCM

Bloomberg MAHGL IN


1,6,12 Rel Perf. (%) 0 / 17 / -17


Sales 22.3 28.2 31.0 34.8 EBITDA 7.8 9.2 9.2 10.0


BV/Sh.(INR) 212.1 244.8 277.8 315.1 RoE (%) 24.3 25.2 22.3 22.2 RoCE (%) 24.3 25.2 22.3 22.2



April 2019 235


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 1,02,624 90,965 1,41,020 1,49,907 1,35,578 1,54,913 1,78,606 1,65,774 4,84,516 6,34,871 YoY Change (%) 21.8 -8.8 22.9 12.4 32.1 70.3 26.7 10.6 12.1 31.0 Total Expenditure 97,112 81,213 1,25,478 1,37,993 1,23,591 1,49,453 1,83,502 1,59,994 4,41,796 6,16,539 EBITDA 5,512 9,752 15,542 11,914 11,987 5,460 -4,896 5,780 42,720 18,331 Margins (%) 5.4 10.7 11.0 7.9 8.8 3.5 -2.7 3.5 8.8 2.9 Depreciation 1,637 1,701 1,720 1,617 1,704 1,824 1,791 1,918 6,674 7,237 Forex loss -315 670 -1,954 1,470 3,856 4,017 -3,849 -588 -128 3,436 Interest 1,074 1,053 1,159 1,118 1,106 1,173 999 1,032 4,405 4,310 Other Income 204 828 202 771 558 381 368 694 2,005 2,001 PBT before EO expense 3,320 7,156 14,819 8,479 5,879 -1,172 -3,469 4,112 33,774 5,350 Extra-Ord expense 0 259 0 0 262 -251 103 0 259 114 PBT 3,320 6,898 14,819 8,479 5,617 -921 -3,572 4,112 33,515 5,236 Tax 980 2,118 5,110 3,058 1,998 -110 -895 1,371 11,266 2,364 Rate (%) 30 31 34 36 36 12 25 33 34 45 Reported PAT 2,340 4,780 9,709 5,421 3,620 -812 -2,677 2,741 22,249 2,872 Adj PAT 2,340 4,959 9,709 5,421 3,788 -1,033 -2,600 2,741 22,421 2,935 YoY Change (%) -67.4 19.2 71.5 -37.8 61.9 -120.8 -126.8 -49.4 -15.2 -86.9 Margins (%) 2.3 5.5 6.9 3.6 2.8 -0.7 -1.5 1.7 4.6 0.5 Key Assumptions Refining throughput (mmt) 3.98 3.53 4.49 4.31 3.85 3.91 4.38 4.25 16.31 16.39 Core GRM (USD/bbl) 7.07 5.30 6.80 4.90 4.20 2.29 4.00 3.70 6.02 3.55 E: MOFSL Estimates

CMP: INR74 TP: INR76 (+3%) Neutral We estimate inventory gain of USD1.5/bbl for MRPL due to upward

crude price moment during the quarter. Poor benchmark refining margin is expected to result in core GRM

of USD3.7/bbl compared with USD4.9/bbl in 4QFY18 andUSD4.0/bbl in 3QFY19.

We expect refinery throughput at 4.25mmt v/s 4.31mmt in 4QFY18and 4.38mmt in 3QFY19.

We expect MRPL to report EBITDA of INR5.8b (-51% YoY). Weestimate adjusted PAT at INR2.7b (v/s INR5.4b in 4QFY18 and loss ofINR2.7b in 3QFY19).

For MRPL, we model GRM of USD5.4/bbl in FY20/21. The stocktrades at 6.3x FY20E EPS of INR10.6 and EV of 3.8x FY20E EBITDA.

The company lacks significant tailwinds in the current subduedrefining margin environment. Downgrade to Neutral.

Key issues to watch for Lower GRMs Forex fluctuations Inventory changes


MRPLBloomberg MRPL IN


1,6,12 Rel Perf. (%) 1 / -1 / -51

Financial snapshot (INR b) Y/E MARCH 2018 2019E 2020E 2021E

Sales 484.5 634.9 606.8 622.3

EBITDA 42.7 18.3 38.5 38.5

Adj. PAT 22.4 2.9 18.6 18.9

Adj. EPS (INR) 12.8 1.7 10.6 10.8

EPS Gr. (%) (13.3) (86.9) 535.5 1.5

BV/Sh.(INR) 63.0 64.2 72.4 80.6

RoE (%) 21.2 2.6 15.6 14.1

RoCE (%) 15.6 4.5 12.8 12.1

Payout (%) 27.4 23.4 23.4 23.4

Valuation

P/E (x) 5.2 40.0 6.3 6.2

P/BV (x) 1.1 1.0 0.9 0.8

EV/EBITDA (x) 3.6 8.5 3.8 3.4

Div. Yield (%) 4.4 0.5 3.2 3.2

April 2019 236

Quarterly Performance (INR Million) Y/E March FY18 FY19

FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 23,317 24,737 28,526 29,984 33,905 37,436 35,140 28,947 1,06,565 1,35,428 Change (%) 5.0 6.1 20.0 23.1 45.4 51.3 23.2 -3.5 13.8 27.1

Raw Material Consumed 171 46 -104 376 60 442 709 303 490 1,514 Staff Cost 4,063 4,388 3,985 4,497 3,430 3,988 4,130 4,030 16,933 15,578 Statutory Levies 6,293 6,641 7,895 8,461 9,676 10,568 9,751 9,659 29,290 39,654 Other Exp 4,049 3,540 4,505 8,645 6,654 7,692 5,336 4,804 20,739 24,486

EBITDA 8,741 10,122 12,245 8,006 14,084 14,746 15,215 10,150 39,113 54,195 % of Net Sales 37.5 40.9 42.9 26.7 41.5 39.4 43.3 35.1 36.7 40.0 Change (%) 1.3 21.0 84.2 34.6 61.1 45.7 24.3 26.8 32.2 38.6

D,D&A 2,903 3,238 3,561 2,998 3,372 3,656 3,694 3,554 12,700 14,276 Interest 999 1,058 1,023 1,077 1,124 1,257 1,216 1,224 4,157 4,821 OI (incl. Oper. other inc) 1,540 3,310 2,128 7,865 1,268 2,878 6,012 9,342 14,842 19,501

PBT before exceptionals 6,379 9,136 9,788 11,795 10,855 12,712 16,317 14,715 37,098 54,599 PBT after exceptionals 6,379 9,136 9,788 11,795 10,855 12,712 16,317 14,715 37,098 54,599 Tax 1,877 2,676 2,736 3,130 3,823 4,092 3,983 4,856 10,419 16,753 Rate (%) 29.4 29.3 28.0 26.5 35.2 32.2 24.4 33.0 28.1 30.7 PAT 4,502 6,460 7,052 8,665 7,032 8,620 12,335 9,859 26,679 37,846 Change (%) -8.9 11.3 55.1 4,387.3 56.2 33.4 74.9 13.8 72.3 41.9 Adj. EPS (INR) 3,983 5,715 6,239 7,666 6,221 7,626 10,912 8,722 23,603 33,481 Key Assumptions (USD/bbl) Exchange rate (INR/USD) 64.5 64.3 64.8 64.4 67.0 70.2 72.3 70.6 64.5 70.0 Gas Price (USD/bbl) 2.8 2.8 3.2 3.2 3.4 3.4 3.4 3.4 3.0 3.4 Gross Oil Realization 48.4 50.1 59.4 64.9 72.0 73.4 66.7 60.8 55.7 68.2 Net Oil Realization 48.4 50.1 59.4 64.9 72.0 73.4 66.7 60.8 55.7 68.2 Subsidy (INR b) - - - - - - - - - - E: MOFSL Estimates


Oil IndiaCMP: INR184 TP: INR237 (+29%) Buy We estimate gross and net realization to decline from USD66.7/bbl

in 3QFY19 to US60.8/bbl in 4QFY19 along with the decline in Brent.We assume no subsidy burden.

We build in 11% YoY and 9% QoQ decline in oil sales at 0.7mmt in4QFY19, and 2% YoY and 11% QoQ decline in gas sales at 0.6bcmduring the quarter.

We estimate EBITDA at INR10.1b (+27% YoY and -33% QoQ). We expect higher other income of INR9.3b in the quarter (v/s

INR7.9b in 4QFY18 and INR6.0b in 3QFY19). We expect OINL to report adjusted PAT of INR9.9b (+14% YoY, -20%

QoQ). Our Brent price assumption is USD70/bbl for FY20/21. The stock trades at 6.2x FY20E EPS of INR29.8. Maintain Buy.

Key issues to watch for Depreciation, depletion and amortization (DD&A) charges Production volumes

Bloomberg OINL IN


1,6,12 Rel Perf. (%) -5 / -24 / -36

Financial snapshot (INR b)

Y/E March 2018 2019E 2020E 2021E


Adj. EPS (INR) 23.6 33.5 29.8 30.6 EPS Gr. (%) -1.2 41.9 -11.1 2.6 BV/Sh.(INR) 246.9 264.8 280.7 297.0

RoE (%) 9.4 13.1 10.9 10.6 RoCE (%) 4.8 7.0 6.8 6.7 Payout (%) 56.1 56.1 56.1 56.1



April 2019 237


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 1,90,735 1,89,649 2,29,959 2,39,698 2,72,128 2,79,892 2,76,941 2,49,349 8,50,041 10,78,310 YoY Change (%) 7.9 3.7 15.4 10.4 42.7 47.6 20.4 4.0 9.5 26.9 EBITDA 98,807 1,04,692 1,25,247 1,13,822 1,47,321 1,57,887 1,65,708 1,35,861 4,42,568 6,06,777 Margins (%) 51.8 55.2 54.5 47.5 54.1 56.4 59.8 54.5 52.1 56.3 Depreciation 45,204 48,389 58,614 62,813 50,266 48,488 61,517 61,553 2,15,020 2,21,824 Interest 2,769 3,274 3,099 5,942 7,486 6,291 5,807 5,491 15,085 25,076 Other Income 8,544 19,315 11,265 37,337 6,499 23,942 22,246 43,226 76,461 95,913 PBT 59,378 72,343 74,800 82,405 96,068 1,27,050 1,20,630 1,12,042 2,88,925 4,55,790 Tax 20,530 21,036 24,653 23,253 34,629 44,404 38,003 37,344 89,472 1,54,380 Rate (%) 34.6 29.1 33.0 28.2 36.0 35.0 31.5 33.3 31.0 34 Adj PAT 38,847 51,307 50,147 59,151 61,439 82,646 82,627 74,699 1,99,453 3,01,411 YoY Change (%) -8.2 3.1 15.2 36.3 58.2 61.1 64.8 26.3 11.4 51.1 Margins (%) 20.4 27.1 21.8 24.7 22.6 29.5 29.8 30.0 23.5 28.0 Key Assumptions (USD/bbl) Fx rate (INR/USD) 64.5 64.3 64.7 64.3 67.0 70.2 72.3 70.6 64.5 70.0 Gross Oil Realization 51.0 51.2 60.6 66.7 74.2 73.1 66.4 63.0 57.4 63.2 Net Oil Realization 51.0 51.2 60.6 66.7 74.2 73.1 66.4 63.0 57.4 63.2 Crude oil sold (mmt) 6.0 5.8 5.9 5.9 5.8 5.4 5.4 5.3 23.7 21.8 Gas sold (bcm) 4.8 4.9 5.0 4.8 4.9 5.0 5.3 5.2 19.5 20.5 VAP sold (tmt) 769.0 849.0 908.0 820.0 856.0 914.0 920.0 858.1 3,346.0 3,548.1 Subsidy (INR b) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 E: MOFSL Estimates


ONGCCMP: INR157 TP: INR193 (+23%) Buy We estimate gross and net realization to decline from

USD66.4/bbl in 3QFY19 to USD63.0/bbl, in line with the decline inBrent. ONGC is unlikely to bear any subsidy burden in the quarter.

We estimate decline of 11% YoY and 2% QoQ in oil sales at5.3mmt, while there should be a growth of 9% YoY and decline of2% QoQ in gas sales at 5.2bcm during the quarter.

We estimate EBITDA at INR135.9b (+19% YoY, -18% QOQ). We expect ONGC to report adjusted PAT of INR74.7b in 4QFY19

(+26% YoY, -10% QoQ). Our Brent price assumption is USD70/bbl for FY20/21. The stock trades at 5.5x consolidated FY20E EPS of INR28.4, with

implied current dividend yield of ~6%. Maintain Buy.

Key issues to watch for DD&A charges Oil & gas production volumes Development plan for the KG Basin

Bloomberg ONGC IN


1,6,12 Rel Perf. (%) -3 / -19 / -30

Financial snapshot (Cons.) (INR b) Y/E March 2018 2019E 2020E 2021E

Sales 3,622 4,621 4,932 5,078 EBITDA 643 844 901 911

Adj. PAT 259 342 365 366 Adj. EPS (INR) 20.2 26.7 28.4 28.5 EPS Gr. (%) -9.9 32.1 6.5 0.4

BV/Sh.(INR) 159 175 192 209 RoE (%) 13.0 16.0 15.5 14.3 RoCE (%) 9.2 11.7 12.4 11.7



April 2019 238


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E Net Sales 64,351 77,702 77,571 86,362 91,692 1,07,453 1,00,977 99,609 3,05,986 3,99,731 YoY Change (%) 20.6 17.5 23.1 35.7 42.5 38.3 30.2 15.3 24.3 30.6 Total Expenditure 56,909 68,715 69,097 78,142 82,347 98,616 92,497 91,050 2,72,863 3,64,511 EBITDA 7,442 8,987 8,474 8,221 9,344 8,837 8,481 8,558 33,124 35,220 Margins (%) 11.6 11.6 10.9 9.5 10.2 8.2 8.4 8.6 10.8 8.8 Depreciation 1,027 1,039 1,039 1,013 1,022 1,037 1,037 1,070 4,117 4,167 Interest 465 465 367 335 300 249 215 196 1,630 960 Other Income 707 1,019 414 1,034 990 1,115 884 1,037 3,174 4,026 PBT 6,658 8,504 7,482 7,908 9,012 8,666 8,113 8,329 30,551 34,119 Tax 2,282 2,616 2,194 2,681 3,142 3,037 2,460 2,748 9,773 11,387 Rate (%) 34.3 30.8 29.3 33.9 34.9 35.0 30.3 33.0 32.0 33.4 Adj PAT 4,376 5,888 5,288 5,227 5,870 5,629 5,653 5,580 20,778 22,732 YoY Change (%) 15.8 28.1 33.0 11.0 34.1 -4.4 6.9 6.8 21.8 9.4 Margins (%) 6.8 7.6 6.8 6.1 6.4 5.2 5.6 5.6 6.8 5.7 Key Assumptions Regas volume (Tbtu) 81 79 92 85 97 88 84 47 336 316 Sales volume (Tbtu) 111 141 131 128 123 129 118 163 511 533 E: MOFSL Estimates


Petronet LNGCMP: INR249 TP: INR315 (+27%) Buy LNG import is expected to increase ~2% in 4QFY19, which reflects

possible higher utilization at Dahej. We build in utilization of 108% at Dahej (v/s 109% in 4QFY18 and

104% in 3QFY19). Kochi is expected to remain at a low utilization of9% in the quarter.

We expect PLNG to report EBITDA of INR8.6b (+4% YoY; +1% QoQ)and PAT of INR5.6b (+7% YoY; -1% QoQ).

PLNG’s long-term growth would depend on Dahej’s ramp-up(expected from Jun’19) and Kochi terminal’s pipeline connectivity.

As against 15mmt capacity, PLNG has ~16mmt long-term take-or-pay contracts.

The stock trades at 13.9x FY20E EPS of INR17.9. Maintain Buy.

Key issues to watch for Utilization at Dahej terminal Progress on Kochi-Mangalore pipeline Spot volumes and marketing margin on spot volumes

Bloomberg PLNG IN


1,6,12 Rel Perf. (%) 3 / 8 / -7


Sales 306.0 399.7 434.6 521.7

EBITDA 33.1 35.2 40.8 47.0 Adj. PAT 20.8 22.7 26.8 31.6 Adj. EPS (INR) 13.9 15.2 17.9 21.1

EPS Gr. (%) 21.8 9.4 17.9 18.0 BV/Sh.(INR) 64.8 71.1 78.5 87.3 RoE (%) 23.3 22.3 23.9 25.4

RoCE (%) 21.1 21.8 23.6 25.4 Payout (%) 38.0 58.5 58.5 58.5 Valuation P/E (x) 17.9 16.4 13.9 11.8

P/BV (x) 3.8 3.5 3.2 2.8 EV/EBITDA (x) 11.2 10.3 8.6 7.0

Div. Yield (%) 1.8 3.0 3.6 4.2

April 2019 239


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 8,34,710 9,14,810 9,98,100 11,69,150 12,87,560 14,33,230 15,63,970 16,09,848 39,16,770 58,94,608 YoY Change (%) 28.4 20.1 25.7 37.8 54.3 56.7 56.7 37.7 28.3 50.5 EBITDA 1,25,540 1,55,650 1,75,880 1,84,690 2,06,610 2,11,080 2,13,170 1,91,757 6,41,760 8,22,617 Margins (%) 15.0 17.0 17.6 15.8 16.0 14.7 13.6 11.9 16.4 14.0 Depreciation 30,370 42,870 45,300 48,520 51,730 52,290 52,370 54,017 1,67,060 2,10,407 Interest 11,190 22,720 20,950 25,660 35,500 39,320 41,190 39,826 80,520 1,55,836 Other Income 32,250 23,310 22,180 22,030 17,780 12,500 24,600 38,455 99,770 93,335 PBT 1,16,230 1,13,370 1,31,810 1,32,540 1,37,160 1,31,970 1,44,210 1,36,369 4,93,950 5,49,709 Tax 25,440 32,400 37,750 37,870 42,410 36,490 40,690 38,837 1,33,460 1,58,427 Rate (%) 21.9 28.6 28.6 28.6 30.9 27.7 28.2 28.5 27.0 28.8 Reported PAT 90,790 80,970 94,450 94,590 94,850 95,490 1,03,760 97,532 3,60,800 3,91,962 YoY Change (%) 28.3 12.8 25.5 17.5 4.5 17.9 9.9 3.1 20.9 8.6 Margins (%) 10.9 8.9 9.5 8.1 7.4 6.7 6.6 6.1 9.2 6.6 Key assumptions Refining throughput (mmt) 17.5 18.1 17.7 16.7 16.6 17.7 18.0 16.8 70.0 69.1 GRM (USD/bbl) 11.9 12.0 11.6 11.0 10.5 9.5 8.8 8.0 11.6 9.2 Petchem sales (mmt) 2.4 2.6 2.8 3.1 3.1 3.3 3.5 3.4 10.9 13.3 Petchem (EBITDA/mt) 329 355 380 382 447 408 379 379 362 403 E: MOSL Estimates


Reliance IndustriesCMP: INR1,388 TP: INR1,457 (+5%) Neutral We expect RIL to report GRM of USD8.0/bbl in 4QFY19 v/s

USD11.0/bbl in 4QFY18 and USD8.8/bbl in 3QFY19. This implies apremium of USD4.8/bbl over SG GRM.

Refining throughput for the quarter is expected at 16.8mmt (+1%YoY, -7% QoQ). Petchem volume is expected to increase 8% YoYand decrease 3% QoQ in 4QFY19 at 3.4mmt.

Petrochemical segment is expected to suffer due to reducedproduct margins. We estimate Petchem EBITDA at USD379/MT.

We expect RIL to report consolidated EBITDA of INR191.8b (+4%YoY, -10% QoQ).

We expect RIL to report consolidated PAT of INR97.5b (+3% YoY, -6% QoQ).

RIL trades at 19.7x FY20E EPS of INR70.3. Positive developments inthe telecom and retail segments should drive growth further for the company. Maintain Neutral.

Key issues to watch for GRM Petrochemical margins Telecom subscribers Future capex

Bloomberg RIL IN Equity Shares (m) 5922.0 M. Cap. (INR b)/(USD b) 8222 / 120


Financial conso snapshot (INR b) Y/E March 2018 2019E 2020E 2021E

Net Sales 3,917 5,895 6,917 7,206 EBITDA 642 823 950 1,062 Net Profit 361 392 417 423

EPS (INR) 60.9 66.2 70.3 71.4 EPS Gr. (%) 20.7 8.6 6.3 1.5 BV/Sh. (INR) 496 554 616 679

RoE (%) 13.0 12.6 12.0 11.0 RoCE (%) 9.1 10.1 9.3 9.9 Payout (%) 11.9 11.9 11.9 11.9



April 2019 240

Double-digit sales growth likely again for sector players EBITDA and PAT to grow over 20%, led by TTAN

Contrasting numbers likely for the two companies under coverage We expect revenue growth of 14.7% YoY for the two retail companies in our coverage in 4QFY19. EBITDA is expected to increase by 21.8% YoY and adj. PAT by 23.0% YoY.

Titan’s (TTAN) jewelry segment sales growth is likely to come in at ~16% YoY, lower than usual, due to higher gold prices in early-4QFY19, which led to delays in gold purchases. In recent quarters, sale of watches have recovered strongly on a like-to-like basis. The company’s overall sales are expected to grow by 15.5% and PAT by 24.5% YoY. EBITDA margins are expected to increase 70bp YoY.

For Jubilant Foodworks (JUBI), we expect sales to increase 10.3% YoY during the quarter, with same-store-sales growth (SSSG) at 8% YoY. JUBI had reported a 28-quarter high of 26.5% SSSG in the base quarter-4QFY18; the base remains challenging at 25.9% and 20.5% for the next two quarters. But for 4QFY19, despite SSSG moderating, a modest increase in operating costs mean that margins are expected to expand by 80bp YoY to 17.2%. Therefore, 4QFY19 EBITDA/PAT growth is likely to remain healthy at 15.9%/16.1%, despite sales growth moderation.

Huge growth opportunity and visibility drive our preference for TTAN We maintain our Buy rating on TTAN. In FY18, TTAN accounted for just over 6% of the INR2t jewelry market in India. Regulations governing the segment, including (a) identity proofs for all transactions over INR200,000, (b) the GST implementation, and (c) the crackdown on black money has tilted the trade decisively in favor of organized players, among which TTAN is a dominant player in terms of scale and trust. Earnings CAGR is likely to be very impressive for the company at 26.3% over FY18-21. We maintain BUY rating on the stock.

We like JUBI’s business model with strong earnings growth potential on recovery. However, with poor visibility of double-digit SSSG beyond the near term, fair valuations of 51.3x FY20E EPS make us wary of turning constructive. We, thus, maintain a Neutral rating on the stock.

Exhibit 1: Summary of expected quarterly performance Sector CMP Sales (INR m) EBDITA (INR M) PAT (INR m)

Retail (INR) RECO Mar-19 Var % YoY


% YoY Var


Var % QoQ

Jubilant Foodworks 1,442 Neutral 8,605 10.3 -7.4 1,480 15.9 -13.2 791 16.1 -18.1Titan Company 1,112 Buy 47,432 15.5 -19.2 5,378 23.5 -9.0 3,885 24.5 -5.5Sector Aggregate 56,037 14.7 -17.6 6,859 21.8 -10.0 4,675 23.0 -7.9

Source: Company, MOS

Company name

Jubilant Foodworks

Titan Company

Retail

Krishnan Sambamoorthy – Research Analyst ([email protected]); +91 22 6129 1545 Vishal Punmiya – Research Analyst ([email protected]); +91 22 6129 1547


April 2019 241

Exhibit 2: Tanishq’s LTL sales have grown 20% in 9MFY19…


Exhibit 3: ...with jewelry grammage up 14%


Exhibit 4: Gold prices up 7.6% YoY in 4QFY19


Exhibit 5: JUBI’s SSS has grown ~20% in 9MFY19


Exhibit 6: Dominos’ is expected to add ~15 stores in 4Q19


(8) (25)

(12)

(40)

30 (5)

3

4 15 52

51

18 12 172

32 27

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

19

Tanishq- LTL Growth (%)

25

(11) (10) (10)

28

15

6

(32)

4

37 49 49

6 6 (3)

24 20

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

19

Jewelry volume Growth %

(12.8) (10.2)(5.7) (6.8)

(2.9) 3.5

10.2

20.4 13.0

3.9 (2.7)

(6.7) 0.4

4.5 7.5 3.7 6.8 7.6

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19

Average gold price (INR/10 gm) Gold price change YoY (%)

(2.6

) (3

.4)

(2.4

) (5

.3)

1.9

6.6

4.6

3.2

2.0

2.9

(3.2

) 4.

2 (3

.3)

(7.5

) 6.

5 5.

5 17

.8

26.5

25

.9

20.5

14

.6

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

19

SSS Growth (%)

679

726

761

797

838

876

911

950

990

1,02

6 1,

049

1,08

1 1,

107

1,11

7 1,

125

1,12

5 1,

127

1,13

4 1,

144

1,16

7 1,

200

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

1QFY

172Q

FY17

3QFY

174Q

FY17

1QFY

182Q

FY18

3QFY

184Q

FY18

1QFY

192Q

FY19

3QFY

19

Dominos stores

April 2019 Results Preview | Sector: Retail

April 2019 242





Exhibit 9: Comparative valuation Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Retail (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Jubilant Foodworks 1,442 Neutral 24.8 28.1 32.9 58.0 51.3 43.8 30.3 26.2 22.5 27.9 26.7 27.0 Titan Company 1,112 Buy 16.1 20.5 25.5 69.0 54.3 43.7 47.0 37.5 29.8 28.1 33.0 35.5 Sector Aggregate 67.0 53.8 43.7 43.2 35.1 28.4 28.0 30.0 31.9

89

99

109

119

129

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Retail Index

80

92

104

116

128

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Retail Index

March 2019 Results Preview | Sector: Retail

April 2019 243

Quarterly Standalone Perf. Y/E March FY18 FY19 Std. Consol.

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY18 FY19E No of stores 1125 1125 1127 1134 1144 1167 1200 1215 1134 1215 LTL growth (%) 6.5 5.5 17.8 26.5 25.9 20.5 14.6 8.0 13.9 17.3 Net Sales 6,788 7,266 7,952 7,798 8,551 8,814 9,291 8,605 29,804 35,260 YoY change (%) 11.5 9.2 20.7 27.3 26.0 21.3 16.8 10.3 17.1 18.3 Gross Profit 5,183 5,388 5,926 5,794 6,373 6,575 7,019 6,485 22,290 26,452

Gross margin (%) 76.4 74.1 74.5 74.3 74.5 74.6 75.6 75.4 74.8 75.0 EBITDA 796 1,022 1,369 1,278 1,421 1,475 1,706 1,480 4,464 6,082 EBITDA growth % 37.8 59.0 113.7 111.1 78.5 44.4 24.6 15.9 81.0 36.2 Margins (%) 11.7 14.1 17.2 16.4 16.6 16.7 18.4 17.2 15.0 17.2 Depreciation 462 326 393 378 366 385 373 422 1,559 1,545 Other Income 30 36 33 127 71 108 138 113 227 431 PBT 364 733 1,009 1,027 1,126 1,199 1,471 1,172 3,132 4,969 Tax 125 248 349 346 380 422 506 381 1,068 1,689 Rate (%) 34.4 33.8 34.6 33.7 33.7 35.2 34.4 32.5 34.1 34.0 Adjusted PAT 238 485 660 681 747 777 965 791 2,064 3,279 YoY change (%) 25.6 124.8 230.6 355.8 213.2 60.2 46.2 16.1 173.5 58.9 E: MOFSL Estimates


Jubilant FoodworksCMP: INR1,442 TP: INR1,380 (-4%) Neutral We expect JUBI’s revenue to grow 10.3% YoY to INR8.6b in

4QFY19.

SSSG is likely to moderate to ~8% for the quarter on a very highbase of 26.5% growth.

We believe that 15 Domino’s stores were added during thequarter.

Gross margin is likely to see an expansion of 110bp YoY to 75.4%.

We expect EBITDA margin to be increase by 80bp YoY to 17.2%.Thus, EBITDA should grow by 15.9% YoY to ~INR1.5b.

We estimate adj. PAT to grow by 16.1% YoY to INR791m.


Key issues to watch for: Demand outlook for QSR with major events on the anvil Benefits of cost-saving efforts Performance of Dunkin Donuts and margin guidance

Bloomberg JUBI IN


1,6,12 Rel Perf. (%) 5 / 9 / 5


Sales 30.2 35.3 41.1 47.0





Div. Yield (%) 0.2 0.7 1.4 1.9

April 2019 244


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 40,673 35,822 43,631 41,072 44,510 45,672 58,715 47,432 161,198 196,329

YoY change (%) 45.1 33.7 10.5 13.3 9.4 27.5 34.6 15.5 23.5 21.8 Gross Profit 9,939 10,085 11,427 12,069 12,177 12,980 15,055 13,358 44,336 53,571

Margin (%) 24.4 28.2 26.2 29.4 27.4 28.4 25.6 28.2 27.5 27.3 EBITDA 3,649 4,219 4,224 4,355 4,829 4,689 5,912 5,378 16,447 20,808

EBITDA growth % 27.2 59.6 21.2 70.3 32.3 11.2 40.0 23.5 42.3 26.5 Margin (%) 9.0 11.8 9.7 10.6 10.8 10.3 10.1 11.3 10.2 10.6

Depreciation 295 310 349 360 407 428 385 427 1,314 1,647 Interest 108 145 109 167 109 135 157 152 529 553 Other Income 283 208 213 185 361 279 626 281 889 1,547 PBT 3,529 3,972 3,979 4,013 4,674 4,405 5,997 5,080 15,492 20,156 Tax 1,038 1,189 1,159 893 1,388 1,377 1,885 1,195 4,279 5,845

Rate (%) 29.4 29.9 29.1 22.3 29.7 31.3 31.4 23.5 27.6 29.0 Adjusted PAT 2,491 2,783 2,820 3,120 3,286 3,028 4,111 3,885 11,213 14,311

YoY change (%) 14.1 64.6 21.0 72.2 31.9 8.8 45.8 24.5 39.9 27.6 E: MOFSL Estimates

CMP: INR1,112 TP:INR1,300(+17%) Buy We expect TTAN’s revenue to increase 15.5% YoY to ~INR47.4b.

Gross margin is expected to have declined 120bp YoY to 28.2%.

We factor in EBITDA growth of 23.5% YoY for the quarter, withunderlying margin expansion of 70bp YoY.

Adj. PAT is expected to grow 24.5% to INR3.9b.


Key issues to watch for: Market share gain from unorganized players Proportion of jewelry sales being driven by SSSG

Bloomberg TTAN IN


1,6,12 Rel Perf. (%) 0 / 30 / 0


Sales 161.2 196.3 234.7 282.1





Div. Yield (%) 0.4 0.7 1.0 1.4

April 2018 Results Preview | Sector: Retail

Titan Company

April 2019 245

March 2019 Results Preview | Sector: Technology

Tier-I marches on Account-specific stress to drag multiple Tier-II companies

Expect unanimous acceleration in YoY growth to pause after four quarters With aggregate Tier-I CC revenue growth of 10.3% YoY in 4QFY19, we expect the

trend of unanimous acceleration to soften after five quarters. While growth rate at INFO and HCLT will continue accelerating, for TCS and TECHM, YoY growth should be comparable to the previous quarter, and acceleration at WPRO should be marginal. For TECHM, Enterprise will be a drag and weaker-than-anticipated 4Q seasonality should play out for Communications.

While currently companies are not worried about deteriorating macros, most firms have cited some weak pockets, which may potentially impact performances in future quarters.

For Tier-II, client-specific issues will drag 4QFY19 performance across companies such as LTI, PSYS, CYL, and TELX; while the supply situation will continue to weigh on margins at MTCL and HEXW.

We expect aggregate INR revenue growth to be 17.7% YoY, while EBTDA is expected to grow 18.1% YoY. PAT growth is expected to be at 12.6% YoY.

Expect HCLT to lead QoQ growth in Tier-I; MPHL and NITEC to continue growth momentum among Tier-II companies At 3% QoQ CC, we expect HCLT to lead the growth in Tier-I due to continued

traction in IMS backed by its double-digit sequential growth in 3Q. While INFO struggled to grow in 4Q in the past, the ramp-up in large

Communication deals should help them circumvent the same this fiscal. We expect 2.3% QoQ CC growth.

We expect WPRO to grow in the upper half of its 0-2% guidance band at 1.5%, and expect 2% QoQ CC growth for TCS.

While TECHM usually experiences seasonality from its Telecom products’ segment in 4Q, the same may not be a strong tailwind; we expect 2% QoQ CC growth. Enterprise should be soft on the high base of 3QFY19 growth in Manufacturing and Retail, pegging our estimate at 1%, and overall company at 1.5% QoQ CC.

Among Tier-II IT companies, momentum for revenues should sustain at NITEC (3% QoQ CC) and MPHL (3.8% QoQ CC). LTI will be dragged by pressures in top BFS accounts; PSYS by weak IP revenues and CYL by deferred ramp-ups in services and regulatory delays in DLM contracts. MTCL should improve growth from 2.5% in the previous quarter (+3.1% QoQ CC) and March quarter’s seasonality should weigh on HEXW (+2.5% QoQ CC).

Supply concerns may weigh on margins of select companies Back-ended nature of investments at INFO will continue to weigh on its margins;

we expect 50bp QoQ decline to 22.4%. Margins should also normalize at WPRO, which is expected to settle between 18-19% (IT Services EBIT). We expect stable margin performance across TCS, HCLT and TECHM.

Among Tier-II, sharp decline in IP revenues will drag PSYS’ margins by ~400bp, the laggard in profitability this quarter. LTI should see normalization of margins

Company Name Cyient

HCL Tech

Hexaware

Infosys

L&T Infotech

Mindtree

Mphasis

NIIT Tech

Persistent

Tata Elxsi

TCS

Tech Mahindra

Wipro

Zensar


Technology

Ashish Chopra – Research Analyst ([email protected]); +91 22 61291530 Anmol Garg – Research Analyst ([email protected]); +91 22 6129 1574

April 2019 246


given the ~200bp reduction in utilization. Margins should decline at MTCL too (EBIT of 13%, -60bp QoQ), given investment in people at onsite v/s earlier outlook of flattish margins QoQ. Expect stable margins across the rest of our coverage universe.

Watch out for INFO’s margin guidance; HCLT’s revenue guidance and TCS’ BFS commentary INFO may not see calibration of investments in FY20, yet, margin guidance may

drop further to 21-23%, in our view. Our expectation comes on the back of aweak 4Q exit and the typical margin cycle of low 1Q followed by a gradualincrease. We expect INFO to start the year with revenue growth guidance of 7-9% YoY CC.

TCS’ comments on BFS will be crucial to get a grip on its sustenance of currentgrowth rates. The company has cited in the past that any macro concerns tendto reflect in the BFS vertical more prominently, given TCS’ wide coverage andnature of client spending.

We believe that HCLT should guide for revenue growth upwards of 15% YoY CCdue to contributions from: (1) improved organic growth (8-9% CC), (2) revenuesfrom IBM’s IP purchases (~5.5%), (3) recent mega deal with Xerox (~2%), and (4)residual impact from acquisition integration in FY19 (~0.5-1%).

We expect WPRO to start the year with a guidance of 1-3% QoQ CC revenuegrowth in 1QFY20.

Watchful of weakening pockets at current valuations; Prefer INFO, ZENT While no company has called out a secular slowdown, multiple companies in the

last month have cited pockets of weaknesses. With valuation multiples runninghigh (in the upper half of historical band, if not higher end), continuedaggravation of this trend could weigh on multiples.

We continue with our bottom-up stance for sectoral picks, and prefer INFO inTier-I and ZENT in Tier-II. Over the short-term, tactical valuation catch-up play isan opportunity for WPRO.

Exhibit 1: Expected quarterly performance summary Sector CMP Sales (INR m) EBIDTA (INR m) Net Profit (INR m)



% YoY Var


Var % QoQ

Technology Cyient 579 Neutral 11,985 12.9 0.9 1,831 22.7 4.7 1,287 9.0 39.8 HCL Technologies 1,101 Neutral 160,256 21.6 2.1 36,828 21.3 1.0 25,931 16.3 -0.7Hexaware Tech. 359 Neutral 12,725 21.3 1.6 1,916 17.8 0.2 1,441 7.3 16.8 Infosys 757 Buy 216,040 19.5 1.0 53,291 8.1 -1.5 40,151 8.8 0.7 L&T Infotech 1,714 Neutral 25,033 25.1 1.2 4,750 34.3 -6.7 3,652 8.0 -2.7Mindtree 945 Neutral 18,353 25.4 2.7 2,803 19.0 -1.1 1,909 12.6 10.9 MphasiS 989 Neutral 20,496 17.5 4.0 3,351 8.3 1.4 2,488 -0.7 -10.5NIIT Tech. 1,350 Neutral 9,848 24.8 1.3 1,792 26.4 -0.7 1,095 27.1 9.3 Persistent Systems 632 Buy 8,274 9.9 -4.3 1,302 17.2 -23.6 726 -1.5 -20.9Tata Elxsi 982 Buy 4,274 13.8 5.0 1,090 14.6 5.5 664 -5.5 0.7 TCS 2,080 Neutral 378,341 18.0 1.3 103,015 19.1 2.2 78,442 13.6 -3.2Tech Mahindra 792 Buy 90,810 12.7 1.5 17,360 23.0 0.8 12,092 -1.1 0.5 Wipro 262 Neutral 153,481 11.5 1.9 33,413 25.6 1.5 24,748 23.2 -2.7Zensar Tech 232 Buy 10,501 28.9 1.4 1,256 30.7 13.7 860 18.4 55.5 Sector Aggregate 1,120,417 17.7 1.5 263,997 18.1 0.7 195,486 12.6 -1.3

April 2019 247


Exhibit 2: HCLT to lead growth in tier-I Revenue (USD m) Revenue (INR b)

Company 4QFY19E 4QFY18 YoY (%) 3QFY19 QoQ (%) 4QFY19E 4QFY18 YoY (%) 3QFY19 QoQ (%) TCS 5,393 4,972 8.5 5,250 2.7 378 321 18.0 373 1.3 Infosys 3,065 2,805 9.3 2,987 2.6 216 181 19.5 214 1.0 Wipro 2,090 2,019 3.5 2,047 2.1 153 138 11.5 151 1.9 HCLT 2,273 2,038 11.6 2,202 3.3 160 132 21.6 157 2.1 TECHM 1,288 1,244 3.5 1,261 2.2 91 81 12.7 89 1.5 Aggregate 14,109 13,078 7.9 13,746 2.6 999 852 17.3 984 1.5

EBITDA Margin (%) PAT (INR b) Company 4QFY19E 4QFY18 YoY (%) 3QFY19 QoQ (%) 4QFY19E 4QFY18 YoY (%) 3QFY19 QoQ (%) TCS 27.2 27.0 30 27.0 20 78 69 12.8 81 (3.9) Infosys 24.7 27.3 (260) 25.3 (60) 40 37 8.8 40 0.7 Wipro 18.4 15.2 320 18.4 (10) 25 20 23.2 25 (2.7) HCLT 23.0 23.0 (10) 23.2 (30) 26 22 16.3 26 (0.7) TECHM 19.1 17.5 160 19.3 (10) 11 12 (13.2) 12 (11.8) Aggregate 23.9 23.6 30 24.0 (10) 179 161 11.7 185 (2.8)


Exhibit 3: PSYS likely to be a laggard in tier-II, expect sanguine growth at MPHL, NITEC Revenue (USD m) Revenue (INR b)

Company 4QFY19E 4QFY18 YoY (%) 3QFY19 QoQ (%) 4QFY19E 4QFY18 YoY (%) 3QFY19 QoQ (%) Persistent Sys. 117 117 0.4 121 (2.9) 8.3 7.5 9.9 8.6 (4.3) Hexaware 181 162 11.3 176 2.5 12.7 10.5 21.3 12.5 1.6 Mindtree 260 226 15.1 252 3.5 18.4 14.6 25.4 17.9 2.7 Mphasis 294 264 11.1 283 3.8 20.5 17.4 17.5 19.7 4.0 Cyient 166 165 1.1 165 0.8 12.0 10.6 12.9 11.9 0.9 NIIT Tech 140 122 14.2 135 3.5 9.8 7.9 24.8 9.7 1.3 Zensar 146 127 15.1 144 1.4 10.5 8.1 28.9 10.4 1.4 LTI 355 309 14.9 347 2.4 13.2 10.5 25.1 13.0 1.2 Aggregate 1,659 1,492 11.2 1,622 2.3 105.4 87.3 20.7 103.7 1.6

EBITDA margin (%) PAT (INR b) Company 4QFY19E 4QFY18 YoY (%) 3QFY19 QoQ (%) 4QFY19E 4QFY18 YoY (%) 3QFY19 QoQ (%) Persistent Sys. 15.7 14.8 100 19.7 (400) 0.7 0.7 (1.5) 0.9 (20.9) Hexaware 15.1 15.5 (40) 15.3 (20) 0.1 0.1 (1.5) 0.1 0.7 Mindtree 15.3 16.1 (80) 15.9 (60) 1.9 1.7 12.6 1.7 10.9 Mphasis 16.4 17.7 (140) 16.8 (40) 2.5 2.4 4.7 2.8 (10.5) Cyient 15.3 14.1 120 14.7 50 1.3 1.2 8.9 0.9 39.7 NIIT Tech 18.2 18.0 20 18.6 (40) 0.4 0.3 23.6 0.4 (20.0) Zensar 12.0 11.8 20 10.7 130 0.9 0.7 17.8 0.6 54.3 LTI 19.0 17.7 130 20.6 (160) 8.6 6.7 27.5 8.6 (0.6) Aggregate 15.6 15.5 10 16.0 (40) 16.3 13.8 17.8 16.0 1.5


Exhibit 4: HCLT to lead QoQ CC revenue growth; INFO to buck weak 4Q trend


1.4 1.6 2.2

4.5

2.6

-2.0

0.0

2.0

4.0

6.0

TCS INFO WPRO HCLT TECHM

1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

April 2019 248

March 2019 Results Preview | Sector: Technology Exhibit 5: YoY traction seen improving at INFO and HCLT


Exhibit 6: TCS continues to drive incremental revenues; Cross-currency tailwind this quarter between 30-70bp across tier-I


Exhibit 7: Operating margin to contract at INFO led by higher investments (EBITDA %)


Exhibit 8: PSYS, CYL struggling for revenue growth among Tier II


6.1

6.4

3.5

12.3

11.0

6.9

4.6

2.9

10.3

8.1

6.1

5.8

3.2

10.6

5.1

7.2

6.4

2.6

8.2

5.9

9.4

6.0

2.4 8.

3

6.9

11.5

8.1

5.0

10.6

4.5

11.7

9.0

6.3

11.9

4.7

11.7

10.8

6.7

13.9

4.5

TCS INFO WPRO HCLT TECHM

Revenue YoY CC (%) 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

-80

0

80

160

240

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

4QFY

19TCS Infosys Wipro HCL Tech Tech Mahindra

70

30

60

30

70

30 20

40 30 30

40 40 50

10

TCS

INFO

WPR

O

HCLT

TECH

M

MPH

L

LTI

MTC

L

KPIT

HEXW CY

L

ZEN

T

NIT

EC

PSYS

Cross currency impact on USD revenues (bp)

27.2 24.7

23.0

18.4 19.1

12

16

20

24

28

32

TCS Infosys HCL Tech Wipro Tech Mahindra


0.4

11.3 15.1

11.1

1.1

14.2 15.1 14.9

PSYS HEXW MTCL MPHL CYL NITEC ZENT LTI


Incremental revenue (USD m)

April 2019 249


Exhibit 9: 4QFY19 currency highlights (INR) Rates (INR) Change (QoQ)

USD EUR GBP AUD USD EUR GBP AUD Average 70.49 80.1 91.7 50.2 -2.2% -2.7% -1.2% -3.0%Closing 69.14 77.6 90.4 49.0 -1.2% -3.1% 1.8% -0.8%


Exhibit 10: 4QFY19 currency highlights (in USD) Rates (USD) Change (QoQ)

EUR GBP AUD EUR GBP AUD Average 1.14 1.30 0.71 -0.4% 1.3% -0.6%Closing 1.12 1.31 0.71 -1.9% 2.9% 0.6%


Exhibit 11: Relative performance—3m (%)


Exhibit 12: Relative performance—1Yr (%)


Exhibit 13: Comparative valuation Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%)

(INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Technology Cyient 579 Neutral 38.4 46.8 50.4 15.1 12.4 11.5 8.4 7.3 6.2 16.6 18.3 17.9 HCL Technologies 1,101 Neutral 73.7 81.1 91.7 14.9 13.6 12.0 10.1 8.6 7.6 25.7 24.9 25.2 Hexaware Tech. 359 Neutral 19.3 21.0 23.6 18.6 17.1 15.2 13.7 11.6 10.1 26.5 24.9 25.0 Infosys 757 Buy 36.2 38.7 45.3 20.9 19.6 16.7 14.9 14.0 12.2 25.5 27.1 29.4 L&T Infotech 1,714 Neutral 88.7 93.0 102.7 19.3 18.4 16.7 14.2 13.8 12.0 34.9 28.8 25.8 Mindtree 945 Neutral 45.4 50.7 61.2 20.8 18.7 15.5 14.9 13.4 11.0 24.6 24.4 25.5 MphasiS 989 Neutral 56.9 60.8 70.4 17.4 16.3 14.1 14.7 12.6 10.7 23.8 31.0 30.9 NIIT Tech. 1,350 Neutral 66.2 74.5 89.9 20.4 18.1 15.0 11.9 10.0 8.2 22.0 22.2 23.1 Persistent Systems 632 Buy 42.7 58.1 51.9 14.8 10.9 12.2 6.5 5.4 5.3 15.4 18.7 15.3 TCS 2,080 Neutral 82.3 88.2 98.6 25.3 23.6 21.1 19.8 18.1 16.4 36.4 38.5 41.1 Tata Elxsi 982 Buy 45.6 48.8 57.8 21.5 20.1 17.0 12.7 10.7 8.2 34.1 26.5 22.3 Tech Mahindra 792 Buy 49.1 54.1 60.7 16.1 14.6 13.0 11.9 10.9 9.6 22.7 23.5 24.3 Zensar Tech 232 Buy 14.0 15.5 18.5 16.5 14.9 12.5 10.1 8.2 6.6 17.9 17.2 17.9 Wipro 262 Neutral 14.8 16.6 18.3 17.7 15.8 14.3 11.3 10.1 9.1 17.3 17.0 17.8 Sector Aggregate 21.6 20.2 17.9 15.4 13.9 12.4 26.5 26.9 27.5

98

101

104

107

110

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Technology Index

80

95

110

125

140

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Technology Index

April 2019 250


Quarterly Perf. (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 141 150 152 165 161 169 165 166 608 661 QoQ (%) 0.0 6.5 1.3 8.3 -2.3 5.0 -2.2 0.8 13.0 8.8 Revenue (INR m) 9,070 9,654 9,834 10,618 10,800 11,870 11,876 11,985 39,176 46,531 YoY (%) 8.6 5.7 7.2 12.8 11.9 20.7 11.8 11.0 8.6 18.8 GPM (%) 34.9 35.4 35.6 34.8 34.3 34.5 35.0 35.1 35.2 34.7 SGA (%) 22.1 20.8 21.1 20.8 22.1 20.8 20.3 19.8 21.2 20.7 EBITDA 1,160 1,410 1,431 1,492 1,316 1,627 1,749 1,831 5,493 6,523 EBITDA Margin (%) 12.8 14.6 14.6 14.1 12.2 13.7 14.7 15.3 14.0 14.0 EBIT Margin (%) 9.9 11.9 11.8 11.6 9.5 11.3 12.4 13.2 11.3 11.7 Other income 350 407 273 409 170 568 -187 202 1,439 753 ETR (%) 31.2 28.0 18.3 21.3 27.2 29.8 22.4 24.0 24.4 26.1 PAT 876 1,116 1,086 1,181 825 1,272 921 1,287 4,291 4,305 QoQ (%) 11.6 27.4 -2.7 8.7 -30.1 54.2 -27.6 39.8 YoY (%) 18.4 14.7 15.5 50.4 -26.1 17.1 -22.0 56.0 16.0 0.3 EPS (INR) 7.8 9.9 9.7 10.5 7.4 11.4 8.2 11.5 38.2 38.4 Headcount 12,201 12,537 12,799 13,087 13,851 13,845 14,002 14,202 13,087 14,202 Util incl. trainees (%) 74.1 75.9 78.6 76.7 75.0 78.0 78.1 78.0 Attrition (%) 16.6 14.2 16.8 16.9 16.9 16.9 18.4 Offshore rev. (%) 40.4 41.2 42.8 44.0 41.9 42.8 42.4 42.4 E: MOFSL Estimates


CyientCMP: INR579 TP: INR650 (+13%) Neutral According to a CYL press release, DLM revenue will be materially

impacted due to deferment of a large deal; the impact will beclose to USD5m. Considering this, we expect DLM revenue atUSD20m.

CYL also cited that there will be some delay in orders from one ofthe customers in A&D and the communications business. We expect services business to report revenue of USD146m

Considering cross currency impact of 40bp, we expect CYL toreport growth of 0.4% QoQ CC on a consolidated basis.

We expect CYL’s full-year EBITDA margin to be flat at 14%. Thisimplies marginal expansion in 4Q EBITDA margins. Our 4Q marginestimate stands at 15.3%.

Consequently, our PAT estimate of INR1,287m implies 40%sequential growth, led by lower base of the previous quarter.

The stock trades at 12.4x FY20E and 11.5x FY20E EPS. MaintainNeutral.

Key issues to watch for Update on trajectory of top customer and aerospace Trajectory in Communications Outlook on investments and profitability Outlook for Rangsons

Bloomberg CYL IN


1,6,12 Rel Perf. (%) -19 / -31 / -33


Sales 39.2 46.5 51.9 57.9




P/BV (x) 2.8 2.5 2.3 2.1 EV/EBITDA (x) 10.4 8.4 7.3 6.2

Div yld (%) 2.2 2.2 2.2 2.6

April 2019 251


Quarterly Performance (INR m) 22.9% Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 1,884 1,928 1,988 2,038 2,055 2,099 2,202 2,273 7,838 8,628 QoQ (%) 3.7 2.3 3.1 2.5 0.8 2.1 4.9 3.3 12.4 10.1 Revenue (INR m) 1,21,490 1,24,340 1,28,080 1,31,790 1,38,780 1,48,610 1,56,990 1,60,256 5,05,700 6,04,636 YoY (%) 7.2 7.9 8.4 9.3 14.2 19.5 22.6 21.6 8.2 19.6 GPM (%) 33.7 34.0 34.3 35.0 34.4 35.5 35.3 34.6 34.3 35.0 SGA (%) 11.6 11.8 11.2 12.0 11.1 11.9 12.1 11.6 11.7 11.7 EBITDA (INRm) 26,810 27,590 29,640 30,360 32,260 34,990 36,470 36,828 1,14,400 1,40,548 EBITDA Margin (%) 22.1 22.2 23.1 23.0 23.2 23.5 23.2 23.0 22.6 23.2 EBIT Margin (%) 20.1 19.7 19.6 19.6 19.7 20.0 19.7 19.5 19.8 19.7 Other income 2,690 2,980 2,640 2,800 2,960 2,520 1,050 1,587 11,110 8,117 ETR (%) 20.0 20.4 20.9 22.1 20.6 21.1 21.1 21.1 20.9 20.1 Adjusted PAT 21,710 21,880 21,940 22,290 24,040 25,400 26,110 25,931 87,820 1,01,481 QoQ (%) 7.2 0.8 0.3 1.6 7.9 5.7 2.8 -0.7YoY (%) 6.3 8.6 5.9 10.1 10.7 16.1 19.0 16.3 3.8 15.6 EPS 15.1 15.7 15.7 16.0 17.3 18.2 19.2 19.0 62.6 73.7 Headcount 1,17,781 1,19,040 1,19,291 1,20,081 1,24,121 1,27,875 1,32,328 1,36,328 1,20,081 1,36,328 Util excl. trainees (%) 85.7 86.0 85.8 85.9 85.5 86.7 87.7 88.7 83.7 84.3 Attrition (%) 16.2 15.7 15.2 15.5 16.3 17.1 Fixed Price (%) 59.8 60.4 60.8 61.6 62.0 61.8 E: MOFSL Estimates


HCL TechnologiesCMP: INR1101 TP: INR1,200 (+9%) Neutral We expect HCL’s revenue to grow at 3.3% QoQ in USD terms / 3%

QoQ CC, mainly due to continued traction in IMS backed by itsdouble-digit sequential growth in 3QFY19.

We believe that HCLT should guide for revenue growth upwardsof 15% YoY CC due to contributions from: (1) improved organicgrowth (8-9% CC), (2) revenues from IBM’s IP purchases (~5.5%),(3) recent mega deal with Xerox (~2%), and (4) residual impactfrom acquisition integration in FY19 (~0.5-1%).

We expect EBIT margins to be ~19.5%, a decline of 20bp QoQ. PAT is expected to decline by 1.2% QoQ to INR 25.9b. The stock trades at 13.6x FY20E and 12x FY21E EPS. Maintain

Neutral.

Key issues to watch for Overall guidance for FY20, organic and inorganic contribution Mode 1: Demand for IMS services and growth in BFSI vertical Mode 3: Plan to launch more HCL branded products and ability

to sell them in the market

Bloomberg HCLT IN


M. Cap. (INR b)/(USD b) 1555 / 23


1,6,12 Rel Perf. (%) -4 / -7 / -5


Sales 505.7 604.6 698.3 772.7

EBITDA 114.4 140.5 167.2 189.6

PAT 87.8 101.5 110.6 125.2

EPS (INR) 62.6 73.7 81.1 91.7

EPS Gr. (%) 4.5 17.8 10.1 13.0

BV/Sh. (INR) 264.5 309.5 342.4 385.8

RoE (%) 25.0 25.7 24.9 25.2

RoCE (%) 22.6 23.3 21.7 21.6

Payout (%) 12.8 11.5 49.3 43.6

Valuation P/E (x) 17.6 14.9 13.6 12.0

P/BV (x) 4.2 3.6 3.2 2.9

EV/EBITDA (x) 12.5 10.1 8.6 7.6

Div yld (%) 0.7 0.8 3.6 3.6

April 2019 252


Quarterly Performance (Indian GAAP, INR m) Y/E Dec CY18 CY19 CY18E CY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 162.2 168.3 171.1 176.1 180.5 186.8 193.4 203.0 678 764 QoQ (%) 3.9 3.8 1.7 2.9 2.5 3.5 3.5 5.0 11.6 12.7 Revenue (INR m) 10,490 11,367 12,096 12,524 12,725 13,078 13,541 14,212 46,477 53,556 YoY (%) 9.2 15.6 21.8 24.6 21.3 15.1 11.9 13.5 17.9 15.2 GPM (%) 32.9 31.8 32.8 31.6 31.4 31.6 31.6 30.3 32.2 31.2 SGA (%) 17.4 16.2 16.0 16.3 16.3 16.2 15.0 14.8 16.5 15.5 EBITDA 1,626 1,773 2,023 1,913 1,916 2,012 2,250 2,205 7,335 8,384 EBITDA Margin (%) 15.5 15.6 16.7 15.3 15.1 15.4 16.6 15.5 15.8 15.7 EBIT Margin (%) 14.1 14.0 15.4 14.0 13.8 14.2 15.4 14.3 14.4 14.4 Other income 204 327 264 -215 56 66 52 58 580 232 ETR (%) 20.0 20.0 19.1 19.9 20.5 20.5 20.5 20.5 19.7 20.5 PAT 1,343 1,534 1,722 1,234 1,441 1,525 1,699 1,664 5,833 6,329 QoQ (%) 10.9 14.2 12.3 -28.3 16.8 5.8 11.4 -2.1YoY (%) 17.9 25.3 21.3 1.9 7.3 -0.6 -1.3 34.9 16.8 8.5 EPS (INR) 4.5 5.1 5.7 4.1 4.8 5.1 5.6 5.5 19.3 21.0 Headcount 14,619 15,357 16,050 16,205 16,513 17,128 17,774 18,697 16,205 18,697 Utilization (%) 81.3 78.2 79.0 78.7 80.0 80.0 80.0 80.0 80.9 81.4 Attrition (%) 13.4 14.4 15.7 17.0 0.0 0.0 0.0 0.0 Offshore rev. (%) 34.6 34.8 35.1 36.1 36.8 36.9 37.1 37.2 35.2 37.0 E: MOFSL Estimates


Hexaware TechnologiesCMP: INR359 TP: INR365 (+2%) Neutral We expect USD revenue to grow at 2.5% QoQ, with cross-

currency tailwind of 30bp. HEXW declared revenue guidance for CY19 at 12-14%, ahead of

previous year’s guidance. HEXW cited that most of the growth willbe clocked in during the latter part of the year, due to calendarimpact ad 4Q deal ramp-up.

EBITDA margin at 15.1% is 20bp lower, primarily on account ofsupply situations. Regulators are also engaging in post-approvalchecks, verifying facts with clients.

Our PAT estimate for the quarter is INR1,441m, up 6% from theprevious quarter despite marginal increase in operational income.This is due to lower base of previous quarter.

HEXW trades at 17x of CY19E and 15.1x CY20E earnings. Neutral.

Key issues to watch for 1QCY19 deals TCV Commentary on acquisitions Margin outlook given the recent commentary on supply issues

Bloomberg HEXW IN


M. Cap. (INR b)/(USD b) 108 / 2


1,6,12 Rel Perf. (%) -8 / -24 / -31

Financial Snapshot (INR b) Y/E DEC 2017 2018E 2019E 2020E

Sales 39.4 46.5 53.6 61.3

EBITDA 6.6 7.3 8.4 9.3

PAT 5.0 5.8 6.3 7.1

EPS (INR) 16.6 19.3 21.0 23.6

EPS Gr. (%) 21.2 16.5 8.5 12.6

BV/Sh. (INR) 66.0 79.7 89.2 99.8

RoE (%) 26.9 26.5 24.9 25.0

RoCE (%) 24.6 24.7 24.7 24.6

Payout (%) 23.5 40.2 44.0 45.2

Valuation P/E (x) 21.6 18.6 17.1 15.2

P/BV (x) 5.4 4.5 4.0 3.6

EV/EBITDA (x) 15.3 13.3 11.3 9.8

Div yld (%) 1.1 2.2 2.6 3.1

April 2019 253


Quarterly performance (INR m) Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 2,651 2,728 2,755 2,805 2,831 2,921 2,987 3,065 10,939 11,804 QoQ (%) 3.2 2.9 1.0 1.8 0.9 3.2 2.3 2.6 7.2 7.9 Revenue (INR m) 1,70,780 1,75,670 1,77,940 1,80,830 1,91,280 2,06,090 2,14,000 2,16,040 7,05,220 8,27,410 YoY (%) 1.8 1.5 3.0 5.6 12.0 17.3 20.3 19.5 3.0 17.3 GPM (%) 38.8 38.7 38.5 38.6 38.0 37.8 37.2 36.9 38.6 37.5 SGA (%) 12.1 11.9 11.4 11.4 12.0 11.8 11.9 12.2 11.7 12.0 EBITDA 45,610 47,020 48,170 49,310 49,730 53,580 54,100 53,291 1,90,100 2,10,691 EBITDA Margin (%) 26.7 26.8 27.1 27.3 26.0 26.0 25.3 24.7 27.0 25.5 EBIT Margin (%) 24.1 24.2 24.3 24.7 23.7 23.7 23.0 22.4 24.3 23.2 Other income 8,140 8,830 9,620 5,340 7,260 7,390 7,530 6,537 31,930 28,717 ETR (%) 28.2 27.4 2.9 26.3 26.2 27.0 29.7 27.0 20.9 26.8 PAT 34,880 37,260 36,970 36,900 36,120 41,100 39,891 40,151 1,61,030 1,61,551 QoQ (%) -3.2 6.8 -0.8 -0.2 -2.1 13.8 -2.9 0.7 YoY (%) 1.5 3.3 -0.3 2.4 3.6 10.3 7.9 8.8 12.0 0.3 EPS (INR) 7.6 8.1 8.1 8.5 8.3 9.4 9.2 9.2 32.4 36.2 Headcount 1,98,553 1,98,440 2,01,691 2,04,107 2,09,905 2,17,739 2,25,501 2,35,475 2,04,107 2,35,475 Util excl. trainees (%) 84.5 85.1 85.4 85.1 86.1 86.0 84.2 84.5 85.5 85.1

December 2018 Results Preview | Sector: Technology

InfosysCMP: INR757 TP: INR870 (+15%) Buy Due to ramp-up in a large Communications deal, we expect

INFO’s 4Q to be better than the usual 3Q. Our estimate is 2.3%QoQ and 12% YoY.

USD revenue growth estimate is 2.6%, with 30bp tailwind fromcross currencies QoQ.

We expect INFO EBIT margin to correct by 60bp QoQ to 22.4%, inline with its outlook of back-ended investments weighing on its profitability.

Our PAT estimate is INR40.1b, +0.7% QoQ and 8.8% YoY. On guidance, we expect INFO to guide for 7-9% CC revenues for

FY20 and 21-23% EBIT margin band (100bp lower). INFO trades at 19.6x of FY20E and 16.7x CY21E earnings. Buy.

Key issues to watch for Guidance on revenues and margins for FY20 Deal wins TCV due to a couple of healthy quarters Attrition rate and color on that for better performers

Bloomberg INFO IN


M. Cap. (INR b)/(USD b) 3461 / 50


1,6,12 Rel Perf. (%) -6 / -5 / 17


Sales 705.2 827.4 913.1 1,021.3

EBITDA 190.1 210.7 225.6 253.3

PAT 161.0 161.6 167.9 196.7

EPS (INR) 32.4 36.2 38.7 45.3

EPS Gr. (%) 3.1 11.7 6.9 17.1

BV/Sh. (INR) 143 142.4 142.8 165.7

RoE (%) 24.1 25.5 27.1 29.4

RoCE (%) 24.1 25.5 27.1 29.4

Payout (%) 126.2 67.6 88.9 40.9

Valuations P/E (x) 23.4 20.9 19.6 16.7

P/BV (x) 5.3 5.3 5.3 4.6

EV/EBITDA (x) 16.4 14.1 13.2 11.5

Div Yield (%) 2.1 2.9 2.4 2.4


Infosys

April 2019 254



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 259 271 294 309 320 329 347 355 1,132 1,350 QoQ (%) 2.0 4.4 8.5 5.3 3.5 2.7 5.6 2.4 16.7 19.3 Revenue (INR m) 16,707 17,509 18,837 20,012 21,557 23,312 24,729 25,033 73,065 94,631 YoY (%) 7.4 9.3 13.0 19.3 29.0 33.1 31.3 25.1 12.4 29.5 GPM (%) 33.8 33.9 33.3 33.5 35.2 35.1 34.8 34.2 33.6 35.3 SGA (%) 17.0 17.1 16.2 15.9 15.7 14.6 14.2 15.2 16.5 14.9 EBITDA 2,799 2,943 3,215 3,537 4,190 4,790 5,090 4,750 12,494 19,315 EBITDA Margin (%) 16.8 16.8 17.1 17.7 19.4 20.5 20.6 19.0 17.1 20.4 EBIT Margin (%) 14.4 14.5 14.9 15.9 17.7 19.0 19.1 17.5 15.0 18.9 Other income 1,084 1,017 883 1,118 1,036 943 288 479 4,101 2,746 ETR (%) 23.4 23.2 23.4 21.3 25.5 25.4 25.2 25.0 22.8 24.7 Adj PAT 2,673 2,730 2,829 3,380 3,612 4,003 3,755 3,652 11,612 15,022 QoQ (%) 4.9 2.1 3.6 19.5 6.9 10.8 -6.2 -2.7YoY (%) 13.3 17.4 14.0 32.7 35.1 46.6 32.7 8.0 19.6 29.4 EPS (INR) 15.3 15.6 16.2 19.3 20.6 22.9 21.6 21.0 66.3 88.7 Headcount 22,321 22,554 23,394 24,139 25,150 26,414 27,513 29,153 24,139 29,153 Util incl. trainees (%) 77.7 79.6 80.3 79.9 79.7 80.4 82.1 80.0 79.4 80.6 Attrition (%) 14.7 15.0 14.6 14.8 15.1 15.3 16.5 Offshore rev. (%) 53.2 53.4 53.8 54.3 53.2 52.4 52.2 52.5 53.7 52.6 E: MOFSL Estimates

CMP: INR1714 TP: INR1950 (+14%) Neutral We expect organic growth to be muted at 1% QoQ CC, while

consolidated growth is pegged at 2.2% QoQ CC led byacquisitions.

With limited cross currency impact (+20bp) we expect USDrevenue growth at 2.4% QoQ, and FY19 growth at 19.3% YoY.

Organic growth will be dragged by softness in BFSI (29% ofrevenue) led by weak spending from top client.

We expect margins to shrink by 150bp led by (1) 200bp drop inutilization, and (2) INR appreciation.

Our PAT estimate is INR3.6b (-2.7% QoQ), led by loweroperational income.

LTI trades at 18.4x FY20E and 16.7x FY20E earnings. Neutral.

Key issues to watch for Large deal wins during the quarter Outlook in top client Growth in digital revenue

Bloomberg LTI IN


M. Cap. (INR b)/(USD b) 295 / 4

52-Week Range (INR) 1990 / 1330

1,6,12 Rel Perf. (%) -8 / -18 / 4

Financial Snapshot (INR b) Y/E MAR 2018 2019 2020E 2021E

Sales 73.1 94.6 105.9 120.5

EBITDA 12.5 19.3 19.3 21.3

PAT 11.6 15.5 16.3 18.0

EPS (INR) 66.3 88.7 93.0 102.7

EPS Gr. (%) 19.6 33.7 4.9 10.5

BV/Sh. (INR) 220.6 287.9 358.6 436.6

RoE (%) 33.1 34.9 28.8 25.8

RoCE (%) 31.2 42.0 33.8 31.0

Payout (%) 21.2 20.0 20.0 20.0

Valuations P/E (x) 25.8 19.3 18.4 16.7

P/BV (x) 7.8 6.0 4.8 3.9

EV/EBITDA (x) 22.7 14.5 14.0 12.2

Div yld (%) 0.8 1.0 1.1 1.2


LTI

April 2019 255


Quarterly Performance Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 200 206 214 226 242 246 252 260 847 1,000 QoQ (%) 2.3 3.0 3.9 5.5 6.8 2.0 2.1 3.5 8.6 18.1 Revenue (INR m) 12,895 13,316 13,777 14,640 16,395 17,554 17,872 18,353 54,628 70,174 YoY (%) -2.9 2.8 6.4 11.1 27.1 31.8 29.7 25.4 4.3 28.5 GPM (%) 34.9 32.4 35.1 36.5 36.6 36.4 37.7 37.1 34.8 36.9 SGA (%) 23.8 20.8 20.0 20.4 22.5 21.0 21.8 21.8 21.2 21.8 EBITDA 1,435 1,541 2,074 2,355 2,310 2,699 2,833 2,803 7,405 10,645 EBITDA Margin (%) 11.1 11.6 15.1 16.1 14.1 15.4 15.9 15.3 13.6 15.2 EBIT Margin (%) 7.3 8.0 11.7 13.1 11.5 13.1 13.6 13.0 10.1 12.8 Other income 368 368 8 464 279 524 -200 206 1,208 809 ETR (%) 28.6 28.9 31.1 28.7 26.8 26.8 22.5 26.5 29.3 25.8 Adj. PAT 931 1,017 1,115 1,695 1,582 2,063 1,722 1,909 4,758 7,276 QoQ (%) -4.2 9.3 9.6 52.1 -6.7 30.4 -16.5 10.9 YoY (%) -24.6 7.3 8.1 74.4 70.0 102.8 54.5 12.6 13.7 52.9 EPS (INR) 7.2 7.4 8.6 11.1 9.6 12.6 11.6 11.6 34.4 45.4 Headcount 16,561 16,910 17,200 17,723 18,990 19,402 19,908 20,628 17,723 20,628 Util incl. trainees (%) 73.2 73.2 72.8 73.8 75.4 74.5 74.6 73.5 73.3 74.5 Attrition (%) 14.0 13.0 12.6 12.5 12.2 13.0 Fixed Price (%) 52.9 55.5 56.4 56.8 56.4 56.1 E: MOFSL Estimates


MindTreeCMP: INR945 TP: INR1,000 (+6%) Neutral MTCL in previous quarters guided that growth will be in line with

3Q, although we believe it may exceed the previous quarter ledby healthy demand and positive seasonality. We peg our 4QFY19estimate at 3.1% QoQ CC.

With cross currency impact of 40bp, we expect USD revenuegrowth at 3.5% QoQ.

EBITDA margin is expected to decline v/s flattish earlier due toinvestments in people and sub-contractors. We expect EBITDAmargin for 4Q to be 15.3%. Consequently, we expect EBITDAmargin for full-year FY19 to be 15.2%.

Our PAT estimate for the quarter is INR1.9b, which implies asequential growth of 11%. This is due to lower base in theprevious quarter.

The stock trades at 18.7x FY20E and 15.5x FY21E earnings.Neutral.

Key issues to watch for Update on the weak performing Retail and BFS verticals Margin trajectory, going forward, given expected improvement

in organic growth next year too Deal wins during the quarter and growth in Digital

Bloomberg MTCL IN


M. Cap. (INR b)/(USD b) 159 / 2


1,6,12 Rel Perf. (%) -7 / -19 / 0

Financial Snapshot (INR b) Y/E MARCH 2018 2019 2020E 2021E

Sales 54.6 70.2 79.1 90.4

EBITDA 7.4 10.6 11.6 13.8

PAT 4.8 7.3 8.3 10.1

EPS (INR) 34.4 45.4 50.7 61.2

EPS Gr. (%) 38.0 32.1 11.6 20.7

BV/Sh. (INR) 166.7 193.1 222.0 257.8

RoE (%) 17.9 24.6 24.4 25.5

RoCE (%) 20.6 30.3 29.1 30.8

Payout (%) 32.0 33.0 35.5 34.3

Valuation P/E (x) 27.5 20.8 18.7 15.4

P/BV (x) 5.7 4.9 4.3 3.7

EV/EBITDA (x) 19.5 13.6 12.3 10.1

Div Yld (%) 1.2 1.6 1.9 2.2

April 2019 256



Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Revenue (USD m) 231 242 252 264 269 276 283 294 989 1,121 QoQ (%) 4.2 4.9 3.8 5.0 1.7 2.6 2.6 3.8 10.7 13.3 Revenue (INR m) 15,360 16,047 16,607 17,445 18,202 19,149 19,710 20,496 65,459 77,557 YoY (%) 1.3 5.7 8.1 15.8 18.5 19.3 18.7 17.5 7.7 18.5 GPM (%) 27.3 27.5 27.6 28.5 28.9 28.1 27.9 28.0 27.7 28.2 SGA (%) 12.4 12.1 11.1 10.7 11.2 10.7 11.2 11.6 11.5 11.2 EBITDA 2,295 2,493 2,742 3,095 3,201 3,329 3,306 3,351 10,625 13,187 EBITDA Margin (%) 14.9 15.5 16.5 17.7 17.6 17.4 16.8 16.4 16.2 17.0 EBIT Margin (%) 13.8 14.4 15.5 16.8 16.6 16.4 15.8 15.5 15.1 16.1 Other income 469 375 354 422 449 467 499 150 1,620 1,565 ETR (%) 26.9 25.4 26.0 26.0 24.7 24.5 24.5 24.5 25.4 24.0 PAT 1,872 1,977 2,150 2,507 2,583 2,709 2,780 2,488 8,507 10,560 QoQ (%) -3.2 5.6 8.8 16.6 3.0 4.9 2.6 -10.5YoY (%) -8.4 -8.7 5.2 29.6 38.0 37.0 29.3 -0.7 3.9 24.1 EPS (INR) 9.1 10.2 11.1 12.3 13.4 14.0 14.4 13.4 44.0 55.2 Headcount 21,878 22,183 22,270 22,264 22,566 23,478 24,215 24,278 22,264 24,278 Net Additions -101 305 87 -6 302 912 737 63 285 2014 HP Channel rev. (%) 25.8 26.1 26.0 27.0 27.4 28.3 29.0 Fixed Price (%) 21.3 22.6 24.8 26.3 26.5 24.6 24.1 E: MOFSL Estimates

CMP: INR989 TP: INR1,050 (+6%) Neutral The strong growth in Direct channel, continued recovery in the HP

channel and strong traction from the Blackstone portfolio areexpected to drive 3.5% QoQ CC growth for MPHL in 4QFY19.Digital Risk is the only segment that continues to face challenges.

Cross-currency tailwind of 30bp would push USD revenue growthto 3.8% QoQ.

This would mark another quarter of strong YoY growth at 13.1%CC.

We expect EBIT margin to marginally dip by 40bp led by supplyissues. Impact from currencies is minimal for MPHL due to hedgegains/losses that are captured in the top line.

Our PAT estimate is INR2.5b (-10.5% QoQ), despite higheroperating profits QoQ, mainly due to lower other income.

The stock trades at 16.1x FY20E and 14.1x FY21E EPS. Neutral.

Key issues to watch for Outlook for Digital Risk Comments on DXC channel and potential pricing risk Traction in Direct International channel and the Blackstone

portfolio

Bloomberg MPHL IN


M. Cap. (INR b)/(USD b) 191 / 3


1,6,12 Rel Perf. (%) -13 / -22 / -1


Sales 65.5 77.6 88.6 100.8

EBITDA 10.6 13.2 15.1 17.4

PAT 8.5 10.6 11.3 13.0

EPS (INR) 44.0 55.2 60.8 70.4

EPS Gr. (%) 13.2 25.4 10.0 15.8

BV/Sh. (INR) 283.6 182.0 217.1 265.6

RoE (%) 14.6 23.8 31.0 30.9

RoCE (%) 13.8 21.8 28.3 29.2

Payout (%) 45.4 141.0 46.1 39.8

Valuations P/E (x) 22.5 17.9 16.3 14.1

P/BV (x) 3.5 5.4 4.6 3.7

EV/EBITDA(x) 16.0 14.1 11.6 9.4

Div yld (%) 2.0 8.1 2.8 2.8


Mphasis

April 2019 257


Quarterly Performance (IND-AS, INR m) Y/E March FY18 FY19 FY18 FY19E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Rev. (USD m) Ex. forex & bought outs 110 115 117 122 124 131 135 140 464 530 QoQ (%) 5.5 4.4 1.7 4.7 1.7 5.3 3.0 3.5 13.6 14.3 Revenue (INR m) 7,089 7,372 7,565 7,888 8,249 9,074 9,717 9,848 29,914 36,888 YoY (%) 5.7 6.4 9.0 9.9 16.4 23.1 28.4 24.8 7.8 23.3 GPM (%) 35.4 35.0 36.4 36.6 34.1 35.0 35.4 35.0 35.9 34.9 SGA (%) 19.8 18.9 19.3 18.6 18.2 17.0 16.8 16.8 19.1 17.2 EBITDA (INR m) 1,108 1,190 1,296 1,418 1,307 1,634 1,805 1,792 5,012 6,538 EBITDA Margin (%) 15.6 16.1 17.1 18.0 15.8 18.0 18.6 18.2 16.8 17.7 EBIT Margin (%) 11.2 11.5 13.0 14.1 12.1 14.5 15.3 15.0 12.5 14.3 Other income 58 87 5 148 209 215 5 41 298 470 ETR (%) 34.7 21.8 16.5 22.8 24.9 23.7 29.7 23.5 23.5 25.5 Minority Interest 42.0 61.0 70.0 112.0 46.0 49.0 49.0 64.0 285.0 208.0 PAT 513 671 757 861 858 1,118 1,002 1,095 2,802 4,073 QoQ (%) -30.6 30.8 12.8 13.7 -0.3 30.3 -10.4 9.3 25.2 45.4 YoY (%) 80.0 13.7 21.3 16.5 67.3 66.6 32.4 27.1 EPS (INR) 8.7 11.4 12.3 14.0 14.0 18.2 16.3 17.8 46.4 66.2 Headcount 8,963 9,022 9,081 9,423 9,764 10,025 10,144 10,769 9,423 10,769 Util excl. trainees (%) 81.2 79.5 79.0 79.5 80.1 80.4 79.0 78.0 79.8 79.3 Attrition (%) 12.1 11.4 11.4 10.5 10.1 10.8 11.7 Offshore rev. (%) 40.0 39.0 39.0 39.0 36.0 36.0 35.0 39.2 35.7 Fixed Price (%) 49.0 48.0 46.0 46.0 47.0 45.0 47.0 E: MOFSL Estimates


NIIT TechnologiesCMP: INR1,349 TP: INR1,400 (+4%) Neutral We expect growth momentum from the previous quarter to

continue. 4QFY19 will have only partial seasonality of GIS as someof it was realized in 3Q; that said, we expect 3% QoQ CC growth in4QFY19.

Cross-currency headwinds would add 50bp to this growth,resulting in 3.5% QoQ growth in USD terms.

With deal wins abnormally high in the previous two quarters,NITEC can do 14-15% growth against 12% base expectations.

We expect EBITDA margins to slightly taper off led by INRappreciation and normalization of utilization levels. Our EBITDAmargin estimate for the quarter stands at 18.2%.

Our PAT estimate is INR1,095m (+9.3% QoQ), primarily led bylower base of 3Q.

The stock trades at 18.1x FY20E and 15x FY21E earnings. Neutral.

Key issues to watch for Traction in Digital and the international business Progress on development of strategy under new leadership Deal wins and outlook for the year

Bloomberg NITEC IN




1,6,12 Rel Perf. (%) -6 / 9 / 36

Financial Snapshot (INR b) Y/E MARCH 2018 2019 2020E 2021E

Sales 29.9 36.9 42.0 47.5

EBITDA 5.0 6.5 7.4 8.7

PAT 2.8 4.1 4.6 5.5

EPS (INR) 45.6 66.2 74.5 89.9

EPS Gr. (%) 19.8 45.4 12.6 20.7

BV/Sh. (INR) 288.5 312.4 360.6 418.1

RoE (%) 16.2 22.0 22.2 23.1

RoCE (%) 16.2 20.8 21.8 22.2

Payout (%) 32.9 52.9 29.5 30.0

Valuations

P/E (x) 29.6 20.4 18.1 15.0

P/BV (x) 4.7 4.3 3.7 3.2

EV/EBITDA (x) 15.0 12.0 10.1 8.2

Div Yld (%) 1.1 2.6 1.6 2.0

April 2019 258


Quarterly Performance (IFRS, INR m) Y/E March FY18 FY18E FY18 FY19E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 113.0 118.1 122.5 117.0 123.6 118.2 120.8 117.4 471 480 QoQ (%) 3.6 4.5 3.8 -4.6 5.7 -4.3 2.2 -2.9 9.7 2.0 Revenue (INR m) 7,280 7,613 7,919 7,525 8,343 8,356 8,642 8,274 30,337 33,615 QoQ (%) 0.1 4.6 4.0 -5.0 10.9 0.2 3.4 -4.3YoY (%) 3.7 8.1 6.2 3.5 14.6 9.8 9.1 9.9 5.4 10.8 GPM (%) 34.3 34.4 36.7 34.6 35.6 35.3 38.2 33.5 35.0 35.7 SGA (%) 20.0 19.2 19.4 19.9 18.8 18.0 18.3 17.8 19.6 18.3 EBITDA 1,044 1,158 1,375 1,111 1,400 1,436 1,703 1,302 4,687 5,842 EBITDA Margin (%) 14.3 15.2 17.4 14.8 16.8 17.2 19.7 15.7 15.5 17.4 EBIT Margin (%) 9.0 10.2 12.4 9.2 12.0 12.4 15.1 10.9 10.2 12.6 Other income 368 336 193 294 187 231 -12 104 1,190 510 ETR (%) 26.3 25.9 22.0 25.1 26.4 30.5 29.2 28.0 24.7 28.6 PAT 751 826 917 737 873 881 917 726 3,231 3,398 QoQ (%) -10.8 10.0 10.9 -19.6 18.5 0.9 4.1 -20.9YoY (%) 2.5 12.4 11.9 -12.5 16.3 6.7 0.1 -1.5 3.3 5.2 EPS (INR) 9.4 10.3 11.5 9.2 10.9 11.0 11.5 9.3 40.4 42.7 Headcount 9,401 9,246 9,109 8,976 8,902 9,302 9,530 8,976 8,976 9,894 Util excl. trainees (%) 77.2 78.6 79.9 81.2 80.7 81.9 82.1 81.2 79.2 80.6 Attrition (%) 15.5 15.5 14.7 14.7 14.8 15.4 IP rev. proportion(%) 27.2 26.0 26.8 22.3 27.4 25.6 25.0 22.3 25.6 24.9 E: MOFSL Estimates


Persistent SystemsCMP: INR632 TP: INR800 (+26%) Buy We expect USD5m decline in PSYS’s IP revenue in 4QFY19. Our

estimate for IP revenue stands at USD25.3m. We expect services to grow at a nominal growth rate of 1.6% QoQ

in dollar terms. Combining these two, our expected revenue for4Q should decline by 2.9% QoQ.

With USD5m impact in IP revenue, we expect a 400bp decline inmargins. Our margin estimate for 4Q stands at 10.9%.

Consequently, PAT estimate for the quarter is INR726m, down21% QoQ, primarily because of lower operational income.

The stock trades at 10.9x FY20E and 12.2x FY21E earnings. Buy.

Key issues to watch for Performance and outlook for top clients in ISV (ex-IBM) Commentary on traction with Enterprise customers and

potential of winning large deals in Digital Outlook on sustainable profit margins in the near-to-medium

term

Bloomberg PSYS IN


1,6,12 Rel Perf. (%) -14 / -23 / -25

Financial Snapshot (INR b) Y/E MARCH 2018 2019E 2020E 2021E Sales 30.3 33.6 37.0 40.7

EBITDA 4.7 5.8 6.8 6.1

Adj. PAT 3.2 3.4 4.4 4.0

Adj. EPS (INR) 40.4 42.7 58.1 51.9

EPS Gr. (%) 7.2 5.6 36.3 -10.8

BV/Sh.(INR) 273.8 295.0 316.9 348.9

RoE (%) 16.0 15.4 18.7 15.3

RoCE (%) 15.2 14.4 14.2 17.1

Payout (%) 24.8 35.2 27.5 30.8

Valuations

P/E (x) 15.7 14.8 10.9 12.2

P/BV (x) 2.3 2.1 2.0 1.8

EV/EBITDA (x) 8.1 6.3 5.1 5.1

Div. Yield (%) 1.6 2.4 2.5 2.5

April 2019 259


Consolidated - Quarterly Earning Model (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Sales 3,232 3,422 3,455 3,754 3,820 4,028 4,070 4,274 13,863 16,192 YoY Change (%) 9.3 12.5 11.4 15.1 18.2 17.7 17.8 13.8 12.4 16.8 Total Expenditure 2,498 2,581 2,520 2,803 2,755 2,961 3,037 3,184 10,403 11,936 EBITDA 734 840 935 951 1,065 1,067 1,033 1,090 3,460 4,255 Margins (%) 22.7 24.6 27.1 25.3 27.9 26.5 25.4 25.5 25.0 26.3 Depreciation 65 64 63 61 61 61 62 65 254 249 Other Income 79 89 68 196 78 233 -27 -28 432 256 PBT before EO expense 749 864 940 1,086 1,083 1,240 944 996 3,639 4,263 PBT 749 864 940 1,086 1,083 1,240 944 996 3,639 4,263 Tax 251 292 313 383 378 418 284 332 1,227 1,423 Rate (%) 33.6 33.8 33.2 35.3 34.9 33.7 30.1 33.3 33.7 33.4 Reported PAT 497 572 628 703 705 822 660 664 2,412 2,840 Adj PAT 497 572 628 703 705 822 660 664 2,412 2,840 YoY Change (%) 19.3 25.9 42.2 58.0 41.7 43.6 5.1 -5.5 37.7 17.7 Margins (%) 15.4 16.7 18.2 18.7 18.5 20.4 16.2 15.5 17.4 17.5 E: MOFSL Estimates


Tata ElxsiCMP: INR982 TP: INR1,125 (+15%) Buy Growth on a YoY basis has been picking up and has increased

from 12.5% in 1QFY18 to 17.8% in 3QFY19, also aided bydepreciation of the INR.

We expect this to be altered led by weakness in its top client. We expectYoY growth of 13.8% in INR terms.

EBITDA margin is expected to remain constant at 25.5%. PAT is expected to remain constant with sequential increase of

1%. The stock trades at 18.1x FY19E and 15.3x FY20E earnings. Buy.

Key issues to watch for Addition of new customers and subsequent realization JLR’s contribution to revenue Outlook on growth and profitability for the year

Bloomberg TELX IN


1,6,12 Rel Perf. (%) -1 / -23 / -20

Financial Snapshot (INR b) Y/E MARCH 2018 2019 2020E 2021E Sales 13.9 16.2 18.7 22.1

EBITDA 3.5 4.3 4.7 5.6

PAT 2.4 2.8 3.0 3.6

EPS (INR) 38.7 45.6 48.8 57.8

EPS Gr. (%) 37.7 17.7 7.0 18.6

BV/Sh. (INR) 118.6 149.1 219.6 299.1

RoE (%) 37.2 34.1 26.5 22.3

RoCE (%) 37.2 34.1 39.7 33.4

Payout (%) 31.1 33.0 44.5 37.5

Valuations

P/E (x) 22.8 19.4 18.1 15.3

P/BV (x) 7.5 5.9 4.0 3.0

EV/EBITDA (x) 16.5 12.7 10.7 8.2

Div. Yield (%) 1.1 1.4 2.0 2.0

April 2019 260


Quarterly Performance (IFRS, INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 4,591 4,739 4,787 4,972 5,051 5,215 5,250 5,393 19,089 20,909 QoQ (%) 3.1 3.2 1.0 3.9 1.6 3.2 0.7 2.7 8.6 9.5 Revenue (INR m) 2,95,840 3,05,410 3,09,040 3,20,750 3,42,610 3,68,540 3,73,380 3,78,341 12,31,040 14,62,871 YoY (%) 1.0 4.3 3.9 8.2 15.8 20.7 20.8 18.0 4.4 18.8 GPM (%) 42.8 43.6 43.5 43.5 42.5 43.6 42.9 42.8 43.4 42.9 SGA (%) 17.8 16.9 16.7 16.5 16.1 15.7 15.9 15.5 17.0 15.8 EBITDA 74,120 81,640 82,880 86,520 90,710 1,02,780 1,00,830 1,03,015 3,25,160 3,97,335 EBITDA Margin (%) 25.1 26.7 26.8 27.0 26.5 27.9 27.0 27.2 26.4 27.2 EBIT Margin (%) 23.4 25.1 25.2 25.4 25.0 26.5 25.6 25.8 24.8 25.8 Other income 9,320 8,120 8,640 9,820 12,080 5,930 11,470 6,308 35,900 35,788 ETR (%) 24.2 23.7 24.3 24.1 24.8 23.5 24.2 24.5 24.1 24.2 PAT 59,450 64,460 65,310 69,040 73,400 79,010 81,050 78,442 2,58,260 3,11,902 QoQ (%) -10.0 8.4 1.3 5.7 6.3 7.6 2.6 -3.2YoY (%) -5.9 -2.1 -3.6 4.5 23.5 22.6 24.1 13.6 -1.8 20.8 EPS (INR) 15.2 16.8 17.1 18.0 19.2 20.6 21.6 20.9 66.0 82.3 Headcount 3,85,809 3,89,213 3,90,880 3,94,998 4,00,875 4,11,102 4,17,929 4,27,727 3,94,998 4,27,727 CC QoQ rev gr (%) 2.0 1.7 1.3 2.5 4.1 3.7 1.8 2.5 8.6 9.5 Attrition (%) 11.6 11.3 11.3 11.0 11.7 10.9 E: MOFSL Estimates


TCSCMP: INR 2,079 TP: INR2,000 (-4%) Neutral We expect TCS to grow its constant currency revenues by 2% QoQ

(12.1% YoY). 4QFY19 is a seasonally weak quarter compared to3Q. Most pockets for TCS are doing well, with the exception ofAutomotives and Hi-Tech.

We expect USD revenue growth of 2.7% QoQ, on the back of70bp tailwind from currencies.

Despite 1.3% QoQ appreciation of the INR, our EBIT marginestimate of 25.8% is 20bp higher QoQ as pressure from escalatedsub-contractors has abated for TCS.

Our PAT estimate of INR78.4b is lower QoQ by 3% due to lowertotal other income.

Key issues to watch for Outlook and visibility for double-digit growth in FY20 Commentary on BFS Trajectory of margins amid rising sub-contractor expenses

Bloomberg TCS IN


1,6,12 Rel Perf. (%) -4 / -15 / 26


Sales 1,231 1,463 1,603 1,778

EBITDA 325 397 433 480 PAT 258 312 331 370 EPS (INR) 66.0 82.3 88.2 98.6

EPS Gr. (%) -1.0 24.7 7.2 11.7 BV/Sh. (INR) 228.3 224.2 233.9 246.6 RoE (%) 29.4 36.4 38.5 41.1


P/BV (x) 9.1 9.3 8.9 8.4 EV/EBITDA(x) 23.2 18.8 17.2 15.5

Div. yield (%) 3.2 3.6 3.1 3.4

April 2019 261



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 1,138 1,179 1,209 1,244 1,224 1,218 1,261 1,288 4,771 4,991 QoQ (%) 0.6 3.6 2.5 2.9 -1.6 -0.5 3.5 2.2 9.6 4.6 Revenue (INR m) 73,361 76,064 77,760 80,545 82,763 86,298 89,437 90,810 3,07,730 3,49,308 YoY (%) 6.0 6.1 2.9 7.5 12.8 13.5 15.0 12.7 5.6 13.5 GPM (%) 28.0 29.3 30.8 31.9 30.7 34.0 33.1 33.0 30.0 32.7 SGA (%) 15.3 14.7 14.6 14.3 14.3 15.3 13.8 13.9 14.7 14.3 EBITDA 9,347 11,057 12,638 14,119 13,569 16,186 17,226 17,360 47,161 64,341 EBITDA Margin (%) 12.7 14.5 16.3 17.5 16.4 18.8 19.3 19.1 15.3 18.4 EBIT Margin (%) 9.4 11.0 12.7 13.8 13.0 15.3 16.1 15.9 11.8 15.1 Other income 4,106 3,222 2,250 4,513 1,114 1,751 806 2,139 14,091 5,810 Interest expense 370 386 341 527 305 388 358 344 1,624 1,395 ETR (%) 25.4 25.3 21.8 18.6 21.2 26.8 17.8 25.0 22.4 22.8 PAT excl. BT amort & EOI 7,985 8,362 9,422 12,221 8,979 10,642 12,029 12,092 37,990 44,257 QoQ (%) 35.8 4.7 12.7 29.7 -26.5 18.5 13.0 0.5 YoY (%) 21.7 29.7 10.1 107.9 12.4 27.3 27.7 -1.1 38.3 16.5 EPS (INR) 9.0 9.4 10.6 13.7 10.1 11.9 13.5 13.5 42.6 48.9 Headcount 1,15,990 1,17,225 1,15,241 1,12,807 1,13,552 1,18,391 1,21,842 1,12,807 1,12,807 1,25,491 Util excl. trainees (%) 77.0 81.0 83.0 84.0 81.0 81.0 82.0 84.0 81.1 81.9 Attrition (%) 17.0 16.0 17.0 18.0 19.0 20.0 Offshore rev. (%) 36.3 35.9 34.2 33.0 33.4 35.5 34.5 33.0 34.8 34.7 E: MOFSL Estimates


Tech MahindraCMP: INR792 TP: INR940 (+19%) Buy We expect 1.5% QoQ, 6.2% YoY CC revenue growth at TECHM.

With 70bp tailwind from cross currency movements, our dollarrevenue estimate stands at USD1,288m, +2.2% QoQ.

We expect Communications to grow 2% QoQ CC and Enterprise togrow 1% QoQ CC. Muted growth in Enterprise is on the back of a strong 3Q growth base in Manufacturing, Retail and Healthcare.

Our EBIT margin estimate is 15.9%, -20bp QoQ mainly on accountof changes in currencies.

We expect net income of INR12.1b, in line with previous quarterdespite lower ETR in 3Q (offset by lower other income in 3Q).

Key issues to watch for Commentary on 5G and related impact on TECHM’s

communications vertical Outlook for BFSI and Healthcare in Enterprise Deal wins on the back of two quarters of above-average TCV

Bloomberg TECHM IN


1,6,12 Rel Perf. (%) -13 / -3 / 6



Adj. EPS (INR) 42.7 48.9 54.1 60.7 EPS Gr. (%) 33.6 14.8 10.3 12.3 BV/Sh.(INR) 213.4 226.6 237.9 269.7

RoE (%) 21.5 22.7 23.5 24.3 RoCE (%) 17.8 18.9 19.7 20.7 Payout (%) 32.8 36.7 40.7 41.2

Valuation P/E (x) 18.5 16.1 14.6 13.0

P/BV (x) 3.7 3.5 3.3 2.9


April 2019 262


Quarterly Performance (IFRS, INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q IT Services Revenue (USD m) 1,933 1,970 1,973 2,019 1,989 2,010 2,047 2,090 7,895 8,135 QoQ (%) -1.1 1.9 0.2 2.3 -1.5 1.0 1.8 2.1 2.5 3.0 Overall Revenue (INR m) 1,36,261 1,34,234 1,36,690 1,37,686 1,39,777 1,45,410 1,50,595 1,53,481 5,44,871 5,89,263 QoQ (%) -2.6 -1.5 1.8 0.7 1.5 4.0 3.6 1.9 YoY (%) 0.2 -2.5 -0.1 -1.6 2.6 8.3 10.2 11.5 -1.0 8.1 GPM (%) 28.7 29.5 30.1 29.0 28.2 30.0 31.0 31.4 29.3 30.2 SGA (%) 12.8 12.6 13.4 13.8 13.9 13.3 12.5 13.1 13.2 13.2 EBITDA 26,683 27,788 28,104 26,610 24,343 28,641 32,929 33,413 1,09,185 1,19,326 EBITDA Margin (%) 19.6 20.7 20.6 19.3 17.4 19.7 21.9 21.8 20.0 20.3 IT Serv. EBIT (%) 16.8 17.3 17.2 16.0 15.6 18.0 19.8 19.1 16.8 18.2 EBIT Margin (%) 16.0 16.8 16.7 15.2 14.3 16.7 18.4 18.4 16.2 17.0 Other income 5,079 5,728 5,054 3,796 4,319 5,053 4,646 3,767 19,657 17,785 ETR (%) 22.3 22.7 19.2 18.7 24.1 22.1 21.5 22.5 20.8 22.5 PAT 20,824 21,895 22,534 20,086 18,407 22,860 25,444 24,748 85,339 91,478 QoQ (%) 7.4 5.1 2.9 -10.9 -8.4 24.2 11.3 -2.7YoY (%) 1.1 5.6 6.6 3.5 -11.6 4.4 12.9 23.2 4.2 7.2 EPS (INR) 3.2 3.4 3.0 3.1 3.5 2.9 4.2 4.1 13.4 14.8 Headcount 1,61,439 1,59,300 1,58,865 1,59,923 1,60,846 1,71,451 1,72,379 1,80,994 1,59,923 1,80,994 Util excl. trainees (%) 82.1 82.5 81.9 83.4 85.2 85.5 83.2 83.2 78.1 78.7 Attrition (%) 16.1 16.0 16.1 16.8 17.1 17.5 Offshore rev. (%) 46.4 46.8 46.5 47.3 47.1 47.2 47.8 47.4 46.8 47.4 Fixed Price (%) 58.2 57.7 57.7 58.7 58.9 58.9 E: MOFSL Estimates


WiproCMP: INR262 TP: INR275 (+5%) Neutral WPRO had guided for 0-2% QoQ CC growth keeping in mind the

macro uncertainties. With the quarter passing by relativelyunscathed on the macro front, we expect WPRO’s revenuegrowth to be in the upper half of this band – at 1.5% QoQ CC.

Our USD revenue growth estimate is 2.1%, implying tailwind of60bp from cross currencies.

We expect IT Services EBIT margin to decline by 70bp QoQ to19.1%, owing to INR appreciation and some reinvestment ofprofits to build capabilities.

Overall EBIT margin is expected to remain flat at 18.4%, withrecovery of profitability in the non-IT Services.

Our PAT estimate for the quarter is INR24.8b, -2.7% QoQ and+32.7% YoY, due to lower profitability and swing in forex gains.

For 1QFY20, we expect WPRO to guide for 1-3% QoQ CC in termsof revenues and marginal decline in margins due to one-month ofwage hikes.

Key issues to watch for Performance of Healthcare vertical Comments on sustenance of growth in BFSI vertical The quantum of buyback that is likely to be announced with the

results

Bloomberg WPRO IN


1,6,12 Rel Perf. (%) -15 / -2 / 3


Sales 544.9 589.3 634.0 681.4





Div Yld (%) 0.2 0.3 2.7 2.7

April 2019 263



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue (USD m) 114 119 123 127 135 138 144 146 482 563 QoQ (%) 2.2 3.8 3.4 3.3 6.6 2.3 4.1 1.4 5.0 16.7 Revenue (INR m) 7,367 7,626 7,937 8,147 9,047 9,687 10,355 10,501 31,077 39,590 YoY (%) -2.5 -1.0 0.9 9.6 18.6 22.0 27.1 16.1 1.7 27.4 GPM (%) 27.6 28.8 30.1 29.4 30.7 29.0 26.8 27.0 29.0 28.3 SGA (%) 17.4 17.2 16.8 17.6 16.5 16.5 16.0 15.0 17.2 16.3 EBITDA 748 884 1,054 961 1,163 1,229 1,104 1,256 3,647 4,751 EBITDA Margin (%) 10.2 11.6 13.3 11.8 12.9 12.7 10.7 12.0 11.7 12.0 EBIT Margin (%) 7.7 9.3 11.3 10.1 10.8 10.4 8.4 9.8 9.6 9.8 Other income 203 194 49 268 238 412 25 285 714 960 ETR (%) 32.0 26.8 33.7 28.8 27.8 28.1 28.0 28.0 30.2 28.0 PAT 472 608 574 726 821 934 553 860 2,380 3,168 QoQ (%) 354.7 29.0 -5.7 26.5 13.0 13.8 -40.8 55.5 YoY (%) -36.3 -13.6 -28.3 599.7 73.9 53.5 -3.7 18.4 1.3 33.1 EPS (INR) 2.1 2.7 2.5 3.2 3.6 4.1 2.4 3.8 10.6 14.0 Headcount 8,567 8,414 8,597 8,905 9,122 9,482 9,813 9,863 8,905 9,863 Utilization (%) 83.2 85.9 84.8 83.8 85.8 82.6 81.7 81.5 84.4 82.9 Offshore rev. (%) 37.5 37.5 37.0 37.3 35.4 33.6 32.6 33.7 37.3 33.8


Zensar TechnologiesCMP: INR232 TP: INR260 (+13%) Buy We expect revenue of USD148m in 4QFY19, representing growth

of 1.4% QoQ. This breaks up into 1% QoQ CC growth, a cross-currency tailwind of 40bp for ZENT.

Lower growth performance is led by seasonality in IMS productspartially offset by continued traction digital.

We expect EBITDA margin to expand gradually from here on ledby mobile levers such as high digital percentage, exit of ROWbusiness, etc. Our margin estimate is pegged at 12% for 4QFY19(+130bp QoQ).

Our PAT estimate is INR860m, an increase of 56% QoQ, led byhigher operational income and lower base of the previousquarter.

The stock trades at 15x FY20E and 12.6x FY21E earnings. Buy.

Key issues to watch for Traction in Digital, large deals and other new initiatives Margin outlook, given restructuring of IMS business Progress on revival of revenue growth post US turnaround

Bloomberg ZENT IN


1,6,12 Rel Perf. (%) 7 / -35 / 9

Financial Snapshot (INR b) Y/E MAR 2018 2019 2020E 2021E Sales 31.1 39.6 45.2 50.3 EBITDA 3.6 4.8 5.7 6.6 PAT 2.4 3.2 3.5 4.2 EPS (INR) 10.6 14.0 15.5 18.5 EPS Gr. (%) 1.3 33.1 10.6 19.2 BV/Sh. (INR) 73.2 83.9 95.9 110.5 RoE (%) 15.3 17.9 17.2 17.9 RoCE (%) 18.2 20.9 22.2 23.0 Payout (%) 20.9 19.4 19.2 18.1 Valuations P/E (x) 21.9 16.5 14.9 12.5 P/BV (x) 3.2 2.8 2.4 2.1 EV/EBITDA (x) 13.2 9.9 8.0 6.5 Div Yld (%) 1.0 1.2 1.3 1.4

April 2019 264

Winds slowly changing course

Watch out for the interplay! Fourth quarter numbers for telcos are likely to reflect the interplay of (a) revenue/EBITDA accretion of 1-2% each from the recently launched minimum recharges and the shift of subscribers from feature phone to broadband and (b) incumbents’ loss of IUC receipts and market share. We believe that large part of downtrading is now completed, and thus, stability in revenue/EBITDA should emerge, unless RJio initiates a new round of tariff war to accelerate its subscriber growth.

Some calmness after harsh tides After facing pressures for the last 10 quarters, telcos are likely to witness some stabilization in their revenue/EBITDA performance in 4QFY19. The roll out of minimum recharge plans by incumbents (in the third quarter), coupled with the continuous shift of subscribers from feature phones to smartphones (as evident from the TRAI data), bodes well from the APRU accretion perspective. We expect a 15%/18% QoQ improvement in ARPU for Bharti/Vodafone Idea, higher than the subscriber churn of 8%/9% QoQ, resulting in QoQ revenue growth of 1.5%/flat for Bharti India wireless/Vodafone Idea. Growth in Bharti’s India wireless revenue, coupled with an uptick in its Africa biz, should drive consol. revenue growth of 1% QoQ. RJio is expected to continue its strong subscriber-led revenue growth momentum (ARPU to remain flat QoQ to INR129), driving 11% QoQ overall revenue growth.

Bharti Infratel should witness healthy 3% QoQ revenue growth on the back of 3,260 net tenancy adds (as against QoQ deletions in previous quarters), coupled with a modest 1% QoQ uptick in rentals/tenant. TCOM is expected to report flat QoQ revenue; ex-one-offs in 3Q, the data segment should see 3% QoQ improvement, driven by 2%/7% growth in the traditional/growth segments.

EBITDA downtrend may get arrested Revenue stability should partly support EBITDA, but growing network and access cost should marginally dilute the margins. Vodafone Idea should benefit from its ongoing merger synergy exercise. We expect Bharti’s India wireless EBITDA to stabilize (flat QoQ) in 4QFY19 after last 10 quarters of downtrend. Vodafone Idea should see 24% QoQ jump in EBITDA led by synergy gains, while RJio should continue its steady 12% QoQ growth driven by revenue increase.

Bharti Infratel’s EBITDA should also stabilize with 3% QoQ growth, after witnessing tenancy losses for the last five quarters. TCOM’s consol. EBITDA should grow 7% on adjusted third quarter numbers; data segment is likely to grow 9% QoQ, driven by breakeven in growth services.

Company name

Bharti Airtel

Bharti Infratel

Tata Communications

Vodafone Idea

Telecom March 2019 Results Preview | Sector: Telecom


April 2019 265

Bharti plans to turn self-sufficient, Vodafone Idea may need more fuel At steep discounted pricing, fund raising in the form of rights issue for both Bharti and Vodafone Idea should get through, in our view. This would turn Bharti self-sufficient, but provide Vodafone Idea a breather for the next 6-8 quarters, without building in any ARPU increase. Bharti Airtel has built strong product/network capability (compared to RJio) (evident in the incremental broadband share), which should allow it to execute its strategy well in terms of market share, network investments and operations, despite the turmoil in the sector. On the other hand, Vodafone Idea may again require large-scale additional funding post 6-8 quarters, if the sector does not revive. This leaves it in a precarious situation.

Exhibit 1: Expected quarterly performance summary Sector CMP Sales (INR m) EBDITA (INR M) PAT (INR m)

Telecom (INR) RECO Mar-19 Var % YoY


% YoY Var


Var % QoQ

Bharti Airtel 358 Buy 208,135 6.0 1.4 62,894 -9.2 1.1 -7,173 PL Loss Bharti Infratel 314 Neutral 37,426 2.2 2.8 15,479 -2.8 2.9 7,067 11.3 9.0 Tata Comm 606 Buy 42,855 6.9 0.4 6,795 22.3 -19.4 737 79.1 218.7 Vodafone Idea 17 Buy 117,365 91.2 -0.2 14,073 -2.8 23.8 -41,205 Loss Loss Sector Aggregate 405,780 21.3 1.0 99,241 -5.7 2.3 -40,575 Loss Loss

Exhibit 2: Industry wireless subscriber and net addition trend (m)

Source: TRAI, MOFSL

Exhibit 3: Player-wise QoQ ARPU trend (INR)

*Represents Vodafone Idea merged co performance Source: Company, MOFSL

Exhibit 4: Player-wise QoQ ARPU growth trend (%)


23 14 6 4 6 6 0 -1 -3 -5-16

5 -15

5 27

-58

6 15 11 10 2 1 2 4 6

1,0801,1001,1201,1401,1601,1801,200

Jan-

17Fe

b-17

Mar

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Apr-

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ay-1

7Ju

n-17

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7Au

g-17

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19

Wireless Subsriber (m) Wireless Subsriber net additions (m)

196

188

172

158

154

145

123

116

105

100

104 11

9

180

173

156

142

141

132

114

105

100

88

89

105

156

154

137

135

132

130

129

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q*

3Q*

4QE*

FY17 FY18 FY19

Bharti (India) Idea RJio

-15

-7

1

9

17

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

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18

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18

4QFY

18

1QFY

19

2QFY

19*

3QFY

19*

4QFY

19E*


March 2019 Results Preview | Sector: Telecom

April 2019 266

Exhibit 5: Player-wise QoQ wireless traffic trend (b min)


Exhibit 6: Player-wise QoQ wireless traffic growth trend (%)

*Represents Vodafone Idea merged co performance


Exhibit 7: Player-wise QoQ data traffic trend (b Mb)


Exhibit 8: Player-wise QoQ data traffic growth trend (%)

*Represents Vodafone Idea merged co performance

Source: Company, MOFSL Exhibit 9: Aggregate India wireless revenue and growth trend (QoQ, %)

Source: TRAI, MOFSL

315

313

330

381

422

437

495

593

684

693

703

630

199

196

210

231

251

255

283

330

350

731

712

650 24

6 311 37

2 449 53

4 634 71

0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q*

3Q*

4QE*

FY17 FY18 FY19


-4

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12

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3QFY

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19E*


0

1500

3000

4500

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1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q*

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FY17 FY18 FY19


020406080

100

1QFY

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2QFY

19*

3QFY

19*

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19E*


6

-1

5 1 2

-1 2

4 1

-2 -5 -6

0

7

-9

1

-10

11

0

200

400

600

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

Agg. India wireless revenue (INR b) Agg. India wireless revenue growth (QoQ, %)


April 2019 267

Exhibit 10: Relative performance – 3M (%)


Exhibit 11: Relative performance – 1Y (%)


Exhibit 12: Comparative valuation Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Telecom (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E Bharti Airtel 358 Buy -7.6 -5.4 -2.7 -47.3 -65.8 -131 9.8 9.6 8.0 -4.7 -3.7 -1.9Bharti Infratel 314 Neutral 14.1 14.3 13.8 22.2 22.0 22.8 8.9 9.1 9.2 15.6 16.2 16.3 Tata Comm 606 Buy 1.3 11.2 20.3 450.3 54.1 29.8 8.9 8.1 6.7 6.5 37.6 44.7 Vodafone Idea 17 Buy -18.6 -18.8 -16.7 -0.9 -0.9 -1.0 37.1 18.8 13.0 -37.0 -31.5 -39.8Sector Aggregate -14.1 -15.0 -18.7 12.2 11.1 9.3 -12.1 -13.3 -12.2


94

101

108

115

122

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Telecom Index

72

87

102

117

132

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Telecom Index


April 2019 268

Exhibit 13: Wireless KPIs comparison FY17 FY18 FY19 YoY QoQ

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q* 3Q* 4QE (%) (%) Wireless Subs (m) Bharti (India) 256 260 266 274 281 282 290 304 336 330 284 261 -14.3 -8.3Idea 176 179 185 190 189 182 189 195 188 422 387 352 81.0 -9.1RJio 109 123 139 160 187 215 252 280 316 69.4 12.9 Avg. Wireless Subs (m) Bharti (India) 253 258 263 270 277 281 286 297 320 333 308 272 -8.3 -11.7Idea 176 178 182 187 189 186 185 192 191 305 405 370 93.0 -8.7RJio 116 131 149 173 201 234 266 298 72.0 12.0 ARPU (INR/month) Bharti (India) 196 188 172 158 154 145 123 116 106 101 104 119 2.9 15.0 Idea 180 173 156 142 141 130 113 105 100 88 89 105 -0.3 17.6RJio 156 154 137 135 132 130 129 -6.1 -1.0MOU/Sub (INR) Bharti (India) 414 406 419 471 507 518 575 670 701 694 726 733 9.4 1.0 Idea 379 368 385 412 441 459 509 577 609 568 580 586 1.5 1.0 RJio 625 697 716 744 761 794 794 10.9 0.0 Wireless traffic (B min) Bharti (India) 315 313 330 381 422 437 495 593 684 693 703 630 6.4 -10.3Idea 199 196 210 231 251 255 283 330 350 731 712 650 96.6 -8.8RJio 246 311 372 449 534 634 710 90.8 12.0 Data usage/sub (Mb) Bharti (India) 904 1,000 972 1,331 2,611 4,087 5,349 6,585 7,864 9,221 10,528 10,860 64.9 3.2 Idea 674 694 703 957 2,204 3,805 4,742 6,065 7,309 5,740 6,324 10,287 69.6 62.7 RJio 9,620 9,600 9,700 10,649 10,992 10,819 11,122 14.7 2.8 Data traffic (B Mb) Bharti (India) 158 178 172 225 472 784 1,106 1,540 2,151 2,660 3,217 3,643 136.6 13.2 Idea 93 107 109 127 253 439 571 818 1,018 2,260 2,705 3,192 290.2 18.0 RJio 3,780 4,301 5,044 6,420 7,710 8,640 9,946 97.2 15.1


Exhibit 14: Quarterly financials (pro forma) FY17 FY18 FY19 YoY

(%) QoQ (%) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q* 3Q* 4QE*

Revenue (INR b) Bharti (India wireless) 151 147 138 130 129 122 108 104 105 103 102 103 -0.1 1.5 Bharti (consolidated) 255 247 233 219 220 218 203 196 201 204 205 208 6.0 1.4 Idea 95 93 87 81 82 75 65 61 59 77 118 117 91.2 -0.2RJio 61 69 71 81 92 104 115 61.5 10.9 EBITDA (INR b) Bharti (India wireless) 64 62 53 48 44 42 35 29 28 21 19 20 -33.3 0.7 Bharti (consolidated) 95 94 85 79 78 79 75 69 67 62 62 63 -9.2 1.1 Idea 31 28 22 21 19 15 12 14 7 5 11 14 -2.8 23.8 RJio 14 26 27 31 36 41 45 68.1 11.8 EBITDA Margin (%) Bharti (India wireless) 42.4 42.4 38.3 36.9 34.3 34.4 32.6 28.4 26.3 20.9 19.1 19.0 -944bps -16bpsBharti (consolidated) 37.4 38.3 36.3 35.8 35.3 36.4 36.8 35.3 33.5 30.6 30.3 30.2 -508bps -9bpsIdea 32.6 30.5 25.0 26.1 23.0 20.1 18.8 23.6 11.2 6.0 9.7 12.0 -1159bps 233bpsRJio 23.5 38.2 37.8 38.8 38.7 39.0 39.3 156bps 31bps PAT (INR b) Bharti (consolidated) 15 15 5 4 4 3 3 1 1 1 1 -7 NM NM Idea 2 1 -4 -3 -8 -11 -13 -10 3 -50 -50 -41 NM NM RJio -3 5 5 6 7 8 9 79.5 10.2 EPS (INR) Bharti (consolidated) 3.7 3.7 1.3 0.9 0.9 0.9 0.8 0.2 0.2 0.3 0.2 -1.8 NM NM Idea 0.6 0.3 -1.1 -0.9 -2.3 -3.1 -3.6 -2.5 0.6 -5.7 -5.7 -4.7 NM NM RJio 0.0 -0.1 0.1 0.1 0.1 0.2 0.2 0.2 85.1 10.2


September 2018 Results Preview | Sector: Telecom March 2019 Results Preview | Sector: Telecom

April 2019 269

Consolidated quarterly performance

(INR m) Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue 2,19,581 2,17,769 2,03,186 1,96,343 2,00,800 2,04,225 2,05,192 2,08,135 8,36,879 8,18,352 YoY Change (%) -14.0 -11.7 -12.9 -10.5 -8.6 -6.2 1.0 6.0 -12.3 -2.2 Total Expenditure 1,41,997 1,38,549 1,28,498 1,27,044 1,33,542 1,41,790 1,43,012 1,45,241 5,36,088 5,63,585 EBITDA 77,584 79,220 74,688 69,299 67,258 62,435 62,180 62,894 3,00,791 2,54,767 Margins (%) 35.3 36.4 36.8 35.3 33.5 30.6 30.3 30.2 35.9 31.1 Depreciation 48,192 46,873 48,375 48,991 51,452 52,366 54,723 53,319 1,92,431 2,11,860 Net Finance cost 18,274 23,266 20,882 18,293 21,266 29,857 19,448 28,983 80,715 99,554 Other Income 3,698 3,907 2,950 2,401 2,610 1,253 -144 -697 12,956 3,022 PBT before EO expense 14,816 12,988 8,381 4,416 -2,850 -18,535 -12,135 -20,105 40,601 -53,625 Extra-Ord expense 503 1,786 2,395 3,247 3,621 1,449 -14,137 0 7,931 -9,067 PBT 14,313 11,202 5,986 1,169 -6,471 -19,984 2,002 -20,105 32,670 -44,558 Tax 8,136 5,341 379 -3,021 -11,267 -22,476 -1,824 -8,042 10,835 -43,609 Rate (%) 56.8 47.7 6.3 -258.4 174.1 112.5 -91.1 40.0 33.2 97.9 Minority Interest 2,504 2,431 2,549 3,361 3,823 1,304 2,964 -4,890 10,845 3,201 Reported PAT 3,673 3,430 3,058 829 973 1,188 862 -7,173 10,990 -4,150 Adj PAT 4,060 4,724 4,341 834 -3,004 -9,650 -10,408 -7,173 13,960 -30,234 YoY Change (%) -77.6 -67.8 -38.7 -91.5 NM NM NM NM -68.6 NM Margins (%) 1.8 2.2 2.1 0.4 -1.5 -4.7 -5.1 -3.4 1.7 -3.7

E: MOFSL Estimates


Bharti Airtel

CMP: INR358 TP: INR410 (+15%) Buy We expect consolidated revenue to grow 1% QoQ/6% YoY to

INR208b, and consolidated EBITDA to grow 1% QoQ to INR63b. This will mainly be led by a revival of India wireless business and an uptick in Africa business.

India wireless revenue is likely to grow 1.5% QoQ to INR103.4b, as the benefits of APRU uptick (from roll-out of minimum recharge plans) will outweigh the decline in subscribers. India wireless EBITDA too is expected to grow 1% QoQ to INR19.6b.

We expect India wireless ARPU to grow 15% QoQ to INR119 and subscriber base to drop 8% QoQ.

Africa revenue/EBITDA is expected to grow 3%/4% QoQ to INR60.9b/INR22.5b.

We expect Bharti to report net loss of INR7.2b. Bharti trades at an EV/EBITDA of 10x FY20E and 8x FY21E.

Maintain Buy.

Key issues to watch Consolidated revenue (expect 1% QoQ growth). Consolidated EBITDA (expect 1% QoQ growth). India wireless revenue (expected to grow 1.5% QoQ). India wireless EBITDA (expected to grow 1% QoQ).

Bloomberg BHARTI IN Equity Shares (m) 3997.3 M. Cap. (INR b)/(USD b) 1429 / 21



Net Sales 836.9 818.4 856.1 939.1 EBITDA 300.8 254.8 264.1 306.0 Adj. NP 14.0 -30.2 -21.7 -10.9 Adj EPS(INR) 3.5 -7.6 -5.4 -2.7 Adj EPS Gr.(%) -68.6 NM NM NM BV/Sh (INR) 173.9 148.8 143.4 140.7 RoE (%) 2.0 -4.7 -3.7 -1.9 RoCE (%) 4.6 0.1 1.1 2.0 Div. payout (%) 43.8 0.0 0.0 0.0 Valuations P/E (x) 102.4 NM NM NM P/BV (x) 2.1 2.4 2.5 2.5 EV/EBITDA (x) 8.0 10.1 9.9 8.3 Div. Yld (%) 0.3 0.0 0.0 0.0

April 2019 270


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue from operations 35,239 36,482 36,553 36,622 36,735 36,683 36,402 37,426 1,44,896 1,47,246 YoY Change (%) 9.8 10.8 7.5 4.0 4.2 0.6 -0.4 2.2 7.9 9.7 Total Expenditure 19,489 20,336 20,571 20,699 21,539 21,819 21,361 21,947 81,095 86,666 EBITDA 15,750 16,146 15,982 15,923 15,196 14,864 15,041 15,479 63,801 60,580 Margins (%) 44.7 44.3 43.7 43.5 41.4 40.5 41.3 41.4 44.0 41.1 Depreciation 5,905 5,941 5,895 5,721 5,389 5,625 5,727 5,859 23,462 22,600 Net Interest expense -530 -109 510 129 -285 -442 -601 -1,087 0 -4,041 Other Income 571 401 495 956 609 557 460 0 2,423 0 PBT before EO expense 10,946 10,715 10,072 11,029 10,701 10,238 10,375 10,708 42,762 42,022 Extra-Ord expense 0 0 0 500 0 357 0 0 500 357 PBT 10,946 10,715 10,072 10,529 10,701 9,881 10,375 10,708 42,262 41,665 Tax 4,307 4,331 4,218 4,469 4,321 3,883 3,891 3,641 17,325 15,736 Rate (%) 39.3 40.4 41.9 42.4 40.4 39.3 37.5 34.0 41.0 37.8 Reported PAT 6,639 6,384 5,854 6,060 6,380 5,998 6,484 7,067 24,937 25,929 Adj PAT 6,639 6,384 5,854 6,348 6,380 6,215 6,484 7,067 25,232 26,146 YoY Change (%) -12.2 -17.5 -5.6 6.4 -3.9 -2.7 10.8 11.3 -8.1 -4.8 Margins (%) 18.8 17.5 16.0 17.3 17.4 16.9 17.8 18.9 17.4 17.8 E: MOFSL Estimates


Bharti InfratelCMP: INR314 TP: INR290 (-8%) Neutral We expect consolidated revenue to grow 3% QoQ/2% YoY to

INR37.4b, led by healthy rental and energy revenue growth.Consolidated EBITDA is expected to grow 3% QoQ to INR15.5b;margins to remain flat at 41.4%.

We expect 2% QoQ growth in tenancies to 1,77,709. This coupledwith 1% QoQ uptick in rental/tenant should drive 2% QoQ rentalrevenue growth (INR21.4b). Further, 4% QoQ uptick in energy andother reimbursement revenue (INR16.1b) should drive overallrevenue.

Rental EBITDA margin at 67.4% is likely to expand 30bp QoQ;expect 40bp QoQ expansion in energy margin.

PAT is likely to grow 9% QoQ to INR7.1b led by EBITDA growth. Bharti Infratel trades at EV/EBITDA of 9x FY20E/21E. Maintain

Neutral.

Key issues to watch Consolidated net co-location (expect to grow 2% QoQ to

1,77,709). Consolidated revenue sharing per operator (expect to grow 1%

QoQ).

Bloomberg BHIN IN Equity Shares (m) 1896.7 M. Cap. (INR b)/(USD b) 596 / 9



Net Sales 144.9 147.2 151.4 155.9 EBITDA 63.8 60.6 58.8 58.5 Adj. NP 25.2 26.1 26.4 25.5 AdjEPS INR 13.6 14.1 14.3 13.8 Gr. (%) -8.1 3.6 0.9 -3.4BV/Sh (INR) 91.7 89.4 86.3 82.7 RoE (%) 15.6 15.6 16.2 16.3 RoCE (%) 13.7 12.4 12.7 12.7 Payout (%) 120.5 115.8 122.0 126.3 Valuations P/E (x) 23.0 22.2 22.0 22.8 P/BV (x) 3.4 3.5 3.6 3.8 EV/EBITDA (x) 8.4 8.7 8.8 8.9 Div. Yld (%) 4.5 4.5 4.8 4.8

April 2019 271

Consol. Quarterly performance (INR m) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue 43,100 42,474 41,146 40,086 39,438 40,682 42,695 42,855 1,66,508 1,65,670 YoY Change (%) -3.3 -5.8 -5.6 -6.6 -8.5 -4.2 3.8 6.9 -5.5 -0.5 Total Expenditure 37,514 36,531 35,019 34,531 33,569 34,381 34,269 36,060 1,43,595 1,38,279 EBITDA 5,586 5,943 6,128 5,555 5,869 6,302 8,426 6,795 22,914 27,391 Margins (%) 13.0 14.0 14.9 13.9 14.9 15.5 19.7 15.9 13.8 16.5 Depreciation 4,447 4,837 4,728 5,052 4,849 5,006 5,235 5,352 19,063 20,441 Interest 761 877 896 910 909 979 1,040 1,043 3,445 3,970 Other Income 444 -6 740 2,330 -70 86 192 1,119 3,805 1,327 PBT before EO expense 822 223 1,244 1,922 41 404 2,343 1,518 4,211 4,306 Exceptional expense 0 2,134 0 1,621 0 -16 0 0 3,755 -16 PBT 822 -1,911 1,244 301 41 419 2,343 1,518 456 4,322 Tax 461 588 1,050 1,451 641 418 667 501 3,549 2,227 Rate (%) 56.0 -30.8 84.4 481.6 1,560.6 99.6 28.5 33.0 778.2 51.5 MI & P/L of Asso. Cos. 39 1 92 60 -15 -15 -58 281 193 193 Reported PAT 322 -2,500 101 -1,210 -585 16 1,733 737 -3,286 1,902 Adj PAT 322 -366 -37 411 -585 1 231 737 331 384 YoY Change (%) -76.2 NM NM -48.6 NM -100.2 -728.0 79.1 -89.0 15.9 Margins (%) 0.7 -0.9 -0.1 1.0 -1.5 0.0 0.5 1.7 0.2 0.2 E: MOFSL Estimates


Tata CommunicationsCMP: INR606 TP: INR700 (+15%) Buy We expect consolidated revenue to remain flat QoQ (+7% YoY);

however, adj. for 3QFY19 one-offs, consol. revenue is likely togrow 3% QoQ to INR42.9b as growth in data revenue is expectedto be offset by muted voice revenue.

Data revenue is likely to grow 1% QoQ to INR33.5b; however,excluding INR910m one-offs in 3Q, data revenue is expected togrow 4% QoQ primarily on the back of Growth segment. Weexpect voice revenue to decline 1% QoQ to INR9.4b.

Adj. for one-offs in 3Q, consolidated EBITDA is likely to grow 7%QoQ to INR6.8b and margins are likely to expand 70bp to 15.9%.Data EBITDA is expected to grow 9% QoQ (adj. for 3Q one-offs)led by break-even in Growth segment. Voice EBITDA is likely todecline 1% QoQ to INR0.8b.

The stock trades at EV/EBITDA of 9x FY20E and 7x FY21E.Maintain Buy.

Key issues to watch Data revenue performance (expect 4% QoQ growth ex one off

gains in 3Q). Data EBITDA margin (expect 80bp QoQ expansion to 18% ex-off

gains in 3Q).

Bloomberg TCOM IN Equity Shares (m) 285.0 M. Cap. (INR b)/(USD b) 173 / 3


Financial Snapshot (INR Million) Y/E March 2018 2019E 2020E 2021E

Net Sales 166.5 165.7 180.7 198.1 EBITDA 22.9 27.4 28.7 32.5

Adj. NP 0.3 0.4 3.2 5.8 AdjEPS (INR) 1.2 1.3 11.2 20.3 Adj.EPSGr. (%) -89.0 15.9 732.3 81.6

BV/Sh (NR) 17.5 24.2 35.4 55.7 RoE (%) 3.2 6.5 37.6 44.7 RoCE (%) 3.8 3.8 5.6 8.0


EV/EBITDA(x) 11.1 9.4 8.6 7.1 Div. Yield (%) 0.7 0.7 0.7 0.7

April 2019 272

Consol. Quarterly Earning Model (INR m) Y/E March FY18 FY19 FY18 FY19E*

1Q 2Q 3Q 4Q 1Q 2Q* 3Q* 4QE* Revenue 81,665 74,655 65,096 61,373 58,892 76,635 1,17,648 1,17,365 2,82,789 3,70,540 YoY Change (%) -13.9 -19.7 -24.9 -24.5 -27.9 2.7 80.7 91.2 -20.5 31.0 Total Expenditure 62,911 59,639 52,862 46,902 52,298 72,021 1,06,279 1,03,292 2,22,314 3,33,890 EBITDA 18,754 15,016 12,234 14,471 6,594 4,614 11,369 14,073 60,475 36,650 Margins (%) 23.0 20.1 18.8 23.6 11.2 6.0 9.7 12.0 21.4 9.9 Depreciation 20,679 21,143 21,415 20,854 20,924 30,059 47,734 48,126 84,091 1,46,843 Share in Profits from Associates 818 843 818 745 598 423 398 406 3,224 1,825 Net Finance Costs 11,539 11,829 11,490 9,742 13,844 19,511 26,068 27,159 44,600 86,582 PBT before EO expense -12,646 -17,113 -19,853 -15,380 -27,576 -44,533 -62,035 -60,806 -64,992 -1,94,950Extra-Ord expense 0 0 0 0 -33,645 5,658 8,008 0 0 -19,979 PBT -12,646 -17,113 -19,853 -15,380 6,069 -50,191 -70,043 -60,806 -64,992 -1,74,971Tax -4,497 -6,047 -7,008 -5,758 3,504 -453 -19,997 -19,601 -23,310 -36,547 Rate (%) 35.6 35.3 35.3 37.4 57.7 0.9 28.5 32.2 35.9 20.9 Reported PAT -8,149 -11,066 -12,845 -9,622 2,565 -49,738 -50,046 -41,205 -41,682 -1,38,424Adj PAT -8,149 -11,066 -12,845 -9,622 -14,333 -44,530 -62,050 -41,205 -41,682 -1,62,119YoY Change (%) NM NM NM NM NM NM NM NM NM NM Margins (%) -10.0 -14.8 -19.7 -15.7 -24.3 -58.1 -52.7 -35.1 -14.7 -43.8 E: MOFSL Estimates; *Represents Vodafone Idea merged performance


Vodafone IdeaCMP: INR17 TP: INR20 (+15%) Buy We expect revenue to remain flat QoQ at INR117.7b, as the

uptick in APRU will be largely be offset by the decline insubscriber base and revenue dilution from IUC.

We expect 18% QoQ growth in ARPU to INR105; steep 9% QoQdecline in subscriber base.

Despite flat revenue, EBITDA at INR14.1b is likely to grow atrobust 24% QoQ mainly on the back of merger synergies.

Subsequently, EBITDA margin is expected to expand ~230bp QoQto 12%.

We expect Vodafone Idea’s net loss to narrow down to INR41.2b.

Vodafone Idea trades at EBITDA of 19x FY20E and 13x FY21E.Maintain Buy.

Target price of INR20 is adjusted for INR250b rights issue (20bshares at a price of INR12.5)

Key issues to watch Consolidated revenue (expect to remain flat QoQ). Blended ARPU (expect INR105, 18% QoQ growth). EBITDA margin (expect ~230bp QoQ expansion).

Bloomberg IDEA IN Equity Shares (m) 8735.1 M. Cap. (INR b)/(USD b) 148 / 2


Financial Snapshot (INR Million) Y/E March 2018 2019E* 2020E* 2021E*

Net Sales 282.8 370.5 465.6 490.0 EBITDA 60.5 36.6 80.5 125.5

Adj. NP -41.7 -162.1 -164.6 -145.8AdjEPS (INR) -9.6 -18.6 -18.8 -16.7Adj.EPSGr(%) NM NM NM NM

BV/Sh (INR) 62.5 69.2 50.3 33.6 RoE (%) -16.0 -37.0 -31.5 -39.8RoCE (%) -1.8 -6.1 -3.8 -2.5

Payout (%) 0.0 0.0 0.0 0.0Valuations P/E (x) NM NM NM NM

P/BV (x) 0.3 0.2 0.3 0.5 EV/EBITDA(x) 9.6 37.1 18.8 13.0 Div. Yield (%) 0.0 0.0 0.0 0.0

*Represents Vodafone Idea merged performance

April 2019 273

Improvement in NTPC’s PAF to result in cost recoveries Valuations at lower end of historical range; prefer COAL, PWGR and NTPC

Conventional electricity generation declined by ~1% YoY in the first two months of 4QFY19 owing to the seasonality led demand decline. For 11MFY19, conventional generation grew by 3.8% YoY, while coal-based generation grew at a faster rate of 4.2% YoY. Hydro grew 6% YoY, while nuclear declined 2.7% YoY during the same period. For 10MFY19, generation grew by ~5% YoY. Day-ahead volumes at IEX declined ~11% YoY due to lower demand and an improvement in coal stocks at power plants in 4QFY19. Average day-ahead prices declined 32% QoQ to INR3.2/kWh.

Within our Utilities Universe, we expect Power Grid’s PAT to increase ~8% YoY to INR24.5b on account of continued capitalization momentum. NTPC’s adj. PAT is expected to be broadly flat at ~INR28b. Reported PAT is expected to increase by ~3% YoY, led by fixed-cost recoveries given improved availability, offset by prior-period revenues witnessed in the previous year. NHPC’s PAT is expected to decline to INR0.9b due to lower other income and charging off expenses on the Lower Subhansiri project. Coal India’s EBITDA (ex-OBR) is expected to decrease ~22% YoY to INR78.7b due to higher cost of production. PAT is expected to decline ~12% YoY to INR54.5b. CESC’s standalone PAT growth will be muted as regulator has not approved the tariff hike for FY19. Tata Power’s adj. PAT is expected to increase 9% YoY to ~INR2.9b on higher profits from coal JVs. Torrent Power’s adj. PAT is expected to decline 17% YoY to ~INR1.8b on account of higher interest expenses and lower other income.

Top picks – Coal India, Power Grid and NTPC The reversal in interest rate cycle should benefit valuation of utility stocks, which have a negative correlation. At current valuations, the sector is trading at the lower end of its 10-year historical P/E and P/BV range. Valuations are heavily discounting the risk to growth potential. Our top picks are Coal India (benefiting from strong earnings growth led by price hike and operating leverage), Power Grid (visibility of earnings growth and best-in-class RoE) and NTPC (capitalization-driven, double-digits regulated equity and earnings growth). We also like NHPC and Torrent Power.

Company name

CESC

Coal India

JSW Energy

NHPC

NTPC

Power Grid Corp.

Tata Power

Utilities March 2019 Results Preview | April 2019

Sanjay Jain – Research Analyst ([email protected]); +91 22 6129 1523 Dhruv Muchhal – Research Analyst ([email protected]); +91 22 6129 1549

April 2019 274

Exhibit 1: Expected quarterly performance summary Sector CMP Sales (INR m) EBDITA (INR M) PAT (INR m)

Utilities (INR) RECO Mar-19 Var % YoY


% YoY Var


Var % QoQ

CESC 726 UR 19,026 6.0 11.5 5,010 89.0 142.0 2,907 -0.4 63.3 Coal India 237 Buy 283,573 5.4 13.2 78,731 -21.8 -1.2 54,542 -11.6 19.5 JSW Energy 76 Neutral 20,921 17.9 -13.6 4,441 5.4 -39.9 -738 Loss PL NHPC 25 Buy 13,975 22.9 -11.1 4,996 39.7 -16.1 896 -52.7 -50.8NTPC 135 Buy 175,860 -24.8 -26.1 70,971 14.3 13.2 28,399 1.4 11.3 Power Grid Corp. 200 Buy 74,154 -7.0 -10.8 73,154 9.5 -1.3 24,507 7.7 3.9 Tata Power 74 Neutral 85,479 8.3 10.9 12,898 -13.3 -19.5 2,963 9.2 LP Torrent Power 263 Buy 31,281 11.3 -3.9 7,906 14.5 7.4 1,809 -16.6 -23.7Sector Aggregate 704,270 -4.4 -4.6 258,105 -1.4 1.1 115,285 -5.1 14.0

Exhibit 2: Relative performance—3m (%)


Exhibit 3: Relative performance—1Yr (%)


Exhibit 4: Comparative valuation Sector / Companies CMP RECO EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) Utilities (INR) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E CESC 726 UR 75.4 80.0 90.6 9.6 9.1 8.0 7.1 6.8 6.4 11.4 11.2 11.7 Coal India 237 Buy 27.4 29.0 29.9 8.6 8.1 7.9 4.5 4.3 4.2 82.5 80.4 76.3 JSW Energy 76 Neutral 3.8 4.7 5.6 20.3 16.3 13.5 8.8 7.5 6.8 5.5 6.7 7.7 NHPC 25 Buy 2.2 2.6 3.1 11.6 9.6 8.3 9.1 7.1 6.5 7.4 8.7 9.8 NTPC 135 Buy 11.1 13.7 15.9 12.2 9.8 8.5 9.6 8.1 6.8 10.3 12.0 12.9 Power Grid Corp. 200 Buy 18.3 20.8 22.6 10.9 9.6 8.8 8.2 7.3 6.8 16.7 17.1 16.8 Tata Power 74 Neutral 2.5 6.6 6.7 29.4 11.2 11.1 11.0 9.6 9.1 4.3 10.3 9.6 Torrent Power 263 Buy 22.0 23.1 27.6 12.0 11.4 9.5 6.9 6.5 5.6 13.0 12.5 13.5 Sector Aggregate 10.8 9.3 8.6 7.8 6.9 6.3 16.1 17.3 17.5

85

92

99

106

113

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Utilities Index

72

87

102

117

132

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec-

18

Jan-

19

Feb-

19

Mar

-19

Sensex Index MOSL Utilities Index

March 2019 Results Preview | Utilities

April 2019 275

Quarterly performance (INR million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 21,840 20,880 17,060 17,950 21,650 22,200 17,070 19,026 77,858 79,946 Change (%) 8.5 3.6 5.3 14.2 -0.9 6.3 0.1 6.0 7.8 2.7 EBITDA 6,070 5,050 3,140 2,650 4,960 5,110 2,070 5,010 16,463 17,150 Change (%) 18.8 -14.6 -0.3 29.9 -18.3 1.2 -34.1 89.0 1.6 4.2 As of % Sales 27.8 24.2 18.4 14.8 22.9 23.0 12.1 26.3 21.1 21.5 Depreciation 1,050 1,080 1,090 1,110 1,100 1,110 1,090 1,119 4,256 4,419 Interest 1,210 1,260 1,210 1,160 1,200 1,200 1,170 1,190 4,839 4,760 Other Income 400 350 430 480 200 280 450 545 1,679 1,475 Regulatory (inc)/exp 1,940 -90 -700 -2,860 500 -370 -2,000 0 -2,092 -1,870PBT 2,270 3,150 1,970 3,720 2,360 3,450 2,260 3,246 11,139 11,316 Tax 490 680 430 800 520 740 480 338 2,377 2,078 Effective Tax Rate (%) 21.6 21.6 21.8 21.5 22.0 21.4 21.2 10.4 21.3 18.4 Reported PAT 1,780 2,470 1,540 2,920 1,840 2,710 1,780 2,907 8,762 9,237 Adjusted PAT 1,780 2,470 1,540 2,920 1,840 2,710 1,780 2,907 8,791 9,237 Change (%) 2.3 2.1 1.3 -1.0 3.4 9.7 15.6 -0.4 1.9 5.1


CESCCMP: INR726 Under Review We expect CESC’s standalone PAT to remain largely unchanged YoY

at INR2.9b due to the delay in approval of tariff hike. Regulated equity is estimated to grow by ~4% YoY to INR40.1b.

Key issues to watch for Sales in distribution circles. Extension of PPAs.

Bloomberg CESC IN


1,6,12 Rel Perf. (%) -2 / 1 / -23

Financial Snapshot (INR Million) Y/E March FY18 FY19E FY20E FY21E Sales 102.7 104.1 101.9 105.0 EBITDA 30.0 31.3 31.7 32.5 NP 8.3 10.1 10.7 12.1 EPS (INR) 62.1 75.4 80.0 90.6 EPS Gr. (%) 54.6 21.5 6.0 13.3 BV/Sh. (INR ) 632.0 686.5 742.5 805.6 RoE (%) 8.7 11.4 11.2 11.7 RoCE (%) 7.4 8.5 8.5 8.8 Payout (%) 19.3 23.2 25.0 25.4 Valuation P/E (x) 11.6 9.5 9.0 7.9 P/BV (x) 1.1 1.0 1.0 0.9 EV/EBITDA (x) 7.5 7.1 6.8 6.4 Div. Yield (%) 1.7 2.4 2.8 3.2

April 2019 276

Quarterly Performance (INR million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 191,617 181,483 216,433 269,092 240,708 218,840 250,458 283,573 858,624 993,580 Change (%) 4.0 11.9 6.0 16.1 25.6 20.6 15.7 5.4 9.8 15.7 Adj. EBITDA 34,151 12,888 55,405 100,646 65,435 51,194 79,655 78,731 203,089 275,015 As of % Sales 17.8 7.1 25.6 37.4 27.2 23.4 31.8 27.8 23.7 27.7 Depreciation 6,699 7,146 7,511 9,308 7,452 8,069 8,611 7,049 30,664 31,180 OBR -1,069 578 9,226 24,847 8,835 8,023 11,777 4,583 33,583 33,218 Interest 1,209 1,007 974 1,127 1,103 8 620 1,880 4,318 3,611 Other Income 12,066 6,107 8,409 20,002 12,824 16,084 11,633 12,305 46,583 52,846 EO Inc/(Exp) 0 0 0 -73,844 0 0 0 0 -73,844 0 PBT 39,378 10,264 46,102 11,521 60,869 51,178 70,281 77,525 107,264 259,852 Tax 15,860 6,576 16,052 -1,420 23,025 20,317 24,623 22,983 37,067 90,948Tax Rate (%) 40.3 64.1 34.8 -1.7 37.8 39.7 35.0 29.6 34.6 35.0 Reported PAT 23,518 3,689 30,050 12,942 37,843 30,861 45,657 54,542 70,198 168,904 Adjusted PAT 23,518 3,689 30,050 61,686 37,843 30,861 45,657 54,542 118,942 168,904 Change (%) -23.3 -38.5 4.2 127.0 60.9 736.7 51.9 -11.6 28.3 42.0


Coal IndiaCMP: INR237 TP: INR281 (+19%) Buy We expect Coal India’s EBITDA (ex-OBR) to decrease 22% YoY (-

1% QoQ) to INR78.7b on account of higher costs. Expect dispatches to be up 5% YoY (+8% QoQ) to 167mt. FSA

volumes are estimated to increase 11% YoY to 141mt on strongpower sector demand. E-auction volumes would be down 24%YoY to ~22mt.

FSA realization is estimated to decrease 1% YoY to INR1,388/ton. E-auction realization is estimated to increase 24% YoY to

INR2,619/t. PAT is estimated to increase 19% QoQ/-12% YoY to INR54.5b.

Buy.

Key issues to watch for E-auction volumes and realization. Global coal prices.

Bloomberg COAL IN


1,6,12 Rel Perf. (%) -7 / -20 / -32


Net Sales 858.6 993.6 992.5 1,032.7 EBITDA 203.1 275.0 274.4 284.8 NP 118.9 168.9 179.0 184.0

Adj.EPS (INR) 19.2 27.4 29.0 29.9

EPS Gr. (%) 26.3 43.0 6.0 2.8

BV/Sh. (INR) 32.0 33.2 36.1 39.1 RoE (%) 35.4 82.5 80.4 76.3 RoCE (%) 58.4 102.5 101.3 94.6


P/BV (x) 7.4 7.1 6.5 6.0


April 2019 277

Consolidated performance (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 22,316 20,490 19,932 17,751 23,606 24,308 24,217 20,921 80,490 93,051 YoY Change (%) -8.9 0.1 4.7 -4.7 5.8 18.6 21.5 17.9 -2.6Total Expenditure 13,628 11,667 14,079 13,536 15,843 15,694 16,830 16,481 52,909 64,848 EBITDA 8,688 8,824 5,853 4,215 7,762 8,613 7,387 4,441 27,580 28,204 Margins (%) 38.9 43.1 29.4 23.7 32.9 35.4 30.5 21.2 34.3 30.3 Depreciation 2,428 2,449 2,407 2,377 2,899 2,933 2,933 2,975 9,661 11,740 Interest 3,963 3,910 3,406 3,235 3,130 3,083 2,948 2,850 14,513 12,011 Other Income 1,025 1,705 879 1,039 673 1,370 701 769 4,649 3,513 PBT before EO expense 3,323 4,170 920 -358 2,407 3,967 2,208 -616 8,056 7,965 Extra-Ord expense 0 0 0 4,179 0 0 0 0 4,179 0 PBT 3,323 4,170 920 -4,537 2,407 3,967 2,208 -616 3,876 7,965 Tax 1,114 1,202 198 19 236 1,125 638 -7 2,532 1,991 Rate (%) 33.5 28.8 21.5 -0.4 9.8 28.3 28.9 1.1 65.3 25.0 MI and Associates 36 -1 254 275 -121 -317 109 129 564 -200Reported PAT 2,173 2,969 469 -4,831 2,292 3,160 1,461 -738 780 6,174 Adj PAT 2,173 2,969 469 -634 2,292 3,160 1,461 -738 4,959 6,174 YoY Change (%) -40.7 36.6 119.1 -361.9 5.5 6.4 211.8 16.5 -21.2 24.5


JSW EnergyCMP: INR76 TP: INR77 (+1%) Neutral We expect JSW Energy’s EBITDA to increase 5% YoY to INR4.4b due

to higher merchant prices. PAT loss is expected to come in at INR738m in 4QFY19 v/s loss of

INR634m in 4QFY18.

Key issues to watch for International coal prices. Short-term power market prices.

Bloomberg JSW IN


1,6,12 Rel Perf. (%) 8 / 20 / -16


Sales 804.9 918.4 944.3 986.9 EBITDA 27.6 29.4 31.3 32.2 NP 5.0 7.1 7.7 9.3

EPS (INR) 3.0 4.3 4.7 5.7 EPS Gr. (%) -21.2 43.3 9.0 20.4 BV/Sh. (INR ) 67.7 69.6 71.9 75.1

RoE (%) 4.6 6.3 6.7 7.7 RoCE (%) 7.7 7.6 7.9 8.3 Payout (%) 66.1 46.1 42.3 35.1

Valuation P/E (x) 24.0 16.8 15.4 12.8

P/BV (x) 1.1 1.0 1.0 1.0


April 2019 278

Standalone performance (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 23,275 19,717 14,979 11,369 21,290 24,950 15,714 13,975 69,340 75,929 YoY Change (%) 6.0 -18.0 14.5 -16.6 -8.5 26.5 4.9 22.9 -4.6 9.5 EBITDA 13,863 11,150 7,843 3,576 12,904 15,966 5,958 4,996 36,431 39,824 Margins (%) 59.6 56.5 52.4 31.5 60.6 64.0 37.9 35.7 52.5 52.4 Depreciation 3,536 3,505 3,469 3,549 3,726 4,044 4,016 4,063 14,059 15,849 Interest 2,409 2,356 2,279 2,179 2,212 2,283 2,226 2,386 9,223 9,106 Other Income 1,053 5,194 5,688 2,975 1,129 4,716 1,199 1,692 14,910 8,736 Rate regulated activity 2,010 1,426 1,710 2,053 1,431 575 1,775 1,087 7,198 4,868 PBT before EO expense 10,980 11,908 9,492 2,877 9,527 14,930 2,690 1,327 35,257 28,474 PBT 10,980 11,908 9,492 2,877 9,527 14,930 2,690 1,327 35,257 28,474 Tax 2,354 1,722 2,613 983 2,151 2,745 868 431 7,671 6,195 Rate (%) 21.4 14.5 27.5 34.2 23 18 32 32 21.8 21.8 Reported PAT 8,627 10,186 6,879 1,894 7,376 12,185 1,822 896 27,587 22,279 Adj PAT 8,627 10,186 6,879 1,894 7,376 12,185 1,822 896 27,587 22,279 YoY Change (%) 0.6 -34.5 220.4 12.5 -14.5 19.6 -73.5 -52.7 -1.3 -19.2


NHPCCMP: INR25 TP: INR31 (+22%) Buy We expect standalone revenue to increase ~23% YoY to INR13.9b

on higher generation across plants. Generation is expected to increase 10% YoY to 2.4BU. We expect PAT at INR0.9b on lower other income and charging off

expenses on the Lower Subhansiri project. Other income is expected to decline 43% YoY to INR1.7b, as the

base included benefit of late payment surcharge. Buy.

Key issues to watch for Commissioning of ongoing projects.

Bloomberg NHPC IN


1,6,12 Rel Perf. (%) 2 / 3 / -26


Sales 77.5 88.8 101.9 108.9 EBITDA 42.0 47.4 59.7 65.3 NP 25.0 22.8 26.6 31.0

EPS (INR) 2.4 2.3 2.7 3.1 EPS Gr. (%) -17.3 -6.9 16.7 16.5BV/Sh. (INR ) 29.3 29.9 30.9 32.2

RoE (%) 8.5 7.6 8.7 9.8 RoCE (%) 5.6 5.7 7.3 7.9 Payout (%) 55.1 71.3 63.4 58.3

Valuation P/E (x) 10.3 11.0 9.5 8.1

P/BV (x) 0.9 0.8 0.8 0.8

Div. Yield (%) 10.5 9.4 7.5 6.9

April 2019 279

Quarterly Performance (Standalone) – INR million Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 201,076 198,518 207,151 234,000 228,637 226,310 238,104 173,674 840,057 866,725

Change (%) 6.6 2.4 6.9 12.6 13.7 14.0 14.9 -25.8EBITDA 52,684 55,933 52,177 62,097 61,149 59,623 62,699 68,938 222,203 252,409

Other income 6,626 2,616 3,135 5,176 1,364 2,249 1,877 3,438 17,553 8,927 PBT 34,654 32,228 25,848 36,883 31,712 30,046 31,795 42,234 128,925 135,788

Tax 8,472 7,842 2,240 7,627 5,831 5,786 7,941 12,128 25,493 31,686 PAT 26,182 24,386 23,608 29,256 25,881 24,260 23,854 30,106 103,432 104,101

Change (%) 21.1 -2.3 -4.4 40.7 -1.1 -0.5 1.0 2.9 10.2 0.6 Adj. PAT 25,388 27,015 26,277 28,000 29,410 27,475 25,526 28,282 108,200 110,693

Change (%) 15.6 15.4 17.1 5.2 15.8 1.7 -2.9 1.0 12.4 2.3 A. Core PAT 23,178 24,988 23,864 24,601 28,305 25,617 24,095 25,891 98,005 103,908

Core RoE (%) 21.1 21.6 19.2 19.4 22.2 19.9 18.5 19.5 20.6 19.8 a. Base RoE @15.5% 17,058 17,972 19,245 19,662 19,732 19,940 20,169 20,200 73,938 80,040 b. PLF incentive 549 660 450 1,200 1,270 340 970 1,176 2,859 3,756 c. Others 5,571 6,356 4,169 3,739 7,303 5,338 2,956 4,515 21,208 20,111

B. Other income 2,210 2,027 2,412 3,399 1,105 1,858 1,431 2,391 10,195 6,785 Key metrics

Regulated Equity 439,927 487,680 505,625 509,207 509,207 519,934 521,059 542,774 509,207 542,774 Commercial cap.(MW) 40,749 43,619 44,492 44,500 44,500 45,300 44,815 45,725 44,500 45,725 Coal-based PLF (%) 79.1 76.6 76.9 79.0 78.0 72.6


NTPCCMP: INR135 TP: INR164 (+21%) Buy We expect adjusted PAT (before impact of fixed charge under-

recoveries) to be broadly flat at INR28.2b. Reported PAT is expected to increase by ~3% YoY, led by fixed-

cost recoveries given improved availability offset by prior-periodrevenues witnessed in the previous year.

Standalone commercial capacity would increase 910MW QoQ to45.7GW.

Regulated equity is expected to increase ~7% YoY to INR542.7b.

Key issues to watch for PAF for coal-based projects. Core RoE and incentives.

Bloomberg NTPC IN


1,6,12 Rel Perf. (%) 5 / -11 / -22


Net Sales 877.6 925.0 1,018.6 1,123.7 EBITDA 229.8 268.0 322.7 381.5 NP 88.0 109.1 133.6 156.1

Adj.EPS (INR) 8.9 11.0 13.5 15.8 EPS Gr. (%) -10.9 24.0 22.4 16.8BV/Sh. (INR) 104.7 110.9 118.7 128.2

RoE (%) 8.7 10.2 11.8 12.8 RoCE (%) 6.4 6.6 7.5 8.5 Payout (%) 40.5 36.3 35.6 33.0

Valuation P/E (x) 14.8 12.0 9.8 8.4

P/BV (x) 1.3 1.2 1.1 1.0


April 2019 280

Quarterly Performance INR million Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE Sales 72,509 72,528 74,050 79,699 83,365 86,880 83,116 74,154 299,597 327,515 Change (%) 19.5 16.4 14.1 17.3 15.0 19.8 12.2 -7.0 16.2 9.3 EBITDA 62,699 65,560 66,364 66,826 71,365 73,774 74,098 73,154 261,449 292,391 Change (%) 16.8 17.5 14.0 17.2 13.8 12.5 11.7 9.5 15.3 11.8 As of % Sales 86.5 90.4 89.6 83.8 85.6 84.9 89.2 98.7 87.3 89.3 Depreciation 21,311 22,350 23,186 24,065 24,506 25,483 26,047 25,397 90,913 101,433 Interest 17,624 18,673 19,555 20,055 21,406 23,095 22,753 20,941 75,907 88,196 Other Income 2,085 2,397 2,781 2,876 3,006 4,069 4,190 4,098 10,139 15,363 PBT 25,848 26,934 26,405 25,582 28,458 29,265 29,488 30,913 104,769 118,125 Tax 5,324 5,523 5,996 5,536 6,053 6,170 6,177 6,407 22,379 24,806 Effective Tax Rate (%) 20.6 20.5 22.7 21.6 21.3 21.1 20.9 20.7 21.4 21.0 Reported PAT 20,524 21,410 20,408 20,047 22,405 23,095 23,312 24,507 82,390 93,319 Change (%) 14.0 14.1 5.7 4.6 9.2 7.9 14.2 22.2 9.6 13.3 Adjusted PAT 20,831 21,266 21,570 22,747 22,505 23,455 23,581 24,507 86,414 94,047 Change (%) 15.7 13.3 10.9 13.0 8.0 10.3 9.3 7.7 13.4 8.8


Power Grid CorporationCMP: INR200 TP: INR232 (+16%) Buy We estimate PAT to increase by 8% YoY to INR24.5b, driven by

growth in regulated equity. We estimate capitalization of INR73b in the quarter, with full-year

capitalization at INR200b.

Key issues to watch for Capitalization/capex guidance for FY20. Details on competitively bid projects. Development on green energy projects, state JVs, etc.

Bloomberg PWGR IN


1,6,12 Rel Perf. (%) 1 / -3 / -15


Sales 299.4 335.2 380.0 409.4 EBITDA 263.1 299.4 341.1 367.9 NP 86.5 95.5 108.7 118.4

EPS (INR) 16.5 18.3 20.8 22.6 EPS Gr. (%) 16.1 10.4 13.9 8.8 BV/Sh. (INR ) 104.0 115.2 127.9 141.9

RoE (%) 16.6 16.7 17.1 16.8 RoCE (%) 7.5 8.1 8.4 8.6 Payout (%) 44.2 40.0 40.0 40.0

Valuation P/E (x) 11.3 10.2 9.0 8.3

P/BV (x) 1.8 1.6 1.5 1.3


April 2019 281


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 69,686 76,573 69,499 78,952 73,134 75,146 77,067 85,479 293,312 310,826 YoY Change (%) 1.9 6.2 4.0 10.2 4.9 -1.9 10.9 8.3 5.1 6.0 Total Expenditure 51,375 58,075 57,412 64,075 55,426 56,067 61,050 72,581 229,743 245,125 EBITDA 18,311 18,498 12,087 14,878 17,708 19,079 16,017 12,898 63,570 65,701 Margins (%) 26.3 24.2 17.4 18.8 24.2 25.4 20.8 15.1 21.7 21.1 Depreciation 5,857 5,900 5,972 6,454 6,006 6,106 6,027 6,050 23,981 24,190 Interest 9,286 9,814 8,455 8,975 10,130 10,344 10,140 9,670 37,230 40,283 Other Income 313 1,331 911 641 898 1,046 148 2,508 4,327 4,600 Rate regulated activity -2,438 -2,641 1,459 -425 -1,748 -3,727 -1,360 0 -4,099 -6,835PBT before EO expense 1,044 1,474 30 -335 722 -53 -1,362 -313 2,587 -1,006Extra-Ord expense 0 -1,488 3,151 11,323 14,496 593 2,380 -1,098 10,308 16,371PBT 1,044 -15 3,181 10,988 15,218 540 1,018 -1,411 12,895 15,365Tax 2,630 1,553 1,263 -965 1,556 935 1,498 -496 1,643 3,492 Rate (%) 252.0 39.7 -9 10 147 35 12.7 22.7 MI & P/L of Asso. Cos. 3,224 3,909 4,197 2,085 3,047 3,752 1,747 2,780 13,514 11,326 Reported PAT 1,638 2,342 6,115 14,037 16,709 3,358 1,267 1,865 24,766 23,198 Adj PAT 1,638 3,830 2,965 2,714 2,213 2,764 -1,113 2,963 14,458 6,827


Tata PowerCMP: INR74 TP: INR71 (-4%) Neutral We expect Tata Power’s adj. PAT to increase 9% YoY to ~INR2.9b

on account of higher profit from coal JV companies. We expect Mundra to make EBITDA loss of ~INR0.9b given high

coal prices and higher PLF.

Key issues to watch for Cost control at Mundra. Performance at Delhi.

Bloomberg TPWR IN


1,6,12 Rel Perf. (%) 2 / 2 / -27


Sales 293.3 313.9 320.4 333.3 EBITDA 63.6 66.7 65.6 67.1 NP 14.5 5.8 18.0 18.0

EPS (INR) 5.3 2.1 6.6 6.7 EPS Gr. (%) 3.5 -59.8 209.2 0.2 BV/Sh. (INR ) 56.4 62.0 68.8 72.4

RoE (%) 10.7 3.6 10.2 9.4 RoCE (%) 6.3 6.3 5.9 5.8 Payout (%) 0.0 60.5 19.6 19.5

Valuation P/E (x) 13.3 33.0 10.7 10.6

P/BV (x) 1.3 1.1 1.0 1.0

Div. Yield (%) 0.0 1.8 1.8 1.8

April 2019 282


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 30,590 29,151 27,546 28,104 35,281 34,445 32,535 31,281 115,391 133,542 YoY Change (%) 17.8 8.9 18.4 14.6 15.3 18.2 18.1 11.3 Total Expenditure 21,938 20,759 19,607 21,201 27,617 24,577 25,171 23,375 83,504 100,740 EBITDA 8,652 8,392 7,940 6,903 7,664 9,869 7,364 7,906 31,887 32,803 Margins (%) 28.3 28.8 28.8 24.6 21.7 28.6 22.6 25.3 27.6 24.6 Depreciation 2,777 2,801 2,704 3,033 3,018 3,044 3,074 3,093 11,315 12,228 Interest 2,101 2,131 2,145 2,105 2,292 2,247 2,287 2,472 8,482 9,298 Other Income 355 850 443 988 523 441 533 603 2,636 2,100 PBT before EO expense 4,129 4,310 3,534 2,752 2,877 5,019 2,537 2,944 14,725 13,376 Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 PBT 4,129 4,310 3,534 2,752 2,877 5,019 2,537 2,944 14,725 13,376 Tax 1,397 1,079 1,474 540 604 884 155 1,167 4,489 2,809 Rate (%) 33.8 25.0 41.7 19.6 21.0 17.6 6.1 39.6 30.5 21.0 MI and Associates 5 4 11 43 15 13 12 -32 62 8 Reported PAT 2,728 3,228 2,049 2,170 2,259 4,122 2,370 1,809 10,174 10,559 Adj PAT 2,728 3,228 2,049 2,170 2,259 4,122 2,370 1,809 10,174 10,559 YoY Change (%) 497.9 129.0 92.1 59.8 -17.2 27.7 15.6 -16.6 3.8


Torrent PowerCMP: INR263 TP:INR315 (+20%) Buy We expect Torrent Power’s adj. PAT to decline 17% YoY to INR1.8b

due to higher interest cost and lower other income. We expect EBITDA to come in at INR7.9b (+7% QoQ).

Key issues to watch for AT&C losses for distribution assets. Performance of renewables’ assets.

Bloomberg TPW IN


1,6,12 Rel Perf. (%) -1 / 10 / -5


Sales 115.1 133.5 138.4 143.6 EBITDA 31.2 32.8 36.6 40.8 NP 9.4 10.6 11.1 13.3

EPS (INR) 19.6 22.0 23.1 27.6 EPS Gr. (%) 119.7 12.1 5.1 19.5 BV/Sh. (INR ) 160.6 176.6 193.7 215.3

RoE (%) 12.9 13.0 12.5 13.5 RoCE (%) 8.4 8.8 8.8 9.4 Payout (%) 11.2 22.8 21.6 18.1


Div. Yield (%) 6.2 6.9 6.6 5.6

April 2019 283

Standalone - Quarterly performance Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue 35,981 35,083 40,939 38,100 45,594 48,725 54,509 50,636 1,50,332 1,99,465 YoY Change (%) 35.7 26.3 22.6 22.5 26.7 38.9 33.1 32.9 26.4 32.7 Total Expenditure 32,949 31,904 36,721 35,155 41,367 44,829 49,976 46,517 1,36,804 1,82,690 EBITDA 3,032 3,179 4,217 2,945 4,227 3,896 4,533 4,118 13,528 16,775 Margins (%) 8.4 9.1 10.3 7.7 9.3 8.0 8.3 8.1 9.0 8.4 Depreciation 337 351 393 465 403 444 522 674 1,590 2,042 Interest 243 109 110 132 100 101 149 133 594 483 Other Income 228 212 137 149 143 139 86 99 693 466 PBT 2,680 2,930 3,851 2,497 3,866 3,491 3,949 3,410 12,037 14,716 Tax 932 1,020 1,334 826 1,360 1,233 1,378 1,180 4,158 5,151 Rate (%) 34.8 34.8 34.6 33.1 35.2 35.3 34.9 34.6 34.5 35.0 MI & Profit/Loss of Asso. Cos. 0 0 0 0 0 0 0 0 -185 0 Reported PAT 1,748 1,910 2,518 1,671 2,506 2,257 2,571 2,231 8,064 9,565 Adj PAT 1,748 1,910 2,518 1,671 2,506 2,257 2,571 2,231 8,064 9,565 YoY Change (%) 47.6 65.2 65.8 72.9 43.4 18.2 2.1 33.5 68.4 18.6 Margins (%) 4.9 5.4 6.1 4.4 5.5 4.6 4.7 4.4 5.4 4.8

CMP: INR1,492 TP: INR1,300 (-13%) Sell We expect standalone revenue to grow 33% YoY to INR50.6b,

primarily on the back of strong SSSG and a fillip from new storeadditions.

However, given the company’s focus on price competitiveness, weexpect gross margins to remain flat YoY at 14.8%.

We expect EBITDA margin to expand 40bp YoY to 8.1% on the backof operating leverage. Consequently, we expect EBITDA to grow at robust 40% YoY to INR4.1b.

PAT is expected to grow 34% YoY to INR2.2b driven by robust EBITDA growth.

The stock trades at P/E of 75x FY20E and 56x FY21E.

Key things to watch for Same-store sales growth. New store additions.

Bloomberg DMART IN Equity Shares (m) 624.1 M. Cap. (INR b)/(USD b) 931 / 14



Adj. NP 8.1 9.6 12.3 16.3 Adj. EPS (INR) 12.9 15.3 19.7 26.1 Adj. EPS Gr. (%) 68.4 18.6 28.5 32.7

BV/Sh (INR) 74.8 90.1 109.8 136.0 RoE (%) 18.9 18.6 19.7 21.3 RoCE (%) 15.8 17.7 18.8 20.5


EV/EBITDA (x) 67.7 54.6 43.5 33.4


Avenue Supermarts


April 2019 284

Chintan Modi – Research analyst ([email protected]); +91 22 6129 1554 Lopa Thakkar – Research analyst ([email protected]); +91 22 6129 1548


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Gross Sales 5,550 4,847 4,239 4,335 6,991 8,259 6,877 6,725 18,972 28,852 YoY Change (%) 20.9 7.7 -24.4 -21.7 26% 70% 62% 55% -6.3 52.1 Total Expenditure 4,288 3,506 2,647 2,987 5,196 6,071 5,118 5,077 13,427 21,462 EBITDA 1,263 1,341 1,593 1,348 1,795 2,188 1,759 1,648 5,545 7,390 Margins (%) 22.8 27.7 37.6 31.1 25.7 26.5 25.6 24.5 29.2 Depreciation 317 321 366 372 317 339 320 380 1,377 1,355 Interest 608 605 636 746 628 697 697 815 2,594 2,837 Other Income 97 148 97 141 88 177 103 145 483 512 PBT before EO expense 435 564 688 371 938 1,329 845 598 2,057 3,710 Extra-Ord expense 0 0 0 115 0 0 0 0 115 0 PBT 435 564 688 256 938 1,329 845 598 1,942 3,710 Tax 142 147 237 102 313 464 251 197 628 1,225 Rate (%) 32.7 26.2 34.4 39.9 33.4 34.9 29.7 33.0 32.4 Minority Interest & P/L of Asso. Cos. -22 8 -38 -27 -6 -4 -4 93 -79 79 Reported PAT 314 409 489 180 631 869 598 307 1,392 2,405 Adj PAT 314 409 489 250 631 869 598 307 1,470 2,405 YoY Change (%) 27.4 42.5 60.6 -66.3 101% 113% 22% 23% -6.9 63.7 Margins (%) 5.7 8.4 11.5 5.8 9.0 10.5 8.7 4.6 7.7 8.3 E: MOSL Estimates

March 2018 Results Preview | Sector: Real estate

Brigade EnterprisesCMP: INR252 TP: INR316 (+26%) Buy Revenue is expected to grow 55% YoY to INR6,725m in 4QFY19 on

account of traction across all residential and commercial projects.

We expect EBITDA margin to contract by 660bp YoY to 24.5%,given above-normal base quarter margins.

We estimate net profit at INR307m, up 23% YoY.

Key issues to watch for Performance from new residential launches and impact of GST

rate cut. Construction progress and monetization of Brigade Tech

Gardens and WTC Chennai (SEZ projects) Potential stake sale in hotel portfolio and construction progress

of new hotels.

Bloomberg BRGD IN


1,6,12 RelPerf. (%) 18 / 25 / -22

Financial Snapshot (INR Billion) Y/E March FY18 FY19E FY20E FY21E

Sales 19.0 28.8 28.3 28.8

EBITDA 5.5 7.3 7.3 8.3 NP 1.5 2.3 2.4 1.9 EPS (INR) 10.8 16.5 16.1 14.2

EPS Gr. (%) -4.0 53.1 -2.9 -11.4BV/Sh. (INR) 168.1 181.6 194.3 204.9 RoE (%) 7.4 9.5 8.5 7.1



April 2019 285

Ashish Chopra – Research Analyst ([email protected]); +91 22 6129 1530 Anmol Garg – Research Analyst ([email protected]); +91 22 6129 1574


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue from operations 1,099 1,108 1,301 1,386 1,185 1,121 1,016 1,052 4,894 4,374 YoY Change (%) 22.7 20.0 49.7 25.0 7.8 1.2 -21.9 -24.1 28.9 -10.6 Total Expenditure 896 820 947 1,107 992 1,028 1,110 989 3,770 4,119 EBITDA 203 288 354 279 193 93 -94 62 1,124 254 Margins (%) 18.5 26.0 27.2 20.1 16.3 8.3 -9.3 5.9 23.0 5.8 Depreciation 101 109 112 133 115 120 129 129 455 493 Interest 2 4 3 2 2 3 2 2 10 9 Investment income 513 556 454 572 479 497 756 526 2,095 2,258 PBT before EO expense 614 731 694 716 555 468 530 457 2,754 2,010 Extra-Ord expense 0 5 7 14 28 -15 133 31 26 177 PBT 614 726 686 702 527 483 397 427 2,728 1,834 Tax 118 126 162 149 70 101 18 85 555 274 Rate (%) 19.2 17.4 23.6 21.2 13.3 20.9 4.6 20.0 20.3 15.0 MI & P/L of Asso. Cos. 2 68 60 69 58 77 70 74 -199 -279 Reported PAT 498 668 584 622 515 459 449 415 2,372 1,838 Adj PAT 496 612 538 568 465 398 382 356 2,213 1,601 YoY Change (%) 44.5 19.5 25.0 16.2 -6.3 -35.0 -29.0 -37.3 12.9 -27.7 Margins (%) 45.1 55.2 41.4 41.0 39.2 35.5 37.6 33.8 45.2 36.6 E: MOSL Estimates

March 2019 Results Preview | Sector: Exchanges

BSECMP: INR613 TP: INR 750(+22%) Buy We expect operating revenues from the BSE to slightly recover

led by volume increase (10% QoQ). However, amid marketvolatility, revenue is expected to decline 24% YoY.

Turnover in cash equities during the quarter was down 31.7%YoY, driving our expectations of a 40% decline in transactionrevenues to INR282m. Revenue from corporate services isexpected to decline 21% YoY to INR489m. Other sources areassumed at INR281m v/s INR216m in the same quarter last year –growth was driven by contribution from monetization of the BSEStar MF platform.

Our EBITDA margin estimate of 5.9% is down 78% YoY.

Due to decline in operations, we have assumed PAT at INR415m,a decline of 37% YoY.

Key issues to watch for Revenues from Star MF platform. Commentary on commodity derivatives launched recently.

Bloomberg BSE IN


1,6,12 RelPerf. (%) -1 / -16 / -38


Net Sales 4.9 4.4 4.8 5.4

EBITDA 1.1 0.3 0.4 0.8

PAT 2.4 1.8 2.2 2.6

EPS (INR) 43.5 34.6 40.0 47.5

EPS Gr (%) 6.0 -20.3 15.6 18.6

BV / Sh (INR) 574 701 712 722

P/E (x) 4.7 17.6 15.2 12.8

P / BV (x) 1.1 0.9 0.9 0.8

RoE (%) 7.6 4.9 5.6 6.6

RoCE (%) 10.7 7.3 8.0 9.0

April 2019 286

Quarterly Performance (INR Million) Y/E December CY18 CY19E CY18 CY19E

1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Volume (m litres) 51.2 57.0 51.2 54.0 51.7 57.6 51.7 54.5 213 215 Realization 181 178 181 191 190 191 194 194 183 192 Net Sales 9,271 10,172 9,269 10,334 9,832 10,993 10,017 10,566 39,046 41,408 YoY Change (%) 5.1 16.9 7.6 6.5 6.1 8.1 8.1 2.2 8.9 6.1 Total Expenditure 6,528 7,655 6,995 7,160 6,768 8,192 7,486 8,124 28,338 30,570 EBITDA 2,743 2,517 2,274 3,174 3,064 2,801 2,531 2,443 10,708 10,838 YoY Change (%) 4.2 20.1 -10.3 3.5 11.7 11.3 11.3 -23.0 3.7 1.2 Margins (%) 29.6 24.7 24.5 30.7 31.2 25.5 25.3 23.1 27.4 26.2 Depreciation 143 132 135 146 147 136 139 151 556 573 Interest 7 3 -2 3 4 4 4 4 11 15 Other Income 228 173 186 256 262 198 213 294 843 967 PBT 2,821 2,555 2,327 3,281 3,175 2,859 2,601 2,582 10,984 11,217 Tax 1,003 913 823 1,162 1,111 1,001 910 904 3,901 3,926 Rate (%) 36 36 35 35 35 35 35 35 36 35 PAT 1,818 1,642 1,504 2,119 2,064 1,858 1,691 1,678 7,083 7,291 YoY Change (%) 1.6 19.1 -15.6 7.7 13.5 13.2 12.4 -20.8 2.4 2.9 Margins (%) 19.6 16.1 16.2 20.5 21.0 16.9 16.9 15.9 18.1 17.6 E: MOSL Estimates


Castrol (India)CMP: INR166 TP: INR221 (+33%) Buy We expect sales volume growth for 1QCY19 at 51.7m liters (+1%

YoY, -4% QoQ), with expected realization at ~INR190/litre. EBITDA margin is expected to be 31.2%, slightly higher than 30.7%

in 4QCY18, led by the benefit from a decline in average Brent oilprices in the quarter.

We expect CSTRL to report EBITDA of INR3.1b (+12% YoY, -3%QoQ).

We estimate net profit at INR2.1b (+14% YoY, -3% QoQ), withexpected tax rate of 35%.

The stock trades at 20.9x CY19E EPS of INR7.4. Current dividendyield at 3.2%.

Key issues to watch for Volume growth. Operating margin expansion. Launch of new products. Competitive pressure from other players.

Bloomberg CSTRL IN


1,6,12 RelPerf. (%) -5 / 7 / -37


Y/E Dec 2017 2018 2019E 2020E

Sales 35.8 39.0 41.4 42.2

EBITDA 10.3 10.7 10.8 10.7

PAT 6.9 7.1 7.3 7.4

EPS (INR) 7.0 7.2 7.4 7.5

EPS Gr. (%) 74.9 2.4 2.9 1.2

BV/Sh.(INR) 10.3 11.8 13.0 14.2

RoE (%) 69.1 64.8 59.5 54.9

RoCE (%) 69.2 64.9 59.6 55.0

Valuations P/E (x) 22.0 21.5 20.9 20.6

P/BV (x) 14.9 13.1 11.9 10.8

EV/EBITDA (x) 14.0 13.5 13.1 13.2

Div. Yield (%) 3.1 3.2 3.3 3.4


April 2019 287

Sumant Kumar – Research Analyst ([email protected]); +91 22 6129 1569 Research Analyst: Aksh Vashishth ([email protected]); +91 22 6129 1553; Darshit Shah ([email protected]); +91 22 6129 1546

Quarterly Performance (INRm) Y/E March FY18 FY19 FY18 FY19E Consolidated 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 22,609 36,753 27,349 23,714 25,285 50,083 30,495 29,649 110,425 135,512 YoY Change (%) 12.1 4.4 22.4 5.0 11.8 36.3 11.5 25.0 9.1 22.7 Total Expenditure 20,916 31,005 24,075 22,023 23,146 43,420 27,456 27,673 98,019 121,693 EBITDA 1,693 5,748 3,274 1,691 2,139 6,663 3,039 1,977 12,406 13,819 Margins (%) 7.5 15.6 12.0 7.1 8.5 13.3 10.0 6.7 11.2 10.2 Depreciation 249 253 252 234 256 263 269 275 987 1,063 Interest 441 413 422 506 644 696 514 510 1,783 2,364 Other Income 125 180 125 155 88 98 98 98 586 383 PBT before EO expense 1,128 5,262 2,725 1,106 1,328 5,802 2,354 1,290 10,221 10,775 Extra-Ord expense 0 0 0 0 0 197 4 0 0 201 PBT 1,128 5,262 2,725 1,106 1,328 5,605 2,350 1,290 10,221 10,573 Tax 396 1,774 919 374 423 1,944 821 426 3,463 3,616 Rate (%) 35.1 33.7 33.7 33.8 31.8 34.7 34.9 33.0 33.9 34.2 Minority Interest & P/L of Asso. Cos. 6 3 1 -3 3 5 -14 0 6 -7 Reported PAT 727 3,486 1,805 735 902 3,656 1,543 864 6,752 6,964 Adj PAT 727 3,486 1,805 735 902 3,785 1,546 864 6,752 7,096 YoY Change (%) 870.0 63.3 61.4 -49.0 24.2 8.6 -14.3 17.5 39.1 5.1 Margins (%) 3.2 9.5 6.6 3.1 3.6 7.6 5.1 2.9 6.1 5.2 E: MOSL Estimates

March 2019 Results Preview | Sector: Fertilizers

Coromandel International CMP: INR491 TP: INR604 (+23%) Buy We expect revenue to grow 25% YoY to INR29,649m in 4QFY19.

Fertilizer volumes are seen growing 6% YoY, which coupled withsignificantly higher realization v/s previous year, should result inrevenue growth of 27.8% YoY in nutrients and other alliedbusinesses. Crop protection business is expected to grow 6% YoY.

Volume growth is expected to be triggered by growth of 75% YoYin urea and traded DAP growing by 31x. NPK & manufactured DAPvolumes are expected to post de-growth of 8% YoY each.

EBITDA margin is likely to contract 40bp to 6.7% due to higherphos acid prices YoY.

Consequently, adj. PAT is expected to grow 17.5% YoY toINR864m in 4QFY19.

The stock trades at 16.8x/14.6x FY20E/21E EPS.

Key things to watch for Outlook for upcoming Kharif season. Phos acid price trend.

Bloomberg CRIN IN


1,6,12 Rel Perf. (%) 3 / 18 / -26


Sales 109.5 135.5 145.8 159.3

EBITDA 12.3 13.8 15.9 17.8 NP 6.6 7.1 8.6 9.8 EPS (INR) 22.7 24.3 29.3 33.6




April 2019 288

Y/E March FY18 FY19E FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 1,286 1,453 1,622 1,716 1,873 2,014 2,058 1,960 6,077 7,905 YoY Change (%) 18.4 8.2 56.6 58.7 46% 39% 27% 14% 33.7 30.1 Total Expenditure 833 798 935 1,041 1,219 1,251 1,218 1,176 3,606 4,862 EBITDA 453 655 687 675 654 762 840 784 2,470 3,044 Margins (%) 35.2 45.1 42.4 39.3 34.9 37.9 40.8 40.0 40.7 38.5 Depreciation 89 94 94 94 94 94 95 98 371 381 Interest 70 22 3 8 2 7 6 8 104 25 Other Income 37 86 79 84 83 83 55 50 286 270 PBT before EO expense 332 624 669 656 641 744 795 728 2,281 2,908 Extra-Ord expense -18 0 0 8 0 0 0 0 -10 0

PBT 350 624 669 648 641 744 795 728 2,292 2,908 Tax 127 194 225 191 225 267 291 237 737 1,016 Rate (%) 36.1 31.1 33.6 29.5 35.0 35.8 36.6 32.5 32.2 35.0 MI & P/L of Asso. Cos. 1 -2 -3 -4 -3 4 2 4 -1 -8 Reported PAT 223 433 447 453 414 481 505 495 1,555 1,900 Adj PAT 211 433 447 458 414 481 505 495 1,548 1,900 YoY Change (%) 24.4 33.8 327.8 302.3 96% 11% 13% 8% 118.9 22.7 Margins (%) 16.4 29.8 27.6 26.7 22.1 23.9 24.6 25.3 25.5 24.0 E: MOSL Estimates

March 2019 Results Preview | Sector: Others

Delta Corp CMP: INR273 TP: INR312 (+15%) Buy We expect revenue to grow 14% YoY to INR1,960m in 4QFY19,

driven by traction in Goa casinos and ramp-up of online business.

EBITDA margin is expected to remain at 40%. EBITDA is expected togrow 16% YoY to INR784m in 4QFY19.

Adjusted net profit is expected to grow by 8% YoY to INR495m in4QFY19.

Key issues to watch for Impact on margins due to competitive intensity in online

business. Management update on timelines for announcement of land-

based policy.

Bloomberg DELTA IN


1,6,12 RelPerf. (%) 1 / 21 / -6


Net Sales 6.1 7.9 9.6 11.5 EBITDA 2.5 3.0 3.8 4.7 Adj. Net Profit 1.5 1.9 2.5 3.0

Adj. EPS (INR) 5.8 7.0 9.0 10.9 Adj. EPS Gr. (%) 89.4 21.2 29.0 20.8 BV/Sh (INR) 62.9 65.7 74.2 84.5


Valuations P/E (x) 47.0 38.8 30.1 24.9 P/BV (x) 4.3 4.1 3.7 3.2 EV/EBITDA (x) 22.9 18.9 15.0 12.3

Div. Yield (%) 0.0 0.1 0.2 0.2


April 2019 289

CMP: INR541 TP: INR623 (+15%) Buy We expect consolidated revenue to grow 11.5% YoY to

INR13,320m in 4QFY19. Both animal feed and crop protectionbusiness segment are expected to grow at 14% YoY to INR7,782mand INR2,134m respectively.

Expect consolidated EBITDA margins to expand by 20bp to 6.4% in4QFY19. We expect EBIT margins in animal feed segment todecline by 300bp YoY to 4.1%; however, it is expected to improveon QoQ basis by 100bp on account of price hike.

However, we expect adj. PAT to grow 9.5% YoY to INR274m in4QFY19 primarily on account of higher depreciation (INR265m in4QFY19 v/s INR217m in 4QFY18).

The stock trades at 18.4x FY20 and 15.3x FY21 EV/ EBITDA.

Key things to watch for Response to the price hike taken in the animal feed segment. Recovery of provision amounting to INR50m made in the crop

protection segment.

Bloomberg GOAGRO IN


1,6,12 Rel Perf. (%) 3 / -3 / -33


Sales 52.1 58.6 66.2 74.9 EBITDA 4.4 4.7 6.0 7.1

NP 2.2 2.4 3.1 3.8 EPS (INR) 11.3 12.6 16.1 19.7 EBITDA Gr. (%) 1.1 5.2 28.5 19.4

EPS Gr. (%) -5.1 11.8 27.4 22.4RoE (%) 17.9 16.4 18.7 20.1 RoCE (%) 14.7 14.8 17.2 18.8

EV/EBITDA (x) 24.9 23.6 18.4 15.3 P/E (x) 47.8 42.8 33.6 27.4

Sumant Kumar – Research Analyst ([email protected]); +91 22 6129 1569 Research Analyst: Darshit Shah ([email protected]); +91 22 6129 1546; Aksh Vashishth ([email protected]); +91 22 6129 1553


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Gross Sales 13,647 14,258 12,207 11,947 14,844 15,884 14,541 13,320 52,059 58,588 YoY Change (%) 2.4 0.4 7.1 15.5 8.8 11.4 19.1 11.5 5.7 12.5 Total Expenditure 12,389 12,797 11,238 11,206 13,451 14,477 13,531 12,470 47,629 53,929 EBITDA 1,258 1,461 969 742 1,393 1,407 1,010 850 4,430 4,659 Margins (%) 9.2 10.2 7.9 6.2 9.4 8.9 6.9 6.4 8.5 8 Depreciation 216 211 215 217 224 237 264 265 859 990 Interest 118 144 114 78 81 85 98 85 453 349 Other Income 67 86 57 108 39 338 49 97 318 521 PBT before EO expense 991 1,193 698 554 1,126 1,423 696 597 3,436 3,842 Extra-Ord expense 0 0 -121 0 0 0 0 0 -121 0

PBT 991 1,193 818 554 1,126 1,423 696 597 3,556 3,842 Tax 342 374 297 194 393 452 244 209 1,207 1,298 Rate (%) 34.6 31.4 36.3 35 34.9 31.8 35 35 33.9 33.8 Minority Interest & P/L of Asso. Cos. 2 -90 12 26 -69 29 43 113 57 116 Reported PAT 647 909 510 335 802 942 409 274 2,292 2,428 Adj PAT 647 909 389 335 802 942 409 274 2,171 2,428 YoY Change (%) -7.5 11 -39.2 -0.7 24.1 3.7 5.1 -18 -12.9 11.8 Margins (%) 4.7 6.4 3.2 2.8 5.4 5.9 2.8 2.1 4.2 4.1 E: MOSL Estimates

March 2019 Results Preview | Sector: Agri

Godrej Agrovet

April 2019 290

CMP: INR158 TP: INR189 (+20%) Buy We expect consolidated revenue to grow 9.5% YoY to INR12.5b in

4QFY19 with revenue growth of 9% in the standalone business toINR8.6b. Subsidiary (consolidated less standalone) is expected togrow at 10.7% YoY to INR4.0b.

Consolidated EBITDA margin is likely to expand by 140bp to 22.8%in 4QFY19, mainly on account of 150bp margin expansion in thestandalone business to 34% and decline in losses of the subsidiaryto INR57m in 4QFY19 from INR108m in 4QFY18.

Adj. PAT is expected to grow 21.6% YoY to INR1.1b in 4QFY19primarily on account of lower interest cost (INR490m in 4QFY19v/s INR520m in 4QFY18) and higher other income, which is partlyoffset by an increase in depreciation.

The stock trades at 19.9x FY20E and 15.9x FY21E EV/ EBITDA.

Key things to watch for Rate hikes for the corporate segment in the domestic market. Improvement in the US business.

Bloomberg IH IN Equity Shares (m) 1189.3 M. Cap. (INR b)/(USD b) 187 / 3



Sales 41.0 45.2 49.3 53.8 EBITDA 6.7 8.3 10.5 12.9 NP 0.8 2.9 3.7 5.0

EPS (INR) 0.7 2.4 3.1 4.2 EBITDA Gr. (%) 10.0 24.0 26.0 23.1 EPS Gr. (%) NA 269.3 26.9 36.7

RoE (%) 2.3 6.7 8.0 10.2 RoCE (%) 4.6 5.7 7.6 9.4 EV/EBITDA (x) 31.9 25.5 19.9 15.9

P/E (x) 239.6 64.9 51.2 37.4

Sumant Kumar – Research Analyst ([email protected]); +91 22 6129 1569 Research Analyst: Darshit Shah ([email protected]); +91 22 6129 1546; Aksh Vashishth ([email protected]); +91 22 6129 1553


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Gross Sales 9,073 8,517 11,973 11,435 9,797 9,645 13,235 12,524 40,997 45,201 YoY Change (%) -4.2 -4.0 5.8 8.7 8.0 13.3 10.5 9.5 2.0 10.3 Total Expenditure 8,167 7,971 9,168 8,988 8,690 8,653 9,879 9,668 34,293 36,890 EBITDA 906 546 2,805 2,447 1,107 992 3,355 2,857 6,704 8,311 Margins (%) 10.0 6.4 23.4 21.4 11.3 10.3 25.4 22.8 16.4 18.4 Depreciation 714 705 742 852 785 812 833 900 3,012 3,330 Interest 695 716 760 520 469 467 491 490 2,690 1,917 Other Income 88 125 199 206 150 166 145 219 617 681 PBT before EO expense -415 -750 1,502 1,281 3 -120 2,177 1,686 1,618 3,745 Extra-Ord expense -157 -24 -187 144 39 453 -410 0 -225 82

PBT -258 -725 1,690 1,137 -36 -573 2,587 1,686 1,843 3,663 Tax 39 -214 819 568 -98 -193 990 759 1,211 1,460 Rate (%) -15.0 29.6 48.4 49.9 267.1 33.6 38.3 45.0 65.7 39.8 Minority Interest & P/L of Asso. Cos. 22 111 -208 -187 -92 -329 -22 -168 -261 -611 Reported PAT -319 -622 1,079 756 153 -51 1,618 1,095 894 2,814 Adj PAT -476 -647 891 900 192 401 1,208 1,095 669 2,896 YoY Change (%) NA NA 6.0 7,463.9 NA NA 35.5 21.6 281.6 332.8 Margins (%) -5.2 -7.6 7.4 7.9 2.0 4.2 9.1 8.7 1.6 6.4 E: MOSL Estimates

March 2019 Results Preview | Sector: Hospitality

Indian Hotels

April 2019 291


Quarterly Performance (Standalone) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenues 2,225 2,252 2,272 2,407 2,595 2,650 2,811 2,931 9,155 10,987 YoY (%) 12.6 7.2 22.1 15.5 16.7 17.7 23.7 21.8 14.1 20.0 Salary costs 991 938 954 1,048 1,106 1,118 1,151 1,159 3,931 4,534 Ad and Promotion costs 254 176 256 478 376 404 503 513 1,164 1,796 Other Expenses 276 251 273 287 270 304 324 288 1,088 1,186 Operating Profit 703 888 788 593 843 825 833 971 2,973 3,471 Margins (%) 31.6 39.4 34.7 24.7 32.5 31.1 29.6 33.1 32.5 31.6 Other Income 264 262 220 225 236 275 296 353 971 1,160 Depreciation 54 53 53 56 53 52 50 55 215 211 PBT bef. Extra-ordinary 913 1,097 956 763 1,026 1,048 1,079 1,268 3,729 4,421 Provision for Tax 270 270 253 197 236 267 335 300 991 1,138 ETR (%) 29.6 24.6 26.5 25.8 23.0 25.5 31.1 23.6 26.6 25.7 PAT bef. Minority 642 786 534 -137 630 781 744 968 1,825 3,123 EOI 0 -41 -169 -703 -160 0 0 0 -913 -160 Adjusted PAT 642 827 703 566 790 781 744 968 2,738 3,283 QoQ (%) 95.3 28.7 -15.0 -19.5 39.6 -1.1 -4.8 30.2 YoY (%) 44.8 3.2 49.1 72.1 22.9 -5.5 5.8 71.1 31.4 19.9 EPS (INR) 5.2 6.4 4.3 -1.1 5.1 6.4 6.1 7.3 14.9 24.9 E: MOSL Estimates


Info EdgeCMP: INR1811 TP: INR1800 (-1%) Neutral We expect standalone revenue to grow 22% YoY to INR2.9b. Recruitment segment (~70% of business) is estimated to grow

17% YoY to INR2.05b. We estimate a decline in revenue of 99acres sequentially (-7.5%),

in lieu of near-term pressure in the segment. While matrimony business may see some upside (+6% YoY), this

may be at the cost of higher cash burn to match up withcompetition.

Our EBITDA margin estimate for the quarter stands at 30.8%, up120bp sequentially. Margins are positively impacted byseasonality in recruitment business, which will be partially offsetby higher ad spends.

Consequently, we expect PAT at INR899m, an increase of 59%YoY.

Key issues to watch for Outlook on 99acres.com given emerging clarity on RERA. Traction in the recruitment business from segments other than IT. Commentary around monetization in Zomato.com.

Bloomberg INFOE IN

Equity Shares (m) 104.3 M. Cap. (INR b)/(USD b) 189 / 3 1863 1927 / 1125

1,6,12 RelPerf. (%) -8 / 21 / 33


Sales 9.2 11.0 13.1 15.3

EBITDA 3.0 3.5 4.5 5.7 NP 1.8 3.1 4.4 5.4 EPS (Rs) 14.9 24.9 33.9 41.9

EPS Gr. (%) -3.3 67.2 36.4 23.5BV/Share 172.9 189.2 216.1 251.1 RoE (%) 13.4 14.6 16.9 18.1



April 2019 292

Quarterly performance (INR Million) Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 57,529 52,910 61,779 57,991 65,120 61,853 79,162 78,015 2,30,209 2,84,150 YoY Change (%) 25.6 27.0 23.9 19.6 13.2 16.9 28.1 34.5 23.9 23.4

Ticket revenue 50,780 45,234 53,225 50,194 57,694 52,893 70,472 67,839 1,99,433 2,48,898 Non-ticket revenue 6,749 7,676 8,554 7,797 7,426 8,960 8,690 10,176 30,776 35,252 Non-ticket revenue share (%) 11.7 14.5 13.8 13.4 11.4 14.5 11.0 13.0 13.4 12.4

Fuel cost 17,929 16,781 20,465 23,677 27,480 30,684 34,487 27,649 78,853 1,20,300 Employee cost 5,843 6,004 6,137 6,566 6,536 7,729 8,347 8,752 24,550 31,364 Other expenses 14,250 14,550 15,820 16,519 20,791 22,330 20,375 21,671 61,139 85,166

Total Expenditure 38,022 37,335 42,422 46,762 54,807 60,742 63,209 58,072 1,64,542 2,36,830 EBITDAR 19,507 15,574 19,357 11,229 10,313 1,111 15,953 19,943 65,667 47,320 Margins (%) 33.9 29.4 31.3 19.4 15.8 1.8 20.2 25.6 28.5 16.7 Net Rentals 8,537 8,193 9,442 9,931 10,424 11,161 13,761 13,731 36,102 49,076 EBITDA 10,970 7,382 9,915 1,298 -110 -10,050 2,192 6,213 29,565 -1,756 Margins (%) 19.1 14.0 16.0 2.2 -0.2 -16.2 2.8 8.0 12.8 -0.6 Depreciation 983 1,025 1,074 1,286 1,553 1,820 2,038 2,092 4,369 7,503 Interest 770 857 844 927 1,087 1,300 1,377 1,375 3,398 5,139 Other Income 2,026 2,146 2,719 2,577 3,064 3,289 3,131 3,441 9,469 12,925 PBT 11,243 7,645 10,716 1,662 314 -9,881 1,908 6,186 31,267 -1,473 Tax 3,132 2,130 3,096 486 36 -3,359 0 1,794 8,843 -1,530 Rate (%) 27.9 27.9 28.9 29.2 11.3 34.0 0.0 29.0 28.3 103.9 Reported PAT 8,111 5,516 7,620 1,176 278 -6,521 1,908 4,392 22,424 57 EPS 21.1 14.3 19.8 3.1 0.7 -17.0 5.0 11.4 58.3 0.1 YoY Change (%) 37.1 294.5 56.4 -73.3 -96.6 -218.2 -75.0 273.3 35.1 -99.7 E: MOSL Estimates

March 2019 Results Preview | Sector: Aviation

InterGlobe AviationCMP: INR1,384 TP: INR1,444 (+4%) Neutral We expect INDIGO to report revenues of INR78b in 4QFY19 and

EBITDAR of INR19.9b (+78% YoY, +25% QoQ).

We model revenue passenger kilometer (RPK) for the quarter atINR18.6b (+23% YoY, +6% QoQ).

We model ATF at INR63.0/liter (+2.1% YoY) for 4QFY19 andexpect INDIGO to report net gain of INR4.4b.

We model Available Seat Kilometer (ASK) at 80.6b/101.7b inFY19/FY20 v/s 63.5b in FY18, and RPK at 69.5b/87.5b inFY19/FY20 v/s 55.5b in FY18, driven by an increase in its fleet size.

The stock trades at 20.5x FY20E EPS of INR67.4 and at an EV of8.5x FY20E adjusted EBITDAR.

Key issues to watch for Induction of new aircraft in the fleet. Fuel costs and their impact on yields.

Bloomberg INDIGO IN


1,6,12 RelPerf. (%) 15 / 64 / -13

Financial Snapshot (INR Billion)

Y/E March 2018 2019E 2020E 2021E

Sales 230.2 284.2 405.3 497.8

EBITDAR 65.7 47.3 98.5 130.0

NP 22.4 0.1 25.9 39.6

EPS (INR) 58.3 0.1 67.4 103.1

EPS Gr. (%) 35.1 -99.7 NM 53.0

BV/Sh (INR) 184.1 184.1 195.4 212.6

RoE (%) 41.3 0.1 35.5 50.6

RoCE (%) 31.0 3.8 39.8 56.8

Payout (%) 77.5 83.3 83.3 83.3

Valuations

P/E (x) 23.7 NM 20.5 13.4

P/BV (x) 7.5 7.5 7.1 6.5

Adj.EV/EBITDAR(x) 11.3 17.0 8.5 6.9

Div. Yield (%) 2.7 0.0 3.4 5.2


April 2019 293


Quarterly - Standalone Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 5,906 696 706 416 5,819 752 672 421 7,724 7,664 YoY Change (%) 19.6 2.7 4.1 3.4 -1.5 8.0 -4.9 1.3 15.3 -0.8 Total Expenditure 3,837 549 609 549 3,784 673 671 563 5,544 5,690 EBITDA 2,069 147 97 -133 2,035 79 1 -141 2,180 1,974 Margins (%) 35.0 21.2 13.8 -32.1 35.0 10.5 0.2 -33.5 28.2 25.8 Depreciation 63 61 57 52 53 47 53 50 234 203 Interest 2 1 0 0 0 0 1 2 4 3 Other Income 43 164 16 14 168 131 106 18 237 423 PBT before EO expense 2,046 250 56 -172 2,150 162 54 -175 2,179 2,191 PBT 2,046 250 56 -172 2,150 162 54 -175 2,179 2,191 Tax 22 41 1 11 44 43 18 -4 76 100 Rate (%) 1.1 16.4 2.3 -6.5 2.0 26.4 32.5 2.5 3.5 4.6 Reported PAT 2,024 209 54 -184 2,106 119 36 -171 2,103 2,091 Adj PAT 2,024 209 54 -184 2,106 119 36 -171 2,103 2,091 YoY Change (%) 31.1 169.9 53.0 NA 4.1 -42.9 -32.9 NA 57.5 -0.6 Margins (%) 34.3 30.0 7.7 -44.2 36.2 15.9 5.4 -40.5 27.2 27.3 E: MOSL Estimates


Kaveri SeedCMP: INR467 TP: INR582 (+25%) Buy We expect revenue to grow 1.3% YoY to INR421m in 4QFY19.

Revenue from hybrid rice is expected to grow 10% YoY, while thatof maize is expected to decline 15% YoY.

We expect EBITDA margin of -33.5% in 4QFY19 v/s -32.1% in4QFY18.

Consequently, we expect adjusted PAT of INR-171m in 4QFY19 v/sINR-184m in 4QFY18.

The stock trades at 12.7x/12x FY20E/21E EPS.

Key things to watch for Volume growth given subdued Rabi sowing. Ramp-up of vegetable seeds business .

Bloomberg KSCL IN


1,6,12 Rel Perf. (%) 6 / -23 / -23


Sales 8.2 8.0 9.2 9.9

EBITDA 2.2 2.1 2.5 2.7 NP 2.1 2.2 2.4 2.6 EPS (INR) 32.0 32.9 36.9 38.8

EPS Gr. (%) 67.8 2.7 12.2 5.3 BV/Sh (INR) 153.2 165.6 182.1 200.5 RoE (%) 20.9 20.6 21.2 20.3



Div Yield (%) 3.1 3.5 3.5 3.5

April 2019 294


MCX Quarterly Performance FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Sales 592 673 610 706 729 711 769 774 2,580 2,983 Q-o-Q Gr. (%) -5.5 13.6 -9.4 15.8 3.2 -2.4 8.2 0.6 -2.3 15.6 Staff Costs 178 178 169 155 180 174 177 179 680 710 Other expenses 282 288 306 310 311 312 383 355 1,186 1,335 Depreciation 48 48 35 36 37 38 38 38 167 152 EBIT 84 158 101 205 201 187 171 202 548 786 Margins (%) 14.2 23.6 16.5 29.0 27.6 26.3 22.2 26.1 21.2 26.4 Other Income 277 243 156 242 100 222 322 244 917 887 PBT bef. Exceptional items 361 401 256 447 301 408 493 446 1,465 1,674 Tax 98 110 68 107 22 53 75 98 383 249 Rate (%) 27.2 27.3 26.7 24.0 7.4 13.1 15.3 22.0 26.2 14.9 PAT 263 292 188 340 279 355 420 348 1,081 1,187

Q-o-Q Gr. (%) 20.0 11.0 -35.6 80.9 -17.9 27.4 18.2 -17.1 -17.4 9.7 EPS (INR) 5.1 5.7 3.7 6.7 1.2 7.0 8.2 6.8 21.2 23.3 Total volumes (INR t) 12.0 14.1 12.8 15.0 16.2 16.6 17.4 17.6 53.9 67.7

Q-o-Q Gr. (%) -3.4 17.0 -8.8 17.3 7.6 2.2 5.1 1.2 Y-o-Y Gr. (%) -24.8 -14.0 -7.6 20.9 34.7 17.7 35.7 17.0 -8.1 25.6

E: MOSL Estimates

March 2019 Results Preview | Sector: Exchanges

MCXCMP: INR793 TP: INR910 (+15%) Buy Total traded volumes at MCX during the quarter stood at

INR17.6t, up 1.2% QoQ and 20.4% YoY.

Volumes since 4QFY18 have seen a strong pick-up after fourquarters of YoY decline, post demonetization. This drives ourrevenue expectation of INR774m, an increase of 9.7% YoY.

There was a healthy jump in gold volumes during the quarter.Volumes from gold increased 25% QoQ while crude volumes wereup 13% sequentially.

Consequently, EBIT margins are expected to expand by 390bpsequentially to 26.1%.

We expect Software charges as a percentage to graduallydecrease; however, we estimate this quarter to be similar as theprevious one.

However, we expect PAT at INR348m, a decline of 17% QoQ, dueto normalization of tax rate and lower other income.

Key issues to watch for Pick-up in options and steps taken to enhance liquidity. Pace of reforms under SEBI. Strategy around new opportunities.

Bloomberg MCX IN


1,6,12 RelPerf. (%) 9 / 5 / -4


Sales 2.6 3.0 3.3 3.9

EBITDA 0.7 0.9 1.1 1.6 NP 1.1 1.2 1.5 1.9 EPS (INR) 21.2 23.3 28.5 36.6

EPS Gr. (%) -14.6 9.9 22.3 28.4 BV/Sh.(INR) 269.9 241.6 256.1 274.7 RoE (%) 7.9 9.1 11.5 13.8



Dividend yield 2.6 3.1 3.1 3.1

April 2019 295

Standalone - Quarterly Earning Model Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 5,652 1,834 1,744 2,126 6,700 2,635 1,816 2,303 11,356 13,454 YoY Change (%) 0.9 6.3 11.4 1.3 18.5 43.7 4.1 8.3 -3.9 18.5 Total Expenditure 4,028 1,553 1,540 1,888 4,726 2,171 1,659 2,003 9,008 10,559 EBITDA 1,624 281 205 238 1,974 463 157 299 2,348 2,894 Margins (%) 28.7 15.3 11.7 11.2 29.5 17.6 8.6 13.0 20.7 21.5 Depreciation 53 56 62 64 57 60 62 70 235 250 Interest 26 16 1 17 42 23 11 28 60 104 Other Income 123 47 44 79 71 72 30 45 292 217 PBT before EO expense 1,668 256 186 236 1,946 451 113 246 2,345 2,757 Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 PBT 1,668 256 186 236 1,946 451 113 246 2,345 2,757 Tax 572 89 67 84 683 162 38 62 812 945 Rate (%) 34.3 34.9 36.1 35.8 35.1 35.9 33.5 25.0 34.6 34.3 Minority Interest & P/L of Asso. Cos. 0 0 0 0 0 0 0 0 0 0 Reported PAT 1,097 166 119 151 1,263 289 75 185 1,533 1,812 Adj PAT 1,097 166 119 151 1,263 289 75 185 1,533 1,812 YoY Change (%) -3.4 -10.5 -6.1 -10.3 15.2 73.9 -36.5 22.1 -15.4 18.2 Margins (%) 19.4 9.1 6.8 7.1 18.9 11.0 4.2 8.0 13.5 13.5 E: MOSL Estimates


Navneet EducationCMP: INR112 TP: INR159 (+42%) Buy We expect sluggish revenue growth of 8.3% YoY to INR2,303m in

4QFY19 due to seasonal nature of the publication business.Typically, 1Q is the largest quarter in publishing/supplementarybook business.

EBIDTA margin is likely to expand 180bp YoY to 13% on the back ofdecline in paper prices and high margin stationery exports. EBIDTAis likely to grow by 26% YoY to INR299m in 4QFY19.

We estimate PAT to grow 22% YoY to INR185m.

Key issues to watch for New-series launch under Indiannica – crucial quarter for

Indiannica business. Stationery segment performance, especially orders from

exports. Guidance on syllabus change in Maharashtra and Gujarat from

FY20.

Bloomberg NELI IN


1,6,12 RelPerf. (%) -1 / -9 / -40

Financial Snapshot Consolidated (INR Billion) Y/E MARCH 2018 2019E 2020E 2021E

Net Sales 12.0 14.4 16.4 18.6 EBITDA 2.2 3.0 3.5 4.0 Adj. Net Profit 1.3 1.9 2.2 2.6

Adj. EPS (INR) 5.5 8.3 9.8 11.4 Adj. EPS Gr. (%) -25.4 53.0 17.7 15.6BV/Sh (INR) 32.2 34.3 39.3 44.7


Valuations P/E (x) 19.3 12.6 10.7 9.2 P/BV (x) 3.3 3.1 2.7 2.4 EV/EBITDA (x) 12.0 8.9 7.4 6.4

Div. Yield (%) 1.3 2.9 3.8 4.8


April 2019 296

Consolidated - Quarterly Earning Model Y/E March FY18 FY19E FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 2,607 3,035 3,562 3,450 8,883 5,921 5,286 5,371 12,654 25,461 YoY Change (%) -18.5 20.5 41.3 19.1 240.7 95.1 48.4 55.7 13.6 101.2 Total Expenditure 1,252 1,398 1,636 1,616 4,266 2,963 3,405 3,120 5,901 13,754 EBITDA 1,355 1,638 1,926 1,834 4,617 2,958 1,881 2,250 6,753 11,707 Margins (%) 52.0 54.0 54.1 53.1 52.0 50.0 35.6 41.9 53.4 46.0 Depreciation 124 128 122 118 106 110 114 120 491 450 Interest 16 16 18 19 49 58 49 45 69 201 Other Income 96 50 42 79 71 277 202 150 266 700 PBT before EO expense 1,312 1,544 1,828 1,776 4,533 3,067 1,920 2,235 6,459 11,755 Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 PBT 1,312 1,544 1,828 1,776 4,533 3,067 1,920 2,235 6,459 11,755 Tax 405 509 635 357 1,450 940 573 798 1,907 3,761 Rate (%) 30.9 33.0 34.8 20.1 32.0 30.7 29.8 35.7 29.5 32.0 Minority Interest & P/L of Asso. Cos. -7 -9 -10 -11 -11 -12 -32 -25 -36 -80 Reported PAT 914 1,043 1,202 1,429 3,094 2,138 1,379 1,462 4,588 8,073 Adj PAT 914 1,043 1,202 1,429 3,094 2,138 1,379 1,462 4,588 8,073 YoY Change (%) -16.1 24.6 41.9 40.4 238.6 105.0 14.8 2.3 21.0 76.0 Margins (%) 35.0 34.4 33.7 41.4 34.8 36.1 26.1 27.2 36.3 31.7 E: MOSL Estimates

March 2019 Results Preview | Sector: Real Estate

Oberoi Realty CMP: INR546 TP: INR628 (+15%) Buy We expect revenues to grow to INR5,371m, up 56% YoY— primarily

driven by Sky City and Eternia project achieving revenuerecognition threshold.

We expect EBITDA margin to contract by 1,120bp YoY to 41.9%,primarily on account of change in product mix where margins arelower.

We estimate net profit of INR1,462m, up 2% YoY.

Key things to watch for Impact of GST rate cut and demand offtake thereafter. Launch plan for monetizing Thane land parcel, offtake of Skycity

project. Response to subvention schemes and future action plan.

Bloomberg OBER IN


1,6,12 RelPerf. (%) 4 / 28 / -9


Sales 12.7 25.5 28.5 32.3

EBITDA 6.8 11.7 13.6 16.1

Net Profit 4.6 8.1 12.6 12.1

EPS (INR) 12.6 22.2 34.5 33.3

EPS Gr. (%) 21.2 75.9 55.6 -3.7

BV/Sh (INR) 167.6 218.8 247.2 274.5

RoE (%) 7.8 11.5 14.8 12.7

RoCE (%) 6.4 9.7 9.5 9.9

Valuations

P/E (x) 35.7 20.3 13.0 13.5

P/BV (x) 2.7 2.1 1.8 1.6

EV/EBITDA (x) 25.0 13.9 12.2 10.3

EV/ Sales (x) 13.3 6.4 5.8 5.1


April 2019 297


Standalone - Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 5,532 5,611 5,377 6,251 6,056 7,230 7,075 7,458 22,771 27,820 YoY Change (%) -13.4 3.1 10.2 3.2 9.5 28.9 31.6 19.3 0.0 22.2 Total Expenditure 4,227 4,389 4,330 4,904 4,875 5,884 5,589 5,758 17,851 22,106 EBITDA 1,304 1,222 1,047 1,347 1,181 1,346 1,486 1,701 4,920 5,714 Margins (%) 23.6 21.8 19.5 21.5 19.5 18.6 21.0 22.8 21.6 20.5 Depreciation 197 205 211 212 220 228 234 240 825 922 Interest 14 13 14 18 17 14 15 18 59 64 Other Income 126 123 161 191 102 124 152 150 600 528 PBT before EO expense 1,219 1,126 983 1,307 1,046 1,228 1,389 1,593 4,635 5,256 Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 PBT 1,219 1,126 983 1,307 1,046 1,228 1,389 1,593 4,635 5,256 Tax 218 324 177 253 229 284 316 350 972 1,183 Rate (%) 17.9 28.8 18.0 19.3 21.9 23.1 22.8 22.0 21.0 22.5 Reported PAT 1,001 802 806 1,054 817 944 1,073 1,242 3,664 4,074 Adj PAT 1,001 802 806 1,054 817 944 1,073 1,242 3,664 4,074 YoY Change (%) -21.1 -20.9 -14.1 -22.0 -18.4 17.7 33.1 17.8 -20.3 11.2 Margins (%) 18.1 14.3 15.0 16.9 13.5 13.1 15.2 16.7 16.1 14.6 E: MOSL Estimates


PI IndustriesCMP: INR1,056 Under Review We expect revenue to grow 19.3% YoY to INR7,458m, aided by

strong growth of 25% in the CSM business . The growth in agri-input business is expected to be 6% YoY.

We estimate 130bp margin expansion to 22.8% on account ofoperating leverage in CSM business. We expect EBITDA to grow26.3% YoY to INR1,701m.

We estimate adjusted PAT to grow 17.8% YoY to INR1,242m in4QFY19 partially contained on account of higher tax rate of 22%v/s 19.3% in 4QFY18 (deferred tax of INR-34m in 4QFY18).


Key things to watch for Revenue contribution from new launches. Ramp-up in CSM business.

Bloomberg PI IN


1,6,12 Rel Perf. (%) 6 / 45 / 0


Sales 22.8 27.8 33.0 38.6

EBITDA 4.9 5.7 6.8 8.2 NP 3.7 4.1 5.0 6.0 EPS (INR) 26.7 29.5 36.0 43.3

EPS Gr. (%) -20.2 10.8 21.8 20.3BV/Sh. (INR) 139.6 161.2 189.3 224.6 RoE (%) 20.7 19.6 20.5 20.9



April 2019 298


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Gross Sales 3,959 3,706 4,166 4,366 4,132 4,047 4,404 4,839 16,198 17,422 YoY Change (%) -10.5 -24.5 -4.6 -3.9 4.4 9.2 5.7 10.8 -11.2 7.6 Total Expenditure 2,199 1,922 2,099 2,205 2,178 2,066 2,180 2,419 8,424 8,843 EBITDA 1,760 1,785 2,067 2,161 1,953 1,981 2,225 2,419 7,774 8,579 Margins (%) 44.5 48.2 49.6 49.5 47.3 49.0 50.5 50.0 48.0 49.2 Depreciation 475 510 485 513 499 506 523 530 1,983 2,058 Interest 901 857 883 836 846 917 917 963 3,476 3,643 Other Income 156 149 106 145 170 183 170 180 556 702 PBT before EO expense 541 567 806 957 778 740 955 1,107 2,871 3,580 Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 PBT 541 567 806 957 778 740 955 1,107 2,871 3,580 Tax 267 267 218 7 235 179 175 376 758 965 Rate (%) 49.3 47.1 27.0 0.7 30.2 24.1 18.3 34.0 26.4 27.0 MI & P/L of Asso. Cos. -151 -118 -64 25 -54 -58 72 76 -308 35 Reported PAT 426 418 652 926 597 620 708 655 2,422 2,580 Adj PAT 426 418 652 926 597 620 708 655 2,422 2,580 YoY Change (%) -1.1 -23.1 46.5 255.5 40.3 48.5 8.5 -29.3 44.2 6.5 Margins (%) 10.8 11.3 15.7 21.2 14.5 15.3 16.1 13.5 15.0 14.8 E: MOSL Estimates


March 2019 Results Preview | Sector: Real Estate

Phoenix MillsCMP: INR666 TP:805 INR (+21%) Buy We estimate sales of INR4,839m, up 11% YoY. Retail segment, the

largest contributor to revenue, is expected to grow 9%.

We expect EBITDA margin to expand by 50bp YoY to 50%.

We estimate net profit at INR655m, down 29% YoY.

We maintain our target price at INR805.

Key things to watch for Lease tie-ups for newly launched malls and status of under-

construction malls acquired under the CPPIB platform. Sales velocity in Kessaku project and occupancy in HSP.

Bloomberg PHNX IN


1,6,12 RelPerf. (%) -1 / 19 / -8


Sales 16.2 17.4 21.3 23.5

EBITDA 7.8 8.6 10.3 11.5

Net Profit 2.4 2.6 3.3 4.1

EPS (INR) 15.8 16.9 21.8 26.7

EPS Gr. (%) 44.2 6.5 29.3 22.5

BV/Sh (INR) 186.3 222.3 241.0 267.7

RoE (%) 9.7 8.2 9.4 10.5

RoCE (%) 7.9 7.6 8.0 8.6

Valuations

P/E (x) 37.1 34.8 26.9 22.0

P/BV (x) 3.2 2.6 2.4 2.2

EV/EBITDA (x) 15.5 15.0 12.4 2.9

EV/ Sales (x) 7.4 7.4 6.0 1.4

April 2019 299


Consolidated - Quarterly Y/E March FY18 FY19 FY18 FY19E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Sales 12,973 13,953 15,840 18,908 19,684 20,917 21,722 23,218 61,673 85,540 YoY Change (%) 30.9 37.1 48.5 52.5 51.7 49.9 37.1 22.8 42.9 38.7 Total Expenditure 12,221 13,164 14,930 17,814 18,659 19,797 20,538 21,930 58,129 80,924 EBITDA 752 789 909 1,093 1,025 1,120 1,183 1,287 3,544 4,616 Margins (%) 5.8 5.7 5.7 5.8 5.2 5.36 5.4 5.5 5.7 5.4 Depreciation 136 144 183 285 299 291 317 317 747 1,223 Interest 170 157 177 252 261 282 280 282 755 1,107 Other Income 35 168 126 240 156 143 123 134 569 556 PBT before EO expense 482 656 675 797 621 690 710 822 2,611 2,841 Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 PBT 482 656 675 797 621 690 710 822 2,611 2,841 Tax 31 -619 74 31 93 105 11 90 -483 299 Rate (%) 6.4 -94.4 11.0 3.9 14.9 15.1 1.5 11.0 -18.5 10.5 MI & P/L of Asso. Cos. -6 2 -9 8 -16 -31 49 5 -4 0 Reported PAT 457 1,274 610 758 544 616 650 726 3,098 2,543 Adj PAT 457 1,274 610 758 544 616 650 726 3,098 2,543 YoY Change (%) 84.8 322.8 81.2 127.2 19.2 -51.6 6.5 -4.1 154.2 -17.9 Margins (%) 3.5 9.1 3.9 4.0 2.8 2.9 3.0 3.1 5.0 3.0 E: MOSL Estimates

March 2019 Results Preview | Sector: Staffing

Quess CorpCMP: INR740 TP: INR730 (-1%) Neutral We expect revenue of INR23.2b for Quess in 4QFY19, signifying

growth of 22.8% YoY.

With total headcount in north at 190,000 in PS business, weexpect growth of 27.5% YoY. GTS business is expected to grow at31% YoY.

We expect EBITDA margin to gradually increase hereon. Ourestimate for EBITDA margin stands at 5.5%, which is expected toinch up by 20bp sequentially due to normalization of investmentsin the P&S business.

Our PAT estimate is INR822m, a decline of 4% YoY. While benefitswill come from 80JJA, we expect tax rate to normalize at 11% (vs.4% in 4QFY18). PAT margin is 3.1% for 4QFY19.

Key things to watch for Integration of recently acquired entities. Restructuring of operations in the industrials segment. Organic growth momentum and traction in the general staffing

business post-GST.

Bloomberg QUESS IN


1,6,12 RelPerf. (%) -5 / -23 / -45

Financial Snapshot (INR Billion) INR million FY18 FY19 FY20E FY21E

Sales 61.7 85.5 105.8 123.9

EBITDA 3.5 4.6 6.4 7.8

NP 3.1 2.5 4.5 5.9

EPS (Rs) 21.8 17.4 30.5 40.5

EPS Growth (%) 115.7 -20.2 75.2 32.7

BV/Share (Rs) 217.1 239.6 278.9 331.1

P/E (x) 32.4 40.6 23.2 17.5

P/BV (x) 3.3 3.0 2.5 2.1

EV/EBITDA (x) 29.5 22.3 16.0 12.9

EV/Sales (x) 1.7 1.2 1.0 0.8

RoE (%) 16.5 9.8 15.2 17.1

RoCE (%) 14.6 10.2 14.2 16.0

April 2019 300

Consolidated - Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 2,343 2,219 2,831 2,851 2,374 2,845 2,565 2,969 10,430 10,753 YoY Change (%) -15.3 -9.5 13.5 15.2 1.3 28.2 -9.4 4.1 -1.6 3.1 Total Expenditure 1,929 1,865 2,255 2,580 2,035 2,467 2,165 2,503 8,808 9,173 EBITDA 414 355 576 271 340 378 400 466 1,622 1,581 Margins (%) 17.7 16.0 20.3 9.5 14.3 13.3 15.6 15.7 15.6 14.7 Depreciation 58 57 58 65 68 76 89 85 238 315 Interest 6 11 7 16 15 19 45 45 40 125 Other Income 51 12 7 154 23 50 50 40 216 162 PBT before EO expense 401 298 517 344 280 334 316 376 1,560 1,303 Extra-Ord expense 0 0 101 28 0 0 0 0 -129 0 PBT 401 298 416 316 280 334 316 376 1,432 1,303 Tax 133 110 144 119 100 49 103 126 506 378 Rate (%) 33.1 36.8 34.7 37.6 35.7 14.6 32.5 33.6 35.3 29.0 Minority Interest & P/L of Asso. Cos. 0 0 0 -16 -7 3 -1 13 -16 6 Reported PAT 268 189 272 213 187 288 214 237 942 919 Adj PAT 268 189 338 231 187 288 214 237 1,025 919 YoY Change (%) -2.5 -22.4 33.0 -15.9 -30.2 52.8 -36.7 2.6 -2.2 -10.3 Margins (%) 11.4 8.5 11.9 8.1 7.9 10.1 8.3 8.0 9.8 8.5 E: MOSL Estimates


S H KelkarCMP: INR155 TP: INR207 (+34%) Buy We expect revenue to grow at a sluggish 4% YoY to INR2,969m in

4QFY19 due to sluggish demand.

EBIDTA margin is likely to expand 600bp YoY to 16% on weak base quarter performance (a one-time expense had dragged base quarter margins) but remain flat on QoQ basis at 16% in 4QFY19. EBIDTA is likely to grow by 72% YoY to INR466m.

We estimate adjusted PAT to grow 2.6% YoY to INR237m in 4QFY19.

Key issues to watch for Pricing pressure in key raw materials, impacting profitability. CFF acquisition – cross-selling opportunities. Shift of ingredients from Netherlands to manufacturing plants in

India.

Bloomberg SHKL IN


1,6,12 RelPerf. (%) -5 / -34 / -58


Net Sales 10.4 10.8 12.4 14.4

EBITDA 1.6 1.6 2.0 2.4

Adj. Net Profit 1.0 0.9 1.1 1.4

Adj. EPS (INR) 7.1 6.4 7.6 9.4

Adj. EPS Gr. (%) -2.2 -10.3 19.5 24.1

BV/Sh (INR) 59.3 63.8 69.2 75.9

RoE (%) 12.3 10.3 11.4 13.0

RoCE (%) 16.9 13.3 15.4 18.0

Div. Payout (%) 28.9 28.9 28.9 28.9

Valuations

P/E (x) 22.7 25.3 21.2 17.1

P/BV (x) 2.7 2.5 2.3 2.1

EV/EBITDA (x) 15.2 15.8 12.7 10.3

Div. Yield (%) 1.0 0.9 1.1 1.4


April 2019 301


Consolidated - Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 12,933 12,864 13,971 16,123 17,413 19,154 19,640 20,101 55,890 76,308 YoY Change (%) -0.5 5.8 23.3 21.6 34.6 48.9 40.6 24.7 15.9 36.5 Total Expenditure 10,835 10,828 11,655 13,332 14,300 15,827 16,330 16,543 46,650 63,000 EBITDA 2,098 2,036 2,316 2,790 3,112 3,327 3,310 3,558 9,241 13,308 Margins (%) 16.2 15.8 16.6 17.3 17.9 17.4 16.9 17.7 16.5 17.4 Depreciation 758 768 770 861 886 880 932 970 3,158 3,668 Interest 271 305 239 425 443 500 544 585 1,239 2,072 Other Income 196 152 209 130 38 146 52 100 688 336 PBT before EO expense 1,266 1,115 1,516 1,634 1,823 2,093 1,886 2,103 5,532 7,904 Extra-Ord expense 0 -74 -211 0 0 179 -102 0 -285 77 PBT 1,266 1,189 1,727 1,634 1,823 1,914 1,988 2,103 5,817 7,827 Tax 228 162 415 395 484 402 331 547 1,200 1,769 Rate (%) 18.0 13.6 24.0 24.2 26.6 21.0 16.7 26.0 20.6 22.6 Reported PAT 1,038 1,028 1,312 1,239 1,338 1,512 1,657 1,556 4,617 6,058 Adj PAT 1,038 964 1,152 1,239 1,338 1,653 1,572 1,556 4,393 6,120 YoY Change (%) -32.8 -21.6 2.9 -4.1 28.9 71.6 36.5 25.6 -14.7 39.3 Margins (%) 8.0 7.5 8.2 7.7 7.7 8.6 8.0 7.7 7.9 8.0 E: MOSL Estimates

March 2019 Results Preview | Sector: Diversified

SRF

CMP: INR2,390 Under Review We expect SRF’s revenue to grow 24.7% YoY to INR20,101m in

4QFY19.

Technical textile business is seen posting a growth of 8% YoY, chemicals & polymers business should deliver 30% growth and the packaging film business should post a growth of 35.3% YoY in 4QFY19.

We expect EBITDA margin to expand 40bp to 17.7% and EBITDA to grow 28% YoY to INR3,558m.

We expect EBIT margin contraction of 150bp (to 16%) in chemicals and polymers’ business. Margin in the packaging film business is expected to contract 170bp (to 12%), while margin in technical textile is expected to expand 40bp to 14%.

Consequently, adj. PAT is expected to grow 26% YoY to INR1,556m.

Key things to watch for Ramp up in specialty chemicals business. Update on Dahej plant shutdown.

Bloomberg SRF IN


1,6,12 Rel Perf. (%) -4 / 32 / 3


Sales 55.9 76.3 86.8 100.1

EBITDA 9.1 13.3 16.4 19.7 NP 4.6 6.1 7.9 10.3 EPS (INR) 77.9 104.7 134.4 176.5

EPS Gr. (%) -11.5 34.3 28.4 31.3 BV/Sh. (INR) 609.9 690.4 801.6 954.9 RoE (%) 13.5 16.1 18.0 20.1



April 2019 302


Consolidated - Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 24,517 26,902 25,739 25,551 27,691 29,607 28,319 28,683 102,709 114,300 YoY Change (%) -23.7 -20.4 5.8 1.7 12.9 10.1 10.0 12.3 -0.7 11.3 Total Expenditure 19,740 20,523 20,114 20,426 22,535 23,586 23,606 23,331 80,802 93,058 EBITDA 4,778 6,379 5,626 5,124 5,157 6,020 4,712 5,352 21,907 21,242 Margins (%) 19.5 23.7 21.9 20.1 18.6 20.3 16.6 18.7 21.3 18.6 Depreciation 1,263 1,292 1,286 1,339 1,351 1,417 1,441 1,497 5,180 5,706 Interest 755 751 894 855 887 921 972 967 3,256 3,747 Other Income 187 498 172 738 817 1,233 961 900 1,595 3,911 PBT before EO expense 2,947 4,834 3,618 3,668 3,735 4,916 3,260 3,788 15,066 15,699 Extra-Ord expense 0 0 -596 -48 0 0 275 0 -643 275 PBT 2,947 4,834 4,213 3,715 3,735 4,916 2,985 3,788 15,709 15,424 Tax 759 1,365 -1,874 351 1,258 1,199 716 905 601 4,078 Rate (%) 25.8 28.2 -44.5 9.5 33.7 24.4 24.0 23.9 3.8 26.4 Minority Interest & P/L of Asso. Cos. 461 887 633 221 338 499 74 283 2,202 1,194 Reported PAT 1,726 2,582 5,455 3,143 2,140 3,217 2,195 2,600 12,906 10,151 Adj PAT 1,726 2,582 4,594 3,100 2,140 3,217 2,404 2,600 12,002 10,361 YoY Change (%) -12.8 43.2 132.7 21.0 23.9 24.6 -47.7 -16.1 36.4 -13.7 Margins (%) 7.0 9.6 17.8 12.1 7.7 10.9 8.5 9.1 11.7 9.1 Profits from Discontinued Operations(DO) 53 0 2,136 8,543 -80 0 0 0 E: MOSL Estimates

March 2019 Results Preview | Sector: Chemicals

Tata Chemicals CMP: INR595 TP: INR787 (+32%) Buy We expect revenue to grow 12% YoY to INR28,683m in 4QFY19 led

by growth of 14.4% in TCNA (North America), 13.5% growth in standalone business and 12% growth in TCAHL (Africa). TCEHL (Europe) is expected to remain subdued at 4.1% growth YoY.

After multiple on-offs in TCNA in 9MFY19, the geography is expected to resume growth. The EBITDA/MT too is likely to increase to USD45/MT in 4QFY19 from USD37.2/MT on account of subsequent operating leverage.

EBITDA margin is likely to contract 140bp to 18.7% as Rallis and standalone business offset the margin expansion in the US and Africa business. We expect margin expansion of 300bp in the US business and 290bp in TCNA. Standalone business and Rallis are expected to witness a margin contraction of 460bp and 140bp, respectively.

EBITDA is likely to grow 4.4% YoY to INR5,352m. Adj. PAT is expected to decline 16% YoY to INR2,600m in 4QFY19 on account of higher tax rate of 23.9% v/s 9.5% in 4QFY18 .

Key things to watch for Scaling up of the consumer business. Revival in the US business after a subdued 9MFY19.

Bloomberg TTCH IN


1,6,12 Rel Perf. (%) -3 / -21 / -30


Sales 102.7 114.3 126.3 141.6

EBITDA 21.9 21.2 24.9 28.1 NP 12.3 10.4 11.9 14.3 EPS (INR) 48.2 40.7 46.8 56.0




April 2019 303

Consolidated - Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Sales 8,530 8,756 9,181 9,775 10,213 10,907 11,722 12,142 36,241 44,984 YoY Change (%) 24.1 21.2 12.7 19.6 19.7 24.6 27.7 24.2 19.2 24.1 Total Expenditure 8,399 8,605 9,002 9,547 10,012 10,666 11,477 11,881 35,553 44,036 EBITDA 130 151 179 227 202 240 245 261 688 948 Margins (%) 1.5 1.7 1.9 2.3 2.0 2.2 2.1 2.1 1.9 2.1 Depreciation 20 20 24 28 27 29 25 25 92 105 Interest 2 3 8 11 11 14 13 10 25 48 Other Income 58 44 42 12 52 40 36 45 157 173 PBT 166 173 189 200 217 236 240 267 729 969 Tax 2 -3 5 -15 -3 -12 -9 0 -10 -24 Rate (%) 1.3 -1.5 2.5 -7.4 -1.2 -5.3 -3.7 0.0 -1.4 -2.5 MI & P/L of Asso. Cos. 0 0 0 0 0 2 3 4 0 9 Adj PAT 164 176 184 215 219 252 255 275 739 1,002 YoY Change (%) 158.5 99.5 99.9 -35.1 33.8 43.6 38.6 27.7 28.4 35.5 Margins (%) 1.9 2.0 2.0 2.2 2.1 2.3 2.2 2.3 2.0 2.2 Headcount 1,59,261 1,62,090 1,77,283 1,81,323 1,91,635 1,99,935 2,11,335 2,19,515 1,81,323 2,19,515 Revenue composition (%) General staffing 96% 95% 92% 90% 91% 90% 88% 89% 93% 90% Specialized staffing 3% 3% 6% 7% 7% 7% 8% 8% 5% 7% Other HR services 1% 2% 2% 2% 3% 3% 3% 3% 2% 3% E: MOSL Estimates

March 2019 Results Preview | Sector: Staffing

TeamLease Services

CMP: INR3040 TP: INR3500 (+15%) Buy We expect revenues to increase by 22.1% YoY to INR11.2b in

4QFY19.

This is expected to be a function of 24% YoY growth in Staffing and Allied Services, 17% YoY growth in Specialized Staffing and 63% YoY growth in Other HR services.

Growth will be majorly dominated by headcount addition into general staffing business, while IT staffing growth is expected to be muted (relatively). Healthy growth in both general staffing and specialized staffing is expected next year.

We expect margins to marginally improve in specialized staffing, while margins in general staffing are expected to remain flattish. Taking this into consideration, we increase our margin estimate by ~6bp.

Our PAT expectation of INR275m (28% YoY) factors in a zero tax rate owing to benefits from Section 80JJJAA of the Income Tax Act.

Key issues to watch for Outlook on headcount growth in General Staffing business. Momentum in IT staffing business. Penetration of other HR services in existing customers and new

accounts.

Bloomberg TEAM IN


1,6,12 RelPerf. (%) -2 / 23 / 12


Sales 36.2 45.0 55.9 68.4

EBITDA 0.7 0.9 1.4 2.0

NP 0.7 1.0 1.5 2.1

EPS (Rs) 43.0 59.1 86.1 122.6

EPS Growth (%) 28.0 37.4 45.6 42.4

BV/Share (Rs) 265.9 325.1 411.2 533.8

P/E (x) 59.3 43.2 29.7 20.8

P/BV (x) 9.6 7.9 6.2 4.8

EV/EBITDA (x) 60.4 43.1 28.7 19.5

EV/Sales (x) 1.1 0.9 0.7 0.6

RoE (%) 17.6 20.0 23.4 26.0

RoCE (%) 17.9 20.3 23.4 26.1


April 2019 304


Standalone - Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 11,658 11,205 10,941 11,850 11,312 13,915 12,914 13,369 45,654 51,535 YoY Change (%) 1.5 -2.4 -2.4 -6.1 -3.0 24.2 18.0 12.8 -1.5 12.9 Total Expenditure 9,361 9,471 8,941 9,682 8,941 10,746 10,487 10,955 37,455 41,139 EBITDA 2,297 1,734 2,000 2,168 2,371 3,169 2,427 2,413 8,199 10,396 Margins (%) 19.7 15.5 18.3 18.3 21.0 22.8 18.8 18.1 18.0 20.2 Depreciation 1,023 1,022 1,013 982 944 917 892 990 4,040 3,743 Interest 334 319 252 277 280 260 294 310 1,182 1,141 Other Income 201 352 43 -29 85 98 150 99 568 432 PBT before EO expense 1,141 746 777 880 1,232 2,090 1,391 1,212 3,544 5,945 Extra-Ord expense -96 0 0 0 0 0 0 0 -96 0 Forex (gain)/loss -5 -273 416 558 -260 -278 714 PBT 1,237 751 1,050 880 816 1,532 1,650 1,212 3,918 5,231 Tax 348 242 320 371 224 441 529 339 1,281 1,517 Rate (%) 28.1 32.2 30.5 42.2 27.4 28.8 32.1 28.0 32.7 29.0 Minority Interest & P/L of Asso. Cos. 0 0 0 0 0 0 0 0 0 0 Reported PAT 889 509 730 509 592 1,091 1,121 873 2,637 3,714 Adj PAT 820 506 541 509 894 1,489 945 873 2,375 4,200 YoY Change (%) 4.6 -36.9 -31.2 -48.9 8.9 194.5 74.8 71.6 -29.3 76.8 Margins (%) 7.0 4.5 4.9 4.3 7.9 10.7 7.3 6.5 5.2 8.2 E: MOSL Estimates

March 2019 Results Preview | Sector: Textiles

Trident

CMP: INR70 TP: INR93 (+32%) Buy We expect revenue to grow 12.8% YoY to INR13,369m in 4QFY19

driven by 13% growth in textiles segment and 12% growth in paper and chemicals segment.

EBITDA margin is likely to contract by 20bp to 18.1% on account of higher raw material cost. EBIT margin in paper is expected to remain healthy at 37.5% (1,000bp expansion YoY, 60bp contraction QoQ), while in textiles segment the EBIT margin is expected to expand by 30bp to 7%.

EBITDA is likely to grow 11.3% YoY to INR2,413m. Adj. PAT is expected to grow 71.6% YoY to INR873m in 4QFY19 driven by higher other income (INR99m v/s INR-29m in 4QFY18) and lower tax rate (28% v/s 42.2% in 4QFY18).


Key things to watch for Outlook on paper prices. Utilization improvement of bed linen and towel segments.

Bloomberg TRID IN Equity Shares (m) 497.8

M. Cap. (INR b)/(USD b) 35 / 1 52-Week Range (INR) 76 / 51 1,6,12 Rel Perf. (%) 3 / 18 / -9


Sales 45.6 51.5 54.6 57.2 EBITDA 8.2 10.4 11.1 11.7

NP 2.6 4.2 4.6 5.1 EPS (INR) 5.3 8.5 9.3 10.3 EPS Gr. (%) -21.8 60.6 9.7 10.5

BV/Sh. (INR) 59.1 64.0 70.1 76.9 RoE (%) 9.2 13.8 13.9 14.0 RoCE (%) 6.0 8.8 9.4 10.0



April 2019 305


Cons.: Quarterly Earning Model Y/E March FY18 FY19 FY18 FY19E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 37,230 37,700 41,940 56,910 41,340 42,570 49,210 65,609 173,780 198,729 YoY Change (%) 6.1 6.5 7.0 6.5 11.0 12.9 17.3 15.3 6.5 14.4 Total Expenditure 29,730 30,510 33,650 44,730 32,870 34,180 39,050 51,160 138,620 157,260 EBITDA 7,500 7,190 8,290 12,180 8,470 8,390 10,160 14,449 35,160 41,469 Margins (%) 20.1 19.1 19.8 21.4 20.5 19.7 20.6 22.0 20.2 20.9 Depreciation 1,580 1,650 1,690 1,840 1,750 1,810 1,820 2,119 6,760 7,499 Interest 800 1,820 1,110 4,100 1,750 1,810 2,020 2,884 7,830 8,464 Other Income 1,010 760 1,190 1,180 1,230 320 370 380 4,140 2,300 Exch. difference on trade rec./payable 590 420 1,130 -2,030 500 520 780 0 110 1,800 PBT before EO expense 5,540 4,060 5,550 9,450 5,700 4,570 5,910 9,826 24,600 26,006 Extra-Ord expense 190 310 70 60 40 570 910 0 630 1,520 PBT 5,350 3,750 5,480 9,390 5,660 4,000 5,000 9,826 23,970 24,486 Tax 480 750 -140 1,660 520 1,160 280 1,572 2,750 3,532 Rate (%) 9.0 20.0 -2.6 17.7 9.2 29.0 5.6 16.0 11.5 14.4 MI & P/L of Asso. Cos. 140 630 -120 370 40 140 110 290 1,020 580 Reported PAT 4,730 2,370 5,740 7,360 5,100 2,700 4,610 7,964 20,200 20,374 Adj PAT 5,010 3,320 6,320 7,650 5,590 3,580 6,340 7,964 22,300 23,474 YoY Change (%) 19.9 -7.4 28.6 -9.5 11.6 7.8 0.3 4.1 5.5 5.3 Margins (%) 13.5 8.8 15.1 13.4 13.5 8.4 12.9 12.1 12.8 11.8 E: MOSL Estimates

Bloomberg UPLL IN


1,6,12 Rel Perf. (%) -2 / 32 / 6


Sales 173.8 198.7 362.1 401.2

EBITDA 35.2 41.5 75.8 96.4

NP 22.3 23.5 24.5 38.7

EPS (Rs) 43.8 46.0 48.0 75.8

EPS Gr. (%) 4.8 5.1 4.3 58.1

BV/Share 181.6 213.8 256.0 305.9

RoE (%) 26.9 23.5 20.6 27.3

RoCE (%) 19.8 19.0 15.8 15.2

Valuations

P/E (x) 21.2 20.2 19.3 12.2

P/BV (x) 5.1 4.3 3.6 3.0

EV/EBITDA (x) 14.3 12.1 9.0 6.9

EV/Sales (x) 2.9 2.5 1.9 1.7

March 2019 Results Preview | Sector: Agrochemicals

UPL

CMP: INR927 TP: INR1,062 (+15%) Buy We expect revenue to grow 15% YoY to INR65.6b in 4QFY19,

driven by robust growth of 24% in Latin America.

We expect India and Europe to post growth of 5% and 10%, respectively, with North America and RoW business growing at 15% and 11%, respectively.

We expect EBITDA margin to expand 60bp YoY to 22% and EBITDA to increase 18.6% YoY to INR14,449m.

We expect adjusted PAT to grow 4.1% to INR7,964m contained by lower other income (INR380m v/s INR1,180m in 4QFY18).

Key things to watch for Consolidation of Arysta. New launches and share of branded products.

Motilal Oswal India Strategy Gallery

Strategy

February 2019 42

Explanation of Investment Rating Investment Rating Expected return (over 12-month) BUY >=15% SELL < - 10% NEUTRAL > - 10 % to 15% UNDER REVIEW Rating may undergo a change NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation * In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures: The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Securities Ltd. (MOSL*) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and BSE Limited (BSE), Multi Commodity Exchange of India (MCX) & National Commodity & Derivatives Exchange Ltd. (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf

MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject company at the end of the month immediately preceding the date of publication of the Research Report. MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report. Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have received any compensation from the subject company in the past 12 months.

In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have: a) managed or co-managed public offering of securities from subject company of this research report, b) received compensation for investment banking or merchant banking or brokerage services from subject company of this research report, c) received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report. d) Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.

MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

Terms & Conditions: This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by virtue of their receiving this report. Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Disclosure of Interest Statement Companies where there is interest Analyst ownership of the stock No A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views.

Regional Disclosures (outside India) This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong: This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S. Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore, as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.

Disclaimer: The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id: [email protected], Contact No.:022-30801085.

Registration details of group entities: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100.Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products *MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench. The existing registration no(s) of MOSL would be used until receipt of new MOFSL registration numbers.

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