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Q3 FY16 PreviewAnother disappointing quarter

Little to cheer

India StrategyJanuary 08, 2016

Amar Ambani

Head of Research [email protected]

Analysts: Alok Deora

Ankit Tikmany

Bhavesh Gandhi

Hemant Nahata

Prayesh Jain

Rajiv Mehta

Ruchita Maheshwari

Tarang Bhanushali

Q3 FY16 Preview Another disappointing quarter

This report is published by IIFL ‘India Private Clients’ research desk. IIFL has other business units with independent research teams separated by 'Chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc. The views and opinions expressed in this document may at times be contrary in terms of rating, target prices,

estimates and views on sectors and markets… (Read the complete disclaimer at the back of this report)

Strategy Report

January 08, 2016

Nifty: 7,568

Sensex: 24,852 Yet another disappointing quarter Q3 FY16 is expected to be another disappointing quarter for corporate India and raises concerns regarding a much delayed economic recovery. The net profit for our coverage universe (ex energy & financials) is likely to fall by 2.3% yoy (rise 3% qoq). While revenue is expected to grow by 4.2% and 4% on yoy and qoq basis respectively, EBIDTA margins look to be marginally lower by 20bps at 17.9% (although they rose sequentially by 40bps). Our preview analysis is for 341 companies from our coverage universe of 500. These 341 stocks comprise ~70% of total Indian equity market capitalisation. Profit growth for Nifty companies (ex Sun Pharma and Kotak) is expected to be 5.7% yoy and 6.7% qoq.

Energy heavyweights to provide big boost to headline profit growth Headline profit growth of the 341 companies in our estimates universe would report a much higher 15.9% yoy growth in profit, if energy were to be included in the calculation. Four oil & gas majors, namely Reliance, IOC, BPCL and HPCL are expected to report a whopping 451% yoy growth (and double qoq) in combined net profit, taking their contribution to total profit of our universe to 14% compared to merely 2.9% during the same quarter last year. Even on a sequential basis, the percentage contribution to profit would be double of previous quarter. Lower gross under‐recoveries and assumed compensation for the same, higher GRMs with improved product spreads and better marketing margins are the key reasons for the shining performance of these global cyclicals.

Barring Oil & Gas, global cyclicals suffer with Metals dragging growth Global cyclicals (ex Oil & Gas) are expected to register degrowth with Metals being the primary reason for the drag. Metals universe profit is estimated to fall by 58.6% on yoy basis and 46.9% on qoq basis. Slowdown in the global economy and falling commodity prices have impacted the sector heavily. Big contributors to the fall in profit are Hindustan Zinc, NMDC, Vedanta (also marred by debt burden) and Nalco.

In case of IT, the traditionally weak 3rd quarter is likely to be even weaker on account of weakness in Energy and Telecom verticals, client specific setbacks and floods in Chennai. We see a 0.7% qoq profit growth for our estimate universe during the quarter. HCL Tech will report the best growth among the large players.

The quarter will be a mixed bag for Healthcare with pockets of strength offset by lacklustre performance in Sun Pharma and Cipla. Overall, revenues will rise by 14.5% yoy and 1.3% qoq, while profit to rise 40% on yoy and degrew 1.3% on qoq basis. OPM would jump materially on yoy basis by 410bps and by 50bps on qoq basis.

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Q3 FY16 Preview

Domestic cyclicals shine over domestic defensives While revenues for domestic cyclicals and defensives will grow at a similar pace (9‐10% yoy), the former (ex financials) will see higher EBIDTA margin expansion, with 16.7% yoy and 7.3% qoq operating profit growth (v/s 12.9% yoy and 2.4% qoq for domestic defensives). Consequently, net profit for domestic cyclicals will rise 13.1% yoy and 1.8% qoq, whereas in case of defensives, it will fall 1.1% yoy and 4.2% sequentially. Automobiles and select Infra are the major drivers of profit growth for cyclicals whereas Cement and Consumer are drags. ITC, M&M, Bajaj Auto and Reliance Infra will be laggards and Maruti, L&T, Hero Moto and Ultra Tech will likely lead growth in cyclicals. Telecom is likely to be a major drag on performance of domestic defensives with poor show by Bharti and Idea. NTPC and HUL are the big profit contributors to report below average results, while Powergrid will be the leader among the heavyweights. Overall, domestic economy (ex financials) will report 9.3% yoy and 5% qoq growth in revenues; 7.2% yoy growth in PAT and fall of 0.6% on qoq basis.

Disparity in PSU and Private Bank performance continues Private banks are estimated to report impressive loan growth due to their strong retail franchise, resilient retail loan growth supported by strong momentum in mortgages and revival in auto loan demand, strong capital position and prudent aggression. PSU banks, on the other hand, will report lacklustre credit growth due to high reliance on corporate loans, weak capital position and a guarded approach underpinned by prevailing asset quality issues. NBFCs are likely to witness the fastest pace of profit growth and within NBFCs, HFCs will do particularly well. Other key highlights Nifty revenue growth (ex financials and Sun Pharma) will decline by 2.9% yoy and rise by 3.5% qoq EBIDTA margin for Nifty companies (ex financials and Sun Pharma) will expand by 210bps and 110bps,

yoy and qoq respectively Helped by fall in input costs, OPM will expand on sequential basis by 50bps for our universe (ex energy

and financials) to 17.9%. However, compared to same quarter last year, they will contract marginally by 20bps.

High revenue growth companies on yoy basis – Suzlon, Man Idustries, Alembic, Capital First, Reliance

Power, Oberoi Realty, Sequent Scientific, CanFin Home, Torrent Pharma, Swaraj Engines High PAT growth companies on yoy basis – IOC, HPCL, Ashok Leyland, Greaves Cotton, Ashoka Buildcon,

Unichem Labs, apar Ind, Alstom T&D, PTC India, Man Industries, Welspun Corp, BPCL, Alembic, JK Cement, Torrent Pharma, Nilkamal, V‐Guard, Jet Airways, Ramco Cement, Jamna Auto, Sanofi India, United Spirits, Bosch, Blue Star, KEI Ind, Vardhman, BOB, Techno Electric & Eng, Dish Tv

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Q3 FY16 Preview

Aggregate performance for key sectors

Q3 FY16 (Rs cr) Revenue YoY % QoQ % EBIDTA

% YoY Bps

Chg QoQ Bps

Chg Net

Profit YoY % QoQ %

Autos & Ancs 148,217 7.4 10.3 14.9 107 127 9,652 15.0 60.5

Industrials 66,417 10.5 8.0 10.2 51 152 3,151 5.1 27.3

Cement 20,022 7.4 6.1 15.9 125 11 1,063 ‐11.9 9.8

Consumer Discretionary 42,261 5.6 3.3 18.2 8 34 4,754 1.3 ‐10.8

Consumer Staples 32,359 11.0 13.3 17.5 94 52 3,755 2.9 14.1

Healthcare 31,506 14.5 1.3 24.4 414 47 4,723 40.0 ‐1.3

Technology 93,870 12.2 2.6 22.2 ‐85 ‐32 16,082 6.2 0.7

Media 5,942 9.5 5.8 29.1 ‐29 54 869 9.4 10.5

Metals 102,950 ‐16.5 ‐6.6 14.3 ‐494 48 3,849 ‐58.6 ‐46.9

Oil & Gas 272,545 ‐22.0 ‐4.1 13.8 801 460 21,126 129.5 48.9

Power 52,441 11.9 2.7 31.5 121 ‐159 5,140 2.5 ‐21.6

Realty & Infra 27,314 9.7 8.1 21.0 93 ‐114 881 42.4 16.5

Telecom 47,527 6.2 2.7 32.9 57 6 2,706 ‐11.8 19.2

NII YoY % QoQ % Net

Profit YoY % QoQ %

Financials 65,031 11.8 2.9 24,306 17.5 12.0

Note

Sun Pharma and Kotak have been excluded from analysis due to merger with Ranbaxy and ING respectively, making results uncomparable

PAT including extra‐ordinary items considered for analysis

Consolidated taken wherever available

Energy includes Oil & Gas and Power sectors

IIFL Universe revenue break‐up for Q3 FY16E IIFL Universe net profit break‐up for Q3 FY16E

Source: India Infoline Research

14%

6%

2%4%

3%3%

9%

1%

10%

26%

5%

3%4%

6%4%

Autos & Ancs

Industrials

Cement

Cons Discretionary

Consumer Staples

Healthcare

Technology

Media

Metals

Oil & Gas

Power

Realty & Infra

Telecom

Financials

Others

9%3%

1%

4%

4%

4%

15%

1%

4%20%

5%1%3%

23%

3%

Autos & Ancs

Industrials

Cement

Cons Discretionary

Consumer Staples

Healthcare

Technology

Media

Metals

Oil & Gas

Power

Realty & Infra

Telecom

Financials

Others

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Market outlook for 2016

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Market Outlook

Market outlook for 2016 Rising concerns over a global slowdown, particularly due to a possible hard landing in China, heightened geo‐political tensions and lack of visible recovery in India Inc earnings are the reasons for the ongoing fall in the stock market. A strengthening USD is resulting in flight of capital to safety and all emerging markets are getting painted with the same brush by FPIs. A major part of the year 2016 is in for a volatile period and may not see substantial absolute return on Nifty/Sensex, at least in the first half. Global concerns will continue to plaque the market time and again. China has historically never stopped with just one or two rounds of currency devaluation and this time may not be any different. Any further devaluation on its part would result in currency wars among emerging markets to maintain their export market share. The US Fed may raise rates for the second time in April or May and markets are mostly likely to get jittery ahead of crucial Fed meets during the course of the year. We expect a gradual 50‐75 basis points hike by the Fed over next 18‐20 months. Back home, lack of major action in parliament or on the ground level is a cause of worry. The Union Budget is unlikely to be path‐breaking due to inadequate resources and pre‐occupation with politics of tackling the opposition. Three key states go into elections, where the BJP is not a strong regional player and lacks a strong regional ally. An adverse result, similar to one seen in Bihar state elections, may be a sentiment dampener for the market. The slow economic recovery and poor show reported by Corporate India, quarter‐after‐quarter, will continue concern as well. Q3 FY16 is no different with estimated profit fall by 2.3% yoy for our coverage universe (ex energy & financials). While it may be difficult to predict the timing of broad earnings pick up, but a recovery has started in many companies outside the Nifty. It would be prudent for investors to identify these stocks and sectors rather than wait for a full‐fledged recovery. With valuations beginning to ease (P/E of 13x FY18 EPS for Nifty) on account of the ongoing market fall, investors would be best advised to gradually increase portfolio allocation to equities. Among positives, India’s GDP growth is the fastest in the world; even ahead of China this year. The country’s demographic profile makes sustaining high growth rate easily possible. India is one of the few countries in the world with the inherent ability to bring interest rates down. That our inflation is down is not merely a consequence of falling global commodity prices but also due to disinflationary trends in domestic economy clearly evident from the CPI. Reducing current account deficit and fiscal deficit will have a resounding effect on the economy. If commodity prices remain subdued then it would continue to help an importing nation like India. And when the corporate earnings recovery does eventually gather momentum, it would witness a cagr of 20%+ for 3‐4 years easily. GST, of course, would be an added boost to the market. While the near to medium term outlook looks hazy, this period offers a fantastic chance to buy growth stocks from the broader market. It’s not unthinkable for another ~5% fall in Nifty, but the best returns are invariably made when shares are bought in mayhem. Tata Chemicals, J Kumar Infraprojects, Capital First, Greaves Cotton and Coffee Day Enterprises are our top bets for 2016.

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Top bets for 2016

Analyst: Rajiv Mehta

Franklin Moraes

[email protected]

Stock Data

Sensex: 24,852

52 Week h/l (Rs): 465/321

Market cap (Rscr) : 3,679

6m Avg t/o (Rscr): 5.1

Bloomberg code: CAFL IN

BSE code: 532938

NSE code: CAPF

FV (Rs): 10

Div yield (%): 0.9

Prices as on Jan 7, 2016

Company Rating Grid

Low High

1 2 3 4 5

Earnings Growth

RoA Progression

B/S Strength

Valuation appeal

Risk

Shareholding Pattern

Mar‐15 Jun‐15 Sep‐15

Promoters 65.4 65.3 65.3

FII+DII 17.8 17.7 18

Others 16.8 17 16.7

Share Price Trend

80

100

120

140

Jan‐15 Apr‐15 Aug‐15 Dec‐15

CAPF SENSEX

Capital First Ltd. Discovering inherent profitability!

BUY Sector: Financials Sector View: Positive

CMP: Rs404 1‐yr Target: Rs505 Upside: 25%



Company Report

A niche and fast-growing lending franchise Capital First is one of the fastest growing NBFCs in the country who has carved out a niche in MSME financing and is also well positioned to tap the burgeoning market of retail consumption financing. Company’s AUM has grown at a staggering ~65% pa over FY10‐15 driven by significant investments in network, employees, technology, credit appraisal and other processes. MSME financing market is huge and largely under‐penetrated with less competition from commercial banks due to requirement of highly localized set‐up and difficulty involved in appraising credit. Within current AUM of Rs. 13,123cr, MSME financing is ~69%, consumer durable financing is ~8.5%, 2w financing is ~8.5% and wholesale book (largely builder financing) is ~14%.

Set to deliver enviable ~50% earnings CAGR over FY15-18 Off‐late, AUM growth has adjusted lower to increased challenges in operating environment and rising base. Still, at 23% yoy, it is much higher than peers. Capital First aspires to reach an AUM of Rs. 25,000‐30,000cr by end‐FY19, which in our view is highly probable given large market opportunity, company’s strong positioning, impending recovery in economy and a favorable base. With growth capacity in place, a large portion of incremental scale would be generated through existing network and resources thus improving cost productivity. This along with material improvement in NIM will drive significant decline in cost/income ratio over the next couple of years. Key levers for margin expansion would be easing in funding cost (Base Rate cuts and increasing share of bond funding) and shift in asset mix. Asset quality has held‐up well supported by shift towards granular retail assets in past few years and robust credit underwriting in MSME segment.

Sustainable RoE at 18-19%; valuation to re-rate Over the next three years, the inherent robust profitability of the franchise would be discovered. RoA and RoE would improve to 2.1% and 18% respectively by FY18. Valuation should structurally re‐rate from current 1.8x FY18 P/ABV.

Financial Highlights Y/e 31 Mar (Rs cr) FY15 FY16E FY17E FY18E

Total operating income 643 927 1,183 1,506

yoy growth (%) 49.6 44.1 27.6 27.3

Operating profit (pre‐provisions) 266 474 639 843

Net profit 112 181 264 363

yoy growth (%) 202.6 61.7 45.6 37.6

Adj.BVPS (Rs) 167.5 178.7 198.9 226.2

P/E (x) 32.8 20.3 13.9 10.1

P/BV (x) 2.4 2.3 2.0 1.8

ROE (%) 8.4 11.2 14.7 17.8

ROA (%) 1.1 1.6 1.9 2.1 Source: Company, India Infoline Research

Analyst: Ruchita Maheshwari

[email protected]

Stock Data

Sensex: 24,852

52 Week h/l (Rs): 318/252


6m Avg t/o (Rscr): NA

Bloomberg code: CCD IN

BSE code: 539436

NSE code: COFFEEDAY

FV (Rs): 10

Div yield (%): NA


Company Rating Grid

Low High

1 2 3 4 5

Earnings Growth

Cash Flow

B/S Strength

Valuation appeal

Risk


Sep‐15

Promoters 52.6

FII+DII 17.2

Others 30.3

Share Price Trend

80

90

100

110

Nov‐15 Dec‐15 Jan‐16

CDE Sensex

Coffee Day Enterprises Ltd Frothing Growth!

BUY Sector: Restaurants Sector View: Positive

CMP: Rs269 1‐yr Target: Rs318 Upside: 18%



Company Report

CCD is the leading coffee network retail in India: CCD being the first mover in opening coffee retail chain has the largest footprints of cafes across

India, with +1530 outlets across in 220 cities. As per Technopak, CCD enjoys a 46% market share in the chained coffee outlet. The stores are strategically located at multiple consumption point, which enables a wider customer base. This enables it to capitalize on and gain insights into the business opportunities, trends and consumer preferences, which are important in evaluating locations for new stores.

Gross revenues per café per day have increased from ~Rs10.3k in FY12 to Rs13.2k in FY15: CCD had reported an average CAGR of 9% growth during the period when most of the casual dining in India reported flat to declining trend. With urban consumption on the revival trend, we believe CCD will benefit on account of dominant store footprint and first mover advantage.

Operating margin for Coffee Business to improve: Over 75% of the revenues for coffee business are from the high‐margin coffee retail business v/s 25% from the low‐margin coffee exports division. We forecast 15% FY15‐FY18 revenue CAGR for coffee retail v/s a negative 5% CAGR in coffee exports. Hence, on the back of envelop calculation any product mix improvement alone would drive roughly 80‐100bps margin expansion every year. Non-Coffee Business: The company is developing and maintaining two

technology parks and related infrastructure that offer bespoke infrastructure facilities for IT‐ITES companies. In addition there has been value creation due to CDEL's majority control in Sical (52.8%), Mindtree (16%) and other early technology investments.

SOTP valuation at Rs318 — a) Rs194 for CDGL (18x FY17E EV/EBITDA,

~30% discount to JUBI's average 12M forward multiple); b) Rs77 / Rs17 for Mindtree / Sical (3M average market cap with a 20% discount); c) Rs34 for Tanglin tech parks (NAV); d) Rs9 others; e) –Rs13 Adjust for Net Debt in the standalone business. Financial Highlights (Consolidated)

Y/E 31 Mar (Rs cr) FY15 FY16E FY17E FY18E

Revenue 2,479 2,727 3,055 3,421

YoY Growth % 8.7% 10.0% 12.0% 12.0%

EBITDA 375 466 550 640

EBITDA % 15.1% 17.1% 18.0% 18.7%

PAT (160) (39) 44 125

EPS (9.8) (1.9) 2.1 6.1

P/E (x) NA NA 127.0 44.0

EV/EBITDA (x) 19.2 17.9 15.5 13.0

RoE (%) (30.1) (7.9) 8.7 21.3

RoCE (%) 3.9 4.6 5.7 7.2 Source: Company, India Infoline Research

Analyst: Prayesh Jain

[email protected]

Stock Data

Sensex: 24,852

52 Week h/l (Rs): 163/113



Bloomberg code: GRV IS

BSE code: 501455

NSE code: GREAVESCOT

FV (Rs): 2

Div yield (%): 1.8


Company Rating Grid

Low High

1 2 3 4 5

Earnings Growth

Cash Flow

B/S Strength

Valuation appeal

Risk



Promoters 51.5 51.0 51.0

FII+DII 36.8 37.5 38.3

Others 11.7 11.5 10.7

Share Price Trend

40

60

80

100

120

Jan‐15 May‐15 Aug‐15 Dec‐15

GREAVESCOT Sensex

Greaves Cotton Ltd Growth engine cranked!

BUY Sector: Auto Components Sector View: Positive

CMP: Rs139 1‐yr Target: Rs190 Upside: 36.7%



Company Report

Strong growth expected in the automotive engines segment Supply of engines to three‐wheelers and LCVs contribute 55% of the revenues for Greaves Cotton. We see a revival in these segments and Greaves Cotton being a dominant engine supplier should benefit from this opportunity. The three‐wheeler demand in India will see a steady growth considering rapid urbanization and lack of public transport system even in the existing tier‐I and tier‐II cities. Also, export of three‐wheelers from India is increasing at a fast pace. SCV demand should revive with expected revival in industrial activity, implementation of GST and improved finance availability.

Low farm mechanization to drive farm equipment business Farm mechanization in India has grown substantially over the past three decades due to expensive labour and better availability of organized finance. However, India continues to lag behind many emerging and developed economies leaving substantial headroom for growth in farm mechanization. Greaves Cotton being an established name in the rural areas through its pumpset and other equipments, will see large benefits accruing from this opportunity. Farm equipments contribute about 15‐18% of the revenues.

Financials to gain strength on multiple grounds Through value engineering, Greaves Cotton has been able to improve its gross margins consistently since FY12. Meanwhile, the company has also exited its loss‐making infrastructure equipment business. With utilization levels below 70%, we see benefits of operating leverage coming in. These factors will drive 540bps expansion in OPM during FY15‐18E. This coupled with revenue CAGR of 10% will result in PAT CAGR of 47%.

Valuation gap to narrow down when compared with the leader Greaves Cotton currently trades at FY17E P/E multiple of 16.1x v/s 25.7x for Cummins India, the market leader. With strong earnings growth trajectory, exit from the infrastructure equipment business and renewed management focus on core business of engine manufacturing and allied operations, we see this gap narrowing.


Revenues 1,689 1,720 1,929 2,221

yoy growth (%) (1.8) 1.8 12.2 15.1

OPM (%) 11.8 16.7 16.7 17.2

Reported PAT 82 191 216 259

yoy growth (%) 21.8 29.4 13.2 19.8

EPS (Rs) 6.0 7.8 8.8 10.6

P/E (x) 23.5 18.2 16.1 13.4

Price/Book (x) 4.2 3.4 2.8 2.3

EV/EBITDA (x) 17.2 11.6 10.2 8.5

Debt/Equity (x) 0.0 0.0 0.0 0.0

RoE (%) 18.0 20.9 19.3 19.1


Analyst: Alok Deora

[email protected]

Stock Data

Sensex: 24,852

52 Week h/l (Rs): 228/450



Bloomberg code: JKIL IN

BSE code: 532940

NSE code: JKIL

FV (Rs): 5

Div yield (%): 0.6


Company Rating Grid

Low High

1 2 3 4 5

Earnings Growth

Cash Flow

B/S Strength

Valuation appeal

Risk



Promoters 51.0 51.0 51.0

FII+DII 31.0 32.1 31.0

Others 18.0 16.9 18.0

Share Price Trend

50

150

250

Dec‐14 Apr‐15 Aug‐15 Dec‐15

JKIL Sensex

JKumar Infraprojects Ltd Riding the Infra boom

BUY Sector: Infra Sector View: Positive

CMP: Rs372 1‐yr Target: Rs452 Upside: 21.5%



Company Report

Healthy order book provides strong revenue visibility JKIL is currently sitting on healthy order book of nearly Rs. 3,600 cr (excluding L1), which translates into 3x book‐to‐sales thereby providing comfort on high growth in revenues. Including L1, order book more than doubles to whopping Rs.9,200 cr. JKIL has emerged as L1 in two packages of Mumbai metro phase 3 (MM3) project worth nearly Rs.5,200 cr and letter of award is expected to be received soon. JKIL being a strong player in urban infrastructure segment is also set to capitalize on the huge orders expected in road sector.

Recent fund raising via QIP to control leverage, allow JKIL to bid for more projects JKIL has recently raised funds via QIP of Rs.410 cr, which would help reduce debt and fund its capex plans over the next 2‐3 years. While the QIP would have near term dilution of EPS, over the long term it would be beneficial to the Company in terms of bidding for more projects as well as maintaining its leverage at comfortable levels.

Asset light model with focus on EPC projects driving margins As a strategy, JKIL has abstained from bidding for asset heavy BOT projects. It has rather increased focus on EPC projects by diversifying to other regions. The strategy has helped JKIL in generating high margins during last many years. Going forward, we expect the Company to continue focusing on EPC segment and maintain its margin performance.

Outlook & Valuation Taking all the above factors into consideration, we are positive on the company’s prospects in the coming years. We expect JKIL to report revenue and net earnings CAGR of 20% and 27% respectively during FY2015‐18E. At CMP of Rs 372, the stock is trading at a P/E of ~14x based on FY18E EPS of Rs.26.6. We recommend Buy on the stock with a target price of Rs 452.


Revenues 1,346 1,544 1,877 2,337

yoy growth (%) 13.4 14.7 21.6 24.5

Operating profit 254 289 351 439

OPM (%) 18.8 18.7 18.7 18.8

Reported PAT 98 102 139 201

yoy growth (%) 15.5 5.0 35.7 44.7

EPS (Rs) 15.1 13.5 18.4 26.6

P/E (x) 24.6 27.5 20.3 14.0

Price/Book (x) 3.0 2.2 2.0 1.8

EV/EBITDA (x) 10.9 9.8 8.6 7.3

Debt/Equity (x) 0.7 0.4 0.4 0.3

RoE (%) 14.3 9.9 10.4 13.5


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Sector previews

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Q3 FY16 Preview

Automobile & Auto Ancillaries During Q3 FY16, volumes for automobile companies recovered except for two‐wheelers where growth

remained subdued. Amongst commercial vehicles, while M&HCVs continued to see robust momentum, LCVs saw a recovery on a low base with flattish trends. For passenger cars, new launches continued to provide thrust for the leader of the segment, Maruti Suzuki. Tata Motors saw a reversal in the trend with declines for passenger cars and UVs. For M&M, launch of TUV 300 led to a strong growth for the segment. Ashok Leyland continued to gain market share in both M&HCV and LCV segments. JLR has seen a sharp rebound in volume growth on the back of new launches. Going ahead, interest rate cuts, lower fuel prices, revival in infrastructure spends, improvement in industrial activity and a possible recovery in rural India can spur automobile demand growth.

Product mix is expected to have a big impact on the realizations for most companies under our coverage. For Maruti, while contribution of Mini segment declined, contribution of UVs (S‐Cross and new Ertiga) segment saw an increase. This would translate into better realizations for Maruti. Rupee depreciation is expected to aide realizations for Bajaj Auto’s export volumes, while sales of the new Avenger can offset the rising contribution of the commuter category bikes. For Tata Motors, contribution of M&HCVs has increased from 25.5% in Q3 FY15 to 29.4% in Q3 FY16. This should translate into substantial jump in standalone realizations.

Margins for most companies under our coverage are expected to improve on a yoy basis due to soft commodity prices and favorable currency movements for few companies. Depreciation of yen is expected to benefit both Maruti and Hero Motocorp. Biggest benefits of operating leverage are likely to be the CV players. For Tata Motors, however, its JLR business will see robust improvement on a sequential basis as benefits of operating leverage kick in.

Auto component players are expected to see another quarter of decent growth as revenues rise on the back of decent OEM demand and margins expand as a result of benefits of operating leverage. Replacement demand in certain segments such as tyres has also started picking up. Benign commodity prices (rubber for tyre companies) are also likely to be margin accretive. Bharat Forge could see a weak performance on the back of slowdown in volumes from the US market.

Our top picks in the sector are 1) Eicher Motors 2) Tata Motors and 3) Greaves Cotton. Q3 FY16 volumes

Q3 FY16 Q3 FY15 yoy (%) Q2 FY16 qoq (%)

Hero Motocorp 1,690,198 1,648,566 2.5 1,574,861 7.3

Bajaj Auto 951,498 984,520 (3.4) 1,056,596 (9.9)

TVS Motors 692,517 652,970 6.1 678,749 2.0

Maruti 374,182 323,911 15.5 353,335 5.9

M&M ‐ Auto 130,888 113,400 15.4 113,134 15.7

M&M ‐ Tractors 62,666 59,714 4.9 45,246 38.5

Tata Motors 121,390 126,273 (3.9) 126,059 (3.7)

Ashok Leyland 30,984 25,397 22.0 37,337 (17.0)

Eicher ‐ RE 125,744 82,215 52.9 127,611 (1.5)

Eicher ‐ VECV 12,692 9,492 33.7 11,611 9.3 Source: Company, India Infoline Research

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Q3 FY16 Preview

Cement

We expect cement demand to remain sluggish in Q3 FY16. Our channel checks indicate slowdown in construction and real estate activity translating into tepid cement demand during the quarter. We factor in 2‐7%yoy volume growth for companies under our coverage universe.

Lower volumes led to pricing pressures in all regions barring Southern region. As per our channel checks, all‐India realizations were down ~2.6/~1.2% qoq/yoy.

Margins are likely to remain flat sequentially as benefit of low international coal and pet coke prices will cushion falling realization.

Calendar year ending companies (i.e Ambuja Cement and ACC) are likely to report higher‐than industry dispatches.

Orient Cement and Prism Cement are likely to report loss.

Financials

The system credit expansion remained tepid during Q3 FY16 as the headline loan growth continued to be modest at ~8‐10% yoy. Corporate credit activity was muted with no visible revival in private capex given anemic demand and weak consumption trends. The infrastructure investment drive has been led by the government with private participation remaining low. The only bright spot in the banking system has been resilient retail loan growth which has is running at 16‐18% yoy supported by strong momentum in mortgages and revival in auto loan demand.

Q3 FY16 will continue to reflect the disparity in loan growth between the private and public banks. The former is estimated to report impressive loan growth that could average 23‐25% yoy for our covered large players. An established and sizeable retail lending franchise, widening distribution, high capital base and prudent aggression has been enabling private banks to grow much ahead of the system thus gaining market share at fast clip. On the other hand, most PSU Banks are expected to report lack luster credit growth of 5‐10% yoy due to their high reliance on corporate loans, weak capital position and a guarded approach underpinned by prevailing asset quality issues

In H2 CY15, most large private and public banks have reduced their Base Rate by 40‐60bps in response to continued easing by RBI. While banks have also announced material (but not commensurate) deposits rates cuts during the aforesaid period, NIM has likely been exposed to fall in the near term especially for those banks having a large portion of corporate book. Amongst the large corporate lenders, PSU Banks are more vulnerable given negligible share of wholesale funding in their liability franchise and weak CASA accretion being witnessed. So while most PSU banks should see their margin declining by 10‐15 bps qoq, private banks with significant corporate book (ICICI, Axis and Yes) could witness a NIM decline of ~10 bps and the retail oriented peers (HDFC Bank, IndusInd, Kotak) may see a small contraction ranging 0‐10 bps.

Asset quality pressure will persist for the industry given much slower‐than‐expected recovery in economic activity. The dichotomy of high duress in corporate, agri and SME portfolios and relative resilience of the retail portfolio would also continue. Therefore, banks like HDFC Bank, IndusInd Bank and Kotak Bank would report benign stress whereas other private banks and host of public banks face the risk of reporting significant slippages (partially from the restructured book). Pubic Banks, in particular, could report elevated delinquency ratio of 2‐4% (annualized) and thus a further deterioration in their NPL levels in the absence of significant sale or write‐offs.

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Within NBFCs, we see HFCs reporting good earnings growth on the back of strong loan growth and spread expansion. The latter will be driven by the lower incremental cost of bond borrowings and benefits from Base Rate reduction by commercial banks. On a low base, Repco Home and Can Fin Home should continue to deliver robust loan growth (28‐32% yoy). Subdued asset growth is likely to continue for vehicle financing companies (Mahindra Finance, STFC, Magma, etc) due to absence of any tangible improvement in product demand. No improvement in vehicle utilization coupled with seasonal weakness will maintain pressure on asset quality and may drive higher credit cost sequentially.

Bajaj Finance, due to its diversified and urban centric portfolio, would be an outlier once again delivering much superior (30%+ yoy) asset growth and resilient asset quality. MSME financiers such as SCUF and Capital First should be able to sustain healthy book growth despite challenging environment aided by their niche profile.

We expect IndusInd Bank, HDFC Bank, Bajaj Finance, LIC Housing Finance, Can Fin Home, DHFL and Capital First to deliver robust earnings performance in Q3 FY16.

FMCG & Consumer Discretionary

Earnings growth has picked up steadily over the past one to two quarters for most firms driven by weak input costs and a sequential pick‐up in volumes. We expect earnings to continue to strengthen driven primarily by the margin boost as input costs continue to remain benign and also the benefit of low base as Q3FY16 witnesses the full benefit of Diwali sales. While volumes are recovering sequentially, these are primarily driven by select pricing actions and increasing re‐investments in terms of higher ad/promotion spends, new product launches.

Pick‐up in volume growth in staples is aided by pricing actions. Most companies have invested

significantly in their businesses over the past few years (number of stores, new product introductions and brand investments) and thus should see higher operating leverage (especially retail companies such as Bata, Relaxo on improved sales. ITC’s earnings remain heavily contingent on the tax hikes proposed and Maggi issues still overhang Nestle. We expect weakness in ITC and Nestle to impact the companies’ near‐term earnings profile. The companies which drive major source of revenue from rural to be negatively impacted most as the rural GDP had grown slowest due to weak monsoon and lowest single digit wage growth hike. Companies like Dabur, Emami to be negatively impacted. However, the companies with major urban focus to reap the benefit of urban cyclical recovery. The companies to watch out in this space include, Britannia, Jubilant Foodworks, GCPL, Marico and La Opala RG. Further, premiumization continues to remain resilient as the companies dealing in this segment does not witness any slowdown in the category. Britannia, HUL, La Opala RG to benefit the most under the premiumization.

Key things to watch out in Q3FY16: 1) A moderation in raw material prices, especially crude oil, has been a key earnings driver and factor to monitor going forward; 2) recommendations of the Seventh Central Pay Commission could have a meaningful impact on disposable income growth; and 3) a pick‐up in volume growth and premiumization trend in the different consumption categories.

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Key Pointers: Rural and urban spending gap is converging: Sales in rural areas historically grew at 1.5‐2.0x that of the urban segments. Over the last few quarters, this gap has converged, primarily impacted by a weak rural segment and a relatively resilient urban market. Dabur and Emami have the highest rural exposure and thus are likely to be impacted by the market weakness. That said we believe a key differentiator is portfolio resilience and the niche nature of the portfolio. We remain positive on the product portfolios of Dabur and Emami, which is also reflected in the high volume growth profiles for these companies. We believe Marico and HUL, despite an urban focus, remain impacted by high competition given the relatively mass nature of their key product segments (Coconut Oil for Marico, and Soaps for HUL). GCPL, Britannia and Marico have the highest urban exposure and should benefit the most. Premiumization continues to drive revenue growth: For most of the segments, growth in premium categories has remained resilient, with top‐end segments for biscuits (impacts Britannia), showing healthy trends. The premium segments have remained insulated from price disruptions. Pricing pressures tend to be more pronounced in mass categories such as Soaps & Detergents (with regional competition becoming very competitive due to the commodity decline). Gross margin to improve further though the expansion would be limited sequentially: With a 3‐6 month buying cycle, we expect the benefit of the commodity decline to continue in Q3FY16 as well, though the expansion would be limited sequentially. A significant part of the margin expansion is likely to be re‐invested to drive volumes; in our view. We expect Britannia, Marico and HUL to see the highest gross margin impact as well as earnings sensitivity. Britannia’s impact is likely to be amplified due to the company’s low‐digit margin profile, which we believe provides it with high leverage to any gross margin improvement.

Industrials

Q3 FY16 has been an extension of the previous two quarters, wherein execution remained weak in the domestic infrastructure space and pickup was largely confined to specific sectors like railways, roads, Power T&D. Ordering remained high in the railways and road sector during the quarter. However, in the power T&D space ordering has been marginally lower than expectations as Power Grid was focussed on completing its longest HVDC power transmission corridor. In the Power generation space, orders were limited to government companies as private sector capex was tepid.

Higher spending by PSUs and pickup in execution in the T&D space would lead to 11.1% growth in topline for our coverage universe. Led by strong ordering in power generation and T&D sectors, order intake (except L&T) is expected to be better on a yoy basis in Q3 FY16. Margins too are expected to expand on the back of cost rationalisation and completion of low margin orders in FY15. Margin expansion would also be led by the sharp drop in commodity prices and faster execution. Interest costs too are expected to decline due to the cut in lending rates and marginal easing of working capital requirements.

The trend of degrowth in topline for BHEL is expected to be reversed due to weak base and stabilisation of order book. We expect topline to increase by 3% yoy to Rs. 6,384cr; however, margins would remain under pressure from slower execution and high fixed costs. The company has secured orders cumulatively valued at Rs. 4,614cr, for setting up two supercritical thermal power projects involving one unit each of 800MW sets, in Andhra Pradesh. The company’s large orders received

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currently from Telangana do not have environmental clearance, raising doubt over the company’s large order book.

Order inflow for LT during the quarter is expected to be lower by 22% yoy as the company has so far reported orders worth Rs. 6,200cr compared to Rs. 11,400cr in Q3 FY15. Order inflow has been quite lower than our expectations in H1 FY16 and is expected to remain low in H2 FY16. However, the company was expecting ordering to pickup in H2 FY16. Consolidated revenue is expected to increase by 12.1% yoy on the back of strong order backlog and marginal acceleration in domestic infrastructure execution. Losses in Hydrocarbon and MMH segment is expected to reduce drastically as the company has made large provisions over the last one year. Execution pickup in the infrastructure segment and higher contribution from development assets is expected to drive topline growth during the quarter.

KEC and Power Grid are our top picks in the sector.

Infrastructure The focus of many infrastructure players during the quarter has been on deleveraging their balance

sheets. While some Infra companies are raising funds by way of QIP, few are selling stake in SPVs. During Q3 FY16, while J Kumar Infraprojects raised Rs.410 cr by way of QIP, players like NCC Ltd. are close to selling its stake in certain BOT projects. During December 2015, HCC’s infrastructure development subsidiary sold 74% stake in an annuity project. We expect the deleveraging trend to continue, as the companies are looking for alternate sources of funds given the dire need to manage the leverage position.

The government on its part has taken measures to support the sector during the quarter. In sectors like Roads, the government is shifting from the BOT (build, operate, transfer) model to the EPC model along with the newly introduced hybrid annuity model for projects granted from October. Many players had shown lack of interest towards the asset heavy BOT projects and such measures would help revive the sector in coming period.

Most construction companies witnessed a significant growth in their order‐books in the previous quarter which is likely to continue given the up‐tick in the award activity. NHAI for example has already awarded 2,600 km or road projects so far in FY16 as against its target of 5,000 km for the full year. The balance will be awarded by March 2016 which indicates that the awarding activity will continue to be robust. Most companies have a positive two year revenue visibility which provides some comfort. Some notable orders won during the quarter were: (i) Aligarh Moradabad Road Project won by PNC Infratech for Rs.645 cr (ii) MBL Infra bagged a project worth Rs.415 cr (iii) J Kumar Infra bagged two orders worth Rs.1,134 cr from JNPT Port Road Company Limited.

With the pickup in order activity coupled with the quarter being seasonally better quarter post monsoon season, the revenue growth is likely to be strong for most infrastructure companies. There has also been a decline in the cost of raw materials like bitumen. A drop in the price of crude oil has led to a drop in the price of bitumen, which is a byproduct of crude oil. As input costs are expected to subdued and revenues likely to increase, we expect some improvement in operating performance.

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Information Technology The third quarter of a fiscal year has traditionally been a weak period for India IT companies

characterized by lesser number of working days and furloughs at the client’s end. This time around some many companies would face additional growth headwinds on account of general weakness in the energy and telecom verticals and client specific setbacks. A couple of large companies have also alarmed about growth being impacted materially due to the Chennai floods which temporarily disrupted execution from the centers located there. The further strengthening of dollar against other functional currencies would lower reported sequential revenue growth by 40‐70bps.

We broadly see large IT companies under our coverage to report qoq dollar revenue growth in the range of 1‐2% in constant currency terms with HCL Tech and Tech Mahindra delivering near the upper end. Amongst the mid‐sized players, we estimate Cyient to deliver a strong growth of 4‐5% qoq while Mindtree would report a muted 1% qoq growth as seen in the preceding years. In line with its latest commentary, Infosys would deliver a tepid growth of 1.4% qoq in CC terms during Q3 FY16 due to seasonality and lower spending by top clients. TCS has already published that disruption at its Chennai facility (one of its largest delivery locations with over 65,000 employees) is likely to have a material impact on revenues of the quarter. For Wipro, apart from impact of this event (22,000 employees in Chennai), persistent weakness in Energy vertical (15% of revenues) would be a headwind pushing growth delivery towards the lower end of guidance (0.5‐2.5%). Tech M may also report a moderated growth in Q3 FY16 on the back of consolidation within customers which has driven slowdown in decision making.

Weakness in revenue growth would get reflected in operating margins for most players as operational levers such as utilization, SG&A leverage and offshore shift would be elusive for extraction. Despite the likely 30‐40bps benefit from the depreciation of rupee, we expect 20‐60bps qoq reduction in operating margin for our coverage companies barring Tech Mahindra (25 bps expansion), Persistent (20 bps expansion) and Cyient (40 bps expansion).

We continue to maintain a Neutral view on the sector as the investment risk‐reward currently is in balance. Large caps are fairly priced at 13‐17x FY17 P/E for an estimated modest earnings CAGR of 8‐12% over FY15‐17. However, significant rupee depreciation could be a positive earnings catalyst in the near‐to‐medium term. Our preferred picks in the sector are HCL Tech, Infosys and Mindtree.

Media and Entertainment Most of the media and entertainment companies are abuzz and expected to post decent earnings due

to festive cheer coupled with big movie releases, organic and inorganic acquisitions, increase in advertisement rates by radio players, and deadline for phase 3 of digitization.

For ZEEL, while acquisition of Sarthak Entertainment will increase market share in the regional space, accruing of ad revenue share from new launches and extension of its programming hours on its flagship channel ‘Zee TV’ would help boost revenues in Q3 FY16. We expect margins to remain under pressure due to branding and other expenses related to new launches.

According to BARC (Broadcast Audience Research Council India) ratings, Sun TV continues to lead the charts in GEC (General Entertainment Channel) across genres, thereby enabling strong ad revenue growth for its channels. With expected digitization of 4.8cr homes in Southern markets alone in phase 3

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and 4 cities, we expect, improvement in its subscription revenues. Also, ad rate hike of 35% across all its existing FM stations will inch up its radio revenues.

The movie exhibition space is likely to witness a strong quarter backed by blockbuster big budget movies like Prem Ratan Dhan Payo, Tamasha, Dilwale, Bajirao Mastani, Spectre and Star Wars. For PVR and Inox Leisure, apart from box office collections, increase in ATP (Average Ticket Prices) and F&B spend per head will lead to better realizations. However, high Capex to add new screens will restrict profit growth.

Print media players, Jagran Prakashan, HT Media and DB Corp, are likely to witness higher ad revenue growth backed by increase in corporate spending due to festive season. Also, uptrend in cover prices, penetration to new markets and moving to the digital platform work well for these media players during this quarter.

All the major radio players have taken a price hike in ad rates this quarter. This along with the festive season will lead to better ad revenues for the FM companies. However, higher migration fees and license fees for phase three FM auctions will impact margins.

Metals & Mining The rout in the metals sector extended to Q3 FY16 with the fall in commodity prices showing no signs

of slowing down. Metal prices remained under pressure due to subdued demand, lower than expected production cuts and dumping from China into global markets. Due to the sharp fall in prices, all the steel companies in our coverage universe would continue to report loss and most of the non‐ferrous companies would report a decline in earnings. Global steel prices have plunged further by 13.1% qoq as Chinese products continue to flood the market. The decline in steel prices was also led by a sharp fall in steel making raw materials, iron ore and coking coal.

Domestic steel prices during the quarter were lower by 4‐7% qoq on account of the sharp fall in global steel prices. The impact of the sharp fall in global markets was reduced by the safeguard duty levied by the Government. Imports in November were lower by 6.9% yoy and 35.3% qoq due to the duties levied. Domestic steel production too declined 3.5% in November due to closure of small mills and maintenance shutdown at JSW’s two facilities. However, domestic steel consumption was strong at 11.2% yoy due to higher demand from automobile and road sector. Volumes for most of the players would be flat or lower on a yoy basis due to lower prices and pressure from imports. JSW’s volumes would be quite lower on a yoy basis due to maintenance shutdown of its two units. Coal India would continue to report impressive growth in volumes in Q3 as well. However, e‐auction prices have stayed lower and would reduce the impact of higher volumes on topline. NMDC would report a sharp fall in topline due to lower volumes and a plunge in iron ore prices.

The stress in non‐ferrous space was witnessed for the second consecutive quarter. Base metal prices declined by an average of 7.2% qoq as demand was subdued and dumping of material from China continued. Amongst the non‐ferrous space, zinc declined the most with 12.1% qoq, followed by copper 7.5%, aluminium 7% and lead fell the least with 2% qoq. Most of the base metal prices are at levels wherein 1/3rd of the global capacities are making losses. Product premiums continued to remain low for the companies. This impact was somewhat offset by the depreciation of the Rupee against the US Dollar.

For the non‐ferrous space, volumes for most of the players would be higher on a yoy basis. Hindalco’s aluminium volumes would be strong on the back of higher output from new capacities. Vedanta’s

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aluminium volumes too would be higher on the back of higher output from BALCO’s new projects. However, alumina production would be lower due to shutdown of its one alumina refinery unit. HZL is expected to report strong volume growth on a yoy basis. NALCO’s external alumina sales volume would improve post the maintenance shutdown of its refinery in previous quarter. Margins for most of the players would be impacted due to lower realisations. The impact of lower product premiums would be somewhat offset by a decline in coal prices.

For the third consecutive order, all the steel manufacturing companies in our coverage universe are expected to report loss during the quarter. However, the quantum of loss would reduce on a qoq basis due to higher volumes and lower coking coal costs. In the non‐ferrous space, we estimate bottomline to be sharply lower on a yoy basis. Increase in availability of coal and lower input prices would somewhat cushion the impact of lower realisations on bottomline.

Coal India and HZL are our top picks in the sector.

Oil & Gas Crude oil prices declined on a sequential basis from US$50.2/bbl in Q2 FY16 to US$43.7/bbl in Q3 FY16

(average for Brent) while rupee depreciated against the US$ by 6.4% yoy and 1.5% qoq. Gross under recoveries are expected to be lower substantially on a yoy basis and we expect this to be compensated by government and upstream companies.

Product spreads have improved on a sequential basis as fall in petroleum product prices was lower than fall in crude oil prices on back of stable demand from US and India. Resultantly, benchmark GRMs improved on a qoq basis. We expect Reliance Industries to report a GRM of US$11/bbl as compared to US$7.3/bbl reported in Q3 FY15 and US$10.6/bbl in Q2 FY16. Petrochemical prices too have seen a correction in line with the crude oil prices but we expect the spreads to remain flattish. Crude oil production from MA‐1 field and gas production from KG‐D6 field are likely to see flat trends during the quarter on a qoq basis.

Following a weak quarter, we expect OMCs to see some improvement on the back of 1) higher GRMs and 2) improvement in marketing margins. However, inventory losses driven by fall in crude oil prices will restrict these gains. Interest costs will continue to decline as working capital requirements continued to trend down providing thrust to sequential improvement in profitability.

For Cairn India, we see weak set of numbers on yoy basis owing to 1) a flattish production profile at Rajasthan field, 2) fall in crude oil prices and 3) higher profit sharing with the government. For ONGC and Oil India, we expect net realizations to improve. Sales volume for crude oil and gas is likely to remain flat on sequential basis.

GAIL should witness a weak set of numbers on yoy basis but an improvement on a qoq basis. Yoy weakness is on the back of poor profitability for the petchem segment which will see some pressure as the end product prices have fallen but GAIL’s feedstock prices (natural gas prices) have seen commensurate declines. Volumes for transmission and petrochemicals business should improve. For GSPL, we expect moderate increase in transmission volumes on a qoq basis. Petronet is expected to see a decent yoy growth in revenues driven by higher volumes and higher regas tariffs. However, depreciation and interest expenses of Kochi Terminal will impact profitability. IGL margins are expected to improve owing to lower spot LNG prices.

Our top picks in the sector are Reliance Industries and BPCL.

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Pharmaceutical We expect a mixed set of pharma results with pockets of strength offset by lackluster performance in

front line companies like Sun and Cipla. We project a cumulative 2.6% qoq rise in our coverage universe revenues driven by Aurobindo and Torrent on back of sizable launches in the previous quarters. PAT would continue to remain under pressure at ‐2.7% qoq. We reiterate Marksans, Aurobindo and Strides as our top picks in the sector

Sun Pharma Q3 revenues would be impacted due to continued pressure on US supplies due to Halol remediation and pressure on base business as evidenced in Q2 results; we expect adjusted US revenues (for US$40mn one off income in Q2) to decline 1.5% qoq while domestic revenues would inch up 1.5% qoq. Overall we expect 2.7% revenue decline leading to concurrent pressure on margins (‐130bps qoq) and ~17% sequential decline in PAT. We expect InSite acquisition to be factored in Q3 and would look for management commentary on Halol, Ranbaxy integration and US business outlook

Dr Reddys’ is expected to continue its healthy run in US business on back of existing portfolio performance and incremental gains from Namenda; we expect margins to inch up further to 29.2% despite a large base of Q2 while PAT likely to post 5.1% qoq rise

Cipla Q3 revenues would decline 1.4% qoq as gNexium supplies to Teva further taper off from Q2 base and we expect gNexium sales to settle to US$10‐12mn per quarter in FY17E. Margins would largely remain flat qoq though rise in below EBIDTA items would lead to 5.1% qoq decline in PAT

Lupin obtained a reasonable set of approvals during Q3 unlike Q2 which would aide US operations (+3% qoq) though currency would continue to play spoilsport especially in South Africa as ZAR saw average depreciation of ~7% on sequential basis. We do expect margins to revive from lows of Q2 which would support PAT rebound of 4.8% qoq

Aurobindo would report a stellar quarter as large number of approvals in H1 is monetized including sizable opportunities like Entecavir and Abilify. We expect US revenues to jump 10% qoq which in turn would drive 6.6% qoq rise in Q3 revenues. Operating leverage tailwinds would likely ensure margin jump of ~290bps qoq and pre exceptional PAT rise of 13% qoq

Strides numbers would not be comparable qoq or yoy as Arrow consolidation is for full quarter vs 30 days in Q2; we have also factored in Shasun merger as it was completed in Nov’ 15 as well as (small) contribution from acquired Sun’s CNS portfolio. Hence we expect Strides Q3 revenues at Rs.942cr, margin of 18.6% and PAT of Rs. 79cr

Marksans Pharma margin would rebound to 23.4%, up ~330bps qoq in absence of one off cost related to consolidation of Time Cap Labs; revenues would increase 2.2% qoq and 22.5% yoy while PAT would rise 10.7% qoq and 39.3% yoy driven by strong EBIDTA traction

Torrent Pharma results would get a boost from gNexium launch which would offset gAbilify sales erosion; we expect 4.6% qoq rise in revenues and modest ~70bps qoq uptick in margin which would result in ~5% sequential rise in PAT

Cadila is set to report healthy Q3 after a strong showing in Q2 as US revenue momentum continues from Q2 levels though Lat Am growth would be impacted by ~7% qoq Brazil Real depreciation. We model in 1.5% qoq and 14% yoy rise in sales along with stable margins and 7.3% qoq increase in PAT

Glenmark would post flat revenues qoq as domestic sales decline (due to Sitagliptin halt) would be offset by better H2 momentum in US as indicated in Q2 conference call commentary; we forecast 50bps qoq rise in margin and 4.6% growth in PAT

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gAbilify sales would drive ~77% yoy revenue surge for Alembic Pharmaceuticals though on a sequential basis it would decline 11%; management had indicated in Q2 earnings call that US partner is losing market share with additional competition. We expect 300bps margin decline on sequential basis which would result in ~18% qoq decline in PAT

gSovaldi sales would help Natco report an impressive 11% qoq and 31% yoy growth in revenues. Operating leverage tailwinds would turn drive 120bps yoy margin expansion and translate into 29% yoy rise in pre exceptional PAT.

Fortis Healthcare would report 8% yoy rise in revenues led by 13% growth from hospitals and 17% from diagnostic services. We expect steady uptrend in margin on sequential basis while it would surge 400bps yoy, which would help company to post Rs. 44cr PAT (+29% qoq) vs. Rs.22cr loss in previous year

Biocon is expected to report 13% yoy revenue growth as contract research would retain its momentum at +25% yoy while bio pharma growth is likely to be restricted to 1.5% qoq on capacity constraints. We expect company to report 178bps margin expansion and PAT would grow 11% yoy

Apollo Hospitals would report ~20% standalone revenue growth led by 14% growth from hospitals and 5% qoq increase in pharmacy revenue however yoy numbers not comparable as Hetero Pharmacy got integrated from Q1 FY16. Operating margin has been in the range of 14‐14.8% in the last few quarters and we expect company the trend to continue with 14.5% margin and standalone PAT growth of ~10% yoy

Telecom Frontline telcos traditionally enjoy seasonality tailwinds in H2 and we expect a sequential rebound in

traffic growth for Bharti and Idea while Bharti Infratel energy margins are expected to improve qoq which would drive 4.5% qoq PAT growth. We restate our preference for Tata Comm, Bharti and Idea

Bharti topline growth is seen at 2.4% qoq driven by seasonality tailwind in domestic business and ~2% Airtel Africa US$ growth. We expect 1.4% traffic growth though voice pricing would remain under pressure for India business. Given focus on accelerated roll outs of 3G/4G networks, we expect India wireless margin to remain flat despite a +1.5% qoq revenue tailwind. Africa margins would climb to 20.8% while consolidated PAT would decline on sequential basis due to Rs. 660cr one offs gain in Q2 mainly related to sale of tower assets in Africa

Idea Cellular is expected to post a strong topline growth of 4.7% qoq and 13.5% yoy on back of seasonally strong +5.5% qoq surge in traffic offset to some extent by 0.6% qoq voice price decline. Margins would be largely flat qoq on higher network opex and SG&A costs while PAT would fall 0.9% qoq on higher financing costs

Rcom is expected to post a rebound in revenues after a pronounced seasonality headwind in Q2 with topline growth of 3.5% qoq and margin gain of ~30bps qoq

Tata Comm to post 0.3% qoq rise in revenues mainly driven by data and some stability in Neotel after a sharp lumpy decline in Q2 Neotel sales; albeit a ~7% depreciation in ZAR would still lead to lower INR Neotel revenues. Margins would inch up to 15.9% though large tax payouts would result in Rs.33cr PAT down ~70% yoy as Q3 FY15 included a large other income

Bharti Infratel would rebound from a soft Q2 as energy margins rise from a 2‐year low of 3.6% touched in the previous quarter. We expect Indus tenancies to inch up by 0.01x though standalone tenancies would rise at 0.03x. A higher energy reimbursement would drive ~70bps qoq jump in margin and 4.5% sequential growth in PAT

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Utilities The generation capacity addition between April‐November 2015 has been 9,466 MW against the

annual target of 20,037 MW. The aggregate installed capacity in India now stands at 282 GW as at end of November 2015. In the twelfth five year plan, the country witnessed capacity addition of 82 GW till November 2015, which is ~93% of the targeted ~88.5GW. With the spot light on renewable energy, close to 52% of the targeted 4,460 MW capacity addition has been added till November 2015.

With winter season stepping in and the resulting fall in demand, the YoY growth in generation remained flat during November 2015. Power generation during April to November 2015 has been ~740 BU, recording a ~5% growth YoY. The sub‐normal rainfall in the country during the year led to a ~13% YoY decline in hydro power generation in November 2015. Power generation through gas however recorded a growth of ~12% YoY which was triggered by the government’s decision to supply gas at subsidized rates to distressed plants. Peak deficit fell from ~2% in October 2015 to ~1.5% in November 2015 owing to flat pan‐India demand and floods in Tamil Nadu which resulted in reduced offtake.

The continued downward trajectory in commodity prices is expected to bring down the cost of production for power plants. Prices of coal, steel, copper, aluminum which are involved in the development and operation of infrastructure projects, especially power projects, have dropped significantly.

During the quarter, BHEL commissioned 500 MW thermal generating unit in West Bengal and Tata Power commissioned the World’s largest solar rooftop project in Punjab. Tata Power refinanced the outstanding term loans of its wholly owned subsidiary, Coastal Gujarat Power Limited, which will help the company in extending the amortization period and reduce interest costs by ~2%. The company also entered into a contract with Gamesa India for commissioning a 100 MW turnkey wind project in Andhra Pradesh. In December 2015, Tata Power’s Joint Venture Maithon Power commenced supplying 150 MW to Kerala on a Long‐term agreement basis. In October 2015, NTPC commissioned a 500 MW unit of Vindhyachal Super Thermal Power Station (Stage V), the largest operating power plant in India. With this the total commercial capacity of the company increased to 38,442 MW.

The union cabinet approved Ujwal Discom Assurance Yojna (UDAY) to ease the financially distressed power distribution companies and twelve states have given their in principle nod to be a part of UDAY. The program aims to tackle the debt burden of discom utilities and enforce financial discipline. While the move is focused on improving the positioning of the distribution companies, it would also help the power generation companies in terms of allowing the discoms to offtake power and make payments well on time.

While the government’s ‘Make in India’ initiative is likely to spur demand, financial strength of State Electricity Boards, availing timely environmental clearances and availability of fuel continue to remain the key challenges.

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Estimates for IIFL universe Company NII NIM / Spread Net Profit

Rs cr Q3 FY16 yoy % qoq % Q3 FY16 yoy bps

chg qoq bps

chg Q3 FY16 yoy % qoq %

NBFC

REC 2,710 29.1 14.1 4.9 (17.0) 5.0 1822.2 31.7 12.6

PFC 2,990 17.5 1.7 5.3 27.0 3.0 1749.0 13.4 3.2

HDFC Ltd 2,674 23.2 6.9 3.6 60.0 5.0 1746.1 15.4 8.8

Indiabulls Hsg Fin 803 19.3 8.5 5.4 (40.0) 10.0 575.0 20.3 3.5

LIC Housing Finance 803 38.2 6.3 2.6 40.0 4.0 451.0 31.0 9.5

Shriram Transport Fin (SA) 1,296 21.1 6.2 7.2 50.0 15.0 370.2 18.5 9.5

Bajaj Finance 1,179 33.4 19.7 12.4 (20.0) 120.0 350.7 35.7 25.5

DHFL 500 27.0 10.2 3.0 23.0 14.0 202.0 26.3 12.2

Muthoot Finance 592 10.0 3.7 ‐ ‐ ‐ 189.5 22.7 8.5

SCUF 674 18.8 12.2 14.5 20.0 100.0 175.1 22.5 15.0

Chola Fin 551 18.5 8.8 8.6 10.0 10.0 141.4 27.1 17.5

Mahindra Finance 793 7.3 3.5 8.0 0.0 5.0 130.9 (4.4) (10.5)

Manappuram 338 16.7 8.8 12.5 (88.0) 10.0 81.0 (0.2) 26.4

PFS 126 25.2 16.2 4.0 (30.0) 45.0 61.6 12.3 (70.9)

Magma (SA) 339 13.0 7.7 7.0 100.0 15.0 56.1 27.4 15.2

Capital First 242 75.8 8.2 6.9 200.0 10.0 42.5 42.2 3.5

Can Fin Homes 85 53.8 6.5 3.2 70.0 10.0 38.6 48.7 9.1

Repco Home 87 36.9 7.1 3.6 40.0 5.0 37.3 21.4 (4.5)

TFCIL 27 11.4 (11.4) ‐ ‐ ‐ 17.3 9.8 (5.8)

Private Bank

HDFC Bank 7,058 23.8 5.6 4.2 (25.0) (5.0) 3353.5 20.0 16.9

ICICI Bank 5,443 13.1 3.6 3.4 (5.0) (10.0) 3194.2 10.6 5.4

Axis Bank 4,193 16.8 3.2 3.8 (20.0) (10.0) 2243.9 18.1 17.1

Yes Bank 1,134 24.7 2.3 3.2 0.0 (8.0) 625.5 15.8 2.5

IndusInd Bank 1,195 38.8 9.2 3.9 20.0 0.0 600.6 34.3 7.2

Federal Bank 645 9.8 6.1 3.0 (20.0) (10.0) 255.0 (3.5) 58.2

Karur Vysya 481 22.9 9.9 3.4 32.0 1.0 153.0 34.4 7.6

City Union Bank 242 15.5 0.9 3.6 16.0 (10.0) 107.0 4.4 (0.6)

DCB Bank 163 34.6 8.7 3.8 10.0 0.0 47.0 9.4 27.8

PSU Bank

SBI^ (SA) 14,632 6.2 2.7 2.9 (20.0) (10.0) 3347.2 15.0 (13.7)

Bank of Baroda 3,118 (5.1) (3.9) 2.0 (40.0) (12.0) 689.3 106.4 453.7

Punjab National Bank 4,011 (5.3) (7.2) 2.8 (35.0) (13.0) 679.5 (12.3) 9.4

Union Bank 2,047 (3.5) (2.6) 2.2 (28.0) (12.0) 344.0 13.7 (47.8)

Indian Bank 1,081 (2.2) 0.1 2.2 (30.0) (10.0) 265.0 (4.5) (28.3)

Bank of India 2,727 (1.9) (9.7) 2.5 2.0 (9.0) 128.0 (26.1) (111.4)

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Company Net Revenue EBIDTA Margin (%) Net Profit


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Agro

Chambal Fertilisers & Chemicals Ltd. 3,298 16.8 19.8 9.5 1.4 2.3 181.5 25.4 32.0

Coromandel International Ltd. 3,110 5.0 (12.7) 8.5 0.9 (0.3) 133.6 10.7 (23.0)

Gujarat State Fertilizers & Chemicals Ltd.

1,426 9.0 (19.1) 11.5 0.2 (0.2) 112.9 9.6 (20.9)

Rashtriya Chemicals & Fertilizers Ltd. 2,289 16.2 (10.5) 3.5 (6.2) (1.0) 31.7 (66.3) (33.8)

Deepak Nitrite Ltd. 343 11.9 1.4 11.5 0.1 (0.6) 14.1 10.7 (4.5)

Balrampur Chini 651 (22.6) 30.0 (1.8) 1.4 (2.5) (56.0)

Auto

Maruti 14,741 17.2 5.8 16.2 3.5 (0.1) 1310.5 63.4 6.9

M&M 11,354 18.5 22.8 12.1 1.7 1.0 878.2 (6.8) (4.9)

Bajaj Auto 5,544 (2.0) (9.1) 21.9 1.6 0.3 873.5 1.4 (6.4)

Hero Motocorp 7,338 7.3 7.3 16.0 4.0 0.2 838.2 43.8 8.6

Eicher 3,326 45.0 6.5 15.4 2.1 (0.4) 281.4 83.0 10.2

Ashok Leyland 4,058 20.7 (17.8) 10.2 3.1 (1.8) 182.2 6144.4 (36.5)

TVS Motors 2,867 8.1 (0.5) 7.4 1.4 0.0 124.6 38.2 7.1

Motherson Sumi 9,401 2.8 2.2 10.1 0.8 (0.3) 312.8 23.1 9.0

Apollo Tyres 2,890 (6.9) (3.5) 17.4 1.6 1.3 266.5 44.6 (4.4)

Bosch 2,490 4.6 (4.9) 14.4 4.9 (2.9) 250.3 125.7 (18.0)

Cummins 1,191 10.0 (0.5) 16.5 (1.0) (0.3) 193.8 7.1 (2.4)

Bharat Forge 1,083 (9.6) (3.1) 28.4 (1.8) (0.4) 167.3 (14.8) (4.4)

Exide 1,637 5.0 (5.9) 14.7 3.1 (0.1) 140.7 44.8 (9.8)

Amara Raja 1,162 9.0 0.4 17.4 0.5 0.2 119.0 16.3 (2.9)

Greaves Cotton 419 (2.8) (1.4) 17.5 5.6 (0.4) 48.4 2648.1 (10.9)

Sundram Fasteners 643 9.3 (2.6) 13.0 3.1 (0.1) 47.9 59.1 (7.3)

TVS Srichakra 514 5.0 (1.6) 15.5 5.1 (0.2) 46.7 76.3 (4.1)

Wabco 416 30.6 (3.1) 15.8 0.8 0.6 43.5 53.4 (10.0)

Kirloskar Oil Engines 565 (7.8) (4.3) 8.8 (0.7) 0.6 29.8 (12.6) (16.6)

Timken India 257 12.6 (2.6) 13.5 1.8 0.1 20.5 22.6 (2.1)

Gabriel India Ltd. 350 (2.7) (6.8) 8.7 0.7 (0.1) 17.3 8.7 (10.2)

Munjal Showa 397 2.0 7.5 7.3 (0.2) (0.5) 15.8 (8.1) 5.2

Swaraj Engines Ltd. 155 51.4 0.9 14.9 3.2 0.0 15.6 88.3 0.3

LG Balakrishnan 277 5.0 (1.5) 12.0 0.1 (0.8) 15.2 5.2 (12.3)

Jamna Auto Industries Ltd. 303 15.8 (4.5) 11.2 2.9 (0.1) 14.1 159.2 (7.8)

MM Forgings 122 (3.0) (4.4) 21.7 (0.9) (0.2) 12.1 (6.9) (7.2)

Sona Koyo Steering Systems Ltd. 398 6.9 2.3 12.5 (0.3) (0.0) 11.4 6.2 2.4

Lumax Auto Technology 224 6.0 (2.9) 8.5 0.1 (0.6) 9.1 11.1 (19.4)

ZF Steering Gear (India) Ltd. 78 10.0 (20.0) 20.0 5.4 (2.6) 8.6 92.9 (36.3)

Automotive Axles Ltd. 257 25.0 (5.7) 8.3 (0.5) 0.2 7.3 30.1 (7.4)

Wheels India Ltd. 484 1.6 (6.6) 8.2 0.5 0.1 7.1 25.4 (23.4)

Tata Motors 73,277 4.7 19.5 15.5 0.1 2.9 3341.9 (6.7) (877.6)

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Cement

The Ramco Cements Ltd. 827 1.3 (7.2) 23.7 7.8 (9.0) 64.4 180.0 (53.6)

Ultratech 5,965 8.7 6.1 18.5 1.1 0.9 486.2 33.4 23.4

Ambuja Cem 2,516 5.8 20.1 16.0 1.0 1.2 204.0 (37.9) 32.8

Shree Cement* 1,726 11.1 0.1 20.9 1.2 (1.7) 107.0 14.2 (16.9)

ACC 2,895 4.8 5.7 10.2 0.9 (1.2) 99.0 (69.5) (14.0)

JK Cement 878 9.9 0.9 14.8 2.2 2.3 54.5 225.8 297.2

SFCL 397 10.0 27.5 34.5 1.1 16.8 37.0 31.3

India Cement 1,106 6.8 2.5 16.4 0.6 (5.1) 12.2

OCL India 534 (1.9) (0.6) 15.4 (0.6) 1.5 10.0 (65.3) (40.7)

JK Lakshmi Cement 671 20.7 3.9 13.9 0.3 3.6 8.1 (71.6)

Heidelberg Cement 437 4.4 8.5 12.4 (2.3) (0.1) 4.6 119.0

Mangalam Cement Ltd. 211 (0.9) 5.6 7.3 2.9 7.0 (1.4)

Orient Cem 384 0.1 7.7 10.7 (5.2) 0.1 (11.1)

Prism Cement Ltd. 1,475 10.2 5.5 5.5 2.7 1.8 (12.0)

Consumer

Centuryply 4,171 8.1 (5.7) 16.8 (2.1) 0.1 414.9 0.3 (10.3)

Whirlpool 7,480 3.7 4.8 8.5 1.0 0.3 410.5 30.2 9.2

CCL Products 2,550 5.7 8.5 22.0 3.1 1.4 347.4 33.1 18.7

IFB 3,797 14.9 3.2 6.5 (0.1) 0.6 123.8 (21.6) 32.9

BATA 3,291 (9.9) (2.2) 6.8 (9.2) (2.3) 119.8 (67.5) (34.3)

Kajaria 644 15.8 5.5 20.3 4.6 0.8 74.7 63.8 27.2

Jubilant Foodworks 721 30.0 22.6 13.3 0.2 2.5 41.8 19.2 74.9

TTK Prestige 423 10.1 0.5 12.6 0.7 0.2 34.4 22.5 0.0

HSIL 472 2.1 9.9 19.5 (0.9) 1.9 32.8 8.2 34.7

Greenply 417 6.0 4.0 14.5 1.0 0.4 29.9 14.2 9.6

Zydus Wellness 112 (1.3) 6.6 26.5 0.6 0.9 29.3 (33.5) 0.6

V‐Guard Industries 402 1.8 (7.2) 8.6 3.1 0.2 26.5 188.0 14.7

Nilkamal 466 10.3 (3.2) 10.7 3.4 0.3 25.0 195.5 (2.9)

Relaxo 366 10.0 (5.3) 13.6 0.7 0.3 23.6 18.6 (12.8)

La Opala RG 82 29.5 29.9 36.0 3.1 0.8 20.2 45.4 34.0

Cera Sanitarware 240 14.6 6.4 14.4 0.2 1.4 19.2 19.0 7.5

Mirza 257 12.0 0.6 16.5 (1.5) 0.5 15.9 2.5 (0.7)

Somany 412 9.7 1.6 7.3 0.7 0.4 14.6 32.2 36.8

Talwalkars 47 10.1 (44.8) 47.5 0.4 (11.2) 5.3 19.4 (78.3)

Hawkins 118 5.0 (20.7) 5.5 0.7 (10.9) 3.8 25.0 (85.9)

Speciality Restaurants 86 7.5 7.5 8.1 (3.1) 3.1 2.0 (50.0) 100.0

FMCG

HUL 8,513 9.5 7.0 17.5 0.4 0.8 1054.3 (15.8) 9.6

Asian Paints 4,376 19.8 15.8 16.8 0.8 0.4 455.3 23.7 14.1

Dabur 2,432 17.0 16.0 17.6 0.7 (1.7) 348.2 23.1 2.1

Marico 2,328 12.0 56.7 17.1 0.1 1.6 263.3 (6.9) 74.7

Nestle 2,312 (8.7) 32.7 18.2 (4.5) 1.7 226.6 (30.6) 82.3

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Britannia 2,336 14.9 5.8 14.9 4.1 0.1 226.3 64.8 3.5

Pidilite 1,322 10.0 0.2 23.1 7.1 0.3 192.9 55.1 0.6

Colgate 1,066 7.0 2.6 24.8 5.2 0.2 165.0 26.1 5.2

Glaxosmithkline Consumer 1,094 8.1 (2.8) 17.5 7.0 (3.6) 153.3 59.0 (30.1)

Emami 810 17.0 41.0 29.0 (1.6) 2.5 129.8 (29.3) 111.6

Berger Paints 1,339 19.9 14.7 14.0 0.7 0.8 108.1 31.6 21.5

Kansai Nerolac 975 9.8 0.3 16.2 4.0 0.3 99.3 51.2 2.5

Procter & Gamble Hygiene & Health Care Ltd.

709 10.0 18.5 16.4 (3.6) 0.1 80.0 (11.8) 14.6

Bajaj Corp 231 12.0 10.7 30.5 1.8 (0.6) 59.9 11.8 28.1

Akzo Noble 801 16.7 22.1 11.9 0.2 2.8 59.3 16.8 44.6

Gillette 573 15.0 19.0 13.6 0.2 2.9 44.8 21.6 34.5

Jyothy Laboratories Ltd. 375 8.9 (2.3) 12.8 2.5 0.2 38.1 28.3 (0.3)

VST Industries 201 1.5 (1.6) 21.5 (3.1) (1.9) 27.0 (11.1) (15.1)

Everady 362 11.4 (1.5) 10.5 4.4 5.4 17.0 11.1 25.5

Agro Tech Foods Ltd. 203 4.0 1.9 7.6 (0.1) 1.1 6.4 (31.8) 24.8

ITC 9,326 4.3 4.7 40.6 1.9 0.6 2586.2 (1.9) 6.4

United Spirits 2,335 7.3 8.9 15.7 5.0 0.8 173.9 132.9 (81.3)

Tata Global Beverages Ltd. 2,295 7.0 12.8 7.9 (2.7) 0.6 88.0 4.5 13.0

United Brewreries 1,115 11.5 (1.6) 13.5 1.4 0.2 50.6 28.1 4.2

Radico Khaitan 427 3.5 15.3 14.2 3.1 0.6 26.2 25.5 38.8

Rupa 210 17.9 (22.1) 13.5 2.2 0.6 13.6 72.2 (53.2)

Industrials

Larsen & Tourbo 26,745 12.1 14.3 11.2 (0.9) 0.1 1090.0 25.7 9.4

BHEL 6,384 3.0 7.5 4.3 (0.4) 12.3 264.0 24.2

Bharat Electronics Ltd 1,801 12.0 22.7 16.0 (1.3) 4.1 252.0 (7.4) 21.7

Sintex Industries Ltd. 2,106 14.9 10.1 17.2 0.4 0.0 164.0 1.2 12.3

Inox wind 1,200 28.8 19.0 15.8 (0.9) 1.6 130.0 29.2 45.9

Siemens Ltd 2,349 7.5 (28.8) 8.0 (0.7) (0.5) 120.0 (81.1) (45.2)

Suzlon Energy 1,334 361.6 15.0 18.5 53.8 0.6 120.0 3.4

Havells India 1,239 (0.6) (8.2) 14.0 (0.3) 0.0 111.0 (4.3) (8.3)

ABB India Ltd 2,822 26.1 43.3 6.9 (1.1) (1.0) 91.4 8.6 55.6

AIA Engineering Ltd. 480 (6.6) (1.6) 29.0 (0.6) (0.4) 89.9 (21.8) 0.8

Crompton Greaves 3,175 (4.7) (1.3) 7.2 2.7 2.4 70.0 (74.5) 34.6

Thermax Ltd 1,071 (6.6) 1.3 9.0 (2.5) (0.4) 63.8 (16.3) (1.6)

Voltas 1,004 5.6 (5.6) 6.2 0.2 0.4 59.0 (45.1) 32.7

Kalpataru Power Transmission Ltd 1,101 (4.0) 16.4 11.2 1.4 (0.1) 51.8 26.3 26.3

Lakshmi Machine Works Ltd. 601 5.8 (3.1) 11.6 (1.1) (0.0) 50.6 13.0 (10.4)

KEC International 2,119 3.2 4.8 7.6 2.5 (0.1) 49.4 (25.6) 12.3

Solar Industries 370 15.7 10.5 19.2 0.4 (0.2) 41.4 11.9 3.9

Carborundum Universal Ltd. 478 (5.0) (8.3) 15.9 4.6 0.7 37.0 68.2 (5.1)

Sterlite Technologies Ltd 1,064 18.9 0.7 13.0 1.8 0.4 35.3 52.9 20.0

Skipper Ltd 416 28.8 18.9 14.7 0.1 2.4 30.0 76.5 0.0

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Apar Industries 1,290 (0.7) 3.2 5.0 2.9 (0.0) 25.6 896.1 5.3

Triveni Turbine Ltd 173 15.0 (2.4) 21.5 0.4 (2.0) 25.2 6.8 (8.7)

Techno Electric & Engineering Company Limited

206 27.2 (3.2) 16.6 2.6 (3.8) 24.4 103.3 (28.2)

Alstom T&D India Ltd 797 4.0 (11.9) 9.0 3.7 (2.6) 24.2 838.0 (47.7)

Graphite India Ltd. 286 (8.9) (10.1) 13.5 0.2 (1.1) 21.7 6.2 (21.9)

KEI Industries Ltd 654 31.0 6.8 9.9 (0.5) 0.2 19.3 116.3 25.3

Ingersoll‐Rand (India) Ltd. 201 4.4 14.3 8.5 0.4 (0.9) 17.8 5.2 4.9

BGR Energy Systems Ltd. 1,016 2.7 22.1 8.7 0.9 (0.6) 15.0 3.0 78.6

Blue Star Ltd. 649 8.9 (9.5) 6.3 4.8 2.6 14.0 122.2

Indian Hume Pipe Company 305 14.7 32.6 10.8 0.7 0.6 13.0 4.8 85.7

Bajaj Eletrical Ltd. 1,110 7.9 (1.0) 4.2 7.6 0.1 12.5 10.6

Praj Industries 261 18.8 28.3 6.0 (2.7) 1.2 9.0 (27.2) 88.5

Elgi Equipments Ltd. 330 2.8 1.5 7.0 2.3 (0.4) 8.7 (45.8) 73.6

Shakti Pumps (India) Ltd 80 (6.7) 15.0 21.4 2.9 7.8 6.2 (19.3) 84.2

TD Power Systems 117 (22.5) (33.6) 7.0 1.3 2.8 3.1 176.6

Dynamatic Technologies Ltd. 343 (10.5) (7.4) 8.5 (0.4) (0.6) (1.2)

BEML 742 28.6 19.4 1.0 0.1 3.2 (7.6)

Infrastructure & Realty

Reliance Infrastructure Ltd 4,320 (1.2) (1.3) 18.0 0.2 (1.0) 432.0 (4.5) (4.2)

DLF Ltd. 2,103 7.5 12.8 45.0 4.4 (5.3) 174.1 32.1 32.4

IRB Infrastructure Developers Ltd 1,250 29.7 8.8 52.0 (5.6) (0.6) 135.6 2.3 (9.1)

Oberoi Realty Ltd. 346 59.4 82.9 56.0 (2.3) (1.6) 129.8 63.8 79.2

National Buildings Construction Corporation Ltd.

1,518 35.1 34.8 6.5 2.2 0.5 88.3 75.1 29.3

Sobha Developers 526 (23.1) 16.4 26.0 3.5 0.2 52.1 (13.3) 29.9

NCC Ltd 2,881 8.6 20.5 10.0 (0.4) (1.5) 48.0 87.7 16.5

Indiabulls Real Estate Ltd. 663 1.7 9.5 20.0 (3.8) (1.9) 46.3 (41.2) (38.3)

Sadbhav Engineering Ltd 883 22.3 18.4 10.5 0.3 (0.3) 41.9 11.1 60.1

Godrej Properties Ltd. 382 (26.5) (73.8) 15.0 2.7 3.7 38.8 (17.8) (63.4)

Ashoka Buildcon Ltd. 624 36.9 (4.2) 29.0 5.9 (2.8) 29.5 2204.7 (26.5)

IL&FS Transportation Networks Ltd 2,244 14.8 19.9 30.0 2.9 (5.2) 29.3 (77.3) (57.7)

MBL Infrastructures Ltd 632 16.5 53.1 12.0 0.2 (1.0) 25.9 18.6 37.0

J Kumar InfraProject Ltd 340 12.0 2.7 18.0 (1.7) (0.3) 23.5 (1.7) 1.3

Kolte Patil Developers Ltd. 190 (13.8) 22.6 26.0 (4.0) (0.3) 21.8 10.4 65.8

KNR Construction Ltd 204 (4.5) (6.0) 15.0 0.9 (3.0) 15.7 5.3 (71.7)

Simplex Infrastructures Ltd 1,417 (1.2) 1.5 10.5 (0.0) (0.1) 15.5 4.8 14.1

Hindustan Construction Co Ltd 1,054 (3.7) 12.7 17.0 (1.9) (2.4) 8.9 (67.3) (76.9)

ITD Cementation India Ltd 657 27.7 (4.5) 6.5 2.5 0.3 3.5 (93.5) (15.4)

Action Construction Equip 155 5.4 1.0 4.6 3.8 0.8 2.8 5.8 63.7

Punj Lyoyd Ltd 1,876 34.5 85.9 2.0 (3.4) 7.7 (187.5)

GMR Infrastructure Developers Ltd 3,049 10.4 (1.3) 29.0 4.7 (0.1) (294.2)

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Information Technology

TCS 27,766 13.3 2.2 28.6 (0.2) (0.2) 6139.7 12.8 1.4

Infosys 15,984 15.9 2.2 27.5 (1.1) (0.3) 3435.0 5.7 1.1

Wipro 12,810 6.8 2.4 21.2 (1.1) (0.6) 2256.5 2.9 0.9

HCL Tech 10,377 11.8 2.8 21.9 (3.1) 0.0 1877.7 (2.0) 3.0

Tech Mahindra 6,789 18.0 2.6 16.9 (3.3) 0.3 742.4 (7.8) (5.5)

OFFS 1,003 7.0 0.0 41.0 3.6 (2.4) 312.4 (1.7) (3.2)

Mphasis 1,526 8.2 (2.0) 13.3 (1.9) (1.7) 160.1 (1.2) (13.5)

Mindtree 1,190 30.6 1.8 18.3 (2.2) (0.2) 158.9 12.9 0.6

redington 8,967 6.4 7.0 2.2 0.1 0.1 117.6 4.5 20.4

Infotech Entp 812 14.1 5.2 15.5 (0.8) 0.4 102.9 2.2 4.5

Vakrangee 866 23.4 10.0 24.6 (3.0) (1.3) 100.7 12.8 4.8

Hexaware 769 8.1 (6.0) 17.3 (0.6) (0.6) 100.1 0.0 (10.3)

elerx 337 39.4 2.5 36.3 2.7 (0.9) 92.5 52.1 (0.5)

Zensar Tech 743 3.3 (2.0) 15.0 0.3 (0.7) 86.2 23.9 (6.8)

KPIT Tech 840 7.7 3.4 13.5 (0.4) (0.4) 75.6 15.6 0.6

Persistent Syst 561 13.5 3.4 18.9 (1.2) 0.2 75.1 0.7 4.5

First source 807 7.4 1.9 12.2 (0.1) (0.2) 62.8 8.8 1.2

Infoedge 182 24.8 4.6 24.5 (0.4) 5.3 42.2 9.1 24.3

polaris 510 7.2 (1.5) 11.3 0.0 (2.2) 38.9 (0.9) (17.8)

Just Dial 180 16.5 5.0 21.0 (11.5) (1.8) 34.8 8.2 (24.9)

Geometric 318 9.9 3.0 11.8 (0.4) (1.7) 24.9 13.1 (14.1)

Take solution 213 15.2 (12.0) 21.0 0.1 (0.1) 22.4 21.0 (14.6)

sasken comm 144 34.0 12.5 8.0 2.1 (1.7) 9.9 (38.9) (6.6)

SQS BFSI 65 21.1 (2.0) 19.5 0.4 (2.2) 9.1 38.1 (10.5)

repro 110 13.8 15.0 37.3 26.7 28.3 3.6 (41.7) 343.2

Logistics & Shipping

Allcargo Logistics Ltd. 1,445 0.9 (1.6) 9.6 0.4 0.0 70.0 (5.4) (5.4)

VRL Logistics 475 7.7 11.2 16.4 (0.6) 0.3 33.0 32.0 13.8

GATI Ltd. 467 10.1 15.3 7.5 (0.1) 0.3 13.6 (2.9) 64.6

Snowman Logistics Ltd. 61 18.9 5.8 19.2 (3.1) 0.0 4.3 (27.2) 44.6

TIL Ltd. 397 9.1 5.6 6.5 (1.4) 1.2 (8.0)

Adani Ports and Special Economic Zone Ltd.

1,916 23.9 4.0 64.8 (7.2) (8.4) 522.4 2.0 (19.8)

The Great Eastern Shipping Company Ltd.

965 9.9 (6.6) 51.0 12.3 (6.0) 280.5 54.1 (26.8)

Container Corporation Of India Ltd. 1,654 13.9 10.1 24.1 (1.2) 3.0 243.0 (19.3) 4.3

Gateway Distriparks Ltd. 278 2.1 7.1 24.9 (6.8) (0.3) 38.0 (27.7) 1.5

Aegis Logistics Ltd. 480 (49.7) (3.2) 9.8 6.2 0.5 30.0 (23.1) 11.1

Global Offshore Services Ltd. 102 1.9 9.2 31.7 (9.2) 5.9 (2.9)

Media

ZEE 1,496 9.7 8.0 25.1 (0.8) (0.5) 285.2 (6.9) 15.8

Sun TV 599 8.5 5.5 77.5 0.0 1.4 234.9 9.7 7.6

Dish TV 779 9.1 3.5 34.1 7.3 0.2 90.1 3.6

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Jagran Prakashan 573 21.7 10.2 28.5 0.3 0.2 82.2 23.1 7.1

DB Corp 494 (11.0) 3.2 23.7 (9.6) 0.3 63.0 (40.0) 6.6

HT Media 622 2.8 3.5 11.6 (2.7) 1.2 53.0 (28.3) 10.4

PVR 495 17.7 4.2 22.0 2.2 2.9 44.3 40.3 7.8

ENIL 134 14.3 15.0 30.8 (7.5) 0.1 29.7 (9.6) 10.0

Inox Leisure 364 21.1 2.5 16.0 0.6 0.1 21.6 51.3 5.5

Shemaroo 103 18.4 10.5 25.0 2.2 (0.2) 13.4 31.8 18.3

Hathway Cable 284 18.6 3.5 12.6 2.8 0.1 (48.2)

Metals

COAL India 19,003 7.0 8.6 21.8 2.2 4.6 3305.0 1.9 29.9

Hindustan Zinc 3,435 (10.8) (14.8) 52.0 (2.3) (1.7) 1799.0 (24.4) (21.3)

NMDC 1,260 (57.2) (21.3) 32.8 (33.3) (23.5) 543.0 (65.9) (33.0)

Vedanta 14,729 (23.4) (11.1) 22.4 (9.6) (1.7) 269.0 (83.0) (72.4)

NALCO 1,634 (14.3) (10.0) 9.8 1.8 (8.9) 129.0 (63.7) (42.9)

Gujarat Mineral Development Corporation Ltd.

294 (9.8) 18.5 31.0 (7.7) 1.6 71.0 (11.3) 4.4

Welspun Corp Ltd. 2,218 (1.4) (11.4) 11.8 2.3 (0.4) 63.8 275.3 (36.8)

Jindal Saw Ltd. 1,349 (24.1) 0.3 13.3 (0.1) (0.7) 61.0 (1.0) (39.6)

MOIL Ltd. 154 (29.4) 4.8 11.0 (36.2) (2.4) 49.0 (54.6) 0.8

Ratnamani Metals & Tubes Ltd. 448 (10.4) 9.8 17.9 (1.1) 3.6 46.0 (13.2) 43.8

Man Industries 369 82.7 15.0 10.3 2.9 (0.9) 11.0 450.0 (45.0)

Tata Sponge Iron Ltd. 138 (35.7) (9.2) 2.2 (6.2) 1.4 5.9 (64.2) 3.5

Godawari Power & Ispat Ltd. 505 (10.5) (4.4) 7.9 (7.5) (2.9) (29.0)

JSW Steel 9,319 (29.5) (14.6) 16.5 (0.8) 0.7 (132.0)

Hindalco Industries 8,108 (5.8) (9.2) 7.0 (3.7) 0.3 (159.0)

Jindal Steel and Power 4,393 (12.9) (6.7) 17.6 (13.3) (3.9) (528.0)

Tata Steel Limited 26,414 (21.5) (9.9) 7.8 (1.4) 1.5 (676.0)

SAIL Ltd 9,180 (17.3) (0.8) (7.6) (18.5) 3.7 (980.0)

Oil & Gas

Castrol 829 (3.5) 5.7 28.4 4.3 0.9 157.8 19.6 10.2

Gulf Oil Lub 248 3.9 (0.4) 15.7 2.4 0.2 23.9 31.1 1.2

Reliance Industries 58,763 (26.7) (3.4) 18.2 9.2 2.0 7072.0 39.1 7.8

IOCL 80,706 (24.6) (5.5) 9.8 12.1 9.0 4442.9

ONGC 19,994 5.7 (3.3) 50.3 (0.5) (0.5) 4418.6 23.7 (8.7)

BPCL 44,150 (23.8) (5.0) 6.9 4.8 4.0 1924.1 249.1 89.0

HPCL 39,893 (21.9) (5.2) 5.9 6.0 6.0 1295.1

Oil India 2,440 11.2 (3.6) 35.6 5.9 (0.1) 664.9 33.5 (1.5)

GAIL 14,080 (5.9) (0.6) 6.0 (0.6) (0.0) 437.6 (27.6) (0.7)

Petronet LNG 8,193 (26.8) 8.6 5.8 2.8 (0.4) 257.4 58.5 3.4

Cairn 2,014 (42.5) (10.2) 35.4 (26.9) (8.2) 207.6 (84.6) (69.1)

GSPL 271 11.3 7.0 88.0 4.4 (0.7) 117.4 32.2 8.2

IGL 964 2.1 (0.6) 20.5 0.1 0.7 106.8 (1.3) 5.1

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Others

Jet Airways (India) Ltd. 5,755 19.2 9.5 7.2 7.1 0.5 180.0 185.7 104.5

Grasim Industries Ltd. 9,314 15.9 11.0 16.9 2.0 0.3 558.0 67.3 14.2

CARE 67 8.1 (14.1) 62.7 1.4 (9.1) 27.0 3.8 (28.9)

ICRA 90 8.7 6.6 31.9 (0.7) 2.9 20.8 16.6 0.4

MPS 72 13.2 14.0 35.4 (3.1) 2.6 18.0 4.3 2.5

Vinati Organics 175 (13.4) 7.4 30.3 4.0 (2.2) 33.0 6.5 6.5

Meghmani Organics 315 3.6 (9.0) 15.6 2.1 (6.4) 15.0 (287.5) (40.0)

TreeHouse 58 10.0 2.0 53.6 (7.0) 0.9 13.4 (11.2) 5.3

Navneet Education 113 (16.1) (4.0) 18.0 0.2 8.0 9.9 (16.2) (5.6)

MT Educare 70 24.9 (15.0) 22.0 2.2 (5.0) 9.2 63.7 (31.1)

Bombay Burmah 53 1.8 (17.0) 6.8 1.2 7.4 (0.9)

Westlife Development 205 4.6 1.0 3.9 2.4 (0.0) (6.0)

Pharmaceutical

Dr Reddys' 4,093 6.5 2.6 29.2 6.0 0.6 758.5 32.0 5.1

Aurobindo 3,553 10.8 5.3 26.1 7.0 3.2 576.0 49.9 27.6

Torrent Pharma 1,769 51.5 4.6 42.9 22.4 0.7 541.4 224.2 (4.7)

Lupin 3,355 5.6 1.0 21.1 (6.7) 0.9 428.6 (28.7) 4.8

Cadila 2,497 14.0 1.5 25.7 5.3 0.4 419.9 49.0 7.3

Cipla 3,403 23.1 (1.4) 22.7 2.7 (0.2) 408.6 24.6 (5.1)

Divis Lab 982 24.2 1.8 38.2 2.0 (0.8) 288.7 31.4 (2.5)

Alembic 903 76.4 (10.5) 34.4 14.3 (2.9) 235.9 232.0 (18.2)

Glenmark 1,903 11.9 (0.3) 21.5 5.9 0.5 206.8 80.2 4.6

Apollo Hospitals 1,424 20.4 4.1 14.5 (0.3) 0.4 103.9 9.6 11.0

Biocon 872 13.3 4.1 22.3 1.6 (1.2) 100.7 11.6 (67.0)

Ajanta Pharma 410 13.0 5.2 34.2 (2.0) 1.5 93.6 10.6 (0.5)

GlaxiSmithKline Pharma 620 (4.8) (11.4) 16.8 (0.9) (1.7) 90.0 (1.1) (13.5)

Sanofi India 575 12.3 (1.9) 22.4 11.5 (1.8) 66.0 153.8 (9.6)

Fortis 1,105 7.8 0.8 7.4 4.0 0.9 43.9 29.3

Marksans Pharma 261 22.5 2.2 23.4 (1.2) 3.3 38.6 39.3 10.7

Pfizer 490 3.4 (4.3) 16.9 4.1 (5.3) 38.0 65.2 (26.9)

Natco 257 31.1 10.7 25.5 1.1 1.4 37.3 29.4 38.8

Dishman 408 4.8 7.0 23.2 4.3 (0.8) 36.6 53.2 0.7

IPCA 748 1.0 (0.1) 12.1 (4.3) 0.2 34.8 (17.2) 192.1

Granules 393 22.7 7.0 18.9 1.8 0.1 34.2 42.5 9.0

Vivimed Labs 355 2.9 3.2 19.4 2.0 1.1 27.0 28.6 12.5

Indoco 258 19.1 1.3 18.8 (0.9) 0.8 24.7 14.4 8.7

Suven Life Science 120 (7.0) 2.6 27.5 (9.7) 1.0 24.0 (31.4) (4.0)

Shilpa Medicare 170 9.7 (1.7) 22.9 1.0 1.6 23.0 35.3 (8.0)

Unichem Laboratories 300 12.8 (2.0) 11.7 8.7 0.6 21.0 950.0 (8.7)

Poly Medicure 106 9.3 6.0 21.7 (1.0) 0.7 14.0 16.7 7.7

Sequent Scientific 177 58.0 11.3 14.0 13.5 0.8 7.4 112.1

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Retail

Trent 390 12.7 1.0 7.4 (0.4) 1.2 19.0 (34.5) 46.2

V‐Mart 258 7.5 59.3 10.1 (4.5) 6.4 13.0 (45.8) 1200.0

Shoppers Stop 819 7.2 (8.4) 7.3 0.3 0.2 12.0 (14.3) (7.7)

Telecom

Bharti Airtel 24,424 5.1 2.4 34.3 0.8 (0.3) 1133.5 (21.1) (25.6)

Idea Cellular 9,097 13.5 4.7 35.3 1.0 0.1 767.1 (5.2) 16934.6

Bharti Infratel 3,114 5.6 2.5 43.5 0.3 0.7 605.5 19.5 4.5

Rcom 5,510 1.4 3.5 33.2 (0.2) 0.3 164.6 (18.2) 5.5

Tata Comm 5,172 5.2 0.3 15.9 (0.4) 0.4 33.0 (69.6) 448.8

OnMobile 209 (7.7) 1.2 19.3 (1.2) 0.3 2.6 (64.8) 141.3

Textile

Raymond 1,415 2.3 (5.2) 8.5 (1.8) (0.5) 29.0 (48.0) 395.7

Kitex Garments 136 11.4 1.3 33.1 (1.2) (0.5) 26.0 12.4 (4.2)

Welspun India 1,575 17.0 7.0 25.8 0.5 0.4 172.0 19.1 (2.3)

Vardhman Textiles 1,358 (7.5) (2.0) 19.5 2.9 (0.0) 148.2 108.9 (6.9)

Arvind Ltd 2,184 5.3 4.2 12.4 (1.5) (0.1) 88.1 (18.6) (5.2)

Tourism

EIH Ltd 390 3.2 28.7 28.7 0.4 16.2 57.0 32.6 418.2

Indian Hotels 1,235 2.3 21.0 17.0 (2.7) 11.0 47.6 (23.0) (188.8)

Cox & Kings 520 11.5 (24.2) 32.0 (0.7) (14.4) 33.8 (337.1) (71.5)

India Tourism Development Corp 125 (3.8) 42.0 6.4 1.8 12.1 12.0 20.0 140.0

TAJ GVK Hotels 72 5.9 20.0 23.6 (2.9) 5.3 3.0 0.0

Mahindra Holidays 242 16.9 3.9 24.0 0.3 (0.5) 30.0 25.0 3.4

Wonderla 58 22.4 32.7 43.0 (1.4) 8.1 16.8 29.4 40.5

Adlabs Entertainment 83 22.1 122.5 18.0 (2.1) 35.0 (23.6)

Utilities

NTPC Ltd. 20,560 9.0 14.9 24.0 (0.7) 1.5 2515.5 (18.2) (13.2)

Power Grid Corp 5,195 19.3 5.6 87.5 0.9 (0.3) 1456.0 18.5 0.6

Reliance Power Ltd. 2,860 65.2 3.4 43.0 6.7 (1.1) 346.9 36.3 0.4

Tata Power Company Ltd. 10,074 14.4 5.6 20.0 2.8 (5.3) 344.0 74.0 39.1

JSW Energy Ltd. 2,489 4.5 (1.7) 39.0 (1.9) (0.4) 319.6 (18.0) (37.2)

NHPC Ltd. 1,303 10.7 (44.4) 52.0 3.5 (16.0) 283.3 57.6 (76.0)

CESC Ltd. 1,556 24.6 (12.2) 23.0 (0.9) (1.7) 132.7 19.5 (31.9)

PTC India Ltd. 2,620 (7.2) (25.6) 2.0 0.2 (0.3) 61.1 821.6 (39.3)

Adani Power Ltd. 5,784 5.1 0.6 30.0 (1.6) (1.1) (319.0)

Source: Company, India Infoline Research

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‘Best Broker of the Year’ – by Zee Business for contribution to broking Nirmal Jain, Chairman, IIFL, received the award for The Best Broker of the Year (for contribution to broking in India) at India's Best Market Analyst Awards 2014 organised by the Zee Business in Mumbai. The award was presented by the guest of Honour Amit Shah, president of the Bharatiya Janata Party and Piyush Goel, Minister of state with independent charge for power, coal new and renewable energy.

Recommendation parameters for fundamental reports:

Buy – Absolute return of over +15%

Accumulate – Absolute return between 0% to +15%

Reduce – Absolute return between 0% to ‐10%

Sell – Absolute return below ‐10%

Call Failure ‐ In case of a Buy report, if the stock falls 20% below the recommended price on a closing basis, unless otherwise specified by the analyst; or, in case of a Sell report, if the stock rises 20% above the recommended price on a closing basis, unless otherwise specified by the analyst

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